Exhibit 10.44

 

MIDDLESEX WATER COMPANY

NOTE

RELATING TO:

THE CONSTRUCTION FINANCING TRUST LOAN PROGRAM

OF THE NEW JERSEY ENVIRONMENTAL INFRASTRUCTURE TRUST

 

$7,000,000 June 28, 2016

 

CFP-16- 1

 

FOR VALUE RECEIVED, MIDDLESEX WATER COMPANY, a corporation duly created and
validly existing pursuant to the laws of the State (as hereinafter defined), and
its successors and assigns (the “Borrower”), hereby promises to pay to the order
of the NEW JERSEY ENVIRONMENTAL INFRASTRUCTURE TRUST, a public body corporate
and politic with corporate succession, duly created and validly existing under
and by virtue of the Act (as hereinafter defined) (the “Trust”), the Principal
(as hereinafter defined), together with all unpaid accrued Interest (as
hereinafter defined), fees, late charges and other sums due hereunder, if any,
in lawful money of the United States of America, on the Maturity Date (as
hereinafter defined) or the date of any optional prepayment or acceleration in
accordance with the provisions of this note (this “Note”).

 

SECTION 1. Definitions. As used in this Note, unless the context requires
otherwise, the following terms shall have the following meanings:

 

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

 

“Administrative Fee” means a fee of up to four-tenths of one percent (.40%) of
that portion of the Principal identified in clause (i) of the definition thereof
(as set forth in this Section 1), or such lesser amount, if any, as the Trust
may determine from time to time.

 

“Anticipated Financing Program” means the financing program of the Trust,
pursuant to which the Trust will issue its Trust Bonds for the purpose of
financing, on a long term basis, the Project and other projects of certain
qualifying borrowers.

 

“Anticipated Long Term Loan” means the long term loan made by the Trust to the
Borrower from the proceeds of its Trust Bonds, as part of the Anticipated
Financing Program.

 

“Authorized Officer” means any person authorized by the Borrower or the Trust,
as the case may be, to perform any act or execute any document relating to the
Loan or this Note.

 

“Borrower Note Resolution” means the resolution of the Borrower’s Board of
Directors adopted on May, as amended and supplemented from time to time,
pursuant to which this Note has been issued, and entitled:

 

RESOLUTION OF MIDDLESEX WATER COMPANY, DETERMINING THE FORM AND OTHER DETAILS OF
ITS “NOTE RELATING TO THE CONSTRUCTION FINANCING PROGRAM OF THE NEW JERSEY
ENVIRONMENTAL INFRASTRUCTURE TRUST”, TO BE ISSUED IN THE PRINCIPAL AMOUNT OF UP
TO $7.0 MILLION, AND PROVIDING FOR THE ISSUANCE AND SALE OF SUCH NOTE TO THE NEW
JERSEY ENVIRONMENTAL INFRASTRUCTURE TRUST, AND AUTHORIZING THE EXECUTION AND
DELIVERY OF SUCH NOTE BY MIDDLESEX WATER COMPANY IN FAVOR OF THE NEW JERSEY
ENVIRONMENTAL INFRASTRUCTURE TRUST, ALL PURSUANT TO THE NEW JERSEY ENVIRONMENTAL
INFRASTRUCTURE TRUST CONSTRUCTION FINANCING PROGRAM.

 

 

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

 

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

 

“Cost” means those costs that are allocable to the Project, as shall be
determined on a project-specific basis in accordance with the Regulations, as
further set forth in Exhibit B hereto, as the same may be amended by subsequent
changes to eligible costs as evidenced by a certificate of an Authorized Officer
of the Trust.

 

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

 

“Environmental Infrastructure System” means the Environmental Infrastructure
Facilities of the Borrower, including the Project, for which the Borrower is
receiving the Loan.

 

“Event of Default” means any occurrence or event specified in Section 6 hereof.

 

“Interest” means the interest charged on the outstanding Principal of the Loan
at a rate of 0.00%.

 

“Loan” means the loan of the Principal, made by the Trust to the Borrower to
finance or refinance a portion of the Cost of the Project, as evidenced by this
Note.

 

“Loan Disbursement Requisition” means the requisition, to be executed by an
Authorized Officer of the Borrower and approved by the New Jersey Department of
Environmental Protection, in a form to be determined by the Trust and the New
Jersey Department of Environmental Protection.

