[LETTERHEAD - MIDDLESEX WATER COMPANY]
April 18, 2001
Dear Stockholder:
I am pleased to invite you to attend Middlesex Water Company s Annual
Meeting of Shareholders that will take place on Wednesday, May 23, 2001, at
11:00 a.m., at the office of the Company, 1500 Ronson Road, Iselin, New Jersey.
The primary business of the meeting will be election of directors and
approval of the selection of Deloitte & Touche LLP as independent auditors for
2001, and transaction of such other business as may properly come before the
meeting.
During the meeting, we will report to you on the Company s financial
status, operations and other activities during 2000, together with our goals for
2001. We welcome this opportunity to meet with our stockholders and look forward
to your comments and questions.
Your vote is important to us. Whether or not you plan to attend the
annual meeting, I urge you to vote. Please specify your choice by marking the
appropriate boxes on the enclosed proxy card and sign, date and return your
proxy in the enclosed postpaid return envelope as promptly as possible. If you
date, sign and return your proxy card without indicating your choices, the
persons designated as proxies will vote your shares in accordance with the
recommendations of the Directors and management.
I look forward to seeing you on May 23rd.
Sincerely,
/s/ J. Richard Tompkins
-----------------------
J. Richard Tompkins
Chairman of the Board and President
TABLE OF CONTENTS
Page
----
SOLICITATION AND REVOCATION OF PROXIES. . . . . . . . . . . . . . . 1
SHARES ENTITLED TO VOTE. . . . . . . . . . . . . . . . . . . . . . 1
VOTE REQUIRED AND METHOD OF COUNTING VOTES. . . . . . . . . . . . . 1
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 1
PROPOSAL 1 ELECTION OF DIRECTORS. . . . . . . . . . . . . . . . . . 2
NOMINEES FOR ELECTION AS DIRECTOR WITH TERM EXPIRING
IN 2004 CLASS II. . . . . . . . . . . . . . . . . . . . . . . . . . 3
DIRECTORS WHOSE TERMS CONTINUE BEYOND 2001 ANNUAL MEETING. . . . . 4
SECURITY OWNERSHIP OF DIRECTORS, MANAGEMENT AND CERTAIN
BENEFICIAL OWNERS . . . . . . . . . . . . . . . . . . . . . . . . . 5
EXECUTIVE COMPENSATION. . . . . . . . . . . . . . . . . . . . . . . 6
Summary Compensation Table. . . . . . . . . . . . . . . . . . . . . 6
Compensation of Directors . . . . . . . . . . . . . . . . . . . . . 7
Compensation Pursuant to Pension Plans. . . . . . . . . . . . . . . 7
Compensation Committee Interlocks and Insider Participation . . . . 8
EXECUTIVE DEVELOPMENT AND COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION. . . . . . . . . . . . . . . . . . . . . . . 8
AUDIT COMMITTEE REPORT. . . . . . . . . . . . . . . . . . . . . . . 10
STOCK PERFORMANCE GRAPH. . . . . . . . . . . . . . . . . . . . . . 11
PROPOSAL 2 APPOINTMENT OF INDEPENDENT AUDITORS. . . . . . . . . . . 12
PRINCIPAL ACCOUNTING FIRM FEES . . . . . . . . . . . . . . . . . . 12
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS . . . . . . . . . . . 12
OTHER MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
MINUTES OF 2000 MEETING OF STOCKHOLDERS . . . . . . . . . . . . . . 13
APPENDIX A: AUDIT COMMITTEE CHARTER . . . . . . . . . . . . . . . . A-1
[LETTERHEAD - MIDDLESEX WATER COMPANY]
-----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 23, 2001
AND
PROXY STATEMENT
-----------------
To the Stockholders of Middlesex Water Company
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
MIDDLESEX WATER COMPANY will be held at the office of the Company, 1500 Ronson
Road, Iselin, New Jersey, on Wednesday, May 23, 2001, at 11:00 a.m., for the
following purposes:
1. To elect two members of Class II of the Board of Directors to hold
office until the Annual Meeting of Stockholders in the year 2004,
and in each case until their respective successors are elected and
qualify.
2. To consider and act upon the approval of the appointment of
Deloitte & Touche LLP as independent auditors for the year 2001.
3. To transact such other business as may properly come before the
meeting and any adjournment thereof.
Only holders of record of Common Stock at the close of business on March
30, 2001, will be entitled to notice of and to vote at the meeting or any
adjournment thereof. The Company s Annual Report for the year ended December 31,
2000, has already been mailed to stockholders.
If you are unable to be present at the meeting but desire to have your
shares voted, please execute the enclosed proxy and return it in the
accompanying envelope, to which no postage need be affixed if mailed in the
United States.
By Order of the Board of Directors,
/s/ Marion F. Reynolds
----------------------
MARION F. REYNOLDS
Secretary
April 18, 2001
IMPORTANT
To assure your representation at the meeting, please
mail the enclosed proxy promptly.
[LETTERHEAD - MIDDLESEX WATER COMPANY]
------------
PROXY STATEMENT
------------
Notice of the Annual Meeting of Stockholders of Middlesex Water Company
to be held on May 23, 2001, is attached. You are cordially invited to attend the
meeting. If you are unable to attend, you are requested to sign and complete the
enclosed proxy and return it in the accompanying envelope.
