REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
MIDDLESEX WATER COMPANY
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-1114430
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1500 RONSON ROAD, ISELIN, NEW JERSEY 08830
(732) 634-1500
---------------------------------------------------------------------------
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------------
MARION F. REYNOLDS
VICE PRESIDENT, SECRETARY AND TREASURER
MIDDLESEX WATER COMPANY
1500 RONSON ROAD, ISELIN, NEW JERSEY 08830-3020
(732) 634-1500
---------------------------------------------------------
(Name, address, including zip code. and telephone number,
including area code, of agent for service)
---------------------
WITH COPIES TO:
PETER D. HUTCHEON, ESQ. JOHN L. GILLIS, JR., ESQ.
- --------------------------------- --------------------------------------
NORRIS, MCLAUGHLIN & MARCUS, P.A ARMSTRONG, TEASDALE, SCHLAFLY & DAVIS
721 ROUTE 202-206, P.O. BOX 1018 ONE METROPOLITAN SQUARE, SUITE 2600
SOMERVILLE, NEW JERSEY 08876-1018 ST LOUIS, MISSOURI 63102-2740
(908) 722-0700 (314) 621-5070
--------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
---------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of
theearlier effective registration statement for the same offering.[ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
---------------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
========================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) SHARE(2) PRICE(2) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock ..................... 517,000 shares $22.25 $11,503,250 $3,198.00
========================================================================================================================
</TABLE>
- ------------
(1) Includes 67,000 shares which may be purchased by the Underwriters to cover
over-allotments, if any.
(2) Solely for purposes of calculating the registration fee, a proposed
offering price of $22.25 per share has been assumed in accordance with Rule
457(c), which was the average of the high and low prices of the Common
Stock as reported by the Nasdaq National Market System on October 27, 1998.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED NOVEMBER 3, 1998
PROSPECTUS
[LOGO]
MIDDLESEX WATER COMPANY
450,000 SHARES COMMON STOCK (WITHOUT PAR VALUE)
Our Common Stock is quoted on the Nasdaq National Market under the symbol,
"MSEX." On October 30, 1998, the last reported sale price of the Common Stock on
Nasdaq was $22.25 per share. See "COMMON STOCK PRICE RANGE AND DIVIDENDS."
BEFORE INVESTING IN THE COMMON STOCK, YOU SHOULD REVIEW
THE SECTION OF THIS PROSPECTUS CALLED "RISK FACTORS"
WHICH BEGINS ON PAGE 6.
--------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
================================================================================
PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO
PUBLIC AND COMMISSIONS(1) THE COMPANY(2)
- --------------------------------------------------------------------------------
Per Share ........ $ $ $
- --------------------------------------------------------------------------------
Total(3) ......... $ $ $
================================================================================
- ----------------
(1) We have agreed to indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(2) Before deducting expenses of the offering payable by us estimated at
$135,000.
(3) We have granted to the Underwriters an option, exercisable within 30 days
after the date of this Prospectus, to purchase up to 67,000 additional
shares of Common Stock upon the same terms and conditions as the shares
offered hereby to cover over-allotments, if any. If the Underwriters
exercise such option in full, the total Price to Public, Underwriting
Discounts and Commissions, and Proceeds to the Company will be increased to
$______, $______ and $______, respectively. See "Underwriting."
----------------------
The Underwriters are offering the shares of Common Stock subject to prior sale
and their acceptance of the shares from us. Our sale of the shares of Common
Stock to the Underwriters is subject to a number of conditions. The Underwriters
expect to deliver the shares of Common Stock to purchasers at the offices of
Edward D. Jones & Co., L.P. in St. Louis, Missouri, on or about December , 1998.
EDWARD D. JONES & CO., L.P. JANNEY MONTGOMERY SCOTT INC.
The date of this Prospectus is__________, 1998
<PAGE>
[MAP
OF
SERVICE
AREA]
2
<PAGE>
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUMMARY..........................................................4
THE OFFERING................................................................5
RISK FACTORS................................................................7
FORWARD LOOKING STATEMENTS .................................................9
USE OF PROCEEDS.............................................................9
THE PROJECT.................................................................9
THE COMPANY................................................................10
SELECTED CONSOLIDATED FINANCIAL INFORMATION................................16
MANAGEMENT'S DISCUSSION AND ANALYSIS.......................................18
COMMON STOCK PRICE RANGE AND DIVIDENDS.....................................22
DESCRIPTION OF COMMON STOCK................................................23
DIVIDEND REINVESTMENT PLAN.................................................24
UNDERWRITING...............................................................25
LEGAL MATTERS..............................................................26
EXPERTS....................................................................26
WHERE YOU CAN FIND MORE INFORMATION........................................26
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................26
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING SYNDICATE COVERING TRANSACTIONS AND THE IMPOSITION OF A PENALTY BID.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP MEMBERS
MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON NASDAQ
IN ACCORDANCE WITH RULE 103 OF REGULATION M. SEE "UNDERWRITING."
3
<PAGE>
- --------------------------------------------------------------------------------
PROSPECTUS SUMMARY
This Prospectus Summary calls your attention to selected information in
this document, but may not contain all the information that is important to you.
Unless otherwise indicated we have assumed, in presenting information about
outstanding shares of common stock, including per share information, that the
Underwriters' over-allotment option will not be exercised. To understand the
offering fully and for a more complete description of the offering you should
read this entire document carefully, including especially the "Risk Factors"
section, as well as the documents we have referred you to. See "Incorporation of
Certain Documents by Reference."
OUR COMPANY
Middlesex Water Company ("Middlesex Water") has operated as a regulated
water utility in central New Jersey since 1897. Since 1992, Middlesex Water has
acquired water systems in other parts of New Jersey and in Delaware, and today
has five operating subsidiaries, one of which has two subsidiaries of its own.
We will refer to Middlesex Water and its subsidiaries as the "Company" in this
Prospectus.
Our primary business is treating, and distributing water on a retail basis
to residential, commercial, industrial and fire protection customers in parts of
New Jersey and Delaware. We also provide water and treatment services on a
wholesale basis under contract to five municipalities and two municipal
utilities authorities. Under a contract with the City of South Amboy, New
Jersey, we operate and maintain that City's 2,600 customer water system. As of
September 30, 1998, we served approximately 66,000 retail customers and seven
contract customers. We also operate a wastewater system serving 2,200 retail
customers and, under contract, a municipal wastewater system in New Jersey.
We are regulated as to rates charged to customers for water and wastewater
services, as to the quality of water we provide and as to certain other matters.
Our revenues and income are significantly affected by the timing and amounts of
rate increases approved by regulatory authorities. See "RISK FACTORS--Our
Business is Subject to Rate Regulation" and "THE COMPANY--Regulation."
OUR STRATEGY
To support our existing and expanding operations, we strive to maintain and
strengthen our position as a reliable supplier of quality water in all of our
systems. We will continue to seek new service areas and to consider acquisitions
of other water and wastewater systems. In addition, we will try to contract with
municipalities to operate and manage their water systems. We also plan to
continue to increase our customer base in New Jersey and Delaware. We may also
seek to acquire companies in water- and wastewater-related businesses that are
not regulated utilities.
MAINTAIN AND STRENGTHEN OUR POSITION AS A PROVIDER OF QUALITY WATER. We
believe that we meet or exceed all primary regulatory requirements for water
quality. We also believe that we have adequate supplies to provide water in
sufficient quantities to meet our customers' current requirements in all of our
service areas. In order to maintain and improve our ability to provide quality
water in sufficient quantities, we regularly upgrade our facilities. We are
currently upgrading and expanding our Carl J. Olsen Water Treatment Plant (which
we will refer to as the "CJO Plant") in Edison, New Jersey in order to meet more
stringent regulatory requirements anticipated for water quality and to increase
our capacity to meet peak-day demands for water in the utility system serviced
by the CJO Plant. We will refer to the upgrading and expansion of the CJO Plant
as the "Project". See "THE PROJECT." We will also continue to improve our
central New Jersey distribution system by cleaning and cement lining unlined
pipe.
INCREASE CONTRACT SERVICES. We currently operate and maintain the 2,600
customer water system of the City of South Amboy, New Jersey under a 1995
contract with that city which is renewable at five year intervals. We are
negotiating a contract with another New Jersey municipality to operate and
maintain its water and wastewater systems. If negotiations are successful, we
may enter into a subcontract with an experienced sewer contractor for the
operation and maintenance of the wastewater system. We are also currently
negotiating with a third New Jersey municipality to enter into a multi-year
treating and pumping contract. Because we believe contracts with municipalities
provide another way for us to expand our service territories and increase the
number of customers we serve, we continue to seek opportunities to enter into
contracts with additional municipalities to operate their water systems.
INCREASE CUSTOMER BASE. Since 1992, we have increased our retail customer
base in Delaware from approximately 3,000 to approximately 11,000 today through
acquisitions and customer growth. We have also acquired a 2,200 customer water
utility and a 2,200 customer wastewater utility in Burlington County, New
Jersey. We will continue to seek opportunities to increase our customer base by
acquiring additional service areas, water utilities and other water- or
wastewater-related companies in New Jersey and Delaware. There is significant
economic development and population growth near several of our Delaware service
areas.
OUR ADDRESS AND TELEPHONE NUMBER
Our executive offices are located at 1500 Ronson Road, Iselin, New Jersey
08830-3020 and our telephone number is (732) 634-1500.
4
- --------------------------------------------------------------------------------
<PAGE>
THE OFFERING
Common Stock, no par value 450,000 Shares
Common Stock to be outstanding 4,818,847 Shares
after the offering
Nasdaq symbol MSEX
Common Stock 52-week price range $18-$24
(through October 30, 1998)
Annualized dividend rate (1) $1.18 per Share.
Use of proceeds We will use most of the net
proceeds of this offering to
fund part of the cost of the
upgrade and expansion of our
CJO Plant in Edison, New
Jersey. See "THE PROJECT." We
will use the remaining net
proceeds of this offering for
general corporate purposes.
- ----------------------------
(1) The annualized dividend rate gives effect to the increase announced
October 22, 1998, in our quarterly dividend to $0.295 per share, payable
to shareholders of record November 16, 1998. We also have a Dividend
Reinvestment and Common Stock Purchase Plan. See "DESCRIPTION OF COMMON
STOCK" and "DIVIDEND REINVESTMENT PLAN."
5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except share and per share data)
This summary of financial information as of, and for the years ended,
December 31, 1995, 1996 and 1997 was taken from and should be read along with
the additional financial statements contained in our most recent Annual Report
on Form 10-K. Information as of, and for the periods ended, September 30, 1997
and 1998 was taken from financial statements that have not been audited but
which, we believe, fairly present our financial position and results of
operations for those periods and should be read along with our most recently
filed Quarterly Reports on Form 10-Q. See "WHERE YOU CAN FIND MORE INFORMATION."
<TABLE>
<CAPTION>
CONSOLIDATED INCOME STATEMENT DATA:
Nine Months Ended Year Ended
September 30, December 31,
-------------------- ---------------------------------
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating Revenues $ 32,434 $ 30,241 $ 40,294 $ 38,025 $ 37,847
Operating Expenses 25,241 23,544 31,526 29,802 29,184
Net Income 5,185 4,487 5,861 5,168 5,704
Earnings Applicable
to Common Stock 4,946 4,341 5,635 5,009 5,545
Earnings per Share of Common Stock:
Basic $1.14 $1.03 $1.33 $1.20 $1.36
Diluted 1.13 1.02 1.33 1.20 1.36
Dividends Paid
per Share $.855 $.84 $1.125 $1.105 $1.085
Average Number of Shares
Outstanding
Basic 4,326,337 4,226,241 4,235,082 4,169,334 4,078,890
Diluted 4,552,763 4,346,792 4,382,345 4,258,740 4,168,296
<CAPTION>
CONSOLIDATED BALANCE SHEET DATA:
As of September 30, As of December 31,
----------------------- ---------------------------------------
1998 1997 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Total Assets $191,415 $156,706 $159,761 $148,660 $144,822
Utility Plant - Net 152,045 130,853 135,071 121,245 117,933
Common Equity 54,330 50,839 51,226 49,216 47,644
Convertible Preferred Stock 3,894 3,896 3,894 1,565 1,565
Nonredeemable Preferred Stock 1,102 1,102 1,102 1,102 1,102
Long-term Debt 75,884 52,929 52,918 52,961 52,960
(excluding current portion)
</TABLE>
6
<PAGE>
RISK FACTORS
We have described for you below some risks involved in investing in the
Common Stock offered under this Prospectus. A word of caution: the list is not a
complete list of every risk. You should carefully consider each of the following
factors and all of the information both in this Prospectus and in the other
documents we have filed with the Securities and Exchange Commission which are
incorporated in this Prospectus by reference.
OUR BUSINESS IS SUBJECT TO RATE REGULATION. The New Jersey Board of Public
Utilities, which we call the "BPU" in this Prospectus, regulates all of our
public utility companies in New Jersey. The BPU regulates these utilities with
respect to rates and charges for service, classification of accounts, awards of
new service territory, acquisitions and other matters. That means, for example,
that we cannot raise the rates we charge to our customers without first filing a
petition with the BPU and going through a lengthy administrative and hearing
process. In much the same way, the Delaware Public Service Commission, which we
call the "PSC" in this Prospectus, regulates our public utility companies in
Delaware. We cannot give assurances of when we or our subsidiaries will request
approval for any such matter, nor can we predict whether the BPU or PSC will
approve, deny or reduce the amount of any such requests. See" THE COMPANY --
Regulation -- Regulation of Rates and Services."
WE ARE SUBJECT TO ENVIRONMENTAL AND OTHER GOVERNMENTAL LAWS AND REGULATION.
The U.S. Government, New Jersey, Delaware and local agencies regulate many
aspects of our business. Among the most important of these are our water
diversion rights, our water quality and other environmental matters. We believe
that all of our systems are currently in compliance in all important respects
with these regulations. We cannot predict, however, whether we will be able to
continue to comply with these laws and regulations as they may change in the
future. If we fail to comply with government regulations, it could have a
material adverse effect on our financial condition and our ability to earn
income, which we refer to in this Prospectus as "results of operations."
Federal, state and local governments also regulate the quality of water we
supply to our customers, as well as our water supply, treatment and distribution
systems. We believe that all of our systems are currently in compliance in all
important respects with the primary water quality regulations. Government
agencies continually review these regulations and may propose new, more
restrictive requirements in the future. These may include stricter limitations
on the permissible levels of certain chemicals and compounds in the water. We do
not know what the costs may be to meet stricter limits, if adopted as new laws
or regulations. Those costs could be very high and may adversely affect our
financial condition and results of operations. See "RISK FACTORS -- Our Business
Is Subject To Rate Regulation" and "THE COMPANY -- Regulation -- Water Quality
and Environmental Regulations."
The BPU requires that we conduct management audits on a periodic basis. We
either have completed or are in the process of completing changes recommended by
the BPU in response to our most recent management audit. We do not believe any
of the recommended changes will materially or adversely affect us or our
operations. There can be no assurance, however, that future audits will not
result in changes which materially and adversely affect our financial condition
and results of operations.
WE HAVE LONG-TERM CONTRACTUAL OBLIGATIONS FOR WATER AND WASTEWATER SYSTEM
OPERATION AND MAINTENANCE. We and certain of our subsidiaries have, or are
negotiating to enter into, multi-year contracts to operate and maintain water
systems and wastewater systems. See "THE COMPANY -- Strategy -- Increase
Contract Services." None of these contracts protect us or our subsidiaries
against incurring costs in excess of payments we will receive. While we do not
currently anticipate any cost overruns, there can be no assurance that we will
not experience losses under these contracts. In addition, these contracts may
involve leased municipal employees, which unlike our own employees, are members
of unions who have collective bargaining agreements with their municipal
employers. Any losses or labor difficulties under these contracts may have a
material adverse effect on our financial condition and results of operations.
WE REQUIRE FINANCING FOR EXPANSION AND CONSTRUCTION. We need money to
continue our expansion efforts and to fund our construction program. With the
proceeds from this offering and funds already received from bond issuances, as
well as existing lines of credit from banks, we believe we have sufficient funds
to support planned capital expenditures through 2000. See "MANAGEMENT'S
DISCUSSION AND ANALYSIS-- Liquidity and Capital Resources." We may find in the
future that sufficient capital is not available, or that the cost of capital is
too high for future expansion and construction.
7
<PAGE>
Any failure to obtain adequate capital to finance our expansion and construction
programs could have a material adverse effect on our financial condition and
results of operations.
