SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 193
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Check the appropriate box
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by Rule 14a-6(e)(2
x Definitive Proxy Statement
Definitive Additional Material
Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-1
The York Water Company
(Name of Registrant as Specified In Its Charter)
The York Water Company
(Name of Person(s) Filing Proxy Statement)
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Check box if any part of the fee is offset as provided by
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THE YORK WATER COMPANY
130 EAST MARKET STREET
YORK, PENNSYLVANIA 17401
April 4, 2003
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS OF THE YORK WATER COMPANY
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders of The York
Water Company will be held at The Yorktowne Hotel, 48 East Market Street,
York, Pennsylvania, on Monday, May 5, 2003, at 1:00 P.M. for the purpose of
taking action upon the following proposals:
(1) To elect three (3) Directors to three-year terms of office;
(2) To appoint independent accountants to audit the financial
statements of the Company for the year 2003; and
(3) To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on March 14,
2003, as the record date for the determination of shareholders entitled to
notice of and to vote at the meeting, and at any adjournment or adjournments
thereof.
You are cordially invited to attend the meeting. In the event you will
be unable to attend, you are respectfully requested to sign, date and return
the enclosed proxy at your earliest convenience in the enclosed stamped return
envelope. Returning your proxy does not deprive you of the right to attend
the meeting and vote your shares in person.
By order of the Board of Directors,
JEFFREY R. HINES
Secretary
THE YORK WATER COMPANY
130 EAST MARKET STREET
YORK, PENNSYLVANIA 17401
April 4, 2003
PROXY STATEMENT
This Proxy Statement and the accompanying form of proxy are being
furnished to the shareholders of The York Water Company (hereinafter referred
to as the "Company") in connection with the solicitation of proxies by the
Board of Directors of the Company, whereby shareholders would appoint Irvin S.
Naylor, William T. Morris, and Jeffrey S. Osman, and each of them, as Proxies
on behalf of the shareholders, to be used at the Annual Meeting of the
Shareholders of the Company to be held at 1:00 p.m. at The Yorktowne Hotel, 48
East Market Street, York, Pennsylvania, Monday, May 5, 2003 (the "Annual
Meeting"), and at any adjournment thereof.
Solicitation of proxies will be primarily by mail. Proxies may also be
solicited personally and by telephone by regular employees of the Company. The
expenses of the solicitation will be borne by the Company. Such expenses may
also include ordinary charges and expenses of brokerage houses and other
custodians, nominees and other fiduciaries for forwarding documents to
shareholders. This Proxy Statement has been mailed to shareholders of the
Company on or about April 4, 2003.
A shareholder who completes and forwards the enclosed proxy to the
Company's transfer agent, American Stock Transfer & Trust Company, is not
precluded from attending the Annual Meeting and voting his or her shares in
person, and may revoke the proxy by delivering a later dated proxy or by
written notification to the Company or to the transfer agent, at any time
before the proxy is exercised.
PURPOSE OF THE MEETING
At the Annual Meeting, shareholders of the Company will consider and vote
upon proposals: (i) to elect three (3) Directors to serve for a term of three
(3) years; and (ii) to ratify the appointment of Stambaugh Ness, PC as
independent auditors for the fiscal year ending December 31, 2003.
Shareholders may also consider and vote upon such other matters as may
properly come before the Annual Meeting or any adjournment thereof. \
VOTING AT THE MEETING
The outstanding securities of the Company entitled to vote at the
meeting consist of 6,364,803 shares of Common Stock. The presence at the
Annual Meeting in person or by proxy of shareholders entitled to cast a
majority of the votes which all shareholders are entitled to cast will
constitute a quorum for the Annual Meeting.
The record date for the determination of shareholders entitled to notice
of and to vote at the Annual Meeting or at any adjournment or adjournments
thereof was the close of business on March 14, 2003. Shareholders are
entitled to one vote for each share on all matters coming before the meeting,
except that shareholders have cumulative voting rights with respect to the
election of Directors. Cumulative voting rights permit each shareholder to
cast as many votes in the election of each class of Directors to be elected as
shall equal the number of such shareholder's shares of Common Stock multiplied
by the number of Directors to be elected in such class of Directors, and
each shareholder may cast all such votes for a single nominee or distribute
such votes among two or more nominees in such class as the shareholder may see
fit. Discretionary authority to cumulate votes is not being solicited.
