GOVERNANCE AND BOARD MATTERS
General Information
Management of the Company is under the general direction of the Board of Directors who are elected by the shareholders. Our business and affairs are managed under the direction of the Board in accordance with the New Jersey Business Corporation Act and our Certificate of Incorporation and By-Laws. Members of the Board are kept apprised of our business through discussions with the Chairman and Chief Executive Officer and other officers, by reviewing materials provided to them, and by participating in meetings of the Board and its Committees.
Board Meetings and Attendance at Annual Meeting of Shareholders
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 eighteentwenty-one meetings during fiscal year 2009.2010. Each incumbent Director attended 95%90% or more of the total number of meetings of the Board and Committees on which each served. All of the directors serving at the time of the fiscal year 20092010 Annual Meeting of Shareholders held in May 20092010 attended that meeting.
Board Independence
The Company’s Common Stock is listed on the NASDAQ Global Select Market. NASDAQ listing rules require that a majority of the Company’s directors be “independent directors” as defined by NASDAQ corporate governance standards. Generally, a director does not qualify as an independent director if the director has, or in the past three years has had, certain material relationships or affiliations with the Company, its external, or internal auditors, or is an employee of the Company. The Board has determined that directors (Catino,(Cosgrove, Cutting, Klein, Mansue, Middleton, Mulkerin, Reinhard, Shein and Tompkins) are independent directors under the NASDAQ listing standards. Mr. Doll, who is an employee of the Company, is not considered an independent director.
The Board based these determinations primarily on a review of the responses of the Directors and executive officers to questions regarding employment and compensation history, affiliations, family and other relationships, together with an examination of those companies with whom the Company transacts business.
Board Leadership Structure
The Company currently separatesBoard does not have a formal policy on whether or not the role of the Chief Executive Officer and Chairman of the Board should be separate or, if it is to be separate, whether the Chairman should be selected from the non-employee directors or be an employee. Currently we operate with one individual, Mr. Doll, serving as Chairman of the Board, President and Chief Executive Officer. Mr. Doll was elected by the Board as President and Chief Executive Officer with different individuals occupying those roles. This segregation of duties along with the relationshipin 2006 and Chairman of the Board on May 25, 2010 following the decision by J. Richard Tompkins to retire as Chairman but remain on the Board as a Director. Our Board leadership model consists of this combined Chairman, President and management, can best be characterized as one of healthy, constructive tension which beneficially enhancesChief Executive Officer role, coupled with a strong independent Lead Director.
The Board believes that combining the performanceChairman of the Board, President and Chief Executive Officer positions is the appropriate corporate governance structure for us at this time because it most effectively utilizes Mr. Doll’s extensive utility and management experience and knowledge regarding the Company, as well as his capabilities in their respective roles. It shouldeffectively identifying strategic priorities and leading discussions on, and execution of, the Company’s strategy.
The Company’s independent directors bring experience, oversight and expertise from outside the company and industry. In order to ensure that the independent directors play a leading role in our current leadership structure, the Board established the position of Lead Director in 2010 and named Jeffries Shein, director since 1990, to that position on June 22, 2010. Mr. Shein is Chair of the Compensation Committee and serves on the Corporate Governance and Nominating, Pension and Ad Hoc Pricing Committees.
The Lead Director has the following responsibilities:
Advises the Chairman as to an appropriate schedule of Board meetings;
Reviews and provides the Chairman with input regarding the agenda for Board meetings;
Presides at all meetings at which the Chairman is not present, including executive sessions of the independent directors, and apprises the Chairman of the issues considered;
Is available for consultation and direct communication with the Company’s shareholders and other members of the Board;
Calls meetings of the independent directors when necessary and appropriate;
Performs such other duties as the Board may from time to time delegate.
As part of our Board’s annual assessment process, the Board evaluates our board leadership structure to ensure that it remains appropriate. The Board recognizes that there may be notedcircumstances in the future that during 2009, Presidentwould lead it to separate the roles of Chief Executive Officer and CEO Dennis W. Doll was appointed Vice-ChairmanChairman of the Board, bybut believes that the unanimous voteabsence of a formal policy requiring either the separation or combination of the Directors.roles of Chairman and Chief Executive Officer provides the Board with the flexibility to determine the best leadership structure as conditions potentially change in the future.
Board Committee Membership
The Company’s Board of Directors maintains a number of standing committees to assist with the performance of its responsibilities. These committees and their current members during 2010 are described below:
NAME | AUDIT | CAPITAL IMPROVEMENT | COMPENSATION | CORPORATE GOVERNANCE AND NOMINATING | PENSION | AD HOC
PRICING |
Annette Catino (1) | X | X | X | X | | X* |
James Cosgrove, Jr. (2) | | X | | | | X |
John C. Cutting | X | X* | | | X* | X |
Amy B. Mansue (3) | X | | X | | | |
Steven M. Klein (1)(4) | XX*+ | | X | | X | |
John R. Middleton, M.D. | X | | X | X | | |
John P. Mulkerin (5) | X*+ | | | X | X | |
Walter G. Reinhard | | X | | X* | X | |
Jeffries Shein | | | X* | X | X | X |
J. Richard Tompkins | | X | | | X | X | X* |
* Indicates Committee Chair
+ Indicates Audit Committee Financial Expert
(1) Annette Catino resigned from the Board effective October 26, 2010.
(2) Mr. Cosgrove was named to the Board effective September 28, 2010 and to the Capital Improvement and Ad Hoc Pricing Committee on November 30, 2010.
(3) Amy Mansue was named to the Board effective September 28, 2010 and to the Audit Committee and Compensation Committee effective November 30, 2010.
(4) Mr. Klein was appointed to the Board effective August 1, 2009 and became a memberChairman of the Audit Committee and Audit Committee Financial Expert following the Pension Committee in September 2009. Mr. Klein was named toretirement from the Compensation Committee in JanuaryBoard of John Mulkerin on June 22, 2010.
(5) Mr. Mulkerin resigned from the Board, and as Audit Committee Chair, effective June 22, 2010.
Board Committee Responsibilities
Audit Committee
The Audit Committee held four meetings and three teleconferences during 2009.2010. The Audit Committee 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 2010,March 2011, the Board of Directors re-approved the written Charter for the Audit Committee which is available in the Investor Relations section of our website www.middlesexwater.comunder Corporate Governance. 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 held three meetings during 2009.2010. The Capital Improvement Committee reviews and approves the Capital Budget and the long-term capital planning needs. The Committee also monitors capital projects and expenditures during the year.
In April 2009,2010, the Board of Directors re-approved a written Charter for the Capital Improvement Committee which is available in the Investor Relations section of our website www.middlesexwater.comunder Corporate Governance.
Compensation Committee
The Compensation Committee held threefour meetings during 2009.2010. The Compensation Committee reviews and makes recommendations to the Board of Directors as to the salaries, benefits and incentive compensation of the Executive Officers of the Company. Executive Officer incentive compensation is awarded under the Restricted Stock Plan. (Please refer to page 20 for a description of how awards are made under the Restricted Stock Plan.)
In February 2010,2011, the Board of Directors re-approved a written Charter for the Compensation Committee which is available in the Investor Relations section of our website www.middlesexwater.com under Corporate Governance. 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.
Compensation Committee Interlocks and Insider Participation
The members of the 20092010 Compensation Committee were Annette Catino, Steven M. Klein, John R. Middleton, M.D., and Jeffries Shein. It should be noted that Mr. Steven M. KleinAnnette Catino resigned from the Board in October 2010 and Amy B. Mansue was named to the Compensation Committee in JanuaryNovember 2010. During 2009,2010, no member of the Compensation Committee was at any time an officer or employee of the Company or its subsidiaries. No current member is related to any other member of the Compensation Committee, any other member of the Board or any executive officer of the Company.
Corporate Governance and Nominating Committee
The Corporate Governance and Nominating Committee held foursix meetings during 2009.2010. The committee 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 makes recommendations to the Board of Directors with respect to nominations for the Board and screens candidates considered for election to the Board. In this capacity, the Committee 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 Corporate Governance and Nominating Committee or referred by other Board members, management, shareholders or external sources.
In September 2009,November 2010, the Board of Directors re-approved a written Charter for the Corporate Governance and Nominating Committee which is available in the Investor Relations section of our website www.middlesexwater.comunder Corporate Governance. All of the members of the Corporate Governance and Nominating Committee have been determined by the Board to be independent directors as defined in the listing standards of NASDAQ.
Corporate Governance and Nominating Committee Process for Identifying and Evaluating Director Candidates
The Corporate Governance and Nominating Committee periodically identifies director nominees based primarily on recommendations from management, Board members, shareholders and other sources. The Committee recommends to the Boardboard nominees that are independent of management and satisfy SEC and NASDAQ requirements and possess qualities such as personal and professional integrity, sound business judgment, and utility, technical or financial expertise. The Committee also considers age and diversity (broadly construed to mean a variety of opinions, perspectives, personal and professional experiences and backgrounds, such as gender, race and ethnicity differences, as well as other differentiating characteristics) in making its recommendations for nominees to the full Board. Although the Committee has the authority to retain assistance in identifying and evaluating prospective candidates for nomination and election to the Board, the Committee does not currently employ an executive search firm or pay a fee to any other third party to locate qualified candidates for directordirection positions.
The Committee met during the first half of 20092010 to discuss and consider several candidates for Board membership in the Company. Ms. Amy B. Mansue was nominated based upon her background, qualifications and past experience, particularly in the area of finance and business management. Mr. Steven M. KleinJames Cosgrove was nominated based upon his background, qualifications and past experience, particularly in the area of finance.environmental engineering and science. At the June 2009August 2010 meeting of the Corporate Governance and Nominating Committee, there was a full discussion regarding Ms. Mansue and Mr. KleinCosgrove for Board candidacy. Following this full evaluation and discussion, the Committee unanimously voted to recommend to the full Board the addition of Ms. Mansue and Mr. KleinCosgrove as a membermembers of the Board. A discussion by the full Board at its June 2009August 2010 meeting led to Mr. Kleinthese individuals being unanimously approved as a directordirectors effective August 1, 2009.September 28, 2010.