WE ARE DEPENDENT UPON OUR WATER SUPPLY. Our ability to meet the existing
and future water demands of our customers is dependent upon an adequate supply
of water. Unexpected conditions may interfere with our sources of water supply.
Drought and overuse of underground acquifers may limit the availability of
ground water as a source of water supply. These factors might adversely affect
our ability to supply water in sufficient quantity to our customers. In
Burlington County, New Jersey and in Delaware. Any interruption in our water
supply could have a material adverse effect on our financial condition and
results of operations. See "THE COMPANY -- Water Supplies and Contracts."
WE HAVE COMPETITION FROM OTHER UTILITIES AND PRIVATIZATION. We face the
risks of competition from other utilities authorized by federal, state or local
agencies. Once a utility regulator grants a service territory to a utility, that
utility is usually the only one permitted to service that territory. Although a
new territory offers some protection against competitors, the pursuit of
additional service territories is competitive, especially in Delaware. Competing
utilities may challenge any future application by the Company for new service
territories. Third parties may also seek to expand their water service by taking
over and/or entering into long-term agreements to operate municipal systems.
Those developments, which we call privatization, might adversely affect the
Company and its long-term contracts to supply water on a wholesale basis to
municipalities. See "THE COMPANY -- Competition" and "--Regulation."
WE ARE SUBJECT TO YEAR 2000 SYSTEM RISK. Software used in many computer
systems and computerized control devices was designed to record only the last
two digits of each year. This software, some of which we own, may not function
properly as of January 1, 2000 because it interprets the new year as 1900. We
have evaluated our own computer systems, to make certain that those systems will
work properly when 1999 becomes 2000. We have also requested certification of
Year 2000 compliance from the vendor of the new Supervisory Control And Data
Acquisition system (which we refer to as "SCADA" in this Prospectus), as well as
the principal vendors of data processing serving our financial reporting,
payroll, billing, customer information and shareholder record systems. The
vendors have certified that their systems have been tested and will work
properly. We believe we may reasonably rely on those certifications. We also
expect to spend up to $10,000 to bring other operating systems, including our
network of desktop personal computers, into Year 2000 compliance. Nonetheless,
we may not have identified every computerized control device of ours which may
be affected by the Year 2000. Even if identified, we may not be able to
reprogram or replace those devices before January 1, 2000. More importantly, we
cannot assess the impact on us of failures of computer systems and control
devices used by others. We are especially concerned about third parties who
provide significant services and materials to process, treat and distribute
water and to process, treat and dispose of wastewater, and about the possible
failure of electric power and telecommunications or the inability to obtain
diesel fuel for the Company's stand-by generators. The occurrence of any such
Year 2000-related problem could have a material adverse effect on our financial
condition and results of operations.
WE HAVE RESTRICTIONS ON DIVIDENDS. Our Restated Certificate of
Incorporation and our Indenture of Mortgage dated as of April 1, 1927, as
supplemented since then, which we call the "Mortgage" in this Prospectus, impose
conditions on our ability to pay dividends. We have paid dividends on our Common
Stock each year since 1912 and have increased the amount of dividends paid each
year since 1973. Our earnings, financial condition, capital requirements,
applicable regulations and other factors, including the timeliness and adequacy
of rate increases, will determine both our ability to pay dividends on Common
Stock and the amount of those dividends. There can be no assurance that we will
continue to pay dividends in the future or, if dividends are paid, that they
will be in amounts similar to past dividends. See "DESCRIPTION OF COMMON STOCK"
and "PRICE RANGE OF COMMON STOCK AND DIVIDENDS."
WE ARE SUBJECT TO ANTI-TAKEOVER MEASURES. Subsection 10A of the New Jersey
Business Corporation Act, known as the Shareholder Protection Act, applies to
us. The Shareholder Protection Act deters merger proposals, tender offers or
other attempts to effect changes in control of the Company that are not
negotiated and approved by our Board of Directors. In addition, we have a
classified Board of Directors, which means only one third of the Directors are
elected each year. A classified Board can make it harder for an acquirer to gain
control by voting its candidates onto the Board of Directors and may also deter
merger proposals and tender offers. Our Board of Directors also has the ability,
subject to obtaining BPU approval, to issue one or more series of preferred
stock having such number of shares, designation, preferences, voting rights,
limitations and other rights as the Board of Directors may fix. This could be
used to discourage, delay or prevent an acquisition. See "DESCRIPTION OF COMMON
STOCK."
8
<PAGE>
FORWARD LOOKING STATEMENTS
We discuss certain matters in this document which are not historical facts,
but which are "forward looking statements." We intend these "forward looking
statements" to qualify for safe harbors from liability established by the
Private Securities Litigation Reform Act of 1995. These "forward looking
statements" include, but are not limited to, future plans, objectives,
expectations and events concerning various matters such as capital expenditures,
earnings, litigation, growth potential, and rate and other regulatory matters.
The "forward looking statements" in this Prospectus reflect what we currently
anticipate will happen in each case. What actually happens could differ
materially from what we currently anticipate will happen. We are not promising
to make any public announcement when we think "forward looking statements" in
this document are no longer accurate, whether as a result of new
information, what actually happens in the future or for any other reason.
USE OF PROCEEDS
The net proceeds from the sale of the 450,000 shares of Common Stock
offered by this Prospectus, after deducting the Underwriters' discount and
estimated offering expenses, are estimated to be $9,466,987 ($10,896,616 if the
Underwriters' over-allotment option is exercised in full). The Company expects
to use approximately $7,100,000 of the net proceeds to fund a portion of the $38
million estimated cost of the Project. The balance of the net proceeds,
approximately $2,366,987, will be used for general corporate purposes. The
remaining costs of the Project have been financed by (i) the proceeds of the
issuance in March 1998, of the Company's $23 million, 5.35% Series W Mortgage
Bond issued in March, 1998 and (ii) $7.9 million from operations of the Company.
THE PROJECT
The Project is a construction project consisting of the upgrade, expansion
and addition of facilities at the CJO Plant, the Company's principal water
treatment facility, and related water intake station for our utility system in
central New Jersey. The Project includes the installation of new flash mixers
and new chemical storage and feed facilities. The existing conventional
sedimentation basins are being replaced by high rate upflow clarifiers that are
intended to remove turbidity more effectively . The chlorine application point
is being relocated from preclarification to postclarification. The existing
sedimentation basins are to be used as chlorine contact basins. Four additional
filters are being added to the CJO Plant, a new laboratory is being constructed,
and a computerized SCADA system is being added to monitor and control the CJO
Plant and our water supply and distribution system in central New Jersey.
Upgrades are also being made to the heating, ventilating, air conditioning and
the electrical system at the CJO Plant and to the pumping equipment at our raw
water pump station.
The Project will upgrade the CJO Plant to meet the new and anticipated
regulatory changes concerning water quality, as well as increase capacity to
meet peak day demands. The firm capacity of the CJO Plant is being increased
from about 30 million gallons per day, or "mgd" as we call it in this
Prospectus, to 45mgd (we define firm capacity as the capacity when the largest
unit is out of service).
The Project also involves changes to the raw water pump station which
delivers water from the Delaware & Raritan Canal, which we call the "D&R Canal"
in this Prospectus, to the CJO Plant, a distance of about one mile. The station
capacity is being increased by replacing one existing pump with a larger pump.
The firm capacity of the raw water pump station is being increased from about 35
mgd to 45 mgd. Functional completion of the Project (by which we mean the
ability to produce water) is scheduled for June, 1999, with final completion set
for October, 1999.
The total cost of the Project, including design, engineering and
capitalized interest, will be approximately $38 million. Of this amount, we have
already expended $7.9 million through March 31, 1998 from operations of our
central new Jersey system. In March, 1998, we issued our 5.35% Series W Mortgage
Bonds which provided an additional $23 million. The remainder of the cost of the
Project will be funded through the sale of Common Stock offered under this
Prospectus.
9
<PAGE>
THE COMPANY
OVERVIEW
Middlesex Water Company was incorporated as a water utility company in 1897
and operates water utility systems in central and southern New Jersey and in
Delaware as well as a wastewater utility in southern New Jersey. The water
utility system in central New Jersey, which we call in this Prospectus the
"Middlesex System," produced 90% of the Company's 1997 Revenue. The Middlesex
System treats, stores and distributes water for residential, commercial,
industrial and fire prevention purposes.
Our Middlesex System provides water services to approximately 54,000 retail
customers, primarily in eastern Middlesex County, New Jersey and provides water
on a wholesale basis under contract to the Township of Edison, the Boroughs of
Highland Park and Sayreville, the City of South Amboy and both the Old Bridge
and the Marlboro Township Municipal Utilities Authorities. Under a special
contract, the Middlesex System also provides water treatment and pumping
services to the Township of East Brunswick.
The Middlesex System's retail customers are located in an area of
approximately 55 square miles in Woodbridge Township, the Boroughs of Metuchen
and Carteret, portions of Edison Township and the Borough of South Plainfield in
Middlesex County and a portion of the Township of Clark in Union County. The
retail customers include a mix of residential customers, large industrial
concerns and commercial and light industrial facilities. These retail customers
are located in generally well developed areas of central New Jersey. The
contract customers of the Middlesex System comprise an area of approximately 141
square miles with a population of approximately 267,000. Contract sales to
Edison, Sayreville, Old Bridge and Marlboro are supplemental to the existing
water systems of these customers. The State of New Jersey in the mid-1980's
approved plans to increase available surface water supply to these and other
municipalities in the South River Basin area of the State through contracts with
water suppliers outside the South River Basin. The State saw this as a way to
reduce the use of ground water and depletion of acquifers. Our long-term
contracts to pump treated surface water to East Brunswick, Marlboro, Old Bridge,
Sayreville and South Amboy are consistent with the State approved plan.
We have five wholly-owned subsidiaries:
o Tidewater Utilities, Inc. ("Tidewater"), together with Tidewater's
wholly-owned subsidiary, Public Water Supply Company, Inc. ("Public"),
provide water services to 11,000 retail customers for residential,
commercial and fire protection purposes in over 100 separate community
water systems in Kent, Sussex and New Castle Counties, Delaware. We
refer to our Delaware operations as the "Tidewater Systems" in this
Prospectus. The Tidewater Systems produced approximately 7% of our
total revenues in 1997. Tidewater has another wholly-owned subsidiary,
White Marsh Environmental Systems, Inc., which owns the office
building that Tidewater uses as its business office.
o Pinelands Water Company services 2,200 residential customers in
Burlington County, New Jersey. We refer to this water utility as the
"Pinelands System" in this Prospectus. The Pinelands System produced
approximately 0.6% of our total revenues in 1997.
o Pinelands Wastewater Company services approximately 2,200 primarily
residential retail customers and, under contract, one municipal
wastewater system in Burlington County, New Jersey with about 200
residential customers. We refer to this wastewater utility as the
"Pinelands Wastewater System" in this Prospectus. The Pinelands
Wastewater System produced approximately 1.4% of our total revenues in
1997.
o Utility Service Affiliates, Inc. along with Middlesex Water Company
entered into a five-year contract with the City of South Amboy, New
Jersey to operate and maintain the city's 2,600 customer water system
in May 1995. The contract is renewable for up to three additional
five-year periods. We refer to this subsidiary as "USA" in this
Prospectus. USA produced approximately 1% of our total revenues in
1997.
10
<PAGE>
o Utility Service Affiliates (Perth Amboy) Inc., which we refer to "USA
(PA)" in this Prospectus, along with Middlesex Water Company, are
currently negotiating an agreement with the City of Perth Amboy and
the Middlesex County Improvement Authority. Under that agreement, USA
(PA) would operate and maintain the city's water system and the
wastewater system for 20 years. USA (PA) would be paid a fixed fee and
a variable fee based on increased system billings. Fixed fee payments
to USA (PA) in the agreement rises from $6.4 million in the first year
to $9.7 by year 20. The agreement also would require USA (PA) to lease
from the City all of the City's employees who currently work on the
City's water system or wastewater system. In connection with the
agreement, the Middlesex County Improvement Authority is going to
issue up to $69.5 million in three series of bonds. One of those
series of bonds, in principal amount up to $27.5 million, is to be
guaranteed by the Company. The other series of bonds are to be
guaranteed by the City. The Company will also guarantee the
performance of our subsidiary, USA (PA). If the agreement goes into
effect, USA (PA) may enter into a subcontract with a sewer contracting
firm for the operation and maintenance of the city's wastewater
system. City employees who now work on the City's wastewater system
would be subleased by the subcontractor from USA (PA). Of the $6.4
million fixed fee payable to USA (PA) in the first year of the
agreement, $3 million would be payable to the subcontractor. The
variable fee payable by USA (PA) to the subcontractor would be based
on a portion of the increased billings attributable to the wastewater
system. We hope to conclude all aspects of the transactions and to
receive the necessary approvals by January 1999.
STRATEGY
To support our existing and expanding operations, we strive to maintain and
strengthen our position as a reliable supplier of quality water in all of our
systems. We will continue to seek new services and to consider acquisitions of
other water and wastewater systems. In addition, we will try to contract with
additional municipalities to operate and manage their water systems and, in some
cases, their wastewater systems. We also plan to continue to increase our
customer base in New Jersey and Delaware. We may also seek to acquire companies
in water- and wastewater-related businesses that are not regulated utilities.
MAINTAIN AND STRENGTHEN OUR POSITION AS A PROVIDER OF QUALITY WATER. We
believe that we meet or exceed all primary regulatory requirements for water
quality. We also believe that we have adequate supplies to provide water in
sufficient quantities to meet our customers' current requirements in all of our
service areas. In order to maintain and improve our ability to provide quality
water in sufficient quantities, we regularly upgrade our facilities. We are
currently upgrading and expanding our CJO Plant in Edison, New Jersey in order
to meet more stringent regulatory requirements anticipated for water quality and
to increase our capacity to meet peak-day demands for water in the utility
system serviced by the CJO Plant. See "THE PROJECT." We also continue to improve
our central New Jersey distribution system by cleaning and cement lining unlined
pipe.
INCREASE CONTRACT SERVICES. We currently operate and maintain the 2,600
customer water system of the City of South Amboy, New Jersey under a 1995
contract with that city which is renewable at five year intervals. We are
negotiating a contract with another New Jersey municipality to operate and
maintain its water and wastewater systems. If negotiations are successful, we
may enter into a subcontract with an experienced sewer contractor for the
operation and maintenance of the wastewater system. We are also currently
negotiating with a third New Jersey municipality to enter into a multi-year
treating and pumping contract. Because we believe contracts with municipalities
provide another way for us to expand our service territories and increase the
number of customers we serve, we continue to seek opportunities to enter into
contracts with additional municipalities to operate their water systems.
INCREASE CUSTOMER BASE. Since 1992, we have increased our retail customer
base in Delaware from approximately 3,000 to approximately 11,000 today through
acquisitions and customer growth. We have also acquired 2,200 customer water
utility and a 2,200 customer wastewater utility in Burlington, County, New
Jersey. We will continue to seek opportunities to increase our customer base by
acquiring additional service areas, water utilities and other water- or
wastewater-related companies in New Jersey and Delaware. There is significant
economic development and population growth near several of our Delaware service
areas.
11
<PAGE>
<TABLE>
<CAPTION>
SUMMARY OF STATISTICAL INFORMATION
(CONSOLIDATED OPERATIONS)
YEAR ENDED
DECEMBER 31,
-----------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C> <C>
REVENUES
Residential $ 16,291 $ 15,091 $ 15,202 $ 14,306 $ 14,042
Commercial 4,576 4,347 4,393 4,282 4,170
Industrial 6,631 6,621 6,669 6,598 6,481
Fire Protection 4,662 4,637 4,543 4,352 4,312
Contract Sales 7,380 6,778 6,658 6,322 6,232
Other 754 551 382 262 242
======== ======== ======== ======== ========
Total $ 40,294 $ 38,025 $ 37,847 $ 36,122 $ 35,479
<CAPTION>
AS OF
DECEMBER 31,
-----------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Meters in Service 67,673 63,775 61,332 58,371 57,318
Population Served 271,000 255,000 245,000 233,000 229,000
(Retail)
Miles of Main 1,149 1,067 1,035 972 947
Fire Hydrants 4,850 4,750 4,690 4,558 4,503
Pumpage 17,476 16,791 17,380 16,794 16,789
(million gallons)
</TABLE>
WATER SUPPLIES AND CONTRACTS
Our water utility plant consists of sources of supply, pumping, water
treatment, transmission, distribution and general facilities located in New
Jersey and Delaware. Our New Jersey and Delaware water supply systems are
physically separate and are not interconnected. In addition, in New Jersey, the
Pinelands System is not interconnected with the Middlesex System. In the opinion
of management, we have adequate sources of water supply to meet the current and
anticipated future service requirements of our present customers in New Jersey
and Delaware.