In accordance with Pennsylvania law, a shareholder can withhold authority
to vote for all nominees for directors or can withhold authority to vote for
certain nominees for directors. Directors will be elected by a plurality of
the votes cast. Votes that are withheld will be excluded from the vote and
will have no effect.
Any votes that are withheld on the proposal to ratify the selection of
the independent accountants will have the effect of a negative vote because
this proposal requires the affirmative vote of a majority of the shares
present at the meeting in person or represented by proxy at the meeting and
entitled to vote.
Brokers who have received no voting instructions from their customers
will have discretion to vote with respect to election of directors and the
proposal to ratify the Company's auditors.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
No person, so far as known to the Company, beneficially owns five (5)
percent or more of the Company's outstanding Common Stock as of March 14,
2003.
The following table sets forth certain information regarding the
beneficial ownership of our common stock as of March 14, 2003, by (1) each
director and other director nominee of the Company, (2) each executive officer
named in the summary compensation table included elsewhere herein and (3) all
executive officers and directors as a group.
The information appearing in the following table with respect to
principal occupation and beneficial ownership of Common Stock of the Company
has been furnished to the Company by the three nominees and the six directors
continuing in office as of March 14, 2003.
Director Full Shares Percent of
Principal Occupation During or Officer Owned Total Shares
Name Age Last Five Years Since Beneficially(F1) Outstanding(F2)
NOMINEES FOR ELECTION TO THREE YEAR TERMS EXPIRING IN 2006
George Hay Kain, III, Esq. 54 Sole Practitioner, Attorney at Law 08/25/86 31,149 (F3) 0.49
April, 1982 to date
Michael W. Gang, Esq.* 52 Partner/Attorney, Morgan, Lewis & Bockius LLP, 01/22/96 5,273 0.08
Counselors at Law, October, 1984
to date. Morgan, Lewis & Bockius LLP
is counsel to the Company
George W. Hodges 51 Office of the President, The Wolf 06/26/00 60,696 (F4) 0.95
Organization, Inc., Distributor of Building
Products, January, 1986 to date
Director Full Shares Percent of
Principal Occupation During or Officer Owned Total Shares
Name Age Last Five Years Since Beneficially(1) Outstanding(2)
TO CONTINUE FOR TERMS EXPIRING IN 2004
Irvin S. Naylor* 67 Vice Chairman of the Board, The York Water 10/31/60 50,001 0.79
Company, May, 2000 to date
Chairman of the Board, The York Water
Company, September, 1993 to May, 2000
President/Owner, Snow Time, Inc., Owns
and Operates Ski Areas, June, 1964 to date
Vice Chairman/Owner, Cor-Box, Inc.,
Mfg. Corrugated Boxes, June, 1966 to
November, 1999
William T. Morris, P.E.* 65 Chairman of the Board, The York Water 04/19/78 29,081 (F5) 0.46
Company, November, 2001 to date
President and Chief Executive Officer,
The York Water Company, May, 1995
to December, 2002
Jeffrey S. Osman* 60 President and Chief Executive Officer, 05/01/95 3,234 (F6) 0.05
January, 2003 to date
Vice President-Finance and Secretary-
Treasurer, The York Water Company,
May, 1995 to December, 2002
TO CONTINUE FOR TERMS EXPIRING IN 2005
John L. Finlayson* 61 Vice President-Finance and 09/02/93 10,135 0.16
Administration, Susquehanna Pfaltzgraff
Co., Manufacturing, Retailing, Radio
Station, Cable TV, August, 1978 to date
Chloe R. Eichelberger 68 Owner/President/Chief Executive Officer, 09/15/95 5,861 0.09
Chloe Eichelberger Textiles, Inc., Dyeing
and Finishing Fabrics, September, 1987 to date
Thomas C. Norris 64 Retired, Chairman of the Board, P. H. 06/26/00 7,781 (F7) 0.12
Glatfelter Company, Paper Manufacturer,
May, 2000 to date
Chairman of the Board, P. H. Glatfelter Company,
July, 1998 to May, 2000
Chairman, President and Chief Executive Officer,
P. H. Glatfelter Company, April, 1988 to July, 1998
Director Full Shares Percent of
Principal Occupation During or Officer Owned Total Shares
Name Age Last Five Years Since Beneficially(1) Outstanding(2)
EXECUTIVE OFFICERS
Jeffrey R. Hines 41 Vice President-Engineering and Secretary 01/01/03 11,798 (F8) 0.19
The York Water Company, January, 2003 to date
Vice President-Engineering, The York Water
Company, May, 1995 to December, 2002
Duane R. Close 57 Vice President-Operations, The York Water 01/01/03 5,076 0.08
Company, May, 1995 to date
Bruce C. McIntosh 50 Vice President-Human Resources and Assistant 01/01/03 352 0.01
Treasurer, The York Water Company,
January, 2003 to date
Vice President-Human Resources, The
York Water Company, May, 1998 to
December, 2002
Kathleen M. Miller 40 Chief Financial Officer and Treasurer, The 01/01/03 1,406 0.02
York Water Company, January, 2003, to date
Controller and Assistant Treasurer, The York
Water Company, October, 2001, to January, 2003
Accounting Manager and Assistant Treasurer,
The York Water Company, May, 2000,
to October, 2001
All Directors and Executive Officers as a group 221,732 (F9) 3.48
* Members of the Executive Committee.
