YWC Proxy 2006
THE
YORK
WATER COMPANY
130
EAST
MARKET STREET
YORK,
PENNSYLVANIA 17401
March
31,
2006
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 William T. Morris Employee Center, 396 Hess Farm
Road, York, Pennsylvania, on Monday, May 1, 2006, 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
appoint independent accountants to audit the financial statements
of the
Company for the year 2006; and
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(3)
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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 March 15, 2006, as the record
date for the determination of shareholders entitled to notice of and to vote
at
the meeting, and at any adjournment or adjournments thereof.
You
are
cordially invited to attend the meeting. In the event you will be unable to
attend, you are respectfully requested to sign, date and return the enclosed
proxy at your earliest convenience in the enclosed stamped return envelope.
Returning your proxy does not deprive you of the right to attend the meeting
and
vote your shares in person.
By
order
of the Board of Directors,
JEFFREY
R. HINES
Secretary
THE
YORK
WATER COMPANY
130
EAST
MARKET STREET
YORK,
PENNSYLVANIA 17401
March
31,
2006
PROXY
STATEMENT
This
Proxy Statement and the accompanying form of proxy are being furnished to the
shareholders of The York Water Company (hereinafter referred to as the
"Company") in connection with the solicitation of proxies by the Board of
Directors of the Company, whereby shareholders would appoint William T. Morris,
P.E., Irvin S. Naylor, and Jeffrey S. Osman, and each of them, as Proxies on
behalf of the shareholders, to be used at the Annual Meeting of the Shareholders
of the Company to be held at 1:00 p.m. at The William T. Morris Employee Center,
396 Hess Farm Road, York, Pennsylvania, Monday, May 1, 2006 (the "Annual
Meeting"), and at any adjournment thereof.
Solicitation
of proxies will be made primarily by mail. Proxies may also be solicited
personally and by telephone by employees of the Company. The expenses of the
solicitation will be borne by the Company. Such expenses may also include
ordinary charges and expenses of brokerage houses and other custodians, nominees
and other fiduciaries for forwarding documents to shareholders. This Proxy
Statement has been mailed to shareholders of the Company on or about March
31,
2006.
A
shareholder who completes and forwards the enclosed proxy to the Company's
transfer agent, American Stock Transfer & Trust Company, is not precluded
from attending the Annual Meeting and voting his or her shares in person, and
may revoke the proxy by delivering a later dated proxy or by written
notification to the Company or to the transfer agent, at any time before the
proxy is exercised.
PURPOSE
OF THE MEETING
At
the
Annual Meeting, shareholders of the Company will consider and vote upon two
proposals: (i) to elect three (3) Directors to serve for a term of three (3)
years; and (ii) to ratify the appointment of Beard Miller Company LLP as
independent auditors for the fiscal year ending December 31, 2006. Shareholders
may also consider and vote upon such other matters as may properly come before
the Annual Meeting or any adjournment thereof.
VOTING
AT THE MEETING
The
outstanding securities of the Company entitled to vote at the meeting consist
of
6,933,330 shares of Common Stock. The presence at the Annual Meeting in person
or by proxy of shareholders entitled to cast a majority of the votes which
all
shareholders are entitled to cast will constitute a quorum for the Annual
Meeting.
The
record date for the determination of shareholders entitled to notice of and
to
vote at the Annual Meeting or at any adjournment or adjournments thereof was
the
close of business on March 15, 2006. Shareholders are entitled to one vote
for
each share on all matters coming before the meeting, except that shareholders
have cumulative voting rights with respect to the election of Directors.
Cumulative voting rights permit each shareholder to cast as many votes in the
election of each class of Directors to be elected as shall equal the number
of
such shareholder's shares of Common Stock multiplied by the number of Directors
to be elected in such class of Directors, and each shareholder may cast all
such
votes for a single nominee or distribute such votes among two or more nominees
in such class as the shareholder may see fit. Discretionary authority to
cumulate votes is not being solicited.
In
accordance with Pennsylvania law, a shareholder can withhold authority to vote
for all nominees for Directors or can withhold authority to vote for certain
nominees for Directors. Directors will be elected by a plurality of the votes
cast. Votes that are withheld will be excluded from the vote and will have
no
effect.
Any
votes
that are withheld on the proposal to ratify the selection of the independent
accountants will have no effect because this proposal requires 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 have
discretion to vote with respect to election of directors and the proposal to
ratify the Company's auditors.
