SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by
the Registrant [x]
Filed by
a Party other than the Registrant [ ]
Check the
appropriate box:
[x]
Preliminary Proxy Statement
[ ]
Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ]
Definitive Proxy Statement
[ ]
Definitive Additional Materials
[ ]
Soliciting Material Pursuant to §240,14a-12
The
York Water Company
(Name of
Registrant as Specified In Its Charter)
(Name of
Person(s) Filing Proxy Statement if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
[x] No
fee required.
[ ]
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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1)
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Title
of each class of securities to which transaction
applies:
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2)
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Aggregate
number of securities to which transaction
applies:
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3)
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Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was
determined):
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4)
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Proposed
maximum aggregate value of
transaction:
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5)
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Total
fee paid:
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[ ]
Fee paid previously with preliminary materials.
[ ]
Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
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1)
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Amount
Previously Paid:
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2)
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Form,
Schedule or Registration Statement
No.:
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3)
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Filing
Party:
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4)
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Date
Filed:
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THE YORK
WATER COMPANY
130 EAST
MARKET STREET
YORK,
PENNSYLVANIA 17401
2010
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 Strand-Capitol Performing Arts Center, 50 North
George Street, York, Pennsylvania, on Monday, May 3, 2010, at 1:00 p.m. for the
purpose of taking action upon the following proposals:
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(1)
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To
elect three (3) Directors to three-year terms of
office;
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(2)
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To
approve an amendment of our Amended and Restated Articles of Incorporation
to eliminate cumulative voting;
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(3)
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To
ratify the appointment of ParenteBeard LLC as the independent registered
public accounting firm for the fiscal year ending December 31, 2010;
and
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(4)
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To
transact such other business as may properly come before the
meeting.
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The Board of Directors has fixed the
close of business on February 26, 2010, 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 submit your proxy either (a) electronically or; (b) by
signing, dating and returning 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.
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By
order of the Board of Directors,
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| /s/ Bruce C. McIntosh |
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BRUCE
C. McINTOSH
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Secretary
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TABLE
OF CONTENTS
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4
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8
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Incorporation
to Eliminate Cumulative Voting
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26
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Public
Accounting Firm
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THE YORK
WATER COMPANY
130 EAST
MARKET STREET
YORK,
PENNSYLVANIA 17401
2010
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 John L. Finlayson, Thomas C. Norris, and Ernest J.
Waters, 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 Strand Capitol Performing Arts Center, 50 North George Street, York,
Pennsylvania, Monday, May 3, 2010 (the "Annual Meeting"), and at any adjournment
thereof.
Solicitation of proxies will be made by
mail, telephone and via the internet. Those shareholders who
previously opted out of printed copies of the proxy materials will receive a
Notice Regarding the Availability of Proxy Materials (the “Notice”) by
mail. The Notice will instruct you as to how you may access and
review the proxy materials. The Notice also instructs you as to how
you may submit your proxy over the Internet or by telephone. If you
previously opted out of printed copies of the proxy materials but would like to
receive a printed copy of such materials, or vote by telephone, you should
follow the instructions included in the Notice. Those shareholders
who have requested printed copies and some of those who have not specifically
opted out of printed copies of the proxy materials will be provided printed
copies. It is anticipated that proxy materials will first be mailed
and made available on the Internet
on 2010.
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 Company may solicit proxies personally or
by telephone. In addition, the Company has retained The Altman Group
to assist with research, analysis and solicitation of proxies and has agreed to
pay them approximately $5,500 plus reasonable expenses for such
services. Banks, brokerage houses and other institutions and
fiduciaries will be requested to forward the proxy materials to beneficial
owners and to obtain authorization for the execution of proxies.
A shareholder who submits a proxy
electronically, by telephone, or completes and forwards the enclosed proxy 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 at any time before the proxy is exercised.
At the Annual Meeting, shareholders of
the Company will consider and vote upon three proposals: (i) to elect
three (3) Directors to serve for a term of three (3) years; (ii) to amend our
Amended and Restated Articles of Incorporation to eliminate cumulative voting;
and (iii) to ratify the appointment of ParenteBeard LLC as the independent
registered public accounting firm for the fiscal year ending December 31,
2010. Shareholders may also consider and vote upon such other matters
as may properly come before the Annual Meeting or any adjournment
thereof.
1
The outstanding securities of the
Company entitled to vote at the meeting consist of 12,576,851 shares of our
Common Stock. The presence at the Annual Meeting in person or by
proxy of shareholders entitled to cast a majority of the votes that 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 February
26, 2010. 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
proposals to amend our Articles of Incorporation or to ratify the appointment of
the independent registered public accounting firm will have no effect because
these proposals require the affirmative vote of a majority of the votes cast by
all shareholders entitled to vote.
Brokers who have received no voting
instructions from their customers will not have discretion to vote with respect
to election of directors or the amendment to our Articles of Incorporation, but
will have the discretion to vote with respect to the proposal to ratify the
appointment of the Company's auditors.
No person, so far as known to the
Company, beneficially owns more than five (5) percent of the Company’s
outstanding common stock as of February 26, 2010.
The following table sets forth certain
information regarding the beneficial ownership of our Common Stock as of
February 26, 2010, 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 beneficial ownership of Common Stock of the
Company has been furnished to the Company by the three nominees, the seven
directors continuing in office, and the six executive officers, all as of
February 26, 2010.
The table includes shares owned or
beneficially owned by the respective individuals as of February 26,
2010. No individual has a specific right to acquire beneficial
ownership of any additional shares within 60 days.
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Number
of Shares
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Percent
of Total
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Beneficially
Owned (1)
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Shares
Outstanding(2)
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Vernon
L. Bracey
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423
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(3)
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0.00
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Cynthia
A. Dotzel, CPA
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9,309
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0.07
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John
L. Finlayson
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20,079
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0.16
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Michael
W. Gang, Esq.
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9,045
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0.07
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Joseph
T. Hand
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5,370
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(4)
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0.04
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Jeffrey
R. Hines, P.E.
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36,185
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(5)
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0.29
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George
W. Hodges
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1,654
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(6)
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0.01
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George
Hay Kain, III
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33,956
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(7)
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0.27
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Bruce
C. McIntosh
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3,106
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0.02
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Kathleen
M. Miller
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4,007
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0.03
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William
T. Morris
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35,583
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(8)
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0.28
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Thomas
C. Norris
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17,995
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(9)
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0.14
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Jeffrey
S. Osman
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13,292
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(10)
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0.11
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Ernest
J. Waters
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100
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0.00
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All
Directors and Executive Officers as a group (16 persons)
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194,074
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(11)
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1.50
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(1)
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Except
as indicated in the footnotes below, Directors and Officers possessed sole
voting power and sole investment power with respect to all shares set
forth in this column. All Directors and Officers can be reached
through the Executive Offices of the Company.
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(2)
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The
percentage for each individual or group is based on 12,576,851 shares
outstanding as of February 26, 2010.
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(3)
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Includes
17 shares held by Mr. Bracey’s step-son for which Mr. Bracey disclaims
beneficial ownership.
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(4)
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Includes
shares owned jointly by Mr. Hand's wife for which he shares voting and
investment power. Includes shares held by Mr. Hand’s children
for which Mr. Hand disclaims beneficial ownership.
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(5)
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Includes
4,117 shares held by Mr. Hines’ wife, for which Mr. Hines disclaims
beneficial ownership.
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(6)
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Includes
25 shares held by Mr. Hodges' wife, for which Mr. Hodges disclaims
beneficial ownership.
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(7)
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Includes
3,876 shares held by the estate of Mr. Kain's wife for which Mr. Kain
disclaims beneficial ownership. Also includes 15,059 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. Shares are held in a brokerage account under terms that
require them to be pledged as security for margin loans into which Mr.
Kain enters.
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(8)
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Includes
shares owned jointly with Mr. Morris' wife, for which he shares voting and
investment power.
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(9)
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Includes
7,371 shares held by Mr. Norris' wife, for which Mr. Norris disclaims
beneficial ownership.
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(10)
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Includes
shares owned jointly with Karen E. Knuepfer, for which he shares voting
and investment power.
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(11)
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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.
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3
Director Cynthia A. Dotzel became a
director of the Company on January 26, 2009 and was required to file an Initial
Statement of Beneficial Ownership of Securities (Form 3) within ten
days. Ms. Dotzel filed her Form 3 on February 20, 2009 which
disclosed a beneficial ownership of 555 shares. Ms. Dotzel filed all
other reports in a timely manner.
Other than the aforementioned
transaction, the Company believes that during the year ended December 31, 2009,
all 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 on Forms 3, 4 and 5 furnished to the Company and written
representations of its Directors and executive officers that no other reports
were required.
ELECTION
OF DIRECTORS
With the assistance of legal counsel of
the Company, the Nomination and Corporate Governance Committee reviewed the
applicable standards for Board member independence and the criteria applied to
determine “Audit Committee financial expert” status. The Committee
also reviewed a summary of the answers to annual questionnaires completed by
each of the Directors and a report of transactions with Director affiliated
entities.
On the basis of this review, the
Nomination and Corporate Governance Committee delivered a report to the full
Board and the Board made its independence and “Audit Committee financial expert”
determinations based on the Nomination and Corporate Governance Committee report
and supporting information.
As a result of this review, the Board
affirmatively determined that the following Directors are “independent
directors” as such term is defined by Nasdaq:
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Ernest
J. Waters
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George
W. Hodges
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John
L. Finlayson
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George
Hay Kain III
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Michael
W. Gang, Esq.
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Thomas
C. Norris
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Cynthia
A. Dotzel, CPA
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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. 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, meaning that the
directors receiving the most votes are elected, whether or not they receive a
majority of the vote. There is no proposed change to plurality voting
in this proxy.
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NOMIMEES
FOR ELECTION TO THREE YEAR TERM EXPIRING IN 2013
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Cynthia
A. Dotzel, CPA
Age
55
Director
since 2009
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Ms.