Pension Committee
The Pension Committee held four meetings during 2009.2010. The Pension Committee reviews investment policies and determines recommended investment objectives for the Company’s Pension and Retiree Welfare Plans. The Committee also reviews the performance of the Company’s 401(k) Plan Administrator and reviews options offered in the Company’s 401(k) Plan.plan. The Committee meets quarterly with the Company’s outside Investment Managers. In January 2010,2011, the Board of Directors re-approved a written Charter for the Pension Committee which is available in the Investor Relations section of our website www.middlesexwater.comunder Corporate Governance.
Ad Hoc Pricing Committee
The ad hoc Pricing Committee did not meetheld one meeting in 2009.2010. The ad hoc Pricing Committee meets, as needed, to review financial matters including, but not limited to, the pricing and issuance of Common Stockcommon stock and corporate bonds. No written Charter for the Ad Hoc Pricing Committee exists at this time.
Board’s Role in Risk Oversight
The Board of Directors is made aware of risks to the Company through an ongoing Risk Management Program which is designed to identify, evaluate and control loss exposures that could affect the Company business, employees, and customers.
The goals of the Risk Management Program include the effective prevention, control and minimization of the adverse effects of known and predictable events through a centralized program; the building of a risk awareness culture; the development of a program that is transparent and ultimately anticipates and prevents problems before they occur. Risk categories focus on the brand and reputation of the Company; the health and safety of the Company’s employees;employees, and the business operations of the
enterprise. Potential risks as well as the corrective action and risk mitigation strategies are reviewed at the Executive Officer level.Officer. Risks and their associated mitigation strategies that require Board-level awareness are routinely reported to the Board of Directors.
Shareholder Proposals
In order to be eligible for inclusion in our proxy materials for our 20102011 Annual Meeting of Shareholders, any shareholder proposal must have been received by the Secretary of the Company, 1500 Ronson Road, Iselin, New Jersey 08830 no later than December 11, 2009.10, 2010. No shareholder proposals were received by the Company for the 20102011 Annual Meeting.
AdvanceAdvanced Notice of Business to be Conducted at an Annual Meeting of Shareholders.
For business to be properly brought before an Annual Meetingannual meeting by a shareholder, the business must be an appropriate matter to be voted by the shareholders at an Annual Meeting and the shareholder must have given proper and timely notice in writing to the Secretary of the Company at 1500 Ronson Road, P.O. Box 1500, Iselin, New Jersey 08830-0452.
Shareholders are entitled to submit proposals on matters appropriate for shareholder action consistent with regulations of the Securities and Exchange Commission. A shareholder’s notice to the Secretary must set forth as to each matter the shareholder proposes to bring before the Annual Meeting (a) a brief description of the business desired to be brought before the Annual Meeting and reasons for conducting such business at the Annual Meeting, (b) the name and address, as they appear on the Company’s books, of the shareholder proposing such business, (c) the class and number of shares of the Company which are beneficially owned by the shareholder and (d) any material interest of the shareholder in such business.
Director Candidate Recommendations and Nominations by Shareholders
The Corporate Governance and Nominating Committee will consider shareholders’ recommendations for nominees for election to the Board of Directors. Shareholder nominees will be evaluated under the same standards as nominees recommended by management or the non-management members of the board. 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. Recommendations should be sent to Middlesex Water Company, Office of the Corporate 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.kquinn@middlesexwater.com. In order to be considered for inclusion in the Company’s proxy statement and form of proxy relating to the 20102011 Annual Meeting of Shareholders, nominations for Director must have been received by the Company by the close of business on December 11, 2009.10, 2010. The Company did not receive any recommendations from any shareholders in connection with the 20102011 Annual Meeting.
Shareholder Communications with the Board
Any shareholder wishing to communicate with a Director may do so by contacting the Company’s Corporate Secretary, who will forward to the Director a written, e-mail, or phone communication. The Corporate Secretary has been authorized by the Board to screen frivolous or unlawful communications or commercial advertisements.
Code of Business Conduct
The Board of Directors has adopted a Code of Conduct that applies to all of our Directors, Officers and employees. This Code covers all areas of professional conduct, as well as strict adherence to all laws and regulations applicable to the conduct of our business. In addition, the Company has established an internal hotline where Code of Conduct violations may be reported.
The Company’s Code of Conduct as well as the charters for the Audit, Capital Improvement, Compensation, Corporate Governance and Nominating, and Pension Committees are available on our website www.middlesexwater.comunder the heading Investor Relations – (Corporate Governance). The foregoing information is available in print to any shareholder who requests it. Requests should be addressed 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.
DIRECTORS’ ANNUAL RETAINER AND MEETING FEES
For 2009,2010, Middlesex Water Company paid each of the Board members who are not employed by the Company (“outside Directors”) an annual retainer of $12,000. As a result of a study regarding director compensation conducted by Pearl Meyer & Partners, a national provider of compensation consulting services and survey data, effective July 1, 2008, the annual retainer of $12,000 was increased to $15,000 per annum, and the additional $3,000 per outside Director shall be in the form of Common Stock of the Company under the Outside Director Stock Compensation Plan. The first award of such stock took place in 2009. In addition, theMr. Tompkins, Chairman of the Board through May 25, 2010, received an annual retainer for his role as Chairman. Mr. Doll, current Chairman, receives no retainer and there was no change in his compensation as a Chairman’s retainer inresult of assuming the annual amountrole of $50,000.Chairman.
The Board meeting fees for outside Directors amounted to $900 per Director for each Board meeting attended. The Board meeting fee for Board members who are employed by the Company (“inside Directors”) amounted to $400 per meeting.
The Board committee meeting fees for outside Directors amounted to $750 per Director for each Board committee meeting attended. In the event that a Special Board or a Special Committee meeting via teleconference were to be held, the meeting fees for outside Directors are $400 and $200 per meeting, respectively.
Additionally, each Committee Chairperson is paid an annual fee which is generally paid in October of each year as follows:m the Audit Committee Chairperson retainer was $2,500; the Compensation Committee Chairperson retainer was $2,000; all other Committee Chairperson retainers were $1,500. The Chairman of
DIRECTOR COMPENSATION |
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) | Option Awards ($) | Non-equity Incentive Plan Compensation ($) | Change in Pension Value and Non- qualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) |
Annette Catino (1) | 30,250 | 3,000 | n/a | n/a | n/a | -- | 33,250 |
James Cosgrove, Jr. (2) | 8,350 | n/a | n/a | n/a | n/a | -- | 8,350 |
John C. Cutting | 43,700 | 3,000 | n/a | n/a | n/a | -- | 46,700 |
Steven M. Klein | 34,300 | 3,000 | n/a | n/a | n/a | -- | 37,300 |
Amy Mansue (3) | 9,100 | n/a | n/a | n/a | n/a | -- | 9,100 |
John R. Middleton, M.D. | 32,250 | 3,000 | n/a | n/a | n/a | -- | 35,250 |
John P. Mulkerin (4) | 13,250 | 3,000 | n/a | n/a | n/a | -- | 16,250 |
Walter G. Reinhard | 34,800 | 3,000 | n/a | n/a | n/a | -- | 37,800 |
Jeffries Shein | 35,300 | 3,000 | n/a | n/a | n/a | -- | 38,300 |
J. Richard Tompkins (5) | 49,133 | 3,000 | n/a | n/a | n/a | -- | 52,133 |
(1) Annette Catino resigned from the Board’s retainer remained unchanged.
Board effective October 26, 2010.
DIRECTOR COMPENSATION – 2009 |
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) | Option Awards ($) | Non-equity Incentive Plan Compensation ($) | Change in Pension Value and Non- qualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) |
Annette Catino | 30,750 | 3,000 | n/a | n/a | n/a | - | 33,750 |
John C. Cutting | 33,500 | 3,000 | n/a | n/a | n/a | - | 36,500 |
Steven M. Klein | 11,000 (1) | n/a (2) | n/a | n/a | n/a | - | 11,000 |
John R. Middleton, M.D. | 31,250 | 3,000 | n/a | n/a | n/a | - | 34,250 |
John P. Mulkerin | 33,250 | 3,000 | n/a | n/a | n/a | - | 36,250 |
Walter G. Reinhard | 31,800 | 3,000 | n/a | n/a | n/a | - | 34,800 |
Jeffries Shein | 31,400 | 3,000 | n/a | n/a | n/a | - | 34,400 |
J. Richard Tompkins | 75,050 | 3,000 | n/a | n/a | n/a | - | 78,050 |
(1)(2) Mr. KleinCosgrove was appointednamed to the Board effective August 1, 2009. HeSeptember 28, 2010.
(3) Amy Mansue was appointednamed to the Board effective September 28, 2010.
(4) Mr. Mulkerin retired from the Board, and as a memberAudit Committee Chair effective June 22, 2010.
(5) Mr. Tompkins retired as Chairman of the Audit Committee and Pension Committee at the Board meeting held September 21, 2009.
(2) Mr. Klein was not eligible in 2009 to receive the portion of the annual retainer paid in the form of Common Stock.
May 2010. Note: Dennis W. Doll, who is also a director, does not appear inon this table since his director compensation appears in the “All Other Compensation” column of the Summary Compensation Table.
SECURITY OWNERSHIP OF DIRECTORS, MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of March 29, 2010,31,2011, 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 2.15%1.91% of the shares outstanding as of March 29, 2010.31, 2011. All other individual elected Directors and Executive Officers owned less than 1% of the shares outstanding on March 29, 2010.31, 2011.
| Amount and Nature |
| of Beneficial |
Name | Ownership(1) |
Directors | |
Annette Catino Catino* | 8,945 9,215 |
James Cosgrove, Jr. | 0 |
John C. Cutting | 36,833 37,010 |
Steven H.M. Klein | 600 777 |
Amy B. Mansue | 0 |
John R. Middleton, M.D. | 7,492 7,998 |
John P. Mulkerin Mulkerin* | 25,222 25,399 |
Walter G. Reinhard | 3,052 3,598 |
Jeffries Shein | 291,726 298,161 |
J. Richard Tompkins | 42,839 34,262 |
| |
Named Executive Officers | |
Dennis W. Doll | 24,141 27,593 |
James P. Garrett | 6,553 |
A. Bruce O’Connor | 35,544 37,166 |
Kenneth J. Quinn | 6,812 7,244 |
Richard M. Risoldi | 14,897 15,510 |
Ronald F. Williams
| 23,482
|
All elected Directors and Executive Officers as a | |
group including those named above. | 543,836* 528,067** |
* Ms. Catino and Mr. Mullkerin are on longer Directors and the shares reported for each reflect their holdings as of December 31, 2010.