VOTING
SECURITIES AND PRINCIPAL HOLDERS THEREOF
No
person, so far as known to the Company, beneficially owns more than five (5)
percent of the Company's outstanding Common Stock as of March 15,
2006.
The
following table sets forth certain information regarding the beneficial
ownership of our Common Stock as of March 15, 2006, by (1) each director and
other director nominee of the Company, (2) each executive officer named in
the
summary compensation table included elsewhere herein and (3) all executive
officers and directors as a group.
The
information appearing in the following table with respect to principal
occupation and beneficial ownership of Common Stock of the Company has been
furnished to the Company by the three nominees, the six directors continuing
in
office, and the two executive officers as of March 15, 2006.
NOMINEES
FOR ELECTION TO THREE YEAR TERM EXPIRING IN 2009
|
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|
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|
|
|
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|
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Director
|
Full
Shares
|
|
Percent
of
|
|
|
|
or
Officer
|
Owned
|
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Total
Shares
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Name
|
Age
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Principal
Occupation During Last Five Years
|
Since
|
Beneficially
(1)
|
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Outstanding
(2)
|
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|
|
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George
Hay Kain, III
|
57
|
Consultant,
December, 2004 to date
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8/25/1986
|
27,957
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(3)
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0.40
|
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Sole
Practitioner, Attorney at Law
|
|
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April,
1982 to December, 2003
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Michael
W. Gang, Esq.*
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55
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Attorney,
Post & Schell PC, Counselors at
|
1/22/1996
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4,700
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0.07
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law,
October 2005 to date. Post & Schell
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PC
is counsel to the Company
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Partner/Attorney
Morgan, Lewis & Bockius,
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Counselors
at law, October 1984 to
|
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October
2005
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|
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George
W. Hodges
|
55
|
Office
of the President, The Wolf
|
6/26/2000
|
69,730
|
(4)
|
1.01
|
|
|
Organization,
Inc., Distributor of Building
|
|
|
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Products,
January, 1986 to date
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TO
CONTINUE FOR TERMS EXPIRING IN 2007
|
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|
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Director
|
Full
Shares
|
|
Percent
of
|
|
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|
or
Officer
|
Owned
|
|
Total
Shares
|
Name
|
Age
|
Principal
Occupation During Last Five Years
|
Since
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Beneficially
(1)
|
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Outstanding
(2)
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William
T. Morris, P.E.*
|
68
|
Chairman
of the Board, The York Water
|
4/19/1978
|
29,777
|
(5)
|
0.43
|
|
|
Company,
November, 2001 to date
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|
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President
and Chief Executive Officer,
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The
York Water Company, May, 1995 to
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December,
2002
|
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Irvin
S. Naylor*
|
70
|
Vice
Chairman of the Board, The York Water
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10/31/1960
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55,267
|
|
0.80
|
|
|
Company,
May 2000 to date
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|
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President/Owner,
Snow Time, Inc., Owns and operates Ski Areas, June 1964 to
date
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Jeffrey
S. Osman*
|
63
|
President
and Chief Executive Officer,
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5/1/1995
|
12,243
|
(6)
|
0.18
|
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January,
2003 to date
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Vice
President-Finance and Secretary-
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|
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Treasurer,
The York Water Company,
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May,
1995 to December, 2002
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TO
CONTINUE FOR TERMS EXPIRING IN 2008
|
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|
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Director
|
Full
Shares
|
|
Percent
of
|
|
|
|
or
Officer
|
Owned
|
|
Total
Shares
|
Name
|
Age
|
Principal
Occupation During Last Five Years
|
Since
|
Beneficially
(1)
|
|
Outstanding
(2)
|
|
|
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John
L. Finlayson*
|
65
|
Vice
President-Finance and Administration,
|
9/2/1993
|
11,146
|
|
0.16
|
|
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Susquehanna
Pfaltzgraff Co.,
|
|
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|
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Radio
Stations, Cable TV,
|
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August,
1978 to date
|
|
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Chloé
R, Eichelberger
|
71
|
Owner/President/Chief
Executive Officer
|
9/15/1995
|
6,339
|
|
0.09
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|
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Chloé
Eichelberger Textiles, Inc., Dyeing
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and
Finishing Fabrics, September, 1987 to
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date
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Thomas
C. Norris
|
67
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Retired,
Chairman of the Board, Glatfelter,
|
6/26/2000
|
9,691
|
(7)
|
0.14
|
|
|
Paper
Manufacturer, May, 2000 to date
|
|
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EXECUTIVE
OFFICERS
|
Jeffrey
R. Hines
|
44
|
Vice
President-Engineering and Secretary
|
1/1/2003
|
15,229
|
(8)
|
0.22
|
|
|
The
York Water Company, January 2003 to
|
|
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|
date
|
|
|
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Vice
President-Engineering, The York Water
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|
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Company,
May, 1995 to December 2002
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Duane
R. Close
|
60
|
Vice
President-Operations, The York Water
|
1/1/2003
|
6,478
|
(9)
|
0.09
|
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Company,
May, 1995 to date
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All
Directors and Executive Officers as a group
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248,557
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(10)
|
3.58
|
*
Members
of the Executive Committee.