SOLICITATION AND REVOCATION OF PROXIES
The enclosed proxy is solicited by and on behalf of the Board of
Directors of the Company. The cost of soliciting proxies will be borne by the
Company. In addition to solicitation by mail, the Company may make arrangements
with brokerage houses and other custodians, nominees, and fiduciaries to send
proxies and proxy material to their principals and will reimburse them for their
expenses in so doing. The solicitations will be initially by mail, and it may
later be decided to make further solicitations by mail, telephone, telegram,
fax, e-mail or in person by Directors, Officers and employees of the Company.
This proxy statement and the accompanying proxy are first being sent to
stockholders on or about April 18, 2001.
The giving of a proxy does not preclude the right to vote in person
should the stockholder giving the proxy so desire, and a proxy may be revoked by
giving notice to the Secretary of the Company in writing at any time prior to
the commencement of the meeting or in open meeting prior to the taking of the
vote to which such revocation relates.
SHARES ENTITLED TO VOTE
As of March 30, 2001, there were outstanding 5,057,357 shares of Common
Stock which is the only class of capital stock entitled to vote at the Annual
Meeting. Each holder of Common Stock is entitled to one vote for each share
held. As stated in the Notice of Meeting, holders of record of Common Stock at
the close of business on March 30, 2001, will be entitled to vote at the meeting
or any adjournment thereof.
VOTE REQUIRED AND METHOD OF COUNTING VOTES
The affirmative vote of a plurality of the votes cast at the meeting is
required for the election of Directors. For the ratification of the appointment
of Deloitte & Touche LLP, the affirmative vote of the holders of a majority of
the shares represented, in person or by proxy, and entitled to vote on the item
will be required. Abstentions and broker non-votes will not be included in
determining the number of votes cast concerning any matter.
GENERAL INFORMATION
Management of the Company is under the general direction of the Board of
Directors who are elected by the stockholders. The Board of Directors holds
regular monthly meetings and meets on other occasions when required in special
circumstances. The Board of Directors held eleven meetings and the Board
Committees held fifteen meetings during the year 2000. Each incumbent Director
attended 100% of the total number of meetings of the Board and Committees on
which each served.
The Board of Directors has an Audit Committee, consisting of John C.
Cutting, John R. Middleton and John P. Mulkerin, which reviews the scope of the
audit, receives and reviews the auditors annual
1
report and makes a recommendation to the Board for the appointment of an
independent accounting firm for the following calendar year. The Audit Committee
Charter (Appendix A) more fully describes the responsibilities and the
activities of the Audit Committee. The Committee held five meetings during the
year 2000.
The Board of Directors has an Executive Development and Compensation
Committee, consisting of John C. Cutting, Stephen H. Mundy and Jeffries Shein,
which reviews and makes recommendations to the Board of Directors as to the
salaries and benefits of the Executive Officers of the Company and administers
the 1989 Restricted Stock Plan. The Committee held six meetings during the year
2000.
The Board of Directors has a Pension Committee, consisting of John C.
Cutting, John P. Mulkerin and Jeffries Shein, which reviews investment policies
and determines recommended investment objectives for the Company s Pension Plan
and serves as trustee for the Company s Voluntary Employees Beneficiary
Association Trust. The Committee meets quarterly with the Company s Investment
Managers. The Committee held four meetings during the year 2000.
The Board of Directors appoints an ad hoc Nominating Committee from time
to time as needed. Such a Committee, consisting of John P. Mulkerin, Stephen H.
Mundy and Jeffries Shein, was appointed in September 2000. The Committee did not
meet during the year 2000. The ad hoc Nominating Committee will consider
qualified nominations for Directors recommended by stockholders. Recommendations
should be sent to Middlesex Water Company, Office of the Secretary, 1500 Ronson
Road, P.O. Box 1500, Iselin, New Jersey 08830-0452. The Secretary should receive
any nominations for Director on or before December 20, 2001.
PROPOSAL 1
ELECTION OF DIRECTORS
At the Annual Meeting of Stockholders two members of Class II of the
Board of Directors are to be elected each to hold office until the Annual
Meeting of Stockholders in the year 2004, and in each case until their
respective successors are elected and qualified. The present terms of the two
Directors included in Class II expire at the year 2001 Annual Meeting.
Proxies in the accompanying form will be voted for these nominees,
unless authority to vote for one or more of them shall have been withheld by so
marking the enclosed proxy. Directors shall be elected by a plurality of the
votes cast at the election.
If at the time of the meeting any of the nominees listed should be
unable to serve, which is not anticipated, it is the intention of the persons
designated as proxies to vote, in their discretion, for other nominees, unless
the number of Directors constituting a full Board is reduced.
There is shown as to each nominee, and as to each Director whose term of
office will continue after the year 2001 Annual Meeting, age as of the date of
the Annual Meeting, the period of service as a Director of the Company, and
business experience during the last five years.
2
NOMINEES FOR ELECTION AS
DIRECTORS WITH TERMS EXPIRING IN 2004 CLASS II
Expiration Business Experience
Name, Period Served as Date of During Past Five Years
Director of Company Age New Term and Other Affiliations
- ------------------- --- -------- ----------------------
Stephen H. Mundy . . . . . . . . . . 67 2004 Retired. Formerly Vice President, A. Stanley
Director since 1997 Mundy, Inc., Public Utility Contractor,
Virginia Beach, Virginia.