MIDDLESEX SYSTEM:
Our Middlesex System obtains water from both surface and from wells which
we call groundwater sources. In 1997, surface sources of water provided
approximately 64% of the Middlesex System's water supply, groundwater from wells
provided approximately 29% and the balance of 7% was purchased from
Elizabethtown Water Company ("Elizabethtown"), a nonaffiliated water utility.
Middlesex System's distribution storage facilities are used to supply water to
its customers at times of peak demand, outages and emergencies.
12
<PAGE>
The principal source of surface supply for the Middlesex System is the D& R
Canal, owned by the State of New Jersey and operated as a water resource by the
New Jersey Water Supply Authority ("NJWSA"). Under a multistate compact, the
NJWSA is entitled to divert water from the Delaware River into the D&R Canal.
This supply, together with water in the Round Valley and Spruce Run Reservoir
System, provide a safe yield of 225 mgd which supplies our Middlesex System and
other large water purveyors contractually regulated by the NJWSA. We have
contracts with the NJWSA to divert a maximum of 20 mgd of untreated water from
the D&R Canal. In addition, we have a one year agreement for an additional 5
mgd, renewed through April 30, 1999. We also have an agreement with
Elizabethtown, effective through December 31, 2005, which provides for the
minimum purchase of 3 mgd of treated water with provisions for additional
purchases. We have also purchased additional water from Elizabethtown on an
emergent basis when construction activity briefly closed the D&R Canal.
Our Middlesex System also derives water from groundwater sources equipped
with electric motor driven deepwell turbine type pumps. The Middlesex System has
32 wells, which provide an aggregate pump capacity of approximately 27 mgd.
TIDEWATER SYSTEMS:
Water supply to Delaware customers is derived from the Tidewater Systems'
115 wells which provided overall system delivery of 512 million gallons during
1997. The Tidewater Systems do not have a central treatment facility. Several of
its water systems in Sussex County and New Castle County, Delaware have
interconnected transmission systems. Treatment is by chlorination and, in some
cases, pH correction and filtration.
PINELANDS SYSTEM:
The Pinelands System obtains its water supply from four wells drilled into
the Mt. Laurel aquifer. The wells are equipped with three electric motor driven
deep well turbine pumps and one is equipped with a electric motor driven
submersible pump. Disinfection is done at individual well sites. The wells have
an aggregate pump capacity of 2.2 mgd.
PINELANDS WASTEWATER SYSTEM:
The Pinelands Wastewater System discharges into the South Branch of the
Rancocas Creek through a tertiary treatment plant that provides clarification,
sedimentation, filtration and disinfection. The total capacity of the plant is
0.5 mgd. Current average flow is 0.3 mgd. Pinelands has a current valid
discharge permit issued by the New Jersey Department of Environmental Protection
("DEP").
PROPERTIES
The water utility properties of our systems consist of source of supply,
pumping, water treatment, transmission and distribution and general facilities.
MIDDLESEX SYSTEM:
The Middlesex System's principal source of surface supply is the D&R Canal
owned by the State of New Jersey and operated as a water resource by the NJWSA.
Water is withdrawn from the D&R Canal at New Brunswick, New Jersey through
our intake and pumping station located on State owned land bordering the Canal.
It is transported through our 54 inch supply main for treatment and distribution
at the CJO Plant. See "THE PROJECT." Facilities at the CJO Plant consist of
source of supply, pumping, water treatment, transmission, storage, laboratory
and general facilities. We monitor water quality at the CJO Plant, at each well
field and throughout the distribution system to determine that federal and state
water quality standards are met. See "THE PROJECT" and "Regulation -Water
Quality and Environmental Regulations."
The design capacity of the intake and pumping station in New Brunswick, New
Jersey, is 80 mgd. The four electric motor driven vertical turbine pumps
presently installed have an aggregate design capacity of 65 mgd. The station is
designed to permit its pumping capacity to be increased to 80 mgd by the
installation of additional pumping units. The design capacity of our raw water
supply main is 55 mgd. We also have a 58,600 foot transmission main, a long term
lease agreement with the City of Perth Amboy for the use of a 38,800 foot
transmission main, and a long term, nonexclusive "wheeling agreement" with the
East Brunswick system, all used to transport water to several of our contract
customers.
13
<PAGE>
The CJO Plant includes chemical storage and chemical feed equipment, dual
rapid mixing basins, four reinforced concrete mechanical flocculation
compartments, four underground reinforced concrete settling basins, eight rapid
filters containing gravel, sand and anthracite for water treatment and a steel
washwater tank. The firm design capacity of the CJO Plant is now 30 mgd (45 mgd
maximum capacity). The main pumping station at the CJO Plant has a design
capacity of 90 mgd. The four electric motor driven vertical turbine pumps
presently installed have an aggregate capacity of 65 mgd.
In addition to the main pumping station at the CJO Plant, there is a 15 mgd
auxiliary pumping station located in a separate building. It has a dedicated
substation and emergency power supply provided by a diesel-driven generator. It
pumps from the 10 million gallon distribution storage reservoir directly into
the distribution system. We refer to a million gallons as "mg" in this
Prospectus.
We have a RENEW Program in the Middlesex System to clean and line with
cement previously unlined mains. There are approximately 170 miles of unlined
mains in the 670 mile Middlesex System. In 1999, we will clean and line
approximately nine miles of unlined mains.
Middlesex System's storage facilities consist of a 10 mg reservoir at the
CJO Plant, 5 mg and 2 mg reservoirs in Edison, a 5 mg reservoir in Carteret and
a 2 mg reservoir at the Park Avenue Well Field.
We own the properties in New Jersey on which Middlesex System's 32 wells
are located. We also own our headquarters complex at 1500 Ronson Road, Iselin,
New Jersey, consisting of a 27,000 square foot, two story office building and an
adjacent 16,500 square foot maintenance facility.
TIDEWATER SYSTEMS:
The Tidewater Systems' storage facilities include 21 ground level storage
tanks with the following capacities: eleven 30,000 gallon tanks, five 25,000
gallon tanks, three 120,000 gallon tanks, one 135,000 gallon tank, one 82,000
gallon tank and one elevated storage tank with a capacity of 250,000 gallons.
Our Delaware operations are managed from Tidewater's leased offices in
Odessa, Delaware and from Public's leased offices in Millsboro, Delaware.
Tidewater's office property, which is owned by its wholly-owned subsidiary,
White Marsh Environmental Systems, Inc., consists of a 2,400 square foot
building situated on a one (1) acre lot.
PINELANDS SYSTEM:
Pinelands Water Company owns well site properties which are located in
Southampton Township, New Jersey. Pinelands Water storage facility is a 1.2 mg
standpipe.
PINELANDS WASTEWATER SYSTEM
Pinelands Wastewater Company owns a 12 acre site on which its 0.5 mgd
capacity tertiary treatment plant is located.
LEGAL PROCEEDINGS
A Woodbridge, New Jersey motel in our service area originally filed claims
against us in 1990, in the Superior Court, Burlington County, New Jersey
alleging financial losses due to improper water pressure and service and also
seeking punitive damages. Subsequently in 1994, and again in 1997, the motel
suffered outbreaks of legionella, resulting in the 1997, shut-down of the motel
by the New Jersey Department of Health. The motel amended its claims to assert
that we provided water containing the legionella bacteria. The motel is in
bankruptcy. A bank creditor of the motel has joined in the motel's claim against
us in an effort to recover some $3.5 million still owing to the bank. Although
we believe that the motel's claims are not supportable and have expert witness
testimony to that effect, the motel also has an expert who will testify that we
do have responsibility. Claims resulting from the death of a motel guest from
legionella in 1997 have been brought against the motel and the motel in turn has
claimed against us. We have substantial insurance coverage, which we believe
will be sufficient for all claims in this matter other than for punitive
damages. We do not believe the motel's claims for punitive damages will prevail.
While the outcome of this case remains uncertain, we believe that the final
resolution will not have a significant effect on our financial condition or
results of operation.
14
<PAGE>
A 1995 fire at a warehouse in our service territory resulted in multiple
party claims brought both in the Superior Court for Middlesex County, New
Jersey, as well as, with the financial collapse of the principal tenant, in the
Federal Bankruptcy Court. The claims in the State court action are for
unspecified amounts but include claims against us for insufficient water
pressure and supply. The Bankruptcy Court has stayed all claims against the
tenant except, to the extent the tenant is insured, claims brought by us arising
from claims made against us by other tenants and the landlord. Under New Jersey
case law, we will not have financial responsibility to parties to the extent
they receive payments under their own insurance policies. We do not know either
the total amount of claims against us or how much of that amount will be covered
by the parties' own insurance policies. Our counsel in the litigation advises
that the case is unlikely to be resolved rapidly. We believe we have substantial
defenses to the claims against us, although we do not have insurance coverage
for them.
EMPLOYEES
As of September 30, 1998, we had a total of 140 employees in New Jersey,
and a total of 28 employees in Delaware. No employees are represented by a
union. Management considers its relations with its employees to be satisfactory.
Wages and benefits are reviewed annually and are considered competitive within
the industry.
COMPETITION
Our business in our franchised service areas is substantially free from
direct competition with other public utilities, municipalities and other
entities. However, our ability to provide some contract water supply and
wastewater services and operations and maintenance services is subject to
competition from other public utilities, municipalities and other entities.
Although Tidewater has been granted an exclusive franchise for each of its
existing community water systems, its ability to expand service areas has been
affected by the Delaware Department of Natural Resources and Environmental
Control awarding franchises to other regulated water purveyors, including
franchises granted to service community water systems around and in between the
Tidewater Systems service areas.
REGULATION
We are subject to regulation as to our rates, services and other matters by
the states of New Jersey and Delaware with respect to utility service within
those states and with respect to environmental and water quality matters. We are
also subject to environmental and water quality regulation by the United States
Environmental Protection Agency ("EPA"). In addition, our issuances of
securities, including the Common Stock offered under this Prospectus, is subject
to the prior approval of the BPU.
REGULATION OF RATES AND SERVICES
New Jersey operations are subject to regulation by the BPU. Similarly, our
Delaware operations are subject to regulation by the PSC. These regulatory
authorities have jurisdiction with respect to rates, service, accounting
procedures, the issuance of securities and other matters.
In determining our rates, the BPU and the PSC consider the income,
expenses, rate base of property used and useful in providing service to the
public and a fair rate of return on that property. Rate determinations by the
BPU do not guarantee particular rates of return to the Company for our New
Jersey operations nor do rate determinations by the PSC guarantee particular
rates of return for our Delaware operations. Thus, we may not achieve the rates
of return allowed by the BPU or the PSC.
We filed a petition with the BPU on September 17, 1998 for a 21.9% rate
increase to include the $38 million costs of the Project in our rate base and to
recover certain other of our costs which have increased. The Company anticipates
that a BPU determination with respect to this petition may not be made until the
summer of 1999. There can be no assurance that the rate increase will be granted
or, if granted, that it will be in the amount we requested.
We anticipate that we may file with the PSC during 1999 for a rate increase
for the Tidewater Systems, which may also include a request to combine Tidewater
and Public into a single entity.
WATER QUALITY AND ENVIRONMENTAL REGULATIONS
Both the EPA and the DEP regulate our operations in New Jersey with respect
to water supply, treatment and distribution systems and the quality of the
water, as do the EPA, the DNREC, and the Delaware Department of Health with
respect to operations in Delaware.
15
<PAGE>
Federal, Delaware and New Jersey regulations adopted over the past five
years relating to water quality require expanded types of testing by the Company
to insure that its water meets State and Federal water quality requirements. In
addition, environmental regulatory agencies are reviewing current regulations
governing the limits of certain organic compounds found in the water as
byproducts of treatment. The Company believes the CJO Plant upgrade and
expansion will allow the Company to be in a stronger position to meet any such
future regulations with regard to its Middlesex System. Regular testing of our
water demonstrates that we are in compliance with existing Federal, New Jersey
and Delaware primary water quality standards.
As more fully discussed in the Company's most recent Annual Report on Form
10-K, the Company is subject to regulations of the EPA as to maximum contaminant
levels under the Federal Safe Drinking Water Act. There are also similar state
regulations by the DEP in New Jersey.
The DEP and the Delaware Department of Health monitor the activities of the
Company and review the results of water quality tests performed by the Company
for adherence to applicable regulations. Other regulations applicable to the
Company include the Lead and Copper Rule, the maximum contaminant levels
established for various volatile organic compounds, the Federal Surface Water
Treatment Rule, and the Total Coliform Rule. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE" and "WHERE YOU CAN FIND MORE INFORMATION."
16
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except share and per share data)
This selected financial information as of, and for the years ended,
December 31, 1993, 1994, 1995, 1996 and 1997, was taken from and should be read
along with the financial statements contained in our most recent Annual Report
on Form 10-K. Information as of, and for the periods ended, September 30 1997
and 1998 is taken from financial statements that have not been audited but
which, we believe, fairly present our financial position and results of
operations for those periods and should be read along with our most recently
filed Quarterly Report on Form 10-Q. See "WHERE YOU CAN FIND MORE INFORMATION."
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
------------------ ------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME
STATEMENT DATA:
Operating Revenues $32,434 $30,241 $40,294 $38,025 $37,847 $36,122 $35,479
Operating Expenses 25,241 23,544 31,526 29,802 29,184 27,670 27,423
Net Income 5,185 4,487 5,861 5,168 5,704 5,495 5,480
Earnings Applicable 4,946 4,341 5,635 5,009 5,545 5,307 5,224
to Common Stock
Earnings per Share
of Common Stock :
Basic $1.14 $1.03 $1.33 $1.20 $1.36 1.33 1.33
Diluted 1.13 1.02 1.33 1.20 1.36 1.33 1.33
Dividends Paid per Share $.855 $.84 $1.125 $1.105 $1.085 $1.0575 $1.0125
of Common Stock :
Average Number of
Shares Outstanding
Basic 4,326,337 4,226,241 4,235,082 4,169,334 4,078,890 4,003,393 3,924,363
Diluted 4,552,763 4,346,792 4,382,345 4,258,740 4,168,296 4,092,799 4,013,769
<CAPTION>
As of September 30, As of December 31,
------------------ -----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Total Assets $191,415 $156,706 $159,761 $148,660 $144,822 $132,413 $125,676
Utility Plant - Net 152,045 130,853 135,071 121,245 117,933 108,743 105,392
Common Equity 54,330 50,839 51,226 49,216 47,644 44,851 42,839
Convertible Preferred 3,894 3,896 3,894 1,565 1,565 1,565 1,544
Stock
Nonredeemable
Preferred Stock 1,102 1,102 1,102 1,102 1,102 1,226 1,250
Long-term Debt (excluding 75,884 52,929 52,918 52,961 52,960 49,500 37,000
current portion)
</TABLE>
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion and analysis should be read in conjuction with the
financial statements contained in our most recent Annual Report on Form 10-K and
our most recently filed Quarterly Report on Form 10-Q. See "WHERE YOU CAN FIND
MORE INFORMATION."
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1998
Operating Revenues for the nine months ended September 30, 1998, were $2.2
million higher than last year. Rate increases resulted in additional revenues of
$1.2 million. The Middlesex System received regulatory approval from the BPU to
implement a 4.4% rate increase in January, 1998. The Pinelands Water and
Wastewater Companies also increased their rates in January, 1998. This increase
represented the second part of a three part rate increase previously approved by
the BPU. The third increase is scheduled for January 1999.
A subsidiary acquisition added $0.6 million to revenues. The acquisition of
Public by our wholly-owned subsidiary, Tidewater was completed on July 31, 1997.
As a result, the nine months of consolidated revenue for 1997 only include two
months of revenue from Public.
Customer growth contributed $0.4 million to revenues. The customer base of
Tidewater grew by 820 accounts over the twelve month period ended September 30,
1998. This translates to an annual growth rate in customers of 11.6% and is
consistent with the increase of 13.0% in amounts billed for water services to
the customers of Tidewater.
