April 17, 2003
Dear Stockholder:
I am pleased to invite you to attend Middlesex Water Company's
Annual Meeting of Stockholders that will take place on Wednesday, May 28, 2003,
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
2003, 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 2002, together with our goals for
2003. 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 28th.
Sincerely,
J. Richard Tompkins
Chairman of the Board
TABLE OF CONTENTS
Page
----
SOLICITATION AND REVOCATION OF PROXIES 2
SHARES ENTITLED TO VOTE 2
VOTE REQUIRED AND METHOD OF COUNTING VOTES 2
GENERAL INFORMATION 2
PROPOSAL 1 - ELECTION OF DIRECTORS 4
NOMINEES FOR ELECTION AS DIRECTOR WITH TERM EXPIRING IN 2006- CLASS I 5
NOMINEES FOR ELECTION AS DIRECTOR WITH TERM EXPIRING IN 2004- CLASS II 6
DIRECTORS WHOSE TERMS CONTINUE BEYOND THE 2003 ANNUAL MEETING 7
SECURITY OWNERSHIP OF DIRECTORS, MANAGEMENT AND CERTAIN 8
BENEFICIAL OWNERS
EXECUTIVE COMPENSATION 9
Summary Compensation Table 9
Compensation of Directors 9
Compensation Pursuant to Pension Plans 10
Compensation Committee Interlocks and Insider Participation 11
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION 12
AUDIT COMMITTEE REPORT 13
STOCK PERFORMANCE GRAPH 15
PROPOSAL 2 - APPOINTMENT OF INDEPENDENT AUDITORS 16
ACCOUNTING FIRM FEES 16
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS 16
OTHER MATTERS 17
MINUTES OF 2002 MEETING OF STOCKHOLDERS 17
[LOGO] MIDDLESEX WATER COMPANY
1500 Ronson Road
Iselin, New Jersey 08830-0452
732-634-1500
www.middlesexwater.com
-----------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 28, 2003
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 28, 2003, at 11:00 a.m., for the
following purposes:
1. To elect three members of Class I of the Board of Directors to hold
office until the Annual Meeting of Stockholders in the year 2006,
and 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 2003.
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
31, 2003, 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, 2002, 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,
MARION F. REYNOLDS
Secretary
April 17, 2003
- --------------------------------------------------------------------------------
IMPORTANT
To assure your representation at the meeting, please
mail the enclosed proxy promptly.
- --------------------------------------------------------------------------------
[LOGO] MIDDLESEX WATER COMPANY
1500 Ronson Road
Iselin, New Jersey 08830-0452
732-634-1500
www.middlesexwater.com
------------
PROXY STATEMENT
------------
Notice of the Annual Meeting of Stockholders of Middlesex Water Company to
be held on May 28, 2003, 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 17, 2003.
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 31, 2003, there were outstanding 7,810,409 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 31, 2003, 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 twelve meetings and the Board
Committees held eighteen meetings during the year 2002. Each incumbent Director
attended 95% or more 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 Annette
Catino (appointed in January 2003), John C. Cutting, John R. Middleton, M.D. and
John P. Mulkerin, which reviews with the independent auditors the scope of the
annual audit; receives and reviews the auditors' annual report; reviews the
independence of the independent auditors, services provided by them and their
fees; recommends to the Board of Directors the inclusion of the audited
financial statements in the Company's Annual Report to the Securities and
Exchange Commission on Form 10-K; and makes a recommendation to the Board for
the appointment of an independent accounting firm for the following calendar
year. The Board of Directors has adopted a written Charter for the Audit
Committee. The Committee held four meetings during the year 2002.
The Board of Directors has a Capital Improvement Committee, consisting of
John C. Cutting, Stephen H. Mundy and J. Richard Tompkins, which reviews the
Capital Budget and monitors the capital projects and expenditures during the
year. The Committee reports its findings to the Board of Directors. The
Committee was appointed in January 2003.
The Board of Directors has a Compensation Committee (formerly the
Executive Development and Compensation Committee), consisting of John R.
Middleton, M.D., 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 Restricted Stock Plan. The
Committee held five meetings during the year 2002.
The Board of Directors has a Corporate Governance Committee, consisting of
John R. Middleton, M.D., John P. Mulkerin and Walter G. Reinhard, which reviews
and makes recommendations relating to the governance of the Company, the
performance and composition of the Board and Board committees, succession
planning and significant organization changes. The Board of Directors has
adopted a written Charter for the Corporate Governance Committee. The Committee
held two meetings during the year 2002.
The Board of Directors has a Nominating Committee, consisting of John P.