Chairman of Executive Development and Com-
pensation Committee and Member of
Nominating Committee.
Richard A. Russo . . . . . . . . . . . 55 2004 Executive Vice President of the Company.
Director since 1994 Director and President of Tidewater Utilities,
Inc. (TUI). Director and President of White
Marsh Environmental Systems, Inc., a
subsidiary of TUI. Director and Vice
President of Sussex Shores Water Company.
The Board of Directors unanimously recommends a vote FOR Proposal 1.
3
DIRECTORS WHOSE TERMS CONTINUE BEYOND
THE 2001 ANNUAL MEETING AND ARE NOT
SUBJECT TO REELECTION THIS YEAR
Expiration Business Experience
Name, Period Served as Date of Term During Past Five Years
Director of Company Age and Class and Other Affiliations
- ------------------- --- --------- ----------------------
John C. Cutting. . . . . . . . . . . 64 2003 Retired. Formerly Consulting Senior Engineer,
Director since 1997 Class I Science Applications International Corpora-
tion, specialists in information, energy and
military systems, Pittsburgh, Pennsylvania.
Chairman of Pension Committee and Member
of Audit Committee and Executive
Development and Compensation Committee.
John R. Middleton, M.D. . . . . . 56 2002 Chair of the Department of Medicine and
Director since 1999 Class III Medical Director of Raritan Bay Medical
Center. Fellow of American College of
Physicians and Member of Editorial Board
(Infectious Diseases) of New Jersey Medicine.
Member of Audit Committee.
John P. Mulkerin (1) . . . . . . . . 63 2003 President, Chief Executive Officer and Director
Director since 1997 Class I of First Sentinel Bancorp, Inc., Holding
Company for First Savings Bank, Perth
Amboy, New Jersey. Director of FSB Finan-
cial Corp., Raritan Bay Medical Center and
Daytop Village Foundation.
Chairman of Audit Committee and Member of
Nominating and Pension Committees.
Jeffries Shein (1). . . . . . . . . . 61 2002 Partner, Jacobson, Goldfarb & Tanzman, Industrial
Director since 1990 Class III and Commercial Brokerage Firm, Wood-
bridge, New Jersey. Director of First Sentinel
Bancorp, Inc., Holding Company for First
Savings Bank, Perth Amboy, New Jersey,
and Chairman of the Board of Raritan Bay
Medical Center.
Chairman of Nominating Committee and Member
of Executive Development and Compensation
Committee and Pension Committee.
Dennis G. Sullivan . . . . . . . . . 59 2003 Senior Vice President and General Counsel,
Director since 1999 Class I Assistant Secretary and Assistant Treasurer
of the Company. Director and Assistant
Secretary and Assistant Treasurer of
Tidewater Utilities, Inc. (TUI); Director and
Chairman of Pinelands Water Company and
Pinelands Wastewater Company; and
Director of Utility Service Affiliates, Inc.;
and Utility Service Affiliates (Perth Amboy)
Inc., subsidiaries of the Company. Director,
Vice President and Assistant Secretary of
White Marsh Environmental Systems, Inc., a
subsidiary of TUI.
4
Expiration Business Experience
Name, Period Served as Date of Term During Past Five Years
Director of Company Age and Class and Other Affiliations
- ------------------- --- --------- ----------------------
J. Richard Tompkins. . . . . . . . 62 2002 Chairman of the Board and President of the
Director since 1981 Class III Company. Past President of National
Association of Water Companies and
Director of New Jersey Utilities Association.
Director and Chairman of Tidewater
Utilities, Inc. (TUI); Pinelands Water
Company and Pinelands Wastewater
Company; and Director and President of
Utility Service Affiliates, Inc.; and Utility
Service Affiliates (Perth Amboy) Inc.,
subsidiaries of the Company. Director and
Chairman of White Marsh Environmental
Systems, Inc., a subsidiary of TUI.
- ---------------
(1) The Company has established a $10,000,000 line of credit with First Savings
Bank, Perth Amboy, New Jersey. At December 31, 2000, there was an
outstanding loan of $2,050,000 at an interest rate of 7.10% with First
Savings Bank.
SECURITY OWNERSHIP OF DIRECTORS, MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of March 30, 2001, beneficial
ownership of Middlesex Water Company Common Stock by the elected Directors,
Executive Officers named in the table appearing under Executive Compensation and
all elected Directors and Executive Officers as a group. Jeffries Shein owned
1.57% of the shares outstanding on March 30, 2001. All other individual elected
Directors and Executive Officers owned less than 1% of the shares outstanding on
March 30, 2001.
Amount and Nature
of Beneficial
Name Ownership
- ---- ---------
Directors
John C. Cutting . . . . . . . . . . . . . . . . . . . . . . . 16,326
John R. Middleton, M.D.. . . . . . . . . . . . . . . . . . . . 1,042
John P. Mulkerin . . . . . . . . . . . . . . . . . . . . . . . 3,500
Stephen H. Mundy. . . . . . . . . . . . . . . . . . . . . . . 32,150
Richard A. Russo. . . . . . . . . . . . . . . . . . . . . . . 12,896
Jeffries Shein* . . . . . . . . . . . . . . . . . . . . . . . 79,170
Dennis G. Sullivan. . . . . . . . . . . . . . . . . . . . . . 6,610
J. Richard Tompkins** . . . . . . . . . . . . . . . . . . . . 24,544
Named Executive Officers
Walter J. Brady. . . . . . . . . . . . . . . . . . . . . . . . 10,032
A. Bruce O Connor . . . . . . . . . . . . . . . . . . . . . . 5,889
All elected Directors and Executive Officers as a group
including those named above (12). . . . . . . . . . . . . . . 209,690***
- ---------------
* Includes 7,429 shares over which Mr. Shein has shared voting powers. Mr.