(F1) Except as indicated in the footnotes below, Directors possessed
sole voting power and sole investment power with respect to all
shares set forth in this column.
(F2) The percentage for each individual or group is based on the
aggregate shares outstanding as of March 14, 2003, (6,364,803
shares).
(F3) Includes 7,421 shares held by Mr. Kain's wife and child for which
Mr. Kain disclaims beneficial ownership. Also includes 12,464
shares held by the estate of Mr. Kain's grandfather, for which he
is one of three co-trustees and shares voting power and investment
power.
(F4) Includes shares owned by The Wolf Organization for which he shares
voting and investment power with other members of the Office of the
President, The Wolf Organization.
(F5) Includes 22,208 shares owned jointly with Mr. Morris' wife and
mother, for which he shares voting and investment power.
(F6) Includes shares owned jointly with Karen E. Knuepfer, for which he
shares voting and investment power.
(F7) Includes 2,864 shares held by Mr. Norris's wife, for which Mr.
Norris disclaims beneficial ownership.
(F8) Includes 11 shares held by Mr. Hines' wife, for which Mr. Hines
disclaims beneficial ownership.
(F9) Includes shares owned by family members, and certain other shares,
as to which some Directors and Officers disclaim any beneficial
ownership and which are further disclosed in the notes above.
ELECTION OF DIRECTORS
At the Annual Meeting, all the nominees, each of whom is currently
serving as Director, are to be elected to serve for the ensuing three (3)
years and until their respective successors have been elected and qualified.
The bylaws of the Company provide that the Board of Directors will consist of
not less than a total of nine Directors, who are elected to staggered three-
year terms of office. Each share represented by the enclosed proxy will be
voted for each of the nominees listed, unless authority to do so is withheld.
If any nominee becomes unavailable for any reason or if a vacancy should occur
before the election (which events are not anticipated), the shares represented
by the enclosed proxy may be voted as may be determined by the Proxies.
The three Directors are to be elected by a plurality of the votes cast at
the Annual Meeting. The Board of Directors unanimously recommends a vote
"FOR" each of the nominees.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Jeffrey R. Hines, Vice President-Engineering, Duane R. Close, Vice
President-Operations, and Bruce C. McIntosh, Vice President-Human Resources,
were designated by the Board of Directors as Section 16 Reporting Officers
effective January 1, 2003. The Initial Statement of Beneficial Ownership of
Securities, Form 3, for these reporting officers was filed with the Securities
and Exchange Commission on January 14, 2003. Jeffrey R. Hines, Vice
President-Engineering, reported ownership of 11 shares owned by his spouse
on Form 4 Amended on February 14, 2003.
The Company believes that during the year ended December 31, 2002, all
other directors and executive officers complied with all applicable filing
requirements of Section 16(a) of the Securities Exchange Act of 1934. The
foregoing statement is based solely upon a review of copies of reports
furnished to the Company and written representations of its Directors and
executive officers that no other reports were required.
GENERAL INFORMATION ABOUT OTHER BOARDS OF DIRECTORS
The following members of the Board of Directors of The York Water Company
are Board members of other publicly held companies as indicated below:
Publicly Held
Companies Other Than
Board Members The York Water Company
Ms. Chloe Eichelberger Susquehanna Bancshares, Inc.