Dotzel has been a Principal with SF & Company CPAs & Business
Advisors since January 2009. Prior to her current position, Ms.
Dotzel was a Founder, Secretary and Treasurer of Dotzel & Company,
CPAs from 1980 to 2008. Ms. Dotzel served as a director and
audit committee chairman of Waypoint Bank and Waypoint Financial
Corporation and its predecessor York Federal Savings and Loan from 1989
through 2005. She also serves and has served on the Boards or
committees of various non-profit organizations. The Board
considered Ms. Dotzel’s prior experience in auditing and financial matters
and determined that her continued service on the Board would be
beneficial.
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William
T. Morris
Age
72
Director
since 1978
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Mr.
Morris, now retired, served as Chairman of the Board of Directors from
2001 to 2008. He was President and Chief Executive Officer of
the Company from 1995 to 2002, and General Manager from 1978 to
1995. Mr. Morris was a Registered Professional Engineer in
three states, a Certified Waterworks Operator in Pennsylvania and a former
Justice of the Peace. Mr. Morris recently served on the
Pennsylvania Water Resources Advisory Committee and the Lower Susquehanna
Basin Regional Water Resources Committee. He also currently
serves as Director, officer or member of various community and non-profit
organizations. The Board considered Mr. Morris’ prior
experience in the water industry as well as his longstanding service to
the Company in many capacities and determined that his continued service
on the Board would be beneficial.
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Jeffrey
S. Osman
Age
67
Director
since 2001
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Mr.
Osman, now retired, served as President & CEO of the Company from 2003
to 2008, Vice President of Finance, Secretary and Treasurer from 1995 to
2002, and Controller from 1983 to 1995. Prior to joining the
Company, Mr. Osman was a regulatory consultant for Gannett Fleming in Camp
Hill, PA for 4 years. Prior to that, Mr. Osman worked at a
regulated telephone utility for 15 years. During his tenure
with the Company, Mr. Osman was a Director with the National Association
of Water Companies at both the state and national levels as well as
Chairman of the Pennsylvania Chapter. He also has served on
numerous community and non-profit organizations. The Board
considered Mr. Osman’s prior experience in the industry, regulatory and
financial matters as well as his longstanding service to the Company in
many capacities and determined that his continued service on the board
would be beneficial.
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5
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TO
CONTINUE FOR TERMS EXPIRING IN 2011
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John
L. Finlayson
Age
69
Director
since 1993
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Mr.
Finlayson has been a Vice President and Partner in Susquehanna Real
Estate, LP, a real estate development and consulting company, since
2006. He was formerly Vice President of Finance and
Administration for Susquehanna Pfaltzgraff Co., a holding company for
radio and television broadcasting companies, and a dinnerware products
company, from 1978 to 2006. Mr. Finlayson was previously an
audit manager for Arthur Anderson & Co. CPA’s and was a certified
public accountant. Mr. Finlayson has served as director and
Audit Committee Chairman of Adhesives Research, Inc., a private company
that develops high-performance, custom pressure-sensitive adhesives,
tapes, coatings, specialty films, and laminates, since
2005. Mr. Finlayson also participates as an officer or
committee member on various community and non-profit
organizations.
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Thomas
C. Norris
Age
71
Director
since 2000
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Mr.
Norris, currently retired, was the Chairman of the Board for P.H.
Glatfelter Company, Spring Grove, PA, a global supplier of specialty paper
and engineered products, from 1988 to 2000. In addition to
being Chairman of the Board at P.H. Glatfelter, Mr. Norris was President
and CEO from 1980 to 1998, VP of Operations and President of the
Glatfelter Pulp Wood Company (a subsidiary) from 1975 to 1980, and
President of the Spring Grove Water Company from 1980 to
2000. He was a director of Cadmus Communications, a public
company, in Richmond, Virginia from 2000 to 2006. Mr. Norris
currently serves as director, compensation and audit committee member for
the Glatfelter Insurance Group and Farmer’s Fire Insurance in York,
Pennsylvania. He also serves and has served on the Boards or
committees of various non-profit organizations.
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Ernest
J. Waters
Age
60
Director
since 2007
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Mr.
Waters, currently retired, served as York Area Manager, Met-Ed, a First
Energy Company, electric utility, from 1998 to 2009. In
addition to management, Mr. Waters’ experience includes internal auditing
and serving as an expert accounting witness in rate proceedings before the
Pennsylvania Public Utility Commission and the Federal Energy Regulatory
Commission. He was previously a certified public
accountant. Mr. Waters is currently the Chairman of the Board
for the York Hospital and a member of the Wellspan Board of Directors, the
parent company of York Hospital. He also serves and has served
on the Boards or committees of various non-profit and community
organizations.
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6
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TO
CONTINUE FOR TERMS EXPIRING IN 2012
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Michael
W. Gang, Esq.
Age
59
Director
since 1996
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Mr.
Gang is an attorney with Post & Schell PC, Harrisburg, PA,
concentrating in regulatory matters. Mr. Gang was a partner in
Morgan, Lewis & Bockius, Counselors at Law, in Harrisburg, PA from
1984 to 2005. Mr. Gang is counsel to numerous water, gas, and
electric utilities which are regulated by the Pennsylvania Public Utility
Commission; and has represented public utilities over a broad range of
financial, economic regulation, corporate governance and compensation
issues for 32 years.
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Jeffrey
R. Hines, P.E.
Age
48
Director
since 2008
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Mr.
Hines has served as the President and Chief Executive Officer of the
Company since 2008. He was Chief Operating Officer and
Secretary from 2007 to 2008, and Vice President of Engineering from 1995
to 2006. Mr. Hines is a past chairman of the PA Chapter of the
National Association of Water Companies, and serves as director or
committee member of various community and non-profit
organizations. Mr. Hines is a licensed waterworks and
wastewater operator in Pennsylvania, a licensed Professional Engineer in
PA and MD, and holds MBA and law degrees.
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George
W. Hodges
Age
59
Director
since 2000
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Mr.
Hodges, now retired, served as non-executive Chairman of the Board of The
Wolf Organization, regional distributor of kitchen and bath products and
specialty building products, from 2008 to 2009. Prior to being
Chairman, Mr. Hodges was a member of the Office of the President of The
Wolf Organization from 1986 to 2008. Mr. Hodges is a director
and audit committee chairman of Fulton Financial Corporation, which is a
public company in Lancaster, PA. He also serves as a director
and compensation committee chairman of The Wolf Organization, York, PA,
and a director and audit committee member of Topflight Corporation of Glen
Rock, PA. In addition, Mr. Hodges is a director in several real
estate development companies, a director of Burnham Holdings, Lancaster,
PA, and a director of Exteria Building Products, Miami, FL. He
also serves and has served on the Boards or committees of various
non-profit and community organizations.
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George
Hay Kain, III
Age
61
Director
since 1986
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Mr.
Kain has been a substitute school teacher since 2007. He was a
consultant from 2004 to 2007, and sole practitioner, Attorney at Law from
1982 to 2003. Mr. Kain handled pipeline condemnation cases for
a local utility, and cases involving real estate, and estates and
trusts. Mr. Kain was a solicitor for York County Children and
Youth Services where he also practiced in juvenile court. Mr.
Kain is also actively involved in various non-profit
organizations.
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The Board of Directors unanimously
recommends a vote "FOR"
each of the nominees.
7
AMENDMENT
OF OUR AMENDED AND RESTATED ARTICLES OF INCORPORATION TO ELIMINATE CUMULATIVE
VOTING
The Board has authorized an amendment
to Article VI of the Company’s Amended and Restated Articles of Incorporation to
eliminate cumulative voting. The full text of our Amended and
Restated Articles of Incorporation, including this amendment, is attached to the
Proxy Statement as Exhibit A.
The Company’s Amended and Restated
Articles of Incorporation currently provide that shareholders have the right to
cumulate their votes for the election of directors of the
Corporation. 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. In contrast, without cumulative voting, each shareholder has
only one vote per share for each nominee. In uncontested elections,
like the one covered by this proxy, cumulative voting makes no difference
because under the plurality standard, as long as each director gets one vote, he
or she is elected.
Pennsylvania Corporation Law provides
that the shareholders of a corporation have cumulative voting rights, unless the
articles of incorporation expressly provide otherwise. Our Amended
and Restated Articles of Incorporation currently provide that our shareholders
have the right to cumulate their votes in the election of
directors. This proposal is to amend our Amended and Restated
Articles of Incorporation to eliminate cumulative voting under applicable
Pennsylvania Corporation Law.
In contested elections, cumulative
voting could further the candidacy of minority shareholders which may have
interests and goals that are not aligned with the interests of all of the
Company’s shareholders. The Company believes that an effective Board
must represent all of its shareholders and not a small shareholder
group. In addition, cumulative voting is no longer used at many
public companies, and has been used rarely, by the Company’s
shareholders. For these reasons, the Company proposes to eliminate
cumulative voting.
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"
the proposal to amend our Amended and Restated Articles of Incorporation
to eliminate cumulative voting.
The Nomination and Corporate Governance
Committee (“the Committee”) develops and makes recommendations to the Board of
Directors concerning corporate governance principles and
guidelines. Some of the principles and guidelines are listed
below.
The Committee considers candidates for
Board membership suggested by its members and other Board members, as well as
management and shareholders. The Committee recommends to the Board
the appropriate size, function and needs of the Board, so that the Board as a
whole collectively possesses a broad range of skills, industry and other
knowledge and business and other experience useful to the effective oversight of
the Company. Some of these skills include crisis
8
management,
accounting and finance, corporate governance and risk management. The Board also
seeks members from diverse backgrounds with a reputation for
integrity. In addition, Directors should have experience in positions
with a high degree of responsibility, be leaders in the companies or
institutions with which they are affiliated and be selected based upon
contributions that they can make to the Company. The Committee
considers all of these qualities when selecting, subject to Board ratification,
candidates for Director. No distinctions are made between internally
recommended candidates and those recommended by shareholders.
