Middlesex Water Company
Middlesex Water Company
1500 Ronson Road
Iselin, New Jersey 08830-3020
tel.732-634-1500
fax.732-750-5581
www.middlesexwater.com
NASDAQ Stock Market Symbol: MSEX
April 16, 2002
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 22, 2002, at
11:00 a.m., at the office of the Company, 1500 Ronson Road, Iselin, New Jersey.
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.
The primary business of the meeting will be election of directors, approval
of the selection of Deloitte & Touche LLP as independent auditors for 2002, and
approval of an amendment to the Restated Certificate of Incorporation to
increase the number of authorized shares of common stock, 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 2001, together with our goals for
2002. We welcome this opportunity to meet with our stockholders and look forward
to your comments and questions.
I look forward to seeing you on May 22nd.
Sincerely,
/s/J. Richard Tompkins
----------------------
J. Richard Tompkins
Chairman of the Board
Quality Water Service Since 1897
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 2005 - CLASS III . . . . 3
DIRECTORS WHOSE TERMS CONTINUE BEYOND THE 2002 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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
AUDIT COMMITTEE REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
STOCK PERFORMANCE GRAPH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
PROPOSAL 2 - APPOINTMENT OF INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . 13
ACCOUNTING FIRM FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
PROPOSAL 3 - AMENDMENT TO THE RESTATED CERTIFICATE OF
INCORPORATION TO INCREASE THE AUTHORIZED COMMON
STOCK FROM 10,000,000 SHARES TO 20,000,000 SHARES . 14
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS . . . . . . . . . . . . . . . . . . . 14
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
MINUTES OF 2001 MEETING OF STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . 15
APPENDIX - PROPOSED AMENDMENT OF ARTICLE 7A OF THE RESTATED
CERTIFICATE OF INCORPORATION . . . . . . . . . . . . . . . . . . . . . . . A-1
Middlesex Water Company
1500 Ronson Road
Iselin, New Jersey 08830-3020
732-634-1500
www.middlesexwater.com
___________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 22, 2002
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 22, 2002 , at 11:00 a.m., for the
following purposes:
1. To elect three members of Class III of the Board of Directors to hold
office until the Annual Meeting of Stockholders in the year 2005, 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 2002.
3. To amend the Restated Certificate of Incorporation to increase the
authorized Common Stock from 10,000,000 shares to 20,000,000 shares.
4. 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
29, 2002, 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, 2001, 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 16, 2002
- --------------------------------------------------------------------------------
IMPORTANT
To assure your representation at the meeting, please
mail the enclosed proxy promptly.
- --------------------------------------------------------------------------------
Middlesex Water Company
1500 Ronson Road
Iselin, New Jersey 08830-3020
732-634-1500
www.middlesexwater.com
____________
PROXY STATEMENT
____________
Notice of the Annual Meeting of Stockholders of Middlesex Water Company to
be held on May 22, 2002, 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 16, 2002.
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 29, 2002, there were outstanding 7,659,224 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 29, 2002, 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. The amendment of Article 7A of the Certificate of Amendment to
the Restated Certificate of Incorporation will require the affirmative vote of
the holders of two-thirds of the shares of the Company's Common Stock voting at
the 2002 Annual Meeting. 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
1
occasions when required in special circumstances. The Board of Directors held
twelve meetings and the Board Committees held eleven meetings during the year
2001. Each incumbent Director attended 95% 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, M.D. and John P. Mulkerin, which reviews the scope
of the audit, receives and reviews the auditors' annual report, reviews the
Audit Committee Charter annually and makes a recommendation to the Board for the
appointment of an independent accounting firm for the following calendar year.
The Committee held three meetings during the year 2001.
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 four meetings during the year
2001.
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 2001.
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 and September 2001.
The Committee did not meet during the year 2001. 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 18,
2002.
J. Richard Tompkins has announced that he intends to retire as Chief
Executive Officer of the Company on or about January 31, 2003. If elected a
Director at this annual meeting, however, he expects to remain on the Board in
his current position as Chairman of the Board.