(1)
|
Except
as indicated in the footnotes below, Directors possessed sole voting
power
and sole investment power with respect to all shares set forth in
this
column.
|
(2)
|
The
percentage for each individual or group is based on shares outstanding
as
of March 15, 2006.
|
(3)
|
Includes
2,584 shares held by the estate of Mr. Kain's wife for which Mr.Kain
disclaims beneficial ownership. Also includes 5,320 shares held by
Mr.
Kain's son for which Mr. Kain disclaims ownership. Also includes
10,039
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.
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(4)
|
Includes
shares owned by The Wolf Organization for which Mr. Hodges shares
voting
and investment power with other members of the Office of the President,
The Wolf Organization. Includes 3,000 shares held by Mr. Hodges'
wife, for
which Mr. Hodges disclaims beneficial ownership.
|
(5)
|
Includes
shares owned jointly with Mr. Morris' wife, for which he shares voting
and
investment power.
|
(6)
|
Includes
shares owned jointly with Karen E. Knuepfer, for which he shares
voting
and investment power.
|
(7)
|
Includes
3,914 shares held by Mr. Norris' wife, for which Mr. Norris disclaims
beneficial ownership.
|
(8)
|
Includes
12 shares held by Mr. Hines’ wife, for which Mr. Hines disclaims
beneficial ownership.
|
(9)
|
Includes
157 shares held by Mr. Close's wife for which Mr. Close disclaims
beneficial ownership.
|
(10)
|
Includes
shares owned by family members, and certain other shares, as to which
some
Directors and Officers disclaim any beneficial ownership and which
are
further disclosed in the notes
above.
|
ELECTION
OF DIRECTORS
At
the
Annual Meeting, all the nominees, each of whom is currently serving as Director,
are to be elected to serve for the ensuing three (3) years and until their
respective successors have been elected and qualified. The bylaws of the Company
provide that the Board of Directors will consist of not less than a total of
nine Directors, who are elected to staggered three-year terms of office. Each
share represented by the enclosed proxy will be voted for each of the nominees
listed, unless authority to do so is withheld. If any nominee becomes
unavailable for any reason or if a vacancy should occur before the election
(which events are not anticipated), the shares represented by the enclosed
proxy
may be voted as may be determined by the Proxies.
The
three
Directors are to be elected by a plurality of the votes cast at the Annual
Meeting. The Board of Directors unanimously recommends a vote "FOR"
each of
the nominees.
The
Board
of Directors has determined each of the following directors to be an
"independent director" as such term is defined in Marketplace Rule 4200(a)(15)
of the National Association of Securities Dealers ("NASD"):
John
L. Finlayson
|
George
Hay Kain III
|
Chloé
R. Eichelberger
|
Michael
W. Gang, Esq.
|
Thomas
C. Norris
|
George
W. Hodges
|
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The
Company believes that during the year ended December 31, 2005, 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 furnished to the Company and written
representations of its Directors and executive officers that no other reports
were required.
GENERAL
INFORMATION ABOUT OTHER BOARDS OF DIRECTORS
The
following members of the Board of Directors of The York Water Company are Board
members of other publicly held companies as indicated below:
|
|
Publicly
Held Companies Other Than
|
Board
Members
|
|
The
York Water Company
|
|
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Ms.
Chloé Eichelberger
|
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Susquehanna
Bancshares, Inc.
|
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Mr.
George W. Hodges
|
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Fulton
Financial Corp.
|
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Mr.
Thomas C. Norris
|
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Cadmus
Communication
|
COMMITTEES
AND FUNCTIONS
The
Company has an Executive Committee, an Audit Committee, a Compensation and
Nomination Committee, and a Corporate Governance Committee, all of which are
composed of members of the Board of Directors.
