LOAN AGREEMENT
BY AND BETWEEN
NEW JERSEY ENVIRONMENTAL INFRASTRUCTURE TRUST
AND
MIDDLESEX WATER COMPANY
DATED AS OF NOVEMBER 1, 1999
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions................................................... 2
ARTICLE II
REPRESENTATIONS AND COVENANTS OF BORROWER
SECTION 2.01. Representations of Borrower................................... 7
SECTION 2.02. Particular Covenants of Borrower............................. 11
ARTICLE III
LOAN TO BORROWER; AMOUNTS PAYABLE; GENERAL AGREEMENTS
SECTION 3.01. Loan; Loan Term.............................................. 20
SECTION 3.02. Disbursement of Loan Proceeds................................ 20
SECTION 3.03. Amounts Payable.............................................. 21
SECTION 3.04. Unconditional Obligations.................................... 22
SECTION 3.05. Loan Agreement to Survive Bond Resolution and Trust Bonds.... 23
SECTION 3.06. Disclaimer of Warranties and Indemnification................. 23
SECTION 3.07. Option to Prepay Loan Repayments............................. 24
SECTION 3.08. Priority of Loan and Fund Loan............................... 25
ARTICLE IV
ASSIGNMENT OF LOAN AGREEMENT AND BORROWER BOND
SECTION 4.01. Assignment and Transfer by Trust............................. 26
SECTION 4.02. Assignment by Borrower....................................... 26
ARTICLE V
EVENTS OF DEFAULT AND REMEDIES
SECTION 5.01. Events of Default............................................ 27
SECTION 5.02. Notice of Default............................................ 28
SECTION 5.03. Remedies on Default.......................................... 28
SECTION 5.04. Attorneys' Fees and Other Expenses........................... 28
SECTION 5.05. Application of Moneys........................................ 28
SECTION 5.06. No Remedy Exclusive; Waiver; Notice.......................... 28
SECTION 5.07. Retention of Trust's Rights.................................. 29
ARTICLE VI
MISCELLANEOUS
SECTION 6.01. Notices...................................................... 30
SECTION 6.02. Binding Effect............................................... 30
SECTION 6.03. Severability................................................. 30
SECTION 6.04. Amendments, Supplements and Modifications.................... 30
SECTION 6.05. Execution in Counterparts.................................... 31
SECTION 6.06. Applicable Law and Regulations............................... 31
SECTION 6.07. Consents and Approvals....................................... 31
SECTION 6.08. Captions..................................................... 31
SECTION 6.09. Benefit of Loan Agreement; Compliance with Bond Resolution... 31
SECTION 6.10. Further Assurances........................................... 31
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
ii
NEW JERSEY ENVIRONMENTAL INFRASTRUCTURE TRUST LOAN AGREEMENT
THIS LOAN AGREEMENT, made and entered into as of this 1st day of
November, 1999, by and between NEW JERSEY ENVIRONMENTAL INFRASTRUCTURE TRUST, a
public body corporate and politic with corporate succession, and MIDDLESEX WATER
COMPANY, a corporation duly created and validly existing under the laws of the
State of New Jersey (the "State");
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 Section 23
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 cost of
Environmental Infrastructure Facilities (as each of the foregoing terms is
defined in Section 1.01 hereof; all capitalized terms used in this Loan
Agreement shall have, unless the context otherwise requires, the meanings set
forth in said Section 1.01);
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 Cost of the Project;
WHEREAS, the State Legislature, in accordance with Section 20 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 Cost 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 Cost of
the Project;
WHEREAS, in accordance with the "Wastewater Treatment Bond Act of
1985", P.L. 1985, c. 329, as amended, and the Regulations, the Borrower has been
awarded a Fund Loan for a portion of the Cost 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. 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
three-tenths of one percent (.30%) 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.
"Bond Resolution" means the "Environmental Infrastructure Bond
Resolution, Series 1999B", as adopted by the Board of Directors of the Trust on
or about September 20, 1999, authorizing the issuance of the Trust Bonds, and
all further amendments and supplements thereto adopted in accordance with the
provisions thereof.
"Borrower" means the corporation that is a party to and is described in
the first paragraph of 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 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.
"Borrower Bond Resolution" means the indenture of the Borrower entitled
"Indenture of Mortgage" dated as of April 1, 1927, as amended and supplemented
from time to time, in particular by a supplemental indenture detailing the terms
of the Borrower Bond dated as of November 1, 1999 and entitled "Twenty-Sixth
Supplemental Indenture", pursuant to which the Borrower Bond has been issued.
"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 has been and may from time
to time be amended and supplemented.
"Code" means the Internal Revenue Code of 1986, as the same has been
and may from time to time be amended and supplemented, including any regulations
promulgated thereunder, any successor code thereto and any administrative or
judicial interpretations thereof.
"Cost" means those costs that are eligible, reasonable, necessary,
allocable to the Project and permitted by generally accepted accounting
principles, including Allowances and Building Costs (as defined in the
Regulations), as shall be determined on a project-specific basis in accordance
with the Regulations as set forth in Exhibit B hereto, as the same may be
amended by subsequent eligible costs as evidenced by a certificate of an
authorized officer of the Trust.