* 4.01%* 3.39% of the shares outstanding on March 29, 2010.31, 2011.
(1) Beneficial owner has the sole power to vote and dispose of such shares.
Section 16(a) Beneficial Ownership Reporting Compliance
Under Section 16 of the Securities Exchange Act of 1934, Executive Officersofficers and Directors,directors, and certain beneficial owners of the Company’s equity securities are required to file reports of ownership and changes in ownership with the SEC on specified due dates.
Based solely on a review of the copies of these reports furnished to us, we believe that all filing requirements applicable to such Executive Officersofficers and Directorsdirectors (we are not aware of any five percent holder) were complied with during fiscal year 2009.2010.
Other Security Holders
The following table sets forth as of March 29, 2010,31, 2011, certain information with respect to the beneficial ownership of shares of Common Stock by each person or group we know to beneficially own more than five percent of the outstanding shares of such stock.
Name and Address of Beneficial Owners | Number of Shares | Percent of Class |
BlackRock, Inc. | | |
40 East 52nd Street | | |
New York, NY 10022 | 1,089,451(1) | 7.0% |
| | |
The Vanguard Group, Inc. | | |
100 Vanguard Blvd. | | |
Malvern, PA 19355 | 777,573(2) | 5.0% |
Name and Address of Beneficial Owners | Number of Shares | Percent of Class |
BlackRock, Inc | | |
40 East 52nd Street | | |
New York, NY 10022 | 823,131(2) | 6.1% |
(1) This information is based on a Schedule 13G filed with the SEC on January 21, 2011 by BlackRock, Inc. (2) This information is based on thea Schedule 13G filed with the SEC on February 9, 2011 by BlackRock,The Vanguard Group, Inc. on January 29, 2010.
CHANGES RELATING TO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
On October 1, 2009 the Company was notified that the audit practice of Beard Miller Company LLP (“Beard”), our independent registered public accounting firm, was combined with another public accounting firm, Parente Randolph, LLC on October 1, 2009 with the resulting combined entity known as ParenteBeard LLC (“ParenteBeard”). On October 1, 2009, Beard resigned as the auditors of the Company and with the approval of the Audit Committee of the Company’s Board of Directors, ParenteBeard was appointed and engaged to act as the Company’s independent registered public accounting firm effective October 1, 2009 for the year ended December 31, 2009.
Prior to engaging ParenteBeard, the Company did not consult with ParenteBeard regarding the application of accounting principles to a specific completed or contemplated transaction or regarding the type of audit opinions that might be rendered by ParenteBeard on the Company’s financial statements, and ParenteBeard did not provide any written or oral advice that was an important factor considered by the Company in reaching a decision as to any such accounting, auditing or financial reporting issue.
The Report of the Independent Registered Public Accounting Firm of Beard regarding the Company’s financial statements for the fiscal years ended December 31, 2008 and 2007 did not contain any adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. During the years ended December 31, 2008 and 2007, and during the interim period from the end of the most recently completed fiscal year through October 1, 2009 the date of resignation, there were no disagreements with Beard on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of Beard would have caused it to make reference to such disagreement in its reports.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors is composedcomprised of fivefour independent directors, one of whom is designated by the Board as the “Audit Committee Financial Expert,” as defined by the Securities and Exchange Commission. TwoOne other directorsAudit Committee member also qualifyqualifies as an Audit Committee Financial Expert although they weresuch member has not been designated as such by the Board. The Committee for the year 20092010, was composedinitially comprised of: Annette Catino, John C. Cutting, Steven M. Klein, John R. Middleton, M.D. and John P. Mulkerin. Steven M.Mr. Mulkerin resigned from the Board of Directors and as Audit Committee Chair in June 2010. Mr. Klein was then simultaneously appointed Audit Committee Chair and designated as the Audit Committee Financial Expert. Annette Catino resigned from the Board in October 2010. Amy B. Mansue joined the Board in September 2010, and was appointed to the Audit Committee in September 2009.November 2010. The Audit Committee operates under a written Charter adopted by the Board of Directors andwhich is reviewed and adopted annually by the Committee and the Board of Directors. The Charter is available on the Company’s website at www.middlesexwater.com.
On October 1, 2009 the Company was notified that the audit practice of Beard Miller Company LLP (“Beard”), our independent registered public accounting firm, was combined with another public accounting firm, Parente Randolph, LLC on October 1, 2009 with the resulting combined entity known as ParenteBeard LLC (“ParenteBeard”). On October 1, 2009, Beard resigned as the auditors of the Company. The Audit Committee appointed and engaged ParenteBeard LLC to act as the Company’s independent registered public accounting firm effective October 1, 2009 for the year ended December 31, 2009.www.middlesexwater.com.
Management is responsible for the Company’s financial statements and internal controls. The Company’s independent accountants, ParenteBeard LLC, are responsible for performing an independent audit of the Company’s annual consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB) (United States) 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, in addition, the Committee has met and held discussions with management and the independent accountants.accountants without management present. 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 the PCAOB, which include, among other things:
• The initial selection of, as well as changes in, significant accounting policies or their application;
• The process used by management in formulating accounting estimates and the basis for the auditors’auditors' conclusions regarding the
reasonableness of these estimates;
• Critical accounting policies;
• Methods used to account for significant transactions;
• Disagreements, if any, with management over the application of accounting principles;
• 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 Company and its management. The Committee has the sole authority to pre-approve permitted non-audit Company services performed by the independent accountants and 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, 2009,2010, for filing with the Securities and Exchange Commission.
The Committee also discussed with 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 20102011 Audit Committee |
| John P. Mulkerin,Steven M. Klein, Chairman
|
| Annette Catino
|
| John C. Cutting |
| Steven M. Klein Amy B. Mansue |
| John R. Middleton, M.D. |
PROPOSAL 2
RATIFICATION OF APPOINTMENT BY THE AUDIT COMMITTEE OF
THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The shares represented by the proxies will be voted for ratification of the appointment by the Audit Committee of ParenteBeard LLC, as our independent registered public accounting firm, to issue a report to the Board of Directors and shareholders on our financial statementstatements for the fiscal year ending December 31, 2010.2011.
Although submission of the appointment of an independent registered public accounting firm to shareholders for ratification is not required by law or regulation, the Board is submitting the selection of an independent registered public accounting firm for shareholder ratification. Under the Sarbanes-Oxley Act of 2002 and the rules of the SEC promulgated thereunder, the Audit Committee is solely responsible for the appointment, compensation and oversight of the work of our independent registered public accounting firm. Representatives of ParenteBeard, LLC are expected to be present at the Annual Meeting and will be afforded an opportunity to make a statement, if they so desire, and to respond to appropriate questions.
The affirmative vote of a majority of the votes cast by shareholders in person or represented by proxy, at the Annual Meeting is required for the approval of this Proposal. The Board has not determined what action it would take if the shareholders do not approve the selection of ParenteBeard LLC, but may reconsider the selection if the shareholders’ action so warrants. Even if the selection is ratified, the Audit Committee, exercising its own discretion, may select different auditors at any time during the year if it determines that such a change would be in the Company’s best interests and in the best interests of shareholders.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE
FOR THE RATIFICATION OF THE APPOINTMENT OF PARENTEBEARD LLC.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES
ParenteBeard LLC has been approved and appointed by the Audit Committee as the Company’s independent registered public accounting firm. Aggregate fees billed to the Company for the years ending December 31, 20092010 and 20082009 by ParenteBeard LLC are as follows:
| | Year Ended December 31, | |
| | 2010 | | | 2009 | |
Audit Fees {a} | | $ | 379,630 | | | $ | 325,315 | |
Audit-Related Fees | | | - | | | | - | |
Total Audit and Audit-Related Fees | | $ | 379,630 | | | $ | 325,315 | |
Tax Fees {b} | | $ | 20,000 | | | $ | 17,500 | |
All Other Fees | | | - | | | | - | |
Total Fees | | $ | 399,630 | | | $ | 342,815 | |
| | | | | | | | |
| | Year Ended December 31, | |
| | 2009 | | | 2008 | |
Audit Fees {a} | | $ | 325,315 | | | $ | 330,200 | |
Audit-Related Fees | | | - | | | | - | |
Total audit and audit-related fees | | $ | 325,315 | | | | 330,200 | |
Tax Fees {b} | | $ | 17,500 | | | $ | 14,350 | |
All Other Fees | | | - | | | | - | |
Total Fees | | $ | 342,815 | | | $ | 344,550 | |
{a} | 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. In addition, the above audit fees include fees incurred for certain financing transactions as well as assistance with and review of documents filed with the SEC. |
{b} | Tax fees were incurred for the preparation of the Company’s tax returns. |
{a} In 2009 and 2008, 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. In 2009, the audit fees include $8,815 for services rendered in connection with the issuance of consents on Forms S-3 and a Securities and Exchange Commission comment letter response. In 2008, the audit fees include $4,025 for services rendered in connection with the issuance of a Consent on Form S-8 and an amended Form 10-Q.
{b} Includes 2009 and 2008 fees for the preparation of tax returns of $17,500 and $14,350, respectively.
