UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. _____)
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Middlesex Water Company
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(Name of Registrant as Specified in Its Charter)
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1500 Ronson Road
P.O. Box 1500
Iselin, New Jersey 08830-0452
Tel. (732)634-1500
Fax (732)638-7515
NASDAQ Stock Market Symbol:
MSEX
April 13, 2006
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 24, 2006 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 the election of directors
and the 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 2005, together with our goals for
2006. 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 24th.
Sincerely,
/s/ J. Richard Tompkins
J. Richard Tompkins
Chairman of the Board
Quality Water Service Since 1897
TABLE OF CONTENTS
Page
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SOLICITATION AND REVOCATION OF PROXIES 2
SHARES ENTITLED TO VOTE 2
VOTE REQUIRED AND METHOD OF COUNTING VOTES 2
GENERAL INFORMATION 2
ELECTION OF DIRECTORS 4
NOMINEES FOR ELECTION AS DIRECTOR WITH TERM 5
EXPIRING IN 2009 - CLASS I
DIRECTORS WHOSE TERMS CONTINUE BEYOND THE 2006 6
ANNUAL MEETING
COMPENSATION OF DIRECTORS 7
SECURITY OWNERSHIP OF DIRECTORS, MANAGEMENT 8
AND CERTAIN BENEFICIAL OWNERS
EXECUTIVE COMPENSATION 9
Summary Compensation Table 9
Qualified Pension Plan Plus Supplemental Executive Retirement Plan 10
Compensation Committee Interlocks and Insider Participation 11
COMPENSATION COMMITTEE REPORT ON EXECUTIVE 11
COMPENSATION
AUDIT COMMITTEE REPORT 12
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES 14
STOCK PERFORMANCE GRAPH 15
STOCKHOLDER PROPOSALS 16
OTHER MATTERS 16
MINUTES OF 2005 MEETING OF STOCKHOLDERS 16
EXHIBIT A - AUDIT COMMITTEE CHARTER 17
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 24, 2006
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 24, 2006, 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 2009, and in each case
until their respective successors are elected and qualify.
2. 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,
2006, 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, 2005 has also been
mailed to stockholders with this Notice of Meeting and Proxy Statement.
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/ Kenneth J. Quinn
KENNETH J. QUINN
Vice President, General Counsel,
Secretary and Treasurer
April 13, 2006
YOUR VOTE IS IMPORTANT!
To assure your representation at the meeting,
please mail the enclosed proxy promptly.
1500 Ronson Road
Iselin, New Jersey 08830-0452
732-634-1500
www.middlesexwater.com
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PROXY STATEMENT
------------
Notice of the Annual Meeting of Stockholders of Middlesex Water Company
to be held on May 24, 2006, 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,
facsimile, electronic 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 13, 2006.
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, 2006, there were outstanding 11,603,238 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, 2006, 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. In the case of any other matter that may
properly come before the meeting, 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
2
Committees held twenty-nine meetings during the year 2005. Each incumbent
Director attended 95% or more of the total number of meetings of the Board and
Committees on which each served.
Committees of the Board
Audit Committee
The Audit Committee, consisting of Annette Catino, John C. Cutting,
John R. Middleton, M.D. and John P. Mulkerin (who has been designated as the
Audit Committee Financial Expert), reviews with the independent registered
public accounting firm the scope of the annual audit; receives and reviews the
independent registered public accounting firm's annual report; reviews the
independence of the independent registered public accounting firm, 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 is directly responsible
for the appointment of an independent registered public accounting firm for the
following calendar year. In February 2006, the Board of Directors re-approved a
written Charter for the Audit Committee, a copy of which is attached as Exhibit
A, and which is also available on the Company's website at
www.middlesexwater.com. The Committee held ten meetings during the year 2005.
All of the members of the Audit Committee have been determined by the Board to
be independent directors as defined in the listing standards of NASDAQ.
Capital Improvement Committee
The Capital Improvement Committee, consisting of John C. Cutting,
Walter G. Reinhard and J. Richard Tompkins, 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 held three
meetings during the year 2005.
Compensation Committee
The Compensation Committee, consisting of Annette Catino, John R.
Middleton, M.D. and Jeffries Shein, 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. (Please refer to page 12
for a description of the Restricted Stock Plan.) In March 2006, the Board of
Directors re-approved a written Charter for the Compensation Committee which is
available on the Company's website at www.middlesexwater.com. The Committee held
five meetings during the year 2005. All of the members of the Compensation
Committee have been determined by the Board to be independent directors as
defined in the listing standards of NASDAQ.
Corporate Governance Committee
The Corporate Governance Committee, consisting of John R. Middleton,
M.D., John P. Mulkerin, Walter G. Reinhard and Jeffries Shein, 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 Committee held four meetings during the
year 2005.
Nominating Committee
The Nominating Committee, consisting of Annette Catino, John P.
