Exhibit 10.46


 


 


 


 


 


 


LOAN AGREEMENT


BY AND BETWEEN


THE STATE OF NEW JERSEY,


ACTING BY AND THROUGH THE NEW JERSEY


DEPARTMENT OF ENVIRONMENTAL PROTECTION,


AND


MIDDLESEX WATER COMPANY


 


 


 


 


 


 


DATED AS OF MAY 1, 2018




    


     


    
 

TABLE OF CONTENTS


	 	 	Page
	ARTICLE I
	 
	DEFINITIONS
	 
	SECTION 1.01.	Definitions	2
	 	 	 
	ARTICLE II
	 
	REPRESENTATIONS AND COVENANTS OF BORROWER
	 
	SECTION 2.01.	Representations of Borrower	6
	SECTION 2.02.	Particular Covenants of Borrower	9
	 	 	 
	ARTICLE III
	 
	LOAN TO BORROWER; AMOUNTS PAYABLE; GENERAL AGREEMENTS
	 
	SECTION 3.01.	Loan; Loan Term	14
	SECTION 3.02.	Disbursement of Loan Proceeds	15
	SECTION 3.03.	Amounts Payable	16
	SECTION 3.03A.	Amounts on Deposit in Project Loan Account after Completion of Project Draws	17
	SECTION 3.04.	Unconditional Obligations	17
	SECTION 3.05.	Loan Agreement to Survive Loan	18
	SECTION 3.06.	Disclaimer of Warranties and Indemnification	18
	SECTION 3.07.	Option to Prepay Loan Repayments	19
	SECTION 3.08.	Priority of Loan and I-Bank Loan	19
	SECTION 3.09.	Approval of the New Jersey State Treasurer	20
	 	 	 
	ARTICLE IV
	 
	ASSIGNMENT OF LOAN AGREEMENT AND BORROWER BOND
	 
	SECTION 4.01.	Assignment and Transfer by State	21
	SECTION 4.02.	Assignment by Borrower	21
	 	 	 
	ARTICLE V
	 
	EVENTS OF DEFAULT AND REMEDIES
	 
	SECTION 5.01.	Events of Default	22
	SECTION 5.02.	Notice of Default	23
	SECTION 5.03.	Remedies on Default	23
	SECTION 5.04.	Attorneys’ Fees and Other Expenses	23



 



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TABLE OF CONTENTS


 


	SECTION 5.05.	Application of Moneys	23
	SECTION 5.06.	No Remedy Exclusive; Waiver; Notice	23
	SECTION 5.07.	Retention of State’s Rights	24
	 	 	 
	ARTICLE VI
	 
	MISCELLANEOUS
	 
	SECTION 6.01.	Notices	25
	SECTION 6.02.	Binding Effect	25
	SECTION 6.03.	Severability	25
	SECTION 6.04.	Amendments, Supplements and Modifications	25
	SECTION 6.05.	Execution in Counterparts	26
	SECTION 6.06.	Applicable Law and Regulations	26
	SECTION 6.07.	Consents and Approvals	26
	SECTION 6.08.	Captions	26
	SECTION 6.09.	Further Assurances	26


 


 


	SCHEDULE A 	Certain Additional Loan Agreement Provisions	S-1
	 	 	 
	EXHIBIT A	(1) Description of Project and Environmental Infrastructure System	A-1
	 	(2) Description of Loan	A-2
	 	 	 
	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 Counsel and General Counsel	E-1
	 	 	 
	EXHIBIT F	Additional Covenants and Requirements	F-1
	 	 	 
	EXHIBIT G	General Administrative Requirements for the New Jersey Water Bank	G-1
	 	 	 




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NEW JERSEY
WATER BANK FUND LOAN AGREEMENT


THIS LOAN AGREEMENT,
made and entered into as of May 1, 2018 by and between THE STATE OF NEW JERSEY, acting by and through the New Jersey Department
of Environmental Protection, and the Borrower (capitalized terms used in this Loan Agreement shall have, unless the context otherwise
requires, the meanings ascribed thereto in Section 1.01 hereof);


WITNESSETH
THAT:


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


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


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


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


WHEREAS, in
accordance with the New Jersey Infrastructure Trust Act, P.L. 1985, c. 334, as amended, and the Regulations, the Borrower has been
awarded an I-Bank Loan for a portion of the Costs of the Project plus, if applicable to the Borrower, capitalized interest on the
I-Bank Loan and certain costs of issuance.


