Document:

Exhibit 4.1

 

 

THE BANK OF NEW YORK MELLON

NEW YORK’S FIRST BANK-FOUNDED 1784 BY ALEXANDER HAMILTON

 

 

2 HANSON PLACE, 12TH FLOOR, BROOKLYN,
N.Y. 11217

 

 

 

March 7, 2013

 

Hennion & Walsh, Inc.

2001 Route 46, Waterview Plaza

Parsippany, New Jersey 07054

 

Smart Trust, New Jersey Municipal Portfolio
of Closed-End Funds Trust, Series 2

Dear Sirs:

The Bank of New York
Mellon is acting as trustee for Smart Trust, New Jersey Municipal Portfolio of Closed-End Funds Trust, Series 2 set forth above
(the “Trust”). We enclosed a list of the Securities to be deposited in the Trust on the date hereof. The prices
indicated therein reflect our evaluation of such Securities as of close of business on March 7, 2013, in accordance with the valuation
method set forth in the Trust Indenture and Agreement. We consent to the reference to The Bank of New York Mellon as the party
performing the evaluations of the Trust Securities in the Registration Statement (No. 333-186373) filed with the Securities and
Exchange Commission with respect to the registration of the sale of the Trust Units and to the filing of this consent as an exhibit
thereto.

 

	Very truly yours,
	 
	/s/ GERARDO CIPRIANO
	Gerardo Cipriano
	Vice PresidentExhibit 4.3

Consent of Independent Registered
Public Accounting Firm

We consent to the
reference made to our firm under the caption “Independent Registered Public Accounting Firm” in Part B of the Prospectus
and to the use of our report dated March 7, 2013, in this Registration Statement (Form S-6 No. 333-186373) of Smart Trust, New
Jersey Municipal Portfolio of Closed-End Funds Trust, Series 2.

 

/s/ Grant
Thornton LLP

Grant
Thornton LLP

Chicago, Illinois

March 7, 2013Exhibit 10.41

 

LOAN
AGREEMENT

by and between

NEW JERSEY
ECONOMIC DEVELOPMENT AUTHORITY

and

MIDDLESEX
WATER COMPANY

 

Dated as of November 1, 2012

 

 

Subject to the
“Reserved Rights”, as defined in the Indenture of Trust dated as of the date hereof between the New Jersey Economic
Development Authority (the “Authority”) and Deutsche Bank National Trust Company (the “Trustee”), as trustee
therein (the “Indenture”), certain rights of the Authority in this Loan Agreement have been assigned pursuant to the
Indenture and are subject to the security interest of the Trustee.

    	 

    	 

    

TABLE OF CONTENTS

 

ARTICLE I

 

	DEFINITIONS	 	2
	 	 	 
	ARTICLE II
	REPRESENTATIONS, COVENANTS AND WARRANTIES
	 	 	 
	Section 2.01.	Representations, Covenants and Warranties of Authority	8
	Section 2.02.	Representations, Covenants and Warranties of the Company	8
	Section 2.03.	Public Purpose Representations and Covenants	9
	Section 2.04.	Non-Arbitrage Covenant	12
	Section 2.05.	Arbitrage and Rebate.	12
	Section 2.06.	Other Tax Matters	15
	Section 2.07.	Costs and Expenses	16
	Section 2.08.	Insurance	16
	Section 2.09. 	Filing of Other Documents.	17
	 	 	 
	ARTICLE III
	ISSUANCE OF THE BONDS
	 	 	 
	Section 3.01.	Agreement To Issue Bonds; Application of Bond Proceeds	18
	Section 3.02.	First Mortgage Bonds	18
	Section 3.03.	Conditions Precedent to Financing	19
	Section 3.04.	Disbursements From Redemption Fund	19
	Section 3.05.	Investment of Moneys	19
	 	 	 
	ARTICLE IV
	LOAN PROCEEDS TO COMPANY; LOAN PROVISIONS;
	PROVISIONS RELATING TO THE PROJECTS
	 	 	 
	Section 4.01.	Loan of Proceeds	20
	Section 4.02.	Amounts Payable	20
	Section 4.03.	Obligations of Company Hereunder Unconditional	21
	Section 4.04.	Preservation of Projects	21
	Section 4.05.	Taxes and Governmental Charges	21
	Section 4.06.	Limitation of Authority’s Liability	22
	 	 	 
	ARTICLE V
	SPECIAL COVENANTS AND AGREEMENTS
	 	 	 
	Section 5.01.	No Warranty of Condition or Suitability by Authority	23
	Section 5.02.	Further Assurances and Corrective Instruments	23
	Section 5.03.	Authority and Company Representatives	23
	

    	 

    	 

    

	 	 	 
	 	 	 
	ARTICLE VI
	INDEMNIFICATION AND REDEMPTION
	 	 	 
	Section 6.01.	[Intentionally Omitted.]	24
	Section 6.02.	Indemnification Covenants	24
	Section 6.03.	Assignment of Interest in This Agreement by Authority	25
	Section 6.04.	Optional Redemption of Bonds	25
	Section 6.05.	References to Bonds Ineffective After Bonds Paid	25
	Section 6.06.	Authority To Grant Security Interest to Trustee	25
	 	 	 
	ARTICLE VII
	EVENTS OF DEFAULT AND REMEDIES
	 	 	 
	Section 7.01.	Events of Default Defined	26
	Section 7.02.	Remedies on Default	27
	Section 7.03.	No Remedy Exclusive	28
	Section 7.04.	Agreement To Pay Attorneys’ Fees and Expenses	28
	Section 7.05.	No Additional Waiver Implied by One Waiver	28
	Section 7.06.	Additional Remedies	29
	Section 7.07.	Waiver	29
	 	 	 
	ARTICLE VIII
	OPTIONS; PREPAYMENT OF LOAN
	 	 	 
	Section 8.01.	Option To Terminate at Any Time	30
	Section 8.02.	Option To Prepay Loan Upon the Occurrence of Certain Events	30
	 	 	 
	ARTICLE IX
	OBLIGATION TO PREPAY LOAN IN CERTAIN EVENTS
	 	 	 
	Section 9.01.	Determination of Taxability.	32
	Section 9.02.	Public Purpose Covenant Violations.	33
	 	 	 
	 	 	 
	ARTICLE X
	MISCELLANEOUS
	 	 	 
	Section 10.01.	Term of Agreement	34
	Section 10.02.	Notices	34
	Section 10.03.	Binding Effect	34
	Section 10.04.	Severability	34
	Section 10.05.	Amounts Remaining in Bond Fund	35
	Section 10.06.	Amendments, Changes and Modifications	35
	Section 10.07.	No Personal Liability of Company Officials	35
	

    	ii

    	 

    

	Section 10.08.	Authority Not Liable	35
	Section 10.09.	Delegation of Duties by Authority	36
	Section 10.10.	Execution in Counterparts	36
	Section 10.11.	Applicable Law	36
	Section 10.12.	Captions	36
	Section 10.13.	Application of New Jersey Contractual Liability Act	366

 

Exhibit A
– Form of First Mortgage Bonds

 

Schedule A
– List of Project Municipalities

 

    	iii

    	 

    

 

LOAN AGREEMENT

 

THIS LOAN AGREEMENT
by and between the NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY (the “Authority”), a public body corporate and
politic constituting an instrumentality of the State of New Jersey, and MIDDLESEX WATER COMPANY (the “Company”),
a corporation that is a regulated public utility company organized under the laws of the State of New Jersey, is dated as of November
1, 2012.

Capitalized terms and phrases used in these
Recitals and not otherwise defined shall have the meanings ascribed to them in Article I of this Agreement.

 

WHEREAS, the Authority
is a public body corporate and politic constituting an instrumentality of the State, organized and existing under the Act and is
authorized under the Act (i) to extend credit or make loans to any person for the planning, designing, acquiring, constructing,
reconstructing, improving, equipping and furnishing of a project, which credit or loans may be secured by loan and security agreements,
mortgages, leases, and any other instruments, upon such terms and conditions as the Authority shall deem reasonable; (ii) to require
the inclusion in any mortgage, lease, contract, loan and security agreement or other instruments, of such provisions for the construction,
use, operation and maintenance and financing of a project as the Authority may deem necessary or desirable; and (iii) to enter
into contracts with respect to the planning, designing, financing, constructing, reconstructing, improving, equipping, furnishing,
operating and maintaining of a project, for such consideration and upon such terms and conditions as the Authority may determine
to be reasonable; and

 

WHEREAS,
the Authority, by resolution adopted on October 9, 2012 (the “Resolution”), and in furtherance of the purposes of the
Act, proposes to issue its $9,915,000 Water Facilities Refunding Revenue Bonds (Middlesex Water Company Project) Series 2012A (the
“Series A Bonds”), its $22,500,000 Water Facilities Refunding Revenue Bonds (Middlesex Water Company Project) Series
2012B (the “Series B Bonds”) and its $23,000,000 Water Facilities Refunding Revenue Bonds (Middlesex Water Company
Project) Series 2012C (the “Series C Bonds”) and to loan the proceeds of the Bonds to the Company, and the Company
desires to borrow the proceeds of the Bonds from the Authority, to refund the Authority’s Prior Bonds (as hereinafter defined),
the proceeds of which were used to finance or refinance all or a portion of the costs of the Projects referred to herein and further
described in the Prior Agreements (as hereinafter defined), upon the terms and conditions set forth herein;

WHEREAS,
Middlesex Water Company is the owner and operator of the Projects which were financed or refinanced with the proceeds of the Prior
Bonds, as they may at any time exist;

NOW, THEREFORE,
for and in consideration of the premises and the mutual covenants hereinafter contained, the parties hereto agree as follows:

    	 

    	 

    

 

ARTICLE
I

DEFINITIONS

 

All capitalized,
undefined terms used in this Agreement shall have meanings given them in the Indenture. In addition, the following words and phrases
shall have the following meanings:

“Act”
means The New Jersey Economic Development Act, constituting Chapter 80 of the Pamphlet Laws of 1974 of the State, approved on August
7, 1974, as amended and supplemented and as it may, from time to time, hereafter be amended or supplemented.

“Agreement”
means this Loan Agreement and any amendments and supplements hereto.

“Affirmative Action
Requirements” or “Affirmative Action Program” means the requirements of the Authority set forth in
the Authority Regulations and any other affirmative action requirements of the Authority from time to time announced, as the same
may from time to time be revised, amended or supplemented;

 

“Application”
shall mean the Company’s application to the Authority, dated July 26, 2012, seeking financial assistance for the refunding
of the Prior Bonds, and all attachments, exhibits, correspondence and modifications submitted in writing to the Authority in connection
therewith.

 

“Authority
Representative” means the person or persons at the time designated to act on behalf of the Authority by written certificate
furnished to the Company and the Trustee containing the specimen signatures of such person or persons and signed on behalf of the
Authority by its duly authorized agent.

“Bonds”
means, collectively, the Series A Bonds, the Series B Bonds and the Series C Bonds in the aggregate total principal amount of $55,415,000
authorized to be issued by the Authority pursuant to the Indenture and the Resolution.

“Bond Counsel”
means Wolff & Samson PC or another attorney or firm of attorneys of nationally recognized standing in the field of law relating
to municipal, state and public agency financing, selected by the Company and satisfactory to the Authority and the Trustee.