Shein also disclaims beneficial ownership of 2,436 additional shares.
** Disclaims beneficial ownership of 450 additional shares.
*** 4.15% of the shares outstanding on March 30, 2001.
5
The following table sets forth information made known to the Company as
of February 1, 2001, of any person or group to be the beneficial owner of more
than five percent of the Company s Common Stock:
Number of Shares
Beneficially Owned
and Nature
of Beneficial Percent
Name and Address Ownership (1) of Class
- ---------------- ------------- --------
Verona Construction Company. . . . . . 329,800 6.52%
Wilmington, Delaware 19801
- ---------------
(1) Beneficial owner has sole power to vote and dispose of such shares.
EXECUTIVE COMPENSATION
There is shown below information concerning the annual and long-term
compensation for services in all capacities to the Company for the years 2000,
1999 and 1998 of those named executives whose total annual salary amounted to
$100,000 or more.
SUMMARY COMPENSATION TABLE
Name and Stock Other Annual
Principal Position Year Salary Bonus Award Compensation
- ------------------ ---- ------ ----- ----- ------------
(1) (2)
J. Richard Tompkins 2000 $273,400 $43,700 $ 8,845
Chairman of the Board 1999 $265,000 $10,192 $51,700 $ 9,416
and President 1998 $256,350 $24,615 $43,500 $10,470
Richard A. Russo 2000 $182,400 $23,300 $ 7,119
Executive Vice President 1999 $176,000 $ 6,769 $25,850 $ 6,512
1998 $166,773 $12,846 $21,750 $ 6,794
Dennis G. Sullivan 2000 $142,862 $23,300 $ 5,786
Senior Vice President & 1999 $130,000 $ 5,000 $25,850 $ 5,577
General Counsel and 1998 $123,369 $ 9,500 $21,750 $ 5,397
Assistant Secretary &
Assistant Treasurer
Walter J. Brady 2000 $139,400 $23,300 $ 5,671
Senior Vice President- 1999 $133,000 $ 5,115 $25,850 $ 5,400
Administration 1998 $127,369 $ 9,808 $21,750 $ 5,760
A. Bruce O Connor 2000 $135,400 $23,300 $ 4,882
Vice President and 1999 $128,000 $ 4,923 $25,850 $ 4,710
Controller 1998 $114,273 $ 9,000 $21,750 $ 4,244
- ---------------
(1) The number and value of Restricted Stock held in escrow as of December 31,
2000, were as follows: Mr. Tompkins 9,500/$320,625; Mr. Russo
4,900/$165,375; Mr. Sullivan 4000/ $135,000; Mr. Brady 3,900/$131,625; and
Mr. O Connor 3,800/$128,250. Generally, the restrictions lapse on these
awards five years from the date of grant. The restrictions also lapse in the
event of a change in control of the Company. All dividends on these shares
are paid to the awardees.
(2) Includes employer contributions to the Company s defined contribution plan
and life insurance premiums for 2000: Mr. Tompkins ($5,950 and $2,895), Mr.
Russo ($5,950 and $1,169), Mr. Sullivan ($4,962 and $824), Mr. Brady ($4,841
and $830) and Mr. O Connor ($4,697 and $186); for 1999: Mr. Tompkins ($5,600
and $3,816), Mr. Russo ($5,600 and $912), Mr. Sullivan ($4,550 and $1,027),
Mr. Brady ($4,341 and $1,059) and Mr. O Connor ($4,480 and $230); for 1998:
Mr. Tompkins ($5,600 and $4,870), Mr. Russo ($5,600 and $1,194), Mr.
Sullivan ($4,139 and $1,258), Mr. Brady ($4,446 and $1,314) and Mr. O Connor
($3,987 and $256).
6
COMPENSATION OF DIRECTORS
A Director who is not an officer of the Company or its subsidiaries is
paid an annual retainer of $8,100 and a fee of $600 for attendance at Board of
Directors (Board) meetings; a fee of $300 for attendance at special meetings of
the Board and a fee of $150 for attendance at special Board Committee meetings
by means of communications facilities and a fee of $400 for each committee
meeting attended. Committee chairmen receive an additional $200 for each
committee meeting chaired. Directors who are officers of the Company are paid a
fee of $300 for each meeting of the Board attended.