Mr. George W. Hodges Fulton Financial Corp.
Mr. Thomas C. Norris Cadmus Communication
COMMITTEES AND FUNCTIONS
The Company has an Executive Committee, an Audit Committee and a
Compensation and Nomination Committee, all of which are composed of members of
the Board of Directors.
The Executive Committee held eleven (11) meetings during the fiscal year
ended December 31, 2002. The Executive Committee is empowered to function as
delegated by the Board of Directors. The Executive Committee is composed of
the following Directors appointed by the Board: William T. Morris, P.E.,
Chairman; Irvin S. Naylor; John L. Finlayson; Michael W. Gang, and Jeffrey S.
Osman.
The Audit Committee held four (4) meetings during 2002. The Audit
Committee monitors the audit functions of our independent public accountants
and internal controls of the Company. The Audit Committee of the Company is
composed of the following independent Directors appointed by the Board: John
L. Finlayson, Chairman; Chloe R. Eichelberger; George W. Hodges; and Thomas C.
Norris. The Board of Directors has adopted a written charter for the Audit
Committee.
The Compensation and Nomination Committee held four (4) meetings during
the fiscal year-ended 2002 and considers and makes recommendations to the
Board of Directors concerning the proposed compensations, salaries and per
diems of the corporate officers, Directors and members of the Committees of
the Board of Directors of the Company and makes recommendations to the Board
of Directors for nominations for Directors and officers of the Company. This
Committee will consider nominees recommended by shareholders of the Company.
Such recommendations should be made in writing, should include a statement of
the recommended nominee's qualifications, and should be addressed to the
Committee at the address of the Company. In accordance with the Company's
bylaws, actual nominations must be made in writing and must be received by
the Company not less than ninety (90) days before the date of the Annual
Meeting. The Compensation and Nomination Committee is composed of the
following Directors appointed by the Board: Michael W. Gang, Chairman; John
L. Finlayson; George W. Hodges; Irvin S. Naylor; and Thomas C. Norris.
On December 16, 2002, the Company's Board separated the Compensation and
Nomination Committee into the Compensation Committee and the Corporate
Governance and Nomination Committee. The Compensation Committee is comprised
of the following Directors appointed by the Board: George W. Hodges,
Chairman; John L. Finlayson; George Hay Kain, III; and Chloe R. Eichelberger.
The Corporate Governance and Nomination Committee is comprised of the
following Directors appointed by the Board: Michael W. Gang, Chairman; Irvin
S. Naylor; Thomas C. Norris; George W. Hodges; and William T Morris. The
newly-formed Compensation Committee and Corporate Governance and Nomination
Committee did not meet during the fiscal year ended 2002.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICER
The following table sets forth information concerning compensation paid
or accrued by the Company to the Chief Executive Officer and the Vice
President-Finance, Secretary-Treasurer of the Company. No other executive
officer of the Company earned more than $100,000 in salary during any of the
last three fiscal years. The Company has not paid any bonuses in any of the
last three fiscal years.
SUMMARY COMPENSATION TABLE
Annual Compensation
Name and All Other
Principal Compensation
Position Year Salary($) ($) (1)
William T. Morris, Chairman, 2002 251,115 1,000
President, Chief Executive 2001 190,182 1,000
Officer and Director 2000 175,542 1,000
Jeffrey S. Osman, Vice 2002 125,240 1,000
President-Finance, Secretary- 2001 116,658 1,000
Treasurer and Director 2000 109,753 1,000
(1) Represents $1,000 of Company matching contributions to Mr.
Morris' and to Mr. Osman's 401(k) plan in 2000, 2001, and 2002.
Officers with five years' service are entitled to benefits under the
Company's General and Administrative Employees Pension Plan (the "Pension
Plan") upon retirement after attaining age 55. The pension benefit
computation is based on the years of service times the sum of $17.50 and 1-
1/2% of that portion of the final average monthly earnings which are in excess
of $400. The final average monthly earnings are the average of the employee's
earnings for the 60 months immediately preceding the date the pension benefit
calculation is made. As of December 31, 2002, Mr. Morris has been credited
with 34 years of service and Mr. Osman has been credited with 19 years of
service under the Pension Plan. The following table illustrates the
approximate annual benefit that may become payable under the Pension Plan to
the executive officers who have met both the five year and 55 year age
requirements, based upon the indicated assumptions as to remuneration and
years of credited service.