Mulkerin, Stephen H. Mundy and Jeffries Shein, which makes recommendations to
the Board of Directors with respect to nominations for the Board. The Committee
held two meetings during the year 2002. The Nominating Committee will consider
stockholders' recommendations for nominees for election to the Board of
Directors. Recommendations should be sent to Middlesex Water Company, Office of
the Secretary, 1500 Ronson Road, P.O. Box 1500, Iselin, New Jersey 08830-0452.
Nominations must be accompanied by the written consent of any such person to
serve if nominated and elected and by biographical material to permit evaluation
of the individual recommended. The Secretary of the Company should receive any
nominations for Director by the close of business on December 17, 2003, in order
to be considered for inclusion in the Company's proxy statement and form of
proxy relating to the 2004 Annual Meeting of Stockholders.
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 2002.
The Board of Directors appoints an ad hoc Pricing Committee from time to
time as needed. In January 2002 the Committee met to approve the sale of Series
DD First Mortgage Bonds. The Committee, consisting of John C. Cutting, John P.
Mulkerin and Jeffries Shein, was appointed in September of 2001.
Walter G. Reinhard was elected a Director by the Board of Directors
effective September 1, 2002, and Annette Catino was elected a Director by the
Board of Directors effective January 1, 2003, both for terms expiring with the
2003 Annual Meeting. Mr. Reinhard and Ms. Catino have been nominated to serve as
Directors in Class II for one-year terms, which will expire at the 2004 Annual
Meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
At the Annual Meeting of Stockholders three members of Class I of the
Board of Directors are to be elected each to hold office until the Annual
Meeting of Stockholders in the year 2006, and two members of Class II of the
Board of Directors are to be elected 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 three Directors
included in Class I and the two Directors included in Class II expire at the
year 2003 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 2003 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.
NOMINEES FOR ELECTION AS
DIRECTORS WITH TERMS EXPIRING IN 2006 - CLASS I
Business Experience
Name, Period Served as During Past Five Years
Director of Company Age and Other Affiliations
------------------- --- ----------------------
John C. Cutting 66 Retired. Formerly Senior Engineer, Science Applications
Director since 1997 International Corporation, specialists in information, energy
and military systems, Pittsburgh, Pennsylvania.
Chairman of Pension Committee and Capital Improvement Committee
and Member of Audit Committee and ad hoc Pricing Committee.
John P. Mulkerin (1) 65 Retired. Formerly President and Chief Executive Officer of First
Director since 1997 Sentinel Bancorp, Inc., Holding Company for First Savings
Bank, Perth Amboy, New Jersey. Director of First Sentinel
Bancorp, Inc., Raritan Bay Medical Center and Daytop Village
Foundation.
Chairman of Audit Committee and Member of Corporate Governance
Committee, Nominating Committee, Pension Committee and ad hoc
Pricing Committee.
Dennis G. Sullivan 61 President and Chief Executive Officer of the Company since
Director since 1999 January 2003, prior to that date was President and General
Counsel since May 2001; Senior Vice President and General
Counsel since July 2000 and Vice President and General Counsel
since May 1990. Director 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) See Footnote on page 7.
NOMINEES FOR ELECTION AS
DIRECTORS WITH TERMS EXPIRING IN 2004 - CLASS II
Business Experience
Name, Period Served as During Past Five Years
Director of Company Age and Other Affiliations
------------------- --- ----------------------
Annette Catino 46 President and CEO of QualCare Alliance Networks, Inc., of
Director since January 2003 Piscataway, New Jersey, a managed care organization,
since 1991. Director of Caucus NJ Educational
Corporation, New Jersey Shore Medical Center Foundation,
Executive Women of New Jersey and Liberty Bancorp Inc.
Member of Somerset Medical Center, Women's Health
Advisory Board and The Val Skinner Foundation.
Member of Audit Committee.
Walter G. Reinhard (2) 57 Partner, Law Firm of Norris, McLaughlin & Marcus, P.A. of
Director since September 2002 Bridgewater, New Jersey, since 1984. Director of the
Fanwood-Scotch Plains YMCA.
Chairman of Corporate Governance Committee.
(2) See Footnote on page 7.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE FOR PROPOSAL 1.
DIRECTORS WHOSE TERMS CONTINUE BEYOND
THE 2003 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 R. Middleton, M.D. 58 2005 Chair of the Department of Medicine and
Director since 1999 Class III Chief Medical Officer of Raritan Bay
Medical Center. Fellow of American
College of Physicians and Member of the
Infectious Diseases Society of America.