COMPENSATION PURSUANT TO PENSION PLANS
Annual Benefit Based on Compensation and Years of Service
Years of Service
------------------------------------------------------------------------------
Remuneration 15 20 25 30 35 45
- ------------ -- -- -- -- -- --
$100,000 . . . . . . . . . . . . . $ 57,804 $ 57,804 $ 57,804 $ 57,804 $ 57,804 $ 71,015
$125,000 . . . . . . . . . . . . . $ 76,554 $ 76,554 $ 76,554 $ 76,554 $ 76,554 $ 90,765
$150,000 . . . . . . . . . . . . . $ 95,304 $ 95,304 $ 95,304 $ 95,304 $ 95,304 $110,515
$175,000 . . . . . . . . . . . . . $114,054 $114,054 $114,054 $114,054 $114,054 $126,315
$200,000 . . . . . . . . . . . . . $132,804 $132,804 $132,804 $132,804 $132,804 $132,804
$225,000 . . . . . . . . . . . . . $151,554 $151,554 $151,554 $151,554 $151,554 $151,554
$250,000 . . . . . . . . . . . . . $170,304 $170,304 $170,304 $170,304 $170,304 $170,304
$300,000 . . . . . . . . . . . . . $207,804 $207,804 $207,804 $207,804 $207,804 $207,804
All employees, including the named executives, who receive pay for 1,000
hours during the year are included in the Company s Qualified Defined Benefit
Pension Plan (Qualified Plan). Under the noncontributory trusteed Qualified
Plan, current service costs are funded annually. The Company's annual
contribution is determined on an actuarial basis. Benefits are measured from the
member's entry date and accrue to normal retirement date or date of early
retirement. Benefits are calculated, at normal retirement, at 1.25% of pay up to
the employee s benefit integration level, plus 1.9% of such excess pay,
multiplied by service to normal retirement date, capped at 35 years of such
excess pay, multiplied by service to normal retirement date of age 65. Average
pay is the highest annual average of total pay during any 5 consecutive years
within the 10 calendar-year period prior to normal retirement date. The benefit
integration level is based on the 2000 Summary Compensation Table. The benefit
amounts are not subject to any deduction for Social Security benefits or other
offset amounts.
During the year 2000, the Company was not required to make a statutory
contribution to the Qualified Plan. Remuneration covered under the Qualified
Plan includes base wages only.
The estimated credited years of service based on normal retirement at
age 65 includes 22 years, 20 years, 44 years, 22 years and 33 years for Messrs.
Tompkins, Russo, Brady, Sullivan, and O Connor, respectively.
Supplemental Executive Retirement Plan The named executive officers and
the other executive officers are eligible to participate in the deferred
compensation plan known as the Supplemental Executive Retirement Plan (Executive
Plan) at the discretion of the Board of Directors.
A participant who retires on his normal retirement date is entitled to
an annual retirement benefit equal to 75% of his compensation reduced by his
primary Social Security benefit and further reduced by any benefit payable from
the Qualified Plan. In certain cases further reductions are made for benefits
from other employment. Generally, a participant is vested at 10 years of
service. Annual retirement benefits are payable for 15 years either to the
participant or his beneficiary. Retirement benefits may be in the form of single
life annuity, joint and 50% survivors annuity, joint and 100% survivors annuity,
single life annuity with a 10-year certain period and single life annuity with a
15-year certain period paid on an actuarial equivalent basis.
The Company is not obligated to set aside or earmark any monies or other
assets specifically for the purpose of funding the Executive Plan, except that
upon a change of control the Company would be
7
obligated to make contributions to a trust anticipated to be sufficient
to meet its obligations under the Executive Plan. In any event, the benefits are
in the form of an unfunded obligation of the Company. The Company has elected to
purchase corporate-owned life insurance as a means of satisfying its obligation
under the Executive Plan. The Company reserves the right to terminate any plan
or life insurance at any time; however, a participant is entitled to any
benefits he would have been entitled to under the Executive Plan provisions. For
the year 2000, the Company paid life insurance premiums totaling $0.1 million
for Messrs. Tompkins, Russo, Brady, Sullivan and O Connor, which provides a
pre-retirement net death benefit of 1-1/2 times base salary at date of death.
Defined Contribution Plan Under its 401(k) Plan, the Company matches
100% of that portion of the employee contribution that does not exceed 1% of
base pay, plus an additional 50% of that portion from 2% to 6% of base pay.
Distributions under the 401(k) Plan are made upon normal retirement, total and
permanent disability or death and are subject to certain vesting provisions as
to Company contributions.
Change of Control Agreements The Company has change of control
termination agreements with the named executive officers, and the other
executive officers. These agreements provide that if the executive is terminated
by the Company, other than for death, disability, cause (as defined in the
agreement) or good reason (as defined in the agreement) within three years after
a change of control, the executive is entitled to receive (a) a lump sum
severance payment equal to the sum of three times the executive s average total
compensation for the five years prior to the termination; (b) continued coverage
for three years under any health or welfare plan in which the executive and the
executive s dependents were participating; and (c) an additional amount
sufficient to pay any additional tax liability resulting from the severance
payments and benefits under this, and any other plans or agreements. In
addition, the executive will be entitled to receive benefits under the Executive
Plan, at the executive s otherwise normal retirement date, with such benefits
calculated as if the executive had continued employment to age 65, unless the
executive elects to receive such benefits at a lesser amount at termination.
Further, all restricted stock held by the executive will become unrestricted
(with respect to the plan s five year holding period) upon a change of control.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the 2000 Executive Development and Compensation Committee
were John C. Cutting, Stephen H. Mundy and Jeffries Shein. During 2000, no
member of the Executive Development and Compensation Committee was an officer or
employee of the Company or a subsidiary.