“Business
Day” means a day on which banking business is transacted, but not including any day on which banks are authorized to
be closed, in the city in which the Trustee has its corporate trust office and the city in which the Company has its principal
place of business.

“Code”
means the Internal Revenue Code of 1986, as amended.

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“Company"
shall mean Middlesex Water Company, a corporation that is a regulated public utility company organized under the laws of the State
of New Jersey, engaged principally in the treatment and distribution of water to customers and its successors or assigns.

 

“Company
Representative” means the person or persons at the time designated to act on behalf of Company by written certificate
furnished to the Authority and the Trustee containing the specimen signatures of such person or persons and signed on behalf of
the Company by the Vice President and Treasurer, any other Vice President or any Assistant Treasurer.

“Construction
Contract” shall mean, for purposes of the Prevailing Wage Provision, any contract or subcontract in the amount of $2,000
or more for construction, reconstruction, demolition, alteration, repair, or maintenance work, including painting and decorating,
undertaken in connection with the Projects and shall mean, for purposes of the Affirmative Action Program, any contract or subcontract
for construction, reconstruction, renovation or rehabilitation undertaken in connection with the Projects.

 

“Contractor”
shall mean the principal or general contractor or contractors engaged by the Company in the performance of a Construction Contract.

 

“Default”
and “Event of Default” mean with respect to any Default or Event of Default under this Agreement any occurrence
or event specified and defined by Section 7.01 hereof.

“Delivery
Date” means the date of delivery of the Bonds to the Underwriters.

"First Mortgage
Bonds" shall collectively mean the First Mortgage Bond, Series QQ in the aggregate principal amount of $9,915,000 due
October 1, 2023, the First Mortgage Bond, Series RR in the aggregate principal amount of $22,500,000 due October 1, 2038 and the
First Mortgage Bond, Series SS in the aggregate principal amount of $23,000,000 due October 1, 2047, of the Company issued under
and secured by the Mortgage Indenture and delivered to the Trustee, attached hereto as Exhibit A.

 

“Governmental
Authority” means

(1)           the
government of

(A)            the
United States of America or any State or other political subdivision thereof, or

(B)            any
other jurisdiction in which the Company or any other Subsidiary conducts all or any part of its business, or which asserts jurisdiction
over any properties of the Company or any other Subsidiary, or

(2)           any entity exercising executive,
legislative, judicial, regulatory or administrative functions of, or pertaining to, any such government.

 

“Income Exclusion”
means the exclusion of interest on the Bonds from gross income of the holders thereof for federal income tax purposes under Section
103(a) of the Code.

 

    	3

    	 

    

“Indemnified
Parties” means the Authority, any person who “controls” the Authority (within the meaning of Section 15 of
the Securities Act of 1933, as amended or Section 20 of the Securities
Exchange Act of 1934, as amended), and any member, officer, director, official, agent and employee of the Authority, the Trustee
or the State or its employees.

“Indenture”
means the Indenture of Trust dated as of November 1, 2012 between the Authority and the Trustee, pursuant to which the Bonds are
authorized to be issued, including any indenture supplemental thereto.

“Late Payment
Rate” means a rate of interest equal to the highest rate of interest borne by the Bonds.

“Mortgage Indenture”
shall mean the Indenture of Mortgage dated as of April 1, 1927, by and between the Company and the Mortgage Trustee, as trustee,
as supplemented by the Supplemental Mortgage Indenture.

 

“Mortgage Trustee”
shall mean U.S. Bank National Association, as successor trustee under the Mortgage Indenture, or any successor thereto.

 

“Net Proceeds”
shall mean the proceeds of the Bonds less any amounts placed in a reasonably required reserve or replacement fund within the meaning
of Section 148 of the Code.

 

“Permitted Investments”
means any one or more of the following investments, if and to the extent the same are then legal investments under the applicable
laws of the State for moneys proposed to be invested therein:

 

(i)           Bonds or other obligations
of the United States;

 

(ii)           Bonds or other
obligations, the payment of the principal and interest of which is unconditionally guaranteed by the United States;

 

(iii)           Direct obligations
issued by the United States or obligations guaranteed in full as to principal and interest by the United States or repurchase agreements
with a qualified depository bank or securities dealers fully collateralized by such obligations, maturing on or before the date
when such funds will be required for disbursement;

 

(iv)           Obligations
of state and local government and municipal bond issuers, which are rated investment-grade by either S&P or Moody’s or
other non-rated obligations of such issuers guaranteed or credit enhanced by a Person whose long-term debt or long-term deposits
or other obligations are rated investment-grade by either S&P or Moody’s;

 

(v)           Prime commercial
paper rated either “A-1” by S&P or “P-1” by Moody’s and, if rated by both, not less than “A-1”
by S&P and “P-1” by Moody’s;

 

(vi)           Bankers’
acceptances drawn on and accepted by commercial banks;

 

    	4

    	 

    

(vii)           Interests
in any money market fund or trust, the investments of which are restricted to obligations described in clauses (i) through (vi)
of this definition or obligations determined to be of comparable quality by the board of directors of such fund or trust; and

 

(viii)           Such other obligations as may
at any time hereafter be authorized by applicable law, provided that the Trustee may require as a condition to the investment of
funds under this clause (viii) there having first been delivered to the Trustee an opinion of Counsel to the effect that investment
in such other obligations is permitted under any applicable laws of the State.

 

“Prevailing Wage
Requirements” and “Prevailing Wage Provision” means the requirements of the Authority set forth in
the Authority Regulations and any other prevailing wage requirements of the Authority from time to time announced, as the same
may from time to time be revised, amended or supplemented.

 

“Prevailing Wage
Rate” shall mean the prevailing wage rate established by the Commissioner of the New Jersey Department of Labor and Industry
from time to time in accordance with the provisions of N.J.S.A. 34:11-56.30 for the locality in which the Projects are located.

 

“Prior
Agreements” means collectively the loan agreements between the Authority and the Company with respect to the Prior Bonds.

“Prior
Bonds” means the (i) Water Facilities Revenue Refunding Bonds (Middlesex Water Company Project) Series 1993-B in the
aggregate principal amount of $12,000,000, to be refunded with the proceeds of the Series A Bonds; (ii) Water Facilities Revenue
Bonds (Middlesex Water Company Project) Series 1993-C in the aggregate principal amount of $6,500,000, to be refunded with the
proceeds of the Series B Bonds; (iii) Water Facilities Revenue Refunding Bonds (Middlesex Water Company Project) Series 1994-A
in the aggregate principal amount of $10,000,000, to be refunded with the proceeds of the Series B Bonds; (iv) Water Facilities
Revenue Bonds (Middlesex Water Company Project) Series 1998 in the aggregate principal amount of $23,000,000, to be refunded with
the proceeds of the Series C Bonds; and (v) Water Facilities Revenue Refunding Bonds (Middlesex Water Company Project) Series 2002
in the aggregate principal amount of $6,000,000, to be refunded with the proceeds of the Series B Bonds.

“Prior
Indentures” means collectively the trust indentures between the Authority and the Prior Trustees with respect to the
Prior Bonds

“Prior
Trustee(s)” means (i) U.S. Bank, National Association, as the trustee for the Water Facilities Revenue Refunding Bonds
(Middlesex Water Company Project) Series 1993-B and the Water Facilities Revenue Bonds (Middlesex Water Company Project) Series
1993-C; and (ii) The Bank of New York Mellon as trustee for the other Prior Bonds.

“Project”
or “Projects” means, collectively, those water facilities and related facilities previously acquired, constructed,
improved or equipped with proceeds from the Prior Bonds, as more particularly described in the Prior Agreements and any renewals
and replacements thereof, as the same may at any time exist.

    	5

    	 

    

“Project
Costs” means the cost of the payment or redemption, or provision therefor, of the outstanding Prior Bonds.

“Project
Municipalities” means those municipalities set forth in Schedule A hereto.

“Rebatable
Arbitrage” shall mean 100% of the excess of the future value, as of a date, of all receipts on nonpurpose investments
over the future value, as of that date, of all payments on nonpurpose investments, as more fully described in Code Section 148(f)
and Regulations Section 1.148-3.

“Rebate
Expert” means any of the following chosen by the Company: (A) Bond Counsel, (B) any nationally recognized firm of certified
public accountants, (C) any reputable firm which offers to the tax-exempt bond industry rebate calculation services and holds itself
out as having expertise in that area, or (D) such other person as is approved by Bond Counsel.

“Series
A Bonds” means the $9,915,000 Water Facilities Refunding Revenue Bonds (Middlesex Water Company Project) Series 2012A.

“Series
B Bonds” means the $22,500,000 Water Facilities Refunding Revenue Bonds (Middlesex Water Company Project) Series 2012B.

“Series
C Bonds” means the $23,000,000 Water Facilities Refunding Revenue Bonds (Middlesex Water Company Project) Series 2012C.

“State”
means the State of New Jersey.

“Subcontractor”
shall mean any person engaged by a Contractor or a Subcontractor in the performance of any Construction Contract.

 

"Supplemental Mortgage
Indenture" means the Forty-Second Supplement to the Mortgage Indenture by and between the Company and U.S. Bank National
Association, as trustee, dated as of November 1, 2012.

 

“Tax Certificate”
shall mean the arbitrage and tax certificate executed by the Company in form and substance acceptable to the Authority, wherein
the Company certifies as to such matters as the Authority shall require.

 

“Term of
Agreement” means the term of this Agreement as specified in Section 10.01 hereof.

“Trustee”
means Deutsche Bank National Trust Company, a national banking association, as Trustee under the Indenture, and its successors
and any corporation or association resulting from or surviving any consolidation or merger to which it or its successors may be
a party or any corporation or association that acquires substantially all the corporate trust business of the Trustee and any successor
Trustee at the time serving as successor trustee under the Indenture.

    	6

    	 

    

“Underwriters”
collectively means PNC Capital Markets LLC, Edward D. Jones & Co, L.P. (as representative of itself and Janney Montgomery Scott
LLC) and Merrill Lynch, Pierce Fenner & Smith, Inc., the underwriters of the Series A Bonds, the Series B Bonds and the Series
C Bonds, respectively.

 

 

    	7

    	 

    

ARTICLE
II

REPRESENTATIONS,
COVENANTS AND WARRANTIES

 

Section 2.01.        Representations,
Covenants and Warranties of Authority. The Authority represents, covenants and warrants that:

 

(a)           The Authority is a
public body corporate and politic constituting an instrumentality of the State duly organized and validly existing under the laws
of the State. Under the provisions of the Act, the Authority is authorized to enter into the transactions contemplated by this
Agreement and the Indenture and to carry out its obligations hereunder and thereunder. The Authority has been duly authorized to
execute and deliver this Agreement and the Indenture and to issue the Bonds.

 

(b)           All covenants, stipulations,
promises, agreements and obligations of the Authority set forth herein shall be deemed to be the covenants, stipulations, promises,
agreements and obligations of the Authority and not of any member, officer or employee of the Authority in his or her individual
capacity, and no recourse shall be had for the payment of the principal or redemption price of or interest on the Bonds or for
any claim based thereon or hereunder against any member, officer or employee of the Authority or any person executing the Bonds.