Operating Expenses rose $1.7 million or 7.2% for the nine months ended
September 30, 1998. Some of the reasons for this increase are briefly discussed
here. The Middlesex System changed the composition of the water sources it used
to supply its customers. During 1998, less water was withdrawn from its well
fields and more was purchased from the NJWSA and Elizabethtown. This resulted in
higher purchased water costs and higher chemicals expense of $0.2 million.
Electric power costs for the Middlesex System were higher by about $0.2 million
over last year due primarily to a large credit we received in the 1997 period
from our power provider. Costs associated with the recognition of post
retirement benefits under mandated accounting standards pushed operating
expenses up by $0.3 million. Public's expenses are now included in our
consolidated expenses. Its expenses amounted to $0.3 million for the nine months
ended September 30, 1998.
On a consolidated basis, almost $9.5 million of newly constructed utility
plant or utility plant acquired through acquisition was placed in service since
September 30, 1997. This resulted in higher depreciation expense in the first
nine months of 1998 of $0.2 million or 8% over that period last year.
Taxes other than income taxes includes the taxes that the State of New
Jersey charges regulated water and wastewater utilities based upon gross
receipts from operations in New Jersey. These taxes are called Gross Receipts
and Franchise Taxes. In general, for every dollar of revenue collected from our
New Jersey customers approximately 13.5% is remitted to the State of New Jersey.
As described above, about $1.2 million of additional revenues were recorded by
our New Jersey companies which, in turn, increased the tax expense by just under
$0.2 million.
Other income increased $0.7 million in the first nine months of 1998 over
last year. One of the components of the increase is higher earnings on the
unexpended proceeds from the 5.35% Series W Mortgage Bond issued in March, 1998.
As of September 30, 1998, $11.3 million of the $23.0 million received from the
Series W offering remains in a CJO Plant Construction account maintained by a
trustee. We submit payment requisitions to the trustee for qualified CJO Plant
expenditures. It is our expectation that the balance of the proceeds will be
exhausted by February, 1999. Another piece of the increase pertains to interest
capitalized on the CJO Plant work in process expenditures. Public utilities
refer to this as Allowance for Funds Used During Construction ("AFUDC"). In
general, AFUDC is recorded as a cost of the project until the utility plant is
ready to provide service to customers. The effect is to reduce expenses
currently for the Company and depreciate the capitalized interest along with the
rest of the CJO Plant costs over its estimated useful life.
Interest charges rose $0.5 million which represents our obligation to pay
interest on the 5.35% Series W Mortgage Bond issued in March 1998.
18
<PAGE>
Net Income for the nine months ended September 30, 1998 increased $0.7
million or 15.6% over the comparable 1997 period based upon the discussion
above. The increase in the preferred stock dividend requirement is attributable
to the issuance of preferred stock in July, 1997, to complete the acquisition of
Public. Through September, 1998, nine months worth of the dividend requirements
were recorded while for the same period in 1997 only two months were recorded.
Basic and Diluted Earnings per Share both increased by $0.11 over last
year. There is a $0.01 per share difference between Basic and Diluted Earnings
per Share. This difference is due to the two series of convertible preferred
stock that we have issued. See "-- Accounting Standards."
RESULTS OF OPERATIONS
1997 COMPARED TO 1996
Operating Revenues increased by $2.3 million to $40.3 million due to
favorable weather conditions in New Jersey and Delaware, continued growth in
Tidewater's customer base of 12%, rate increases implemented by the Pinelands
Companies, increased contract revenues from USA and the inclusion of Public's
operating results since August 1997.
Offsetting effects to net income were higher operations and maintenance
expenses of $0.8 million or 4.1%, which reflected increased purchased water of
$0.3 million transmission and distribution expenses of $0.3 million;
administrative and general expenses of $0.3 million and the inclusion of
operating expenses for Public of $0.2 million. These increases were offset by
reductions in purchased power and water treatment expenses of $0.3 million.
Depreciation expense increased 4.8% due to a higher level of depreciable
plant in service. Taxes, other than income taxes increased $0.2 million and were
related primarily to revenue-related taxes. A higher level of taxable income
resulted in a $0.6 million increase in federal taxes.
As a result, Net Income increased 13.4% to $5.9 million in 1997 compared
with $5.2 million in the prior year.
RESULTS OF OPERATIONS
1996 COMPARED TO 1995
Operating Revenues in 1996 were $0.2 million higher than in 1995.
Consumption was lower in all major classes of customers. These decreases were
offset by additional fixed service charges as a result of an increased customer
base in Delaware of 12.5% and the inclusion of revenues from the Pinelands
Companies and USA for a full year in 1996.
Operations and maintenance expenses were $0.9 million or 4.8% higher in
1996 over 1995 due principally to increases in purchased water of $0.3 million;
water treatment of $0.3 million; pumping expenses of $0.2 million; and customer
accounts and administrative and general expenses of $0.3 million; offset by a
decrease in transmission and distribution expenses of $0.2 million.
Depreciation increased $0.1 million or 4.1% due to a higher depreciation
base. Federal income taxes decreased $0.5 million due to lower taxable income.
Interest expenses increased $0.2 million or 5.3% as a result of the long-term
borrowings by Tidewater.
As a result, Net Income decreased $0.5 million or 9.4%.
LIQUIDITY AND CAPITAL RESOURCES
The table below presents the estimated capital expenditures, in millions
for all our companies for 1998, 1999 and 2000:
1998 1999 2000
---- ---- ----
(in millions)
CJO Plant $16.0 $17.0 $ -
Delaware Systems 3.2 2.0 0.7
RENEW Program 2.1 2.2 2.2
Scheduled upgrades to
existing systems 3.0 4.7 3.6
----- ----- -----
Total $24.3 $25.9 $6.5
----- ----- ----
19
<PAGE>
Our plan to finance these projects is underway. Proceeds from the $23.0
million Series W First Mortgage Bonds and the anticipated common stock offering
will be used to finance the CJO Plant expenditures in 1998 and 1999. Our
Middlesex System will receive $2.2 million from New Jersey Environmental
Infrastructure Trust to cover the cost of the 1999 RENEW Program, which is our
program to clean and line with cement approximately nine miles of unlined mains
in the Middlesex system. There is a total of approximately 170 miles of unlined
mains in the 670 mile Middlesex System. We expect to apply for similar funds in
1999 for the year 2000 RENEW Program. The financing of our Delaware
subsidiaries, capital program will be a combination of a capital contribution
from the Company and long-term debt financing from either a financial
institution or the Company. The debt financing decision will be based upon the
terms of financing available to our Delaware subsidiaries. We expect to be able
to cover the costs of scheduled upgrades to the existing systems with the cash
flow generated from our utility operations through the year 2000. For the nine
months ended September 30, 1998 our consolidated group has expended $18.8
million for capital projects, including $12.2 million for the Project.
The Company currently has six series of First Mortgage Bonds outstanding in
the aggregate principal amount of $72.5 million. In addition, two additional
series of First Mortgage Bonds in the principal amount of $2.2 million have been
delivered in escrow with an expected closing of November 5, 1998. The First
Mortgage Bonds have been issued under and secured by a First Mortgage Bond
Indenture and supplements thereto which constitute a direct first mortgage lien
upon substantially all of the property of the Company. Tidewater borrowed funds
under a $3.5 million 8.05% Amortizing Secured Note due December 20, 2021.
Approximately $3.4 million was outstanding under that note as of September 30,
1998.
From time to time it may be necessary to utilize all or part of the $28.0
million in total lines of credit we have available with three commercial banks
for working capital purposes or provide interim funds until long-term financing
is arranged. At September 30, 1998, we had $4.5 million of loans outstanding
against those lines of credit.
REGULATORY MATTERS
On September 17, 1998, Middlesex filed a petition with the BPU for a base
rate increase of $7.9 million or 21.9%. Approximately 75% of the increase is
necessary to recover the investment in the upgrade and expansion of the CJO
Plant serving our central New Jersey water system. The purpose of the Project is
to meet the new and anticipated regulatory standards concerning water quality,
as well as to increase the plant's production capacity. A decision by the BPU is
expected in the summer of 1999.
On January 29, 1998, the BPU acted upon our November 1996 petition and
approved an increase in our rates for the Middlesex System by 4.4% or $1.5
million. Under the rate increase, the allowed return on equity is 11.0% with an
overall rate of return of 8.56%. The increase included the recovery of
postretirement costs other than pension expenses which are mandated by the
Company's compliance with Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions." The
prior increase in base rates granted by the BPU was $2.8 million, or 9.33%, in
April 1993.
In January 1997, the BPU approved a stipulation agreed to by the parties to
the Pinelands Water and Wastewater Companies' rate cases which were filed in
February 1996. The stipulations allow for a combined rate increase which will
result in $0.4 million additional revenues. The new rates are being phased in
over a three-year period to minimize the impact on customers. Phases one and two
were implemented in January 1997 and 1998, respectively.
ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No.128, "Earnings Per Share." This
statement supersedes Accounting Principles Bulletin Opinion No. 15, "Earnings
Per Share," and simplifies the reporting and computing of earnings per share
("EPS"). SFAS No. 128 requires dual presentation of basic and diluted earnings
per share on the face of the income statement and requires
20
<PAGE>
a reconciliation of the basic EPS computation to the diluted EPS computation. At
December 31, 1997, the Company adopted SFAS No. 128.
SFAS No. 130, "Reporting Comprehensive Income," establishes standards for
reporting and display of comprehensive income and its components in a full set
of general-purpose financial statements. At September 30, 1998, the Company did
not have any items of comprehensive income that would affect the current
reporting of the Company's financial position, results of operations or cash
flows.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," requires that public enterprises report certain information about
operating segments in complete sets of financial statements. Disclosure is not
required for interim financial statements in the initial year of its
application. The Company is evaluating the requirements of SFAS No. 131. Because
the statement relates solely to disclosure provisions, it will not have any
effect on the Company's financial position, results of operations or cash flows.
SFAS No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits," revises and standardizes disclosure requirements for
pension and other postretirement benefit plans but does not change the
measurement or recognition of those plans. This statement is required to be
adopted for the fiscal year ending December 31, 1998.
YEAR 2000
Software used in many computer systems and computerized control devices was
designed to record only the last two digits of each year. This software, some of
which we own, may not function properly as of January 1, 2000 because it
interprets the new year as 1900. We have tested our own computer systems, to
make certain that those systems will work properly when 1999 becomes 2000. We
have also requested certification of Year 2000 compliance from the vendor of the
new SCADA, as well as the principal vendors of data processing serving our
financial reporting, payroll, billing, customer information and shareholder
record systems. The vendors have certified that their systems have been tested
and will work properly. We believe we may reasonably rely on those
certifications. We also expect to spend up to $10,000 to bring certain other
operating systems, including our network of desktop personal computers, into
Year 2000 compliance. Nonetheless, we may not have identified every computerized
control device of ours which may be affected by Year 2000. Even if identified,
we may not be able to reprogram or replace those devices before January 1, 2000.
More importantly, we cannot assess the impact on us of failures of computer
systems and control devices used by others. We are especially concerned about
third parties who provide significant services and materials to process, treat
and distribute water and to process, treat and dispose of wastewater, and about
the possible failure of electric power and telecommunications or the inability
to obtain diesel fuel for the Company's stand-by generators. The occurrence of
any such Year 2000-related problem could have a material adverse effect on our
financial condition and results of operations.
21
<PAGE>
COMMON STOCK PRICE RANGE AND DIVIDENDS
Cash dividends on our Common Stock have been paid each year since 1912, and
the annual dividend has increased for 25 consecutive years. On October 22, 1998,
the Board of Directors declared a quarterly cash dividend of $0.295 per share
payable on December 1, 1998 to shareholders of record on November 16,1998.
The Board of Directors' policy has been to pay cash dividends on the Common
Stock on a quarterly basis. Future cash dividends will be dependent upon our
earnings, financial condition, capital demands and other factors, and will be
determined in accordance with policies established by the Board of Directors.
See "Description of Common Stock" for certain restrictions upon the payment of
cash dividends.
Our Common Stock is listed on the Nasdaq National Market and trades under
the symbol "MSEX." On October 22, 1998, we had 2,271 common shareholders of
record.
The following table sets forth the range of sales prices of the Common
Stock, as reported by the Nasdaq National Market and dividends paid thereon for
the periods indicated.
<TABLE>
<CAPTION>
SALES PRICE
-------------------------
HIGH LOW QUARTERLY CASH DIVIDENDS
---- --- ------------------------
<S> <C> <C> <C> <C>
1998:
Fourth Quarter (through $24 $21 1/4 $0.295
October 30, 1998)
Third Quarter 22 20 1/8 0.285
Second Quarter 21 1/4 19 1/4 0.285
First Quarter 22 1/2 19 7/8 0.285
------
$1.150
======
1997:
Fourth Quarter $22 1/2 $18 $0.285
Third Quarter 19 1/4 16 3/8 0.28
Second Quarter 17 7/8 16 3/8 0.28
First Quarter 18 17 0.28
------
$1.125
======
1996:
Fourth Quarter $18 1/4 $16 3/4 $0.28
Third Quarter 18 16 0.275
Second Quarter 17 1/2 15 1/2 0.275
First Quarter 19 1/4 17 1/4 0.275
------
$1.105
======
</TABLE>
The book value per share of the Common Stock at September 30, 1998 was
$12.20 per share. For a recent closing sale price of the Common Stock, as
reported on the Nasdaq National Market, see the cover page of this Prospectus.
22
<PAGE>
DESCRIPTION OF COMMON STOCK
Our authorized capital stock consists of 10,000,000 shares of Common Stock,
without par value, 149,980 shares (as of October 30, 1998) of Cumulative
Preferred Stock, without par value, and 100,000 shares of Cumulative Preference
Stock, without par value. As of October 30, 1998, there were 4,368,847 shares of
Common Stock outstanding, four series of Cumulative Preferred Stock representing
a total of 45,898 shares outstanding and no shares of the Cumulative Preference
Stock outstanding. The issuance of the Common Stock offered hereby is subject to
approval by the BPU. See "THE COMPANY --Regulation."
The transfer agent for the Common Stock is Registrar and Transfer Company.
Our outstanding Common Stock is traded on the over-the-counter market on the
Nasdaq National Market System.
Certain New Jersey state laws and provisions in our Restated Certificate of
Incorporation may deter or prevent a change in control of us and/or a change in
management, even if desired by a majority of the shareholders. See "--Voting
Rights" and "--Restriction on Acquisitions."
The following is a brief summary of certain information relating to our
Common Stock. This summary does not purport to be complete and is intended to
outline such information in general terms only.
DIVIDEND RIGHTS
Our Restated Certificate of Incorporation provides that whenever full
dividends have been paid on the Preferred Stock and the Preference Stock
outstanding for all past quarterly periods, the Board of Directors may declare
and pay dividends on the Common Stock out of legally available funds.
LIMITATIONS ON PAYMENT OF DIVIDENDS
Under the terms of the Fourth Supplement to the Company's First Mortgage
Bond Indenture, unless the holders of not less than 75% in principal amount of
all first mortgage bonds consent in writing, the Company may not make a payment
as a dividend or other distribution on capital stock issued by the Company or
for the redemption or acquisition of capital stock issued by the Company, if the
aggregate of all such payments made and to be made by the Company, including the
proposed payment, during the period from October 1, 1948 to the date of the
proposed payment would exceed the aggregate of (a) the consolidated net earnings
of the Company for the period, and (b) the proceeds of the sale received by the
Company for all capital stock issued by it subsequent to September 30, 1948;
provided, that a dividend paid or to be paid in capital stock shall not be
included in the aggregate of such payments.
In addition, under the Thirteenth Supplement to the Company's First
Mortgage Bond Indenture, the Company may not declare or pay any dividends on its
Common Stock (except dividends in shares of its Common Stock) or make any
distribution (except in shares of its Common Stock) or purchase or otherwise
acquire any shares of its Common Stock for value if the aggregate amount of such
dividends, distributions, purchases and acquisitions paid or made subsequent to
December 31, 1972 exceeds the sum of the aggregate of the consolidated net
income of the Company (as defined in the Thirteenth Supplemental Indenture)
available for dividends on its Common Stock accumulated subsequent to December
31, 1971, plus $l.0 million.
As of the date of this Prospectus, the payment of dividends by the Company
has not been affected by these limitations.