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




     


     


    


ARTICLE
I



DEFINITIONS


SECTION
1.01.       Definitions.


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


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


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


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


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


“Borrower
Bond” means the general obligation bond, note, debenture or other evidence of indebtedness authorized, executed, attested
and delivered by the Borrower to the State 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.


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


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


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


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



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


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


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


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


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


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


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


“I-Bank
Loan” means the loan made to the Borrower by the I-Bank pursuant to the I-Bank Loan Agreement.


“I-Bank
Loan Agreement” means the loan agreement by and between the Borrower and the I-Bank dated as of May 1, 2018 to finance
or refinance a portion of the Costs of the Project.


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


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


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


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



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


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


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


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


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


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


“Regulations”
means the rules and regulations, as applicable, now or hereafter promulgated under N.J.A.C. 7:22-3 et seq., 7:22-4 et
seq., 7:22-5 et seq., 7:22-6 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, acting, unless otherwise specifically indicated, by and through the Department, and its successors
and assigns.


“Trustee”
means, initially, ZB, National Association d/b/a Zions Bank, the Trustee appointed by the I-Bank and its successors as Trustee
under the Bond Resolution (as defined in the I-Bank Loan Agreement), as provided in Article X of the Bond Resolution.


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



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




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ARTICLE
II



REPRESENTATIONS AND COVENANTS OF BORROWER


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


(a)       Organization
and Authority.


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


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


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


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


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



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the execution, delivery
and due performance of any and all other certificates, agreements and instruments that may be required to be executed, delivered
and performed by the Borrower in order to carry out, give effect to and consummate the transactions contemplated by this Loan Agreement.


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


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


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


(d)       Compliance
with Existing Laws and Agreements. (i) The authorization, execution, attestation and delivery of this Loan Agreement and the
Borrower Bond by the Borrower, (ii) the authentication of the Borrower Bond by the trustee or paying agent under the Borrower Bond
Resolution, as the case may be, and the sale of the Borrower Bond to the State, 



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


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


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



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governmental body or officer that has not been obtained
is required on the part of the Borrower as a condition to the authorization, execution, attestation and delivery of this Loan Agreement
and the Borrower Bond, the issuance of the Borrower Bond and the sale thereof to the State, the undertaking or completion of the
Project or the consummation of any transaction herein contemplated.


(g)       Compliance
with Law. The Borrower:


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


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


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


SECTION
2.02.Particular Covenants of Borrower.


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


(b)       Performance
Under Loan Agreement; Rates. The Borrower covenants and agrees (i) to comply with all applicable state and federal laws, rules
and regulations in the performance of this Loan Agreement; (ii) to maintain its Environmental Infrastructure System in good repair
and operating condition; (iii) to cooperate with the State in the observance and performance of the respective duties, covenants,
obligations and agreements of the Borrower and the State under this Loan Agreement; and (iv) to establish, levy and collect rents,
rates and other charges for the products and services provided by its Environmental Infrastructure System, which rents, rates 



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and
other charges shall be at least sufficient to comply with all covenants pertaining thereto contained in, and all other provisions
of, any bond resolution, trust indenture or other security agreement, if any, relating to any bonds, notes or other evidences of
indebtedness issued or to be issued by the Borrower, including without limitation rents, rates and other charges, together with
other available moneys, sufficient to pay the principal of, and interest if any on, the Borrower Bond, plus all other amounts due
hereunder.


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


(d)       Completion
of Project and Provision of Moneys Therefor. The Borrower covenants and agrees (i) to exercise its best efforts in accordance
with prudent environmental infrastructure utility practice to complete the Project and to accomplish such completion on or before
the estimated Project completion date set forth in Exhibit C 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 I-Bank Loan, required to complete the Project.


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


(f)       Reserved.


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



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Infrastructure System so that at all times
the business carried on in connection therewith shall be properly and advantageously conducted.


(h)       Records
and Accounts.


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


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


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


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



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


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


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


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


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


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


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


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


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



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




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ARTICLE
III



LOAN TO BORROWER; AMOUNTS PAYABLE; GENERAL AGREEMENTS


SECTION
3.01.       Loan; Loan Term.