PROPOSAL 1
ELECTION OF DIRECTORS
At the Annual Meeting of Stockholders three members of Class III of the
Board of Directors are to be elected each to hold office until the Annual
Meeting of Stockholders in the year 2005, and in each case until their
respective successors are elected and qualified. The present terms of the three
Directors included in Class III expire at the year 2002 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 2002 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 2005 - CLASS III
Business Experience
Name, Period Served as During Past Five Years
Director of Company Age and Other Affiliations
------------------- --- ----------------------
John R. Middleton, M.D. 57 Chair of the Department of Medicine and
Director since 1999 Chief Medical Officer 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.
Jeffries Shein (1) 62 Partner, Jacobson, Goldfarb & Tanzman,
Director since 1990 Industrial and Commercial Brokerage
Firm, Woodbridge, 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.
J. Richard Tompkins 63 Chairman of the Board of the Company
Director since 1981 since May 2001 and prior to that date
was Chairman of the Board and
President since May 1990. Past
President of National Association of
Water Companies and Director of New
Jersey Utilities Association.
Director, Chairman and President of
Tidewater Utilities, Inc. (TUI);
Director of Pinelands Water Company,
Pinelands Wastewater Company and
Bayview Water 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.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE FOR PROPOSAL 1.
---
_______________
(1) See Footnote on page 4.
3
DIRECTORS WHOSE TERMS CONTINUE BEYOND
THE 2002 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 65 2003 Retired. Formerly Consulting Senior
Director since 1997 Class I Engineer, Science Applications
International Corporation,
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 P. Mulkerin (1) 64 2003 President, Chief Executive Officer and
Director since 1997 Class I Director of First Sentinel Bancorp,
Inc., Holding Company for First
Savings Bank, Perth Amboy, New
Jersey. Director of FSB Financial
Corp., Raritan Bay Medical Center and
Daytop Village Foundation.
Chairman of Audit Committee and Member of
Nominating and Pension Committees
Stephen H. Mundy 68 2004 Retired. Formerly Vice President, A.
Director since 1977 Class II Stanley Mundy, Inc., Public Utility
Contractor, Virginia Beach, Virginia.
Chairman of Executive Development and
Compensation Committee and Member of
Nominating Committee.
Dennis G. Sullivan 60 2003 President and General Counsel of the
Director since 1999 Class I Company since May 2001, prior to that
date was Senior Vice President and
General Counsel since July 2000 and
prior to that date was Vice President
and General Counsel since May 1990.
Director and Assistant Secretary and
Assistant Treasurer of Tidewater
Utilities, Inc. (TUI); Director and
Chairman of Pinelands Water Company
and Pinelands Wastewater Company;
Director of Utility Service
Affiliates, Inc., and Utility Service
Affiliates (Perth Amboy) Inc., and
Director and President of Bayview
Water Company, subsidiaries of the
Company. Director, 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, 2001, there was
an outstanding loan of $1,125,000 at an interest rate of 3.65% with
First Savings Bank.
4
SECURITY OWNERSHIP OF DIRECTORS, MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of March 29, 2002, 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 1.46%
of the shares outstanding on March 29, 2002. All other individual elected
Directors and Executive Officers owned less than 1% of the shares outstanding on
March 29, 2002.
Amount and Nature
of Beneficial
Name Ownership
---- ---------
Directors
John C. Cutting 24,569
John R. Middleton 2,079
John P. Mulkerin 5,250
Stephen H. Mundy 30,005
Jeffries Shein* 111,771
Dennis G. Sullivan 10,615
J. Richard Tompkins** 36,750
Named Executive Officers
Walter J. Brady 15,806
A. Bruce O'Connor 10,284
Ronald F.Williams 7,126
All elected Directors and Executive Officers as a group
including those named above (11) 275,684***
_____________
* Disclaims beneficial ownership of 3,771 additional shares.
** Disclaims beneficial ownership of 700 additional shares.
*** 3.60% of the shares outstanding on March 29, 2002.
The following table sets forth information made known to the Company as of
March 25, 2002, 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 Percent
Name and Address Beneficial Ownership (1) of Class
---------------- ------------------------ --------
Verona Construction Company 494,700 6.46%
Wilmington, Delaware 19801
____________
(1) Beneficial owner has sole power to vote and dispose of such shares.
5
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 2001,
2000 and 1999 for the Chief Executive Officer and the four most highly
compensated executive officers of the Company.