VOTING RIGHTS
Every holder of the Common Stock is entitled to one vote for each share
held of record. The Company's Restated Certificate of Incorporation and By-laws
provide for a Board of Directors divided into three classes of directors serving
staggered three-year terms. A classified board has the effect of increasing the
time required to effect a change in control of the Board of Directors. The
Company's By-laws provide that nominations for directors must be (i) made in
writing, (ii) received by the Secretary of the Company not less than 21 days
prior to the date fixed for the meeting of stockholders and (iii) accompanied by
the written consent of the nominee to serve as a director. In addition, the
Restated Certificate of Incorporation provides that the By-laws may only be
amended by stockholders if the holders of two-thirds or more of the issued and
outstanding shares of Common Stock vote for the amendment. The Company's
Restated Certificate of Incorporation also provides that stockholders may take
action only at an annual or special meeting upon prior notice and pursuant to a
vote.
23
<PAGE>
No holder of Preferred Stock or Preference Stock (none of which Preference
Stock has been issued) has any right to vote for the election of directors or,
except as otherwise required by law, for any other purpose; provided, however,
that if and whenever dividends on the outstanding Preferred Stock are in arrears
in an amount equal to at least four quarterly dividends, the holders of the
outstanding Preferred Stock of all series, voting as a class, are entitled,
until all dividends in arrears are paid, to elect two members to the Board of
Directors, which two members shall be in addition to the directors elected by
the holders of the Common Stock. Whenever dividends on the outstanding
Preference Stock are in arrears in an amount equal to at least four quarterly
dividends, the holders of the outstanding Preference Stock of all series, voting
as a class, are entitled, until all dividends in arrears are paid, to elect two
members to the Board of Directors, which two members shall be in addition to the
members elected by the holders of the Common Stock and by the holders of the
Preferred Stock. In addition, unless certain tests set forth in the Company's
charter are met, the consent of the holders of a majority of the outstanding
shares of Preferred Stock of all series, voting as a class, is required for
issuance or sale of any additional series of Preferred Stock or any class of
stock ranking prior to or on a parity with the Preferred Stock as to dividends
or distributions. The consent of the holders of two-thirds in interest of the
outstanding Preferred Stock of all series, voting as a class, is required to
create or authorize any stock ranking prior to the Preference Stock as to
dividends or in liquidation, or to create or authorize any obligation or
security convertible into shares of any such stock, except that such consent is
not required with respect to any increase in the number of shares of Preferred
Stock which the Company is authorized to issue or with respect to the creation
and establishment of any series of the Company's Preferred Stock.
LIQUIDATION RIGHTS
Holders of Common Stock are entitled to share on a pro-rata basis, subject
to the rights of holders of the Company's First Mortgage Bonds, Preferred Stock
or Preference Stock, in the assets of the Company legally available for
distribution to shareholders in the event of the Company's liquidation,
dissolution or winding up.
RESTRICTION ON ACQUISITIONS
As a New Jersey corporation with its headquarters and principal operations
in the state the Company, is a "resident domestic corporation" as defined in New
Jersey's Shareholder Protection Act (the "Act"). The Act bars any "business
combination" as defined in that Act, (generally, a merger or other acquisition
transaction) with any person or affiliate of a person who owns 10% or more of
the outstanding voting stock of a resident domestic corporation for a period of
five years after such person first owns 10% or more of such stock, unless the
"business combination" both is approved by the board of directors of the
resident domestic corporation prior to the time that person acquires 10% or more
of the resident domestic corporation's voting stock and meets certain other
statutory criteria.
DIVIDEND REINVESTMENT PLAN
The Company has a Dividend Reinvestment and Common Stock Purchase Plan
("DRIP") under which participating shareholders may have cash dividends on all
or a portion of their shares of Common Stock or Cumulative Preferred Stock
automatically reinvested in newly issued shares of Common Stock and may invest
at the same time up to an additional $25,000 per quarter in newly issued shares
of Common Stock. Under the DRIP, the Company may permit the purchase of shares
of Common Stock at 95% of market value for specified periods as announced by the
Company from time to time. The Company last authorized the purchase of shares of
Common Stock at 95% of market value during the period January 1, to June 1,
1998. As currently in effect, any purchase of shares under the DRIP is at full
market value. No commission or service charge is paid by participants in
connection with any of their purchases under the DRIP.
24
<PAGE>
UNDERWRITING
Subject to the terms and conditions of an Underwriting Agreement among the
Company and Edward D. Jones & Co., L.P. and Janney Montgomery Scott Inc. (the
"Underwriters"), the Underwriters have severally agreed to purchase from the
Company the aggregate number of shares of the Company's Common Stock set forth
opposite their respective names below.
NUMBER
UNDERWRITER OF SHARES
----------- ---------
Edward D. Jones & Co., L.P.......................
Janney Mortgomery Scott Inc. .................... ---------
Total................................
==========
The Underwriting Agreement provides that the obligations of the
Underwriters to pay for and accept delivery of the Common Stock are subject to
the approval of certain legal matters by counsel and to certain other
conditions. The Underwriters are obligated to take and pay for all of the shares
of the Common Stock offered hereby if any are taken (other than shares of Common
Stock covered by the over-allotment option described below).
The Underwriters have advised the Company that they propose to offer the
Common Stock being purchased by them directly to the public at the initial
public offering price set forth on the cover page of this Prospectus and in part
to certain securities dealers which are members of the National Association of
Securities Dealers, at such prices less a concession which shall not exceed
$_____ per share of Common Stock. After the initial public offering, the public
offering price and concessions may be changed by the Underwriters.
The offering of the Common Stock is made for delivery when, as and if
accepted by the Underwriters and subject to prior sale and to withdrawal,
cancellation or modification of the offer without notice. The Underwriters
reserve the right to reject any order for the purchase of Common Stock in whole
or in part.
The Company has granted to the Underwriters an option for 30 days to
purchase (at the Common Stock Public Price less the Underwriting Discounts and
Commissions shown on the cover page of this Prospectus) up to 67,000 additional
shares of Common Stock. The Underwriter may exercise such option only to cover
over-allotments of shares of Common Stock made in connection with the sale of
the shares offered hereby.
In connection with this offering and in compliance with applicable law, the
Underwriters may over-allot (i.e., sell more Common Stock than is set forth on
the cover page of this Prospectus) and may effect transactions which stabilize,
maintain or otherwise affect the market price of the Common Stock at levels
above those which might otherwise prevail in the open market. Such transactions
may include placing bids for the Common Stock or effecting purchases of the
Common Stock for the purpose of pegging, fixing or maintaining the price of the
Common Stock or for the purpose of reducing a short position created in
connection with the Offering. A short position may be covered by exercise of the
over-allotment option described above in lieu of or in addition to open market
purchases. The Underwriters are not required to engage in any of these
activities and any such activities, if commenced, may be discontinued at any
time.
Neither the Company nor the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Stock. In addition, neither
the Company nor the Underwriters makes any representation that the Underwriters
will engage in such transactions or that such transactions, once commenced, will
not be discontinued without notice.
The Company and its directors and executive officers have agreed to enter
into lock-up agreements pursuant to which they will agree that, subject to
certain customary exceptions, they will not, without the prior written consent
of Edward D. Jones & Co., L.P., for a period of 60 days from and after the date
of this Prospectus, sell, offer to sell, contract to sell, or otherwise dispose
of, directly or indirectly, any shares of Common Stock of the Company or any
securities convertible into, or exercisable or exchangeable for, Common Stock of
the Company (other than shares issuable pursuant to a plan for employees in
effect on the date of this Prospectus).
25
<PAGE>
The Company has agreed to indemnify the Underwriters and persons who
control the Underwriters against certain liabilities that may be incurred in
connection with the offering contemplated hereby, including liabilities under
the Securities Act of 1933, as amended, or to contribute to payments the
Underwriters may be required to make in respect thereof.
LEGAL MATTERS
Certain legal matters in connection with the validity of the Common Stock
offered hereby will be passed upon for the Company by Norris, McLaughlin &
Marcus, P.A., Somerville, New Jersey. Certain legal matters will be passed upon
for the Underwriters by Armstrong, Teasdale, Schlafly & Davis, St. Louis,
Missouri.
EXPERTS
The financial statements incorporated in this Prospectus by reference from
the Company's Annual Report on Form 10-K for the year ended December 31, 1997
have been audited by Deloitte & Touche, independent auditors, as stated in their
report, which is incorporated herein by reference, and have been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements, and other
information with the Securities and Exchange Commission (the "Commission"). You
may read and copy any of the reports and other information we file at the
Commission's public reference facilities located in Washington at Judiciary
Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, in New York
located at 7 World Trade Center, Suite 1300, New York, New York 10048, and in
Chicago located at Northwest Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. You may call the SEC at 1-800-SEC-0330 for further
information about the public reference rooms. Copies of such material can also
be obtained from the Public Reference Section of the commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. Our SEC filings are
also available to the public over the Internet at the Commission's web site
which is located at the following address: http://www.sec.gov.
This Prospectus is a part of a registration statement on Form S-3 (which,
together with all exhibits filed along with it, will be referred to as the
"Registration Statement") which we filed with the Commission to register the
securities we are offering. Certain information and details which may be
important to specific investment decisions may be found in other parts of the
Registration Statement, including its exhibits, but are left out of this
Prospectus in accordance with the rules and regulations of the Commission. To
see more detail, you may wish to review the Registration Statement and its
exhibits. Copies of the Registration Statement and its exhibits are on file at
the offices of the Commission and may be obtained upon payment of the prescribed
fee or may be examined without charge at the public reference facilities of the
Commission described above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Commission's rules allow us to "incorporate by reference" the
information we file with the Commission, which means we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is an important part of this Prospectus. We
incorporate by reference the documents listed below, which already have been
filed with the Commission, and certain information we may file in the future
will automatically update and take the place of information already filed. The
following documents are incorporated by reference as of the date each was filed:
(a) the Company's Quarterly Reports on Form 10-Q for the quarters ended March
31, 1998, June 30, 1998 and September 30, 1998; (b) the Company's Annual Report
on Form 10-K for the year ended December 31, 1997; and (c) the Company's Current
Report on Form 8-K filed on September 11, 1998.
26
<PAGE>
In addition to the documents already filed, all reports and other documents
which we file in the future with the Commission pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Securities Exchange Act of 1934, before this stock
offering ends, shall also be incorporated by reference in this Prospectus.
You may request a copy of any of these filings. Such requests should be
directed to: Ms. Marion F. Reynolds, Vice President, Secretary and Treasurer,
Middlesex Water Company, 1500 Ronson Road, Iselin, New Jersey 08830, phone no.
(732) 634-1500. You will not be charged for these copies unless you request
exhibits, for which we will charge you a minimal fee. However, you will not be
charged for exhibits in any case where the exhibit you request is specifically
incorporated by reference into another document which is incorporated by this
Prospectus.
27
<PAGE>
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS WHICH ARE NOT CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING OF SHARES OF COMMON STOCK COVERED IN
THIS PROSPECTUS. IF GIVEN OR MADE, SUCH REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY MIDDLESEX WATER COMPANY OR ANY OF THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, ANY SHARES OF COMMON STOCK OFFERED HEREBY IN ANY JURISDICTION
WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
450,000 Shares
MIDDLESEX WATER COMPANY
COMMON STOCK
------------
PROSPECTUS
------------
EDWARD D. JONES & CO., L.P.
JANNEY MONTGOMERY
SCOTT INC.
____________, 1998
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The costs and expenses, other than underwriting discounts and commissions,
payable by the Company in connection with this Offering (all amounts are
estimated except the registration fee) are as follows:
TO BE PAID
BY THE
ITEM COMPANY
---- -----------
Securities and Exchange Commission registration fee...... 3,198
National Association of Securities Dealers, Inc. fee..... 1,700
Nasdaq listing fee....................................... 10,340
Accounting fees and expenses............................. 20,000
Legal fees and expenses.................................. 66,000
Printing................................................. 25,000
Blue Sky fees and expenses .............................. 5,000
Transfer agent fees and expenses ........................ 1,000
Miscellaneous ........................................... 2,762
--------
Total............................................ $135,000
========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 14A:3-5 of the New Jersey Business Corporation Act (the "NJBCA")
gives the Company power to indemnify each of its directors and officers against
expenses and liabilities in connection with any proceeding involving him by
reason of his being or having been a director or officer if (a) he acted in good
faith and in a manner he reasonably believed to be in, or not opposed to, the
best interests of the Company, and (b) with respect to any criminal proceeding,
he had no reasonable cause to believe his conduct was unlawful. However, in a
proceeding by or in the right of the Company, there shall be no indemnification
in respect of any liabilities or expenses if the officer or director shall have
been adjudged liable to the Company unless the Court in such proceeding
determines he is entitled to indemnity for such liabilities and/or expenses. No
indemnification shall be made to or on behalf of a director or officer if a
judgment or other final adjudication adverse to such director or officer
establishes that his acts or omissions (a) were in breach of his duty of loyalty
to the Company and its shareholders, (b) were not in good faith or involved a
knowing violation of law or (c) resulted in receipt by the director or officer
of an improper personal benefit.
II-1
<PAGE>
The NJBCA defines an act or omission in breach of a person's duty of loyalty as
an act or omission which that person knows or believes to be contrary to the
best interests of the Corporation or its shareholders in connection with a
matter in which he has a material conflict of interest. If a director or officer
is successful in a proceeding, the statute mandates that the Company indemnify
him against expenses.
Article V of the Company's By-laws provides:
"Any present or future director or officer of the Company and any
present or future director or officer of any other corporation serving as
such at the request of the Company because of the Company's interest in
such other corporation, or the legal representative of any such director or
officer, shall be indemnified by the Company against reasonable costs,
expenses (exclusive of any amount paid to the Company in settlement), and
counsel fees paid or incurred in connection with any action, suit, or
proceeding to which any such director or officer or his legal
representative may be made a party by reason of his being or having been
such director or officer; provided, ( 1 ) said action, suit, or proceeding
shall be prosecuted against such director or officer or against his legal
representative to final determination, and it shall not be finally adjudged
in said action, suit, or proceeding that he had been derelict in the
performance of his duties as such director or officer; or (2) said action,
suit or proceeding shall be settled or otherwise terminated as against such
director or officer or his legal representative without a final
determination on the merits, and it shall be determined by the Board of
Directors (or, at the option of the Board of Directors, by a disinterested
person or persons selected by the Board of Directors to determine the
matter) that said director or officer had not in any substantial way been
derelict in the performance of his duties as charged in such action, suit,
or proceeding. The right of indemnification provided by this By-law shall
be in addition to and not in restriction or limitation of any other
privilege or power which the Company may have with respect to the
indemnification or reimbursement of directors, officers, or employees."
The Company has in effect a $20,000,000.00 policy of insurance indemnifying
it against certain liabilities to directors and officers of the Company, and
indemnifying directors and officers of the Company against certain of the
liabilities which they may incur in acting in their capacities as such, all
within specific limits. The insurance was purchased from the Federal Insurance
Company, a subsidiary of the Chubb Group of Insurance Companies, for a term
expiring May 31, 2001.
Pursuant to Section 14A:2-7 of the NJBCA, the Company's shareholders
adopted an amendment to the Company's Certificate of Incorporation which
provides that a director or officer shall not be personally liable to the
Company or its shareholders for damages for breach of any duty owed to the
Company or its shareholders, except that such provision shall not relieve a
director or officer from liability for any breach of duty based upon an act or
omission (a) in breach of such person's duty of loyalty to the Company or its
shareholders, (b) not in good faith or involving a knowing violation of law or
(c) resulting in receipt by such person of an improper personal benefit.
II-2
<PAGE>
ITEM 16. EXHIBITS
Exhibits designated with an asterisk (*) are filed herewith. The exhibits
not so designated have heretofore been filed with the Commission and are
incorporated herein by reference to the documents indicated.
Exhibit
No. Document Description
- ------- --------------------
1.1* Form of Underwriting Agreement
3.1 Restated Certificate of Incorporation of the Company, as
amended, is incorporated herein by reference to
Exhibit 3.1 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1997.
3.2 Bylaws of the Company, as amended, is incorporated herein by
reference to Exhibit 3.2 to the Company's Annual Report on Form
10-K for the year ended December 31, 1997.
4.1 Form of Common Stock Certificate, is incorporated
by reference to Exhibit 2(a) filed with the
Company's Registration Statement No. 2-55058
4.2 Articles 7A through 7F, 8, 9 and 10 of the Restated
Certificate of Incorporation as amended are
incorporated herein by reference to Exhibit 3.1 to
the Company's Annual Report on Form 10-K for the
Year ended December 31, 1997.