Mulkerin and Jeffries Shein, makes recommendations to the Board of Directors
with respect to nominations for the Board. The Nominating Committee acts as a
screening committee for candidates considered for election to the Board. In this
capacity, it concerns itself with the composition of the Board with respect to
depth of experience, balance of professional interests, required expertise and
other factors and evaluates prospective nominees identified by the Nominating
Committee or referred by other Board members, management, shareholders or
external sources. In January 2006, the Board of Directors re-approved a written
Charter for the Nominating
3
Committee which is available on the Company's website at www.middlesexwater.com.
The Committee held two meetings during the year 2005. All of the members of the
Nominating Committee have been determined by the Board to be independent
directors as defined in the listing standards of NASDAQ.
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; or sent via the internet to the
following e-mail address: kquinn@middlesexwater.com. 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, including appropriate references. The Committee shall make inquiry
of all references and any other areas deemed appropriate in fulfilling its
obligations. The Secretary of the Company should receive any nominations for
Director by the close of business on December 13, 2006, in order to be
considered for inclusion in the Company's proxy statement and form of proxy
relating to the 2007 Annual Meeting of Stockholders.
Pension Committee
The Pension Committee, consisting of John C. Cutting, John P. Mulkerin,
Walter G. Reinhard and Jeffries Shein, reviews investment policies and
determines recommended investment objectives for the Company's Pension Plan. The
Committee meets quarterly with the Company's Investment Managers. In January
2006, the Board of Directors re-approved a written Charter for the Pension
Committee which is available on the Company's website at www.middlesexwater.com.
The Committee held five meetings during the year 2005.
Ad Hoc Pricing Committee
The ad hoc Pricing Committee, consisting of Annette Catino, John C.
Cutting and Jeffries Shein, meets, as needed, to review financial matters
including, but not limited to, the pricing and issuance of common stock and of
corporate bonds. The Committee did not meet in 2005.
The Board of Directors has also adopted a Code of Conduct that applies
to all of our Directors, Officers and employees. Links to these materials can be
found on our website at www.middlesexwater.com.
ELECTION OF DIRECTORS
The Nominating Committee has recommended to the Board the following
candidates for election at the Annual Meeting of Stockholders: Dennis W. Doll,
John C. Cutting and John P. Mulkerin. Mr. Doll became President and CEO
effective January 1, 2006. Mr. Doll was appointed as a Director effective
January 1, 2006 to fill a vacancy created when the Board increased the number of
directors from eight to nine and to hold such office until the next Annual
Meeting of Stockholders. Mr. Doll is a candidate as a Class I Director. (Please
refer to page 5.) Dennis G. Sullivan, a current Class I Director, retired as
President and CEO on January 1, 2006 and remains on the Board until the
expiration of his term at the 2006 Annual Meeting. These three candidates are to
be elected each to hold office until the Annual Meeting of Stockholders in the
year 2009, and until their respective successors are elected and qualified. The
present terms of Class I directors expire at the year 2006 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 2006 Annual Meeting, age as of the date
of the Annual Meeting, Class, the period of service as a Director of the
Company, and business experience during the last five years.
4
NOMINEES FOR ELECTION AS
DIRECTORS WITH TERMS EXPIRING IN 2009 - CLASS I
JOHN C. CUTTING, age 69, became a director of the Company in 1997. Prior to his
retirement he served as Senior Engineer, Science Applications International
Corporation, specialists in information, energy and military systems,
Pittsburgh, Pennsylvania. He is Chairman of the Pension Committee and Capital
Improvement Committee and a Member of the Audit Committee and ad hoc Pricing
Committee. Mr. Cutting serves as a Director of Tidewater Utilities, Inc. (TUI),
Tidewater Environmental Services, Inc. and White Marsh Environmental Systems,
Inc. (1)
JOHN P. MULKERIN, age 68, became a director of the Company is 1997. Prior to his
retirement, he served as President and Chief Executive Officer of First Sentinel
Bancorp, Inc., Holding Company for First Savings Bank, Perth Amboy, New Jersey
and was a member of the Boards of Directors of said Companies. First Sentinel
Bancorp, Inc. was acquired by Provident Financial Services, Inc., the Holding
Company for The Provident Bank. Mr. Mulkerin currently serves on the Boards of
Directors of both of those Companies. Mr. Mulkerin is a Director of Raritan Bay
Medical Center, Daytop Village Foundation, Middlesex County College and Catholic
Charities of the Diocese of Metuchen. He is Chairman of the Audit Committee and
the Audit Committee Financial Expert; a Member of the Corporate Governance
Committee, Nominating Committee and Pension Committee. (1), (2).
DENNIS W. DOLL, age 47, was named President and Chief Executive Officer and
became a Director of Middlesex effective January 1, 2006. Mr. Doll joined the
Company in November 2004 as Executive Vice President. Mr. Doll serves as
Director and Chairman of Tidewater Utilities, Inc. (TUI), Tidewater
Environmental Services, Inc.; White Marsh Environmental Systems, Inc., a
subsidiary of TUI; Pinelands Water Company and Pinelands Wastewater Company;
Utility Service Affiliates, Inc., and Utility Service Affiliates (Perth Amboy)
Inc.
(1) This director has been determined by the Board of Directors to be
independent under the applicable listing standards of NASDAQ.
(2) The Company has established a $7,000,000 line of credit with The
Provident Bank.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE FOR THE ABOVE CANDIDATES.