Years of Service
Remuneration 19 25 30 34
$248,286 $73,382 $96,555 $115,866 $131,315
147,539 44,672 58,779 - -
The above figures assume retirement at age 65 with a straight-life
annuity and without reduction for a survivor benefit or Social Security
benefits.
The Company maintains a supplemental retirement program (the
"Supplemental Plan"), which provides senior management with a retirement
benefit in addition to the Pension Plan. The Supplemental Plan is designed to
encourage management to stay with the Company until retirement. Supplemental
Plan benefits have been made available to five members of the Company's
management and are payable to the executive or his beneficiary (a
"Supplemental Plan Beneficiary") monthly over a period of 180 months. The
annual benefit payable under the Supplemental Plan (the "Annual Benefit") may
be calculated by multiplying the number of years of service subsequent to
December 31, 1983 but prior to the attainment of age 65, by a predetermined
annual retirement benefit unit, which in the case of Mr. Morris is $3,600, in
the case of Mr. Osman is $1,440 and in the case of all Supplemental Plan
Participants ranges from $1,200
to $3,600. The estimated Annual Benefit payable to Mr. Morris at normal
retirement age under the Supplemental Plan is $68,400, and the estimated
benefit payable to Mr. Osman at normal retirement age under the Supplemental
Plan is $34,560. The Supplemental Plan is funded by insurance policies owned
by the Company on each manager covered by the Supplemental Plan, and if the
assumptions made as to mortality experience, policy dividends and other
factors (the "Funding Assumptions") are realized, the Company will recover all
of its payments made under the Supplemental Plan plus a factor for the use of
the Company's money. The Company is obligated to pay Annual Benefits, and
Supplemental Plan Beneficiaries have the status of unsecured creditors of the
Company with respect to Annual Benefits, regardless of whether the Funding
Assumptions are realized and the insurance policies fully fund or reimburse
the Company for its payments under the Supplemental Plan. The following table
illustrates the approximate Annual Benefits that may become payable to
Supplemental Plan Beneficiaries:
Annual Retirement Years of Service
Benefit Unit Subsequent to December 31, 1983
10 15 20 25 30
$3,600 $36,000 $54,000 $72,000 $90,000 $108,000
2,100 21,000 31,500 42,000 52,500 63,000
1,754 17,540 26,310 35,080 43,850 52,620
1,440 14,400 21,600 28,800 36,000 43,200
1,200 12,000 18,000 24,000 30,000 36,000
The Deferred Compensation Program permits eligible supervisors,
managers and executives to defer up to 5% of salary, normally over an eleven
(11) year period, with the Company matching the deferment, up to 2-1/2% of
salary. The Company has obtained life insurance policies for participants
under the Deferred Compensation Program to fund its future payment obligations
under the Deferred Compensation Program, and no cash balances are maintained
by the Company to fund participant deferrals, Company matching contributions,
or earnings with respect to such balances derived from the insurance policies
(together, the "Deferred Compensation Program Balances"). At retirement, each
participant, or beneficiary, is entitled to receive over a ten-year period
monthly payments equal in the aggregate to the Deferred Compensation Program
Balance that accrued with respect to such participant in Company maintained
book-entry accounts. Except for Mr. Morris and Mr. Osman, no other directors
participate in this program. Mr. Morris' projected annual payment under this
program is $24,792, and Mr. Osman's projected annual payment under this
program is $15,828.
Mr. Osman has an employment contract with the Company which provides
that, in the event of his involuntary termination of employment for any reason
other than cause prior to or following a change of control of the Company, he
would be entitled to severance payments. Mr. Osman would be entitled to a
severance payment equal to .5 times his base salary for the preceding 12
months. Mr. Osman would be entitled to medical, dental and other insurance
benefits for a period of one year after his termination date. The employment
contract contains provisions regarding his obligation to maintain the
confidentiality of Company information and his agreement not to compete with
the Company within its franchised service territory for a period of one year
after termination of his employment by the Company.