5* Opinion of Counsel Re: Legality of Securities Registered
23.1* Independent Auditors' Consent
23.2* Consent of Counsel is included in its legal opinion as Exhibit 5
24 Power of Attorney (is included as a part of the
signature page of this registration statement)
II-3
<PAGE>
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "1933 Act"), may be available to directors, officers
and controlling persons of the Company pursuant to the New Jersey Business
Corporation Act, the By-laws of the Company, the Underwriting Agreement, or
otherwise, the Company has been advised that, in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the 1933 Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Company of expenses incurred or paid by a director, officer, or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the 1933 Act and
will be governed by the final adjudication of such issue.
The undersigned Company hereby undertakes that:
(1) For purposes of determining any liability under the 1933 Act, the
information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the 1933 Act shall be deemed to be part of the registration
statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities Act
of 1933, each filing of the Registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the Registration Statement shall be deemed to
be a new Registration Statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) For the purposes of determining any liability under the 1933 Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Township of Woodbridge, State of New Jersey on the 3rd day of
November, 1998.
MIDDLESEX WATER COMPANY
By: /s/ J. RICHARD TOMPKINS
--------------------------------------
J. Richard Tompkins
President and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints J. Richard Tompkins and A. Bruce O'Connor, and
either of them (with full power in each to act alone), his true and lawful
attorneys-in-fact, with full power of substitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto each said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming that all said attorneys-in-fact, or
their substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated below.
<TABLE>
<CAPTION>
Person Capacity Date
------ -------- ----
<S> <C> <C>
/s/ J. RICHARD TOMPKINS
- ----------------------------------- Chairman of the Board, November 3, 1998
J. Richard Tompkins President, Chief Executive
Officer and Director
/s/ JOHN C. CUTTING
- ----------------------------------- Director November 3, 1998
John C. Cutting
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ ERNEST C. GERE
- ----------------------------------- Director November 3, 1998
Ernest C. Gere
/s/ JOHN P. MULKERIN
- ----------------------------------- Director November 3, 1998
John P. Mulkerin
/s/ STEPHEN H. MUNDY
- ----------------------------------- Director November 3, 1998
Stephen H. Mundy
/s/ PHILIP H. REARDON
- ----------------------------------- Director November 3, 1998
Philip H. Reardon
/s/ RICHARD A. RUSSO
- ----------------------------------- Director November 3, 1998
Richard A. Russo
/s/ WILLIAM E. SCOTT
- ----------------------------------- Director November 3, 1998
William E. Scott
/s/ JEFFRIES SHEIN
- ----------------------------------- Director November 3, 1998
Jeffries Shein
/s/ A. BRUCE O'CONNOR
- ----------------------------------- Vice President and Controller November 3, 1998
A. Bruce O'Connor (Chief Financial Officer)
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
Exhibits designated with an asterisk (*) are filed herewith. The exhibits
not so designated have heretofore been filed with the Commission and are
incorporated herein by reference to the documents indicated.
Exhibit
No. Document Description
- ------- --------------------
1.1* Form of Underwriting Agreement
3.1 Restated Certificate of Incorporation of the Company, as
amended, is incorporated herein by reference to
Exhibit 3.1 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1997.
3.2 Bylaws of the Company, as amended, is incorporated herein by
reference to Exhibit 3.2 to the Company's Annual Report on Form
10-K for the year ended December 31, 1997.
4.1 Form of Common Stock Certificate, is incorporated
by reference to Exhibit 2(a) filed with the
Company's Registration Statement No. 2-55058
4.2 Articles 7A through 7F, 8, 9 and 10 of the Restated
Certificate of Incorporation as amended are
incorporated herein by reference to Exhibit 3.1 to
the Company's Annual Report on Form 10-K for the
Year ended December 31, 1997.
5* Opinion of Counsel Re: Legality of Securities Registered
23.1* Independent Auditors' Consent
23.2* Consent of Counsel is included in its legal opinion as Exhibit 5
24 Power of Attorney (is included as a part of the
signature page of this registration statement)
450,000 SHARES OF COMMON STOCK
OF
MIDDLESEX WATER COMPANY
UNDERWRITING AGREEMENT
November ___, 1998
Edward D. Jones & Co., L.P.
Janney Montgomery Scott Inc.
c/o Edward D. Jones & Co., L.P.
12555 Manchester Road
St. Louis, Missouri 63131
Ladies and Gentlemen:
Middlesex Water Company, a New Jersey corporation (the "Company"), confirms
its agreement with Edward D. Jones & Co., L.P. and Janney Montgomery Scott Inc.
(hereinafter collectively referred to as the "Underwriters") as follows:
1. DESCRIPTION OF SHARES. The Company proposes to issue and sell to
the Underwriters 450,000 shares of the common stock, without par value (the
"Common Stock") of the Company (such 450,000 shares are hereinafter
sometimes referred to as the "Firm Shares"). In addition, solely for the
purpose of covering over-allotments, the Company proposes to grant the
Underwriters the option to purchase up to an additional 67,000 shares of
Common Stock (the "Option Shares"). The Firm Shares and the Option Shares
are hereinafter sometimes referred to collectively as the "Shares." The
Shares are more fully described in the Registration Statement and
Prospectus hereinafter defined.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents, warrants and agrees that:
(a) The Company meets the requirements for use of Form S-3 under
the Securities Act of 1933, as amended (the "Act") and has prepared
and filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (Registration
Statement No. 333-___________) relating to the Shares and the offering
thereof in accordance with the Act and has filed such amendments
thereto as may have been required to the date hereof. The registration
statement has been prepared in conformity with the requirements of the
Act and the rules and regulations thereunder (the "Rules and
Regulations"). Copies of that registration statement as amended to
date have been delivered by
<PAGE>
the Company to each of you as the Underwriters. As used in this
Agreement, "Preliminary Prospectus" means each prospectus included in
that registration statement, or amendments of such registration
statement or prospectus, before that registration statement, as so
amended, became effective under the Act and any prospectus filed by
the Company with the consent of the Underwriter pursuant to Rule
424(a) of the Rules and Regulations and the documents incorporated by
reference in such preliminary prospectus. "Registration Statement"
means that registration statement including the prospectus, exhibits
and financial statements, and all documents incorporated by reference
therein, including any information deemed by virtue of Rule 430A(a)(3)
of the Rules and Regulations to be part of such Registration
Statement, as of the time such registration statement or
post-effective amendment became effective under the Act; and
"Prospectus" means the prospectus filed with the Commission by the
Company with the consent of the Underwriters pursuant to Rule 424(b)
of the Rules and Regulations, unless no such Rule 424(b) Prospectus is
filed, in which case it shall mean the Prospectus filed as part of the
last Registration Statement filed on or before the effective date
thereof. The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus.
(b) Each Preliminary Prospectus, at the time of the filing
thereof, did not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances in which made, not misleading; provided that no
representation or warranty is made as to information contained in or
omitted from any Preliminary Prospectus in reliance upon and in
conformity with written information furnished to the Company by or on
behalf of the Underwriters specifically for inclusion therein. The
Registration Statement has been declared effective by the Commission.
(c) The Registration Statement and the Prospectus in all material
respects: (i) complied as of the date the Registration became
effective, (ii) comply as of the date hereof and (iii) will comply as
of the Closing Date, as hereinafter defined, with the requirements of
the Act, the Rules and Regulations, the Securities Exchange Act of
1934, as amended (the "Exchange Act") and the rules and regulations of
the Commission under the Exchange Act (the "Exchange Act Rules and
Regulations"); the Registration Statement and any amendment thereof,
at the time it became effective, did not contain an untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading; and the Prospectus, at the time the Registration Statement
became effective did not, as of the date hereof does not and as of the
Closing Date will not, contain an untrue statement of a material fact
or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that the representations
and warranties in this Paragraph 2.(c) shall not apply to statements
in or omissions
<PAGE>
from the Registration Statement or the Prospectus made in reliance
upon and in conformity with information furnished to the Company in
writing by the Underwriters expressly for use in the Registration
Statement or the Prospectus.
(d) The documents incorporated by reference into the Prospectus
pursuant to Item 12 of Form S-3 under the Act, at the time they were
filed with the Commission, complied in all material respects with the
requirements of the Exchange Act and the Exchange Act Rules and
Regulations and did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein,
or necessary to make the statements therein, in the light of the
circumstances under which they are made, not misleading.
(e) Deloitte & Touche, the accountants whose report appears in
the Prospectus, are independent public accountants as required by the
Act and the Rules and Regulations.
(f) The consolidated financial statements of the Company and its
subsidiaries filed as part of the Registration Statement or included
in any Preliminary Prospectus or the Prospectus present fairly, and
the financial statements included in any amendment or supplement to
the Prospectus will present fairly, the financial condition and
results of operations of the Company and its subsidiaries, at the
dates and for the periods indicated, and have been, and in the case of
financial statements included in any amendment or supplement to the
Prospectus will be, prepared in conformity with generally accepted
accounting principles applied on a consistent basis throughout the
periods involved. No other financial statements are required to be set
forth in the Registration Statement or the Prospectus under the Act or
the Rules and Regulations thereunder.
(g) Except as described in or contemplated by the Registration
Statement and the Prospectus, subsequent to the respective dates as of
which information is given in the Registration Statement and the
Prospectus, neither the Company nor any of its subsidiaries (as
defined in Paragraph 12) has incurred any material liability or
obligation, direct or contingent, or entered into any material
transaction, whether or not in the ordinary course of business, and
there has not been any material change on a consolidated basis in the
Company's capital stock, or any material increase in the long-term
debt of the Company or any of its subsidiaries, or any issuance of
options, warrants, convertible securities or other rights to purchase
capital stock of such entity, or any material adverse change in, or
any adverse development which materially affects, the business,
properties, financial condition, results of operations, or prospects
of the Company and its subsidiaries taken as a whole.
<PAGE>
(h) Each of the Company and its subsidiaries has been duly
incorporated, is validly existing and in good standing under the laws
of its jurisdiction of incorporation, and the Company and each of its
subsidiaries are duly qualified to do business and in good standing as
foreign corporations in each jurisdiction in which their respective
ownership of property or the conduct of their respective businesses
requires such qualification and wherein the failure to be so qualified
would have a material adverse effect on the business of the Company
and each of its subsidiaries, and have all power and authority
necessary to own or hold their properties and to conduct the business
in which they are engaged. All outstanding shares of capital stock of
the subsidiaries of the Company are owned directly or indirectly by
the Company and are validly authorized, issued and outstanding, fully
paid and non-assessable with no personal liability attaching to the
ownership thereof, and all of such shares are owned free and clear of
any lien, pledge or encumbrance or any claim of any third party.
(i) The authorized and outstanding capitalization of the Company
as of September 30, 1998 was as set forth in the Registration
Statement and the Prospectus, and there have been no changes in the
authorized or outstanding capitalization of the Company since
September 30, 1998 except as contemplated by the Registration
Statement and the Prospectus. When the Shares have been issued,
delivered and paid for in the manner herein described, the Shares will
be fully paid, duly issued and non-assessable; the Shares conform to
all statements relating thereto in the Registration Statement, and
holders of the Shares will not be entitled to preemptive rights.
(j) The filing of the Registration Statement and the execution
and delivery by the Company of this Agreement, and the consummation of
the transactions contemplated hereby and thereby, have been duly
authorized by the board of directors of the Company, and all necessary
corporate action to authorize and approve the same has been taken.
This Agreement has been duly executed and delivered by the Company and
is a valid and legally binding obligation of the Company.
(k) The Company and its subsidiaries have good and marketable
title to, or valid and enforceable leasehold interests in, all items
of real and personal property which are material to the business of
the Company and its subsidiaries taken as a whole, free and clear of
all liens, encumbrances and claims (other than the liens disclosed in
the Prospectus) which might materially interfere with the conduct of
the business of the Company and its subsidiaries taken as a whole.
(l) Except to the extent disclosed in the Prospectus, neither the
Company, nor any of its subsidiaries, is in violation of its corporate
charter or bylaws or in default under any obligation, agreement,
covenant or condition contained in any mortgage or other material
contract, lease, note, indenture or
<PAGE>
instrument to which it is a party or by which it may be bound, the
effect of which violation or default would be material to the Company
and its subsidiaries taken as a whole, or is in violation in any
material respect of any law, ordinance, governmental rule, regulation
or court decree to which it or its property may be subject the effect
of which violation would be material to the Company and its
subsidiaries taken as a whole, or has failed to obtain any material
license, permit, certificate, franchise or other governmental
authorization or permit necessary to the ownership of its property or
to the conduct of its business; and the execution, delivery and
performance of this Agreement by the Company, the sale of the Shares
and the consummation of the transactions contemplated by this
Agreement will not conflict with, result in the creation or imposition
of any lien, charge or encumbrance upon any of the properties or
assets of the Company pursuant to the terms of, or constitute a breach
of or default under, any agreement, indenture or instrument to which
the Company is a party, or by which the Company is bound, or result in
a violation of the corporate charter or bylaws of the Company or any
law or ordinance to which the Company or its properties may be subject
or of any order, rule or regulation of any court or governmental
agency having jurisdiction over the Company or its properties, except
for conflicts, breaches, violations or defaults which would be
immaterial to the business and operations of the Company and its
subsidiaries taken as a whole and which would not affect the validity
or enforceability of this Agreement or otherwise adversely affect the
rights, duties or obligations of the Underwriters or the holders of
the Shares.
(m) No approval or consent of any governmental body, other than
(i) as may be required under the Act or in connection or compliance
with the provisions of the securities or "blue sky" laws of any
jurisdiction, and (ii) approval by the New Jersey Board of Public
Utilities and the Delaware Public Service Commission, is legally
required for the carrying out by the Company of the provisions of this
Agreement.
(n) Except as described in the Registration Statement and the
Prospectus, there is no litigation or governmental proceeding pending
or, to the knowledge of the Company threatened against the Company or
any of its subsidiaries which, if adversely resolved, could reasonably
be expected to result in any material adverse change in the business,
properties, financial condition, results of operations or prospects of
the Company and its subsidiaries taken as a whole or which is required
to be disclosed in the Registration Statement or the Prospectus.
(o) There are no contracts or other documents which are required
to be filed as exhibits to the Registration Statement by the Act or by
the Rules and Regulations which have not been filed as exhibits to the
Registration Statement.
(p) The Company and each of its subsidiaries have sufficient
authority
<PAGE>
under statutory provisions or by grant of franchises or permits by
municipalities or counties to conduct in all material respects their
respective businesses as presently conducted and as described in the
Registration Statement and Prospectus.
(q) Except as set forth in the Registration Statement and the
Prospectus, the Company and its subsidiaries are in compliance with
all applicable existing federal, state and local laws and regulations
relating to protection of human health or the environment or imposing
liability or standards of conduct concerning any Hazardous Material
("Environmental Laws"), except for such instances of noncompliance
which, either singly or in the aggregate, would not have a material
adverse effect on the condition (financial or otherwise), results of
operations or properties of the Company and its subsidiaries, taken as
a whole. The term "Hazardous Material" means (i) any "hazardous
substance" as defined by the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, (ii) any
"hazardous waste" as defined by the Resource Conservation and Recovery
Act, as amended, (iii) any petroleum or petroleum product, (iv) any
polychlorinated biphenyl and (v) any pollutant or contaminant or
hazardous, dangerous or toxic chemical, material, waste or substance
regulated under or within the meaning of any other law relating to
protection of human health or the environment or imposing liability or
standards of conduct concerning any such chemical, material, waste or
substance.
(r) No material labor dispute with the employees of the Company
or any of its subsidiaries exists or, to the knowledge of the Company,
is imminent; and the Company knows of no existing or imminent labor
disturbance by the employees of any of its principal suppliers,
manufacturers or contractors which might reasonably be expected to
result in any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects
of the Company and its subsidiaries taken as a whole.
(s) Each of the Company and its subsidiaries owns, possesses or
has the right to use all material licenses, trademarks, patents,
patent rights, inventions, copyrights, service marks and trade names
presently employed by it in connection with the businesses now
operated by it, and neither the Company nor any of its subsidiaries
has received any notice of infringement of or conflict with asserted
rights of others with respect to any of the foregoing.
(t) The Company and its subsidiaries maintain insurance covering
their properties, operations, personnel and businesses which insures
against such losses and risks as are adequate in accordance with its
reasonable business judgment to protect the Company and its
subsidiaries and their businesses. Neither the Company nor any of its
subsidiaries has received notice from any insurer or agent of such
insurer that substantial capital improvements
<PAGE>
or other expenditures will have to be made in order to continue such
insurance. All such insurance is outstanding and duly in force on the
date hereof and will be outstanding and duly in force on the Closing
Date.