Member of Audit Committee, Compensation
Committee and Corporate Governance
Committee.
Stephen H. Mundy 69 2004 Retired. Formerly Vice President, A.
Director since 1977 Class II Stanley Mundy, Inc., Public Utility
Contractor, Virginia Beach, Virginia.
Chairman of Compensation Committee and
Member of Capital Improvement Committee
and Nominating Committee.
Expiration Business Experience
Name, Period Served as Date of Term During Past Five Years
Director of Company Age and Class and Other Affiliations
------------------- --- --------- ----------------------
Jeffries Shein (1) 63 2005 Managing Partner, JGT Management Co., LLC, a
Director since 1990 Class III management and investment firm, since 2003
and formerly Partner, Jacobson, Goldfarb &
Tanzman Associates, a commercial real
estate brokerage firm, since 1972,
Woodbridge, New Jersey. Director of First
Sentinel Bancorp, Inc., Holding Company
for First Savings Bank, Perth Amboy, New
Jersey.
Chairman of Nominating Committee and ad hoc
Pricing Committee and Member of Compensation
Committee and Pension Committee.
J. Richard Tompkins 64 2005 Chairman of the Board of the Company since May
Director since 1981 Class III 2002 and prior to that date was Chairman
of the Board and President since May
1990. Past President of National
Association of Water Companies and New
Jersey Utilities Association. Director
and Chairman of Tidewater Utilities, Inc.
(TUI), Utility Service Affiliates, Inc.,
and Utility Service Affiliates (Perth
Amboy) Inc., and Director of Bayview
Water Company, Pinelands Water Company,
Pinelands Wastewater Company, subsidiaries
of the Company. Director and Chairman of
White Marsh Environmental Systems, Inc., a
subsidiary of TUI.
Member of Capital Improvement Committee
- ----------
(1) The Company has established a $10,000,000 line of credit with First
Savings Bank, Perth Amboy, New Jersey. At December 31, 2002, there was an
outstanding loan of $2,200,000 at an interest rate of 3.238% with First
Savings Bank.
(2) Norris, McLaughlin & Marcus, P.A., has provided legal services to the
Company in the area of utility and regulatory matters for over 30 years.
SECURITY OWNERSHIP OF DIRECTORS, MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of March 31, 2003, 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 1.63%
of the shares outstanding on March 31, 2003. All other individual elected
Directors and Executive Officers owned less than 1% of the shares outstanding on
March 31, 2003.
Amount
and Nature
of Beneficial
Name Ownership
---- ---------
Directors
Annette Catino 2,700
John C. Cutting 24,653
John R. Middleton, M.D. 3,003
John P. Mulkerin 5,250
Stephen H. Mundy 41,776
Walter G. Reinhard 1,011
Jeffries Shein* 127,508
Dennis G. Sullivan 8,820
J. Richard Tompkins** 28,611
Named Executive Officers
Walter J. Brady 17,224
A. Bruce O'Connor 13,113
Ronald F. Williams 8,858
All elected Directors and Executive Officers as a group
including those named above (13) 305,711***
- ----------
* Disclaims beneficial ownership of 3,894 additional shares.
** Disclaims beneficial ownership of 728 additional shares.
*** 3.91% of the shares outstanding on March 31, 2003.
The following table sets forth information made known to the Company as of
March 11, 2003, 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 6.33%
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 2002,
2001 and 2000 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 Award Compensation
------------------ ---- ------ ----- ------------
(1) (2)
J. Richard Tompkins (3) 2002 $294,631 $52,605 $9,406
Chairman of the Board and 2001 $276,631 $26,180 $9,003
Chief Executive Officer 2000 $273,400 $43,700 $8,845
Dennis G. Sullivan 2002 $191,073 $14,028 $8,943
President and Chief 2001 $164,246 $13,090 $7,379
Operating Officer 2000 $142,862 $23,300 $5,786
A. Bruce O'Connor 2002 $153,939 $14,028 $5,590
Vice President, Controller 2001 $140,016 $13,090 $5,086
and Chief Financial Officer 2000 $135,400 $23,300 $4,883
Walter J. Brady 2002 $152,515 $14,028 $7,376
Senior Vice President - 2001 $142,169 $13,090 $6,361
Administration 2000 $139,400 $23,300 $5,671
Ronald F. Williams 2002 $147,518 $14,028 $6,222
Vice President - 2001 $133,939 $13,090 $5,106
Operations 2000 $128,400 $23,300 $4,837
(1) The number and value of Restricted Stock held in escrow as of December 31,
2002, were as follows: Mr. Tompkins - 10,950/$229,622; Mr. Sullivan -
6,000/$125,820; Mr. O'Connor - 5,800/$121,626; Mr. Brady - 5,800/$121,626;
and Mr. Williams - 5,800/$121,626.