SUMMARY COMPENSATION TABLE
Restricted All
Name and Stock Other Annual
Principal Position Year Salary Bonus Award Compensation
------------------ ---- ------ ----- ----- ------------
(1) (2)
J. Richard Tompkins 2001 $276,631 -- $ 26,180 $ 9,003
Chairman of the Board and 2000 $273,400 -- $ 43,700 $ 8,845
Chief Executive Officer 1999 $265,000 $ 10,192 $ 51,700 $ 9,416
Richard A 2001 $199,500 -- -- $ 5,082
Russo (3) 2000 $182,400 -- $ 23,300 $ 7,119
Executive Vice President 1999 $176,000 $ 6,769 $ 25,850 $ 6,512
Dennis G. Sullivan 2001 $164,246 -- $ 13,090 $ 7,379
President & General 2000 $142,862 -- $ 23,300 $ 5,786
Counsel and Chief 1999 $130,000 $ 5,000 $ 25,850 $ 5,577
Operating Officer
Walter J. Brady 2001 $142,169 -- $ 13,090 $ 6,301
Senior Vice President - 2000 $139,400 -- $ 23,300 $ 5,671
Administration 1999 $133,000 $ 5,115 $ 25,850 $ 5,400
A. Bruce O'Connor 2001 $140,016 -- $ 13,090 $ 5,086
Vice President and 2000 $135,400 -- $ 23,300 $ 4,882
Controller and Chief 1999 $128,000 $ 4,923 $ 25,850 $ 4,710
Financial Officer
Ronald F. Williams 2001 $133,939 -- $ 13,090 $ 5,106
Vice President - 2000 $128,400 -- $ 23,300 $ 4,837
Operations 1999 $122,000 $ 4,692 $ 25,850 $ 4,837
(1) The number and value of Restricted Stock held in escrow as of December
31, 2001, were as follows: Mr. Tompkins - 11,700/$264,572; Mr.
Sullivan - 5,400/$122,110; Mr. Brady - 5,400/$122,110; Mr. O'Connor -
5,400/$122,110 and Mr. Williams - 5,400/$122,110. Upon Mr. Russo's
retirement on July 1, 2001, restrictions lapsed on 2,450 shares
previously held in escrow for his benefit. At that same time, another
2,450 shares held in escrow for Mr. Russo were forfeited and returned
to the Company. 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 2001: Mr. Tompkins ($5,950 and
$3,053), Mr. Russo ($3,798 and $1,284), Mr. Sullivan ($5,735 and
$1,644), Mr. Brady ($4,962 and $1,399), Mr. O'Connor ($4,887 and $199)
and Mr. Williams ($4,674 and $432); 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), Mr. O'Connor ($4,697
6
and $186) and Mr. Williams ($4,270 and $567); 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) , Mr. O'Connor ($4,480 and $230) and
Mr. Williams ($4,270 and $567).
(3) Richard A. Russo retired on July 1, 2001.
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
Remuneration Years of Service
-------------- ----------------------------------------------------------------------
15 20 25 30 35 45
---------- ---------- ------------ ---------- --------- -----------
$100,000 $56,640 $56,640 $56,640 $56,640 $56,640 $70,534
$125,000 $75,390 $75,390 $75,390 $75,390 $75,390 $90,284
$150,000 $94,140 $94,140 $94,140 $94,140 $94,140 $110,034
$175,000 $112,890 $112,890 $112,890 $112,890 $112,890 $125,834
$200,000 $131,640 $131,640 $131,640 $131,640 $131,640 $131,640
$225,000 $150,390 $150,390 $150,390 $150,390 $150,390 $150,390
$250,000 $169,140 $169,140 $169,140 $169,140 $169,140 $169,140
$300,000 $206,640 $206,640 $206,640 $206,640 $206,640 $206,640
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 2001 Summary Compensation Table. The benefit
amounts are not subject to any deduction for Social Security benefits or other
offset amounts.
During the year 2001, the Company was not required to make a statutory
contribution to the Qualified Plan.
The estimated credited years of service based on normal retirement at age
65 includes 22 years, 44 years, 22 years, 33 and 19 years for Messrs. Tompkins,
Brady, Sullivan, O'Connor and Williams, respectively.
Supplemental Executive Retirement Plan - The named 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.