The Company paid Withum Smith + Brown LLP $22,570 and $21,600 in fees during 2009 and 2008, respectively, for the 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 ParenteBeard LLC. The Audit Committee approves 100% of the services related to Audit Fees, Audit-Related Fees, Tax Fees and All Other Fees in excess of $5,000.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the section entitled “Compensation Discussion and Analysis” included in this Proxy Statement with management.Statement. Based on this review and discussion, the Compensation Committee recommended to the Board of Directors that the “Compensation Discussion and Analysis” be included in our Proxy Statement. The members of the Compensation Committee for 2010 are: Jeffries Shein, who serves as Chair; Annette Catino;Steven M. Klein, Amy B. Mansue, and John R. Middleton, M.D. and Steven M. Klein, who became a member effective January 1, 2010.
COMPENSATION DISCUSSION AND ANALYSIS
Persons Covered.This discussion and analysis addresses compensation for 2009 for2010 of the following executive officers: Dennis W. Doll, President and Chief Executive Officer; A. Bruce O’Connor, Vice President and Chief Financial Officer; Ronald F. Williams, Vice President and Chief Operating Officer; Richard M. Risoldi, Vice President – Subsidiary Operations–Operations and Chief Operating Officer; Kenneth J. Quinn, Vice President – General Counsel and Corporate Secretary.Secretary and Treasurer and James P. Garrett, Vice President – Human Resources. These five executives are referred to in this discussion as the “Named Executive Officers.” Mr. Williams retired from the Company effective January 1, 2010. See “Committee Actions During 2009 Affecting 2010 Compensation, and Other Actions by the Committee.”
Executive Summary. A primary objective of our executive compensation program is to align the interests of our senior leadership with those of our customers and shareholders. The key components of the Company’s compensation program are designed, augmented and modified, as appropriate, to ensure that we attract and retain qualified executive talent, and appropriately reward performance. We strive to create a compensation program that provides adequate balance between shorter- and longer-term performance. Our 20092010 compensation program included competitively benchmarked base salaries and a formal long-term annual equity incentive-basedincentive compensation program in the form of restricted common stock linked to, among other things, the Company’s strategic objectives. Notwithstanding unprecedented challenges in national and global economies and financial markets, the Company’s total shareholder return in 2009 marginally exceeded the average total shareholder return of its peers. The Company has remainedremains committed to itsa disciplined and balanced approach to meeting the short- and long-term needs of its customers, shareholders and employees and utilizesemployees. This compensation philosophy is consistent with the same philosophy in designing aCompany’s overall approach to risk management. The Company’s formal risk management program seeks to mitigate, transfer or eliminate risk while simultaneously maximizing opportunity for shareholders. The Company’s compensation program that is aligned with effective risk management.seeks to achieve an appropriate balance among all these objectives and therefore, does not encourage or reward inappropriate risk-taking.
Role of the Compensation Committee.The Compensation Committee of the Board of Directors is responsible for making recommendations to the full Board of Directors with respect to the compensation of the Named Executive Officers, including the Chief Executive Officer. As part of these duties, the Committee administers the Company’s equity-based incentive compensation plan and conducts an annual performance review of the Chief Executive Officer and, in consultation with the Chief Executive Officer, reviews the performance of the other Named Executive Officers. The Board of Directors has ultimate authority to determine the compensation of all Named Executive Officers, including the Chief Executive Officer.
The Compensation Committee has a formal charter that describes the Committee’s scope of authority and its duties. The Compensation Committee for 2010 consists of four Directors, all of whom are “independent” as set forth in the listing requirements for NASDAQ Global Select securities. The Corporate Governance and Nominating Committee of the Board of Directors evaluates the independence of Committee members at least annually, using the standards contained in the NASDAQ Global Select listing requirements. This evaluation, and the determination that each member of the Committee is independent, was made most recently in February 2010.2011.
Role of Executives in Compensation Committee Activities.The executive officers who serve as a resource to the Compensation Committee are the Chief Executive Officer and the Vice President-Human Resources. These executives provide the Compensation Committee with input regarding employeemarket-based compensation philosophy, processes and decisionsrestricted stock awards for eligible employees other than Named Executive Officers. This communication assists in the design and alignment of incentive programs for eligible employees throughout the Company. In addition to providing factual information such as company-wide performance on relevant measures, these executives articulate management’s views on current compensation programs and processes, recommend relevant performance measures to be used for future evaluations and otherwise supply information to assist the Compensation Committee. The Chief Executive Officer also provides information about individual performance assessments for the other Named Executive Officers, and expresses to the Compensation Committee his views on the appropriate levels of compensation for the other Named Executive Officers for the ensuing year. At the request of theOfficers. The Compensation Committee the Vice
President-Human Resources communicates directly with third-party consultants, providing third-party consultants with Company-specific data and information. Certain portions of such information andmay be provided by the Vice President-Human Resources or the Chief Executive Officer, in assisting in the evaluation of the estimated financial effect regarding any proposed changes to the various components of compensation.
Executives participate in Committee activities purely in an informational and advisory capacity and have no vote in the Committee’s decision-making process. The Chief Executive Officer and Vice President-Human Resources do not attend those portions of Compensation Committee meetings during which their performance is evaluated or their compensation is being determined. No executive officer other than the Chief Executive Officer attends those portions of Compensation Committee meetings during which the performance of the other Named Executive Officers is evaluated or their compensation is being determined. In addition, the Compensation Committee meets in executive session as it considers appropriate.
Use of Consultants.The Compensation Committee periodically engages qualified independent compensation consultants to assist it in the compensation process for Named Executive Officers. The consultants are retained by, and report directly to, the Compensation Committee. The Compensation Committee places no restrictions on consultants within the scope of contracted services and such consultants are not engaged by management for any purpose. The consultants provide expertise and information about competitive trends in the employment marketplace, including established and emerging compensation practices at other companies.companies both inside and outside the utilities industry. The consultants also provide proxy statement and survey data, and assist in assembling relevant comparison groups for various purposes andgroups. In addition, they also assist in establishing benchmarks for base salary and incentives from the comparison group proxy statement and survey data.
For 2009,In determining compensation for the CompensationNamed Executive Officers in 2010, the Committee evaluatedrelied on data from a comprehensive review presented in December 2007, for Named Executive Officer compensation,which was performed by Pearl Meyer & Partners. Such study is in the process of being updated in 2011 by a different firm whose expertise is national in scope. To the extent any of the results of the study that is currently in progress are ultimately implemented in 2011, such changes will be appropriately reflected in the Compensation Committee Report in the 2012 Proxy Statement.
Compensation Objectives and Philosophy. The overall objectives of the Company’s compensation program are to retain, motivate, and reward employees and officers (including the Named Executive Officers) for short- and long-term performance, and to provide competitive compensation to attract appropriate executive talent to the Company. The methods used to achieve these goals for Named Executive Officers are influenced by the compensation and employment practices of our peers and competitors within the utilities industry, and elsewhere in the marketplace, for executive talent.marketplace. Other considerations include each Named Executive Officer’s individual performance in achieving both financial and non-financial corporate goals.
Our compensation program is designed to reward the Named Executive Officers based on their level of assigned management responsibilities, individual experience and performance levels and their knowledge and management of the Company’s operations. The creation of long-term value is highly dependent on the development and effective execution of our business strategy by our executive officers.
| Factors that influence the design of our executive compensation program include, among other things, the items listed below: |
We operate primarily in a highly regulated utility industry, with regard to both the environment, service levels and the rates for utility services that are charged to our customers. We value industry-specific experience that promotes safe, proper and reliable utility services for our customers.
We value our executives’ ability to appropriately balance the short- and long-termlong term needs of our customers, our employees and our shareholders. We seek to not only provide safe, proper and reliable utility services on a current basis for our customers, but we also plan and execute strategies that ensure the sustainability of critical utility services into the future. In addition, we simultaneously seek to provide financial returns for our shareholders that appropriately reflect the risks and opportunities that are inherent in meeting the short-and long-term needs of our customers, and that are inherent in the provision of our utility services.
We value our executives’ ability to attract, retain and continually develop a workforce that ensures critical technical and management skills are maintained in sufficient quantity and quality.
Our 20092010 compensation program for our Named Executive Officers includesincluded three key components. The first component is base salary. The second is an equity-based long-term incentive plan in the form of restricted common stock and the third is certain benefits and perquisites at levels that are competitive in the marketplace and appropriate for the roles of the Named Executive Officers.
Assembling the Components of Compensation.The Compensation Committee analyzes the level and relative mix of executive compensation by component (e.g., base salary, incentives, and benefits) and in the aggregate. The Chief Executive
Officer provides recommendations to the Committee relating to compensation to be paid to the Named Executive Officers other than himself. Based on this analysis, the Compensation Committee challenges and approves each Named Executive Officer’s compensation, subject to ratification by the full Board of Directors.
When evaluating the components comprising total compensation, the Compensation Committee considers among other things, general market practices and the alignment of incentive awards with our strategic objectives and Company performance. The Compensation Committee seeks to create appropriate incentives without encouraging behaviors that result in inappropriate risk. These components are periodically evaluated in relation to benchmark data derived from information reported in publicly- availablepublicly-available proxy statements and from market survey data.
Base Salary. Base salary is designed to provide a reasonable level of predictable income commensurate with market standards of the position held, adjusted for specific job responsibilities assigned, individual experience and demonstrated performance. Named Executive Officers are eligible for periodic adjustments to their base salary based on these factors. The Compensation Committee reviews and approves any base salary changes for Named Executive Officers, including ourthe Chief Executive Officer. The Compensation Committee generally seeks to undertake a comprehensive review of the compensation structure approximately every three years.
Base salary amounts for 2009 were determined based on a review of peer proxy and survey data provided by Pearl Meyer & Partners in December 2007, updated by the Company using peer group proxy data and reflecting our current knowledge of market conditions. The Compensation Committee has generally established the 50th percentile of peer proxy and survey data as the targeted base compensation level, with adjustments made upwards or downwards for each Named Executive Officer’s specific experience, responsibilities and performance, estimated value in the marketplace and the Committee’s view of each Named Executive Officers’ role in the future success of the Company. Subject to consideration of the significant experience, contributions, and performance of each Named Executive Officer, their value in the marketplace and their critical roles in the future successes of the Company, it is intended to target the base salary level of each Named Executive Officer at the 50th percentile of peer proxy and survey data. Base salariessalary increases of no more than 2.8% were adjusted in 2008 in two increments, at six-month intervals, in connection with the goalawarded to move further toward the 50th percentile target. Despite the intent to continue to manage base salaries toward this target level, in light of general macro-economic conditions during 2009, the Compensation Committee made a determination not to change base salaries for any of the Named Executive Officers in 2009.April 2010, with the exception of Mr. Risoldi. With the promotion of Mr. Risoldi to the position of Vice President-Operations and Chief Operating Officer, effective January 1, 2010, Mr. Risoldi was awarded an increase in annual salary of $12,700, effective April 1, 2010 and an additional amount, based on performance, of $7,500, effective July 1, 2010.