5
DIRECTORS WHOSE TERMS CONTINUE BEYOND THE 2006 ANNUAL MEETING
AND WHO ARE NOT SUBJECT TO ELECTION THIS YEAR
Class II - Directors Whose Terms Expire in 2007
ANNETTE CATINO, age 49, became a director of the Company in 2003. She is
President and CEO of QualCare Alliance Networks, Inc., Piscataway, New Jersey, a
managed care organization, since 1991. Ms. Catino is a Director of Caucus
Educational Corporation, Cancer Institute of New Jersey Leadership Council,
Executive Women of New Jersey, Northfield Savings Bank and the American
Association of PPO's. She also serves on the Garden State Women Editorial Board
and The Val Skinner Foundation. Ms. Catino is a Member of the Audit Committee,
the Compensation Committee and the Nominating Committee. Ms. Catino became a
member of the ad hoc Pricing Committee in September 2005. (1)
WALTER G. REINHARD, age 60, became a director of the Company in 2002. He is a
Member of the law firm of Norris, McLaughlin & Marcus, P.A. of Bridgewater, New
Jersey, since 1984. Mr. Reinhard serves as a Director of the Fanwood-Scotch
Plains YMCA. Mr. Reinhard is Chairman of the Corporate Governance Committee and
a member of the Pension and Capital Improvement Committees. Mr. Reinhard became
a member of the Pension Committee in September 2005. (2)
(1) This director has been determined by the Board of Directors to be
independent under the applicable listing standards of NASDAQ.
(2) Norris, McLaughlin & Marcus, P.A., has provided legal services to the
Company in the areas of corporate and regulatory matters for over 30 years.
6
DIRECTORS WHOSE TERMS CONTINUE BEYOND THE 2006 ANNUAL MEETING
AND WHO ARE NOT SUBJECT TO ELECTION THIS YEAR
Class III - Directors Whose Terms Expire in 2008
JOHN R. MIDDLETON, M.D., age 61, became a director of the Company in 1999. He is
Chair of the Department of Medicine and Chief Medical Officer of Raritan Bay
Medical Center. He is a Fellow of the American College of Physicians and a
Fellow of the Infectious Diseases Society of America. Dr. Middleton is a Member
of the Audit Committee, Compensation Committee and the Corporate Governance
Committee. (1)
JEFFRIES SHEIN, age 66, became a director of the Company in 1990. He is a
Managing Partner, JGT Management Co., LLC, a management and investment firm,
since 2003 and formerly a Partner of Jacobson, Goldfarb & Tanzman Associates, a
commercial real estate brokerage firm, since 1972, Woodbridge, New Jersey. He is
Director of Raritan Bay Medical Center and a Director of The Provident Bank. Mr.
Shein is Chairman of the Compensation Committee, the Nominating Committee and
the ad hoc Pricing Committee and is a Member of the Corporate Governance
Committee and Pension Committee. Mr. Shein became a member of the Corporate
Governance Committee in September 2005. (1), (2)
J. RICHARD TOMPKINS, age 67, became a director of the Company in 1981. He has
served as Chairman of the Board of the Company since May 1990 and was President
from May 1981-2001. He currently serves as a consultant to the Company. Mr.
Tompkins is a past Director and Chairman of Tidewater Utilities, Inc. (TUI),
White Marsh Environmental Systems, Inc., a subsidiary of TUI, Pinelands Water
Company, Pinelands Wastewater Company, Utility Service Affiliates, Inc., Utility
Service Affiliates (Perth Amboy) Inc., and Bayview Water Company. He currently
serves as a member of the Capital Improvement Committee. Mr. Tompkins is a past
President of the National Association of Water Companies and the New Jersey
Utilities Association.
(1) This director has been determined by the Board of Directors to be
independent under the applicable listing standards of NASDAQ.
(2) The Company has established a $7,000,000 line of credit with The Provident
Bank.
COMPENSATION OF DIRECTORS
A Director who is not an officer of the Company or its subsidiaries is
paid an annual retainer of $12,000 and a fee of $800 for each meeting attended;
a fee of $400 for Special Board meetings via communication facilities; a fee of
$500 for each Committee meeting attended; and a fee of $200 for Special
Committee meetings via communication facilities. The annual retainer for the
Chairman of the Board is $24,000 per year. Each Committee Chairperson is paid an
additional annual retainer fee of $1,000. A Director who is an officer of the
Company or its subsidiaries is paid a fee of $400 for each meeting attended. A
Director Emeritus may attend Board meetings but does not have any voting
privileges. A Director Emeritus is paid an annual retainer fee of $6,000 and a
Board meeting fee of $500 for each meeting attended. Mr. Stephen H. Mundy
retired from the Board of Directors on January 25, 2005 and serves as a Director
Emeritus at the discretion of the Board.
Consulting Agreements: In January 2006, the Company renewed its
consulting agreement with J. Richard Tompkins in the amount of $50,000 annually
for the period February 1, 2006 through January 31, 2007. The Company also has a
consulting agreement with immediate past President Dennis G. Sullivan in the
amount of $80,000 for services rendered from January 1, 2006 through March 31,
2006.