The bylaws of the Company provide that
the Board of Directors will consist of no less than eight Directors and no more
than twelve directors, who are elected to staggered three-year terms of
office. There is a mandatory retirement age of 73 for all
directors.
Directors are required under the bylaws
of the Company to own at least one share of stock.
The Board conducts an annual evaluation
of its performance and the performance of other Board
committees. This process is managed by the Nomination and Corporate
Governance Committee.
The Audit, Compensation, and Nomination
and Corporate Governance committees must be composed of at least three directors
all of which are considered independent directors under Nasdaq
rules. Each of these three key committees has a charter which is
posted on our website (www.yorkwater.com)
under “Investor Relations” then “Corporate Governance”.
The Board of Directors has adopted a
Code of Conduct applicable to all directors and employees. The Code
of Conduct is available on our website under “Investor Relations” then
“Corporate Governance”.
The preference of the Board, per its
Standing Resolutions, is for the Chairman of the Board to be an independent
director per Nasdaq rules. Generally, independent directors’ concerns
are more in line with shareholder concerns and values, and they offer more
objective input and leadership to the Board. Due to the current
composition of the Board, with three directors that are not independent, the
Board thought it was particularly appropriate to have an independent director as
Chairman at this time. The current Chairman also leads executive
sessions of the Board’s independent directors.
The Board is responsible for oversight
of the Company’s risk management process. The entire senior
management of the Company is responsible for identifying risks, managing risks,
and reporting and communicating risks back to the Board of
Directors. A Chairman that is independent of management adds another
layer of insight to the risk assessment process.
The Company has an Executive Committee,
an Audit Committee, a Compensation Committee, and a Nomination and Corporate
Governance Committee, all of which are composed of members of the Board of
Directors.
9
The Executive Committee held three (3)
meetings during the fiscal year ended December 31, 2009. The
Executive Committee is empowered to function as delegated by the Board of
Directors. Their main focus is on budgeting, water rates, and debt
and equity financing. The Executive Committee is composed of the
following Directors appointed by the Board: Thomas C. Norris, Chairman; William
T. Morris, Michael W. Gang, Esq.; Jeffrey S. Osman; and Jeffrey R. Hines,
P.E.
The Audit Committee held four (4)
meetings during the fiscal year ended December 31, 2009. The Audit
Committee monitors the audit functions of our independent public accountants and
internal controls of the Company. The Audit Committee is composed of
the following Directors appointed by the Board: John L. Finlayson,
Chairman; George W. Hodges; Thomas C. Norris; and Cynthia A. Dotzel, CPA, all of
whom have been determined to be independent as defined by Nasdaq. The
Board has adopted a written charter for the Audit Committee, which it reviews
and reassesses on an annual basis. A copy of the Audit Committee
Charter is available on the Company's website, on the Corporate Governance page
at www.yorkwater.com.
The Compensation Committee held two (2)
meetings during the fiscal year ended December 31, 2009. The
Compensation Committee considers and makes recommendations to the Board of
Directors concerning the proposed compensation, salaries and per diems of the
corporate officers, Directors and members of the Committees of the Board of
Directors of the Company. The Compensation Committee is composed of
the following Directors appointed by the Board: George W. Hodges,
Chairman; George Hay Kain, III; and Thomas C. Norris, all of whom have been
determined to be independent by the Board as defined by Nasdaq. The
Board has adopted a written charter for the Compensation Committee, which it
reviews and reassesses on an annual basis. A copy of the Compensation
Committee Charter is available on the Company’s website, on the Corporate
Governance page at www.yorkwater.com.
The Compensation Committee reviewed the
Company’s compensation policies and practices for all employees (including
non-executive officers) covering base salaries and wages, deferred compensation,
incentive plans and change in control agreements in order to assess the inherent
risks involved.
Considering all of the elements of the
various compensation plans and the fact that the Company has no competing
segments or divisions, the Compensation Committee concluded that the Company’s
compensation policies and practices did not incentivize excessive risk-taking
that would have a material adverse effect on the Company.
The Nomination and Corporate Governance
Committee held four (4) meetings during the fiscal year ended December 31,
2009. The Nomination and Corporate Governance Committee recommends
the appropriate Board structure, oversees the Board’s annual evaluation of its
performance and the performance of other Board Committees, 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
shall 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 by-laws, 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.
10
The Nomination and Corporate Governance
Committee is composed of the following Directors appointed by the
Board: Michael W. Gang, Chairman; John L. Finlayson; and Ernest J.
Waters, all of whom have been determined to be independent by the Board as
defined by Nasdaq. The Board of Directors has adopted a written
charter for the Nomination and Corporate Governance Committee, which it reviews
and reassesses on an annual basis. A copy of the Nomination and
Corporate Governance Committee charter is available on the Company's website, on
the Corporate Governance page at www.yorkwater.com.
The independent directors of the Board
schedule regular executive sessions of independent directors in which they meet
without management participation. The Chairman of the Board leads
these sessions.
Our Named Executive
Officers. This section discusses the compensation we paid to
our named executive officers (as defined by SEC rules) in 2009. Our
named executive officers are:
|
Name
|
Title
|
|
Jeffrey
R. Hines, P.E.
|
President,
Chief Executive Officer and Director
|
|
Kathleen
M. Miller
|
Chief
Financial Officer
|
|
Joseph
T. Hand
|
Chief
Operating Officer
|
|
Bruce
C. McIntosh
|
Vice
President-Human Resources
|
|
Vernon
L. Bracey
|
Vice
President-Customer Service
|
General
Philosophy. We compensate our senior management through a
combination of base salary and cash incentives designed to be competitive with
comparable employers and to align management's incentives with the long-term
interests of our customers and shareholders. Our compensation setting
process consists of establishing a base salary for each senior manager and
designing an annual cash incentive (currently up to 5% of salary) for such
manager to reward the achievement of specific operational goals. We
only incentivize operational goals that add value for both our customers and our
shareholders, such as increasing efficiency, ensuring a safe, adequate supply of
water, reducing costs, improving customer service and expanding our service
territory in order to gain economies of scale and spread fixed costs over a
larger number of customers. Payouts for incentives that are not in
the long-term interest of customers may not be considered prudent, and
therefore, be recoverable through water rates granted by the Pennsylvania Public
Utility Commission.
Base Salary. To
assist us in establishing base salary in 2009, the Compensation Committee
engaged SAJE, a nationally recognized consulting firm, to provide a survey of
the compensation of senior management at York and at seven comparable
investor-owned water
11
utilities. These
comparables included Aqua America, Inc., Aquarion Water Company, Middlesex Water
Company, Pennichuck Water, San Jose Water Company, Suburban Water Systems and
United Water. SAJE also determined relative measures of the
relationship between the size and compensation of the companies included in the
survey. Outside of this survey, SAJE provided no other services, and
no other compensation consultants were engaged or consulted by the Board of
Directors, the Compensation Committee, or management for any
purpose.
Based upon an analysis of the base
salary levels and trend lines developed using regression analysis reflected in
the survey, we establish base salaries for our senior management. The
base salary of the President and Chief Executive Officer and other Named
Executive Officers is currently below the 25th
percentile of the seven comparable investor-owned water utilities. We
have chosen this level due to the relatively low level of complexity of the
Company’s business and operations as compared to many of the comparable
investor-owned water utilities. We are a pure regulated water
utility, while some of the comparables also have wastewater and other
non-regulated businesses. We are a stand alone company with no
subsidiaries, parent or holding company. We have one filtration plant
and serve a relatively smaller number of customers in one state. Many
of the comparables serve in multiple states and have many subsidiaries, and many
filtration plants. In addition, there are issues specific to certain
parts of the country such as water availability and regulatory environment that
challenge some water utilities more than others. Finally, the cost of
living in the geographic area in which our operations are located is lower than
some of the comparables.
The base salary level of senior
management will be reviewed annually to determine if the 25th
percentile continues to be appropriate based on changes in our product line, the
current regulatory environment, changes in water quality standards, competition
for competent management and growth in our service territory, as well as other
relevant factors.
In addition to the survey of comparable
companies, the Compensation Committee also considers the value of the position
to the Company, the performance of the executive and the length of service in
the current position and with the Company.
Bonuses and Equity
Compensation. We do not provide bonuses or equity compensation
in the form of stock options to senior management. We do, however,
offer an Employee Stock Purchase Plan to all employees, including senior
management, on the same terms. Employees may purchase stock from the
Company on a quarterly basis, at a 5% discount to market. Annual
purchases under this plan may not exceed 10% of the employee’s regular
salary.
Cash
Incentives. Our practice is to use cash awards to incentivize
our senior managers to create value for our customers and
shareholders. To that end, we adopted a Cash Incentive Plan in 2005,
pursuant to which our Compensation Committee sets annual performance objectives
and target incentive payment amounts. All of our managers participate
in the plan, including our senior managers.
The plan is administered by the
Compensation Committee, which has complete and final authority to, among other
things, select participants, to determine the goals and circumstances under
which incentive awards are granted, to grant awards and to construe and
interpret the Plan. Decisions of the Compensation Committee with
respect to the administration and interpretation of the Plan are final,
conclusive and binding upon all participants.
The Compensation Committee has
discretion to determine all performance objectives. In addition, the
Committee may specify that any incentive award be conditioned upon achievement
or satisfaction of business criteria or other measures of
performance. One or more of the following
12
business
criteria or other measures of performance may be used by the
Committee: (1) growth in revenues or assets; (2) earnings from
operations; (3) net income or earnings per common share; (4) return on
investment or return on equity; (5) stock price or shareholder return; and (6)
strategic business criteria, consisting of meeting specified water quality
standards, environmental or safety standards, affordability of rates and
customer satisfaction standards. The Compensation Committee may
exercise its discretion to eliminate, reduce or increase the amounts payable as
incentive, subject to such business criteria or other measures of
performance.