Incentives.The Company does not have any plan or program that provides for cash or other form of short-term incentive compensation for Named Executive Officers. The Company does have a long-term incentive plan in the form of restricted Company Common Stockcommon stock (the Restricted Stock Plan). Awards under this plan are considered on an annual basis and are intendedbased on the achievement of certain goals in the preceding calendar year. The Restricted Stock Plan is designed to motivatecompensate the Named Executive Officers to executefor executing specific financial and non-financial elements of our business plan. The target award is 15% of base salary and is comprised of a single corporate financial goal, in addition to one or more individual non-financial performance goals. The financial corporate goal for 20092010 was budgeted Income Before Income Taxes. The corporate financial goal comprised 60% of the target award for Named Executive Officers other than the President and Chief Executive Officer, whose corporate financial goal comprised 80% of his target award. In order to be eligible for any level of award related to the corporate financial goal, threshold financial performance of at least prior year Income Before Income Taxes must generally be met. The remaining portion of the target award for all Named Executive Officers is based upon the level of achievement of the individual non-financial performance goals. The non-financial individual performance goals are intended to motivate the Named Executive Officers to implement operational, technical, management and other initiatives that benefit the Company’scompany’s customers, shareholders and employees, and which require effort above and beyond what would normally be required as part of the Named Executive Officer’s base job responsibilities. The personal performance goals generally also contain elements that are strategic in nature in a competitive environment.
The Compensation Committee evaluates the reasonableness and likelihood of attaining designated incentive goals in an effort to ensure that such targets appropriately reward performance, but do not encourage inappropriate risk taking or compromises in the quality of service to the Company’s customers. Actual performance during the applicable measurement period may exceed or fall short of the targets resulting in the Named Executive Officer receiving an annual incentive award that is above or below the initial targeted level. Annual incentive awards granted in prior years are not taken into account by the Compensation Committee in the process of setting performance targets, or in evaluating achievements, for the current year.
In evaluating actual performance as compared to the established corporate financial goal, the Compensation Committee may, at its discretion, exclude items that are considered non-recurring in nature. In addition, the Compensation Committee may increase or decrease a Restricted Stock award based upon its additional consideration of a Named Executive Officer’s performance or achievements.
In February 2010, the Compensation Committee evaluated achievement of the corporate financial goal.goal for 2009. The Compensation Committee evaluated actual 2009 Net Income Before Income Taxes and determined that there were no non-recurring items in
2009 that should be considered in the determination of the level of achievement of the 2009 corporate financial goal. Based on the Company’s reported 2009 Net Income Before Income Taxes, the Compensation Committee determined that threshold financial performance was not met in 2009 and therefore, no awards were not made to the Named Executive Officers related to the 2009 corporate financial goal. Detailed explanation of the factors contributing to 2009 financial performance iswere articulated in our Annual Report to Shareholders under the heading “Management’sManagement’s Discussion and Analysis of Financial Condition and Results of Operations”.
Operations in our 2009 Annual Report to Shareholders. Separately, the Compensation Committee also evaluated the level of achievement of the personal performance goals relative to the contribution to the various strategic, competitive, operational and management objectives referenced above.
Broad-based Benefits. We also provide to our Named Executive Officers certain broad-based benefits available to all qualifying employees of the Company, as well as fringe benefits and perquisites, not generally available to all qualifying employees of the Company.
The following summarizes the significant broad-based benefits in which the Named Executive Officers were eligible to participate in 2009:2010:
A defined benefit pension plan
A defined contribution 401(k) retirement plan
Medical insurance coverage (employees(all employees share in the cost of such coverage)
Disability insurance coverage
Group life insurance coverage (premiums associated with coverage above $50,000 are reported as taxable income to all eligible employees)employees per Internal Revenue Service regulations)
Executive Benefits and Perquisites. In addition to the broad-based benefits described above, the Named Executive Officers received the following fringe benefits and perquisites in 2009:2010:
Use of a company-owned vehicle. The cost of operation and maintenance of such vehicles is borne by the Company. The value of any personal use of such vehicle is reported as taxable income to the Officerexecutive
Use of a company-owned cellular telephone generally for business purposes
Group life insurance coverage of 1.5x base salary (amount in excess of coverage generally available to all employees, for which premiums are reported as taxable income to the executive)
Supplemental Executive Retirement Plan
The Compensation Committee reviews the other components of executive compensation (broad-based benefits(benefits and executive perquisites) on an annual basis. Changes to the level or types of broad-based benefits within these categories, including considerations relating to the addition or elimination of benefits and plan design changes, are made by the Compensation Committee on an aggregate basis with respect to the group of employees entitled to those benefits, and not necessarily with reference to a particular Named Executive Officer’s compensation. Decisions about these components of compensation are made without reference to the Named Executive Officers’ salary and annual cash incentives, as they involve issues of more general application and often include consideration of trends in the industry or in the employment marketplace.
Employment Agreements. The Company does not have any employment agreements with any of the Named Executive Officers.
Supplemental Executive Retirement Plan (SERP).The Company’s seven Executive Officers including the five Named Executive Officers, are eligible to participate in a non-qualified Supplemental Executive Retirement Plan (SERP) at the discretion of the Board of Directors. A participant, who retires on their normal retirement date, as defined in the SERP, is entitled to an annual retirement benefit of up to 75% of compensation, generally reduced by the primary social security benefit, and further reduced by any benefit payable from the Company’s qualified defined benefit pension plan. Further reductions are made for certain retirement benefits from prior employment, where such benefits have accrued. The maximum annual retirement benefit to which Mr. Quinn and Mr. Garrett may be entitled is 50% of compensation. Offsetting amounts related to Social Security and other benefit plans are calculated similarly for all Named Executive Officers. Generally, a participant is vested at ten (10) years of service in the case of retirement, and in the event of a Change in Control, as described further herein. A participant’s right to receive benefits under the SERP generally commences upon retirement or death, and in connection with a Change in Control, upon termination under the circumstances described in the SERP.
Annual benefits are generally payable upon achieving normal retirement, for fifteen (15) years, either to the participant or the participant’s spousal beneficiary. Retirement benefits may also be in the form of a single life annuity, joint and 50% survivor’s annuity, joint and 100% survivor’s annuity, single life annuity with a ten (10) year certain period or single life annuity with a fifteen (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 SERP, except that upon a Change in Control, the Company would be obligated to make contributions to a trust anticipated to be sufficient to meet the obligations under the SERP. Absent a Change in Control, benefits are in the form of an unfunded general obligation of the Company.
Exceptions to Usual Procedures.The Compensation Committee may recommend to the full Board of Directors that they approve the payment of special cash compensation to one or more Named Executive Officers, in addition to payments approved during the normal annual compensation-setting cycle. The Committee may make such a recommendation if it believes it would be appropriate to reward one or more Named Executive Officers in recognition of contributions to a particular project, or in response to competitive and other factors that were not addressed during the normal annual compensation-setting cycle or, that may have changed since the normal annual compensation-setting cycle. The Compensation Committee did not make any such recommendation related to any Named Executive Officers for 2009.during 2010.
The Committee may also make off-cycle compensation decisions and recommendations when a current employee is promoted to executive officer status, or an executive officer is hired. The Committee may depart from the compensation guidelines it would normally follow for executives in the case of outside hires.
Committee Actions During 2009 Affecting 2010 Compensation, and Other Actions by the Committee. In February 2009, the Compensation Committee made a determination that Named Executive Officers’ base salaries would remain unchanged in 2009. | Year 2011 Compensation Committee |
| Jeffries Shein, Chairman |
| Steven M. Klein |
| Amy B. Mansue |
| John R. Middleton, M.D. |
In connection with the retirement of Mr. Williams at the end of 2009, the Compensation Committee underwent a process to evaluate the options to replace Mr. Williams skills. It was determined that Mr. Risoldi was qualified to fill this role and it was recommended by the Compensation Committee, and approved by the Board of Directors, that Mr. Risoldi would be promoted to the position of Vice President - Operations & Chief Operating Officer effective January 4, 2010 and that his base salary would increase $15,000 to $191,200 effective as of that date.
All Compensation Committee actions taken are reviewed by the full Board of Directors for their ratification.