 

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“Maturity Date” means June 28, 2017, or such earlier or later date to be
determined by the Trust in its sole discretion, which date shall be determined
by the Trust to be the date of the closing for the Anticipated Financing
Program; provided that the maturity may not be more than one year after the date
hereof..

 

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

 

“Principal” means the principal amount of the Loan, at any time being the lesser
of (i) Seven Million Dollars ($7,000,000), or (ii) the aggregate outstanding
amount as shall actually be disbursed to the Borrower by the Trust pursuant to
one or more Loan Disbursement Requisitions, which Principal shall be payable by
the Borrower to the Trust (i) on the Maturity Date or (ii) with respect to any
optional prepayment or acceleration of the Loan, on the date of such optional
prepayment or acceleration, as the case may be.

 

“Project” means the Environmental Infrastructure Facilities of the Borrower
which constitutes a project for which the Trust is making the Loan to the
Borrower, as further described in Exhibit A-1 hereto.

 

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

 

“State” means the State of New Jersey.

 

“Trust Bonds” means the revenue bonds of the Trust to be issued, as part of the
Anticipated Financing Program.

 

SECTION 2. Representations of the Borrower. The Borrower represents and warrants
to the Trust:

 

(a)      Organization. The Borrower: (i) is a corporation duly created and
validly existing under and pursuant to the Constitution and laws of the State,
including the Business Corporation Law; (ii) has full legal right and authority
to execute, attest and deliver this Note, to authorize the authentication of
this Note, to sell this Note to the Trust, and to perform its obligations
hereunder, and (iii) has duly authorized, approved and consented to all
necessary action to be taken by the Borrower for: (A) the issuance of this Note,
the authentication of this Note, the sale thereof to the Trust and the due
performance of its obligations hereunder and (B) the execution, delivery and due
performance of all certificates and other instruments that may be required to be
executed, delivered and performed by the Borrower in order to carry out and give
effect to this Note.

 

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(b)     Authority. This Note has been duly authorized by the Borrower, and duly
executed, attested and delivered by Authorized Officers of the Borrower, and
duly authenticated by the trustee or the paying agent pursuant to the Borrower
Note Resolution. This Note has been duly sold by the Borrower to the Trust and
duly issued by the Borrower and constitutes a legal, valid and binding
obligation of the Borrower, enforceable against the Borrower in accordance with
its terms, except as the enforcement thereof may be affected by bankruptcy,
insolvency or other laws or the application by a court of legal or equitable
principles affecting creditors’ rights.

 

(c)     Pending Litigation. There are no proceedings pending or, to the
knowledge of the Borrower, threatened against or affecting the Borrower that, if
adversely determined, would adversely affect (i) the condition (financial or
otherwise) of the Borrower, (ii) the adoption of the Borrower Note Resolution,
(iii) the ability of the Borrower to satisfy all of its Loan repayment
obligations hereunder, (iv) the authorization, execution, attestation,
authentication or delivery of this Note, (v) the issuance of this Note and the
sale thereof to the Trust, and (vi) the Borrower’s ability otherwise to observe
and perform its duties, covenants, obligations and agreements under this Note.

 

(d)     Compliance with Existing Laws and Agreements; Governmental Consent. (i)
The authorization, execution, attestation and delivery of this Note by the
Borrower, (ii) the adoption of the Borrower Note Resolution, (iii) the sale of
this Note to the Trust, (iv) the observation and performance by the Borrower of
its duties, covenants, obligations and agreements hereunder, including, without
limitation, the repayment of the Loan and all other amounts due hereunder, and
(iii) the undertaking and completion of the Project, will not (A) result in the
creation or imposition of any lien, charge or encumbrance upon any properties or
assets of the Borrower pursuant to, (B) result in any breach of any of the
terms, conditions or provisions of, or (C) constitute a default under, any
existing ordinance or resolution, outstanding debt or lease obligation, trust
agreement, indenture, mortgage, deed of trust, loan agreement or other
instrument to which the Borrower is a party or by which the Borrower, its
Environmental Infrastructure System or any of its properties or assets may be
bound, nor will such action result in any violation of the provisions of the
charter or other document pursuant to which the Borrower was established or any
laws, ordinances, injunctions, judgments, decrees, rules, regulations or
existing orders of any court or governmental or administrative agency, authority
or person to which the Borrower, its Environmental Infrastructure System or its
properties or operations are subject. The Borrower has obtained all permits and
approvals required to date by any governmental body or officer for the
authorization, execution, attestation, authentication and delivery of this Note,
for the sale of this Note to the Trust, for the making, observance and
performance by the Borrower of its duties, covenants, obligations and agreements
under this Note, and for the undertaking and completion of the Project.