The
Executive Committee held eleven (11) meetings during the fiscal year ended
December 31, 2005. The Executive Committee is empowered to function as delegated
by the Board of Directors. The Executive Committee is composed of the following
Directors appointed by the Board: William T. Morris, P.E., Chairman; Irvin
S.
Naylor; John L. Finlayson; Michael W. Gang, Esq., and Jeffrey S.
Osman.
The
Audit
Committee held four (4) meetings during 2005. The Audit Committee monitors
the
audit functions of our independent public accountants and internal controls
of
the Company. The Audit Committee of the Company is composed of the following
independent Directors appointed by the Board: John L. Finlayson, Chairman;
Chloé
R. Eichelberger; George W. Hodges; and Thomas C. Norris, all of who have been
determined to be independent by the Board. The Board of Directors has adopted
a
written charter for the Audit Committee which it reviews and reassesses on
an
annual basis.
The
Compensation and Nomination Committee held three (3) meetings during the fiscal
year ended December 31, 2005. The Compensation and Nomination Committee
considers and makes recommendations to the Board of Directors concerning the
proposed compensations, salaries and per diems of the corporate officers,
Directors and members of the Committees of the Board of Directors of the
Company.
The
Compensation and Nomination Committee also 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.
The
Compensation and Nomination Committee considers candidates for Board membership
suggested by its members and other Board members, as well as management and
shareholders. The Compensation and Nomination Committee requires that the
Committee consider and recommend 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's business. 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 as
between internally-recommended candidates and those recommended by
shareholders.
The
Compensation and Nomination Committee is composed of the following Directors
appointed by the Board: George W. Hodges, Chairman; John L. Finlayson; George
Hay Kain III; Thomas C. Norris, and Chloé R. Eichelberger, all of whom have been
determined to be independent by the Board. The Board of Directors has adopted
a
written charter for the Compensation and Nomination Committee which it reviews
and reassesses on an annual basis. A copy of the Compensation and Nomination
Committee charter was attached to the March 30, 2005 Proxy Statement as Appendix
A.
The
Corporate Governance Committee is comprised of the following Directors appointed
by the Board: Michael W. Gang, Chairman, George W. Hodges, William T. Morris,
Irvin S. Naylor and Thomas C. Norris. The Corporate Governance Committee
develops and makes recommendations to the Board of Directors concerning
corporate governance principles and guidelines.
COMMUNICATION
WITH THE BOARD OF DIRECTORS
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.
COMPENSATION
OF DIRECTORS AND EXECUTIVE OFFICERS
The
following table sets forth information concerning compensation paid or accrued
by the Company to the Chief Executive Officer, the Vice President-Engineering,
Secretary and Vice President-Operations of the Company. No other executive
officer of the Company earned more than $100,000 in salary and bonus during
any
of the last three fiscal years. On January 24, 2005, the Board adopted a Cash
Incentive Plan for calendar year 2005 that authorizes cash based incentives
for
Executive Officers to be awarded based on criteria established by the
Compensation and Nomination Committee of the Board.
SUMMARY
COMPENSATION TABLE
|
|
Annual
Compensation
|
|
Cash
Incentive
|
401(k)
Matching
|
|
|
|
|
|
|
Bonus
|
Contribution
|
Name
and Principal Position
|
|
Year
|
|
Salary
($)
|
|
($)
|
($)
|
|
|
|
|
|
|
|
|
Jeffrey
S. Osman, President,
|
|
2005
|
|
248,627
|
|
11,250
|
1,950
|
Chief
Executive Officer
|
|
2004
|
|
217,824
|
|
|
1,950
|
and
Director
|
|
2003
|
|
194,859
|
|
|
1,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey
R. Hines
|
|
2005
|
|
119,734
|
|
5,737
|
1,950
|
Vice
President-Engineering and
|
|
2004
|
|
114,239
|
|
|
1,950
|
Secretary
|
|
2003
|
|
118,812
|
|
|
1,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Duane
R. Close
|
|
2005
|
|
115,402
|
|
5,453
|
1,950
|
Vice
President-Operations
|
|
2004
|
|
109,658
|
|
|
1,950
|
|
|
2003
|
|
105,683
|
|
|
1,950
|
Officers
with five years' service are entitled to benefits under the Company's General
and Administrative Employees Pension Plan (the "Pension Plan") upon retirement
after attaining age 55. The pension benefit computation is based on the years
of
service times the sum of $18.50 and 1-1/2% of that portion of the final average
monthly earnings which are in excess of $400. The final average monthly earnings
are the average of the employee's earnings for the 60 months immediately
preceding the date the pension benefit calculation is made. As of December
31,
2005, Mr. Osman has been credited with 22 years of service, Mr. Hines has been
credited with 15 years of service and Mr. Close has been credited with 28 years
of service under the Pension Plan. The following table illustrates the
approximate annual benefit that may become payable under the Pension Plan to
the
executive officers who have met both the five year and 55 year age requirements,
based upon the indicated assumptions as to remuneration and years of credited
service.