"Debt Service Reserve Fund" means the Debt Service Reserve Fund as
defined in the Bond Resolution.
"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.
"Fund Loan" means the loan made to the Borrower by the State, acting by
and through the New Jersey Department of Environmental Protection, pursuant to
the loan agreement dated as of November 1, 1999 by and between the Borrower and
the State, acting by and through the New Jersey Department of Environmental
Protection, to finance or refinance a portion of the Cost of the Project.
"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 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.
"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 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 Servicer" means, initially, First Union National Bank, the loan
servicer for the Loan and the Fund Loan, duly appointed and designated as "Loan
Servicer" pursuant to the Loan Servicing and Trust Bonds Security Agreement
dated as of November 1, 1999 by and among the Trust, the State, acting by and
through the Treasurer of the State on behalf of the New Jersey Department of
Environmental Protection, and First Union National Bank, and any successors as
"Loan Servicer" under such agreement, as the same may be modified, amended or
supplemented from time to time in accordance with its terms.
"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 First Union National Bank), in several capacities
thereunder, 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 Bond Resolution, all or a
portion of the Cost of which is financed or refinanced by the Trust through the
making of the Loan under this Loan Agreement.
"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 Cost 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 and delivered
pursuant to Section 2.04 of the Bond Resolution, in each case issued in order to
finance (i) the portion of the Loan deposited in the Project Loan Account, (ii)
the portion of the Loans deposited in the balance of the Project Fund, (iii) any
capitalized interest related to such bonds, (iv) a portion of the costs of
issuance related to such bonds, and (v) that portion of the Debt Service Reserve
Fund, if any, allocable to the Loan or Loans, as the case may be, a portion of
which includes the funding of reserve capacity 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, First Union National Bank, the Trustee
appointed by the Trust and its successors as Trustee under the Bond Resolution,
as provided in Article X of the Bond Resolution.
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.
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.
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(i) The Borrower is a corporation duly created and validly
existing under the laws of the State.
(ii) The acting officials 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
officials 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 official no
longer the duly acting official of such Borrower, all such actions
previously taken by such official 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 applicable State law 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 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 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 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. Since December 31, 1975 and as of the date of delivery of this Loan
Agreement, the Borrower has not been, and is not now, in default in the payment
of the principal of or interest on any of its bonds, notes, lease purchase
agreements or other debt obligations. 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
principal and redemption premiums, if any, of and interest on the Borrower Bond
or otherwise to observe and perform its duties, covenants, obligations and
agreements under this Loan Agreement and the Borrower Bond.
(f) Governmental Consent. The Borrower has obtained all permits and
approvals required to date by any governmental body or officer for the
authorization, execution, attestation and delivery of this Loan Agreement and
the Borrower Bond, for the issuance of the Borrower Bond and the sale thereof to
the 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, 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 or (B) 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 or (B) 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 Cost of the Borrower's Project; and
(ii) where applicable, to reimburse the Borrower for a portion of the Cost of
the Borrower's Project, which portion was paid or incurred in anticipation of
reimbursement by the 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.
(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 were
"deemed final" by the Borrower for the purposes and within the meaning of Rule
15c2-12.
SECTION 2.02. Particular Covenants of Borrower.
(a) Promise to Pay. The Borrower unconditionally promises, in
accordance with the terms of and to the extent provided in the Borrower Bond
Resolution, to make punctual payment of the principal 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.
(c) Borrower Bond; No Prior Liens. Except for (i) the Borrower Bond,
(ii) any bonds at parity with the Borrower Bond and currently outstanding or
issued on the date hereof, (iii) any future bonds 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 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) 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.
(f) Exclusion of Interest from Federal Gross Income and Compliance
--------------------------------------------------------------
with Code.
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(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 hereinafter
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 loaned to the
Borrower 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 of the interest on the Trust Bonds for
federal income tax purposes under Section 103 of the Code, 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 loaned to the
Borrower to reimburse the Borrower for an expenditure with respect to a
Cost 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 ss.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, 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 ss.1.150-2.
(v) The Borrower shall not directly or indirectly use or
permit the use of any proceeds of the Trust Bonds loaned to the
Borrower to pay any Cost of the Borrower's Project that does not
constitute a "capital expenditure" within the meaning of Treasury
Regulations ss.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 ss.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) 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.
(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 ss.1.148-1(b)).
(xii) Based upon all of the objective facts and circumstances
in existence on the date of issuance of the Trust Bonds used to finance
the Project, (A) within six months of the date of issuance of the Trust
Bonds used to finance the Project, the Borrower will 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 ss.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
ss.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) at least 85 percent
(85%) of the proceeds of the Loan used to finance the Project (other
than amounts deposited into the Debt Service Reserve Fund allocable to
that portion of the Loan used to finance reserve capacity, if any) and
investment earnings thereon will be spent prior to the period ending
three (3) years subsequent to the date of issuance of the Trust Bonds
used to finance the Project. Accordingly, the proceeds of the Loan
deposited in the Project Loan Account used to finance the Project will
be eligible for the 3-year arbitrage temporary period since the
expenditure test, time test and due diligence test, as set forth in
Treasury Regulations ss.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 ss.1.148-1(c)(4).