Under the plan, annual performance
objectives are established no later than ninety (90) days after the beginning of
any annual incentive period, which is usually a calendar year. Each
performance objective carries with it a score of five (5) points. No
points are awarded for partial achievement of performance
objectives. Incentive awards are granted only if an overall score of
seventy-five (75) percent of the available performance objective points are
achieved. The Compensation Committee believes that achieving
performance objectives should be the shared responsibility of
management. Accordingly, if an overall score of seventy-five (75)
percent of the available performance objective points is achieved, all
participants receive their target incentive awards. If an overall
score of less than seventy-five (75) percent of the available performance
objectives is achieved, no participant receives any award.
The Compensation Committee set the
performance objectives and target incentive awards for 2009 on January 26,
2009. For 2009, the Compensation Committee determined that the amount
of the target cash incentive award would be 5% of the base salary as of December
31, 2009 for each management employee, including senior management
employees. The Committee selected 5% as the target cash incentive
award for 2009, and for all of the previous years since the plan’s inception in
2005, after considering various factors. One such factor was the
range of other benefits already provided by the Company. Another
factor was the comparison of the Company’s total salary and benefit package to
the compensation packages paid by other comparable companies. A third
factor was the level of motivation needed to achieve the established goals of
the Company. Finally, the Compensation Committee considered how the
plan would be perceived by the regulators, customers and
shareholders. All of these factors together contributed to the
Committee’s decision to keep the target incentive relatively low as compared to
other companies.
The 2009 performance objectives as
determined by the Compensation Committee were: implement on-line bill pay,
implement a service line protection plan, develop a nineteen-year meter change
out plan, replace or reline 33,000 feet of pipe, develop an annual hydrant
inspection plan, obtain regulatory approval of municipal contract, design and
permit spillway improvements, conduct a customer attitude survey, implement a
customer satisfaction survey, complete an equity offering, retire debt, reduce
the number of billing cycles, complete recommendations of the management audit,
develop a payment agreement reconciliation process and implement identity theft
procedures.
On January 25, 2010, the Compensation
Committee determined that our management had achieved at least seventy-five (75)
percent of the performance objectives listed above for 2009, as well as the set
business criteria for 2009, which was earnings per common share of
$0.60. The Committee awarded the senior managers the amounts set
forth in the 2009 Grants of Plan Based Awards Table below, which was the target
incentive amount for each senior manager.
On January 25, 2010, the Compensation
Committee determined performance objectives and target incentive amounts to be
awarded under the plan for 2010. The performance objectives are:
review and implement, if beneficial, a service line protection plan, update the
valve maintenance program, reline or replace infrastructure amounting to 29,000
feet of pipe, design and permit Lake Williams spillway improvements, complete a
debt financing, implement a payment agreement reconciliation process, complete
and successfully resolve a major rate case filing, complete phase 2
13
of the
water treatment plant update and expansion project, implement paperless billing,
implement an annual risk analysis and management plan, reach a successful
bargaining unit agreement that provides for uninterrupted service, implement
system-wide Scada (Supervisory Control and Data Acquisition) read-only access,
develop an energy optimization protocol, implement new public notification rule,
streamline the billing cycles and develop on-line policy and procedures
manuals. The target incentive amounts for 2010, as determined by the
Compensation Committee, are 5% of senior managers' base salary as of December
31, 2010 and the business criteria for 2010 is earnings per common
share.
Severance
Benefits. Other than Change in Control payments described
below, we do not provide severance benefits to employees.
Retirement
Plans. We provide a traditional defined benefit pension
plan. Senior management is entitled to benefits under the defined
benefit pension plan upon retirement after the age of 55 on the same terms as
other employees. The pension benefit is based on the years of service
multiplied by the sum of $19.25 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 highest
consecutive sixty (60) complete months during the last one hundred and twenty
(120) complete months immediately prior to the date the pension benefit
calculation is made. Employees who terminate their employment prior to the age
of 55 may elect to collect benefits upon attaining age 55.
We also provide a supplemental
retirement program, which provides senior management with a retirement benefit
after the age of 55 in addition to the defined benefit pension. The
supplemental retirement program is designed to encourage senior management to
stay with the Company until retirement. Generally, supplemental
retirement benefits are made available to senior management and are payable to
the executive or his or her beneficiary over 15 years beginning no earlier than
age 60. The annual benefit payable under the supplemental retirement
program is calculated by multiplying the number of years of service subsequent
to December 31, 1983 by a predetermined annual retirement benefit unit as shown
below:
|
Mr.
Hines
|
$1,441
|
|
Ms.
Miller
|
1,394
|
|
Mr.
Hand
|
1,961
|
|
Mr.
McIntosh
|
1,754
|
|
Mr.
Bracey
|
1,471
|
The estimated annual benefit payable to
Mr. Hines at normal retirement age under the supplemental retirement program is
$53,333. The estimated annual benefit payable to Ms.
Miller, Mr. Hand, Mr. McIntosh and Mr. Bracey at normal retirement
age under the supplemental retirement program is $33,333. Benefits
are paid monthly. Senior managers who terminate their employment
prior to the age of 55 forfeit their supplemental retirement
benefits.
We also provide a deferred compensation
program to management. The deferred compensation program permits
senior managers to defer up to 5% of salary over an eight (8) year period, with
the Company matching the deferment up to 2-1/2% of salary. Mr. Hand
and Mr. Bracey are the only named senior management members currently deferring
salary. In 2009, Mr. Hand received annual matching benefits of
$2,188, and Mr. Bracey received annual matching benefits of
$1,565. Annually, the Company credits participants’ deferred
compensation balances with interest on the existing credit balance at a rate
selected by the Company, currently equal to the December 31 rate of Moody’s AAA
Corporate Bond Yield. This rate amounted to 5.30% for
2009. Our deferred compensation program does not provide above-market
or preferential earnings.
14
2009
credited earnings are shown in the “2009 Nonqualified Deferred Compensation”
table. Payouts from this plan on retirement, termination, disability
or death are described in detail below in the narrative discussion accompanying
the 2009 Nonqualified Deferred Compensation Table.
Our senior managers may participate in
our 401(k) savings plan on the same terms as other employees. We
provide an annual maximum matching contribution of $2,240 per
employee. Mr. Bracey did not participate in the plan in
2009. All other senior managers received the maximum matching
contribution of $2,240 during 2009.
Change in
Control. Our senior management has built York Water into the
successful business that it is today. We believe that it is important
to protect them in the event of a change of control and to protect the company
from the distractions senior managers often suffer as a result of the
uncertainties that frequently surround changes in
control. Accordingly, in 2008 we entered into amended and restated
agreements with each of our senior managers that provide for certain payments
upon changes of control in consideration of such senior managers agreeing not to
compete with us for a period of time following the termination of their
employment. Most change in control payments are only paid if the
senior manager in question is terminated in connection with a change in
control. In certain circumstances, however, payments may be made to
senior managers who do not terminate their employment for one year following a
change in control of us. These payments incentivize our senior
managers to continue their employment amid the uncertainty that often follows
changes in control and thereby promotes stability for the company during such
times. Change in control benefits are paid lump sum and are based on
a multiple of base salary and cash incentive compensation. In the
event of a change of control, we also continue health and other insurance
benefits for up to one year depending on circumstances. The
agreements are valid for an initial term of five years, and renew automatically
for one-year periods after the first five years. The agreements
terminate upon the employee reaching age 65 or terminating employment with the
Company. The Company must provide 90 days notice to terminate the
agreements. These agreements are described in more detail below under
the heading "Potential Payments upon Termination or Change in
Control."
Perquisites and Other
Benefits. The primary perquisite for senior management is the
use of York Water's vehicles for personal use. The most common
personal use of York Water's vehicles by senior management is commuting to and
from work. No member of senior management receives perquisites valued
in the aggregate at $10,000 or more.
Senior management also participates in
York Water's other benefit plans on the same terms as other
employees. These plans include medical and health insurance, life
insurance and employee stock plan discount.
Board Process. The
Compensation Committee of the Board of Directors approves all compensation and
awards to executive officers, which include the Chief Executive, Chief Financial
Officer, Chief Operating Officer and four vice presidents. The
Compensation Committee reviews the performance and compensation of the Chief
Executive and, following discussions with that individual, and a review of the
data provided by SAJE, establishes his compensation level. For the
remaining executive officers, the Chief Executive Officer makes recommendations
to the Compensation Committee that generally are approved. With
respect to the cash incentive awards, the Compensation Committee grants cash
incentives when warranted.
15
The Compensation Committee has reviewed
and discussed the foregoing Compensation Discussion and Analysis with
management, and based on that review and discussion, the Compensation Committee
recommended to the board of directors that the Compensation Discussion and
Analysis be included in this proxy statement.
|
George
W. Hodges, Chairman
|
George
Hay Kain III, Member
|
Thomas
C. Norris, Member
|
The following table sets forth
information concerning compensation paid by the Company to senior managers or
accrued by the Company for the senior managers in 2009, 2008 and
2007.