7
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 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 2001 the Company paid life insurance
premiums totaling $0.1 million for Messrs. Tompkins, Russo, Brady, O'Connor,
Sullivan and Williams, 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 2001 Executive Development and Compensation Committee
were John C. Cutting, Stephen H. Mundy and Jeffries Shein. During 2001, no
member of the Executive Development and Compensation Committee was an officer or
employee of the Company or a subsidiary.
8
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 2002 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.
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.
9
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 2002 Executive Development and Compensation Committee
Stephen H. Mundy, Chairman
John C. Cutting
Jeffries Shein
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.
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, as amended (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, if any, with management over the application of
accounting principles;
o Audit adjustments; 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.
10
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, 2001, for filing with the Securities and Exchange Commission.
Year 2002 Audit Committee
John P. Mulkerin, Chairman
John C. Cutting
John R. Middleton, M.D.
11
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, 1996. 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, SJW Corp., Southwest Water Company,
York Water Company and the Company. As a result of the terminated merger of SJW
Corp., it was added back to the Peer Group. The Wilshire 5000 Stock Index
measures the performance of all U.S. headquartered equity securities with
readily available price data.
[GRAPHI-STOCK PERFORMANCE GRAPH-PLOTTED POINTS BELOW]
--------------- ----------- ----------- ---------- ---------- ---------- ------------
12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
--------------- ----------- ----------- ---------- ---------- ---------- ------------
Middlesex $100 $141 $160 $221 $244 $254
--------------- ----------- ----------- ----------- --------- ---------- ------------
Peer Group 100 138 172 145 187 241
--------------- ----------- ----------- ----------- --------- ---------- ------------
Wilshire 5000 100 131 162 200 178 159
--------------- ----------- ----------- ----------- --------- ---------- ------------
12
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 2002, 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.
ACCOUNTING FIRM FEES
Aggregate fees billed to the Company for the fiscal year ending December
31, 2001, by the Company's accounting firm, Deloitte & Touche LLP:
Audit Fees $99,000{a}
Financial Information Systems $ 0{b}
All Other Fees $ 66,745{c} {d}
__________
{a} Audit Fees - The aggregate fees billed by Deloitte & Touche LLP, for
professional services rendered for the audit of the annual consolidated
financial statements and the review of the financial statements included in
quarterly reports on Form 10-Q of Middlesex Water Company for the year
ended December 31, 2001 totaled $99,000.
{b} Financial Information Systems Design and Implementation Fees - No fees were
billed by Deloitte & Touche for professional services rendered for
information technology services relating to financial information systems
and implementation for the year ended December 31, 2001.
{c} All Other Fees - The aggregate fees billed by Deloitte & Touche for
services rendered to the Company, other than the services described above
under "Audit Fees" and "Financial Information Systems Design and
Implementation Fees", for the year ended December 31, 2001 were $66,745,
representing audit and non-audit related services. Audit related services
include fees for the audits of benefit plans ($15,000). Non-audit related
services include fees related to preparation of Tax Returns and Tax related
services ($34,205) and a Human Resources Survey ($17,540). Deloitte &
Touche has recently announced its intent to separate Deloitte Consulting
from Deloitte Touche Tohmatsu.
{d} The Audit Committee has considered whether the provision of these services
is compatible with maintaining the accounting firm's independence.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE FOR THE APPOINTMENT OF DELOITTE & TOUCHE LLP.
---
13
PROPOSAL 3
AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION TO
INCREASE THE AUTHORIZED COMMON STOCK FROM 10,000,000 SHARES TO
20,000,000 SHARES
The Board of Directors unanimously recommends that the stockholders approve
an amendment to the Company's Restricted Certificate of Incorporation increasing
the authorized Common Stock, without par value, from 10,000,000 shares to
20,000,000 shares. The text of the proposed amendment is attached hereto as
Appendix A.
As of March 29, 2002, 7,659,224 shares of the 10,000,000 shares of Common.
Stock presently authorized were outstanding. 2,000,000 shares have been reserved
for issuance for other purposes, including the Dividend Reinvestment and Common
Stock Purchase Plan.
The Board of Directors believes that it would be in the best interests of
the Company to have additional shares available for issuance at its discretion
for acquisitions, financings, stock dividends or splits, and other corporate
purposes. The Company has no specific plans and there are no commitments,
understandings or negotiations at this time with respect to the issuance of
additional shares of Common stock. The proposed amendment would not change the
terms of the Common stock, which does not have preemptive rights. No further
stockholder authorization for the issuance of the additional shares will be
solicited prior to issuance.