For purposes of this subsection and subsection (h) of this Section
2.02, quoted terms shall have the meanings given thereto by Section 148 of the
Code, including, particularly, Treasury Regulations ss.ss.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;
provided, that no provision of this subsection shall prevent the sale, lease,
abandonment or other disposition of property that comprises a portion of the
Borrower's Environmental Infrastructure System, so long as such sale, lease,
abandonment or other disposition does not materially adversely affect the
Borrower's Environmental Infrastructure System.
(h) Records and Accounts.
--------------------
(i) The Borrower shall keep accurate records and accounts for
its Environmental Infrastructure System specifically relating to the
Project (the "Project Records") separate and distinct from its other
records and accounts (the "General Records"). Such Project 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 Project 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) Unless otherwise advised in writing by the Trust, in
furtherance of the covenant of the Borrower contained in subsection (f)
of this Section 2.02 not to cause the Trust Bonds to be arbitrage
bonds, the Borrower shall keep, or cause to be kept, accurate records
of each investment it makes in any "nonpurpose investment" acquired
with, or otherwise allocated to, "gross proceeds" of the Trust Bonds
not held by the Trustee and each "expenditure" it makes allocated to
"gross proceeds" of the Trust Bonds. Such records shall include the
purchase price, including any constructive "payments" (or in the case
of a "payment" constituting a deemed acquisition of a "nonpurpose
investment" (e.g., a "nonpurpose investment" first allocated to "gross
proceeds" of the Trust Bonds after it is actually acquired because it
is deposited in a sinking fund for the Trust Bonds)), the "fair market
value" of the "nonpurpose investment" on the date first allocated to
the "gross proceeds" of the Trust Bonds, nominal interest rate, dated
date, maturity date, type of property, frequency of periodic payments,
period of compounding, yield to maturity, amount actually or
constructively received on disposition (or in the case of a "receipt"
constituting a deemed disposition of a "nonpurpose investment" (e.g., a
"nonpurpose investment" that ceases to be allocated to the "gross
proceeds" of the Trust Bonds because it is removed from a sinking fund
for the Trust Bonds)), the "fair market value" of the "nonpurpose
investment" on the date it ceases to be allocated to the "gross
proceeds" of the Trust Bonds, the purchase date and disposition date of
the "nonpurpose investment" and evidence of the "fair market value" of
such property on the purchase date and disposition date (or deemed
purchase or disposition date) for each such "nonpurpose investment".
The purchase date, disposition date and the date of determination of
"fair market value" shall be the date on which a contract to purchase
or sell the "nonpurpose investment" becomes binding, i.e., the trade
date rather than the settlement date. For purposes of the calculation
of purchase price and disposition price, brokerage or selling
commissions, administrative expenses or similar expenses shall not
increase the purchase price of an item and shall not reduce the amount
actually or constructively received upon disposition of an item, except
to the extent such costs constitute "qualified administrative costs".
(iii) Within thirty (30) days of the last day of the fifth and
each succeeding fifth "bond year" (which, unless otherwise advised by
the Trust, shall be the five-year period ending on the date five years
subsequent to the date immediately preceding the date of issuance of
the Trust Bonds and each succeeding fifth "bond year") and within
thirty (30) days of the date the last bond that is part of the Trust
Bonds is discharged (or on any other periodic basis requested in
writing by the Trust), the Borrower shall (A) calculate, or cause to be
calculated, the "rebate amount" as of the "computation date" or "final
computation date" attributable to any "nonpurpose investment" made by
the Borrower and (B) remit the following to the Trust: (1) an amount of
money that when added to the "future value" as of the "computation
date" of any previous payments made to the Trust on account of rebate
equals the "rebate amount", (2) the calculations supporting the "rebate
amount" attributable to any "nonpurpose investment" made by the
Borrower allocated to "gross proceeds" of the Trust Bonds, and (3) any
other information requested by the Trust relating to compliance with
Section 148 of the Code (e.g., information related to any "nonpurpose
investment" of the Borrower for purposes of application of the
"universal cap").
(iv) The Borrower covenants and agrees that it will account
for "gross proceeds" of the Trust Bonds, investments allocable to the
Trust Bonds and expenditures of "gross proceeds" of the Trust Bonds in
accordance with Treasury Regulations ss.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 Cost of
the Borrower's Project is paid or the date the portion of the project
financed by the Trust Bonds is placed in service. All allocations of
proceeds of the Trust Bonds to expenditures will be made no later than
the date that is 60 days after the fifth anniversary of the date the
Trust Bonds are issued or the date 60 days after the retirement of the
Trust Bonds, if earlier. Such records and accounts will include the
particular Cost paid, the date of the payment and the party to whom the
payment was made.
(i) Inspections; Information. The Borrower shall permit the Trust and
the Trustee and any party designated by any of such parties, at any and all
reasonable times during construction of the Project and thereafter upon prior
written notice, to examine, visit and inspect the property, if any, constituting
the Project and to inspect and make copies of any accounts, books and records,
including (without limitation) its records regarding receipts, disbursements,
contracts, investments and any other matters relating thereto and to its
financial standing, and shall supply such reports and information as the Trust
and the Trustee may reasonably require in connection therewith.