 

(e)     Reliance. The Borrower hereby acknowledges that the Trust is making the
Loan to the Borrower pursuant to the terms hereof in reliance upon each of the
representations of the Borrower set forth in this Section 2.

 

SECTION 3. Covenants of the Borrower.

 

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(a)     Participation in the Anticipated Financing Program. The Borrower
covenants and agrees that it shall undertake and complete in a timely manner all
conditions precedent identified by the Trust relating to (i) the participation
by the Borrower in the Anticipated Financing Program and (ii) the qualification
by the Borrower for receipt of the Anticipated Long Term Loan.

 

(b)     Pledge. The Borrower unconditionally and irrevocably promises to make
the Loan repayments in accordance with the terms of, and to the extent provided
in, the Borrower Note Resolution for the punctual repayment of the Loan and all
other amounts due pursuant to this terms of this Note.

 

(c)     Disposition of Environmental Infrastructure System. The Borrower
covenants and agrees that it shall not sell, lease, abandon or otherwise dispose
of all or substantially all of its Environmental Infrastructure System without
the express written consent of the Trust, which consent may or may not be
granted by the Trust in its sole discretion.

 

(d)     Financing With Tax-Exempt Bonds. The Borrower acknowledges, covenants
and agrees that it is the intention of the Borrower to finance the Project on a
long term basis with proceeds of Trust Bonds now or hereinafter issued, the
interest on which is excluded from gross income for purposes of federal income
taxation pursuant to Section 103(a) of the Code (“tax-exempt bonds”). In
furtherance of such long term financing with tax-exempt bonds, the Borrower
covenants that, except to the extent expressly permitted in writing by the
Trust, the Borrower will not take any action or permit any action to be taken
which would result in any of the proceeds of the Loan being used (directly or
indirectly) to make or finance loans to persons other than the Borrower. In
addition, the Borrower covenants and agrees that (i) all of the proceeds of the
Loan will be used to pay costs of an exempt facility, within the meaning of
Section 142 of the Code, which were paid and incurred by the Borrower no more
than 60 days before the date on which the Trust adopted a declaration of intent
with respect to the Project, and (ii) no portion of the Project will be
investment property, within the meaning of Section 148(b) of the Code. The
Borrower covenants and agrees that any Costs to be paid or reimbursed with
proceeds of the Loan will result in the expenditure of proceeds under Treasury
Regulations §1.148-6(d) and Treasury Regulations §1.150-2, for costs subject to
the allowance for depreciation provided in Section 167 of the Code which are
chargeable to the capital account of the Borrower with respect to such exempt
facility.

 

(e)     Operation and Maintenance of Environmental Infrastructure System. The
Borrower covenants and agrees that it shall maintain its Environmental
Infrastructure System in good repair, working order and operating condition, and
make all necessary and proper repairs and improvements with respect thereto.

 

(f)     Records and Accounts; Inspections. The Borrower covenants and agrees
that it shall keep accurate records and accounts for its Environmental
Infrastructure System, separate and distinct from its other records and
accounts, which shall be audited annually by an independent registered certified
public accountant and shall be made available for inspection by the Trust upon
prior written notice. The Borrower shall permit the Trust to inspect the
Environmental Infrastructure System.

 

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(g)     Insurance. The Borrower covenants and agrees that it shall maintain
insurance policies providing against risk of direct physical loss, damage or
destruction of its Environmental Infrastructure System, in an amount that will
satisfy all applicable regulatory requirements. The Borrower covenants and
agrees that it shall include, or cause to be included, the Trust as an
additional “named insured” on any certificate of liability insurance procured by
the Borrower and by any contractor or subcontractor for the Project.

 

(h)     Reliance. The Borrower hereby acknowledges that the Trust is making the
Loan to the Borrower pursuant to the terms hereof in reliance upon each of the
covenants of the Borrower set forth in this Section 3.