(2) Includes employer contributions to the Company's defined contribution plan
and life insurance premiums for 2002: Mr. Tompkins ($6,417 and $2,989),
Mr. Sullivan ($7,000 and $1,943), Mr. O'Connor ($5,374 and $216), Mr.
Brady ($5,907 and $1,469), and Mr. Williams ($5,732 and $490); for 2001:
Mr. Tompkins ($5,950 and $3,053), Mr. Sullivan ($5,735 and $1,644), Mr.
O'Connor ($4,887 and $199), Mr. O'Connor ($4,887 and $199), Mr. Brady
($4,962 and $1,399), and Mr. Williams ($4,674 and $432); for 2000: Mr.
Tompkins ($5,950 and $2,895), Mr. Sullivan ($4,962 and $824), Mr. O'Connor
($4,697 and $186), Mr. Brady ($4,841 and $830), and Mr. Williams ($4,270
and $567).
(3) Mr. Tompkins retired as an employee of the Company effective February 1,
2003.
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 Average Annual Compensation and Years of Service
Remuneration Years of Service
- ------------ -------------------------------------------------------------------------
15 20 25 30 35 45
-------- -------- -------- -------- -------- --------
$100,000 $ 55,080 $ 55,080 $ 55,080 $ 55,080 $ 55,080 $ 70,025
$125,000 $ 73,830 $ 73,830 $ 73,830 $ 73,830 $ 74,150 $ 89,775
$150,000 $ 92,580 $ 92,580 $ 92,580 $ 92,580 $ 92,580 $109,525
$175,000 $111,330 $111,330 $111,330 $111,330 $124,025 $149,025
$200,000 $130,080 $130,080 $130,080 $130,080 $130,080 $149,025
$225,000 $148,830 $148,830 $148,830 $148,830 $148,830 $149,025
$250,000 $167,580 $167,580 $167,580 $167,580 $167,580 $167,580
$300,000 $205,080 $205,080 $205,080 $205,080 $205,080 $205,080
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 2002 Summary Compensation Table. The benefit
amounts are not subject to any deduction for Social Security benefits or other
offset amounts.
During the year 2002, the Company was required to make a statutory
contribution to the Qualified Plan in the amount of $0.5 million.
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. Mr. Tompkins retired
effective February 1, 2003, with 21 years of service.
Supplemental Executive Retirement Plan - The named executive officers and
certain 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 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 2002 the Company paid life insurance
premiums totaling $0.1 million for Messrs. Tompkins, 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 2002 Compensation Committee (formerly the Executive
Development and Compensation Committee) were John C. Cutting, Stephen H. Mundy
and Jeffries Shein. During 2002, no member of the Executive Development and
Compensation Committee was an officer or employee of the Company or a
subsidiary. In September 2002, John R. Middleton, M.D., was appointed a member
of the Compensation Committee and John C. Cutting was reassigned.
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
Overview
The Compensation Committee of the Board of Directors administers the
compensation program for executive officers of the Company. The Committee for
the year 2002 was composed of three independent Directors: John C. Cutting,
Stephen H. Mundy and Jeffries Shein. The Committee for the year 2003 is composed
of three independent Directors: John R. Middleton, M.D., 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 the Chief Executive Officer to evaluate the
performance of the other executive officers and meets in the absence of the
Chief Executive Officer 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 the Chief Executive Officer's
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 Chief Executive
Officer, 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 2003 Compensation Committee
Stephen H. Mundy, Chairman
John R. Middleton, M.D.
Jeffries Shein
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors is composed of four
independent directors, one of whom has significant accounting and financial
expertise. The Committee for the year 2002 was composed of three independent
Directors: John C. Cutting, John R. Middleton, M.D. and John P. Mulkerin.
Annette Catino was appointed a member of the Audit Committee in January 2003.
The Audit Committee operates under a written Charter adopted by the Board of
Directors.
Management is responsible for the Company's financial statements and
internal controls. The independent accountants of Middlesex Water, Deloitte &
Touche LLP, are responsible for performing an independent audit of the Company'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 the Company'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
Middlesex Water and its management. The Committee has considered whether the
independent accountants' provision of non-audit services to the Company 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 the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2002, for filing with the Securities and Exchange Commission.
The Committee also discussed with senior management the process used for
the establishment and maintenance of disclosure controls and procedures in
quarterly and annual reports which is required by the Securities and Exchange
Commission (SEC) and the Sarbanes-Oxley Act of 2002 for certain of the Company's
filings with the SEC.