(j) Insurance. The Borrower shall maintain or cause to be maintained,
in force, insurance policies with responsible insurers or self-insurance
programs providing against risk of direct physical loss, damage or destruction
of its Environmental Infrastructure System at least to the extent that similar
insurance is usually carried by utilities constructing, operating and
maintaining Environmental Infrastructure Facilities of the nature of the
Borrower's Environmental Infrastructure System, including liability coverage,
all to the extent available at reasonable cost but in no case less than will
satisfy all applicable regulatory requirements.
(k) Cost of Project. The Borrower certifies that the building cost of
the Project, as listed in Exhibit B hereto and made a part hereof, is a
reasonable and accurate estimation thereof, and it will supply to the 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 twenty (20) years from the
expected date of the Loan Closing.
(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 confirming the details of the sale
of the Borrower Bond to the Trust, (D) the resolution of the Borrower,
if any, declaring its official intent to reimburse expenditures for the
Cost 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, 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 of the interest on the Trust Bonds for
federal income tax purposes under Section 103 of the Code; 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
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 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 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. 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 agrees to observe and comply with each such additional covenant and
requirement, if any, included in Exhibit F hereto.
(r) Year 2000 Compliance. All software or computer programs used by the
Borrower after calendar year 1999 in the operation of its Environmental
Infrastructure System and material to such operation will be designed to be used
prior to, during and after calendar year 2000, and all such software or computer
programs will operate during each time period without material error relating to
date data, specifically including any error relating to, or the product of, date
data that represents or references different centuries or more than one century.
Without limiting the generality of the foregoing, all such software or computer
programs (i) will not abnormally end or provide invalid or incorrect results as
a result of date data and (ii) have been designed to ensure year 2000
compatibility, including date data, century recognition, calculations that
accommodate same century and multi-century formulas and date values, and date
data interface values that reflect the century.
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 Cost 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 certain costs of issuance and underwriter's
discount for all Trust Bonds issued to finance the Loan 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;
(ii) in accordance with the "Wastewater Treatment Bond Act of
1985", P.L. 1985, c. 329, as amended, 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 covered 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 cost of the Project that is
not eligible to be funded from the Fund Loan or the Loan, or (B) that
portion of the total cost of the Project that exceeds the actual
amounts of the loan commitments made by the State and the Trust,
respectively, for the 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 Loan Servicer as follows:
(i) the principal of the Loan shall be repaid annually on
August 1, commencing August 1, 2002, 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 February 1 and August
1, commencing August 1, 2000, 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 Loan Servicer 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 Loan Servicer 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.
(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 Loan Servicer 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 Loan Servicer semiannually on each February 1
and August 1, commencing February 1, 2000, during the term of the Loan.
SECTION 3.04. Unconditional Obligations. The obligation of the Borrower
to make the Loan Repayments and all other payments required hereunder and the
obligation to perform and observe the other duties, covenants, obligations and
agreements on its part contained herein shall be absolute and unconditional, and
shall not be abated, rebated, set-off, reduced, abrogated, terminated, waived,
diminished, postponed or otherwise modified in any manner or to any extent
whatsoever while any Trust Bonds remain outstanding or any Loan Repayments
remain unpaid, for any reason, regardless of any contingency, act of God, event
or cause whatsoever, including (without limitation) any acts or circumstances
that may constitute failure of consideration, eviction or constructive eviction,
the taking by eminent domain or destruction of or damage to the Project or
Environmental Infrastructure System, commercial frustration of the purpose, any
change in the laws of the United States of America or of the State or any
political subdivision of either or in the rules or regulations of any
governmental authority, any failure of the Trust or the Trustee to perform and
observe any agreement, whether express or implied, or any duty, liability or
obligation arising out of or connected with the Project, this Loan Agreement or
the Bond Resolution, or any rights of set-off, recoupment, abatement or
counterclaim that the Borrower might otherwise have against the Trust, the
Trustee, the Loan Servicer or any other party or parties; provided, however,
that payments hereunder shall not constitute a waiver of any such rights. The
Borrower shall not be obligated to make any payments required to be made by any
other Borrowers under separate Loan Agreements or the Bond Resolution.
The Borrower acknowledges that payment of the Trust Bonds by the Trust,
including payment from moneys drawn by the Trustee from the Debt Service Reserve
Fund, does not constitute payment of the amounts due under this Loan Agreement
and the Borrower Bond. If at any time the amount in the Debt Service Reserve
Fund shall be less than the Debt Service 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 Loan Servicer from repayments by the
Borrowers of loans made to the Borrowers by the State, acting by and through the
New Jersey Department of Environmental Protection, pursuant to loan agreements
dated as of November 1, 1999 by and between the Borrowers and the State, acting
by and through the New Jersey Department of Environmental Protection, to finance
or refinance a portion of the cost of the Environmental Infrastructure
Facilities of the Borrowers, and which moneys were upon such receipt by the Loan
Servicer 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
federal income tax purposes under Section 103 of the Code, 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) during the term of this
Loan Agreement and 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 latter
of the date of the Loan Closing or the date of the initiation of construction of
the Project until the date the Borrower receives the written certificate of
Project completion from the Trust, the Borrower shall maintain said liability
insurance covering the Trust and said directors, employees and officers in good
standing; and (ii) the Borrower shall include the Trust as an additional "named
insured" on any certificate of insurance providing against risk of direct
physical loss, damage or destruction of the Environmental Infrastructure System,
and during the Loan Term the Borrower shall maintain said insurance covering the
Trust in good standing.
