MIDDLESEX WATER COMPANY


NOTE


RELATING TO:


THE CONSTRUCTION FINANCING TRUST LOAN PROGRAM


OF THE NEW JERSEY ENVIRONMENTAL INFRASTRUCTURE
TRUST


 


	$4,826,540	June 28, 2016


 


CFP-16-2


 


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 $5.0 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) Four Million Eight Hundred Twenty Six Thousand Five
Hundred Forty Dollars ($4,826,540), 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.


 



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SECTION 3.Covenants
of the Borrower.


 


(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.
1225001-016 (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
13,921 Linear Feet of 8-inch ductile iron watermains and the installation of 373 meter pits. Contract A consists of replacing 5,600
linear feet of 8 inch ductile iron water main located on Burchard Street, Carlton Street, Coral Street, Dartmouth Street, Edgegrove
Avenue, Glencourt Avenue and Gross Street. Contract B consists of replacing 8, 321 linear feet of 8 inch ductile iron water main
located on Albany Street, Bloomfield Avenue, Franklin Pl, Gold Street, Ireland Avenue, Jefferson Avenue, Leghigh Avenue, Lincoln
Street, Madison Avenue, Maple Street, Safran Avenue, Walsh Avenue, North Wolf Avenue, Wolf Avenue. 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. 1225001-016 (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	 	 	120,000	 	 	$	113,854	 	 	$	113,854	 
	2.  Other Costs	 	$	0	 	 	$	0	 	 	$	0	 
	3.  Engineering Fees	 	$	180,000	 	 	$	180,000	 	 	$	180,000	 
	4.  Building Costs	 	$	4,000,000	 	 	$	3,795,141	 	 	$	3,795,141	 
	5.  Contingencies	 	$	200,000	 	 	$	189,757	 	 	$	189,757	 
	6.  Allowance for Planning and Design	 	$	500,000	 	 	$	500,000	 	 	$	500,000	 
	7.  Sub-Total	 	$	5,000,000	 	 	$	4,778,752	 	 	$	4,778,752	 
	8.  DEP Fee (Financed Portion (50%))	 	 	 	 	 	 	 	 	 	$	47,788	 
	9.  Total Project Costs	 	$	5,000,000	 	 	 	 	 	 	$	4,826,540	 
	10. IFP Loan Amount	 	 	 	 	 	 	 	 	 	$	4,826,540	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 



 


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 $120,000. 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 $3,795,141 x 0.03 = $113,854.


 


Allowable Administrative Expenses
are $113,854.


 


		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.
1225001-016 (IFP)


 


		3.	Engineering Fees:



 


The amount requested for this line
item on the application was $180,000. 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 $180,000.


 


		4.	Building Costs:



 


The amount requested for this line
item on the application was $4,000,000. The allowable amount based on the low bid received is $3,432,467 (consisting of Contract
A of $1,392,373.50 and Contract B of $2,040,093.50) and an additional $362,674 for materials. Thus, the total building costs are
$3,432,467 + $362,674 = 3,795,141. Therefore,


 


Allowable Building Costs are $3,795,141.


 


		5.	Contingencies:



 


The amount requested for this line
item on the application was $200,000. The allowable amount is authorized to be 5% of the allowable building cost. Therefore, the
allowable amount for this line item is $3,795,141 x 0.05 = $189,757. Therefore,


 


Allowable Contingencies are $189,757.


 


		6.	Allowance for Planning and Design:



 


The amount requested for this line
item on the application was $500,000. 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:


 


$250,000 + 12% x ($3,795,141- 1,000,000)
= $585,417. The maximum allowance for this line item based on allowable building costs is $585,417. However, this line item has
been reduced to the application amount of $500,000.


 


Allowable Planning and Design Allowance
is $500,000.




     


     

    


Middlesex Water Company


Project No.
1225001-016 (IFP)


 


		7.	Sub-Total:



 


The total amount applied for was
$5,000,000. The subtotal line item amount is $4,778,752.


 


		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 = $4,778,752 x 2% = $95,576



 


$95,576 x .50 = $47,778
(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) $4,826,540. 


 


		10.	IFP Loan Amount:



 


The IFP Loan Amount is $4,826,540.




     


     

    


Middlesex Water Company


Project No.
1225001-016 (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	 	$	47,778	 	 	 	860,900	 
	 	 	July	 	 	 	 	 	 	647,900	 
	 	 	August	 	 	 	 	 	 	647,900	 
	 	 	September	 	 	 	 	 	 	647,900	 
	 	 	October	 	 	 	 	 	 	647,900	 
	 	 	November	 	 	 	 	 	 	647,900	 
	 	 	December	 	 	 	 	 	 	678,352	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	Total	 	 	 	$	47,778	 	 	$	4,778,752	 



 



     


     

    




Middlesex Water Company


Project No. 1225001-016 (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:	 
	 	February 3, 2016
	 	 
	Bid Receipt:	 
	 	May 10, 2016
	 	 
	Award:	 
	 	June 6, 2016
	 	 
	Issuance of Notice to Proceed:	 
	 	June 27, 2016
	 	 
	Completion of Construction:	 
	 	December 24, 2016
	 	 
	Initiation of Operation:	 
	 	December 25, 2016
	 	 
	Project Performance Certification:	 
	 	December 26, 2017