 

(c)           The Authority hereby
covenants to comply with the provisions of the Code applicable to the Bonds and not to take any action or fail to take any action
which would cause the interest on the Bonds to lose the Income Exclusion. The Authority covenants and agrees that it will take
or cause to be taken, at the written direction of the Company, all required actions to assure that interest paid on the Bonds does
not lose the Income Exclusion and that it will refrain from doing or performing any act or thing that will cause such interest
not to be so excludable.

 

(d)           The Authority agrees
to direct the Prior Trustees to pay and discharge the Prior Bonds on the Delivery Date upon receipt by the Prior Trustees of the
proceeds of the Bonds.

 

(e)           The Authority covenants
that it will not pledge the amounts derived from this Agreement other than as contemplated by the Indenture and the Bonds.

 

Section 2.02.       Representations,
Covenants and Warranties of the Company. The Company represents, covenants and warrants as follows:

 

(a)           The Company is duly
incorporated as a corporation that is a regulated public utility company organized under the laws of the State of New Jersey. The
Company is in good standing under the laws of its jurisdiction of incorporation and is qualified to do business in the State. The
Company is not in violation of any provision of its charter or its Bylaws. The Company has the power to enter into this Agreement
and the Tax Certificate and has duly authorized the execution and delivery of this Agreement and the Tax Certificate by proper
corporate action.

 

    	8

    	 

    

(b)           Neither the execution
and delivery of this Agreement or the Tax Certificate, the consummation of the transactions contemplated hereby or thereby nor
the fulfillment of or compliance with the terms and conditions of this Agreement or the Tax Certificate conflicts with or results
in a breach of the terms, conditions or provisions of any restriction or any agreement or instrument to which the Company is now
a party or by which it is bound, or constitutes a default under any of the foregoing, or (except as provided in the Mortgage Indenture)
results in the creation or imposition of any lien, charge or encumbrance whatsoever upon any of the property or assets of the Company
under the terms of any instrument or agreement.

 

(c)           There is no litigation
or proceeding pending against the Company, or to the knowledge of the Company pending or threatened against the Company or any
other person affecting in any manner whatsoever the right of the Company to execute this Agreement or the Tax Certificate or (except
as disclosed in the Official Statement) affecting the ability of the Company to make the payments required hereunder or thereunder
or to otherwise comply with their respective obligations contained herein.

 

(d)           The Projects are of
the type authorized and permitted by the Act, they have been completed, and their Costs of Construction (as defined by the Prior
Indentures) were not less than $57,500,000.

 

(e)           The proceeds from
the sale of the Bonds will be used only to refund the Prior Bonds.

 

Section 2.03.        Public
Purpose Representations and Covenants.

 

(a)           Inducement. The
availability of financial assistance from the Authority as provided for in the Prior Agreements and as provided herein has been
an important inducement to the Company to undertake the refinancing of the Projects and to continue to locate the Projects in
the State.

 

(b)           No Untrue Statements.
The Company represents that the representations, statements and warranties of the Company set forth in the Application, this Agreement,
or any other document furnished to the Authority in connection with the issuance of the Bonds (i) are true, correct and complete,
(ii) do not contain any untrue statement of a material fact and (iii) do not omit to state a material fact necessary to make the
statements contained herein or therein not misleading or incomplete. The Company understands that all such statements, representations
and warranties have been relied upon as an inducement by the Authority to issue the Bonds.

 

(c)            Project Users. (i)(A) Prior
to leasing, subleasing or consenting to the subleasing or assignment of any lease of all or any part of the Projects, during the
period commencing on the date hereof and terminating three years after the Company has completed the acquisition, renovation and
construction of all or substantially all of such Projects, and (B) upon the request of the Authority from time to time thereafter,
the Company shall cause a Project Occupant Information Form to be submitted to the Authority by every prospective lessee, sublessee
or lease assignee of the Projects.

 

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(ii) The Company shall
not permit any such leasing, subleasing or assigning of leases that would impair the Income Exclusion, or that would impair the
ability of the Company to operate any Project or cause any Project not to be operated as an authorized project under the Act.

 

(d)           Maintain Existence;
Merge, Sell, Transfer. The Company shall maintain its existence as a corporation that is a regulated public utility company,
and shall not sell, assign, transfer or otherwise dispose of the Projects or substantially all of its assets without the consent
of the Authority; provided however that the Company may merge with or into or consolidate with another entity, and the Projects
or this Agreement may be transferred pursuant to such merger or consolidation without violating this section provided:

 

		(i)	the Company shall cause the proposed surviving, resulting or transferee company to furnish the
Authority with a Change of Ownership Information Form;

		(ii)	the net worth of the surviving, resulting or transferee company following the merger, consolidation
or transfer is equal to or greater than the net worth of the Company immediately preceding the merger, consolidation or transfer;

		(iii)	any litigation or investigations in which the surviving, resulting or transferee company or its
principals, officers and directors are involved, and any court, administrative or other orders to which the surviving, resulting
or transferee company or its officers and directors are subject, relate to matters arising in the ordinary course of business;

		(iv)	the merger, consolidation or transfer will not impair the Income Exclusion pursuant to an opinion
of Bond Counsel;

		(v)	the surviving, resulting or transferee company assumes in writing the obligations of the Company,
as the case may be, under this Agreement and the Company’s obligations under the First Mortgage Bonds; and

		(vi)	after the merger, consolidation or transfer, the Projects shall be operated as authorized projects
under the Act.

 

(e)           Relocate Projects.
The Company shall not relocate the Projects or any part thereof out of the State. The Company shall not relocate the Projects within
the State without the prior written consent of an Authority Representative and an opinion of Bond Counsel that the relocation will
not affect the Income Exclusion.

 

(f)            Operate Projects.
The Company shall operate or cause each Project to be operated as an authorized project for a purpose and use as provided for under
the Act until the expiration or earlier termination of this Agreement. The Projects are of a character included within the definition
of “project” in the Act. The Company will operate the Projects substantially in the form represented in the Application
and will not cause a change in the use of any Project such that any Project would cease to be a “facility for the furnishing
water” within the meaning of Section 142(a)(4) of the Code.

 

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(g)           Annual Certification.
On each anniversary hereof, the Company shall furnish to the Authority the following:

 

(i)           a certification
indicating whether or not the Company is aware of any condition, event or act which constitutes an Event of Default, or which would
constitute an Event of Default with the giving of notice or passage of time, or both, under any of the documents executed by the
Company in connection with the issuance of the Bonds;

 

(ii)           a written
description of the present use of the Projects and a description of any anticipated material change in the use of the Projects
or in the number of employees employed at the Projects; and

 

(iii)           a report
from every entity that leases or occupies space at the Projects indicating the number of persons the entity employs at the Projects.

 

(h)           Representation
as to Affirmative Action and Prevailing Wage Requirements. The Company hereby covenants that none of the proceeds of the Bonds
will be used to pay any Contractors or Subcontractors in connection with any Construction Contract.

 

(i)           Preservation of
Projects. (A) The Company will at all times preserve and protect the Projects in good repair, working order and safe condition,
and from time to time will make, or will cause to be made, all needed and proper repairs, renewals, replacements, betterments
and improvements.

 

(B)           In
addition, the Company shall have the privilege of making substitutions, additions, modifications and improvements to the Projects
from time to time as the Company may deem to be desirable for its use for such purposes as shall be permitted by the Act, provided
the same are included as part of the Projects, the costs of which substitutions, additions, modifications and improvements shall
be paid by or on behalf of the Company, and the same shall be the property of the Company (including, for this purpose, the Company
or any other wholly-owned subsidiary or affiliate of the Company).

(j)           Access to the Projects
and Inspection. The Authority and its duly authorized agents shall have the right, at all reasonable times upon the furnishing
of notice that is reasonable under the circumstances to the Company, to enter upon the Project sites and to examine and inspect
the Projects and the Project sites for the purpose of determining compliance with this Agreement.

 

(k)           Compliance with the
Affirmative Action and Prevailing Wage Requirements As determined by the Authority, the Company shall comply with the Authority's
Affirmative Action and Prevailing Wage Rate Regulations and to that end copies of the Affirmation Action Regulations are available
on the Authority's Internet web page at: www.njeda.com/affirmativeaction or contacting: New Jersey Economic Development Authority
- Internal Process Management - Gateway One, Suite 900, Newark, New Jersey 07102 Phone (973) 648-4130 or e-mail: affirmativeaction@njeda.com.

 

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(l)           Additional Information.
Until payment of the Bonds in full shall have occurred, the Company shall promptly, from time to time, deliver to the Trustee
and upon the request of the Authority, to the Authority, such information regarding the operations, business affairs and financial
condition of the Company as the Trustee (or the Authority) may reasonably request. The Trustee is hereby authorized to deliver
a copy of any such financial information delivered hereunder, or otherwise obtained by the Trustee, to the Authority, any Bondholder
or prospective Bondholder, to any regulatory authority having jurisdiction over the Trustee and to any other Person as may be
required by law. The Trustee is authorized to provide information concerning the outstanding principal amount and payment history
of, and other information pertaining to, the Bonds or the First Mortgage Bonds to any agency or regulatory authority of the State
requesting such information.

 

Section 2.04.        Non-Arbitrage
Covenant. The Company hereby covenants and agrees with the Authority and the Trustee for the benefit of the holders of any
Bonds, present and future, that it will not make, or permit, any use of the proceeds of the Bonds which will cause the Bonds to
be “arbitrage bonds” within the meaning of Section 148 of the Code. The Company shall deliver to the Authority its
certificate, evidencing the reasonable expectations of the Company, in such reasonable form as the Authority shall specify and
upon which the Authority may rely in furnishing its own certificate. The covenants contained in this Section are in addition to,
and not in limitation of, the covenants contained in Section 2.05 or 2.06 hereof.

 

Section 2.05.        Arbitrage
and Rebate.

 

(a)           The Company covenants
that it will not take any action, or fail to take any action, if any such action or failure to take action would adversely affect
the Income Exclusion. The Company will take and will cause its members, managers, employees and agents to take all affirmative
actions legally within its power necessary to ensure that the Bonds continue to be subject to the Income Exclusion (including,
without limitation, the calculation of rebate required to preserve the Income Exclusion). The Company will comply with Sections
103 through 150 of the Code and further covenants not to directly or indirectly use or permit the use (including the making of
any investment) of any Bond proceeds or any other funds of the Authority or the Company, or take or omit to take any action, that
would cause the Bonds to be “arbitrage bonds” within the meaning of Section 148(a) of the Code.

 

(b)           The Company hereby
covenants that in connection with complying with the requirement for payment of the Rebatable Arbitrage to the United States with
respect to the Bonds the Company will take the following actions:

 

(i)            Six
months after closing, the Company will provide a written certification to the Authority and the Trustee indicating whether
the Company complied with the six month exception to the arbitrage rebate requirement set forth in Section 148(f)(4)(B) of
the Code.