The Borrower shall provide the Trust with a copy of each of any such
original, supplemental, amendatory or reissued certificates of insurance (or
other similar documents evidencing the insurance coverage) required pursuant to
this Section 3.06(d).
SECTION 3.07. Option to Prepay Loan Repayments. The Borrower may prepay
the Trust Bond Loan Repayments, in whole or in part (but if in part, in the
amount of $100,000 or any integral multiple thereof), upon prior written notice
to the Trust and the Trustee not less than ninety (90) days in addition to the
number of days' advance notice to the Trustee required for any optional
redemption of the Trust Bonds, and upon payment by the Borrower to the Trustee
of amounts that, together with investment earnings thereon, will be sufficient
to pay the principal amount of the Trust Bond Loan Repayments to be prepaid plus
the Interest Portion described in clause (ii) of the definition thereof on any
such date of redemption; provided, however, that 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
acknowledges 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
Loan Servicer before any loan repayments on the Borrower's Fund Loan shall be
satisfied by the Loan Servicer. The Borrower agrees not to interfere with any
such action by the Loan Servicer.
(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 to the extent allowed by law
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 Loan
Servicer during the time of any such Trust Bond Loan Repayment deficiency, shall
be applied by the Loan Servicer first to satisfy such Trust Bond Loan Repayment
deficiency as a credit against the obligations of the Borrower to make payments
of the Interest Portion under the Loan and the Borrower Bond, second, to the
extent available, to make Trust Bond Loan Repayments of principal hereunder and
payments of principal under the Borrower Bond, third, to the extent available,
to pay the Administrative Fee, fourth, to the extent available, to pay any late
charges hereunder, fifth, to the extent available, to satisfy the repayment of
the Borrower's Fund Loan under its related loan agreement therefor, and finally,
to the extent available, to satisfy the repayment of the administrative fee
under any such related loan agreement.
(c) The Borrower hereby further acknowledges that any loan repayments
paid by the Borrower on its Fund Loan under the related loan agreement therefor
shall be applied (i) according to Section 3(c) of the Loan Servicing and Trust
Bonds Security Agreement (as defined in the definition of Loan Servicer herein)
and (ii) according to the provisions of the Master Program Trust Agreement.
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.
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 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;
(c) 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;
(d) 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;
(e) the Borrower shall generally fail to pay its debts as such debts
become due; and
(f) 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.
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.
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, the Trustee and the Loan Servicer at the
following addresses:
(a) Trust:
New Jersey Environmental Infrastructure Trust
P.O. Box 440
Trenton, New Jersey 08625
Attention: Executive Director
(b) Trustee:
First Union National Bank
21 South Street
Morristown, New Jersey 07960
Attention: Corporate Trust Department
(c) Loan Servicer:
First Union National Bank
21 South Street
Morristown, New Jersey 07960
Attention: Corporate Trust Department
Any of the foregoing parties may designate any further or different
addresses to which subsequent notices, certificates or other communications
shall be sent by notice in writing given to the others.
SECTION 6.02. Binding Effect. This Loan Agreement shall inure to the
benefit of and shall be binding upon the Trust and the Borrower and their
respective successors and assigns.
SECTION 6.03. Severability. In the event any provision of this Loan
Agreement shall be held illegal, invalid or unenforceable by any court of
competent jurisdiction, such holding shall not invalidate, render unenforceable
or otherwise affect any other provision hereof.
SECTION 6.04. Amendments, Supplements and Modifications. Except as
otherwise provided in this Section 6.04, this Loan Agreement may not be amended,
supplemented or modified without the prior written consent of the Trust and the
Borrower and without the satisfaction of all conditions set forth in Section
11.12 of the Bond Resolution. Notwithstanding the conditions set forth in
Section 11.12 of the Bond Resolution, (i) Section 2.02(p) hereof may be amended,
supplemented or modified upon the written consent of the Trust and the Borrower
and without the consent of the Trustee, any Bond Insurer or any holders of the
Trust Bonds, and (ii) Exhibit H hereto may be amended, supplemented or modified
prior to the execution and delivery thereof as the Trust, in its sole
discretion, shall determine to be necessary, desirable or convenient for the
purpose of satisfying Rule 15c2-12 and the purpose and intent thereof as Rule
15c2-12, its purpose and intent may hereafter be interpreted from time to time
by the SEC or any 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.
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:________________________
ATTEST: Barton E. Harrison
Vice-Chairman
- ---------------------
Robert A. Briant, Sr.