 

SECTION 4. Disbursement of the Loan Proceeds; Amounts Payable; Prepayment; and
Late Fee. The Trust shall effectuate the Loan to the Borrower by making one or
more disbursements to the Borrower promptly after receipt by the Trust of a Loan
Disbursement Requisition and the approval of such Loan Disbursement Requisition
by an Authorized Officer of the Trust or designee thereof, each such
disbursement and the date thereof to be recorded by an Authorized Officer of the
Trust on the table attached as Exhibit A-2 hereto; provided, however, that no
Loan Disbursement Requisition shall be approved for disbursement unless the
portion of the Project to which such Loan Disbursement Requisition relates has
been certified for funding by the NJDEP. It is expected that the proceeds of the
Loan will be disbursed to the Borrower in accordance with Exhibit C hereto. The
latest date upon which the Borrower may submit to the Trust a Loan Disbursement
Requisition is the business day immediately preceding the date fixed by the
Trust for the sale of its bonds in connection with the Anticipated Financing
Program, or such alternative date as shall be identified by the Trust for the
Borrower in writing. On the Maturity Date, the Borrower shall repay the Loan to
the Trust in an amount equal to: (i) the Principal; (ii) the Interest; (iii) the
Administrative Fee, if any; and (iv) any other amounts due and owing pursuant to
the provisions of this Note. Any earnings accrued on the undrawn portion of the
Principal of the Loan shall be credited against the Borrower’s repayment
obligations hereunder. The Borrower may prepay the Loan obligations hereunder,
in whole or in part, upon receipt of the prior written consent of an Authorized
Officer of the Trust. Each payment made to the Trust shall be applied to the
payment of, first, the Interest then due and payable, second, the Principal,
third, the Administrative Fee, if any, fourth, any late charges, and, finally,
any other amount due pursuant to the provisions of this Note. In the event that
the repayment obligation set forth in this Note is received by the Trust later
than the Maturity Date, a late fee shall be payable to the Trust in an amount
equal to the greater of twelve percent (12%) per annum or the prime rate as
published in the Wall Street Journal on the Maturity Date plus one half of one
percent per annum on such late payment from the Maturity Date to the date it is
actually paid; provided, however, that any late payment charges incurred
hereunder shall not exceed the maximum interest rate permitted by law.
Notwithstanding the provisions of this Section 4 to the contrary, the Borrower
hereby acknowledges and agrees that, on the date of issuance of this Note, a
disbursement shall be made and shall be recorded by an Authorized Officer of the
Trust on the table attached as Exhibit A-2 hereto in the amount recorded
thereon. Such disbursement shall be made for the purpose of funding fifty
percent (50%) of an administrative fee, which administrative fee is payable by
the Borrower to the NJDEP as a portion of the Cost of the Project that has been
incurred by the Borrower for engineering and environmental services provided to
the Borrower by the NJDEP. Such disbursement shall be paid by the Trust on
behalf of the Borrower directly to the NJDEP in satisfaction of the provisions
hereof.

 

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SECTION 5. Unconditional Obligations. The obligation of the Borrower to make the
Loan repayments and all other payments required hereunder and the obligation to
perform and observe the other duties, covenants, obligations and agreements on
its part contained herein shall be absolute and unconditional, and shall not be
abated, rebated, set-off, reduced, abrogated, terminated, waived, diminished,
postponed or otherwise modified in any manner whatsoever while any Loan
repayments, or any other payments due hereunder, remain unpaid, regardless of
any contingency, act of God, event or cause whatsoever, including (without
limitation) any acts or circumstances that may constitute failure of
consideration, eviction or constructive eviction, the taking by eminent domain
or destruction of or damage to the Project or Environmental Infrastructure
System, commercial frustration of the purpose, any change in the laws of the
United States of America or of the State or any political subdivision of either
or in the rules or regulations of any governmental authority, any failure of the
Trust to perform and observe any agreement or any duty, liability or obligation
arising out of this Note, or any rights of set-off, recoupment, abatement or
counterclaim that the Borrower might have against the Trust or any other party;
provided, however, that payments hereunder shall not constitute a waiver of any
such rights.