(u) Neither the Company nor any of its subsidiaries is an
"investment company" or an entity "controlled" by an "investment
company," as such terms are defined in the Investment Company Act of
1940, as amended.
(v) The Company and each of its subsidiaries have all necessary
consents, authorizations, approvals, orders, certificates and permits
of and from, and have made all declarations and filings with, all
federal, state, local and other governmental authorities, all
self-regulatory organizations and all courts and other tribunals, to
own, lease, license and use their respective properties and assets and
to conduct their respective businesses in the manner described in the
Prospectus, except to the extent that the failure to obtain or file
would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
Any certificate signed by any officer of the Company and delivered to you
or to counsel for the Underwriters shall be deemed a representation and warranty
by the Company to the Underwriters as to the matters covered thereby.
3. PURCHASE, SALE AND DELIVERY OF SHARES. On the basis of the
representations and warranties contained in, and subject to the terms and
conditions of, this Agreement, the Company agrees to sell to the Underwriters,
and each of the Underwriters agrees, severally and not jointly, to purchase from
the Company the number of Firm Shares set forth opposite such Underwriter's name
on Schedule 1 hereto. The purchase price for the Firm Shares will be an amount
equal to the initial public offering price for the Shares as set forth in the
Prospectus (the "Share Public Offering Price"), less ______% of the Share Public
Offering Price.
Delivery of the Firm Shares, in definitive form, and payment therefor,
shall be made at 10:00 A.M., St. Louis time, on the fourth business day after
the Registration Statement shall have been declared effective by the Commission,
or on such later date and time as may be agreed upon in writing between the
Underwriters and the Company, such day and time of delivery and payment being
herein called the "Closing Date." On the Closing Date, the Firm Shares shall be
delivered by the Company to the Underwriters at The Depository Trust Company in
New York, New York, for the accounts of the several Underwriters against payment
of the purchase price therefor in funds immediately available to the order of
the Company. The Company agrees to make available to the Underwriters for
inspection and packaging in New York, New York, at least one full business day
prior to the Closing Date, certificates for the Shares so to be delivered in
good delivery form and in such denominations and registered in such names as the
Underwriters shall have requested, all such requests to have been
<PAGE>
made in writing at least one full business day prior to the Closing Date.
In addition, on the basis of the representations and warranties herein
contained, but subject to the terms and conditions herein set forth, the Company
hereby grants to the Underwriters the option to purchase all or a portion of the
Option Shares as may be necessary to cover over-allotments, at the Share Public
Offering Price, less _____% of the Share Public Offering Price. Such Option
Shares shall be purchased for the account of each Underwriter in the same
proportion as the number of Firm Shares set forth opposite such Underwriter's
name bears to the total number of Firm Shares (subject to adjustment by Edward
D. Jones & Co., L.P. to avoid fractions). This option may be exercised only to
cover over-allotments in the sale of Firm Shares by the Underwriters. This
option may be exercised at any time (but not more than once) on or before the
thirtieth day following the effective date of the Registration Statement by
written notice by you to the Company. Such notice shall set forth the number of
Option Shares as to which the option is being exercised, and the date and time,
as reasonably determined by the Underwriters, when the Option Shares are to be
delivered (such date and time being herein sometimes referred to as the
"Additional Closing Date"); provided, however, that the Additional Closing Date
shall not be earlier than the Closing Date nor earlier than the third business
day after the date on which the option shall have been exercised nor later than
the eighth business day after the day on which the option shall have been
exercised, unless otherwise agreed by the parties.
Payment for the Option Shares shall be made in immediately available funds,
payable to the order of the Company, at the offices of the Company, or such
other place as shall be agreed upon between us, against delivery of the Option
Shares to the Underwriters through the facilities of The Depository Trust
Company for the account of the Underwriters.
Certificates for the Option Shares shall be in such denominations and
registered in such names as requested in writing by the Underwriters at least
two business days prior to the Additional Closing Date.
4. COVENANTS. The Company covenants and agrees with the Underwriters:
(a) To furnish promptly to the Underwriters and counsel for the
Underwriters one signed copy of the Registration Statement as originally
filed, and of each amendment thereto filed with the Commission, including
all consents and exhibits filed therewith.
(b) To deliver promptly to the Underwriters such number of conformed
copies of the Registration Statement as originally filed and each amendment
thereto (excluding exhibits other than this Agreement) and of each
Preliminary Prospectus, the Prospectus and any amended or supplemented
Prospectus as the Underwriters may reasonably request.
<PAGE>
(c) To file promptly with the Commission the Prospectus pursuant to
Rule 424(b) of the Rules and Regulations and to file with the Commission
any amendment to the Registration Statement or the Prospectus or any
supplement to the Prospectus that may, in the reasonable judgment of the
Company or the Underwriters, be required by the Act or requested by the
Commission and approved by the Underwriters.
(d) Prior to filing with the Commission any amendment to the
Registration Statement or amendment or supplement to the Prospectus, or to
filing any Prospectus pursuant to Rule 424 of the Rules and Regulations, to
furnish a copy thereof to the Underwriters and counsel for the Underwriters
and obtain the consent of the Underwriters to the filing (which consent
will not be unreasonably withheld).
(e) To use its best efforts to cause any required post-effective
amendment to the Registration Statement to become effective and to advise
the Underwriters promptly (i) when any post-effective amendment to the
Registration Statement becomes effective, (ii) of any request or proposed
request by the Commission for an amendment to the Registration Statement,
an amendment or a supplement to the Prospectus or for any additional
information, (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation or threat of any stop order proceeding, (iv) of receipt by the
Company of any notification with respect to the suspension of the
qualification of the Shares for sale in any jurisdiction or the initiation
or threat of any proceeding for that purpose, and (v) of the happening of
any event which makes untrue any statement of a material fact made in the
Registration Statement or the Prospectus, or which requires the making of a
change in the Registration Statement or the Prospectus in order to make any
material statement therein not misleading.
(f) If, at any time when a prospectus relating to the Shares is
required to be delivered under the Act, any event occurs as a result of
which the Prospectus as then amended or supplemented would include an
untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or if it shall be necessary to
amend or supplement the Registration Statement or the Prospectus to comply
with the Act or the Exchange Act or the rules and regulations of the
Commission under such Acts, the Company promptly will prepare and file with
the Commission, subject to Paragraph 4.(d), an amendment or supplement
which will correct such statement or omission or an amendment which will
effect such compliance.
(g) If the Commission shall issue a stop order suspending the
effectiveness of the Registration Statement, to make every reasonable
effort to obtain the lifting of that order at the earliest possible time.
<PAGE>
(h) As soon as practicable after the effective date of the
Registration Statement, to make generally available to its security holders
and to deliver to the Underwriters an earnings statement, conforming with
the requirements of Section 11(a) of the Act, covering a period of at least
twelve months beginning after the effective date of the Registration
Statement, provided that the Company may comply with this Paragraph 4.(h)
by complying with the safe harbor provisions of Rule 158 of the Rules and
Regulations.
(i) For a period of three years from the effective date of the
Registration Statement, to furnish to the Underwriters copies of all
reports to shareholders and all reports, filings and financial statements
furnished by the Company to any securities exchange pursuant to
requirements of or agreements with such exchange or to the Commission
pursuant to the Exchange Act or any rule or regulation of the Commission
thereunder.
(j) To endeavor to qualify the Shares for offer and sale under the
securities laws of such jurisdictions as the Underwriters may reasonably
request, provided that no such qualification shall be required if as a
result thereof the Company would be required to qualify as a foreign
corporation, subject itself to general taxation or would be made subject to
service of general process, in each case in any jurisdiction in which it is
not so qualified or subject; and to maintain such qualifications in effect
so long as required for the distribution of the Shares and to arrange for
the determination of the legality of the Shares for purchase by
institutional investors.
(k) Whether or not the transactions contemplated by this Agreement are
consummated or this Agreement is terminated, the Company will pay (i) the
costs incident to the sale and delivery of the Shares and any taxes payable
in that connection; (ii) the costs incident to the preparation, printing
and filing under the Act of the Registration Statement, any Preliminary
Prospectus, the Prospectus and any amendments, supplements and exhibits
thereto; (iii) the costs of distributing the Registration Statement as
originally filed and each amendment thereto and any post-effective
amendments thereof (including exhibits), any Preliminary Prospectus, the
Prospectus, and any amendment or supplement to the Prospectus; (iv) the
costs, if any, of printing and distributing this Agreement; (v) the costs
of filings incident to securing any required review by the National
Association of Securities Dealers, Inc.; (vi) the fees and expenses of
qualifying the Shares under the securities laws of the several
jurisdictions as provided in this Paragraph 4 and of preparing and printing
a Blue Sky Memorandum (including related fees and expenses of counsel to
the Underwriters); (vii) the cost of printing the certificates for the
Shares; (viii) the fees and expenses of the Company's accountants and
counsel; and (ix) all other
<PAGE>
costs and expenses incident to the performance of the obligations of the
Company under this Agreement; provided, however, that except as provided in
sub-parts (v) and (vi) of this Paragraph 4.(k) and in Paragraph 9, the
Underwriters shall pay their own costs and expenses, including the fees and
expenses of its counsel, any transfer taxes on the Shares which it may sell
and the expenses of advertising any offering of the Shares made by the
Underwriters.
(l) Until the termination of the offering of the Shares, to file
timely all documents, and any amendments to previously filed documents,
required to be filed by it pursuant to the Exchange Act.
(m) To apply the net proceeds of the Shares as set forth in the
Prospectus.
(n) For a period of 60 days after the effective date of the
Registration Statement the Company will not, without the prior written
consent of the Underwriters, directly or indirectly sell, contract to sell
or otherwise dispose of any shares of the Company's Common Stock or rights
to acquire such shares, except for the Shares sold hereunder and except
pursuant to (i) stock option plans or in connection with other incentive
compensation arrangements, or (ii) the exercise of warrants, and the
Company will obtain a similar agreement from each of its directors and
executive officers listed in the Prospectus.
5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
Underwriters hereunder are subject to the accuracy, when made and on the Closing
Date, of the representations and warranties of the Company contained herein, to
the performance by the Company of its obligations hereunder, and to each of the
following additional terms and conditions:
(a) The Prospectus shall have been timely filed to the extent
required; at or before the Closing Date, no stop order suspending the
effectiveness of the Registration Statement shall have been issued, and
prior to that time no stop order proceeding nor any order directed at any
document incorporated by reference in the Prospectus shall have been
initiated or, to the knowledge of the Company, threatened by the
Commission, and no challenge shall have been made to any document
incorporated by reference in the Prospectus; any request of the Commission
for inclusion of additional information in the Registration Statement or
the Prospectus or otherwise shall have been complied with; and the Company
shall not have filed with the Commission the Prospectus or any amendment or
supplement to the Registration Statement or the Prospectus without the
consent of the Underwriters.
(b) The Underwriters shall not have discovered and disclosed to the
Company on or prior to the Closing Date that the Registration Statement or
the
<PAGE>
Prospectus or any amendment or supplement thereto contains an untrue
statement of a fact which, in the reasonable opinion of the Underwriters or
Armstrong, Teasdale, Schlafly, & Davis, counsel for the Underwriters, is
material or omits to state a fact that, in the reasonable opinion of the
Underwriters or such counsel, is material and is required to be stated
therein or is necessary to make the statements therein not misleading.
(c) All corporate proceedings and other legal matters incident to the
authorization, form and validity of this Agreement, the Shares, the form of
the Registration Statement and the Prospectus, other than financial
statements and other financial data, and all other legal matters relating
to this Agreement and the transactions contemplated hereby shall be
satisfactory in all reasonable respects to Armstrong, Teasdale, Schlafly, &
Davis, counsel for the Underwriters; and the Company shall have furnished
to such counsel all documents and information that such counsel may
reasonably request to enable them to pass upon such matters.
(d) Norris, McLaughlin & Marcus, P.A., as counsel to the Company,
shall have furnished to the Underwriters their opinion, addressed to the
Underwriters and dated the Closing Date, to the effect that:
(i) Each of the Company and its subsidiaries has been duly
incorporated and is validly existing and in good standing under the
laws of its jurisdiction of incorporation, is duly qualified to do
business and in good standing as a foreign corporation in each
jurisdiction in which its ownership of property or conduct of business
requires such qualification and wherein the failure to be so qualified
would have a material adverse effect on the business of the Company or
such subsidiary, and has all corporate power and authority necessary
to own or hold its properties and conduct the business in which it is
engaged as described in the Prospectus.
(ii) All of the outstanding shares of Common Stock of the Company
(including the Shares) have been duly authorized and validly issued,
are fully paid and non-assessable and conform to the description
thereof in the Prospectus; and the shareholders of the Company have no
preemptive rights with respect to the Shares being issued and sold by
the Company hereunder under the terms of the Company's charter and
bylaws or New Jersey law and, to the knowledge of such counsel after
reasonable inquiry, under the terms of or pursuant to any other
agreement, law or regulation.
(iii) All corporate action required to have been taken by the
Company for the due and proper authorization, issuance, sale and
delivery of the Shares, has been validly and sufficiently taken, and
the
<PAGE>
Shares have been duly authorized, validly issued and are non-
assessable.
(iv) To the knowledge of such counsel based upon communications
with representatives of the Commission, (A) the Registration Statement
is effective under the Act, and (B) the Prospectus was timely filed
with the Commission as required. To the knowledge of such counsel,
(C) no stop order suspending the effectiveness of the Registration
Statement has been issued, and (D) no proceeding for that purpose is
pending or threatened by the Commission.
(v) To the knowledge of such counsel, (A) no order directed to
any document incorporated by reference in the Prospectus has been
issued by the Commission or any court, government or regulatory body
and (B) no pending or threatened challenge has been made to the
accuracy or adequacy of any such document.
(vi) The Registration Statement and the Prospectus and each
amendment or supplement, if any, thereto comply as to form in all
material respects with the requirements of the Act and the Rules and
Regulations thereunder and the rules and regulations of the Commission
under such act (except that no opinion need be expressed as to the
financial statements or financial data contained therein).
(vii) The statements made in the Prospectus, insofar as they
purport to summarize the provisions of statutes, legal and
governmental proceedings, contracts or other documents specifically
referred to therein are accurate and fairly present the information
called for with respect thereto by Form S-3 under the Act (except that
no opinion need be expressed as to financial statements or financial
or statistical data continued therein).
(viii) To such counsel's knowledge, except as disclosed in the
Prospectus, there is no litigation or any governmental proceeding
pending or threatened against the Company or any of its subsidiaries
which could have a material adverse effect on the Company and its
subsidiaries taken as a whole or which is required to be disclosed in
the Registration Statement or the Prospectus.
(ix) To such counsel's knowledge, there are no contracts or other
documents which are required to be filed as exhibits to the
Registration Statement by the Act or by the Rules and Regulations
which have not been filed as exhibits to the Registration Statement as
permitted by the Rules and Regulations.
<PAGE>
(x) To such counsel's knowledge, neither the Company nor any of
its subsidiaries is in violation of its corporate charter or bylaws,
or in default under any agreement, indenture or instrument, the effect
of which violation or default would be material to the Company and its
subsidiaries taken as a whole, or is in violation in any material
respect of any law, ordinance, governmental rule, regulation or court
decree to which it or its property may be subject or, except as
disclosed in the Prospectus, has failed to obtain any material
license, permit, certificate, franchise or other governmental
authorization or permit necessary to the ownership of its property or
to the conduct of its business.
(xi) This Agreement has been duly authorized, executed and
delivered by the Company. The Agreement and the transactions
contemplated by this Agreement will not conflict with any agreement of
the Company or its subsidiaries known to counsel, will not create a
lien or encumbrance upon any property of the Company or its
subsidiaries, will not violate the articles of incorporation or bylaws
of the Company or its subsidiaries and will not violate any law or
governmental ordinance, order or regulation, except to the extent that
such conflict, lien, encumbrance or violation would have no material
adverse effect on the Company and its subsidiaries taken as a whole.
(xii) No approval or consent of any governmental body, other than
(i) as may be required in connection or compliance with the provisions
of the securities or "blue sky" laws of any jurisdiction, and (ii)
approval by the New Jersey Board of Public Utilities and the Delaware
Public Service Commission, is legally required for the issue and sale
of the Shares by the Company or for the carrying out by the Company of
the provisions of this Agreement.