Secretary
MIDDLESEX WATER COMPANY
[SEAL]
By:________________________
ATTEST: Authorized Officer
- -----------------------------
Authorized Officer
Approval of New Jersey State
Treasurer required pursuant
to Section 9a of the Act
By:________________________
Roland M. Machold
Acting New Jersey State Treasurer
[Signature Page]
EXHIBIT A-1
Description of Project and Environmental Infrastructure System
A-1-1
EXHIBIT A-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-5
(Except for assignment page, to be supplied by Borrower's
bond counsel in substantially the following form)
IMPORTANT NOTE: The next three pages set forth the form of the Borrower
Bond prepared by the Trust's Bond Counsel for municipal/county Borrowers.
Although the Trust recognizes that each corporate Borrower has its own bond form
as required pursuant to its Borrower Bond Resolution, please incorporate in the
bond form the pertinent information from this municipal/county bond form (e.g.,
amounts payable under the Borrower Bond set forth in the first paragraph,
assignment in the second paragraph, disbursement language in the third
paragraph, unconditional obligation in the fourth paragraph, optional prepayment
provisions in the fifth paragraph and the date of the Borrower Bond).
SEE IMPORTANT NOTE ON PRIOR PAGE
FOR VALUE RECEIVED, Middlesex Water Company, a corporation duly created
and validly existing under the Constitution and laws of the State of New Jersey
(the "Borrower"), hereby promises to pay to the order of the New Jersey
Environmental Infrastructure Trust (the "Trust") (i) the principal amount of Two
Million Three Hundred Fifty Thousand Dollars ($2,350,000), or such lesser amount
as shall be determined in accordance with Section 3.01 of the Loan Agreement (as
hereinafter defined), at the times and in the amounts determined as provided in
the Loan Agreement, together with (ii) Interest on the Loan constituting the
Interest Portion, the Administrative Fee and any late charges incurred under the
Loan Agreement (as such terms are defined in the Loan Agreement) in the amount
calculated as provided in the Loan Agreement, payable on the days and in the
amounts and as provided in the Loan Agreement, which principal amount and
Interest Portion of the Interest on the Loan shall, unless otherwise provided in
the Loan Agreement, be payable on the days and in the amounts as also set forth
in Exhibit A attached hereto under the column headings respectively entitled
"Principal" and "Interest", plus (iii) any other amounts due and owing under the
Loan Agreement at the times and in the amounts as provided therein. The Borrower
irrevocably pledges its full faith and credit for the punctual payment of the
principal of and the Interest on this Borrower Bond (as defined in the Loan
Agreement) and for the punctual payment of all other amounts due under this
Borrower Bond and the Loan Agreement according to their respective terms.
This Borrower Bond is issued pursuant to the Loan Agreement dated as of
November 1, 1999 by and between the Trust and the Borrower (the "Loan
Agreement"), and is issued in consideration of the loan made thereunder (the
"Loan") and to evidence the payment obligations of the Borrower set forth in the
Loan Agreement. This Borrower Bond has been assigned to First Union National
Bank, as trustee (the "Trustee") under the "Environmental Infrastructure Bond
Resolution, Series 1999B", adopted by the Trust on September 20, 1999, as the
same may be amended and supplemented in accordance with the terms thereof (the
"Bond Resolution"), and payments hereunder shall, except as otherwise provided
in the Loan Agreement, be made directly to the Loan Servicer (as defined in the
Loan Agreement) for the account of the Trust pursuant to such assignment. Such
assignment has been made as security for the payment of the Trust Bonds (as
defined in the Loan Agreement) issued to finance or refinance the Loan and as
otherwise described in the Loan Agreement. This Borrower Bond is subject to
further assignment or endorsement in accordance with the terms of the Bond
Resolution and the Loan Agreement. All of the terms, conditions and provisions
of the Loan Agreement are, by this reference thereto, incorporated herein as
part of this Borrower Bond.
Pursuant to the Loan Agreement, disbursements shall be made by the
Trustee to the Borrower, in accordance with written instructions of the Trust,
upon receipt by the Trust and the Trustee of requisitions from the Borrower
executed and delivered in accordance with the requirements set forth in Section
3.02 of the Loan Agreement.
This Borrower Bond is entitled to the benefits and is subject to the
conditions of the Loan Agreement. The obligations of the Borrower to make the
payments required hereunder shall be absolute and unconditional, without any
defense or right of set-off, counterclaim or recoupment by reason of any default
by the Trust under the Loan Agreement or under any other agreement between the
Borrower and the Trust or out of any indebtedness or liability at any time owing
to the Borrower by the Trust or for any other reason.
This Borrower Bond is subject to optional prepayment under the terms
and conditions, and in the amounts, provided in Section 3.07 of the Loan
Agreement. To the extent allowed by applicable law, this Borrower Bond may be
D-3
subject to acceleration under the terms and conditions, and in the amounts,
provided in Section 5.03 of the Loan Agreement.
IN WITNESS WHEREOF, the Borrower has caused this Borrower Bond to be
duly executed, sealed and delivered as of this 15th day of October, 1999.