Remuneration
|
Years
of Service
|
|
25
|
30
|
35
|
40
|
$310,500
144,585
138,549
|
$120,189
57,972
55,707
|
-
69,566
66,848
|
-
$81,161
$77,990
|
-
$92,755
$89,131
|
The
above
figures assume retirement at age 65 with a straight-life annuity and without
reduction for a survivor benefit or Social Security benefits.
The
Company maintains a supplemental retirement program (the "Supplemental Plan"),
which provides senior management with a retirement benefit in addition to the
Pension Plan. The Supplemental Plan is designed to encourage management to
stay
with the Company until retirement. Supplemental Plan benefits have been made
available to six members of the Company's management and are payable to the
executive or his beneficiary (a "Supplemental Plan Beneficiary") monthly over
a
period of 180 months. The annual benefit payable under the Supplemental Plan
(the "Annual Benefit") may be calculated by multiplying the number of years
of
service subsequent to December 31, 1983 but prior to the attainment of age
65,
by a predetermined annual retirement benefit unit, which in the case of Mr.
Osman is $1,389, in the case of Mr. Hines is $1,441, in the case of Mr. Close
is
$1,235 and in the case of all Supplemental Plan Participants ranges from $1,235
to $1,754. The estimated Annual Benefit payable to Mr. Osman at normal
retirement age under the Supplemental Plan is $33,333, the estimated Annual
Benefit payable to Mr. Hines at normal retirement age under the Supplemental
Plan is $53,333, and the estimated Annual Benefit payable to Mr. Close at normal
retirement age under the Supplemental Plan is $33,333. The Company is obligated
to pay Annual Benefits, and Supplemental Plan Beneficiaries have the status
of
unsecured creditors of the Company with respect to Annual Benefits.
The
following table illustrates the approximate Annual Benefits that may become
payable to Supplemental Plan Beneficiaries:
Annual
Retirement
Benefit
Unit
|
Years
of Service
Subsequent
to December 31, 1983
|
|
10
|
15
|
20
|
25
|
30
|
$1,750
1,450
1,400
1,250
|
$17,500
14,500
14,000
12,500
|
$26,250
21,750
21,000
18,750
|
$35,000
29,000
28,000
25,000
|
$43,750
36,250
35,000
31,250
|
$52,500
43,500
42,000
37,500
|
The
Deferred Compensation Program permits eligible supervisors, managers and
executives to defer up to 5% of salary, normally over an eight (8) year period,
with the Company matching the deferment, up to 2-1/2% of salary. At retirement,
each participant, or beneficiary, is entitled to receive over a ten-year period,
monthly payments equal in the aggregate to the Deferred Compensation Program
Balance that accrued with respect to such participant in Company maintained
book-entry accounts. Except for Mr. Osman, no other directors participate in
this program. Mr. Osman’s projected annual payment under this program is
$15,663, Mr. Hines’ projected annual payment under this program is $10,046 and
Mr. Close’s projected annual payment under this program is $16,885.
Mr.
Osman, Mr. Hines and Mr. Close have employment contracts with the Company which
provide that, in the event of their involuntary termination of employment for
any reason other than cause prior to or following a change of control of the
Company, they would be entitled to severance payments. Mr. Osman would be
entitled to a severance payment equal to 2.99 times his base salary for the
preceding 12 months. Mr. Osman would be entitled to medical, dental and other
insurance benefits for a period of two years after his termination date. Mr.
Hines and Mr. Close would be entitled to severance payments equal to .5 times
their base salary for the preceding 12 months. Mr. Hines and Mr. Close would
also be entitled to medical, dental and other insurance benefits for a period
of
one year after their termination date. The employment contracts contain
provisions regarding their obligation to maintain the confidentiality of Company
information and their agreement not to compete with the Company within its
franchised service territory for a period of one year after termination of
their
employment by the Company.