|
Change
in
|
||||||
|
Pension
Value
|
||||||
|
&
Nonqualified
|
||||||
|
Non-Equity
|
Deferred
|
|||||
|
Name
and
|
Incentive
Plan
|
Compensation
|
All
Other
|
|||
|
Principal Position
|
Year
|
Salary ($)
|
Compensation ($)
|
Earnings ($)
|
Compensation ($)
|
Total ($)
|
|
Jeffrey
R. Hines, P.E.
|
||||||
|
President,
Chief
|
||||||
|
Executive
Officer
|
||||||
|
and
Director
|
2009
|
237,685
|
12,100
|
75,282
|
4,922
|
329,989
|
|
2008
|
215,085
|
11,056
|
124,314
|
4,484
|
354,939
|
|
|
2007
|
146,914
|
7,415
|
463
|
2,240
|
157,032
|
|
|
Kathleen
M. Miller
|
||||||
|
Chief
Financial
|
||||||
|
Officer
|
2009
|
124,483
|
6,407
|
23,360
|
3,638
|
157,888
|
|
2008
|
116,806
|
5,725
|
43,235
|
3,409
|
169,175
|
|
|
2007
|
103,232
|
5,162
|
4,637
|
2,429
|
115,460
|
|
|
Joseph
T. Hand
|
||||||
|
Chief
Operating
|
||||||
|
Officer
|
2009
|
115,708
|
5,850
|
0,000
|
4,776
|
126,334
|
|
2008
|
91,938
|
4,545
|
0,000
|
1,913
|
98,396
|
|
|
Bruce
C. McIntosh
|
||||||
|
Vice
President-
|
||||||
|
Human
Resources
|
2009
|
107,825
|
5,375
|
56,586
|
3,639
|
173,425
|
|
2008
|
105,098
|
5,118
|
109,839
|
3,411
|
223,466
|
|
|
2007
|
99,412
|
4,971
|
9,080
|
2,240
|
115,703
|
|
|
Vernon
L. Bracey
|
||||||
|
Vice
President-
|
||||||
|
Customer
Service
|
2009
|
97,965
|
4,950
|
25,908
|
3,720
|
132,543
|
|
2008
|
95,572
|
4,667
|
37,162
|
3,381
|
140,782
|
|
16
Non-Equity Incentive
Awards. As described in the Compensation Discussion and
Analysis under the heading "Cash Incentives," our practice is to award cash
incentives based upon the achievement of diverse performance
objectives. The performance objectives are established annually by
the Compensation Committee, and are designed to recognize and reward the
achievement of our goals and the creation of value for our customers and
shareholders. The following table sets forth awards granted to our
senior managers in 2009 pursuant to our incentive plan.
|
Name and Principal Position
|
Estimated
Future Payouts Under
Non-Equity
Incentive
Plan Awards Target ($)
|
|
|
Jeffrey
R. Hines, P.E.
President,
Chief Executive Officer and Director
|
12,100
|
|
|
Kathleen
M. Miller
Chief
Financial Officer
|
6,407
|
|
|
Joseph
T. Hand
Chief
Operating Officer
|
5,850
|
|
|
Bruce
C. McIntosh
Vice
President-Human Resources
|
5,375
|
|
|
Vernon
L. Bracey
Vice
President-Customer Service
|
4,950
|
The awards appearing in this table also
appear in the Summary Compensation Table.
We do not grant equity incentive plan
awards.
17
The table below sets forth the present
value of accumulated benefits payable to each senior manager, including the
number of years of credited service, under the Company's General and
Administrative Pension Plan (a defined benefit pension plan) and its
Supplemental Executive Retirement Plan. Detailed information on these
plans can be found in the Compensation Discussion and Analysis above, under the
heading "Retirement Plans."
|
Years
of
|
Present
Value
|
||
|
Name
and
|
Credited
|
of
Accumulated
|
|
|
Principal Position
|
Plan Name
|
Service
|
Benefit ($)
|
|
Jeffrey
R. Hines, P.E.
|
|||
|
President,
Chief Executive Officer
|
General
and Administrative
|
||
|
and
Director
|
Pension
Plan
|
19
|
197,023
|
|
Jeffrey
R. Hines, P.E.
|
|||
|
President,
Chief Executive Officer
|
Supplemental
Executive
|
||
|
and
Director
|
Retirement
Plan
|
20
|
172,687
|
|
Kathleen
M. Miller
|
General
and Administrative
|
||
|
Chief
Financial Officer
|
Pension
Plan
|
13
|
85,833
|
|
Kathleen
M. Miller
|
Supplemental
Executive
|
||
|
Chief
Financial Officer
|
Retirement
Plan
|
6
|
45,294
|
|
Bruce
C. McIntosh
|
General
and Administrative
|
||
|
Vice
President-Human Resources
|
Pension
Plan
|
13
|
136,262
|
|
Bruce
C. McIntosh
|
Supplemental
Executive
|
||
|
Vice
President-Human Resources
|
Retirement
Plan
|
11
|
188,069
|
|
Vernon
L. Bracey
|
General
and Administrative
|
||
|
Vice
President-Customer Service
|
Pension
Plan
|
11
|
61,075
|
|
Vernon
L. Bracey
|
Supplemental
Executive
|
||
|
Vice
President-Customer Service
|
Retirement
Plan
|
6
|
51,758
|
All assumptions made in quantifying the
present value of the accumulated benefits to the senior managers under these
plans are described in Note 6 to the Company's Financial Statements included in
our 2009 Annual Report to Shareholders. The present values are based
upon a 6.00% discount rate. Mr. Hand was not vested in the General
and Administrative Pension Plan and had no complete years of service under the
Supplemental Executive Retirement Plan as of December 31, 2009. There
were no payments made under these plans during the last fiscal
year.
18
The table set forth below presents
contributions, earnings and the balance at year-end (including tax savings) for
the accounts of our senior managers under our deferred compensation program that
is described in more detail in the Compensation Discussion and Analysis under
the heading "Deferred Compensation."
|
Name
and
Principal Position
|
Executive
Contribution
|
Company
Contribution
|
Earnings
|
Distributions
|
Balance
at
Year-End
|
|
Jeffrey
R. Hines, P.E.
President,
Chief Executive Officer
and
Director
|
2,682
|
89,697
|
|||
|
Kathleen
M. Miller,
Chief
Financial Officer
|
1,398
|
46,742
|
|||
|
Joseph
T. Hand,
Chief
Operating Officer
|
4,376
|
2,188
|
348
|
11,634
|
|
|
Bruce
C. McIntosh,
Vice
President-Human Resources
|
1,399
|
46,799
|
|||
|
Vernon
L. Bracey
Vice
President-Customer Service
|
3,129
|
1,565
|
2,155
|
72,069
|
Payouts upon
Retirement. Following a senior manager's retirement, a monthly
retirement benefit will be paid to him or her for 120 months. This
benefit will be equal to a percentage of his or her deferred income account
immediately prior to retirement divided by the following factor (1 minus the
corporate federal and state income tax rate for the Company immediately prior to
retirement). Assuming a federal income tax rate of 34% and a state
income tax rate of 9.99% for 2009, and assuming all senior managers were
eligible for retirement as of December 31, 2009, the senior managers would
receive the monthly benefits in the table that follows the next
paragraph. The Company does not gross up the deferred compensation
payout, but rather passes on the tax benefit the Company will realize when death
benefit proceeds are received under corporate-owned life insurance policies
which are in place in order to recoup the costs of the plan.
Payouts upon
Disability. If a senior manager becomes disabled before his or
her deferred income account has been distributed, a monthly retirement benefit
will be paid to him or her for 120 months. This benefit will be equal
to a percentage of his or her deferred income account immediately prior to the
date he or she became disabled divided by the following factor (1 minus the
corporate federal and state income tax rate for the Company immediately prior to
the date he or she became disabled). Assuming a federal income tax
rate of 34% and a state income tax rate of 9.99% for 2008, and assuming each
senior manager became disabled as of December 31, 2009, such senior managers
would receive the monthly benefits in the table that follows. Once
again, the Company is not grossing up the benefit, but rather passing on tax
savings it will realize in the future.
19
|
Name
and
Principal
Position
|
Deferred
Income
Account Percentage (%)
|
Monthly
Retirement Amount ($)
|
|||
|
Jeffrey
R. Hines, P.E., President, Chief Executive Officer and
Director
|
1.110
|
996
|
|||
|
Kathleen
M. Miller,
Chief
Financial Officer
|
0.833
|
390
|
|||
|
Joseph
T. Hand,
Chief
Operating Officer
|
0.833
|
97
|
|||
|
Bruce
C. McIntosh, Vice
President-Human
Resources
|
0.833
|
390
|
|||
|
Vernon
L. Bracey, Vice President-Customer Service
|
0.833
|
601
|
|||
Payouts upon Termination of
Employment. If a senior manager's employment with the Company
is terminated other than by death or disability before he or she is eligible for
retirement, the amount of his or her contributions, without the Company's
matching contribution and without accumulated interest credited to the deferred
income account shall be distributed to such senior manager immediately upon his
or her termination in a lump sum. Assuming each senior manager were
terminated as of December 31, 2009, such senior managers would be entitled to
receive the following lump sum payments:
|
Name
and
Principal
Position
|
Lump
Sum Payment Upon Termination ($)
|
|
|
Jeffrey
R. Hines, P.E., President, Chief Executive Officer and
Director
|
18,238
|
|
|
Kathleen
M. Miller,
Chief
Financial Officer
|
10,216
|
|
|
Joseph
T. Hand
Chief
Operating Officer
|
4,376
|
|
|
Bruce
C. McIntosh, Vice
President-Human
Resources
|
10,021
|
|
|
Vernon
L. Bracey, Vice President-Customer Service
|
24,369
|
20
The
senior management deferrals have previously been reported in the salary column
of the Summary Compensation Table in the year in which they were
earned.
Payouts upon
Death. If a senior manager were to die before distribution of
his or her deferred income account has commenced, his or her beneficiary would
receive a death benefit in an amount equal to the higher of $150,000 or the
senior manager’s deferred income account immediately prior to his or her death
divided by the following factor (1 minus the corporate federal and state income
tax rate for the Company immediately prior to the date of death). The
death benefit determined as above will be paid to beneficiaries in a lump
sum. Assuming death benefits for each senior manager became payable
as of December 31, 2009, such senior manager’s respective beneficiaries would be
entitled to receive the following lump sum payments:
|
Name
and
Principal
Position
|
Beneficiary
Death Benefit ($)
|
|
|
Jeffrey
R. Hines, P.E., President, Chief Executive Officer and
Director
|
150,000
|
|
|
Kathleen
M. Miller,
Chief
Financial Officer
|
150,000
|
|
|
Joseph
T. Hand
Chief
Operating Officer
|
150,000
|
|
|
Bruce
C. McIntosh, Vice
President-Human
Resources
|
150,000
|
|
|
Vernon
L. Bracey, Vice
President-Customer
Service
|
150,000
|
Description of Change in Control
Agreements. We have entered into Amended and Restated Change
in Control Agreements with each member of senior management that provide for
payments to them under certain circumstances in connection with a change in
control in consideration of such senior managers agreeing not to compete with us
for a period of time following the termination of their employment.