 

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(ii)           Unless
the Company has complied with the six month exception, the Company will retain a Rebate Expert (defined below) on or within thirty
(30) days before the Initial Rebate Computation Date (defined below) and on each Rebate Computation Date (defined below) thereafter,
(A) to compute the Rebatable Arbitrage with respect to the Bonds for the period ending on Initial Rebate Computation Date, (B)
to deliver an opinion to the Authority and Trustee, concerning its conclusions with respect to the amount (if any) of such Rebatable
Arbitrage together with a written report providing a summary of the calculations relating thereto and (C) to deliver an opinion
to the Authority and the Trustee that all of the gross proceeds of the Bonds (within the meaning of Section 148(f) of the Code),
other than gross proceeds of the Bonds on deposit in a bona fide debt service fund (within the meaning of Section 148(f)(4) of
the Code), have been expended on or prior to the Initial Rebate Computation Date. If a rebate exception applies to the proceeds
of the Bonds, the Company will cause a Rebate Expert to deliver an opinion to the Authority and Trustee that all of the gross Bond
proceeds (within the meaning of Section 148(f) of the Code), other than gross Bond proceeds on deposit in a bona fide debt service
fund (within the meaning of Section 148(f)(4) of the Code), have been expended on or prior to the Initial Rebate Computation Date.

 

(iii)           The
Company shall within ten (10) days of receipt of the report furnished by the Rebate Expert pursuant to subparagraph (ii) above,
pay or cause to be paid to the Trustee for deposit into the Rebate Fund the difference between the amount therein and the amount
required to fund the Rebatable Arbitrage. If the Company fails to make or causes to be made any payment required pursuant to this
subparagraph (iii) when due, the Authority shall have the right, but shall not be required, to make such payment to the Trustee
on behalf of the Company. Any amount advanced by the Authority pursuant to this subparagraph (iii) shall be added to the moneys
owing by the Company under this Agreement and shall be payable on demand with interest at the Late Payment Rate

 

(iv)           Each
payment of Rebatable Arbitrage to be paid to the United States shall be filed with the Internal Revenue Service at such address
that may be specified by the Internal Revenue Service. Each payment shall be accompanied by Form 8038-T (or such other form required
by the Internal Revenue Service furnished by the Company or the Authority), executed by the Authority, and a statement identifying
the Authority, the date of the issue, the CUSIP number for the Bonds with the longest maturity and a copy of the applicable Form
8038.

 

(v)           In the
event Rebatable Arbitrage is due, the Company will direct the Trustee in writing to withdraw from the Rebate Fund and pay over
to the United States the Rebatable Arbitrage with respect to the Bonds in installments as follows: each payment shall be made not
later than sixty (60) days after the then current Rebate Computation Date and shall be in an amount which ensures that 100% of
the Rebatable Arbitrage with respect to the Bonds, as of the then current Rebate Computation Date, will have been paid to the United
States.

 

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(vi)           The
Company acknowledges that the Authority shall have the right at any time and in the sole and absolute discretion of the Authority
to obtain from the Company and the Trustee the information necessary to determine the amount required to be paid to the United
States pursuant to Section 148(f) of the Code. Additionally, the Authority may, with reasonable cause, (A) review or cause to be
reviewed any determination of the amount to be paid to the United States made by or on behalf of the Company and (B) make or retain
a Rebate Expert to make the determination of the amount to be paid to the United States. The Company hereby agrees to be bound
by any such review or determination, absent manifest error, to pay the costs of such review, including without limitation the reasonable
fees and expenses of counsel or a Rebate Expert retained by the Authority, and to pay to the Trustee any additional amounts for
deposit in the Rebate Fund required as the result of any such review or determination.

 

(vii)           Notwithstanding
any provision of this subsection to the contrary, the Company shall be liable, and shall indemnify and hold the Authority and the
Trustee harmless against any liability, for payments due to the United States pursuant to Section 148(f) of the Code. Further,
the Company specifically agrees that neither the Authority nor the Trustee shall be held liable, or in any way responsible, and
the Company shall indemnify and hold harmless the Trustee and Authority against any liability, for any mistake or error in the
filing of the payment or the determination of the amount due to the United States or for any consequences resulting from any such
mistake or error. The provisions of this subparagraph (vii) shall survive termination of this Agreement.

 

(viii)           The
Authority, the Trustee and the Company acknowledge that the provisions of this section are intended to comply with Section 148(f)
of the Code and the regulations promulgated thereunder and if as a result of a change in such section of the Code or the promulgated
regulations thereunder or in the interpretation thereof, a change in this section shall be permitted or necessary to assure continued
compliance with Section 148(f) of the Code and the promulgated regulations thereunder, then with written notice to the Trustee,
the Authority and the Company shall be empowered to amend this section and the Authority may require, by written notice to the
Company and the Trustee, the Company to amend this section to the extent necessary or desirable to assure compliance with the provisions
of Section 148 of the Code and the regulations promulgated thereunder; provided that the Authority shall require, prior to any
such amendment becoming effective, at the sole cost and expense of the Company, an opinion of Bond Counsel satisfactory to the
Authority and the Trustee to the effect that either (A) such amendment is required to maintain the Income Exclusion or (B) such
amendment shall not adversely affect the Income Exclusion. In the event of a conflict between the provisions of this Section and
the Code, the provisions of the Code shall control.

 

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(ix)           The term “Initial
Rebate Computation Date” shall mean the first Computation Date, which shall be within sixty (60) days after the fifth (5th)
anniversary of the date of issuance of the Bonds. The term “Rebate Computation Date” shall mean any subsequent Computation
Date. The term “Computation Date” shall have the meaning assigned to such term as set forth in Treasury Regulation
Section 1.148-1 et seq.

 

(c)           The Company will aid
and assist the Authority in connection with preparing and submitting to the Internal Revenue Service a Form 8038 (or other applicable
information reporting statement) at the time and in the form required by the Code.

 

(d)           The Company will comply
fully at all times with the Tax Certificate, and the Company will not take any action, or omit to take any action, which, if taken
or omitted, respectively, would violate the Tax Certificate.

 

(e)           The Projects were
not acquired or placed in service by the Company (determined in accordance with the provisions of Section 103 of the Code and applicable
regulations thereunder) more than one year prior to the date of issuance of their respective Prior Bonds.

 

(f)           Nothing contained
in this Loan Agreement or in the Indenture shall be interpreted or construed to require the Authority to pay the Rebatable Arbitrage,
such obligations being the sole responsibility of the Company.

 

Section 2.06.         Other
Tax Matters.

 

(a)           Subsequent to fifteen
(15) days prior to the date the Bonds are sold and fifteen (15) days subsequent to the date the Bonds are sold, the Company has
not, or will not, as the case may be, guarantied, arranged, participated in, assisted with, borrowed the proceeds of, or leased
facilities financed by obligations issued pursuant to Section 103 of the Code by any state or local governmental unit or any constituted
authority empowered to issue obligations by or on behalf of any state or local governmental unit other than the Authority. During
the period commencing on the date of the sale of the Bonds and ending 15 days thereafter, there will be no obligations issued pursuant
to Section 103 that are guarantied by the Company or which are issued with the assistance or participation of, or by arrangement
with, the Company without the written opinion of Bond Counsel to the effect that the issuance of such obligation will not adversely
affect their opinion as to the Income Exclusion. Other than the Company and the financial advisors to the Company, no person has
(i) guarantied, arranged, participated in, assisted with the issuance of, or paid any portion of the cost of the issuance of the
Bonds, or (ii) provided any property or any franchise, trademark or trade name (within the meaning of Code Section 1253) which
is to be used in connection with the Projects.

 

(b)           The information contained
in the Company’s Arbitrage and Tax Certificate, setting forth the respective cost, economic life, ADR midpoint life, if any,
under Rev. Proc. 87-56, 1987-2 C.B. 674, as supplemented and amended from time to time, and guideline life, if any, under Rev.
Proc. 62-21, 1962-2 C.B. 118, as supplemented and amended from time to time, of each asset constituting the Projects to be financed
with the Bond proceeds is true, accurate and complete.

    	15

    	 

    

 

(c)           The Bonds will not
be federally guaranteed within the meaning of Section 149(b) of the Code.

 

Section 2.07.       Costs
and Expenses. All expenses in connection with the preparation, execution, delivery, recording and filing of this Loan Agreement,
the First Mortgage Bonds and other collateral documents and in connection with the preparation, issuance and delivery of the Bonds,
the Authority’s fees, the fees and expenses of Wolff & Samson PC, the fees and expenses of the Trustee, the fees and
expenses of Trustee’s counsel and the fees and expenses of counsel to the Underwriters shall be paid directly by the Company.
The Company shall also pay throughout the term of the Bonds the Authority’s annual fees and expenses, if any, and the Trustee’s
annual and special fees and expenses under the Indenture, the Loan Agreement and the First Mortgage Bonds, including, but not limited
to, reasonable attorney’s fees and all costs of issuing, marketing, collecting payment on and redeeming the Bonds thereunder,
and any costs and expenses of any Bondholder (or Beneficial Owner) in connection with any approval, consent or waiver under, or
modification of, any such document.

 

Section 2.08.      Insurance. (a)
Until payment of the Bonds shall be made, the Company will at a minimum, maintain general comprehensive liability insurance against
claims for bodily injury, death or property damage occurring on, in or about the Projects or the Project sites (such coverage to
include provisions waiving subrogation against the Authority) in amounts not less than $1,000,000 with respect to bodily injury
to any one person, $3,000,000 with respect to bodily injury to two or more persons in any one accident and, $1,000,000 with respect
to property damage resulting from any one occurrence naming each of the Trustee and the Authority, as an additional insured.

 

(b)           Each insurance policy
obtained in satisfaction of the requirements of this section hereof:

 

(i)            shall be by such insurer
(or insurers) as shall be financially responsible, qualified to do business in the State and of recognized standing;

 

(ii)            shall be in such form and
have such provisions as are generally considered standard provisions for the type of insurance involved;

 

(iii)            shall prohibit cancellation
or substantial modification, termination or lapse in coverage by the insurer without at least thirty (30) days prior written notice
to the Trustee and the Authority;

 

(iv)            without limiting the generality
of the foregoing, policies carried on the Projects shall name the Company, the Authority and the Trustee as parties insured thereunder
as the respective interests of each may appear, and any loss thereunder shall be made payable and shall be applied as provided
in the Mortgage Indenture and all liability insurance shall name the Authority and the Trustee as additional insureds;

 

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(v)            prior to expiration of any
such policy, the Company shall furnish the Authority with evidence satisfactory to the Authority that the policy or certificates
has been renewed or replaced in compliance with this Loan Agreement.

 

(c)            In the event the Company
shall fail to maintain the insurance coverage required by this Loan Agreement, the Authority or the Trustee may (but shall be under
no obligation to), after ten (10) days written notice to the Company unless cured within such ten (10) days, contract for the required
policies of insurance and pay the premiums on the same and the Company agrees to reimburse the Authority or the Trustee to the
extent of the amounts so advanced with interest thereon at the maximum rate permitted by law.

 

(d)            In addition to the
provisions of Section 2.08(a), (b) and (c) above, the Company shall also comply with any insurance requirements set forth in the
Mortgage Indenture.

 

Section 2.09.            Filing
of Other Documents. The parties hereto shall execute, at the request of the Company, and the Company shall file financing
statements, continuation statements, notices and such other documents necessary to perfect all security interests created pursuant
to the terms of this Agreement and the Indenture and to preserve and protect the rights of the Trustee in the granting by the
Authority of certain rights of the Authority, pursuant to the Indenture, under this Agreement and the First Mortgage Bonds, and
the Authority and the Trustee shall have no responsibilities for such filings whatsoever, other than executing the documents requested
by the Company as applicable. The Company shall provide to the Trustee, and upon its request, to the Authority, copies of such
filed documents.