Each
Director who is not a regular full-time employee of the Company is entitled
to
receive the following amounts for services rendered to the Company: $9,880
per
annum in Directors' fees; $4,940 per annum for service as a regular member
of
the Executive Committee; a per diem of $615 for each Board of Directors'
Meeting; and a per diem of $615 for each Executive Committee Meeting. There
were
14 Board of Directors' Meetings and 11 Executive Committee Meetings during
the
fiscal year ended December 31, 2005. All Directors attended at least 75% of
the
scheduled Board of Directors and committee meetings.
COMPANY
PERFORMANCE
The
following line graph presents the annual and cumulative total shareholder return
for The York Water Company Common Stock over a five-year period, as compared
to
a comparable return associated with an investment in the S&P 500 Composite
Index and a composite index of water companies (the "Peer Index").
The
line
graph above assumes $100 invested on December 31, 2000 in the Company's Common
Stock and the stock of companies included in the S&P 500 and the Peer Index
and assumes the quarterly reinvestment of dividends. The return for the Peer
Index presented above took into consideration the cumulative total return of
the
common stock of the following water companies included in the Peer Index:
American States Water Company, Artesian Resources Corp., BIW Limited, California
Water Service, Connecticut Water Service, Inc., Middlesex Water Company,
Pennichuck Corporation, Aqua America, Inc., SJW Corp., and Southwest Water
Co.
COMPENSATION
AND NOMINATION COMMITTEE REPORT
ON
EXECUTIVE COMPENSATION AND OTHER MATTERS
The
Company's Compensation and Nomination Committee (the "Committee") consists
of
four (4) non-employee Directors who are considered independent according to
Marketplace Rule 4200(a)(15) of the National Association of Securities Dealers.
In April 2004, the Board of Directors adopted a written charter for the
Compensation and Nomination Committee.
The
Compensation and Nomination Committee of the Board of Directors of the Company
establishes general compensation policies of the Company and considers and
makes
recommendations to the Board of Directors concerning the proposed compensation,
salaries and per diems of the President and Chief Executive Officer, the
Chairman, Vice Chairman, Directors and members of the Committees of the Board
of
Directors of the Company and Executive Officers. The Chairman and Vice Chairman
serve the Company in a part-time capacity, and the amount of salary payable
to
such officers has been determined by the Committee based upon the amount of
time
dedicated and value of contributions made to the Company.
Mr.
Osman, the Chief Executive Officer of the Company, served the Company as its
Vice President-Finance and Secretary-Treasurer from May 1995 to December 2002.
In January 2003, Mr. Osman assumed the position of President and Chief Executive
Officer. Mr. Hines, Vice President-Engineering and Secretary of the Company,
served the Company as its Vice President-Engineering from May 1995 to date,
and
in January 2003 became Secretary. Mr. Close has served the Company as Vice
President-Operations from May 1995 to date. The Compensation and Nomination
Committee historically has established Mr. Osman’s, Mr. Hines’ and Mr. Close’s
compensation after considering comparative salary data from industry and other
salary surveys (including data derived from publicly disclosed compensation
information concerning many of the companies identified in the Peer Index),
individual past performance, the Company's performance (on an absolute basis
and
in comparison to peer performance within the context of a regulated industry),
and to a lesser extent changes in the cost of living in the Company's service
territory. While no formal salary or compensation guidelines have been developed
or used, salary levels have been determined after balancing the foregoing
factors (in their entirety, without giving weight to any particular factor
and
without regard to any particular relationship between compensation levels and
any quantitative or qualitative aspect of the Company's performance) with the
interests of the Company's shareholders, customers and employees.
Section
162(m) of the Internal Revenue Code generally disallows, in certain
circumstances, a tax deduction to public companies for compensation over $1
million paid to a corporation's chief executive officer and next four most
highly compensated executive officers. The Company does not have any
compensation programs that would be impacted by Section 162(m).
The
Compensation and Nomination Committee also identifies and recommends to the
Board nominees for election or re-election to the Board, identifies and
recommends to the Board the names of Directors to serve as members of Committees
of the Board and conducts periodic assessment of the Board's
performance.
George
W. Hodges, Chairman
|
|
George
Hay Kain III, Member
|
John
L. Finlayson, Member
|
|
Chloé
R. Eichelberger, Member
|
Thomas
C. Norris, Member
|
|
|
REPORT
OF THE AUDIT COMMITTEE
The
Company’s Audit Committee (the “Committee”) consists of four non-employee
Directors who are "independent Directors" as defined in NASD Rule 4200 (a)(15).