EXECUTIVE DEVELOPMENT AND COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
Overview
The Executive Development and Compensation Committee of the Board of
Directors administers the compensation program for executive officers of the
Company. The Committee for the year 2001 is composed of three independent
Directors: John C. Cutting, Stephen H. Mundy and Jeffries Shein. The Committee
is responsible for setting and administering the policies that govern annual
compensation and Restricted Stock awards. The full Board of Directors approves
policies and plans developed by the Committee.
The Committee s compensation policies and plans applicable to the
executive officers seek to enhance the profitability of the Company and
shareholder value, as well as control costs and maintain reasonable rates for
the customers. The Committee s practices reflect policies that compensation
should (1) attract and retain well-qualified executives, (2) support short- and
long-term goals and objectives of the Company, (3) reward individuals for
outstanding contributions to the Company s success, (4) be meaningfully related
to the value created for shareholders, and (5) relate to maintenance of good
customer relations and reasonable rates.
8
The Committee meets with Mr. Tompkins to evaluate the performance of the
other executive officers and meets in the absence of Mr. Tompkins to evaluate
his performance. The Committee reports on all executive evaluations to the full
Board of Directors.
Salary Compensation
Base salary levels are reviewed annually using compensation data
produced by an independent compensation consultant for similar positions and
comparable companies. Base salaries for satisfactory performance are targeted at
the median of the competitive market. Individual performance of the executive is
determined and taken into account when setting salaries against the competitive
market data. The Committee reviews, as well, the individual s efforts on cost
control and his or her contributions to the results of the year. The Committee
also reviews the Company s financial results compared with prior years and
compared with other companies. It compares salaries with both water and general
industry salaries.
The factors and criteria upon which Mr. Tompkins compensation was based
generally include those discussed with respect to all the executive officers.
Specifically, however, his salary is based on his overall performance and that
of the Company. His salary was set at a rate, which was approximately the median
of the utility market and below that of the general industry. In addition, in
evaluating the performance of the CEO, the Committee has taken particular note
of management s success with respect to the growth of the Company.
Restricted Stock
The Company maintains a restricted stock plan for the purpose of
attracting and retaining key executives and other employees having managerial or
supervisory responsibility who have contributed, or are likely to contribute,
significantly to the long-term performance and growth of the Company and its
subsidiaries. This plan is designed to enhance financial performance, customer
service and corporate efficiency through a performance-based stock award. Annual
stock awards are based upon several factors including the participant s ability
to contribute to the overall success of the Company.
The level of awards and the value of the performance are reviewed
annually by the Committee. The Committee submits reports on all executive
evaluations and restricted stock awards to the full Board of Directors for
approval.
Year 2001 Executive Development and Compensation Committee
Stephen H. Mundy, Chairman
John C. Cutting
Jeffries Shein
9
AUDIT COMMITTEE REPORT
The Audit Committee of the MWCo Board of Directors is composed of three
independent Directors. It operates under a written charter adopted by the Board
of Directors, a copy of which is attached as Appendix A to the MWCo Proxy
Statement.
Management is responsible for MWCo s financial statements and internal
controls. The independent accountants of MWCo, Deloitte & Touche LLP, are
responsible for performing an independent audit of MWCo s annual consolidated
financial statements in accordance with generally accepted auditing standards
and for issuing a report thereon. The Committee s responsibility is to assist
the Board of Directors in overseeing the quality and integrity of the
accounting, auditing and financial reporting practices.
In this context, the Committee has met and held discussions with
management and the independent accountants. Management represented to the
Committee that MWCo s consolidated financial statements were prepared in
accordance with generally accepted accounting principles, and the Committee has
reviewed and discussed the consolidated audited financial statements with
management and the independent accountants. The Committee discussed with the
independent accountants the matters required to be discussed by Statement on
Auditing Standards No. 61 (Communication with Audit Committees), which includes,
among other things:
o Changes in significant accounting policies;
o The process used by management in formulating accounting estimates and
the basis for the auditors conclusions regarding the reasonableness of
these estimates;
o Any disagreements with management over the application of accounting
principles; and
o Disclosures in the financial statements.
The independent accountants also provided to the Committee the written
disclosures required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and the Committee discussed
with the independent accountants the firm s independence with respect to MWCo
and its management. The Committee has considered whether the independent
accountants provision of non-audit services to MWCo is compatible with
maintaining their independence.
Based on the Committee s discussions with management and the independent
accountants, the Committee s review of the audited financial statements, the
representations of management regarding the audited financial statements and the
report of the independent accountants to the Committee, the Committee
recommended to the Board of Directors that the audited financial statements be
included in MWCo s Annual Report on Form 10-K for the fiscal year ended December
31, 2000, for filing with the Securities and Exchange Commission.
Year 2001 Audit Committee
John P. Mulkerin, Chairman
John C. Cutting
John R. Middleton, M.D.
10
STOCK PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly change in the
cumulative total return (which includes reinvestment of dividends) of a $100
investment for the Company s Common Stock, a peer group of investor-owned water
utilities, and the Wilshire 5000 Stock Index for the period of five years
commencing December 31, 1995. The current peer group includes American States
Water Company, American Water Works Company, Inc., Artesian Resources Corp.,
California Water Service Company, Connecticut Water Service, Inc., Pennichuck
Corp., Philadelphia Suburban Corporation, Southwest Water Company, York Water
Company and the Company. Because of the ongoing water industry consolidation,
the Committee deemed it appropriate to add Artesian Resources Corp., Pennichuck
Corp., and York Water Company. The Wilshire 5000 Stock Index measures the
performance of all U.S. headquartered equity securities with readily available
price data.