7
SECURITY OWNERSHIP OF DIRECTORS, MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of March 31, 2006, 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 2.59% of the shares outstanding on March 31, 2006. All other individual
elected Directors and Executive Officers owned less than 1% of the shares
outstanding on March 31, 2006.
Amount and Nature
of Beneficial
Name Ownership
Directors
Annette Catino 6,198
John C. Cutting 36,580
John R. Middleton, M.D. 6,173
John P. Mulkerin 20,000
Walter G. Reinhard 1,808
Jeffries Shein 300,880
Dennis G. Sullivan 14,967
J. Richard Tompkins 36,217
Named Executive Officers
Dennis W. Doll 4,300
Gerard L. Esposito 7,126
A. Bruce O'Connor 24,905
Richard M. Risoldi 9,035
Ronald F. Williams 16,598
All elected Directors and Executive Officers as a group including those
named above. 484,787*
* 4.18% of the shares outstanding on March 31, 2006.
The following table sets forth information made known to the Company as of March
31, 2006, 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 680,000 5.86%
Wilmington, Delaware 19801
(1) Beneficial owner has sole power to vote and dispose of such shares.
8
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 2005,
2004 and 2003 for the Chief Executive Officer and the most highly compensated
executive officers of the Company (Named Executive Officers).
SUMMARY COMPENSATION TABLE
Name and Restricted All Other Annual
Principal Position Year Salary Stock Award Compensation
(1) (2)
Dennis G. Sullivan 2005 $302,666 $ 57,375 $ 13,825
President and 2004 $267,192 $ 32,049 $ 12,038
Chief Executive Officer (3) 2003 $251,714 $ 37,883 $ 10,902
Dennis W. Doll 2005 $199,950 $ 6,885 $ 3,950
Executive Vice President (4) 2004 $ 31,253 $ -- $ 69
A. Bruce O'Connor 2005 $180,777 $ 34,425 $ 6,725
Vice President and 2004 $172,424 $ 23,147 $ 6,410
Chief Financial Officer 2003 $170,094 $ 30,306 $ 6,348
Ronald F. Williams 2005 $169,842 $ 28,688 $ 7,054
Vice President - Operations 2004 $165,645 $ 19,586 $ 6,623
and Chief Operating Officer 2003 $163,469 $ 25,255 $ 5,987
Gerard L. Esposito 2005 $147,625 $ 24,098 $ 5,148
President 2004 $139,006 $ 19,586 $ 4,851
Tidewater Utilities, Inc. 2003 $129,404 $ 30,306 $ 4,515
Richard M. Risoldi 2005 $147,094 $ 26,393 $ 4,343
Vice President- 2004 $130,916 $ 12,463 $ 4,000
Subsidiary Operations 2003 $124,546 $ 15,153 $ 3,732
(1) The number and value of Restricted Stock held in escrow as of December 31,
2005, were as follows: Mr. Doll - 300/$5,202; Mr. O'Connor - 6,533/$113,282; Mr.
Williams - 5,816/$100,849; Mr. Esposito - 5,083/$88,139; and Mr. Risoldi -
3,583/$62,129. 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.
The restrictions on all prior unvested awards made to Mr. Sullivan lapsed upon
his completion of service with the Company as of December 31, 2005.
(2) Includes employer contributions to the Company's defined contribution plan
and life insurance premiums for 2005: Mr. Sullivan ($10,499 and $3,326), Mr.
Doll ($3,500 and $450), Mr. O'Connor ($6,327 and $398), Mr. Williams ($5,968 and
$1,086), Mr. Esposito ($5,148 and $-0-) and Mr. Risoldi ($4,036 and $307); for
2004: Mr. Sullivan ($9,280 and $2,758), Mr. Doll ($-0- and $69), Mr. O'Connor
($6,034 and $376), Mr. Williams ($5,593 and $1,030), Mr. Esposito ($4,851 and
$-0-) and Mr. Risoldi ($3,736 and $264); for 2003: Mr. Sullivan ($8,167 and
$2,735), Mr. O'Connor ($5,953 and $395), Mr. Williams ($5,411 and $576), Mr.
Esposito ($4,515 and $-0-), and Mr. Risoldi ($3,469 and $263).
(3) Mr. Sullivan retired as President and Chief Executive Officer effective
January 1, 2006.
(4) Mr Doll was elected President and Chief Executive Officer effective January
1, 2006.