The power of the Board of Directors to issue additional shares of Common
Stock (within the limits imposed by applicable law) with voting or other rights
which might impede or discourage a takeover attempt, may make the Company a less
attractive takeover candidate, and may deter takeover attempts not approved by
the Board in which stockholders might receive for some or all of their shares a
substantial premium above market value at the time such takeover bid is made.
Vote Required for Proposal 3
The amendment of Article 7A of the Restated Certificate of Incorporation,
which constitutes Proposal 3, will require the affirmative vote of the holders
of two-thirds of the shares of the Company's Common Stock voting at the 2002
Annual Meeting (assuming the presence of a quorum).
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
THE AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION.
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 next year's
annual meeting, the Secretary of the Company at 1500 Ronson Road, P.O. Box 1500,
Iselin, New Jersey 08830-0452, must receive it not later than December 18, 2002,
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.
14
MINUTES OF 2001 MEETING OF STOCKHOLDERS
The minutes of the 2001 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 16, 2002
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 and files an Annual Report on Form 10-K with the Securities
and Exchange Commission. Additional copies of the 2001 Annual Report on Form
10-K filed by the Company, including the financial statements and schedules, but
without exhibits, can be mailed without charge to any shareholders. The exhibits
are obtainable from the Company upon payment of the reasonable cost of copying
such exhibits. Shareholders can request this information by phone at
732-634-1500, ext. 212, or by mail to Marion F. Reynolds, Vice President,
Secretary and Treasurer, Middlesex Water Company, 1500 Ronson Road, Iselin, New
Jersey 08830.
15
APPENDIX A
PROPOSED AMENDMENT OF THE FIRST SENTENCE OF
ARTICLE 7A OF THE RESTATED CERTIFICATE OF INCORPORATION
ARTICLE 7A. The total authorized capital stock of the Company is 20,240,497
shares, divided into 20,000,000 shares of common stock without par value,
140,497 shares of preferred stock without nominal or par value and 100,000
shares of preference stock without nominal or par value.
A - 1
[THIS PAGE INTENTIONALLY LEFT BLANK]
MIDDLESEX WATER COMPANY
1500 Ronson Road
Iselin, New Jersey 08830-3020
732-634-1500
www.middlesexwater.com
[GRAPHIC-STREET MAP]]
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 1/2
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 the 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 22,2002
The undersigned stockholder(s) hereby appoint(s) John C. Cutting and Dennis
G. Sullivan, 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 29, 2002, at the annual meeting of shareholders to be held
on May 22, 2002, at 11:00 a.m., local time or any adjournment thereof.
1. Election of Directors, Nominees for Class III term expiring in 2005 are:
John R.Middleton, M.D., Jeffries Shein and J. Richard Tompkins
With- For All
For hold Except
[_] [_] [_]
INSTRUCTION: To withhold authority to vote for any individual nominee,
mark "For All Except" and writethat nominee's name in the space provided
below.
2. Approve the appointment of Deloitte & Touche LLP as auditors for the
Company for the year 2002.
For Against Abstain
[_] [_] [_]
3. Approve the amendment to the Restated Certificate of Incorporation to
increase the Authorized Common Stock from 10,000,000 shares to 20,000,000
shares.
For Against Abstain
[_] [_] [_]
In their discretion, the Proxies are authorized to voteupon 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 andreturned, the shares represented
hereby will be voted. If not otherwise specified, this Proxy will be voted FOR
the persons nominated asdirectors, and FOR proposals number 2 and 3.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
Please be sure to sign and date this Proxy in the box below.
___________________________________________________
Date
___________________________________________________
Shareholder sign above
___________________________________________________
Co-holder (if any) sign above
=> 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 22, 2002, at 11:00 a.m. Middlesex Water
Company - 1500 Ronson Rd., Iselin, NJ
IF YOUR ADDRESS HAS CHANGED, PLEASE PRINT YOUR NEW ADDRESS IN THE SPACE PROVIDED
BELOW AND RETURN THIS PORTION WITH YOUR PROXY IN THE ENVELOPE PROVIDED.
______________________________
______________________________
______________________________