 

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ARTICLE
III

ISSUANCE
OF THE BONDS

 

Section 3.01.      Agreement
To Issue Bonds; Application of Bond Proceeds. In order to provide funds to finance the refunding of the principal of the Prior
Bonds, the Authority agrees that it will issue under the Indenture, sell and cause to be delivered to the respective Underwriters
or their designee, the Bonds in the aggregate principal amount of $55,415,000, bearing interest, maturing and having the terms
as set forth in the Indenture. The proceeds received from the sale of the Bonds shall be deposited with the Trustee as follows:
(a) a sum equal to the accrued interest, if any, shall be deposited into the Bond Fund and used to pay interest on the Bonds on
the first Bond interest payment date; and (b) the balance of the proceeds received from the sale of the Bonds, together with the
funds furnished by the Company shall be applied on December 27, 2012 to the redemption of all the Prior Bonds, except the Series
2002 Prior Bonds, and on January 1, 2013 to the redemption of the Series 2002 Prior Bonds.

 

Section 3.02.      First
Mortgage Bonds. To evidence the Loan to the Company, the Company shall deliver to the Authority the First Mortgage Bonds in
the total aggregate principal amount of $55,415,000. In order to secure the repayment of the Bonds, simultaneously with the issuance
and delivery of the Bonds, the Authority through the Indenture shall assign its interests in the First Mortgage Bonds to the Trustee,
subject to its Reserved Rights. The form and nature of the First Mortgage Bonds to be delivered by the Company are set forth and
described in Exhibit A attached hereto and the First Mortgage Bonds shall be in substantially such form, with such variations
in principal amounts, interest rates, interest payment and maturity dates and prepayment or redemption provisions as may be necessary
to correspond to such provisions of the Bonds issued by the Authority.

 

The First Mortgage Bonds
shall:

 

(a)           be payable to the
Trustee, registered in the name of the Trustee and be non-transferable except to a successor Trustee;

 

(b)           be issued in the principal
amount equal to the aggregate principal amount of the Bonds;

 

(c)           provide for payments
of interest equal to the payments of interest on the Bonds except that the Company shall receive a cash credit against its interest
obligations equal to (i) accrued interest on the Bonds deposited with the Trustee at the time of issuance of the Bonds, if any,
and (ii) such other moneys held at the time of such interest payment date by the Trustee in the Bond Fund created under the Indenture
and available for the payment of interest on such Bonds;

 

(d)           require payments of
principal, or principal plus a premium, equal to the stated maturities on the Bonds and the payment of all other amounts due under
this Agreement;

 

    	18

    	 

    

(e)           contain redemption
provisions, or provisions in respect of the acceleration or prepayment of principal and premium, if any, equivalent to the redemption
provisions of the Bonds; and

 

(f)           require all payments
on such First Mortgage Bonds to be made one (1) Business Day prior to the due date for the corresponding payment to be made on
the Bonds.

 

Section 3.03.      Conditions
Precedent to Financing. The Authority shall not be obligated to issue the Bonds until the conditions set forth in Section 2.06
of the Indenture have been satisfied.

 

Section 3.04.      Disbursements
From Redemption Fund. The moneys in the Redemption Fund shall be transferred by the Trustee to the Prior Trustees, in their
capacity as trustee for the respective series of Prior Bonds, for the payment of the principal of, premium, if any, and interest
on the Prior Bonds on the Delivery Date.

 

Section 3.05.      Investment
of Moneys. Any moneys held as a part of the Bond Fund, the Redemption Fund or any other fund shall be invested or reinvested
by the Trustee, at the request of and as directed in writing by a Company Representative, in any of the Permitted Investments,
but in compliance with the Tax Certificate. The Trustee shall be entitled to conclusively rely on the Company’s directions
and make investments at the written direction of the Company Representative without determining whether such investments comply
with the Tax Certificate.

 

The Trustee may make such
Permitted Investments through its own bond department or the bond department of any entity under common control with the Trustee.
All such Permitted Investments shall at all times be a part of the fund (the Redemption Fund, the Bond Fund or such other fund,
as the case may be) from which the moneys used to acquire such Permitted Investments shall have come, and all income and profits
on such Permitted Investments shall be credited to, and losses thereon shall be charged against, such funds. Such Permitted Investments
shall be made so as to mature or be subject to redemption at the option of the holder thereof on or prior to the date or dates
that the Company anticipates that moneys therefrom will be required. Such Permitted Investments shall be registered in the name
of the Trustee or its nominee.

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ARTICLE
IV

LOAN
PROCEEDS TO COMPANY; LOAN PROVISIONS;

PROVISIONS
RELATING TO THE PROJECTS

 

Section 4.01.      Loan
of Proceeds. The Authority agrees, upon the terms and conditions contained in this Agreement, to lend to the Company the proceeds
received by the Authority from the sale of the Bonds. Such proceeds shall be disbursed as provided in Section 3.01 hereof.

 

Section 4.02.       Amounts
Payable.

 

(a)           The Company agrees
to repay the principal of the loan in installments, on or before each Interest Payment Date, commencing October 1, 2013, and on
or before any other date fixed for redemption or maturity of any or all of the Bonds pursuant to the Indenture, and to pay interest
on the loan on or before each Interest Payment Date, commencing April 1, 2013, and on or before any other date fixed for redemption
or maturity of any or all of the Bonds pursuant to the Indenture, until the principal of and interest on the Bonds shall have been
fully paid or provision for the payment thereof shall have been made in accordance with the Indenture, in an amount which, together
with other moneys available therefor in the Bond Fund, will enable the Trustee to pay the amount payable on such date as principal
of (whether at maturity or upon redemption or acceleration or otherwise), and interest on the Bonds as provided in the Indenture.
Such payments shall be made in immediately available funds at least one (1) Business Day in advance of the due date.

 

It is understood and
agreed that all payments payable under this Section 4.02(a) by the Company are assigned by the Authority to the Trustee for the
benefit of the holders of the Bonds. The Company hereby consents to such assignment. The Authority hereby directs the Company,
and the Company hereby agrees, to pay to the Trustee at the Trustee’s corporate trust office all payments payable pursuant
to this Section 4.02(a).

(b)           The Company will also
pay the expenses of the Authority as set forth in Section 2.07, including attorneys’ fees, of the Authority related to the
issuance of the Bonds and incurred at or before the issuance and delivery thereof and any fees and expenses, including attorneys’
fees, of the Authority incurred hereafter.

 

(c)           The Company will also
pay the reasonable fees and expenses of the Trustee and any Paying Agents under the Indenture, such reasonable fees and expenses
to be paid directly to the Trustee or any Paying Agents for the Trustee’s or any such Paying Agents’ own account as
and when such reasonable fees and expenses become due and payable, and any reasonable expenses in connection with any redemption
of the Bonds.

 

(d)           The Company shall
also make any payments required under the Tax Certificate.

 

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(e)           If the Company should
fail to make any of the payments required in this Section 4.02, the item or installment so in Default shall continue as an
obligation of the Company until the amount in Default shall have been fully paid, and the Company agrees to pay the same with interest
thereon, to the extent permitted by law, from the date thereof at the Late Payment Rate per annum.

 

Section 4.03.      Obligations
of Company Hereunder Unconditional. The obligations of the Company to make the payments required under the First Mortgage Bonds
and in Section 4.02 and other sections hereof and to perform and observe the other agreements contained herein shall be absolute
and unconditional and shall not be subject to any defense or any right of setoff, counterclaim or recoupment arising out of any
breach by the Authority or the Trustee of any obligation to the Company, whether hereunder or otherwise, or out of any indebtedness
or liability at any time owing to the Company by the Authority or the Trustee and until such time as the principal of and interest
on the Bonds shall have been fully paid or provision for the payment thereof shall have been made in accordance with the Indenture,
the Company (a) will not suspend or discontinue any payments provided for in Section 4.02 hereof, and (b) except
as provided in Article VIII hereof, will not terminate the Term of Agreement for any cause, including, without limiting the
generality of the foregoing, the occurrence of any acts or circumstances that may constitute failure of consideration, eviction
or construction, eviction, destruction of or damage to any Project, the taking by eminent domain of title to or temporary use of
any or all of the Projects, commercial frustration of purpose, any change in the tax or other laws of the United States of
America or of the State or any political subdivision of either thereof or any failure of the Authority 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 this
Agreement.

 

Section 4.04.      Preservation
of Projects. The Company shall pay all operating costs, utility charges and other costs and expenses arising out of ownership,
possession, use or operation of the Projects. The Authority shall have no obligation and makes no warranties respecting the condition
or operation of the Projects. The Company will not use as a basis for contesting any assessment or levy of any tax the financing
under this Agreement or the issuance of the Bonds by the Authority and, if any administrative body or court of competent jurisdiction
shall hold for any reason that the Projects are exempt from taxation by reason of the financing under this Agreement or issuance
of the Bonds by the Authority or other Authority action in respect thereto, the Company covenants to make payments in lieu of all
such taxes in an amount equal to such taxes and, if applicable, interest and penalties.

 

Section 4.05.      Taxes
and Governmental Charges. The Company will pay or cause to be paid, during the Term of Agreement, as the same respectively
become due, all taxes and governmental charges of any kind whatsoever that may at any time be lawfully assessed or levied against
or with respect to its properties and assets. The Company may, at the Company’s expense and in the Company’s name,
in good faith contest any such taxes, assessments and other charges and, in the event of any such contest, may permit the taxes,
assessments or other charges so contested to remain unpaid during the period of such contest and any appeal therefrom.

 

    	21

    	 

    

Section 4.06.      Limitation
of Authority’s Liability. THE STATE IS NOT OBLIGATED TO PAY, AND NEITHER THE FAITH AND CREDIT NOR TAXING POWER OF THE
STATE IS PLEDGED TO THE PAYMENT OF, THE PRINCIPAL OR REDEMPTION PRICE, IF ANY, OF OR INTEREST ON THE BONDS. THE BONDS ARE A SPECIAL,
LIMITED OBLIGATION OF THE AUTHORITY, PAYABLE SOLELY OUT OF THE REVENUES OR OTHER RECEIPTS, FUNDS OR MONEYS OF THE AUTHORITY PLEDGED
UNDER THE INDENTURE AND FROM ANY AMOUNTS OTHERWISE AVAILABLE UNDER THE INDENTURE FOR THE PAYMENT OF THE BONDS. THE BONDS DO NOT
NOW AND SHALL NEVER CONSTITUTE A CHARGE AGAINST THE GENERAL CREDIT OF THE AUTHORITY. THE AUTHORITY HAS NO TAXING POWER.

 

Pursuant to the Act, neither
the members of the Authority, nor any person executing bonds for the Authority, shall be liable personally on said bonds by reason
of the issuance thereof.

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ARTICLE
V

SPECIAL
COVENANTS AND AGREEMENTS

 

Section 5.01.      No
Warranty of Condition or Suitability by Authority. The Authority makes no warranty, either express or implied, as to the Projects
or the condition thereof, or that the Projects will be suitable for the purposes or needs of the Company.