SUMMARY COMPENSATION TABLE |
| | | | | | | (2) Change in | | |
| | | | | | | Pension Value and | | |
| | | | | | | Non-Qualified | | |
| | | | | | Non-equity | Deferred | (3) | |
| | | | (1) Stock | Option | Incentive Plan | Compensation | All other | |
Name and | | Salary | Bonus | Awards | Awards | Compensation | Earnings | Compensation | Total |
Principal Position | Year | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) |
Dennis W. Doll, | 2009 | 370,200 | n/a | 47,204 | n/a | n/a | 14,998 | 26,744 | 459,146 |
President and | 2008 | 352,574 | n/a | 43,354 | n/a | n/a | 11,080 | 23,139 | 430,147 |
Chief Executive Officer | 2007 | 326,746 | n/a | 42,230 | n/a | n/a | 9,943 | 18,613 | 397,532 |
A. Bruce O’Connor, | 2009 | 212,500 | n/a | 28,694 | n/a | n/a | 27,571 | 16,854 | 285,619 |
Vice President and | 2008 | 204,316 | n/a | 26,884 | n/a | n/a | 26,318 | 17,347 | 274,865 |
Chief Financial Officer | 2007 | 195,116 | n/a | 28,001 | n/a | n/a | 23,816 | 15,385 | 262,318 |
Ronald F. Williams, | 2009 | 203,850 | n/a | 25,022 | n/a | n/a | 197,796 | 18,857 | 445,525 |
VP - Operations and | 2008 | 191,906 | n/a | 16,919 | n/a | n/a | 40,373 | 17,411 | 266,609 |
Chief Operating Officer | 2007 | 186,419 | n/a | 17,171 | n/a | n/a | 37,389 | 15,088 | 256,067 |
Richard M. Risoldi, | 2009 | 176,300 | n/a | 26,442 | n/a | n/a | 30,844 | 16,333 | 249,919 |
VP – Subsidiary | 2008 | 171,464 | n/a | 21,539 | n/a | n/a | 26,704 | 15,745 | 235,452 |
Operations | 2007 | 165,181 | n/a | 24,257 | n/a | n/a | 23,518 | 14,533 | 227,489 |
Kenneth J. Quinn, | 2009 | 162,000 | n/a | 24,297 | n/a | n/a | 25,026 | 17,963 | 229,286 |
VP, General Counsel, | 2008 | 156,222 | n/a | 20,379 | n/a | n/a | 27,756 | 17,335 | 221,692 |
Secretary and Treasurer | 2007 | 149,646 | n/a | 18,966 | n/a | n/a | 22,528 | 13,345 | 204,485 |
SUMMARY COMPENSATION TABLE |
Name and Principal Position | Year | Salary ($) | Bonus ($) | (1) Stock Awards ($) | Option Awards ($) | Non-equity Incentive Plan Compensation ($) | (2) Change in Pension Value and Non-Qualified Deferred Compensation Earnings ($) | (3) All other Compensation ($) | Total ($) |
Dennis W. Doll, | 2010 | 377,565 | n/a | -- | n/a | n/a | 216,959 | 28,643 | 623,167 |
Chairman, President and | 2009 | 370,200 | n/a | 47,204 | n/a | n/a | 14,998 | 26,744 | 459,146 |
Chief Executive Officer | 2008 | 352,574 | n/a | 43,354 | n/a | n/a | 11,080 | 23,139 | 430,147 |
A. Bruce O’Connor, | 2010 | 216,734 | n/a | 7,972 | n/a | n/a | 194,293 | 18,007 | 437,006 |
Vice President and | 2009 | 212,500 | n/a | 28,694 | n/a | n/a | 27,571 | 16,854 | 285,619 |
Chief Financial Officer | 2008 | 204,316 | n/a | 26,884 | n/a | n/a | 26,318 | 17,347 | 274,865 |
Richard M. Risoldi | 2010 | 203,279 | n/a | 3,969 | n/a | n/a | 135,110 | 17,367 | 359,725 |
Vice President-Operations | 2008 | 176,300 | n/a | 26,442 | n/a | n/a | 30,844 | 16,333 | 249,919 |
and Chief Operating Officer | 2008 | 171,464 | n/a | 21,539 | n/a | n/a | 26,704 | 15,745 | 235,452 |
Kenneth J. Quinn, | 2010 | 165,238 | n/a | 7,296 | n/a | n/a | 172,219 | 18,793 | 363,546 |
VP, General Counsel, | 2009 | 162,000 | n/a | 24,297 | n/a | n/a | 25,026 | 17,963 | 229,286 |
Secretary and Treasurer | 2008 | 156,222 | n/a | 20,379 | n/a | n/a | 27,756 | 17,335 | 221,692 |
James P. Garrett | 2010 | 165,245 | n/a | 7,296 | n/a | n/a | 56,281 | 18,815 | 247,637 |
Vice President – | 2009 | 159,927 | n/a | 20,837 | n/a | n/a | 40,049 | 18,076 | 238,889 |
Human Resources | 2008 | 150,014 | n/a | 17,525 | n/a | n/a | 43,511 | 16,115 | 227,165 |
(1) The amounts in this column reflect the value of restricted stock awards made on October 1, 2009,2010, October 1, 20082009 and October 1, 2007,2008, respectively. Under the Restricted Stock Plan, however, these awards generally do not vest to the participants until the expiration of five years from the date of such award. During such five-year period, the participants have contingent ownership of such shares, including the right to vote the same and to receive dividends thereon.
(2) The change in the amount of this non-cash item from 2009 to 2010 is driven primarily by a change in the discount rate applied to calculate the present value of future pension payments and a change to an updated mortality table used in the actuarial calculation of accumulated pension benefits. The Company does not have any non-qualified deferred compensation plans or related earnings.
(3) The detail of “All Other Compensation” recognized for the benefit of the Named Executive Officers is set forth on Schedule A, as supplemental information to the Summary Compensation Table.
SCHEDULE - A SUMMARY - ALL OTHER COMPENSATION |
| | | | (4) | | (4) | | | |
| | Dividends on | Personal | Group Term | | 401(K) - | | | Total - |
| | Restricted | Automobile | Life Insurance | Board | Employer | Club | Spouse | All Other |
| | Stock | Use | Premiums | Fees | Match | Dues | Travel | Compensation |
Name | Year | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) |
Dennis W. Doll | 2009 | 5,206 | 3,116 | 2,928 | 5,700 | 8,575 | — | 1,219 | 26,744 |
President and | 2008 | 3,263 | 3,070 | 2,408 | 4,800 | 8,050 | — | 1,548 | 23,139 |
Chief Executive Officer | 2007 | 1,633 | 3,070 | 792 | 4,800 | 7,700 | — | 618 | 18,613 |
A. Bruce O’Connor | 2009 | 5,145 | 2,621 | 1,622 | — | 7,466 | — | — | 16,854 |
Vice President and | 2008 | 5,275 | 2,683 | 1,335 | — | 7,161 | — | 893 | 17,347 |
Chief Financial Officer | 2007 | 4,859 | 2,683 | 437 | — | 6,829 | — | 577 | 15,385 |
Ronald F. Williams | 2009 | 3,824 | 3,493 | 4,432 | — | 7,108 | — | — | 18,857 |
VP - Operations and | 2008 | 4,095 | 3,289 | 2,322 | — | 6,716 | — | 989 | 17,411 |
Chief Operating Officer | 2007 | 4,090 | 3,289 | 1,185 | — | 6,524 | — | — | 15,088 |
Richard M. Risoldi | 2009 | 4,225 | 4,589 | 1,322 | — | 6,197 | — | — | 16,333 |
VP - Subsidiary | 2008 | 3,888 | 4,589 | 1,096 | — | 6,012 | — | 160 | 15,745 |
Operations | 2007 | 3,233 | 4,589 | 546 | — | 5,781 | — | 384 | 14,533 |
Kenneth J. Quinn | 2009 | 3,634 | 5,206 | 3,453 | — | 5,670 | — | — | 17,963 |
VP, General Counsel, | 2008 | 3,037 | 4,934 | 2,864 | — | 5,467 | — | 1,063 | 17,335 |
Secretary and Treasurer | 2007 | 2,274 | 4,934 | 900 | — | 5,237 | — | — | 13,345 |
SCHEDULE - A |
SUMMARY - ALL OTHER COMPENSATION |
|
| | Dividends on Restricted Stock | Personal Automobile Use | (4) Group Term Life Insurance Premiums | (5) Board Fees | (4) 401(K) - Employer Match | Club Dues | Spouse Travel | Total - All Other Compensation |
Name | Year | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) |
Dennis W. Doll, | 2010 | 6,911 | 3,149 | 2,990 | 5,300 | 8,575 | -- | 1,718 | 28,643 |
Chairman, President and Chief | 2009 | 5,206 | 3,116 | 2,928 | 5,700 | 8,575 | -- | 1,219 | 26,744 |
Executive Officer | 2008 | 3,263 | 3,070 | 2,408 | 4,800 | 8,050 | -- | 1,548 | 23, 139 |
A. Bruce O’Connor | 2010 | 5,353 | 2,576 | 1,658 | -- | 7,617 | -- | 803 | 18,007 |
Vice President and | 2009 | 5,145 | 2,621 | 1,622 | -- | 7,466 | -- | -- | 16,854 |
Chief Financial Officer | 2008 | 5,275 | 2,683 | 1,335 | -- | 7,161 | -- | 893 | 17,347 |
Richard M. Risoldi, | 2010 | 4,685 | 4,589 | 1,547 | -- | 6,546 | -- | -- | 17,367 |
Vice President – Operations and | 2009 | 4,225 | 4,589 | 1,322 | -- | 6,197 | -- | -- | 16,333 |
Chief Operating Officer | 2008 | 3,888 | 4,589 | 1,096 | -- | 6,012 | -- | 160 | 15,745 |
Kenneth J. Quinn, | 2010 | 4,072 | 5,406 | 3,532 | -- | 5,783 | -- | -- | 18,793 |
VP, General Counsel, | 2009 | 3,634 | 5,206 | 3,453 | -- | 5,670 | -- | -- | 17,963 |
Secretary and Treasurer | 2008 | 3,037 | 4,934 | 2,864 | -- | 5,467 | -- | 1,063 | 17,335 |
James P. Garrett | 2010 | 4,030 | 6,086 | 3,532 | -- | 5,167 | -- | -- | 18,815 |
Vice President – | 2009 | 3,555 | 5,956 | 3,404 | -- | 5,161 | -- | -- | 18,076 |
Human Resources | 2008 | 2,799 | 5,780 | 2,701 | -- | 4,835 | -- | -- | 16,115 |
(4) The benefits available to the Named Executive Officers under these programs are also available to all other employees of the Company.(5) Mr. Doll’s board fees in 2010 are lower by $400 due to the timing of the December 2010 board meeting payment, which was made in January 2011.