Under all agreements, generally a
“change in control” will occur if:
|
·
|
Any
person or affiliated group (with limited exceptions) becomes the
beneficial owner in the aggregate of 50 percent or more of all of our
voting securities;
|
|
·
|
A
majority of our Board of Directors is involuntarily removed or defeated
for re-election to our Board of Directors (for example, as a result of a
proxy contest);
|
21
|
·
|
We
are party to a merger or reorganization pursuant to which the holders of
our voting securities prior to such transaction become the holders of 50
percent or less of the voting securities of the new merged or reorganized
company; or
|
|
·
|
The
Company is liquidated or dissolved, or all of its assets are sold to a
third party;
|
In each circumstance described above,
our Board of Directors may make a determination that the circumstances do not
warrant the implementation of the provisions of the agreement, and in such case,
the change in control will not trigger any payments under the
agreements.
All payments under the agreements are
triggered by the occurrence of a change in control of us, and most payments also
require that the relevant senior manager’s employment also be
terminated. The amounts of payments to our senior managers under
these agreements vary depending on the timing of the change in control and the
timing and manner of the termination of employment. Generally, the
manner of termination is divided into four categories.
A “for cause” termination results
from:
|
·
|
misappropriation
of funds or any act of common law
fraud;
|
|
·
|
habitual
insobriety or substance abuse;
|
|
·
|
conviction
of a felony or any crime involving moral
turpitude;
|
|
·
|
willful
misconduct or gross negligence by the senior manager in the performance of
his duties;
|
|
·
|
the
willful failure of the senior manager to perform a material function of
his duties; or
|
|
·
|
the
senior manager engaging in a conflict of interest or other breach of
fiduciary duty.
|
A “good reason” termination occurs when
the senior manager terminates his own employment following a change in control
and after one or more of the following has occurred:
|
·
|
the
Company has breached the change in control
agreement;
|
|
·
|
the
Company has significantly reduced the authority, duties or
responsibilities of the senior manager or reduced his base compensation or
annual bonus compensation
opportunity;
|
|
·
|
the
Company has reduced the senior manager from the employment grade or
officer positions which he or she holds;
or
|
|
·
|
the
Company has transferred the senior manager, without his or her express
written consent, to a location that is more than 50 miles from his or her
principal place of business immediately preceding the change of
control.
|
A voluntary termination is the
termination by the senior manager of his or her own employment under
circumstances that would not be a “good reason” termination. Examples
are ordinary retirement or leaving the Company to seek other job
opportunities.
An involuntary termination is a
termination in connection with a change in control that is not a “for cause”
termination, a good reason termination or a voluntary termination.
Payouts under Change in Control
Agreements. Under the agreements, all senior managers are entitled to
payment in the case of an involuntary termination or a good reason termination
within some time period surrounding a change in control of
us (generally six months prior to or one year following a change in
control). Payments are paid in lump sums and are based on a multiple
of base salary and cash incentive compensation earned by the senior manager in
the preceding 12 months. We call this amount “base
pay.” Additionally, Messrs. Hines, Hand, Bracey, and McIntosh, and
Ms. Miller are entitled to payment of “stay bonuses” if they remain employed
by
22
us for
one year following a change in control, and smaller stay bonuses if they remain
employed for at least three months following a change in control and then
voluntarily terminate their employment more than three months but less than one
year following a change in control. Finally, our senior managers are
entitled to have their health and welfare benefits continue for periods of up to
one year following the termination of their employment (subject to such benefits
terminating or such senior manager becoming covered by the benefit plans of
another employer).
The table below sets forth the relevant
base pay multiples, lump sum payout amounts and the value of continued benefits
our senior managers would receive under various circumstances under their change
in control agreements. For the purposes of this table, we have
assumed that a change in control occurred on December 31, 2009.
|
Health
|
||||
|
and
Other
|
||||
|
Lump
Sum
|
Insurance
|
|||
|
Multiple
of
|
Payment
|
Benefits
|
Total
|
|
|
Name
|
Base Pay
|
Amount ($)
|
($) (1)
|
($)
|
|
Jeffrey
R. Hines, P.E.
|
||||
|
Involuntary
termination or
|
2.99
times
|
746,857
|
3,588
|
750,454
|
|
good
reason termination.
|
||||
|
Voluntary
termination more
|
.25
times
|
62,446
|
3,588
|
66,043
|
|
than
3 months but less than
|
||||
|
one
year after a change in
|
||||
|
control.
|
||||
|
Continuing
employment for
|
.5
times
|
124,893
|
3,588
|
128,490
|
|
one
year after a change in
|
||||
|
control.
|
||||
|
Kathleen
M. Miller
|
||||
|
Involuntary
termination or
|
.5
times
|
65,445
|
6,177
|
71,314
|
|
good
reason termination.
|
||||
|
Voluntary
termination more
|
.25
times
|
32,723
|
6,177
|
38,592
|
|
than
3 months but less than
|
||||
|
one
year after a change in
|
||||
|
control.
|
||||
|
Continuing
employment for
|
.5
times
|
65,445
|
6,177
|
71,314
|
|
one
year after a change in
|
||||
|
control.
|
23
|
Health
|
||||
|
and
Other
|
||||
|
Lump
Sum
|
Insurance
|
|||
|
Multiple
of
|
Payment
|
Benefits
|
Total
|
|
|
Name
|
Base Pay
|
Amount ($)
|
($) (1)
|
($)
|
|
Joseph
T. Hand
|
||||
|
Involuntary
termination or
|
.5
times
|
60,779
|
342
|
61,131
|
|
good
reason termination.
|
||||
|
Voluntary
termination more
|
.25
times
|
30,390
|
342
|
30,742
|
|
than
3 months but less than
|
||||
|
one
year after a change in
|
||||
|
control.
|
||||
|
Continuing
employment for
|
.5
times
|
60,779
|
342
|
61,131
|
|
one
year after a change in
|
||||
|
control.
|
||||
|
Bruce
C. McIntosh
|
||||
|
Involuntary
termination or
|
.5
times
|
56,600
|
7,644
|
64,254
|
|
good
reason termination.
|
||||
|
Voluntary
termination more
|
.25
times
|
28,300
|
7,644
|
35,954
|
|
than
3 months but less than
|
||||
|
one
year after a change in
|
||||
|
control.
|
||||
|
Continuing
employment for
|
.5
times
|
56,600
|
7,644
|
64,254
|
|
one
year after a change in
|
||||
|
control.
|
||||
|
Vernon
L. Bracey
|
||||
|
Involuntary
termination or
|
.5
times
|
51,458
|
9,754
|
61,222
|
|
good
reason termination.
|
||||
|
Voluntary
termination more
|
.25
times
|
25,729
|
9,754
|
35,493
|
|
than
3 months but less than
|
||||
|
one
year after a change in
|
||||
|
control.
|
||||
|
Continuing
employment for
|
.5
times
|
51,458
|
9,754
|
61,222
|
|
one
year after a change in
|
||||
|
control.
|
||||
|
(1)
The value of health benefits was determined using the estimated rates
applicable under the Comprehensive
|
||||
|
Omnibus
Budget Reconciliation Act (COBRA) for terminated
employees.
|
||||
24
Payment of the lump sum payments under
the change in control agreements is contingent upon the senior manager executing
a standard release. The change in control agreements also contain
non-competition provisions that generally require that, a senior manager will
not, while he or she is employed by us and for one year following the
termination of his or her employment by us:
|
·
|
participate
in the ownership, management, operation, control or financing of, or be
connected as an officer, director, employee, partner, principal, agent,
representative, consultant or otherwise with or use or permit his or her
name to be used in connection with, any business or enterprise engaged in
by us within our franchised
territory;
|
|
·
|
solicit
or attempt to convert any account or customer of the Company to another
supplier; or
|
|
·
|
solicit
or attempt to hire any employee of the
Company.
|
Any breach of this non-competition
agreement can result in damages being awarded to the Company, including the
amount of one-half of any lump sum payments described above.
Other Payouts. The
senior managers will also be entitled to the payouts of their pension and
supplemental retirement accounts upon retirement and payout of their deferred
compensation accounts upon termination of their employment with us.
Using the assumptions described in Note
6 to the Company’s Financial Statements included in our 2009 Annual Report to
Shareholders, and assuming that all of our senior managers remain with the
Company until reaching age 55 (or, for those who are currently older than age
55, assuming they retired as of December 31, 2009) our senior managers have
earned monthly benefits under the pension plan and supplemental retirement plan
as follows:
|
Name
|
Plan Name
|
Monthly
Benefit ($)
|
|
Jeffrey
R. Hines, P.E.
|
General
and Administrative Pension Plan
|
4,396
|
|
Jeffrey
R. Hines, P.E.
|
Supplemental
Executive Retirement Plan
|
2,402
|
|
Kathleen
M. Miller
|
General
and Administrative Pension Plan
|
1,964
|
|
Kathleen
M. Miller
|
Supplemental
Executive Retirement Plan
|
697
|
|
Bruce
C. McIntosh
|
General
and Administrative Pension Plan
|
1,864
|
|
Bruce
C. McIntosh
|
Supplemental
Executive Retirement Plan
|
1,608
|
|
Vernon
L. Bracey
|
General
and Administrative Pension Plan
|
1,447
|
|
Vernon
L. Bracey
|
Supplemental
Executive Retirement Plan
|
735
|
Joseph T. Hand has not vested in the
General and Administrative Pension Plan, and he has not yet completed a full
year of service under the Supplemental Executive Retirement Plan.
Our senior managers will also be
entitled to be paid the amounts described in the narrative discussion
accompanying the 2009 Nonqualified Deferred Compensation Table above in the
manner described in that section.