 

Section 5.02.      Further
Assurances and Corrective Instruments. (a) Subject to the provisions of the Indenture, the Authority and the Company agree
that they will, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such
supplements and amendments hereto and such further instruments as may reasonably be required for carrying out the intention or
facilitating the performance of this Agreement, the Mortgage Indenture or the transactions contemplated hereby or thereby.

 

(b)            The Company shall cause this
Agreement, the Supplemental Mortgage Indenture and all necessary UCC financing statements (including continuation statements) to
be recorded and filed in such manner and in such places as may be required by law to fully preserve and protect the security of
the holders and the rights of the Trustee and to perfect the security interest created by the Indenture and the Mortgage Indenture,
except that the Mortgage Indenture (including the Supplemental Mortgage Indenture) shall not be required to be recorded
in Cumberland County, New Jersey. The Company hereby represents and warrants that: the only real estate owned by the Company in
Cumberland County, New Jersey consists of the following properties in Downe Township, which were acquired by the Company by virtue
of the merger in 2006 of the Company's wholly-owned subsidiary, Bayview Water Company, into the Company: (i) 55-57 Virginia Ave,
which is 0.41 acres of vacant land whose tax assessment is $1,000 and whose annual property tax is $17; (ii) Delaware Avenue along
the Canal, which is 1.72 acres of vacant land whose tax assessment is $1,000 and whose annual property tax is $17; (iii) 150 New
Jersey Avenue, which is 0.15 acres of land improved with a pumping station, whose tax assessment is $76,000 and whose annual property
tax is $1,315; and (iv) 862 Downe Avenue, which is 0.17 acres of land improved with a pumping station, whose tax assessment is
$76,000 and whose annual property tax is $1,315. The Company further represents and warrants that (as indicated in the Company's
most recent SEC Form 10-K) the Bayview system is not physically interconnected with the Company's systems in Middlesex County and
Union County, New Jersey; and the Bayview system produced less than one percent (1%) of the Company's 2011 consolidated operating
revenues..

 

Section 5.03.      Authority
and Company Representatives. Whenever under the provisions of this Agreement the approval of the Authority or the Company is
required or the Authority or the Company is required to take some action, such approval or such request shall be given for the
Authority by an Authority Representative, for the Company by a Company Representative; and the Authority and the Trustee and any
party hereto shall be authorized to act on any such approval or request.

    	23

    	 

    

 

ARTICLE
VI

INDEMNIFICATION
AND REDEMPTION

 

Section 6.01.      [Intentionally
Omitted.]

 

Section 6.02.      Indemnification
Covenants.

 

(a)           The Company agrees
to and does hereby indemnify and hold harmless Indemnified Parties against any and all losses, claims, damages or liabilities (including
all costs, expenses and reasonable counsel fees incurred in investigating or defending such claim) suffered by any of the Indemnified
Parties and caused by, relating to, arising out of, resulting from, or in any way connected with (i) the condition, use, possession,
conduct, management, planning, design, acquisition, construction, installation, financing or sale of the Projects or any part thereof
including the payment of rebate to the federal government; or (ii) any untrue statement of a material fact contained in information
provided by the Company with respect to the transactions contemplated hereby; (iii) any omission of a material fact necessary to
be stated therein in order to make such statement not misleading or incomplete; or (iv) the acceptance or administration by the
Authority of its duties under the Trust Indenture (other than those caused by the gross negligence or willful misconduct of the
Authority); or (v) the acceptance or administration or performance by the Trustee of its duties under the Trust Indenture (other
than those caused by the negligence or willful misconduct of the Trustee). In case any action shall be brought against one or more
of the Indemnified Parties based upon any of the above and in respect to which indemnity may be sought against the Company, such
Indemnified Party shall promptly notify the Company in writing, and except where the Company is the claimant the Company shall
assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party, the payment of
all costs and expenses and the right to negotiate and consent to settlement. Any one or more of the Indemnified Parties shall have
the right to employ separate counsel at the Company’s expense in any such action and to participate in the defense thereof
if, in the reasonable opinion of the Indemnified Party, a conflict of interest could arise out of the representation of the parties
by the same counsel. The Company shall not be liable for any settlement of any such action effected without the Company’s
consent, but if settled with the consent of the Company, or if there is a final judgment for the claimant on any such action, the
Company agrees to indemnify and hold harmless the Indemnified Parties from and against any loss or liability by reason of such
settlement of judgment.

 

(b)           The Company agrees
to and does hereby indemnify and hold harmless the Indemnified Parties against any and all losses, claims, damages or liabilities
(including all costs, expenses, and reasonable counsel fees incurred in investigating or defending such claim) suffered by any
of the Indemnified Parties and caused by relating to, arising out of, resulting from, or in any way connected to an examination,
investigation or audit of the Bonds by the Internal Revenue Service (the “IRS”). In the event of such examination,
investigation or audit, the Indemnified Parties shall have the right to employ counsel at the Company’s expense. In such
event, the Company shall assume the primary role in responding to and negotiating with the IRS, but shall inform the Indemnified
Parties of the status of the investigation. In the event the Company fails to respond adequately and promptly to the IRS, the Authority
shall have the right to assume the primary role in responding to and negotiating with the IRS and shall have the right to enter
into a closing agreement, for which Company shall be liable.

    	24

    	 

    

 

(c)           Notwithstanding anything
in this Agreement to the contrary which may limit recourse to the Company or may otherwise purport to limit the Company’s
liability, the provisions of this Section shall control the Company’s obligations and shall survive repayment of the Bonds.

 

Section 6.03.      Assignment
of Interest in This Agreement by Authority. Any assignment or pledge by the Authority to the Trustee pursuant to the Indenture
of any interest in this Agreement or any moneys receivable under this Agreement shall be subject and subordinate to this Agreement.

 

Section 6.04.      Optional
Redemption of Bonds. With the exception of the Series A Bonds, the Company shall have and is hereby granted the option to prepay
from time to time the amounts payable under this Agreement in sums sufficient to redeem or to pay or cause to be paid all or part
of the Bonds in accordance with the provisions of Section 3.01 of the Indenture. On or before the date set for redemption in the
Company's notice of redemption, the Company shall pay to the Trustee an amount equal to the then applicable redemption price for
the First Mortgage Bonds or as a prepayment of the First Mortgage Bonds, plus interest accrued to the redemption date. Upon the
agreement of the Company to deposit moneys in the Bond Fund in an amount sufficient to redeem Bonds subject to redemption, the
Authority, at the request of the Company, shall forthwith take all steps (other than the payment of the money required for such
redemption) necessary under the applicable redemption provisions of the Indenture to effect redemption of all or part of the then
Outstanding Bonds, as may be specified by the Company, on the date established for such redemption.

 

Section 6.05.      References
to Bonds Ineffective After Bonds Paid. Upon payment in full of the Bonds (or provision for payment thereof having been made
in accordance with the provisions of the Indenture) and all fees and charges of the Trustee and the Authority, all references in
this Agreement to the Bonds and the Trustee shall be ineffective, and neither the Trustee nor the holders of any of the Bonds shall
thereafter have any rights hereunder, saving and excepting those that shall have theretofore vested.

 

Section 6.06.      Authority
To Grant Security Interest to Trustee. The parties hereto agree that pursuant to the Indenture, the Authority shall assign
to the Trustee in order to secure payment of the Bonds all of the Authority’s right, title and interest in this Agreement
subject to the Reserved Rights.

    	25

    	 

    

 

ARTICLE
VII

EVENTS
OF DEFAULT AND REMEDIES

 

Section 7.01.      Events
of Default Defined. The following shall be “Events of Default” under this Agreement and the terms “Event
of Default” and “Default” shall mean, whenever they are used in this Agreement, any one or more of the following
events:

 

(a)           default in the payment
of any installment of the principal or interest on the First Mortgage Bonds on the date when due after giving effect to any applicable
grace period; or

 

(b)           the occurrence of
an "event of default" under the Mortgage Indenture other than an event of default resulting from a default in the payment
of any installment of the principal or interest on the First Mortgage Bonds on the date when due, and the acceleration of the First
Mortgage Bonds as a result of such "event of default"; or

 

(c)           if any material representation
or warranty by, or by an authorized representative of the Company on behalf of, the Company made herein or in any report, certificate,
financial statement or other instrument furnished in connection with this Agreement shall prove to be false or misleading in any
material respect when made; or

 

(d)           default in the performance,
or breach, of any covenant or warranty of the Company in this Agreement or any other Loan Document with respect to (other than
a default in the performance, or breach, of a covenant or warranty where such performance or breach is elsewhere in this Section
7.01 specifically dealt with or which has expressly been included in this Agreement), and continuance of such default or breach
for a period of 60 days after there has been given, by registered or certified mail, to the Company and the Mortgage Trustee by
the Trustee, or to the Company, the Mortgage Trustee and the Trustee by the Holders of at least 25% in principal amount of the
Bonds Outstanding, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice
is a “Notice of Default” hereunder; or

 

(e)           default under any
mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness
for money borrowed by the Company (or the payment of which is guaranteed by the Company), if that default is caused by a failure
to pay principal at its stated maturity after giving effect to any applicable grace period, or results in the acceleration of such
indebtedness prior to its stated maturity and, in each case, the principal amount of such indebtedness, together with the principal
amount of any other indebtedness under which there has been a payment default after stated maturity or the maturity of which has
been so accelerated, aggregates $25,000,000 or more; or

 

(f)           the Company (i) is
generally not paying, or admits in writing its inability to pay, its debts as they become due, (ii) files, or consents by answer
or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy,
for liquidation or to take advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction,
(iii) makes an assignment for the benefit of its creditors, (iv) consents to the appointment of a custodian, receiver, trustee
or other officer with similar powers with respect to it or with respect to any substantial part of its property, (v) is adjudicated
as insolvent or to be liquidated, or (vi) takes corporate action for the purpose of any of the foregoing; or

 

    	26

    	 

    

(g)           a court or Governmental
Authority of competent jurisdiction enters an order appointing, without consent by the Company, as the case may be, a custodian,
receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property,
or constituting an order for relief or approving a petition for relief or reorganization or any other petition in bankruptcy or
for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up
or liquidation of the Company, or any such petition shall be filed against the Company and such petition shall not be dismissed
within sixty (60) days; or

 

(h)           a final judgment or
judgments for the payment of money in an aggregate amount (to the extent not paid or insured) in excess of $25,000,000 are rendered
against the Company and which judgments are not, within sixty (60) days after entry thereof, bonded, discharged or stayed pending
appeal, or are not discharged within sixty (60) days after the expiration of such stay; or

 

(i)           The occurrence of
an Event of Default under the Indenture.

 

The provisions of subsection
(b) of this Section are subject to the following limitation: if by reason of force majeure the Company is unable in whole or in
part to carry out any of its agreements contained herein (other than its obligations contained in Sections 4.01, 4.02 and 4.03
hereof and any other Reserved Right), the Company shall not be deemed in Default during the continuance of such inability. The
term “force majeure” as used herein shall mean, without limitation, the following: acts of God; strikes, lockouts or
other industrial disturbances; acts of public enemies; orders or restraints of any kind of the government of the United States
of America or of the State or of any of their departments, agencies or officials, or of any civil or military authority; insurrections;
riots; landslides; earthquakes; fires; storms; droughts; floods; explosions; breakage or accident to machinery, transmission pipes
or canals; and any other cause or event not reasonably within the control of the Company. The Company agrees, however, to remedy
with all reasonable dispatch the cause or causes preventing it from carrying out such agreement, provided that the settlement of
strikes, lockouts and other industrial disturbances shall be entirely within the discretion of the Company, and it shall not be
required to make settlement of strikes, lockouts and other industrial disturbances by acceding to the demands of the opposing party
or parties when such course is in its judgment unfavorable to it.