GRANTS OF PLAN-BASED AWARDS – 2009 |
Name
| | Estimated Future Payouts Under Non-equity Incentive Plan Awards | Estimated Future Payouts Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares or Units
(#)
| All Other Option Awards: Number of Securities Underlying Options
(#)
| Exercise or Base Price of Option Awards
($/Sh)
|
Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold ($) | Target ($) | Maximum ($)
(#) | Units Threshold
($)
(#) | Options Target
($)
(#) | Awards Maximum
(#)
($/Sh) |
Dennis W. Doll | 10/1/2009-- | n/a | n/a | n/a | n/a | n/a | n/a | 3,124-- | n/a | n/a |
A. Bruce O'Connor | 10/1/20092010 | n/a | n/a | n/a | n/a | n/a | n/a | 1,899472 | n/a | n/a |
Ronald F. WilliamsRichard M. Risoldi | 10/1/20092010 | n/a | n/a | n/a | n/a | n/a | n/a | 1,656235 | n/a | n/a |
Richard M. RisoldiKenneth J. Quinn | 10/1/20092010 | n/a | n/a | n/a | n/a | n/a | n/a | 1,750432 | n/a | n/a |
Kenneth J. QuinnJames P. Garrett | 10/1/20092010 | n/a | n/a | n/a | n/a | n/a | n/a | 1,608432 | n/a | n/a |
OUTSTANDING EQUITY AWARDS – 2009 |
| Option Awards | Stock Awards |
| | | Equity | | | Number | Market | Equity Incentive | |
| | | | | | | | | Equity Incentive |
| Number of | Number of | Plan Awards: | | | Shares | of Shares | Number | Plan Awards: |
| Securities | Securities | Number of | | | or | or | Of | Market or Payout |
| Underlying | Underlying | Securities | | | Units of | Units of Stock | Unearned Shares, | Value of Unearned |
| Unexercised | Unexercised | Underlying | Option | Option | Stock That | That Have | Units or Other | Shares, Units or |
| Options (#) | Options (#) | Unexercised | Exercise | Expiration | Have Not | Not | Rights That | Other Rights That |
| Exercisable | Unexercisable | Earned Options | Price | Date | Vested* | Vested* | Have Not Vested | Have Not Vested |
Name | (#) | (#) | (#) | ($) | | (#) | ($) | (#) | ($) |
Dennis W. Doll | n/a | n/a | n/a | n/a | n/a | 9,641 | 169,874 | n/a | n/a |
A. Bruce O'Connor | n/a | n/a | n/a | n/a | n/a | 7,669 | 135,128 | n/a | n/a |
Ronald F. Williams | n/a | n/a | n/a | n/a | n/a | -0- | -0- | n/a | n/a |
Richard M. Risoldi | n/a | n/a | n/a | n/a | n/a | 6,715 | 118,318 | n/a | n/a |
Kenneth J. Quinn | n/a | n/a | n/a | n/a | n/a | 5,779 | 101,826 | n/a | n/a |
OUTSTANDING EQUITY AWARDS |
| Option Awards | Stock Awards |
| | | Equity | | | Number | Market | | |
| | | Incentive | | | of | Value | Equity Incentive | Equity Incentive |
| | | Plan Awards: | | | Shares | of Shares | Plan Awards: | Plan Awards: |
| Number of | Number of | Number of | | | or | or | Number Of | Market or Payout |
| Securities | Securities | Securities | | | Units of | Units | Unearned | Value of |
| Underlying | Underlying | Underlying | | | Stock | of Stock | Shares, Units | Unearned Shares, |
| Unexercised | Unexercised | Unexercised | Option | Option | That | That | or Other | Units or Other |
| Options (#) | Options (#) | Earned | Exercise | Expiration | Have Not | Have Not | Rights That | Rights That |
| Exercisable | Unexercisable | Options | Price | Date | Vested | Vested | Have Not Vested | Have Not Vested |
Name | (#) | (#) | (#) | ($) | | (#) | ($) | (#) | ($) |
Dennis W. Doll | n/a | n/a | n/a | n/a | n/a | 9,341 | 171,407 | n/a | n/a |
A. Bruce O'Connor | n/a | n/a | n/a | n/a | n/a | 6,641 | 121,862 | n/a | n/a |
Richard M. Risoldi | n/a | n/a | n/a | n/a | n/a | 5,800 | 106,430 | n/a | n/a |
Kenneth J. Quinn | n/a | n/a | n/a | n/a | n/a | 5,211 | 95,622 | n/a | n/a |
James P. Garrett | n/a | n/a | n/a | n/a | n/a | 5,153 | 94,558 | n/a | n/a |
OPTION EXERCISES AND STOCK VESTED
| Option Awards | Stock Awards |
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) |
Dennis W. Doll | n/a | n/a | 300 | 5,065 |
A. Bruce O’Connor | n/a | n/a | 1,500 | 25,327 |
Richard M. Risoldi | n/a | n/a | 1,150 | 19,418 |
Kenneth J. Quinn | n/a | n/a | 1,000 | 16,885 |
James P. Garrett | n/a | n/a | 1,000 | 16,885 |
OPTION EXERCISES AND STOCK VESTED – 2009 |
| Option Awards | Stock Awards |
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of shares Acquired on Vesting (#) | Value Realized on Vesting ($) |
Dennis W. Doll | n/a | n/a | 0 | 0 |
A. Bruce O’Connor | n/a | n/a | 1,300 | 19,643 |
Ronald F. Williams | n/a | n/a | 6,883* | 114,296* |
Richard M. Risoldi | n/a | n/a | 700 | 10,577 |
Kenneth J. Quinn | n/a | n/a | 700 | 10,577 |
*Mr. Ronald F. Williams retired effective January 1, 2010. As of December 31, 2009, Mr. Williams’ shares vested as a result of the Board’s approval of the Compensation Committee’s recommendation to waive the Company’s right to re-acquire unvested shares upon his retirement.
PENSION BENEFITS – 2009 |
Name | Plan | Number of Years Credited Service (#) | Present Value of Accumulated Benefit ($) | Payments During Last Fiscal Year ($) |
Dennis W. Doll | MWC Pension Plan | 5 | 49,762 | 0 |
A. Bruce O'Connor | MWC Pension Plan | 20 | 201,849 | 0 |
Ronald F. Williams | MWC Pension Plan | 15 | 446,129 | 0 |
Richard M. Risoldi | MWC Pension Plan | 20 | 174,211 | 0 |
Kenneth J. Quinn | MWC Pension Plan | 8 | 122,729 | 0 |
PENSION BENEFITS |
Name | Plan | Number of Years Credited Service (#) | Present Value of Accumulated Benefit ($) | Payments During Last Fiscal Year ($) |
Dennis W. Doll | MWC Qualified Plan | 6 | 114,320 | -- |
| MWC SERP | 6 | 803,594 | -- |
A. Bruce O'Connor | MWC Qualified Plan | 21 | 407,826 | -- |
| MWC SERP | 21 | 141,441 | -- |
Richard M. Risoldi | MWC Qualified Plan | 21 | 348,432 | -- |
| MWC SERP | 21 | 158,177 | -- |
Kenneth J. Quinn | MWC Qualified Plan | 9 | 223,400 | -- |
| MWC SERP | 9 | 268,827 | -- |
James P. Garrett | MWC Qualified Plan | 8 | 205,001 | -- |
| MWC SERP | 8 | -- | -- |
All employees, hired before April 1, 2007, including the Named Executive Officers, who receive pay for a minimum of 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'smember’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 Social Security benefit integration level, plus 1.9% of such excess pay, multiplied by anticipated total year of service to normal retirement date, capped at 35 years of such excess pay, multiplied by years of service achieved and not to exceed number of years of service achieved at 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 amounts are not subject to any deduction for Social Security benefits or other offset amounts. The benefits under the Supplemental Executive Retirement Plan are described on page 22 of this Proxy Statement.
Ronald F. Williams and Kenneth J. Quinn wereand James P. Garrett are eligible to receive early retirement benefits under the Qualified Plan only in the event of their retirement. If either elected to receive early retirement benefits, such benefits would be at a reduced level as defined under the Qualified Plan for any eligible employee who elects early retirement. No other Named Executive Officer has reached the minimum age and service requirements to receive early retirement benefits under the RetirementQualified Plan. No Named Executive Officer has reached the minimum age and service requirements to receive early retirement benefits under the SERP. No lump sum payment of accumulated retirement benefits is provided under the Plan.Qualified Plan or the SERP.
*Employees hired after March 31, 2007 are not eligible to participate in the Qualified Plan, but do participate in a defined contribution plan that provides an annual contribution at the discretion of the Company based upon a percentage of the participants’ compensation.
POTENTIAL PAYMENTS UPON CHANGE IN CONTROL
The Company has Change in Control Agreements with the Named Executive Officers and other Executive Officers of the Company. These agreements generally provide that if the executive is terminated by the Company, other than for death, disability, retirement, cause (as defined in the agreement), or if the executive resigns for Good Reason (as defined in the agreement) within three (3) years after a Change In Control of the Company as defined in the agreement, the executive is entitled to receive, (a) a lump sum severance payment equal to three (3) times the executive’s average annual total compensation as defined under the Change In Control Agreement for the five (5) years prior to the termination; (b) continued coverage for three (3) years under any health or welfare plan in which the executive and the executive’s dependents were participating; and
(c) an additional amount equal to the amount of federal Excise Tax, if any, that is due or determined to be due resulting from the severance payments or any other payments under the agreement. The benefits under any health or welfare benefit plan could end earlier than three (3) years from the date of termination and would end on the earlier to occur of (i) the date the executive becomes covered by a new employer’s health and welfare benefit plan, or (ii) the date the executive becomes covered by Medicare. Also, coverage for the executive’s dependents could end earlier than any of these dates if required by the health or welfare benefit plan due to age eligibility.
In addition to the benefits to be paid to the executive as noted above, on or before the third anniversary of the Change in Control, the Company shall pay the executive any deferred compensation, including, but not limited to, deferred bonuses allocated or credited to the executive as of the date of termination. Also, any outstanding restricted stock grants awarded to the executive under the Company’s stock plans, which are not vested on termination, shall immediately vest.