9
QUALIFIED PENSION PLAN PLUS SUPPLEMENTAL EXECUTIVE
RETIREMENT PLAN (SERP)
Years of Service
Average
Annual
Compensation 15 20 25 30 35 45
$100,000 $ 52,392 $ 52,392 $ 52,392 $ 52,392 $ 55,957 $ 61,750
$125,000 $ 71,142 $ 71,142 $ 71,142 $ 71,142 $ 72,582 $ 78,375
$150,000 $ 89,892 $ 89,892 $ 89,892 $ 89,892 $ 89,892 $ 95,000
$175,000 $108,642 $108,642 $108,642 $108,642 $108,642 $111,625
$200,000 $127,392 $127,392 $127,392 $127,392 $127,392 $128,250
$225,000 $146,142 $146,142 $146,142 $146,142 $146,142 $146,142
$250,000 $164,892 $164,892 $164,892 $164,892 $164,892 $164,892
$300,000 $202,392 $202,392 $202,392 $202,392 $202,392 $202,392
$325,000 $221,142 $221,142 $221,142 $221,142 $221,142 $221,142
$350,000 $239,892 $239,892 $239,892 $239,892 $239,892 $239,892
$375,000 $258,642 $258,642 $258,642 $258,642 $258,642 $258,642
$400,000 $277,392 $277,392 $277,392 $277,392 $277,392 $277,392
$425,000 $296,142 $296,142 $296,142 $296,142 $296,142 $296,142
$450,000 $314,892 $314,892 $314,892 $314,892 $314,892 $314,892
$475,000 $333,642 $333,642 $333,642 $333,642 $333,642 $333,642
$500,000 $352,392 $352,392 $352,392 $352,392 $352,392 $352,392
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 Qualified Plan,
current service costs are funded annually as allowed under Internal Revenue
Service guidelines. 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 2004
Summary Compensation Table. The benefit amounts are not subject to any deduction
for Social Security benefits or other offset amounts.
During the year 2005, the Company was required to make a statutory
contribution to the Qualified Plan in the amount of $1.0 million. All assets of
the Qualified Plan are held in a trust. The estimated credited years of service
based on normal retirement at age 65 includes 22 years, 19 years, 33 years, 19
years, 18 years and 32 years for Messrs. Sullivan, Doll, O'Connor, Williams,
Esposito and Risoldi, respectively.
Supplemental Executive Retirement Plan - The Named Executive Officers
and 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 (and in the case of two participants, 50% 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
10
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 2005, the Company paid life insurance premiums totaling $0.1 million
for the Named Executive Officers, 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 equals 1% of base pay, plus an
additional 50% of that portion from 2% to 6% of base pay.
Distributions under the 401
Change of Control Agreements - The Company has change of control termination
agreements with the named executive officers and other executive officers. These
agreements generally 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 2005 Compensation Committee were Annette Catino,
John R. Middleton, M.D., and Jeffries Shein. During 2005, no member of the
Compensation Committee was an officer or employee of the Company or a
subsidiary.
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 2005 was composed of three independent Directors: Annette Catino, John
R. Middleton, M.D., 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 Board of Directors has adopted a written Charter for the
Compensation Committee, which is available on the Company's website at
www.middlesexwater.com.
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 to 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
superior contributions to the Company's success, (4) be meaningfully
11
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 comparable companies and
similar positions. Base salaries for satisfactory performance are targeted at
the median of the competitive market. Individual performance of the executive is
assessed and taken into account when setting salaries against the competitive
market data. The Committee reviews, as well, the individual's efforts at 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 utility
companies and general industry.
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 based on the Board's
assessment of his individual performance as well as time in the position and the
competitive rates of pay among comparably sized utilities and general industry
firms. 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 continuing 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 2006 Compensation Committee
Jeffries Shein, Chairman
Annette Catino
John R. Middleton, M.D.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors is composed of four
independent directors, one of whom is designated by the Board as the "Audit
Committee Financial Expert," as defined by the Securities and Exchange
Commission. The Committee for the year 2005 was composed of: Annette Catino,
John C. Cutting, John R. Middleton, M.D. and John P. Mulkerin. The Audit
Committee operates under a written Charter adopted by the Board of Directors and
reviewed annually by the Committee. The Board of Directors has adopted a written
Charter for the Audit Committee, which is set forth herein as Exhibit A in this
Proxy and is available on the Company's website at www.middlesexwater.com.
12
Management is responsible for the Company's financial statements and
internal controls. The independent registered public accounting firm ("the
Independent Auditors") 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
oversee the quality and integrity of the Company's accounting, auditing and
financial reporting practices.
In this context, the Committee has met and held discussions with
management and the Independent Auditors. 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 Auditors. The Committee discussed with the Independent Auditors
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 with management over the application of
accounting principles;
o Audit adjustments; and
o Disclosures in the financial statements.
The Independent Auditors 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 Auditors the firm's independence with respect to Middlesex Water and
its management. The Committee has the sole authority to preapprove permitted
non-audit services performed by the Independent Auditors and has considered
whether the Independent Auditors' furnishing of non-audit services to the
Company is compatible with maintaining their independence.
Based on the Committee's discussions with management and the Independent
Auditors, the Committee's review of the audited financial statements, the
representations of management regarding the audited financial statements and the
report of the Independent Auditors 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,
2005, 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. In that connection, the Committee noted that in November
2005, the Company filed an amended 2004 Form 10-K and an amended Form10-Q for
each of the first and second quarters of 2005 regarding the recording of
non-cash contributions of utility plant by developers. The restatements made in
the 2005 Form 10-Q/A's and the 2004 Form 10-K/A did not affect the Company's net
income, earnings applicable to common stock, cash flows from operations or
liquidity.
The Committee meets privately with the Independent Auditors who have
unrestricted access to the Audit Committee.