 

Section 7.02.Remedies
on Default. Whenever any Event of Default referred to in Section 7.01 hereof shall have happened and be continuing, the Trustee
may take one or any combination of the following remedial steps:

 

    	27

    	 

    

(a)           By written notice
to the Company, declare an amount equal to all amounts then due and payable on the Bonds, whether by acceleration of maturity (as
provided in the Indenture) or otherwise, to be immediately due and payable, whereupon the same shall become immediately due and
payable;

 

(b)           The First Mortgage
Bonds may be redeemed, together with interest then due thereon, by delivery of written notice of the Authority's or the Trustee's
exercise of such option to the Trustee and the Company, such payments to be immediately due and payable, subject to the terms and
conditions of the Mortgage Indenture, or the First Mortgage Bonds may be sold in conformity with the provisions of the New Jersey
Uniform Commercial Code (provided the same is in compliance with all securities laws);

 

(c)           Have reasonable access
to and inspect, examine and make copies of the books and records of the Company relating to the Projects; or

 

(d)           Take whatever action
at law or in equity may appear necessary or desirable to collect the amounts then due and thereafter to become due, or to enforce
performance and observance of any obligation, agreement or covenant of the Company under this Agreement or the Mortgage Indenture.

 

Any amounts collected
pursuant to action taken under this Section 7.02 shall be paid into the Bond Fund and applied in accordance with the provisions
of the Indenture.

Section 7.03.      No
Remedy Exclusive. No remedy herein conferred upon or reserved to the Authority is intended to be exclusive of any other available
remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under
this Agreement or now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accruing upon
any Default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right or power may
be exercised from time to time and as often as may be deemed expedient. In order to entitle the Authority to exercise any remedy
reserved to it in this Article, it shall not be necessary to give any notice, other than such notice as may be required in this
Article. Such rights and remedies as are given the Authority hereunder shall also extend to the Trustee, and the Trustee and the
holders of the Bonds, subject to the provisions of the Indenture, shall be entitled to the benefit of all covenants and agreements
herein contained.

 

Section 7.04.      Agreement
To Pay Attorneys’ Fees and Expenses. In the event the Company should default under any of the provisions of this Agreement
and the Authority or the Trustee should employ attorneys or reasonably incur other expenses for the collection of payments required
hereunder or the enforcement of performance or observance of any obligation or agreement on the part of the Company herein contained,
the Company agrees that it will within thirty (30) days after demand therefor pay to the Authority or the Trustee, as the
case may be, the reasonable fee of such attorneys and such other expenses so incurred.

 

Section 7.05.      No
Additional Waiver Implied by One Waiver. In the event any agreement contained in this Agreement should be breached by any party
and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed
to waive any other breach hereunder.

 

    	28

    	 

    

Section 7.06.      Additional
Remedies. In addition to the above remedies, if the Company commits a breach, or threatens to commit a breach of this Agreement,
or of any other document executed by the Company in connection therewith, the Authority shall have the right and remedy, without
posting bond or other security, to have the provisions of this Agreement specifically enforced by any court having equity jurisdiction,
it being acknowledged and agreed that any such breach or threatened breach will cause immediate and irreparable injury to the Authority
and that money damages will not provide an adequate remedy therefor.

 

Section 7.07.      Waiver.
Upon the occurrence and during the continuance of an Event of Default, to the extent that such rights may then lawfully be waived,
neither the Company, nor anyone claiming through or under it, shall set up, claim or seek to take advantage of any appraisement,
valuation, stay, extension or redemption laws of any jurisdiction now or hereafter in force, in order to prevent or hinder the
enforcement of this Indenture, and the Company, for itself and all who may claim through or under it, hereby waives, to the extent
that it lawfully may do so, the benefit of all such laws.

 

    	29

    	 

    

 

ARTICLE
VIII

OPTIONS;
PREPAYMENT OF LOAN

 

Section 8.01.      Option
To Terminate at Any Time. The Company shall have, and is hereby granted, the option to terminate the Term of Agreement at any
time prior to full payment of the Bonds (or provision for payment thereof having been made in accordance with the provisions of
Article VIII of the Indenture) (a) by paying to the Trustee an amount which, when added to the amount on deposit in the Bond Fund,
will be sufficient to pay, retire and redeem all the Outstanding Bonds in accordance with the Indenture (including, without limiting
the generality of the foregoing, principal of and interest to maturity or applicable redemption date, as the case may be, expenses
of redemption and the Authority’s, the Trustee’s and the Paying Agents’ fees and expenses) and any other amounts
described in the last full paragraph of Section 8.02 hereof, and, in case of redemption, by making arrangements satisfactory to
the Trustee for the giving of the required notice of redemption and (b) by giving the Authority notice in writing of such termination,
and such termination shall forthwith become effective.

 

Section 8.02.      Option
To Prepay Loan Upon the Occurrence of Certain Events. The Company shall have, and is hereby granted, the option or right to
terminate the Term of Agreement and prepay the amounts payable hereunder prior to the full payment of the Bonds (or provision for
payment thereof having been made in accordance with the provisions of the Indenture) at any time and if any of the events set forth
below shall occur:

 

(a)           Any Project shall
have been damaged or destroyed to such extent that the First Mortgage Bonds shall be required to be redeemed pursuant to subsection
B of Section 4 of Article VIII of the Second Supplemental Indenture dated October 1, 1939;

 

(b)           Title to, or the use,
of all or a portion of any Project, shall have been taken under the exercise of the power of eminent domain, or shall be purchased,
by, any governmental body or by any person, firm or corporation acting under governmental authority and the same shall require
the First Mortgage Bonds to be redeemed pursuant to subsection B of Section 4 of Article VIII of the Second Supplemental Indenture
dated October 1, 1939;

 

(c)           Changes which the
Company cannot reasonably control or overcome in the economic availability of materials, supplies, labor, equipment and other properties
and things necessary for the efficient operation or of the Projects for the purpose contemplated by this Agreement shall have occurred,
or technological or other changes shall have occurred which, in the opinion of the Company expressed in a certificate of the Company
Representative filed with the Authority and the Trustee, render the continued operation of the Projects uneconomical for such purposes;

 

(d)           As a result of any
changes in the Constitution of the State or the Constitution of the United States of America or of legislative or administrative
action (whether state or federal) or by final decree, judgment or order of any court or administrative body (whether state or federal)
entered after the contest thereof by the Company in good faith, this Agreement shall have become void or unenforceable or impossible
of performance in accordance with the intent and purposes of the parties as expressed in this Agreement, or unreasonable burdens
or excessive liabilities shall have been imposed on the Company in respect to the Projects, including, without limitation, federal,
state or other ad valorem, property, income or other taxes not being imposed on the date of this Agreement; or

 

    	30

    	 

    

(e)           The Company files
a certificate of the Company Representative with the Authority and the Trustee stating that as a result of circumstances unforeseen
at the time the Bonds were issued, the Company has decided to discontinue operation of the Projects.

 

To exercise such
prepayment option, the Company shall, within 90 days following the event authorizing such prepayment, give written notice
to the Authority and to the Trustee and shall specify therein the date of prepaying the loan, which date shall be not less than
50 days nor more than 90 days from the date such notice is mailed, and shall make arrangements satisfactory to the Trustee for
the giving of the required notice of redemption. The prepayment amount payable by the Company in the event of its prepayment pursuant
to this Section shall be the sum of the following:

(i)           An amount
of money which, when added to the amount then on deposit and available in the Bond Fund, will be sufficient to pay, retire and
redeem all the Outstanding Bonds pursuant to the terms of the Indenture, including, without limitation, the principal amount thereof,
all interest to accrue to said redemption date and expenses, plus

(ii)           An amount
of money equal to the Trustee’s and Paying Agents’ fees and expenses under the Indenture accrued and to accrue until
such final payment and redemption of the Bonds, plus

(iii)           An
amount of money equal to the Authority’s fees and expenses under this Agreement accrued and to accrue until such final payment
and redemption of the Bonds, plus

(iv)           All
other liabilities and payment obligations of the Company accrued and to accrue under this Agreement until such final payment and
redemption of the Bonds.

    	31

    	 

    

 

ARTICLE
IX

OBLIGATION
TO PREPAY LOAN IN CERTAIN EVENTS

Section 9.01.      Determination
of Taxability. The Company shall be obligated to prepay the amounts payable hereunder, and accordingly cause redemption of
the Bonds pursuant to Section 3.01(a)(ii) of the Indenture, within 180 days after a Determination of Taxability (as defined
below) shall have occurred by prepaying an amount equal to, when added to other funds on deposit in the Bond Fund, (a) 100%
of the aggregate principal amount of Bonds Outstanding at the time of a Determination of Taxability plus accrued interest to the
redemption date, plus (b) an amount of money equal to the Trustee’s and Paying Agent’s fees and expenses under
the Indenture accrued and to accrue until such prepayment and redemption of the Bonds, plus (c) an amount of money equal to
all sums due to the Authority under this Agreement.

A “Determination
of Taxability” shall have been deemed to occur if, as a result of an Event of Taxability, a final decree or judgment of any
federal court or a final action of the Internal Revenue Service determines that interest paid or payable on any Bond is or was
includable in the gross income of a holder, Beneficial Owner, former holder or former Beneficial Owner of the Bonds for federal
income tax purposes under Section 103 (or a successor provision to Section 103) of the Code (other than a holder who is or was
a substantial user or related person within the meaning of Section 147(a) of the Code). However, no such decree or action
will be considered final for this purpose unless the Company has been given written notice and, if it is so desired and is legally
allowed, has been afforded the opportunity to contest the same, either directly or in the name of any holder, Beneficial Owner,
former holder or former Beneficial Owner of a Bond, provided that in the event the Company contests such decree or action in the
name of a holder, Beneficial Owner, former holder or former Beneficial Owner of a Bond, the Company agrees to pay all expenses
of such contest and offers such holder, Beneficial Owner, former holder or former Beneficial Owner indemnity with respect to such
expenses, and until conclusion of any appellate review, if sought. If the Trustee receives written notice from any such holder,
Beneficial Owner, former holder or former Beneficial Owner stating that (a) the holder, Beneficial Owner, former holder or
former Beneficial Owner has been notified in writing by the Internal Revenue Service that it proposes to include the interest on
any Bond in the gross income of such holder, Beneficial Owner, former holder or former Beneficial Owner for the reasons described
herein or any other proceeding has been instituted against such holder, Beneficial Owner, former holder or former Beneficial Owner
which may lead to a final decree or action as described herein and (b) such holder, Beneficial Owner, former holder or former
Beneficial Owner will afford the Company the opportunity to contest the same, either directly or in the name of such holder, Beneficial
Owner, former holder or former Beneficial Owner, provided that in the event the Company contests such decree or action in the name
of a holder, Beneficial Owner, former holder or former Beneficial Owner of a Bond, the Company agrees to pay all expenses of such
contest and offers such holder, Beneficial Owner, former holder or former Beneficial Owner indemnity with respect to such expenses,
and until a conclusion of any appellate review, if sought, and the Trustee is satisfied that such information is accurate, then
the Trustee shall promptly give written notice thereof to the Company and the Authority and to each such holder, Beneficial Owner,
former holder or former Beneficial Owner and to all other registered owners of the Bonds. The Trustee shall thereafter coordinate
any similar requests or notices it may have received from other holders, Beneficial Owners, former holders or former Beneficial
Owners and shall keep them informed of the progress of any administrative proceedings or litigation. If a final decree or action
as described above thereafter occurs, the Trustee shall make the required demand for prepayment of the amounts payable hereunder
and redemption of the Bonds and give notice of the redemption of the Bonds at the earliest practical date, but not later than the
date specified in this Article, and in the manner provided by Section 3.02 of the Indenture.