MIDDLESEX WATER COMPANY
[SEAL]
By:___________________
ATTEST: _____________
_____________________ By:___________________
- --------------- -------------
D-4
New Jersey Environmental Infrastructure Trust hereby assigns the
foregoing Borrower Bond to First Union National Bank, as Trustee under the
"Environmental Infrastructure Bond Resolution, Series 1999B", adopted on
September 20, 1999, as amended and supplemented, all as of the date of this
Borrower Bond, as security for the Trust Bonds issued or to be issued under the
Bond Resolution to finance or refinance the Project Fund (as defined in the Bond
Resolution).
NEW JERSEY ENVIRONMENTAL
INFRASTRUCTURE TRUST
[SEAL]
ATTEST: By:_______________________
Barton E. Harrison
Vice-Chairman
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Robert A. Briant, Sr.
Secretary
D-5
EXHIBIT E
Opinions of Borrower's Bond and General Counsels
See Closing Item No. 10.04
E-5
[LETTERHEAD OF COUNSEL TO BORROWER]
November 4, 1999
New Jersey Environmental Infrastructure Trust
P.O. Box 440
Trenton, New Jersey 08625
First Union National Bank
21 South Street
Morristown, New Jersey 07960
Ladies and Gentlemen:
We have acted as counsel to Middlesex Water Company, a corporation duly
organized and validly existing under the laws of the State of New Jersey (the
"Borrower"), which has entered into a Loan Agreement (as hereinafter defined)
with the New Jersey Environmental Infrastructure Trust (the "Trust"), and have
acted as such in connection with the authorization, execution, attestation and
delivery by the Borrower of its Loan Agreement and Borrower Bond (as hereinafter
defined) pursuant to the New Jersey Business Corporation Act, P.L. 1968, c. 263,
as amended (the "Business Corporation Law"), and an indenture of the Borrower
dated as of April 1, 1927 and entitled "Indenture of Mortgage", as amended and
supplemented, including by a supplemental indenture dated as of November 1, 1999
and entitled "Twenty-Sixth Supplemental Indenture" (such indentures shall be
collectively referred to herein as the "Resolution"). All capitalized terms used
but not defined herein shall have the meanings ascribed to such terms in the
Loan Agreement.
In so acting, we have examined the Constitution and laws of the State
of New Jersey, including, without limitation, the Business Corporation Law, and
the certificate of incorporation and by-laws of the Borrower. We have also
examined originals, or copies certified or otherwise identified to our
satisfaction, of the following:
(a) the Trust's "Environmental Infrastructure Bond Resolution, Series
1999B", adopted by the Board of Directors of the Trust on September 20, 1999;
(b) the Loan Agreement dated as of November 1, 1999 (the "Loan
Agreement") by and between the Trust and the Borrower;
(c) the proceedings of the board of directors of the Borrower relating
to the approval of the Loan Agreement and the execution, attestation and
delivery thereof on behalf of the Borrower and the authorization of the
undertaking and completion of the Project;
(d) the Borrower Bond dated as of October 15, 1999 (the "Borrower
Bond") issued by the Borrower to the Trust to evidence the Loan; and
(e) the proceedings (together with the proceedings referred to in
clause (c) above and Section 5 below, the "Proceedings") of the board of
directors of the Borrower, including, without limitation, the Resolution,
relating to the authorization of the Borrower Bond and the sale, execution,
attestation, authentication and delivery thereof to the Trust (the Loan
Agreement and the Borrower Bond are referred to herein collectively as the "Loan
Documents").
We have also examined and relied upon originals, or copies certified or
otherwise authenticated to our satisfaction, of such other records, documents,
certificates and other instruments, and have made such investigation of law as
in our judgment we have deemed necessary or appropriate, to enable us to render
the opinions expressed below.
E-2
We are of the opinion that:
1. The Borrower is a corporation duly created and validly existing
under and pursuant to the Constitution and statutes of the State of New Jersey,
including the Business Corporation Law, with the legal right to carry on the
business of its Environmental Infrastructure System as currently being conducted
and as proposed to be conducted.
2. The Borrower has full legal right and authority to execute, attest
and deliver the Loan Documents, to sell the Borrower Bond to the Trust, to cause
the authentication of the Borrower Bond, to observe and perform its duties,
covenants, obligations and agreements under the Loan Documents and to undertake
and complete the Project.
3. The acting officials of the Borrower who are contemporaneously
herewith performing or have previously performed any action contemplated in the
Loan Agreement are, and at the time any such action was performed were, the duly
appointed or elected officials of the Borrower empowered by applicable New
Jersey law and authorized by resolution of the Borrower to perform such actions.
4. The proceedings of the Borrower's board of directors (i) approving
the Loan Documents, (ii) authorizing their execution, attestation and delivery
on behalf of the Borrower, (iii) with respect to the Borrower Bond only,
authorizing its sale by the Borrower to the Trust and authorizing its
authentication on behalf of the Borrower, (iv) authorizing the Borrower to
consummate the transactions contemplated by the Loan Documents, (v) authorizing
the Borrower to undertake and complete the Project, and (vi) authorizing the
execution and delivery of all other certificates, agreements, documents and
instruments in connection with the execution, attestation and delivery of the
Loan Documents, have each been duly and lawfully adopted and authorized in
accordance with applicable law and applicable resolutions of the Borrower,
including, without limitation, the Resolution, the other Proceedings and the
Business Corporation Law, which Proceedings constitute all of the actions
necessary to be taken by the Borrower to authorize its actions contemplated by
clauses (i) through (vi) above and which Proceedings, including, without
limitation, the Resolution, were duly adopted in accordance with applicable New
Jersey law at a meeting or meetings duly called and held in accordance with
applicable New Jersey law and at which quorums were present and acting
throughout.