25
|
Director
|
Fees
Earned
Paid in Cash
|
All
Other
Compensation
|
Total
Compensation
|
|
Thomas
C. Norris,
|
|||
|
Chairman
of the Board
|
35,700
|
35,700
|
|
|
Cynthia
A. Dotzel, CPA
|
20,100
|
20,100
|
|
|
John
L. Finlayson
|
28,300
|
28,300
|
|
|
Michael
W. Gang. Esq.
|
25,350
|
25,350
|
|
|
George
W. Hodges
|
23,800
|
23,800
|
|
|
George
Hay Kain III
|
20,900
|
20,900
|
|
|
William
T. Morris, P.E.
|
21,750
|
21,750
|
|
|
Jeffrey
S. Osman
|
23,150
|
21,938
|
45,088
|
|
Ernest
J. Waters
|
22,300
|
22,300
|
Director Fees
Earned. In consideration of the services they provide to us,
directors who are not regular full-time employees are entitled to receive
$13,200 per year plus $700 for attendance at each regular and special meeting of
the Board of Directors. Audit Committee members are entitled to
receive $800 for attendance at each regular or special meeting of the Audit
Committee. The chairperson of the Audit Committee receives $1,500 for
attendance at each Audit Committee meeting. All other committee
members (excluding the Executive Committee) who are not regular full-time
employees are entitled to receive $700 for attendance at each Committee
meeting. The chairperson of each Committee (excluding the Executive
and Audit Committees) receives $900 for attendance at Committee
meetings. Executive Committee members are entitled to receive $750
for attendance at each Committee meeting, and the Chairperson of the Executive
Committee receives $1,000 for attendance at Committee
meetings. Directors who are also current employees of the Company
receive no additional compensation for Board service.
Mr. Osman provided regulatory and other
consulting services to the Company in 2009 in the amount of $21,938 which is
shown in the All Other Compensation column of the above table.
No perquisites are provided to
Directors.
There were 9 Board of Directors'
Meetings during calendar year 2009. All Directors attended at least
89% of the scheduled Board of Directors and committee meetings.
26
The Board has adopted a written policy
setting forth procedures for the review, approval and monitoring of transactions
involving the Company and any related persons (directors, nominees for
directors, 5% security holders, and executive officers or their immediate family
members). Under the policy (and our Audit Committee Charter), the
Audit Committee is responsible for reviewing and approving all transactions
involving the Company in which any related person has a direct or indirect
interest, regardless of amount. The Audit Committee intends to
approve only those related party transactions that are on terms no less
favorable to the Company than could be obtained from independent third parties
and are otherwise in, or are not inconsistent with, the best interests of the
Company and its shareholders.
In furtherance of this policy, the
Company’s Board of Directors has adopted a Code of Conduct applicable to all
Directors, officers and employees, which generally requires the reporting to
management of transactions or opportunities that constitute conflicts of
interest so that they may be avoided. Our Code of Conduct is
available on our web site, on the Corporate Governance page at www.yorkwater.com.
The Company does not have any material
related party transactions in which a related person has a direct or indirect
benefit.
The Audit Committee reviewed the
related party transaction between Director Michael W. Gang, Esq., an attorney of
Post & Schell PC, and the Company. The Company paid Post &
Schell PC $46,600 for regulatory legal services during 2009 and plans to
continue to use Post & Schell PC in 2010. The amount paid
represents less than 1% of Post & Schell PC revenue. Mr. Gang is
not a controlling shareholder of the firm. The Committee determined
that the relationship does not create a conflict of interest or impair Mr.
Gang’s judgment with respect to Board member responsibilities.
The Company’s Audit Committee (the
“Committee”) consists of four non-employee Directors who are "independent
Directors" as defined by Nasdaq. The Board of Directors has
determined that each member of the Audit Committee is financially
literate. In January 2003, the Board of Directors adopted an amended
and restated written charter for the Audit Committee. A copy of the
Audit Committee Charter is available on the Company’s website, on the Corporate
Governance page at www.yorkwater.com.
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 shareholder
ratification, the Company’s independent registered public accounting
firm.
The Board of Directors has determined
that John L. Finlayson, Chairman of the Audit Committee, is an Audit Committee
financial expert within the meaning of the applicable SEC rules. Mr.
Finlayson is a former Certified Public Accountant, and has an understanding of
generally accepted accounting principles and financial statements, as well as
the ability to assess the general application of such principles in connection
with the accounting for estimates, accruals and reserves. Mr.
Finlayson is experienced in the preparation and auditing of financial statements
of public companies, and has an understanding of accounting estimates, internal
control over financial reporting, and audit committee functions. He
is independent of management.
27
On October 1, 2009 the Company was
notified that the audit practice of Beard Miller Company LLP (“Beard”) an
independent registered public accounting firm, was combined with ParenteBeard
LLC ("ParenteBeard") in a transaction pursuant to which Beard combined its
operations with ParenteBeard and certain of the professional staff and partners
of Beard joined either as employees or partners of ParenteBeard. On
October 1, 2009, Beard resigned as the auditors of the Company and with the
approval of the Audit Committee of the Company’s Board of Directors,
ParenteBeard was engaged as its independent registered public accounting firm
for the year ended December 31, 2009.
Prior to engaging ParenteBeard, the
Company did not consult with ParenteBeard regarding the application of
accounting principles to a specific completed or contemplated transaction or
regarding the type of audit opinions that might be rendered by ParenteBeard on
the Company’s financial statements, and ParenteBeard did not provide any written
or oral advice that was an important factor considered by the Company in
reaching a decision as to any such accounting, auditing or financial reporting
issue.
There are no disagreements with
ParenteBeard or Beard, on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedures. The
audit reports of ParenteBeard and Beard do not contain any adverse opinion or
disclaimer of opinion, nor are they qualified or modified as to uncertainty,
audit scope or accounting principles.
Management is responsible for the
Company’s internal controls and the financial reporting process. The
independent registered public accounting firm is responsible for performing an
integrated audit of the Company’s financial statements in accordance with the
standards of the Public Company Accounting Oversight Board (PCAOB)(United
States) and to issue reports thereon. The Committee’s responsibility is to
monitor and oversee these processes.
In this context, the Committee has met
and held discussions with management and the independent registered public
accounting firm (ParenteBeard). Management represented to the
Committee that the Company’s audited financial statements were prepared in
accordance with generally accepted accounting principles, and the Committee has
reviewed and discussed the audited financial statements with management and
ParenteBeard. The Committee also reviewed with ParenteBeard the
matters required to be discussed by Statement on Auditing Standards No. 61
(Communication with Audit Committees), and auditor independence from the Company
and its management, and has received the written disclosures and the letter
required by the PCAOB.
The Committee met with ParenteBeard,
with and without management present, to discuss the overall scope and plans for
their audits, the results of their examinations, the evaluations of the
Company’s internal controls, and the overall quality of the Company’s financial
reporting.
Based upon the Committee’s discussions
with management and ParenteBeard and the Committee’s review of the
representations of management and ParenteBeard’s report to the Committee, the
Committee recommended that the Board include the audited financial statements in
the Company’s Annual Report on Form 10-K for the year ended December 31, 2009
for filing with the SEC.
|
John
L. Finlayson, Chairman
|
||
|
Cynthia
A. Dotzel, Member
|
George
W. Hodges, Member
|
Thomas
C. Norris, Member
|
28
RATIFICATION
OF
APPOINTMENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has approved the
appointment of ParenteBeard LLC, as the independent public registered accounting
firm to audit the financial statements of the Company for the year
2010. ParenteBeard LLC audited the Company’s financial statements for
the year ended December 31, 2009, and Beard Miller Company
LLP audited the 2008 and 2007 statements. There have been
no disagreements between the Company and ParenteBeard LLC concerning the
Company’s financial statements. It is intended that, unless otherwise
specified by the shareholders, votes will be cast pursuant to the proxy hereby
solicited in favor of the appointment of ParenteBeard LLC.
Audit fees and all professional
services to be rendered by ParenteBeard LLC are approved by the Company’s Audit
Committee. The Board considers the possible effect on auditors'
independence of providing non-audit services prior to the service being
rendered, but the Board does not anticipate significant non-audit services will
be rendered during 2010.
The following table presents fees for
services provided by ParenteBeard LLC (Beard Miller Company LLP) were as follows
for 2009 and 2008:
|
2009
|
2008
|
|||
|
Audit
Fees (1)
|
152,512
|
144,664
|
||
|
Audit
Related Fees (2)
|
21,083
|
13,633
|
||
|
Tax
Fees (3)
|
8,400
|
9,710
|
||
|
All
Other Fees (4)
|
100
|
|||
|
181,995
|
168,107
|
(1) Professional services rendered for
2009 include (a) the audit of the Company's annual financial statements, (b) the
review of the financial statements included in the Company's Quarterly Reports
on Form 10-Q, (c) the audit of the effectiveness of internal control over
financial reporting, and (d) consent and comfort letters in connection with
registration and equity offering statements. Professional services
rendered for 2008 include (a) the audit of the Company's annual financial
statements, (b) the review of the financial statements included in the Company's
Quarterly Reports on Form 10-Q, (c) the audit of the effectiveness of internal
control over financial reporting, and (d) consent and comfort letters in
connection with registration and debt offering statements.
(2) Audit related fees include research
on accounting issues, limited scope audits of the Company’s 401(k) and general
and administrative pension plans in 2009, and accounting research and a limited
scope audit of the Company’s 401(k) plan in 2008.
(3) Tax fees include preparation of the
federal income tax return and other tax matters.
(4) Other fees (2008) include two
educational seminars conducted by ParenteBeard LLC (Beard Miller Company LLP)
and attended by Company personnel.
The Audit Committee approves in advance
any audit or non-audit services provided by outside auditors. During
2009 and 2008, there were no exceptions to the Audit Committee's pre-approval
requirements.
Representatives of ParenteBeard LLC are
expected to be present at the Annual Meeting. Representatives of
ParenteBeard LLC will have an opportunity to make a statement if they desire to
do so, and will be available to respond to appropriate
questions.