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.
The
Audit
Committee reviews the Company’s financial reporting process on behalf of the
Board, reports to the Securities and Exchange Commission on Forms 10-Q and
10-K
and releases of earnings. In addition, the Committee selects, subject to
stockholder ratification, the Company’s independent public
accountants.
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. Chairman Finlayson is a Certified Public Accountant,
and
has an understanding of generally accepted accounting principles and financial
statements. Chairman Finlayson is experienced in the preparation and auditing
of
financial statements of public companies, and has an understanding of accounting
estimates, internal accounting controls, and audit committee
functions.
There
are
no disagreements with Beard Miller Company LLP, the Company's principal
accountants on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedures. The audit reports of
Beard
Miller Company LLP 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 public accountants are responsible for performing
an
independent audit of the Company’s financial statements in accordance with
generally accepted auditing standards and to issue a report 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 public accountants. 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 the independent
public accountants. The Committee discussed with the independent public
accountants the matters required to be discussed by Statement on Auditing
Standards No. 61 (Communication with Audit Committees).
In
addition, the Committee has discussed with the independent public accountants
the auditor’s independence from the Company and its management, and has received
the written disclosures required by the Independence Standards Board Standard
No. 1 (Independence Discussions with Audit Committees).
The
Committee discussed with the Company’s independent public accountants the
overall scope and plans for their audits. The Committee meets with the
independent public accountants, with and without management present, to discuss
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 the independent public
accountants and the Committee’s review of the representations of management and
the report of the independent public accounts 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, 2005 for
filing with the SEC.
John
L. Finlayson, Chairman
|
|
George
W. Hodges, Member
|
Chloé
R. Eichelberger, Member
|
|
Thomas
C. Norris, Member
|
SHAREHOLDER
APPROVAL OF
APPOINTMENT
OF INDEPENDENT PUBLIC ACCOUNTANTS
The
Audit
Committee has approved the appointment of Beard Miller Company LLP, York,
Pennsylvania as independent public accountants to audit the financial statements
of the Company for the year 2006. Beard Miller Company LLP audited the Company’s
financial statements for the years ended December 31, 2004 and 2005. There
have
been no disagreements between the Company and Beard Miller Company LLP
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 Beard Miller Company
LLP.
Audit
fees and all professional services to be rendered by Beard Miller Company LLP
are approved by the Company’s Audit Committee. The Board considers the possible
effect on auditors' independence of providing nonaudit services prior to the
service being rendered, but the Board does not anticipate significant non-audit
services will be rendered during 2006.
The
following table presents fees for services provided by Beard Miller Company
LLP
were as follows for 2005 and 2004:
|
|
2005
|
|
2004
|
|
|
|
|
|
Audit
Fees (1)
|
|
94,320
|
|
120,740
|
Audit
Related Fees
|
|
0
|
|
0
|
Tax
Fees (2)
|
|
9,194
|
|
5,740
|
All
Other Fees
|
|
0
|
|
0
|
|
|
103,514
|
|
126,480
|
(1)
Professional services rendered for 2005 include the audit of the Company's
annual financial statements, the review of the financial statements included
in
the Company's Quarterly Reports on Form 10-Q and the audit of the Company's
assessment of internal control over financial reporting. Professional services
rendered for 2004 include the audit of the Company's annual financial statements
and the review of the financial statements included in the Company's Quarterly
Reports on Form 10-Q, the audit of the Company's assessment of internal control
over financial reporting, and consent and comfort letters in connection with
registration statements.
(2)
Tax
fees include preparation of the federal income tax return and other tax
matters.
The
Audit
Committee approves in advance any audit or non-audit services provided by
outside auditors. During 2005 and 2004, there were no exceptions to the Audit
Committee's pre-approval requirements.
Representatives
of Beard Miller LLP are expected to be present at the Annual Meeting.
Representatives of Beard Miller LLP will have an opportunity to make a statement
if they desire to do so, and will be available to respond to appropriate
questions.
Adoption
of this proposal requires the affirmative vote of a majority of the votes cast
by all shareholders entitled to vote at the Annual Meeting. The Board of
Directors unanimously recommends a vote "FOR"
this
proposal. It is understood that even if the selection of Beard Miller LLP is
ratified, the Audit Committee, in its discretion, may direct the appointment
of
a new independent auditing firm at any time during the year if the Audit
Committee determines that such a change would be in the best interests of the
Company and its shareholders.