Each Director who is not a regular full-time employee of the Company is
entitled to receive the following amounts for services rendered to the
Company: $8,500 per annum in Directors' fees; $4,250 per annum for service as
a regular member of the Executive Committee; a per diem of $525 for each Board
of Directors' Meeting; and a per diem of $525 for a regular or alternate
member's attendance at each Executive Committee Meeting. There were 15 Board
of Directors' Meetings
and 11 Executive Committee Meetings during the fiscal year ended December 31,
2002. All Directors attended at least 75% of the scheduled Board of Directors
and committee meetings.
COMPANY PERFORMANCE
The following line graph presents the annual and cumulative total
shareholder return for The York Water Company Common Stock over a five-year
period, as compared to a comparable return associated with an investment in
the S&P 500 Composite Index and a composite index of water companies
maintained by Edward D. Jones & Co. (the "Peer Index").
DOLLAR RETURN
For Past 5 Years
1998 1999 2000 2001 2002
Water Peer Group 124 146 154 176 172
The York Water Company 99 91 108 175 177
S & P 500 127 152 137 119 91
The line graph above assumes $100 invested on December 31, 1997 in the
Company's Common Stock and the stock of companies included in the S&P 500 and
the Peer Index and assumes the quarterly reinvestment of dividends. The
return for the Peer Index presented above took into consideration the
cumulative total return of the common stock of the following water companies
included in the Peer Index: American States Water Company, American Water
Works Inc., Artesian Resources Corp., BIW Limited, California Water Service,
Connecticut Water Service, Inc., Middlesex Water Company, Pennichuck
Corporation, Philadelphia Suburban Corp., SJW Corp., and Southwest Water Co.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation and Nomination Committee of the Board of Directors of
the Company establishes general compensation policies of the Company and
considers and makes recommendations to the Board of Directors concerning the
proposed compensation, salaries and per diems of the President and Chief
Executive Officer, the Chairman, Vice Chairman, directors and members of the
Committees of the Board of Directors of the Company. The Vice Chairman
serves the Company in a part-time capacity, and the amount of salary payable
to such officer has been determined by the Committee based upon the amount of
time dedicated and value of contributions made to the Company.
Mr. Morris, the Chief Executive Officer of the Company, served the
Company as its President and General Manager from May, 1982 to May, 1995. In
May 1995 Mr. Morris assumed the position of President and Chief Executive
Officer, and in November 2001 the position of Chairman. Mr. Morris retired as
President and Chief Executive Officer in December, 2002. Mr. Osman has served
the Company as its Vice President-Finance and Secretary-Treasurer since May,
1995, and became President and Chief Executive Officer in January, 2003. The
Compensation and Nomination Committee historically has established Mr. Morris'
and Mr. Osman's compensation after considering comparative salary data from
industry and other salary surveys (including data derived from publicly
disclosed compensation information concerning many of the companies identified
in the Peer Index), individual past performance, the Company's performance (on
an absolute basis and in comparison to peer performance within the context of
a regulated industry), and to a lesser extent changes in the cost of living in
the Company's service territory. While no formal salary or compensation
guidelines have been developed or used, salary levels have been determined
after balancing the foregoing factors (in their entirety, without giving
weight to any particular factor and without regard to any particular
relationship between compensation levels and any quantitative or qualitative
aspect of the Company's performance) with the interests of the Company's
shareholders, customers and employees.
Section 162(m) of the Internal Revenue Code generally disallows, in
certain circumstances, a tax deduction to public companies for compensation
over $1 million paid to a corporation's chief executive officer and next four
most highly compensated executive officers. The Company does not have any
compensation programs that would be impacted by Section 162(m).
Michael W. Gang, Chairman Irvin S. Naylor, Member
John L. Finlayson, Member Thomas C. Norris, Member
George W. Hodges, Member
REPORT OF THE AUDIT COMMITTEE
The Company's Audit Committee (the "Committee") consists of four non-
employee directors that are considered independent according to the guidelines
set forth by the National Association of Securities Dealers. In January,
2003, the Board of Directors adopted an amended and restated written charter
for the Audit Committee. A copy of the amended and restated written charter
is attached as an appendix to the proxy statement.
The Audit Committee reviews the Company's financial reporting process on
behalf of the Board, reports to the Securities and Exchange Commission on
Forms 10-Q and 10-K and releases of earnings. In addition, the Committee
selects, subject to stockholder ratification, the Company's independent public
accountants.