    	32

    	 

    

An “Event
of Taxability” shall mean the failure of the Company to observe any covenant, agreement or representation herein, which failure
results in a Determination of Taxability.

The prepayment amount
shall be applied, together with other available moneys in the Bond Fund, to the redemption of the Bonds on the earliest possible
date after notice as provided in the Indenture, whether or not such date is an Interest Payment Date, and to the payment of the
Trustee’s and Paying Agents’ fees and expenses under the Indenture accrued to such prepayment and redemption of the
Bonds, and to all sums due to the Authority under this Agreement.

Section 9.02.      Public
Purpose Covenant Violations. The Company shall prepay the First Mortgage Bonds in full, together with interest accrued
and to accrue to the redemption date upon the occurrence of one of the following events: (a) the Company ceases to operate any
Project or to cause any Project to be operated as an authorized project under the Act for twelve (12) consecutive months, without
first obtaining the prior written consent of the Authority, or (b) any material representation or warranty made by the Company
in the Agreement or in any document furnished in connection with the Agreement proves to have been false or misleading in any material
respect when made. The Authority shall give notice to the Company and the Trustee of such occurrence; whereupon the Trustee shall
give notice to the Bondholders of the redemption of the Bonds pursuant to Sections 3.01 and 3.02 of the Indenture and will set
a redemption date according to Section 3.01 of the Indenture, but in no event later than sixty (60) days after the Authority gives
notice to the Trustee of the occurrence. The prepayment of the First Mortgage Bonds shall be due and payable on the second Business
Day preceding the redemption date. Payment on the First Mortgage Bonds by the Company pursuant to this Section shall be in an amount
sufficient, together with other funds on deposit with the Trustee which are available for such purpose, to redeem the Bonds then
Outstanding, and to pay (i) all administrative expenses accrued and to accrue through the redemption date and (ii) any other expenses
and fees required to satisfy and discharge the Indenture.

    	33

    	 

    

 

ARTICLE
X

MISCELLANEOUS

 

Section 10.01.      Term
of Agreement. This Agreement shall remain in full force and effect from the date hereof until all of the Bonds, the First Mortgage
Bonds and the fees and expenses of the Authority, the Trustee and any Paying Agents shall have been fully paid or provision made
for such payments.

 

Section 10.02.      Notices.
All notices, certificates or other communications hereunder shall be sufficiently given and shall be deemed given when delivered
or three days after having been mailed, by registered or certified mail, postage prepaid, addressed as follows:

 

	 	if to the Authority:	New Jersey Economic Development Authority

36 West State Street

P.O. Box 990

Trenton, New Jersey 08625

Attention: Director of Program Services

 

	 	if to the Company:	Middlesex Water Company

1500 Ronson Road

Iselin, New Jersey 08830-3020

Attention: A. Bruce O’Connor

Vice President and Chief Financial
Officer

 

	 	if to the Trustee:	Deutsche Bank National Trust Company

100 Plaza One,
6th Floor, MS: JCY03-0699

Jersey City, NJ
07311

 

if to the Underwriters:

 

A duplicate copy
of each notice, certificate or other communication given hereunder by the Authority or the Company shall also be given to the Trustee
and the Underwriters. The Authority, the Company, the Trustee and the Underwriters may, by written notice given hereunder, designate
any further or different addresses to which subsequent notices, certificates or other communications shall be sent.

Section 10.03.       Binding
Effect. This Agreement shall inure to the benefit of and shall be binding upon the Authority, the Company, the Trustee, the
Bondholders and their respective successors and assigns, subject, however, to the limitations contained in Sections 2.03(d), 6.01
and 6.03 hereof.

 

Section 10.04.       Severability.
In the event any provision of this Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such
holding shall not invalidate or render unenforceable any other provision hereof.

 

    	34

    	 

    

Section 10.05.       Amounts
Remaining in Bond Fund. It is agreed by the parties hereto that any amounts remaining in the Bond Fund upon expiration or earlier
termination of the Term of Agreement, as provided in this Agreement, after payment in full of the Bonds (or provision for payment
thereof having been made in accordance with the provisions of the Indenture) and the fees and expenses of the Trustee and any Paying
Agents in accordance with the Indenture, shall belong to and be paid to the Company by the Trustee as the return of an overpayment
of the amounts payable hereunder.

 

Section 10.06.      Amendments,
Changes and Modifications. Subsequent to the issuance of Bonds and prior to their payment in full (or provision for the payment
thereof having been made in accordance with the provisions of the Indenture), and except as otherwise herein expressly provided,
this Agreement may not be amended or terminated without the written consent of the Trustee and, to the extent provided in Article XII
of the Indenture, in accordance with the provisions of the Indenture.

 

Section 10.07.      No
Personal Liability of Company Officials. No covenant or agreement contained in the Bonds or in this Agreement shall be deemed
to be the covenant or agreement of any officer, director, agent or employee of the Company in his or her individual capacity. No
recourse shall be had for the payment of the principal of and interest on any of the Bonds or for any claim based thereon or upon
any obligation, covenant or agreement contained in this Agreement against any past, present or future officer, director, agent
or employee of the Company, or any incorporator, officer, employee, director or agent of any successor corporation, as such, either
directly or through the Company or any successor corporation of the Company, under any rule of law or equity, statute or constitution
or by the enforcement of any assessment or penalty or otherwise, and all such liability of any such incorporator, officer, employee,
director or agent as such is hereby expressly waived and released as a condition of and consideration for the execution of this
Agreement.

 

Section 10.08.      Authority
Not Liable. The Authority shall not be obligated to pay the principal of or interest on the Bonds, except from receipts and
revenues actually received by the Authority or the Trustee under this Agreement. The Company hereby acknowledges that the Authority’s
sole source of moneys to repay the Bonds will be provided by the loan payments made by the Company pursuant to this Agreement,
together with other revenues, including investment income on certain funds and accounts held by the Trustee under the Indenture
and the proceeds of the Bonds, and hereby agrees that if the payments to be made hereunder shall ever prove insufficient to pay
all principal of and interest on the Bonds, as the same shall become due (whether by maturity, redemption, acceleration or otherwise),
then upon notice from the Trustee, the Company shall pay such amounts as are required from time to time to make up any deficiency
or default in the payment of such principal or interest, including, but not limited to, any deficiency caused by acts, omissions,
nonfeasance or malfeasance on the part of the Trustee, the Company, the Authority or any third party; provided, however, that such
payment shall not constitute a waiver of any right or remedy which the Company may possess to recover such payment from any party
whose acts, omissions, nonfeasance or malfeasance has caused or contributed to such deficiency.

 

    	35

    	 

    

Section 10.09.       Delegation
of Duties by Authority. It is agreed that, under the terms of this Agreement and also under the terms of the Indenture, the
Authority has delegated certain of its duties hereunder to the Company and to the Trustee. The fact of such delegation shall be
deemed sufficient compliance by the Authority to satisfy the duties so delegated, and the Authority shall not be liable in any
way by reason of acts done or omitted by the Company, any Company Representative or the Trustee. The Authority shall have the right
at all times to act in reliance upon the authorization, representation or certification of any Company Representative or the Trustee.

 

Section 10.10.      Execution
in Counterparts. This Agreement may be simultaneously executed in several counterparts, each of which shall be an original
and all of which shall constitute but one and the same instrument.

 

Section 10.11.      Applicable
Law. This Agreement shall be governed by and construed in accordance with the laws of the State (without regard to the State’s
conflicts of laws principles).

 

Section 10.12.      Captions.
The captions and headings in this Agreement are for convenience only and in no way define, limit or describe the scope or intent
of any provisions or Sections of this Agreement.

 

Section 10.13.      Application
of New Jersey Contractual Liability Act. Notwithstanding anything to the contrary contained herein, the forgoing is
subject to the limitations of the provisions of the New Jersey Contractual Liability Act, N.J. S. A. 59:13-1, et seq. and the New
Jersey Tort Claims Act, N.J.S.A. 59:2-1, et seq. While the New Jersey Contractual Liability Act, N.J.S.A. 59:13-1, et seq. is not
applicable by its terms to claims arising under contracts with the Authority, the Underwriters and the Company hereby agree that
such statute (except N.J.S.A. 59:13-9) shall be applicable to all claims arising against the Authority under this agreement.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT
BLANK]

 

    	36

    	 

    

IN WITNESS WHEREOF,
the Authority has caused this Agreement to be executed in its corporate name and attested by its duly authorized officials, and
the Company has caused this Agreement to be executed in its corporate name and attested by its duly authorized officers, all as
of the date first above written.

	 	NEW JERSEY ECONOMIC DEVELOPMENT 
	 	AUTHORITY
	 	 	 
	 	 	 
	 	By: 	/s/John J. Rosenfeld
	 	 	John J. Rosenfeld
	 	 	Director of Bonds and Incentives Services

 

ATTEST:

 

 

 

/s/Gregory Ritz                           

Gregory
Ritz

Assistant
Secretary

 

[AUTHORITY SIGNATURE PAGE TO LOAN AGREEMENT]

    	 

    	 

    

	 	MIDDLESEX WATER COMPANY
	 	 	 
	 	 	 
	 	 	 
	 	By	/s/A. Bruce O’Connor
	 	 	A. Bruce O’Connor
	 	 	Vice President and Chief Financial Officer

 

ATTEST:

 

 

	 	 	 
	By	/s/ Kenneth G. Quinn	 
	 	Kenneth G. Quinn	 
	 	Vice President and Corporate Secretary	 

 

 

[COMPANY SIGNATURE PAGE TO LOAN AGREEMENT]

 

    	 

    	 

    

EXHIBIT
A

Form of First Mortgage
Bonds

 

See Tab No. 21

 

    	A-1

    	 

    

SCHEDULE A

 

LIST OF PROJECT MUNICIPALITIES

 

 

	Municipality	County
	Woodbridge, Township of	Middlesex
	Edison, Township of	Middlesex
	Old Bridge, Township of	Middlesex
	Carteret, Borough of	Middlesex
	Metuchen, Borough of	Middlesex
	South Plainfield, Borough of	Middlesex
	Sayreville, Borough of	Middlesex
	Highland Park, Borough of	Middlesex
	New Brunswick, City of	Middlesex

 

    	D-1

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