Such counsel also shall confirm that during the preparation of the
Registration Statement and Prospectus, such counsel has participated in
conferences with your representatives and counsel for the Underwriters, and with
officers and representatives of the Company, at which conferences the contents
of the Registration Statement and Prospectus were discussed, reviewed and
revised. On the basis of the information which was developed in the course
thereof, considered in light of such counsel's understanding of applicable law
and the experience gained by such counsel thereunder, such counsel shall confirm
that nothing came to such counsel's attention that would lead such counsel to
believe that either the Registration Statement or Prospectus or any amendment or
supplement thereto (other than the financial statements and notes thereto, or
any related schedules therein, as to which such counsel need express no opinion)
contains any untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
<PAGE>
(e) On the Closing Date, there shall have been furnished to you a
certificate, dated such date, from the Company, signed on behalf of the
Company by the President and Chief Executive Officer and the Treasurer and
Chief Financial Officer, stating that to the knowledge of the officers
signing such certificate:
(i) The representations, warranties and agreements of the Company
in Paragraph 2 are true and correct as of such date; the Company has
complied with all its agreements contained herein; and the conditions
set forth in Paragraph 5.(a) have been fulfilled;
(ii) Neither the Registration Statement, as of its effective
date, nor the Prospectus, as of its date, included any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, and since the effective date of the
Registration Statement, no event has occurred which should have been
set forth in a supplement to or amendment of the Prospectus which has
not been set forth in such a supplement or amendment; and
(iii) No stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceedings for that
purpose have been instituted or are pending or threatened, under the
Act.
(f) On the date of this Agreement and on the Closing Date, Deloitte &
Touche shall have furnished to you letters dated such dates substantially
in the form of a draft of such letter previously delivered to you.
(g) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, there shall not
have been any change specified in the letter referred to in Paragraph 5.(f)
which makes it impractical or inadvisable in the reasonable judgment of the
Underwriters to proceed with the public offering or delivery of the Shares
as contemplated by the Prospectus.
(h) The Underwriters shall have received from Armstrong, Teasdale,
Schlafly & Davis, counsel for the Underwriters, such opinion or opinions,
dated the Closing Date, with respect to the issuance and sale of the
Shares, the Registration Statement, the Prospectus, and other related
matters as the Underwriters may reasonably require, and the Company shall
have furnished to such counsel such documents as they reasonably request
for the purpose of enabling them to pass upon such matters.
<PAGE>
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to the Underwriters and Armstrong, Teasdale, Schlafly & Davis, counsel for the
Underwriters.
If any of the conditions specified in this Paragraph 5 shall not have been
fulfilled when and as provided in this Agreement, or if any of the opinions or
certificates mentioned above or elsewhere in this Agreement shall not be in all
material respects reasonably satisfactory in form and substance to the
Underwriters and their counsel, this Agreement and all obligations of the
Underwriters hereunder may be canceled at, or at any time prior to, the Closing
Date by the Underwriters.
6. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company shall indemnify and hold harmless the Underwriters and each
person, if any, who controls the Underwriters within the meaning of the Act from
and against any loss, claim, damage or liability, joint or several, and any
action in respect thereof, to which the Underwriters or any such controlling
person may become subject, under the Act or otherwise, insofar as such loss,
claim, damage, liability or action arises out of, or is based upon, any untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement, the Prospectus, or the
Registration Statement or Prospectus as amended or supplemented, or arises out
of, or is based upon, the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and shall reimburse the Underwriters and each such
controlling person for any legal and other expenses reasonably incurred by the
Underwriters or such controlling person for any legal and other expenses
reasonably incurred by the Underwriters or such controlling person in
investigating or defending or preparing to defend against any such loss, claim,
damage, liability or action; provided, however, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability or action arises out of, or is based upon, any untrue statement or
alleged untrue statement or omission or alleged omission made in any Preliminary
Prospectus or in the Registration Statement or the Prospectus or any amendment
or supplement thereto in reliance upon and in conformity with written
information furnished to the Company by the Underwriters specifically for
inclusion therein; and provided further that as to any Preliminary Prospectus
this indemnity agreement shall not inure to the benefit of the Underwriters or
any person controlling the Underwriters on account of any loss, claim, damage,
liability or action arising from the sale of Shares to any person by the
Underwriters if the Underwriters failed to send or give a copy of any
Prospectus, as the same may be amended or supplemented, to that person within
the time required by the Act, and the untrue statement or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact in such Preliminary Prospectus was corrected in such Prospectus, unless
such
<PAGE>
failure resulted from non-compliance by the Company with Paragraph 4.(b) hereof.
The foregoing indemnity is in addition to any liability which the Company may
otherwise have to the Underwriters or any controlling person of the
Underwriters.
(b) The Underwriters agree to indemnify and hold harmless the Company, its
directors and officers who signed the Registration Statement and any person who
controls the Company within the meaning of the Act from and against any loss,
claim, damage or liability, joint or several, or any action in respect thereof,
to which the Company or any such director, officer or controlling person may
become subject, under the Act or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, any untrue statement or
alleged untrue statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement, the Prospectus or the Registration
Statement or Prospectus as amended or supplemented, or arises out of, or is
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, but in each case only to the extent that the untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by the
Underwriters specifically for inclusion therein, and shall reimburse the Company
and its directors, officers and controlling persons for any legal and other
expenses reasonably incurred by the Company or any such director, officer or
controlling person in investigating or defending or preparing to defend against
any such loss, claim, damage, liability or action. The foregoing indemnity
agreement is in addition to any liability which the Underwriters may otherwise
have to the Company.
(c) Promptly after receipt by an indemnified party under this Paragraph 6
of notice of any claim or the commencement of any action, the indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under this Paragraph 6, notify the indemnifying party in writing of the
claim or the commencement of that action, provided that the failure to notify
the indemnifying party shall not relieve it from any liability which it may have
to an indemnified party otherwise than under this Paragraph 6. If any such claim
or action shall be brought against an indemnified party, and it shall notify the
indemnifying party thereof, the indemnifying party shall be entitled to
participate therein, and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party; provided, however, if
the defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party or
parties. After notice from the indemnifying party to the indemnified party of
its
<PAGE>
election to assume the defense of such claim or action, the indemnifying party
shall not be liable to the indemnified party under this Paragraph 6 for any
legal or other expenses subsequently incurred by the indemnified party in
connection with the defense other than reasonable costs of investigation, unless
(i) the indemnified party shall have employed such counsel in connection with
the assumption of legal defenses in accordance with the proviso to the next
preceding sentence, (ii) the indemnified party shall have reasonably concluded
that there may be a conflict of interest between the indemnifying party and the
indemnified party in the conduct of the defense of such action (in which case
the indemnifying party shall not have the right to direct the defense of such
action on behalf of the indemnified party), (iii) the indemnifying party shall
not have employed counsel reasonably satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of
commencement of the action or (iv) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of the
indemnifying party.
(d) If the indemnification provided for in this Paragraph 6 shall for any
reason be unavailable to an indemnified party under Paragraph 6.(a) or 6.(b) in
respect of any loss, claim, damage or liability, or any action in respect
thereof, referred to therein, then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof, (i) in such proportion as shall be appropriate to
reflect the relative benefits received by the Company on the one hand and the
Underwriters on the other from the offering of the Shares or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and the Underwriters on the other with respect to the statements or
omissions which resulted in such loss, claim, damage or liability, or action in
respect thereof, as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and the Underwriters
on the other hand with respect to such offering shall be deemed to be in the
same proportion as the total net proceeds from the offering of the Shares
(before deducting expenses) received by the Company bears to the total
underwriting discounts and commissions received by the Underwriters with respect
to such offering, in each case as set forth in the table on the cover page of
the Prospectus. The relative fault shall be determined by reference to whether
the untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by the Company
or the Underwriters, the intent of the parties and their relative knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Paragraph 6.(d) were to be
determined by pro rata allocation or by any other method of allocation which
does not take into account the equitable considerations referred to herein. The
amount paid or payable by an indemnified party as a result of the loss, claim,
damage or liability, or action in respect thereof, referred to above in this
Paragraph 6.(d) shall be deemed to include, for purposes of this Paragraph
6.(d), any legal or other expenses
<PAGE>
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Paragraph 6.(d), the Underwriters shall not be required to contribute any amount
in excess of the amount by which the total price at which the Shares
underwritten by them and distributed to the public was offered to the public
exceeds the amount of any damages which the Underwriters have otherwise paid or
become liable to pay by reason of any untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e) The Underwriters confirm that the statements with respect to the public
offering of the Shares set forth on the cover page of, and under the caption
"Underwriting" in, the Prospectus are correct and were furnished in writing to
the Company by the Underwriters for inclusion in the Registration Statement and
the Prospectus.
(f) The agreements contained in this Paragraph 6 and the representations,
warranties and agreements of the Company contained in Paragraphs 2 and 4 shall
survive the delivery of the Shares and shall remain in full force and effect,
regardless of any termination or cancellation of this Agreement or any
investigation made by or on behalf of any indemnified party.
7. TERMINATION BY THE UNDERWRITERS. The obligations of the Underwriters
hereunder may be terminated by the Underwriters, in its absolute discretion, by
notice given to and received by the Company prior to delivery of and payment for
the Shares, if prior to that time (a)(i) the Company shall have failed, refused
or been unable to perform any agreement on its part to be performed hereunder,
(ii) any other condition to the Underwriters' obligations hereunder is not
fulfilled, (iii) the Company sustains a loss, whether or not insured, by reason
of fire, flood, accident or other calamity, which, in the reasonable opinion of
the Underwriters, substantially affects the value of the properties of the
Company or which materially interferes with the operation of the business of the
Company, (iv) trading generally shall have been suspended or materially limited
on or by the New York Stock Exchange or American Stock Exchange or the National
Association of Securities Dealers or trading in any securities of the Company
shall have been suspended by any securities exchange or in the over the counter
market, (v) a banking moratorium is declared by the United States, or by New
York, Missouri, New Jersey or Delaware state authorities, (vi) an outbreak of
major hostilities or other national or international calamity occurs, (vii) any
action is taken by any government in respect of its monetary affairs which, in
the reasonable opinion of the Underwriters, has a material adverse effect on the
United States securities markets, or (viii) there is a pending or threatened
material legal or governmental proceeding against the Company, other than
proceedings described in the Registration Statement or amendments or supplements
thereto delivered to the Underwriters prior to the execution of this Agreement,
which in the reasonable opinion of the Underwriters has a material adverse
<PAGE>
effect upon the Company, and (b) with respect to the events specified in clauses
(a)(i) through (a)(iii) hereof, such event singly or together with other such
events makes it, in your reasonable judgment, impractical to market the Shares
on the terms and in the manner contemplated in the Prospectus.
8. TERMINATION BY THE COMPANY. The obligation of the Company to deliver the
Shares upon payment therefor shall be subject to the following conditions:
On the Closing Date no stop order suspending the effectiveness of the
Registration Statement shall be in effect and no proceedings for that purpose
shall then be pending before, or threatened by, the Commission.
In case any of the conditions specified above in this Paragraph 8 shall not
have been fulfilled, this Agreement may be terminated by the Company by
delivering written notice of termination to the Underwriters. Any such
termination shall be without liability of any party to any other party except to
the extent provided in Paragraph 4.(k) and Paragraph 9 hereof.
9. EXPENSES FOLLOWING TERMINATION. If the sale of Shares provided for
herein is not consummated because of any refusal, inability or failure on the
part of the Company to comply with any of the terms or to fulfill any of the
conditions of this Agreement, or if for any reason the Company shall be unable
to perform all its obligations under this Agreement, the Company shall not be
liable to the Underwriters for damages arising out of the transactions covered
by this Agreement, provided however that (i) the Company shall remain liable to
the extent provided in Paragraphs 4.(k), 6.(a) and 6.(d) hereof and (ii) except
where termination occurs pursuant to Section 8 hereof, the Company shall pay the
out-of-pocket expenses incurred by the Underwriters in contemplation of the
performance by it of its obligations hereunder, including the fees and
disbursements of its counsel and travel, postage, telegraph and telephone
expenses.
10. NOTICES. The Company shall be entitled to act and rely upon any
request, consent, notice or agreement given or made by the Underwriters. Any
notice to the Underwriters shall be sufficient if given in writing or by
telecopy addressed to Edward D. Jones & Co., L.P., 12555 Manchester Road, St.
Louis, Missouri 63131, Attention: James A. Krekeler; any notice to the Company
shall be sufficient if given in writing or by telecopy addressed to the Company
at: 1500 Ronson Road, Iselin, New Jersey 08830 (Attention: A. Bruce O'Connor).
11. PARTIES. This Agreement shall inure to the benefit of and be binding
upon the Underwriters, the Company and their respective successors. This
Agreement and the terms and provisions hereof are for the sole benefit of only
those persons, except that (a) the representations, warranties, indemnities and
agreements of the Company
<PAGE>
contained in this Agreement shall also be deemed to be for the benefit of the
person or persons, if any, who control the Underwriters within the meaning of
Section 15 of the Act, and (b) the indemnities and agreements of the
Underwriters contained in Paragraph 6 of this Agreement shall be deemed to be
for the benefit of directors of the Company, officers of the Company who have
signed the Registration Statement and any person controlling the Company.
Nothing in this Agreement is intended or shall be construed to give any person
other than the persons referred to in this paragraph any legal or equitable
right, remedy or claim under or in respect of this Agreement or any provision
contained herein.
12. DEFINED TERMS. For purposes of this Agreement, (a) "business day" means
any day on which the New York Stock Exchange is open for trading, and (b)
"subsidiary" shall have the meaning set forth in Rule 405 of the Rules and
Regulations.
13. SUCCESSORS. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors and assigns and the
officers and directors and controlling persons referred to in Paragraph 6
hereof, and no other person will have any right or obligation hereunder. The
term "successors and assigns" as used in this Agreement shall not include any
purchaser, as such purchaser, of any of the Shares from the Underwriters.
14. COUNTERPARTS. This Agreement may be executed in multiple counterparts,
all of which, when taken together, shall constitute one and the same agreement
among the parties to such counterparts.
15. APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Missouri.
If the foregoing correctly sets forth the agreement between the Company and
the Underwriters, please indicate your acceptance in the space provided for that
purpose.
Very truly yours,
MIDDLESEX WATER COMPANY
By:______________________________________
Name:_________________________________
Title:________________________________
Accepted:
<PAGE>
EDWARD D. JONES & CO., L.P.
By:
______________________________
James A. Krekeler
Principal
JANNEY MONTGOMERY SCOTT INC.
By:______________________________
Name:____________________________
Title:___________________________
EXHIBIT 5
November 3, 1998
Middlesex Water Company
1500 Ronson Road
Iselin, New Jersey
Ladies and Gentlemen:
We refer you to the proposed Registration Statement on Form S-3 (the
"Registration Statement") under the Securities Act of 1933, as amended, of
Middlesex Water Company (the "Company") pertaining to the offer and sale by the
Company of 517,000 shares of the Company's Common Stock, no par value (the
"Common Shares").
We have acted as counsel to the Company in connection with the Registration
Statement. In such capacity, we have examined the Registration Statement, copies
of the Company's Certificate of Incorporation and amendments thereto,
certificates of officers of the Company and of public officials and such other
corporate records and documents as we have deemed necessary in order to express
the opinion set forth below.
Based upon the foregoing examination, it is our opinion that the Common
Shares are duly authorized and, upon the issuance of certificates evidencing the
Common Shares and delivery thereof in exchange for payment of the price per
share to the public less the underwriters' discount per share disclosed in the
Prospectus included in the Registration Statement at the time it becomes
effective or filed with the Commission subsequent to effectiveness pursuant to
Rule 424(b)1), the Common Shares will be validly issued, fully paid and
nonassessable.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and the reference to our firm in the prospectus included
in such Registration Statement under the heading "Legal Matters."
Very truly yours,
NORRIS, McLAUGHLIN & MARCUS
A Professional Corporation
/s/ NORRIS, McLAUGHLIN & MARCUS
----------------------------
Norris, McLaughlin & Marcus
EXHIBIT 23.1
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in this Registration Statement of
Middlesex Water Company on Form S-3 of our report dated February 13, 1998
appearing in and incorporated by reference in the Annual Report on Form 10-K of
Middlesex Water Company for the year ended December 31, 1997 and to the
reference to us under the heading "Experts" in this Registration Statement.
Deloitte & Touche LLP
November 3, 1998