[GRAPHIC - GRAPH PLOTTED POINTS LISTED BELOW]
12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
Middlesex $100 $ 99 $140 $159 $220 $242
Peer Group 100 118 163 205 163 215
Wilshire 5000 100 121 159 196 243 216
11
PROPOSAL 2
APPOINTMENT OF INDEPENDENT AUDITORS
Upon the recommendation of the Audit Committee, the Board of Directors
has appointed Deloitte & Touche LLP of Parsippany, New Jersey, as independent
auditors to make the annual audit of the books of account and supporting records
of the Company for the year 2001, subject to the approval of the stockholders
entitled to vote for the election of Directors, by a majority of the votes cast
on the question of such approval, provided a quorum is present, at the Annual
Meeting of Stockholders.
Representatives of Deloitte & Touche LLP will be present at the meeting,
and will be afforded an opportunity to make a statement if they so desire and to
respond to appropriate questions.
PRINCIPAL ACCOUNTING FIRM FEES
Aggregate fees billed to the Company for the fiscal year ending December
31, 2000, by the Company s accounting firm, Deloitte & Touche LLP:
Audit Fees. . . . . . . . . . . . . . . . . . . . . . . . $107,450
Financial Information Systems . . . . . . . . . . . . . . $ 0
All Other Fees. . . . . . . . . . . . . . . . . . . . . . $ 29,280(a)(b)
- ---------------
(a) Includes fees for tax consulting, employee benefit plan audits and other
non-audit related services.
(b) The Audit Committee has considered whether the provision of these services
is compatible with maintaining the principal accountant s independence. The
Board of Directors unanimously recommends that shareholders vote FOR the
appointment of Deloitte & Touche LLP.
STOCKHOLDER PROPOSALS
Stockholders are entitled to submit proposals on matters appropriate for
stockholder action consistent with regulations of the Securities and Exchange
Commission. Should a stockholder intend to present a proposal at nextyear s
annualmeeting, theSecretary ofthe Company at 1500 Ronson Road, P.O. Box 1500,
Iselin, New Jersey 08830-0452, must receive it not later than December 20, 2001,
in order to be included in the Company s proxy statement and form of proxy
relating to that meeting.
OTHER MATTERS
The management of the Company does not intend to bring any other matters
before the meeting and has no reason to believe any will be presented to the
meeting. If, however, other matters properly do come before the meeting, it is
the intention of the persons named in the accompanying proxy to vote in
accordance with their judgment in such matters.
12
MINUTES OF 2000 MEETING OF STOCKHOLDERS
The minutes of the 2000 meeting of Stockholders will be submitted at the
meeting for the correction of any errors or omissions but not for the approval
of the matters referred to therein.
By Order of the Board of Directors,
/s/ Marion F. Reynolds
----------------------
MARION F. REYNOLDS
Secretary
Iselin, New Jersey
April 18, 2001
Appendix A
AUDIT COMMITTEE CHARTER
There shall be a Committee of the Board of Directors titled the Audit
Committee. The members of the Committee shall be elected by the Board and be
composed of Directors who have at least a minimum level of financial literacy,
are independent of the management of the Company, and are free of any
relationship that, in the opinion of the Board of Directors, would interfere
with their exercise of independent judgment as a Committee member. At least one
member of the Audit Committee shall have significant accounting or financial
expertise.
STATEMENT OF POLICY
The Audit Committee shall provide assistance to the Board of Directors
in fulfilling their responsibility to the shareholders, potential shareholders
and the investment community relating to corporate accounting and reporting
practices of the Company as well as the quality and integrity of the financial
reports of the Company. In so doing, the Audit Committee shall maintain free and
open means of communication between the Directors, the independent auditors and
the financial management of the Company.
RESPONSIBILITIES
In carrying out its responsibilities, the Audit Committee believes its
policies and procedures should remain flexible, in order to best react to
changing conditions and to ensure to the Directors and shareholders that the
corporate accounting and reporting practices of the Company are in accordance
with all requirements and are of the highest quality.
In carrying out these responsibilities, the Audit Committee shall:
o Review and recommend to the Directors the independent auditors to
be selected to audit the financial statements of the Company and
its subsidiaries and approve their proposed fees.
o Meet with the independent auditors and financial management of the
Company to review the scope of the proposed audit for the current
year and the audit procedures to be utilized, and at the
conclusion thereof review such audit, including any comments or
recommendations of the independent auditors.
o It is understood that the independent auditors are ultimately
accountable to the Board of Directors and the Audit Committee, and
that the Board and the Audit Committee have ultimate power to
appoint or remove the independent auditors.
o Review the financial statements contained in the annual report to
shareholders with management and the independent auditors to
ascertain that management and the independent auditors are
satisfied with the disclosure and content of the financial
statements to be presented to the shareholders. Any changes in
accounting principles will also be reviewed.