John L. Finlayson, Chairman of the Audit Committee, is a financial
expert. Chairman Finlayson is a Certified Public Accountant, and has an
understanding of generally accepted accounting principles and financial
statements. Chairman Finlayson is experienced in the preparation and auditing
of financial statements of public companies, and has an understanding of
accounting estimates, internal accounting controls, and audit committee
functions.
Fees for audit services include the examination of financial statements,
assistance with the preparation of the Annual Report to Shareholders and the
reports on Form 10-Q and 10-K to the Securities and Exchange Commission, tax
computation assistance, and consultation in connection with various accounting
and tax related matters.
During 2002 and 2001, fees for services provided by Stambaugh Ness, PC
were as follows:
2002 2001
Audit fees $48,675 $50,940
Income Tax Service Fees 5,690 7,885
SEC Registration Statement Fees 0 5,900
All Other Fees 0 0
$54,365 $64,725
Representatives of Stambaugh Ness, PC are expected to be present at the
Annual Meeting. Representatives of Stambaugh Ness, PC will have an
opportunity to make a statement if they desire to do so, and will be available
to respond to appropriate questions.
Adoption of this proposal requires the affirmative vote of a majority of
the votes cast by all shareholders entitled to vote at the Annual Meeting.
The Board of Directors unanimously recommends a vote "FOR" this proposal. It
is understood that even if the selection of Stambaugh Ness, PC is ratified,
the Audit Committee, in its discretion, may direct the appointment of a new
independent auditing firm at any time during the year if the Audit Committee
determines that such a change would be in the best interests of the Company
and its shareholders.
DISCRETIONARY AUTHORITY
The notice of Annual Meeting of Shareholders calls for the transaction of
such other business as may properly come before the meeting. The Board of
Directors has no knowledge of any matters to be presented for action by the
shareholders at the meeting other than is hereinbefore set forth. In the
event additional matters should be presented, however, the proxies will
exercise their discretion in voting on such matters.
SHAREHOLDER PROPOSALS AND NOMINATIONS FOR DIRECTORS
In accordance with the Company's bylaws, shareholder's proposals and
nominations for Directors for consideration at the 2004 Annual Meeting of
Shareholders must be received by the Company in writing prior to February 3,
2004.
OTHER MATTERS
The expense of this solicitation will be paid by the Company. If
necessary, some of the officers of the Company and regular employees of The
York Water Company may solicit proxies personally or by telephone.
Further information regarding the Company is set forth in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 2002, which
has been filed with the Securities and Exchange Commission. The Form 10-K
(including financial statements and schedules) may be obtained free of charge
by writing to: The York Water Company, 130 East Market Street, York,
Pennsylvania 17401. Copies of exhibits to the Form 10-K will be furnished
upon request and the payment of a reasonable fee. The Form 10-K is available
on the Company's website at www.yorkwater.com.
A copy of the Company's Annual Report to Shareholders, which includes
financial statements, is being transmitted herewith, but does not form part of
the proxy solicitation materials.
DELIVERY OF DOCUMENTS TO SECURITY HOLDERS
SHARING AN ADDRESS
Only one proxy statement and annual report is being delivered to multiple
security holders sharing an address unless the Company has received contrary
instructions from one or more of the security holders. Upon written or oral
request the Company will promptly deliver a proxy statement and annual report
to any security holder at a shared address to which a single copy of the proxy
statement and annual report was delivered. Security holders should make their
request for delivery of an individual copy of the proxy statement and annual
report in writing to the Company's transfer agent, American Stock Transfer &
Trust Company, 59 Maiden Lane, Plaza Level, New York, NY 10038, or by calling
1-800-937-5449.
APPENDIX A
THE YORK WATER COMPANY
AUDIT COMMITTEE CHARTER
The Audit Committee shall be responsible for the appointment,
compensation, and oversight of the work of the Company's registered
independent auditor employed by The York Water Company relating to preparing
and issuing an audit report, financial reporting issues, internal financial
controls, and significant risks and exposures. The Company's registered
independent auditor will report directly to the Audit Committee.
Each member of the Audit Committee must be independent and may not, other
than in the capacity as a member of the Audit Committee, the Board of
Directors or any other board committee, accept any compensatory fee from the
Company. Each member of the Audit Committee may not be an affiliated person
of the Company.