A Change in Control may also lead to the payment of benefits to the Named Executive Officers and other Executive Officers, who are participants under the Company’s Supplemental Executive Retirement Plan (“SERP”).Plan. Under the SERP, if an executive leaves the Company’s employ, under the terms of a Change In Control agreement within five years of the Change In Control under any of the following circumstances: (a) the executive’s employment with the Company is terminated by the Company other than for cause; (b) the nature and scope of the executive’s duties or activities with the Company or its successor are reduced to a level significantly below that which the executive had enjoyed immediately prior to the Change in Control; or (c) the executive’s base salary is reduced; or (d) if the Change in Control is preceded by the Company terminating the executive’s employment with the Company without cause during the six month period prior to the occurrence of the Change in Control, the executive shall be entitled to receive an annual retirement benefit equal to 75% of the executive’s Compensation (and in some cases, 50% of Compensation) reduced by certain other benefits as more particularly set forth in the SERP. Such annual retirement benefits shall commence within sixty days after the later of (a) the executive’s Normal Retirement Date, or (b) the executive’s retirement or termination of employment with the Company or its successor. Unless the executive elects and receives approval of an alternative form of payment under the SERP, the executive shall receive the annual retirement benefit each year for fifteen years payable in monthly installments.
Notwithstanding the foregoing, if an executive leaves the Company’s employ under the terms of a Change In Control agreement and within the time frame and for the reasons discussed above, then, at the executive’s sole option, the executive may elect to receive a reduced benefit equal to 75% of the executive’s Compensation (and in some cases, 50% of Compensation) reduced by certain other benefits as prorated as set forth in the SERP. Such benefit shall commerce within sixty days after the executive terminates employment with the Company or its successor.
The following table indicates the potential value the Named Executive Officers would receive in connection with termination by the Company within three years after a Change in Control of the Company. All scenarios use December 31, 2009,2010, the last business day of the Company’s last completed fiscal year, as the date for the triggering event set forth in the schedule. Additionally, the potential values to each of the Named Executive Officers also include the present value of accumulated benefits under the SERP assuming that each Named Executive Officer made an election to receive such benefits within sixty days after the executive terminates employment with the Company or its successor.
| Compensation paid during calendar | | |
| year 2009 (using definition of | Termination Before | |
Name | “Compensation” under the Agreement) | Third Anniversary (1) | Compensation paid during calendar year 2010 (using definition of “Compensation” under the Agreement) | Termination Before Third Anniversary (1) |
Dennis W. Doll | $385,887 | $2,091,213 | | $ | 387,233 | | | $ | 2,490,121 | |
A. Bruce O’Connor | $233,368 | $1,084,102 | | $ | 235,939 | | | $ | 1,211,071 | |
Ronald F. Williams | $214,349 | $1,455,796 | |
Richard M. Risoldi | $196,977 | $ 978,364 | | $ | 205,300 | | | $ | 1,097,478 | |
Kenneth J. Quinn | $178,621 | $ 959,066 | | $ | 182,308 | | | $ | 1,111,100 | |
James P. Garrett | | | $ | 178,890 | | | $ | 828,392 | |
(1) Compensation and other benefits paid following termination on or before the third anniversary of the Change in Control.
PROPOSAL 3
NON-BINDING PROPOSAL TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
The compensation of our Named Executive Officers is described in the Compensation Discussion and Analysis, the compensation tables and the accompanying narrative on pages 18-26 of this Proxy Statement.
The Compensation Committee of the Board of Directors is responsible for making recommendations to the full Board of Directors with respect to the compensation of the Named Executive Officers, including the Chief Executive Officer. As part of these duties, the Committee administers the Company’s equity-based incentive compensation plan and conducts an annual performance review of the Chief Executive Officer and, in consultation with the Chief Executive Officer, reviews the performance of the other Named Executive Officers. The Board of Directors has ultimate authority to determine the compensation of all Named Executive Officers, including the Chief Executive Officer.
The overall objectives of the Company’s compensation program are to retain, motivate, and reward employees and officers (including the Named Executive Officers) for short- and long-term performance, and to provide competitive compensation to attract appropriate talent to the Company. The methods used to achieve these goals for Named Executive Officers are influenced by the compensation and employment practices of our peers and competitors within the utilities industry, and elsewhere in the marketplace, for executive talent. Other considerations include each Named Executive Officer’s individual performance in achieving both financial and non-financial corporate goals.
Based on its review of the total compensation of our Named Executive Officers for fiscal year 2010, the Compensation Committee believes that the total compensation for each of the named executive officers is reasonable and effectively achieves the objective of aligning compensation with performance measures directly related to our financial goals and creation of shareholder value without encouraging Named Executive Officers to take unnecessary or excessive risks.
The Compensation Discussion and Analysis section of this Proxy Statement and the accompanying tables and narrative provide a comprehensive review of Named Executive Officer compensation objectives, program and rationale. We urge you to read this disclosure before voting on this proposal, the approval of which is included as Proposal 3 in this Proxy Statement. This advisory vote is typically referred to as a “say-on-pay” vote.
For the reasons stated above, the Board is requesting your non-binding approval of the following resolution:
“Resolved, that the compensation of Named Executive Officers, as disclosed in the Compensation Discussion and Analysis, the compensation tables and the accompanying narrative on pages 18-26 of this Proxy Statement, is approved.”
Your vote on this proposal will be non-binding and the Board and will not be construed as overruling a decision by the Board. Your vote will not create or imply any change to fiduciary duties or create or imply any additional fiduciary duties for the Board. However, the Board values the opinions that our shareholders express in their votes and will consider the outcome of the vote when making future executive compensation decisions as it deems appropriate.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE TO APPROVE THE NON-BINDING ADVISORY PROPOSAL APPROVING THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
PROPOSAL 4
PROPOSAL REGARDING THE FREQUENCY (ONE, TWO OR THREE YEARS) OF THE NON-BINDING SHAREHOLDER VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
We believe that a non-binding shareholder vote on executive compensation should occur every year. We believe that a one-year frequency provides the highest level of accountability and communication by enabling the non-binding shareholder vote to approve the compensation of our Named Executive Officers to correspond with the most recent executive compensation information presented in our proxy statement for our Annual Meeting of Shareholders.
We believe that providing a vote only every two or three years may prevent shareholders from communicating in a meaningful and clear manner. For example, we may not know whether the shareholder vote approves or disapproves of compensation for the reporting period or the compensation for previous reporting periods or both. As a result, it could be difficult to discern the implication of the shareholder vote.
For the reasons stated above, the Board recommends a vote FOR a one-year frequency for the non-binding shareholder vote to approve the compensation of our Named Executive Officers. Note that shareholders are not voting to approve or disapprove the recommendation of the Board with respect to this proposal. Instead, each proxy card provides four choices with respect to this proposal: a one, two or three year frequency or shareholders may abstain from voting on the proposal. Your vote on this proposal will be non-binding on us and the Board and will not be construed as overruling a decision by us or the Board. Your vote will not create or imply any change to our fiduciary duties or create or imply any additional fiduciary duties for us or the Board. However, the Board values the opinions that our shareholders express in their votes and will consider the outcome of the vote when making future compensation decision as it deems appropriate.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE FOR A ONE-YEAR FREQUENCY FOR THE NON-BINDING SHAREHOLDER VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.
OTHER MATTERS
The Board of Directors does not intend to bring any other matters before the Annual Meeting and has no reason to believe any will be presented for consideration at 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 their discretion on such matters.
Electronic Access of Proxy Materials and Annual Reports
Our Proxy Statement and Annual Report are available on the Investor Relations section of our website at www.middlesexwater.com and the following website www.proxyvote.com. Paper copies of these documents may be requested by contacting our Corporate Secretary in writing at the Office of the Corporate Secretary, Middlesex Water Company, 1500 Ronson Road, P.O. Box 1500, Iselin, New Jersey 08830-0452. 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 2010 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.
Householding of Annual Meeting Materials
Some banks, brokersThe SEC rules permit us, with your permission, to deliver a single proxy statement and other nomineeannual report to any household at which two or more shareholders of record holders mayreside at the same address. Each shareholder will continue to receive a separate proxy card. This procedure, known as “householding” reduces the volume of duplicate information you received and reduces our expenses. Once given, a shareholder’s consent will remain in effect until he or she revokes it by notifying our Corporate Secretary as described above. If you revoke your consent, we will begin sending you individual copies of future mailings of these documents within 30 days after we receive your revocation notice. Shareholders or record who elect to participate in the practicehouseholding may also request a separate copy of “householding”future proxy statements and annual reports and related notices. This meansby contacting our Corporate Secretary in writing at Office of the Corporate Secretary, Middlesex Water Company, 1500 Ronson Road, P.O. Box 1500, Iselin, New Jersey 08830-0452.
Separate Copies for Beneficial Owners
Institutions that only one copy of our NOIA,hold shares in street name for two or more beneficial owners with the same address are permitted to deliver a single Proxy Statement and our 2009 Annual Report may have been sent to multiple shareholders in your household. If you would like to obtain anotherthat address. Any such beneficial owner can request a separate copy of any of these documents, please contact our Investor Relations Department at 1500 Ronson Road, Iselin, New Jersey 08830 or by telephone at 732-638-7549. If you want to receive separate copies of the NOIA,this Proxy Statement and/or the Annual Report inon Form 10-K by contacting our investor relations department as described above. Beneficial owners with the future, or if you are receiving multiple copiessame address who receive more than one Proxy Statement and would like to receive only one copyAnnual Report on Form 10-K may request delivery of any of these documents for all shareholders in your household, you should contact your bank, broker, or other nominee record holder, or you may contact us at the above address or telephone number.a single Proxy Statement and Annual Report on Form 10-K by contacting our Corporate Secretary as described above.
Minutes of 20092010 Annual Meeting of Shareholders
The minutes of the 20092010 Annual Meeting of Shareholders 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, |
| |
| |
| |
| KENNETH J. QUINN |
| Vice President, General Counsel, |
| Secretary and Treasurer |
| |
Iselin, New Jersey
April 12, 20102011
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 2009 Annual Report on Form 10-K filed by the Company, including the financial statements and schedules, but without exhibits, will be mailed without charge to any shareholders upon request to the Company. The exhibits are obtainable from the Company upon payment of the reasonable cost of copying such exhibits. The 2009 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. 1216, 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 08830-0452.29