Year 2006 Audit Committee
John P. Mulkerin, Chairman
Annette Catino
John C. Cutting
John R. Middleton, M.D.
13
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES
Aggregate fees billed to the Company for the years ended December 31, 2005 and
2004 by the Company's independent registered public accounting firm, Deloitte &
Touche LLP are as follows:
Year ended December 31,
2005 2004
Audit Fees {a} $516,000 $493,900
Audit-Related Fees {b} 2,500 21,000
Total audit and audit-related fees $518,500 $514,900
Tax Fees {c} $ 22,275 $ 18,235
All Other Fees -- --
Total Fees $540,775 $533,135
{a} In 2005 and 2004, audit fees were incurred for audits of the
financial statements and internal control over financial reporting of
the Company, an audit of the financial statements of a subsidiary of
the Company, and reviews of the financial statements included in the
Company's quarterly reports on Form 10-Q. Also in 2004, audit fees were
incurred for services rendered in connection with certain financing
transactions.
{b} In 2005, fees were related to transition procedures for the
successor auditor of the employee benefit plans. In 2004, fees were for
the audits of employees benefit plans.
{c} Includes 2005 and 2004 fees for the preparation of tax returns of
$22,275 and $18,235, respectively.
The Company paid $19,000 in fees to Withum Smith + Brown LLP for the
2005 audits of the Company's employee benefit plans.
The Audit Committee has established pre-approval policies and
procedures for all audit and non-audit services to be performed by Deloitte &
Touche LLP. The Audit Committee approves 100% of the services related to
Audit-Related Fees, Tax Fees and All Other Fees.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ATTENDANCE AT ANNUAL MEETING
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.
14
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 Dow Jones Wilshire 5000 Stock Index for the period of five years commencing
December 31, 2000. The current peer group includes American States Water
Company, Aqua America Inc., Artesian Resources Corp., California Water Service
Company, Connecticut Water Service, Inc., Pennichuck Corp., SJW Corp., Southwest
Water Company, York Water Company and the Company. The Dow Jones Wilshire 5000
Stock Index measures the performance of all U.S. headquartered equity securities
with readily available price data.
Comparison of 5 Year Cumulative Total Return*
Among Middlesex Water Company, The Dow Jones Wilshire 5000 Index
and a Peer Group
[GRAPH OMITTED]
* $100 invested on 12/31/00 in stock or index, including reinvestment of
dividends. Fiscal year ending December 31.
12/00 12/01 12/02 12/03 12/04 12/05
Peer Group $100 $112 $107 $136 $157 $206
Middlesex $100 $104 $100 $134 $129 $123
Dow Jones Wilshire 5000 $100 $ 89 $ 70 $ 93 $104 $111
15
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 2007, 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 13, 2006, in order to be considered for
inclusion in the Company's proxy statement and form of proxy relating to the
2007 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 2005 MEETING OF STOCKHOLDERS
The minutes of the 2005 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/ Kenneth J. Quinn
KENNETH J. QUINN
Vice President, General Counsel,
Secretary and Treasurer
Iselin, New Jersey
April 13, 2006
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 2005 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. The 2005 Annual Report on Form 10-K
can also be found on the Company website at www.middlesexwater.com. Shareholders
can request this information by phone at 732-634-1500, ext. 216, e-mail
kquinn@middlesexwater.com or by mail to Kenneth J. Quinn, Vice President,
General Counsel, Secretary and Treasurer, Middlesex Water Company, 1500 Ronson
Road, P.O. Box 1500, Iselin, New Jersey 08830-0452.
16
EXHIBIT A
MIDDLESEX WATER COMPANY
AUDIT COMMITTEE CHARTER
PREAMBLE
There shall be a standing committee of the Board of Directors (the
"Board") of Middlesex Water Company (the "Company") to be known as the Audit
Committee (the "Committee").
The Committee shall be primarily responsible for oversight of the audit of the
Company's financial statements. It may be assigned additional responsibilities
by the Board from time to time, which may include (i) oversight of the Company's
internal audit functions and of audits or similar assessments of the Company's
information technology and compliance with public water utility regulations;
(ii) review of related party transactions with the Company; (iii) determining
whether to grant waivers with respect to the Company's Code of Conduct and (iv)
investigation of "whistleblower" complaints from Company personnel. In all its
actions, the Committee shall comply with the requirements, rules and regulations
of the Sarbanes-Oxley Act of 2002, Nasdaq Marketplace listing standards and all
other applicable federal and state laws, rules and regulations.
The Committee shall provide assistance to the Board in fulfilling its
responsibility to the shareholders, potential shareholders and the investment
community relating to the corporate accounting and reporting practices of the
Company. In doing so, the Committee shall maintain free and open means of
communication between the Directors, the independent registered public
accounting firm (the "Independent Auditors"), the internal auditors and the
financial management of the Company.
COMPOSITION AND APPOINTMENT
There shall be a minimum of three (3) members of the Committee elected
by the Board. Each shall be an independent Director of the Company as defined by
applicable laws, regulations and listing requirements and as summarized herein.