(a)       The
State hereby agrees (i) to make the Loan as described in Exhibit A-2 attached hereto and made a part hereof, to the Borrower, and
(ii) to disburse proceeds of the Loan to the Borrower in accordance with Section 3.02 and Exhibit C hereof. The Borrower hereby
agrees to borrow and accept the Loan from the State upon the terms set forth in Exhibit A-2 attached hereto and made a part hereof.
The Borrower hereby agrees to borrow and accept the Loan from the State upon the terms set forth in Exhibit A-2 attached hereto
and made a part hereof. The Borrower agrees that the aggregate principal amount set forth in Exhibit A-2 hereto shall constitute
the initial principal amount of the Loan (as the same may be adjusted downward in accordance with the definition thereof), and
the State shall have no obligation thereafter to loan any additional amounts to the Borrower.


(b)       Notwithstanding
the provisions of subsection (a) of this Section 3.01 to the contrary, the State shall be under no obligation (i) to make the Loan
to the Borrower if (1) at the Loan Closing, the Borrower does not deliver to the State a Borrower Bond and such other documents
as are required pursuant to Section 2.02(l) hereof, or (2) an Event of Default has occurred and is continuing pursuant to this
Loan Agreement, or (ii) to disburse the proceeds of the Loan to the Borrower in accordance with section 3.02 and Exhibit C hereof,
unless each of the conditions precedent to such disbursement, as set forth in section 3.02 hereof, have been satisfied in full.
The State intends to disburse the proceeds of the Loan to the Borrower at the times and in the amounts set forth in Exhibit C hereof
in order to pay a portion of the Costs of the Project, subject to compliance by the Borrower with the procedures for disbursement
as set forth in Section 3.02 hereof; nevertheless, due to unforeseen circumstances, there may not be a sufficient amount on deposit
in the State Fund on a given disbursement date in order for the State to make the disbursement in the amount indicated in Exhibit
C hereof so as to satisfy a Loan disbursement request by the Borrower pursuant to the provisions of Section 3.02 hereof, in which
case (1) the State shall have no obligation hereunder to make such disbursement until such time as sufficient funds are on deposit
in the State Fund, and (2) the obligations of the Borrower hereunder shall not be affected.


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


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


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



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SECTION
3.02.       Disbursement of Loan Proceeds.


(a)       The
State shall disburse Federal Funds to the Borrower (i) upon receipt of a requisition executed by an Authorized Officer of the Borrower
in a form satisfying the requirements of the Regulations, and (ii) consistent with the schedule for disbursement as set forth in
Exhibit C hereof.


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


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


(ii)       there
shall be Federal Funds for disbursement, as determined by the State in its sole and absolute discretion;


(iii)       in
accordance with the “New Jersey Infrastructure Trust Act”, P.L. 1985, c. 334, as amended (N.J.S.A. 58:11B-1 et seq.),
and the Regulations, the Borrower shall have timely applied for, shall have been awarded and, prior to or simultaneously with the
Loan Closing, shall have closed a I-Bank Loan for a portion of the Allowable Costs (as defined in such Regulations) of the Project,
plus the amount of: (i) capitalized interest during the Project construction period, if any, (ii) the cost of funding reserve capacity
for the Project, if any, as well as that portion of the Debt Service Reserve Fund (as defined in the I-Bank Loan Agreement) (to
the extent the I-Bank establishes a Debt Service Reserve Fund pursuant to the Bond Resolution) attributable to the cost of funding
such reserve capacity for the Project, (iii) certain issuance expenses related thereto, including, if applicable, a municipal bond
insurance policy premium, and (iv) if applicable, an amount sufficient to pay the interest that accrued on the short-term loan
by the I-Bank to the Borrower;


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


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


(c)       Notwithstanding
any provision of this Loan Agreement to the contrary, the State, at the request of the Borrower but at the sole discretion of the
State, may disburse Loan proceeds to the Borrower from Federal Funds either prior to or subsequent to the scheduled date for disbursement
thereof as such scheduled date is identified in the disbursement schedule set forth in Exhibit C hereof, provided that (A) the
Borrower has otherwise satisfied the requirements of this Section 3.02, and (B) such disbursement, in a manner that is inconsistent
with the disbursement schedule as set forth in Exhibit C hereof, does not conflict with any restrictions set forth in the Regulations.