DISCRETIONARY
AUTHORITY
The
notice of Annual Meeting of Shareholders calls for the transaction of such
other
business as may properly come before the meeting. The Board of Directors has
no
knowledge of any matters to be presented for action by the shareholders at
the
meeting other than is hereinbefore set forth. In the event additional matters
should be presented, however, the proxies will exercise their discretion in
voting on such matters.
SHAREHOLDER
PROPOSALS AND NOMINATIONS FOR DIRECTORS
In
accordance with the Company's bylaws, shareholder's proposals and nominations
for Directors for consideration at the 2007 Annual Meeting of Shareholders
must
be received by the Company in writing prior to February 5, 2007.
OTHER
MATTERS
The
Company's Board of Directors has adopted a code of ethics applicable to all
Directors, officers and employees. There are no waivers of the code for any
Director, officer or employee. A copy of the code of ethics has been filed
with
the Securities and Exchange Commission as Exhibit 14 to the Company's 2002
Form
10-K.
The
expense of this solicitation will be paid by the Company. If necessary, some
of
the officers of the Company and regular employees of The York Water Company
may
solicit proxies personally or by telephone.
Further
information regarding the Company is set forth in the Company’s Annual Report on
Form 10-K for the fiscal year ended December 31, 2005, which has been filed
with
the Securities and Exchange Commission. The Form 10-K (including financial
statements and schedules) may be obtained free of charge by writing to: The
York
Water Company, 130 East Market Street, York, Pennsylvania 17401. Copies of
exhibits to the Form 10-K will be furnished upon request and the payment of
a
reasonable fee. The Form 10-K is available on the Company’s website at
www.yorkwater.com.
A
copy of
the Company’s Annual Report to Shareholders, which includes financial
statements, is being transmitted herewith, but does not form part of the proxy
solicitation materials.
DELIVERY
OF DOCUMENTS TO SECURITY HOLDERS
SHARING
AN ADDRESS
Only
one
proxy statement and annual report is being delivered to multiple security
holders sharing an address unless the Company has received contrary instructions
from one or more of the security holders. Upon written or oral request the
Company will promptly deliver a proxy statement and annual report to any
security holder at a shared address to which a single copy of the proxy
statement and annual report was delivered. Security holders should make their
request for delivery of an individual copy of the proxy statement and annual
report in writing to the Company’s transfer agent, American Stock Transfer &
Trust Company, 59 Maiden Lane, Plaza Level, New York, NY 10038, or by calling
1-800-937-5449.
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE
YORK
WATER COMPANY
Proxy
-
Annual Meeting of Shareholders
May
1,
2006
|
The
undersigned, a Shareholder of The York Water Company, a
Pennsylvania
|
corporation
(the "Company"), does hereby appoint William T. Morris P.E., Irvin
S.
Naylor, and Jeffrey S. Osman, and each of them, the true and lawful
attorneys and proxies with full power of substitution, for and in
the
name, place and stead of the undersigned, to vote all of the shares
of
Common Stock of the Company which the undersigned would be entitled
to
vote if personally present at the Annual Meeting of Shareholders
of the
Company to be held Monday, May 1, 2006 at 1:00 p.m. local time at
The
William T. Morris Employee Center, 396 Hess Farm Road, York, Pennsylvania
or at any adjournment thereof.
|
(Continued
and to be signed on reverse side)
(1)
ELECTION OF DIRECTORS: To vote with respect to the election of George
Hay
Kain, III, Michael W. Gang, and George W. Hodges as
directors.
|
|
For
All Nomimees
|
|
Withhold
Authority for All Nominees
|
|
For
All Except
|
INSTRUCTIONS:
To withhold authority to vote for any individual nominee, write that
Nominee's name on the line provided
below.
|
Cumulative
votes for one or more nominees as follows:
|
|
George
Hay Kain, III
|
|
Michael
W. Gang
|
|
George
W. Hodges
|
(2)
Appoint Beard Miller Company LLP as auditors.
|
For
|
Against
|
Abstain
|
(3)
DISCRETIONARY AUTHORITY
|
|
To
transact such other business as may properly come before the Meeting
and
any adjournment thereof according to the proxies' discretion and
in their
discretion.
|
THIS
PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL
BE VOTED FOR PROPOSALS 1 THROUGH 2.
|
Signature
if Shares Held Jointly
|
|
Date
|
|
NOTE:
Please sign exactly as you 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.