The Committee met privately with the independent auditors who have
unrestricted access to the Audit Committee.
Year 2003 Audit Committee
John P. Mulkerin, Chairman
Annette Catino
John C. Cutting
John R. Middleton, M.D.
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, 1997. The current peer group includes American States
Water Company, 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. American Water Works Company has been removed from the Peer Group due
to its acquisition by another entity. The Wilshire 5000 Stock Index measures the
performance of all U.S. headquartered equity securities with readily available
price data.
[LINE GRAPH OMITTED]
================================================================================
12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02
- --------------------------------------------------------------------------------
Middlesex $100 $114 $157 $173 $180 $187
- --------------------------------------------------------------------------------
Peer Group 100 121 133 155 174 167
- --------------------------------------------------------------------------------
Wilshire 5000 100 123 153 136 121 96
================================================================================
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 perform the annual audit of the books of account and supporting
records of the Company for the year 2003, subject to the ratification 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, 2002, and 2001 by the Company's accounting firm, Deloitte & Touche LLP:
Year ended
2002 2001
-------- --------
Audit Fees $148,105 $ 99,000
Audit-Related Fees {a} 27,000 15,000
-------- --------
Total audit and audit-related fees $175,105 $114,000
Tax Fees {b} 17,850 34,205
All Other Fees {c} {d} 0 17,540
-------- --------
Total Fees $192,955 $165,745
{a} Includes 2002 fees for the audits of employee benefit plans of
$15,000 and certain agreed-upon procedures of $12,000.
Includes 2001 fees for the audits of employee benefit plans of
$15,000.
{b} Includes 2002 and 2001 fees for the preparation of tax returns
and tax related services of $17,850 and $34,205, respectively.
{c} Includes 2001 fees for a Human Resources Survey of $17,540.
{d} All Other Fees include no amounts of fees for services
provided by Deloitte Consulting for the years ended December
31, 2002 and 2001.
In March 2003, the Audit Committee established pre-approval policies and
procedures for all audit and non-audit services to be performed by Deloitte &
Touche LLP.
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 the annual
meeting to be held in the year 2004, you must submit your proposal to the
Secretary of the Company at 1500 Ronson Road, P.O. Box 1500, Iselin, New Jersey
08830-0452, not later than December 17, 2003, in order to be considered for
inclusion in the Company's proxy statement and form of proxy relating to the
2004 Annual 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.
MINUTES OF 2002 MEETING OF STOCKHOLDERS
The minutes of the 2002 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,
MARION F. REYNOLDS
Secretary
Iselin, New Jersey
April 17, 2003
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 2002 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, e-mail mreynolds@middlesexwater.com or by mail to Marion
F. Reynolds, Vice President, Secretary and Treasurer, Middlesex Water Company,
1500 Ronson Road, Iselin, New Jersey 08830.
[LOGO] MIDDLESEX WATER COMPANY
1500 Ronson Road
Iselin, New Jersey 08830-0452
732-634-1500
www.middlesexwater.com
- --------------------------------------------------------------------------------
Map to be inserted here
- --------------------------------------------------------------------------------
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.
REVOCABLE PROXY
MIDDLESEX WATER COMPANY
|X| PLEASE MARK VOTES AS IN THIS EXAMPLE
ANNUAL MEETING OF SHAREHOLDERS
MAY 28,2003
The undersigned stockholder(s) hereby appoint(s) John R. Middleton, M.D.
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 31, 2003, at the annual meeting of
shareholders to be held on May 28, 2003, at 11:00 a.m., local time or any
adjournment thereof.
With- For All
For hold Except
1. Election of Directors, Nominees for Class I |_| |_| |_|
term expiring in 2006 are:
John C. Cutting, John P. Mulkerin and
Dennis G. Sullivan
Nominees for Class II term expiring in 2004 are:
Annette Catino and Walter G. Reinhard
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.
- --------------------------------------------------------------------------------
For Against Abstain
2. Approve the appointment of Deloitte & Touche |_| |_| |_|
LLP as auditors for the Company for the year
2003.
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.
---------------------------------
Please be sure to sign and date Date
this Proxy in the box below.
- --------------------------------------------------------------------------------
- ------Shareholder sign above-------------Co-holder (if any) sign above----------
- --------------------------------------------------------------------------------
^ Detach above card, sign, date and mail in postage paid envelope provided. ^
[LOGO] 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 28, 2003, 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.
_____________________________________
_____________________________________
_____________________________________