 

SECTION 6. Events of Default. The following events shall constitute an “Event of
Default” hereunder: (i) failure by the Borrower to pay, when due, any and all of
its Loan repayment obligations hereunder, and any other payment obligations due
hereunder; (ii) failure by the Borrower to observe and perform any duty,
covenant, obligation or agreement on its part to be observed or performed
pursuant to the terms of this Note; (iii) any representation made by the
Borrower contained in this Note or in any instrument furnished in compliance
with or with reference to this Note is false or misleading in any material
respect; and (iv) a petition is filed by or against the Borrower under any
federal or state bankruptcy or insolvency law or other similar law in effect on
the date of this Note or thereafter enacted, unless in the case of any such
petition filed against the Borrower such petition shall be dismissed within
thirty (30) days after such filing and such dismissal shall be final and not
subject to appeal, or the Borrower shall become insolvent or bankrupt or shall
make an assignment for the benefit of its creditors, or a custodian of the
Borrower or any of its property shall be appointed by court order or take
possession of the Borrower or its property or assets if such order remains in
effect or such possession continues for more than thirty (30) days.

 

SECTION 7. Remedies upon Event of Default. Whenever an Event of Default shall
have occurred and be continuing pursuant to the terms hereof, the Borrower
hereby acknowledges and agrees to the rights of the Trust to take any action
permitted or required at law or in equity to collect the amounts then due and
thereafter to become due hereunder or to enforce the observance and performance
of any duty, covenant, obligation or agreement of the Borrower hereunder. If an
Event of Default shall have occurred, the Borrower hereby acknowledges and
agrees that the Trust shall have the right to declare all Loan repayments and
all other amounts due hereunder to be due and payable immediately without
further notice or demand. The Borrower hereby acknowledges and agrees that no
remedy herein is intended to be exclusive, and every remedy shall be cumulative
and in addition to every other remedy given under this Note or now or hereafter
existing at law or in equity. The Borrower hereby further acknowledges and
agrees that no delay or omission by the Trust to exercise any remedy or right
accruing upon any Event of Default shall impair any such remedy or right or
shall be construed to be a waiver thereof, but any such remedy or right may be
exercised as often as may be deemed expedient. The Borrower hereby agrees that
upon demand it shall pay to the Trust the reasonable fees and expenses of
attorneys and other reasonable expenses (including, without limitation, the
reasonably allocated costs of in-house counsel and legal staff) incurred in the
collection of Loan repayments or any sum due hereunder or in the enforcement of
the observation or performance of any obligations or agreements of the Borrower
upon an Event of Default. Any moneys collected by the Trust pursuant to this
Section 7 shall be applied first to pay any attorneys’ fees or other fees and
expenses owed by the Borrower.

 

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SECTION 8. Certain Miscellaneous Provisions. The Borrower hereby agrees as
follows: (a) all notices hereunder shall be deemed given when hand delivered or
when mailed by registered or certified mail, postage prepaid, to the Borrower at
the following address: Middlesex Water Company, 1500 Ronson Road, Iselin, New
Jersey 08830-0452, Attention: A. Bruce O’Connor, Vice President, Treasurer and
Chief Financial Officer; and to the Trust at the following address: New Jersey
Environmental Infrastructure Trust, 3131 Princeton Pike, Building 4, Suite 216,
Lawrenceville, New Jersey 08648-2201, Attention: Executive Director; (b) this
Note shall be binding upon the Borrower and its successors and assigns; (c) in
the event any provision of this Note is held illegal, invalid or unenforceable
by any court of competent jurisdiction, such holding shall not invalidate,
render unenforceable or otherwise affect any other provision hereof; (d) the
obligations of the Borrower pursuant to the terms of this Note may not be
assigned by the Borrower for any reason, unless the Trust shall have approved
said assignment in writing; (e) this Note may not be amended, supplemented or
modified without the prior written consent of the Trust; (f) this Note shall be
governed by and construed in accordance with the laws of the State; (g) the
Borrower shall, at the request of the Trust, execute and deliver such further
instruments as may be necessary or desirable for better assuring, conveying,
granting, assigning and confirming the rights, security interests and agreements
granted or intended to be granted by this Note; and (h) whenever the Borrower is
required to obtain the determination, approval or consent of the Trust pursuant
to the terms hereof, such determination, approval or consent may be either
granted or withheld by the Trust in its sole and absolute discretion.

 

 

 

 

[The remainder of this page has been left blank intentionally.]

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IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed,
sealed and delivered on the date first above written.

 

  MIDDLESEX WATER COMPANY             [SEAL]       By: /s/A. Bruce O’Connor
ATTEST:   A. Bruce O’Connor     Vice President, Treasurer     And Chief
Financial Officer     Authorized Officer      

 

 

/s/Jay L. Kooper, Esq.

Jay L. Kooper, Esq.