o Review with the independent auditors, and financial and accounting
personnel, the adequacy and effectiveness of the accounting and
financial controls of the Company, and elicit any recommendations
for the improvement of such internal control procedures or
particular areas where new or more detailed controls or procedures
are desirable.
o Ascertain that key executives have annually submitted a compliance
attestation confirming they have complied with the Company's
Policy on Conflicts of Interest and Business Ethics.
o Obtain from the independent auditors a formal written statement
regarding their independence with respect to the Company.
o Actively engage in dialogue with the independent auditors
regarding matters that might reasonably be expected to affect
their independence.
o Provide opportunity for the independent auditors to meet with the
members of the Audit Committee without members of management
present. Among the items to be discussed in these meetings will be
the independent auditors evaluation of the corporation s financial
and accounting policies and the cooperation that the independent
auditors received during the course of the audit.
o Investigate any matter brought to the Audit Committee s attention
within the scope of its duties, with the power to retain outside
counsel or other professional help for this purpose if, in its
judgment, that is appropriate.
The Committee shall issue a report to be included in the Company s Proxy
Statement indicating that it has reviewed the audited financial statements with
management and the independent auditors (including a discussion of the quality
of the accounting principles and significant judgments affecting the financial
statements), whether it has met privately to discuss the information obtained
from management and the independent auditors, and, in reliance on that review,
whether or not it has recommended to the Board of Directors that the audited
financial statements be included in the Company s Annual Report on Form 10-K for
filing with the Securities and Exchange Commission.
[LETTERHEAD - MIDDLESEX WATER COMPANY]
[GRAPHIC - MIDDLESEX WATER COMPANY LOCATION MAP]
This Charter shall be approved by the Board of Directors annually.
DIRECTIONS TO MIDDLESEX WATER COMPANY
FROM GARDEN STATE PARKWAY (NORTH OR SOUTH): Take Exit 131A to third traffic
light. Turn right onto Middlesex-Essex Turnpike and proceed (about 12 @mile) to
third traffic light (Gill Lane). Turn right and go (about 1 mile) under railroad
underpass and make right onto Ronson Road. Proceed past three large mirror-sided
office buildings on the right. At the sign, make a right into Middlesex Water
Company.
FROM NEW JERSEY TURNPIKE (NORTH OR SOUTH): Take Exit 11 onto Garden State
Parkway North and follow above directions.
FROM US ROUTE NO. 1 (NORTH OR SOUTH): Proceed to the Woodbridge Center area and
follow signs to Gill Lane. When on Gill Lane, make left turn onto Ronson Road
and follow above directions.
[ X ] PLEASE MARK VOTES
AS IN THIS EXAMPLE
REVOCABLE PROXY
MIDDLESEX WATER COMPANY
ANNUAL MEETING OF SHAREHOLDERS
MAY 23,2001
The undersigned stockholder(s) hereby appoint(s) John P. Mulkerin and J.
Richard Tompkins, and each of them, proxies, with the power to appoint his
substitute, and hereby authorizes them to represent and to vote as designated,
all the shares of common stock of Middlesex Water Company held on record by the
undersigned on March 30, 2001, at the annual meeting of shareholders to be held
on May 23, 2001, at 11:00 a.m., local time or any adjournment thereof. Please be
sure to sign and date Date this Proxy in the box below.
Please be sure to sign and date
this Proxy in the box below.
-----------------------------------------
Date
-----------------------------------------
Shareholder sign above
-----------------------------------------
Co-holder (if any) sign above
1. Election of Directors, Nominees for Class II term expiring in 2004
are: S. H. Mundy and R. A. Russo
With- For All
[ ] For [ ] hold [ ] Except
INSTRUCTION: To withhold authority to vote for any individual nominee, mark "For
All Except" and write that nominee's name in the space provided below.
- --------------------------------------------------------------------------------
2. Approve the appointment of Deloitte & Touche LLP as auditors for the
Company for the year 2001.
[ ] For [ ] Against [ ] Abstain
In their discretion, the Proxies are authorized to vote upon such other
business that may properly come before the meeting.
PLEASE CHECK BOX IF YOU PLAN TO ATTEND THE MEETING. [ ]
If this Proxy is properly executed and returned, the shares represented
hereby will be voted. If not otherwise specified, this Proxy will be voted FOR
the persons nominated as directors, and FOR proposal number 2.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
Detach above card, sign, date and mail in postage paid envelope provided.
MIDDLESEX WATER COMPANY c/o
Registrar and Transfer
Company 10 Commerce Drive
Cranford, New Jersey 07016-3572
www.middlesexwater.com
PLEASE DATE AND SIGN EXACTLY AS YOUR NAME OR NAMES APPEAR ON THIS PROXY.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such. If signer is a corporation, please sign full corporate
name by authorized officer and attach a corporate seal. For joint account, each
joint owner should sign.
PLEASE ACT PROMPTLY
BE SURE TO COMPLETE, SIGN AND RETURN THIS PROXY, WHETHER OR NOT YOU ELECT TO BE
PRESENT IN PERSON. ALL SIGNATURES MUST APPEAR EXACTLY AS NAMES APPEAR
ON THIS PROXY.
THANK YOU
Annual Meeting of Shareholders - May 23, 2001, at 11:00 a.m.
Middlesex Water Company - 1500 Ronson Rd., Iselin, NJ
HAS YOUR ADDRESS CHANGED?
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