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In the event that, in the
submission of its requisition(s), the Borrower fails to comply with the disbursement schedule as set forth in Exhibit C hereof,
and such non-compliance by the Borrower consists of (i) a failure to timely seek disbursement of Loan proceeds which failure results
in an amount of non-disbursed funds, subsequent to the date on which such funds should have been disbursed pursuant to the disbursement
schedule set forth in Exhibit C hereof, that, in the aggregate, represents twenty-five percent (25%) of the original principal
amount of the Loan, or (ii) a failure to timely seek disbursement of Loan proceeds which failure results in an amount of funds
disbursed earlier than the date on which such funds were scheduled to have been disbursed pursuant to the disbursement schedule
set forth in Exhibit C hereof, that, in the aggregate, represents twenty-five percent (25%) of the original principal amount of
the Loan, then the Borrower shall provide to the I-Bank and the Department a certificate of an Authorized Officer of the Borrower
providing a revised disbursement schedule, in a form similar to Exhibit C hereto and approved by the Department. Any reference
to Exhibit C in Section 3.01, Section 3.02 and Section 3.03A hereof shall mean Exhibit C as such exhibit may have been revised
from time to time pursuant to the provisions of the preceding sentence.


 


SECTION
3.03.       Amounts Payable.


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


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


(c)       In
addition to the Loan Repayments payable under subsections (a) and (b) of this Section 3.03, the Borrower shall pay one-half of
the Administrative Fee, if any, to the Trustee semiannually on each February 1 and August 1, commencing August 1, 2018.


(d)       Upon
thirty (30) days prior written notice to the Borrower, an Authorized Officer of the State may, in the sole discretion of such Authorized
Officer, prescribe the particular method by which payments pursuant to, and in satisfaction of, this Section 3.03 shall be made
by the Borrower. Such method as prescribed by an Authorized Officer of the State may include, 



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without limitation, the automatic
debit by the State or the Trustee of the respective amounts of such payments, as required by this Section 3.03, from an account
that shall be identified by the Borrower in writing and recorded on file with the State. In the absence of any such written notice
to the Borrower by an Authorized Officer of the State pursuant to this subsection (d), the Borrower shall implement the payments
required pursuant to, and in satisfaction of, this Section 3.03 either via electronic transfer of immediately available funds or
via check.


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


(a)       If,
on the date which is thirty (30) days following the final date on which a disbursement of Loan proceeds is scheduled to be made
pursuant to the disbursement schedule contained in Exhibit C hereto, any amounts remain on deposit in the Borrower’s Project
Loan Account, the Borrower shall provide to the I-Bank and the Department a certificate of an Authorized Officer of the Borrower
(i) stating that the Borrower has not yet completed the Project, (ii) stating that the Borrower intends to complete the Project,
(iii) setting forth the amount of remaining Loan Proceeds required to complete the Project, and (iv) providing a revised disbursement
schedule, in a form similar to Exhibit C hereto and approved by the Department.


(b)       If,
on the date which is thirty (30) days following the final date on which a disbursement of Loan proceeds is scheduled to be made
pursuant to the revised disbursement schedule certified to the I-Bank and the Department in accordance with Section 3.03A(a)
hereof, any amounts remain on deposit in the Borrower’s Project Loan Account, the Borrower shall provide to the I-Bank and
the Department a certificate of an Authorized Officer of the Borrower (i) stating that the Borrower has not yet completed the Project,
(ii) stating that the Borrower intends to complete the Project, (iii) setting forth the amount of remaining Loan Proceeds required
to complete the Project, and (iv) providing a further revised disbursement schedule, in a form similar to Exhibit C hereto and
approved by the Department.


(c)       If
(i) the Borrower fails to provide the certificate described in paragraphs (a) or (b) of this Section 3.03A, when due, or (ii) a
certificate provided pursuant to paragraphs (a) or (b) of this Section 3.03A states that the Borrower does not require all or any
portion of the amount on deposit in the Project Loan Account for completion of the Project, or (iii) on the date which is thirty
(30) days following the final date on which a disbursement of Loan proceeds is scheduled to be made pursuant to a further revised
disbursement schedule certified to the I-Bank and the Department in accordance with Section 3.03A(b) hereof, any amounts remain
on deposit in the Borrower’s Project Loan Account, then such amounts on deposit in the Project Loan Account, which are amounts
that have not been certified by an Authorized Officer of the Borrower as being required to complete the Project (“Excess
Project Funds”), be applied by the State as a prepayment of the Borrower’s Loan Repayments, and shall be applied to
the principal payments (including premium, if any) on the Loan in inverse order of their maturity.