29
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
ParenteBeard LLC is ratified by the shareholders, the Audit Committee, in its
discretion, may direct the appointment of a new independent registered public
accounting 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.
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.
A shareholder who wishes to communicate
with the Board of Directors or specific individual Directors, may do so by
directing a written request addressed to such Directors or Director in care of
the Secretary of The York Water Company, at the address appearing on the first
page of this proxy statement. Communication(s) directed to members of
the Board of Directors who are not non-management Directors will be relayed to
the intended Board member(s) except to the extent that it is deemed unnecessary
or inappropriate to do so pursuant to the procedures established by a majority
of the independent Directors. Communications directed to
non-management Directors will be relayed to the intended Board member(s) except
to the extent that doing so would be contrary to the instructions of the
non-management Directors. Any communication so withheld will
nevertheless be made available to any non-management Director who wishes to
review it.
In accordance with the Company's
bylaws, shareholder's proposals and nominations for Directors for consideration
at the 2011 Annual Meeting of Shareholders must be received by the Company in
writing prior to February 1, 2011.
The Company’s Board of Directors has
adopted a Code of Conduct applicable to all Directors, officers and
employees. Our Code of Conduct constitutes a “code of ethics” as
required by Item 406 of Regulation S-K. There were no waivers of the
Code made for any Director, officer or employee during 2009. A copy
of the Code of Conduct was filed with the Securities and Exchange Commission as
Exhibit 14 to the Company’s Annual Report on Form 10-K for the year ended
December 31, 2002. The Code of Conduct is also available, free of
charge, on our website, on the Corporate Governance page at www.yorkwater.com. The
Company intends to disclose amendments to, or Director, officer and employee
waivers from, the Code of Conduct, if any, on its website, or by Form 8-K to the
extent required.
30
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, 2009, 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 also
available, free of charge, on the Investor Relations page of the Company’s
website at www.yorkwater.com.
A copy of the Company’s Annual Report
to Shareholders, which includes financial statements, does not form part of the
proxy solicitation materials. The Annual Report to Shareholders is
also available, free of charge, on the Investor Relations page of the Company’s
website at www.yorkwater.com.
31
AMENDED
AND RESTATED
ARTICLES
OF INCORPORATION
OF
THE
YORK WATER COMPANY
Article
I.
The name of the Corporation is The York
Water Company.
Article
II.
The address of the registered office of
the Corporation in this Commonwealth is 130 East Market Street, York,
Pennsylvania 17401.
Article
III.
The purpose or purposes for which the
corporation is incorporated are:
(a) To engage
in, and do any lawful act concerning, any or all lawful business for which a
corporation may be incorporated under the Business Corporation Law.
(b) To supply
water to the public in the following municipalities or portions thereof in the
Commonwealth of Pennsylvania, and to such persons residing therein or adjacent
thereto as may desire the same:
All of
the City of York, the Boroughs of East Prospect, Glen Rock, Hellam, Jacobus,
Jefferson, Longanville, Manchester, Mount Wolf, New Freedom, New Salem, North
York, Railroad, Seven Valleys, Shrewsbury, Spring Grove, West York,
Wrightsville, York Haven and Yorkanna and the Townships of East Manchester,
Hellam, Manchester, Shrewsbury, Springfield, Spring Garden, Springettsbury and
West Manchester, and parts of the Townships of Codorus, Conewago, Hopewell,
Jackson, Lower Windsor, Newberry, North Codorus, North Hopewell, Windsor and
York, all in the County of York and Commonwealth of Pennsylvania.
(c) To
divert, develop, pump, impound, distribute or furnish water from either surface
or subsurface sources to or for the public in the territory described in clause
(b) of this Article III and also
in such additional territory within the Commonwealth of Pennsylvania as may be
specifically described in Application Docket proceedings hereafter voluntarily
commenced by the corporation (pursuant to appropriate resolutions of the Board
of Directors duly entered upon the minutes of the corporation) before the
Pennsylvania Public Utility Commission or its successor in office for the
purpose of enlarging the territory in which the corporation may lawfully offer,
render, furnish or supply water to the public.
(d) To engage
in all other matters incidental to any or all of such purposes.
Article
IV.
The term for which the Corporation is
to exist is perpetual.
32
Article
V.
The aggregate number of shares which
the Corporation shall have authority to issue is 47,000,000 shares, divided into
46,500,000 shares of Common Stock, without par value, and 500,000 shares of
Series Preferred Stock without par value. At any meeting of the
shareholders, each holder of Common Stock shall be entitled to one vote per
share. Holders of Common Stock shall not have the right to cumulate
their votes for the election of directors of the Corporation. The
board of directors shall have the full authority permitted by law to determine
the voting rights, if any, and designations, preferences, qualifications,
limitations, restrictions, and the special or relative rights of any class or
any series of any class of the Series Preferred Stock that may be
desired.
Any or all classes and series of
shares, or any part thereof, may be represented by uncertificated shares to the
extent determined by the Board of Directors, except that any shares represented
by a certificate that are issued and outstanding shall continue to be
represented thereby until the certificate is surrendered to the
Corporation.
33
THE
YORK WATER COMPANY
130
E. MARKET STREET
BOX
15089
YORK,
PA 17405
VOTE
BY INTERNET – www.proxyvote.com
Use the
internet to transmit your voting instruction and for electronic delivery of
information up until 11:59 P.M. Eastern Time the day before the cut-off date or
meeting date. Have your proxy card in hand when you access the web
site and follow the instructions to obtain your records and to create an
electronic voting instruction form.
ELECTRONIC
DELIVERY OF FUTURE PROXY MATERIALS
If you
would like to reduce the costs incurred by our company in mailing proxy
materials, you can consent to receiving all future proxy statements, proxy cards
and annual reports electronically via e-mail or the Internet. To sign
up for electronic delivery, please follow the instructions above to vote using
the Internet and, when prompted, indicate that you agree to receive or access
proxy materials electronically in future years.
VOTE
BY PHONE – 1-800-690-6903
Use any
touch-tone telephone to transmit your voting instructions up until 11:59 P.M.
Eastern Time the day before the cut-off date or meeting date. Have
your proxy card in hand when you call and then follow the
instructions.
VOTE
BY MAIL
Mark,
sign and date your proxy card and return it in the postage-paid envelope we have
provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way,
Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR
BLACK INK AS
FOLLOWS: KEEP
THIS PORTION FOR YOUR RECORDS
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- - - - - - - - - - - - - - - - - - - -
DETATCH
AND RETURN THIS PORTION ONLY
THIS
PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
|
THE
YORK WATER COMPANY
|
|||||||||||||||||||||
|
Directors
recommend a vote "FOR" Items 1, 2 and 3.
|
|||||||||||||||||||||
|
Vote
On Directors
|
|||||||||||||||||||||
|
1.
|
ELECTION
OF DIRECTORS
|
For
All
|
Withhold
All
|
For
All Except
|
To
withhold authority to vote for any individual nominee(s), mark “For All
Except” and write the number(s) of the nominee(s) on the line
below.
|
||||||||||||||||
|
Nominees:
|
O
|
O
|
O
|
||||||||||||||||||
|
01)
|
William
T. Morris
|
||||||||||||||||||||
|
02)
|
Jeffrey
S. Osman
|
||||||||||||||||||||
|
03)
|
Cynthia
A. Dotzel, CPA
|
||||||||||||||||||||
|
Vote
On Proposals
|
For
|
Against
|
Abstain
|
||||||||||||||||||
| 2 | ELIMINATE CUMULATIVE VOTING |
O
|
O
|
O
|
|||||||||||||||||
| To approve an amendment of our Amended and Restated | |||||||||||||||||||||
| Articles of Incorporation to eliminate cumulative voting. | |||||||||||||||||||||
|
3.
|
APPOINT
PARENTEBEARD LLC AS AUDITORS
|
O
|
O
|
O
|
|||||||||||||||||
| To ratify the appointment of ParenteBeard LLC as auditors | |||||||||||||||||||||
|
4.
|
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.
|
|||||||||||||||||||||
|
To
cumulate votes as to a particular nominee as explained in the Proxy
Statement, check box to the right then indicate the name(s) and the number
of votes to be given to such nominee(s) on the reverse side of this
card. Please do not check box unless you want to exercise
cumulative voting.
|
O
|
||||||||||||||||||||
|
NOTE: Please
sign exactly as your name or names appear on this Proxy. When
shares are held jointly, each holder should sign. When signing
as executor, administrator, attorney, trustee or guardian, please give
full title as such. If the signer is a corporation, please sign
full corporate name by duly authorized officer, giving full title as
such. If signer is a partnership, please sign in partnership
name by authorized person.
|
|||||||||||||||||||||
|
Please
indicate if you plan to attend this meeting.
|
O
|
O
|
|||||||||||||||||||
|
Yes
|
No
|
||||||||||||||||||||
|
Signature
(PLEASE SIGN WITHIN BOX)
|
Date
|
Signature
(Joint Owners)
|
Date
|
||||||||||||||||||
Important
Notice Regarding the Availability of Proxy Materials for the Annual
Meeting:
The
Notice and Proxy Statement, Annual Report and Shareholder Letter are
available at www.proxyvote.com.
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- - - - - - - - - - - - - - - - - - - -
The
York Water Company
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE
YORK WATER COMPANY
Proxy
– Annual Meeting of Shareholders
May
3, 2010
The undersigned, a Shareholder of The
York Water Company, a Pennsylvania corporation (the “Company”), does hereby
appoint John L. Finlayson, Thomas C. Norris, and Ernest J. Waters, 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 3, 2010 at 1:00 p.m. local time at the Strand-Capitol
Performing Arts Center, 50 North George Street, York, Pennsylvania or at any
adjournment thereof.
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 3.
| Cumulative voting | |||||||
| NAME OF CANDIDATE | # OF VOTES CAST | ||||||
| 1.1 | |||||||
| 1.2 | |||||||
| 1.3 | |||||||
(If you
exercised cumulative voting, please mark corresponding box on the reverse
side)
(Continued
and to be signed on reverse side)