5. The Loan Documents have been duly authorized, executed, attested and
delivered by the Authorized Officers of the Borrower, the Borrower Bond has been
duly sold by the Borrower to the Trust, and the Borrower Bond has been duly
authenticated by the trustee or paying agent under the Resolution; and assuming
in the case of the Loan Agreement that the Trust has the requisite power and
authority to authorize, execute, attest and deliver, and has duly authorized,
executed, attested and delivered, the Loan Agreement, the Loan Documents
constitute the legal, valid and binding obligations of the Borrower, enforceable
against the Borrower in accordance with their respective terms, subject,
however, to the effect of, and to restrictions and limitations imposed by or
resulting from, bankruptcy, insolvency, moratorium, reorganization or other
similar laws affecting creditors' rights generally. No opinion is rendered as to
the availability of any particular remedy.
6. The authorization, execution, attestation and delivery of the Loan
Documents by the Borrower and, in the case of the Borrower Bond only, the
authentication thereof by the trustee or paying agent under the Resolution and
the sale thereof to the Trust, the observation and performance by the Borrower
of its duties, covenants, obligations and agreements thereunder, the
consummation of the transactions contemplated therein, and the undertaking and
completion of the Project do not and will not (i) other than the lien, charge or
encumbrance created by the Loan Documents, by the Resolution and by any other
outstanding debt obligations of the Borrower that are at parity with the
E-3
Borrower Bond as to lien on, and source and security for payment thereon from,
the revenues of the Borrower, result in the creation or imposition of any lien,
charge or encumbrance upon any properties or assets of the Borrower pursuant to,
(ii) result in any breach of any of the terms, conditions or provisions of, or
(iii) 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.
7. All approvals, consents or authorizations of, or registrations of or
filings with, any governmental or public agency, authority or person required to
date on the part of the Borrower in connection with the authorization,
execution, attestation, delivery and performance of the Loan Documents, the sale
of the Borrower Bond and the undertaking and completion of the Project have been
obtained or made.
8. There is no litigation or other proceeding pending or, to our
knowledge, after due inquiry, threatened in any court or other tribunal of
competent jurisdiction (either State or federal) (i) questioning the creation,
organization or existence of the Borrower, (ii) questioning the validity,
legality or enforceability of the Resolution, the Loan or the Loan Documents,
(iii) questioning the undertaking or completion of the Project, (iv) otherwise
challenging the Borrower's ability to consummate the transactions contemplated
by the Loan or the Loan Documents, or (v) that, if adversely decided, would have
a materially adverse impact on the financial condition of the Borrower.
9. The Borrower has no bonds, notes or other debt obligations
outstanding that are superior or senior to the Borrower Bond as to lien on, and
source and security for payment thereof from, the revenues of the Borrower.
10. We have consulted with the Borrower and have advised the Borrower
as to the obligations to which the Borrower has agreed in subsections (f) and
(h) of Section 2.02 of the Loan Agreement. We have further advised the Borrower
of the possible consequences that might follow, should the Borrower fail to
comply with its obligations under those subsections of Section 2.02. To the best
of our knowledge, upon due inquiry, (i) all representations made by the Borrower
contained within subsections (f) and (h) of Section 2.02 and, if applicable,
Exhibit F of the Loan Agreement are true, accurate and complete, (ii) we have no
reason to believe that any of the expectations expressed by the Borrower therein
is unreasonable, and (iii) we know of no reason why the Borrower would be unable
to comply on a continuing basis with the covenants contained within subsections
(f) and (h) of Section 2.02 and, if applicable, Exhibit F of the Loan Agreement.
11. Assuming that (i) the Borrower complies on a continuing basis with
the covenants contained in subsections (f) and (h) of Section 2.02 and, if
applicable, Exhibit F of the Loan Agreement, (ii) interest on the Trust Bonds is
otherwise excluded from gross income of the holders thereof for federal income
tax purposes under Section 103(a) of the Internal Revenue Code of 1986, as
amended, and (iii) the proceeds of the Trust Bonds loaned to the Borrower
represent all of the proceeds of the Trust Bonds, the application of the
proceeds of the Loan for their intended purposes will not adversely affect the
exclusion from gross income for federal
E-4
income tax purposes of the interest on the Trust Bonds under Section 103 (a) of
the Internal Revenue Code of 1986, as amended.
We hereby authorize McCarter & English, LLP, acting as bond counsel to
the Trust, and the Attorney General of the State of New Jersey, acting as
general counsel to the Trust, to rely on this opinion as if we had addressed
this opinion to them in addition to you.
Very truly yours,
E-5
EXHIBIT F
Additional Covenants and Requirements
[None]
F-1
EXHIBIT G
General Administrative Requirements for the
State Environmental Infrastructure Financing Program
G-1
EXHIBIT H
Form of Continuing Disclosure Agreement
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