Vice President, General

Counsel and Secretary

 

 

 

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EXHIBIT A-2

 

Loan Disbursements

 

Date of Loan Disbursement Amount of Loan Disbursement Interest Rate     0.00%  
  0.00%     0.00%     0.00%     0.00%     0.00%     0.00%

 

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Middlesex Water Company

Project No. 1225001-023 (IFP)

EXHIBIT A-1

 

1)Name and Address of Local Unit:

 

Middlesex Water Company

500 Ronson Road

Iselin, New Jersey 08830

 

Attention: Richard M. Risoldi, Vice President Operations

 

2)Description of the Project:

 

The project consists of replacing 24,400 linear feet of 6 to 8-inch ductile iron
and 3,710 linear feet of 10 to 12 inch ductile iron watermains. Contract A
consists of replacing 8,850 linear feet of 6 to 8-inch ductile iron and 110
linear feet of 10 to 12 inch ductile iron watermains located on Cedar, Center,
David, Elm, Henry, Main, North Feltus, 6th Street, Walnut, Washington, and Welsh
Street. Contract B consists of replacing 15,550 linear feet of 6 to 8-inch
ductile iron and 3,600 linear feet of 10 to 12 inch ductile iron watermains
located on Betram, Bordentown, Campbell, Catherine, Charles, Church, Dayton,
Division, Ferris, Fourth, George, Gordon, Highland, Hillcrest, Lefferts, Lousia,
Mamie, Meacham, Prospect, Robert, Rt. 35, South Feltus, Thomas and Ward Streets.
The cement mortar lining on the interior of the pipe inhibits the corrosive
effects of the water and is an effective deterrent to the deterioration of the
metal pipe. However over time, unlined pipe will corrode and tuberculate (an
accumulation of iron oxide) affecting the carrying capacity of the pipe. A
reduction in the carrying capacity impacts the service to area customers through
reduced pressure and volume, reduces the ability of the mains to flow sufficient
water to fight fires, and increase in pumping costs due to the restriction in
the pipes. Water quality is impacted, as the corrosion will cause "red water"
problems.

 

3)Description of the Water Treatment System:

 

The Middlesex Water Company is an investor-owned water utility that provides
water service to retail customers primarily in eastern Middlesex County. Water
services are now furnished to approximately 59,000 retail customers located in
an area of approximately 55 square miles of New Jersey in Woodbridge Township,
the Boroughs of Metuchen and Carteret, portions of Edison Township and the
Borough of South Plainfield and the City of South Amboy in Middlesex County, and
a portion of the Township of Clark in Union County.

 

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

 

 

 

Middlesex Water Company

Project No. 1225001-023 (IFP)

 

EXHIBIT B

 

Basis for the Determination of Allowable Costs

 

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

 

Cost Classification  Application
Amount  Allowable
Amount  IFP
Allowable
Amount 1.  Administrative Expenses  $177,300   $186,058   $98,665  2.  Other
Costs  $0   $0   $0  3.  Engineering Fees  $120,000   $120,000   $120,000 
4.  Building Costs  $5,910,000   $6,201,931   $6,201,931  5.  Contingencies 
$295,500   $310,097   $310,097  6.  Allowance for Planning and Design 
$200,000   $200,000   $200,000  7.  Sub-Total  $6,702,800   $7,018,086  
$6,930,693  8.  DEP Fee (Financed Portion (50%))       $70,181   $69,307 
9.  Total Project Costs  $6,702,800   $7,088,267   $7,000,000  10. IFP Loan
Amount            $7,000,000                  

 

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

 

1.Administrative Expenses:

 

The total amount requested for this line item on the application was $177,300.
The allowable administrative expense is authorized to be 3% of the total
allowable building costs (Line Item No. 4). Therefore, the amount for the
administrative line item is $6,201,931 x 0.03 = $186,058. However, this line
item was reduced to $98,665 due to local borrowing limits.

 

Allowable Administrative Expenses are $98,665.

 

2. Other Costs:

 

The amount requested for this line item on the application was $0. Therefore,
the total allowable amount for this line item is $0.

 

Allowable Other Costs are $0.

 

 

Middlesex Water Company

Project No. 1225001-023 (IFP)

 

3.Engineering Fees:

 

The amount requested for this line item on the application was $120,000.
Middlesex Water Company will utilize “in house” engineering and inspection
personnel. The scope of work and costs for utilizing “in house” services has
been reviewed and approved.