SECTION
3.04.       Unconditional Obligations. The obligation of the Borrower to make the Loan Repayments and all other payments
required hereunder and the obligation to perform and observe the other duties, covenants, obligations and agreements on its part
contained herein shall be absolute and unconditional, and shall not be abated, rebated, set-off, 



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


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


SECTION
3.06.       Disclaimer of Warranties and Indemnification.


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


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


(c)       In
connection with its obligation to provide the insurance required under Section 2.02(j) hereof: (i) the Borrower shall include,
or cause to be included, the State and its employees and officers as additional “named insureds” on (A) any certificate
of liability 



    -18- 


     


    

insurance procured by the Borrower (or other similar document evidencing the liability insurance coverage procured
by the Borrower) and (B) any certificate of liability insurance procured by any contractor or subcontractor for the Project, and
from the later of the date of the Loan Closing or the date of the initiation of construction of the Project until the date the
Borrower receives the written certificate of Project completion from the State, the Borrower shall maintain said liability insurance
covering the State and said employees and officers in good standing; and (ii) the Borrower shall include the State as an additional
“named insured” on any certificate of insurance providing against risk of direct physical loss, damage or destruction
of the Environmental Infrastructure System, and during the Loan Term the Borrower shall maintain said insurance covering the State
in good standing.


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


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


SECTION
3.08.       Priority of Loan and I-Bank Loan.


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


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



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


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


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




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ARTICLE
IV



ASSIGNMENT OF LOAN AGREEMENT AND BORROWER BOND


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


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




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ARTICLE
V



EVENTS OF DEFAULT AND REMEDIES


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


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


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


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


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


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


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



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


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


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


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


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


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


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



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




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ARTICLE
VI



MISCELLANEOUS


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


(a)       State:


New Jersey Department of
Environmental Protection


Municipal Finance and Construction
Element


401 East State Street –
3rd Floor


Trenton, New Jersey 08625-0425


Attention: Assistant
Director


New Jersey Department of
the Treasury


Office of Public Finance


State Street Square –
5th Floor


Trenton, New Jersey 08625-0002


Attention: Director


(b)       Trustee:


ZB, National Association
d/b/a Zions Bank


401 Liberty Avenue, Suite
1729


Pittsburgh, Pennsylvania
15222


Attention: Corporate
Trust Department


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


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


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


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



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


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


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


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


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




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


 


	 	 	
        THE STATE OF NEW JERSEY

        ACTING BY AND THROUGH THE

        NEW JERSEY DEPARTMENT OF

        ENVIRONMENTAL PROTECTION

         

         

         

	[SEAL]	 	By:	/s/Michele Putnam
	 	 	 	
        Michele Putnam

        Acting Assistant Commissioner

        Water Resource Management

        Department of Environmental Protection

	
        ATTEST:

         
	 	 	 
	 	 	 	 
	/s/Eugene J. Chebra, P.E.	 	 	 
	
        Eugene J. Chebra, P.E.

        Assistant Director

        Municipal Finance and Construction Element

        Department of Environmental Protection
	 	 	 
	 	 	
         

         

         

        MIDDLESEX WATER COMPANY

	
         

        [SEAL]
	 	 	 
	 	 	 	 
	 	 	By:	/s/A. Bruce O’Connor
	ATTEST:	 	 	A. Bruce O’Connor, Vice
	
         

         
	 	 	President, Treasurer and Chief
	/s/Jay L. Kooper	 	 	 
	Jay L. Kooper, Vice President, General

 Counsel and Secretary	 	 	 


 


[signature page] 




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SCHEDULE A



Certain Additional Loan Agreement Provisions


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


Additional Definitions:


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


“Borrower
Bond Resolution” means the indenture of the Borrower dated as of April 1, 1927 and entitled “Indenture of Mortgage”,
as amended and supplemented from time to time, in particular by a supplemental indenture detailing the terms of the Borrower Bond
dated as of May 1, 2018 and entitled “Fifty-First Supplemental Indenture”, pursuant to which the Borrower Bond has
been issued.


“Principal
Payment Dates” means February 1 and August 1 of each year, commencing on August 1, 2018.


SECTION 2.02(e):


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


 








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