In any instance where this summary is inconsistent with applicable laws,
regulations or listing requirements, the laws, regulations or listing
requirements shall control. To be considered independent, a member of the
Committee must not, other than in his or her capacity as a member of the
Committee, the Board, or any other Board committee, accept any consulting
advisory fee or other compensation from the Company, nor may a Family Member of
a member (as that term is defined by applicable Nasdaq listing standards) accept
any such fee or other compensation. Further, a member of the Committee must not,
other than in his or her capacity as a member of the Committee, the Board, or
any other Board committee, be affiliated with the Company or any of its
subsidiaries (except as a Director of the Company and/or its subsidiaries)
including, but not limited to, affiliation with any entity controlling,
controlled by or under common control with the Company. Additionally, a member
of the Committee may not be a beneficial owner of a controlling interest in the
voting stock of the Company or any subsidiary. A member of the Committee shall
not have participated in the preparation of the financial statements of the
Company or any current Company subsidiary at any time during the three years
prior to becoming a member of the Committee.
All Committee members must, as determined within the business judgment
of the Board at the time such members are appointed to the Committee, be able to
read and understand fundamental financial statements, including the Company's
balance sheet, income statement, and cash flow statement. Additionally, at least
one (1) member of the Committee must either fall within the definition of "Audit
Committee Financial Expert," as that term is defined by the Securities and
Exchange Commission ("SEC"), or, be capable of serving the functions expected of
such an audit committee expert, as determined by the Board within its business
judgment. In determining a member's financial expertise, the Board may consider
one's past employment experience in finance or accounting, requisite
professional certification in
17
accounting, or any other comparable experience or background resulting in the
member's financial sophistication. The Board may also take into consideration a
member's status as, or having been, a chief executive officer, chief financial
officer or other senior officer with financial oversight responsibilities.
The Board must determine annually that the Committee members are able
to read and understand fundamental financial statements as explained in this
Charter. The duties and responsibilities of a member of the Committee are in
addition to those duties set out for a member of the Board.
COMMITTEE MEETINGS
o The Committee shall meet at least four times each year.
o Regularly scheduled Committee meetings may be held in conjunction
with meetings of the full Board, provided the Committee meetings abide by all
the provisions contained herein and all applicable requirements, rules and
regulations of the Sarbanes-Oxley Act of 2002, Nasdaq Marketplace listing
standards and all other applicable federal and state laws, rules and
regulations.
o Special meetings of the Committee may be called by the Chairman of
the Committee or at the request of any two (2) Committee members. The Chairman
of the Board or the Chief Executive Officer may recommend to the Chairman of the
Committee that a special meeting be held.
o The Committee may request that members of management or outside
consultants be present to assist the Committee in the performance of its duties.
o Minutes of each meeting will be kept and distributed to the full
Board.
GENERAL RESPONSIBILITIES
In carrying out its responsibilities, the Committee believes its policies and
procedures should remain flexible in order to best react to changing conditions
and ensure the Directors and shareholders that the corporate accounting and
reporting practices of the Company are in accordance with all requirements and
are of the highest quality.
In carrying out these responsibilities, the Committee shall:
o Review the adequacy of the Audit Committee Charter (the "Charter")
annually and submit Charter revisions to the Board for consideration and
approval.
o Establish, enforce and periodically review procedures designed to
identify related party transactions material to the Company's financial
statements or which otherwise require disclosure under applicable listing
standards, rules, regulations or statutes. The Committee shall review each such
transaction and shall report to the Board whether the transaction is approved.
o Review the Company's Form 10-K Annual Report and such other filings
with the Securities and Exchange Commission as the Committee deems necessary or
appropriate, and will recommend to the Board the inclusion of the audited
financial statements in the Company's Form 10-K Annual Report to the Securities
and Exchange Commission.
o Ascertain that the Board and senior officers of the Company have
annually submitted a compliance attestation confirming they have complied with
the Company's Code of Conduct. The Committee shall have the sole authority to
approve waivers of the Company's Code of Conduct and shall insure that such
waiver be promptly disclosed to shareholders, along with the reasons for
granting such waiver. Such disclosure shall be made in the Company's regular
public filings, not later than the next periodic report and may also be posted
on the Company's website.
18
o Ascertain that the Chief Executive Officer and the Chief Financial
Officer are in full compliance with Section 404 of the Sarbanes-Oxley Act of
2002 regarding certain attestations of the financial statements of the Company.
o Issue an annual Audit Committee Report for inclusion in the Company's
Proxy Statement.
o Investigate any matter brought to the Committee's attention, with the
power to engage independent counsel, accountants and any other advisors or
assistance it determines necessary to carry out its duties. The Committee shall
determine the compensation for such services. The Company is obligated to fund,
without limit, the compensation and all expenses related to any independent
counsel, accountants and any other advisors or assistance the Committee retains.