 

Allowable Engineering Fees are $120,000.

 

4.Building Costs:

 

The amount requested for this line item on the application was $5,910,000. The
allowable amount based on the low bid received is $5,540,463 (consisting of
Contract A of $1,733,238.21 and Contract B of $3,807,225) and an additional
$661,468 for materials. Thus, the total building costs are $5,540,463 + $661,468
= $6,201,931 Therefore,

 

Green Project Reserve (GPR) Funding: Green Infrastructure - $0.   Energy
Efficiency- $0.   Water Efficiency - $0.   Green Innovative - $0.

 

Allowable Building Costs are $6,201,931.

 

5.Contingencies:

 

The amount requested for this line item on the application was $295,500. The
allowable amount is authorized to be 5% of the allowable building cost.
Therefore, the allowable amount for this line item is $6,201,931 x 0.05 =
$310,097.      

 

Allowable Contingencies are $310,097.

 

6.Allowance for Planning and Design:

 

The amount requested for this line item on the application was $200,000. The
allowable amount for this line item based on the allowable building costs and
the planning and design allowance as per N.J.A.C. 7:22-5.12 is as follows:

 

$874,232 = $250,000 + 0.12 x ($6,201,931 - $1,000,000). The maximum allowance
for this line item based on allowable building costs is $874,232. However, this
line item has been reduced to the application amount of $200,000.

 

Allowable Planning and Design Allowance is $200,000.

 

 

Middlesex Water Company

Project No. 1225001-023 (IFP)

 

 

7. Sub-Total:

 

The total amount applied for was $6,702,800. The subtotal line item amount is
$6,930,693.

 

8.DEP Fee:

 

This item represents the DEP Loan Surcharge or Loan Origination Fee imposed by
DEP as a portion of the cost of the project of the borrower. This DEP Loan
Surcharge or Loan Origination Fee is a portion of the cost of the project that
has been incurred for engineering and environmental services provided by DEP for
the borrower in connection with, and as a condition precedent to, the inclusion
of the project of the borrower in the 2016 Financing Program of the Trust, 50%
of which will be financed for the Borrower as part of the Trust Construction
Loan.

 

DEP Fee = $6,930,693 x 2% = $138,614

 

$138,614 x .50 = $69,307 (financed through the Construction Loan and paid to DEP
upon closing of the Construction Loan)

 

9.Total Project Costs:

 

The total project costs are (loan amount + DEP Fee) $7,000,000.

 

10.IFP Loan Amount:

 

The IFP Loan Amount is $7,000,000.

 

 

 

 

Middlesex Water Company

Project No. 1225001-023 (IFP)

 

 

EXHIBIT C

 

1. Disbursement Schedule

 

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

 

Year  Month  DEP Fee (Trust
 to make
payment)  Total            2016  June  $69,307   $1,010,000     July      
$1,010,000     August       $1,010,000     September       $1,010,000    
October       $1,010,000     November       $1,010,000     December      
$870,693                 Total     $69,307   $6,930,693                

 

 

 

 

Middlesex Water Company

Project No. 1225001-023 (IFP)

 

 

2. Project Schedule

 

The Borrower shall expeditiously initiate and complete the project in accordance
with the project schedule which was submitted as part of the loan application
repeated below. Failure to promptly initiate and complete the Project may result
in the imposition of sanctions under N.J.A.C. 7:22-3.40 through 3.44 and
N.J.A.C. 7:22-4.40 through 4.44. In addition, failure to promptly award all
subagreement(s) for building the Project within 12 months of the date of this
loan may result in a limitation on allowable costs as provided by N.J.A.C.
7:22-5.4(d) 4. This limitation provides that costs incurred under contracts
awarded after 12 months from the date of this loan are unallowable unless a
specific extension has been granted by the Department, in the case of a Fund
Loan, and the Trust, in the case of a Trust Loan.

 

EVENT DATE     Advertisement:   1225001-023 February 3, 2016                 Bid
Receipt:   1225001-023 May 3, 2016                 Award:   1225001-023 May 27,
2016                 Issuance of Notice to Proceed:   1225001-023 June 20, 2016
                Completion of Construction:   1225001-023 December 24, 2016
                Initiation of Operation:   1225001-023 December 25, 2016      
          Project Performance Certification:   1225001-023 December 26, 2017