The Audit Committee will include at least one member who is a financial
expert who has an understanding of generally accepted accounting principles,
will have experience in the preparation or auditing of financial statements of
comparable companies, and who has an understanding of accounting estimates,
internal accounting controls and audit committee functions.
The Audit Committee responsibilities will include, but shall not be
limited to:
Selection of the Company's registered independent auditor for
election by the shareholders.
Approve the Company's registered independent auditor fees.
Oversee the work of the Company's registered independent auditor.
Confirm the independence and objectivity of the registered
independent auditor, including those procedures set forth on Exhibit
A.
Determine, in consultation with the independent auditor, and review,
in consultation with Company management, the audit scope and plan.
Approve, in advance, the provision by the registered independent
auditor of all permissible non-audit services.
Authorize and conduct investigations into any matters within the
scope of the Audit Committee. Engage and approve the fees for
independent counsel and other advisors.
Establish procedures for the receipt, retention and treatment of
complaints received by the Company. Ensure such complaints are
treated confidentially and anonymously.
Review with the registered independent auditor quarterly and annual
financial statements, accompanying footnotes and report of the
registered independent auditor.
Prior to publication, review earnings releases.
Resolve disputes and disagreements between the registered
independent auditor and management.
Review with Company management and the independent and internal
auditors the quality and adequacy of internal controls and the
Company's response to recommendations for the improvement thereof.
Review critical accounting policies and practices, disclosure
controls and procedures, internal control report, alternative
generally accepted accounting principles treatment of financial
information and all written communications between the registered
independent auditor and management.
Conduct regularly convened executive sessions of the Audit Committee
and registered independent auditors.
Review and approve or disapprove related-party transactions.
THE YORK WATER COMPANY
AUDIT COMMITTEE CHARTER
EXHIBIT A
The Committee shall:
Request annually from the independent auditors a formal written
statement describing: the independent auditors' internal quality-
control procedures; any material issues raised by the most recent
internal quality-control review, or peer review, of the independent
auditors, or by any inquiry or investigation by governmental or
professional authorities, within the preceding five (5) years,
respecting one or more independent audits carried out by the
independent auditors, and steps taken to deal with such issues; and
all relationships between the independent auditors and the Company
consistent with Independence Standards Board Standard Number 1;
Discuss with the independent auditors any such disclosed
relationships and their impact on the independent auditors'
independence; and
Review with the independent and internal auditors any problems or
difficulties the auditors may have encountered with management's
response to its inquiries or otherwise, and any management letter
provided by the auditors, and the Company's response to that letter.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE YORK WATER COMPANY
Proxy - Annual Meeting of Shareholders
May 5, 2003
The undersigned, a Shareholder of The York Water Company, a
Pennsylvania corporation (the "Company"), does hereby appoint Irvin
S. Naylor, William T. Morris, and Jeffrey S. Osman, and each of them, the
true and lawful attorneys and proxies with full power of substitution,
for and in the name, place and stead of the undersigned, to vote all
of the shares of Common Stock of the Company which the undersigned
would be entitled to vote if personally present at the Annual Meeting
of Shareholders of the Company to be held Monday, May 5, 2003 at 1:00
p.m. local time at The Yorktowne Hotel, 48 East Market Street,
York, Pennsylvania or at any adjournment thereof.
(Continued and to be signed on reverse side)
(1) ELECTION OF DIRECTORS
To vote with respect to For All Nominees Withhold Authority
the election of Listed Below For all Nominees
George Hay Kain, III
Michael W. Gang
George W. Hodges
INSTRUCTIONS: To withhold authority to vote for any individual
nominee, write that Nominee's name on the line provided below.
Cumulative votes for one or more nominees as follows:
Nominees: George Hay Kain, III
Michael W. Gang
George W. Hodges
For Against Abstain
(2) Appoint Stambaugh Ness,
PC as auditors
(3) DISCRETIONARY AUTHORITY
To transact such other business as may properly come before the
meeting and any adjournment thereof according to the proxies'
discretion and in their discretion.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSALS 1 THROUGH 2.
Signature
Signature if Shares Held Jointly
Dated 2003
NOTE: Please mark, date and sign exactly as your name appears on
this proxy card. When shares are held jointly, both holders
should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give your full title. If the holder
is a corporation or partnership, the full corporate or
partnership name should be signed by a duly authorized officer.