In addition, the Company shall provide sufficient funding to pay for the
administrative expenses of the Committee.
o Establish and maintain procedures for (i) the receipt, retention, and
treatment of complaints received by the Company regarding accounting, internal
accounting controls, or auditing matters and (ii) the confidential, anonymous
submission by Company employees, officers or directors of concerns regarding
questionable accounting or auditing matters. As part of its responsibilities the
Committee shall insure that the Company communicates such procedures to all
employees, officers and directors at least annually.
o Review and approve the risk assessment and related methodology, audit
plan/budget, organizational structure, and qualifications of the Internal
Auditor at least annually. The Committee will also approve any changes made
during the year to the risk assessment or audit plan/budget. Any functions
normally performed by the Internal Auditor that are outsourced to a third party
will include ongoing monitoring of the relationship and a review of the
independence and qualifications of such firm/individuals to perform their
assignments.
o Review the performance and approve the appointment and, if necessary,
replacement of the Internal Auditor.
o On at least a quarterly basis, review and approve significant reports
prepared by the Internal Auditor together with management's response and the
Internal Auditor's follow-up to these reports. The Internal Auditor, on a
quarterly basis, will provide the Committee with a status of its audit
plan/budget as well as a report on the current status of significant exceptions
noted by the Internal Auditor.
o Perform such additional activities and consider such other matters
within or beyond the scope of its responsibilities as required by the Company's
Charter or By-laws, the Board, or applicable listing standards, rules,
regulations or statutes.
INDEPENDENT AUDITOR OVERSIGHT RESPONSIBILITIES
In carrying out these responsibilities, the Committee shall:
o Have sole authority to engage, review (at least annually), dismiss
and replace the Company's Independent Auditors. The Committee shall have sole
authority to review and set the fees to be paid to the Company's Independent
Auditors.
o Have the sole authority to preapprove each permitted non-audit
service to be performed by the Independent Auditors. As part of the exercise of
that authority, the Committee shall adopt a written policy governing the
preapproval of non-audit services to be performed by the Independent Auditors.
Any approval by the Committee of such services shall be disclosed to investors
in periodic reports required. The Committee shall have authority to delegate
preapproval authority of Independent Auditor non-audit
19
services to one (1) or more of its members. The decisions of any member(s) to
whom authority is delegated shall be presented to the full Committee at each of
its scheduled meetings.
o Meet with the Independent Auditors and financial management of the
Company to oversee and review the scope of the proposed audit for the current
year and the audit procedures to be utilized, and at the conclusion thereof,
review such audit, including any comments or recommendations of the Independent
Auditors.
o It is understood that the Independent Auditors are ultimately
accountable to the Board and the Committee, and that the Committee has the
ultimate power to appoint or remove the Independent Auditors.
o Review the financial statements contained in the annual shareholders
report, as well as major accounting reserves, with management and the
Independent Auditors to ascertain that management and the Independent Auditors
are satisfied with the disclosure and content of the financial statements to be
presented to the shareholders. Any changes in accounting principles will also be
reviewed.
o Review with the Independent Auditors and financial and accounting
personnel the adequacy and effectiveness of the accounting and financial
controls of the Company, and elicit any recommendations for the improvement of
such internal control procedures or particular areas where new or more detailed
controls or procedures are desirable.
o Obtain from the Independent Auditors a formal written statement
regarding the Independent Auditors full compliance with all applicable
provisions of the Sarbanes-Oxley Act of 2002, including, but not limited to, all
"Auditor Independence" provisions.
o Provide opportunity for the Independent Auditors to meet with members
of the Committee without members of management present. Among the items to be
discussed in these meetings will be the Independent Auditors' evaluation of the
Company's financial and accounting policies and the cooperation that the
Independent Auditors received during the course of the audit.
o Issue a report to be included in the Company's Proxy Statement
indicating that it has reviewed the audited financial statements with management
and the Independent Auditors (including a discussion of the quality of the
accounting principles and significant judgments affecting the financial
statements). The Committee shall state whether it has met privately to discuss
the information obtained from management and the Independent Auditors, and, in
reliance on that review, whether or not it has recommended to the Board that the
audited financial statements be included in the Company's Annual Report on Form
10-K for filing with the Securities and Exchange Commission.
20
1500 Ronson Road
Iselin, New Jersey 08830-0452
732-634-1500
www.middlesexwater.com
[MAP OMITTED]
DIRECTIONS TO MIDDLESEX WATER COMPANY
FROM GARDEN STATE PARKWAY (NORTH OR SOUTH): Take Exit 131A to fourth 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.
21
[X] PLEASE MARK VOTES REVOCABLE PROXY
AS IN THIS EXAMPLE MIDDLESEX WATER COMPANY
ANNUAL MEETING OF SHAREHOLDERS
MAY 24, 2006
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, 2006, at the Annual Meeting of
Shareholders to be held on May 24, 2006, 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 2009 are:
John C. Cutting, Dennis W. Doll
and John P. Mulkerin
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.
- --------------------------------------------------------------------------------
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.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
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Please be sure to sign and date | Date |
this Proxy in the box below. | |
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| |
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- -----------Shareholder sign above----------Co-holder (if any) sign above-------
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Detach above card, sign, date and mail in postage paid envelope provided.
[MIDDLESEX WATER COMPANY LOGO]
c/o Registrar and Transfer Company
10 Commerce Drive
Cranford, New Jersey 07016-3572
www.middlesexwater.com
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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
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Annual Meeting of Shareholders - May 24, 2006, 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.
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