body-def14a2008.htm
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:
[ ]
Preliminary Proxy Statement
[ ]
Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[x]
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.
1)
|
Title
of each class of securities to which transaction
applies:
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2)
|
Aggregate
number of securities to which transaction
applies:
|
3)
|
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):
|
4)
|
Proposed
maximum aggregate value of
transaction:
|
[ ]
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.
1)
|
Amount
Previously Paid:
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2)
|
Form,
Schedule or Registration Statement
No.:
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THE YORK
WATER COMPANY
130 EAST
MARKET STREET
YORK,
PENNSYLVANIA 17401
March 28,
2008
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 5, 2008, 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 2008; 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 February 29, 2008, 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.
|
By
order of the Board of Directors,
|
THE YORK
WATER COMPANY
130 EAST
MARKET STREET
YORK,
PENNSYLVANIA 17401
March 28,
2008
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 George Hay Kain, III, Michael W. Gang, Esq., and
George W. Hodges, 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 5, 2008 (the "Annual Meeting"), and at any
adjournment thereof.
Instead of mailing a printed copy of
our proxy materials to each shareholder of record, the Company is now furnishing
proxy materials on the Internet. Shareholders 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. If you would like to
receive a printed copy of our proxy materials, or vote by telephone, you should
follow the instructions included in the Notice. It is anticipated
that proxy materials will first be made available on the Internet March 28,
2008.
A shareholder who submits a proxy
electronically 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.
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 public accountants
for the fiscal year ending December 31, 2008. 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 11,264,923 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 February
29, 2008. 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 February 29, 2008.
The following table sets forth certain
information regarding the beneficial ownership of our Common Stock as of
February 29, 2008, 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 seven directors continuing in office, and the four executive
officers as of February 29, 2008.
NOMINEES
FOR ELECTION TO THREE YEAR TERM EXPIRING IN 2011
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Director
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Full
Shares
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Percent
of
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or
Officer
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Owned
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Total
Shares
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Name
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Age
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Principal
Occupation During Last Five Years
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Since
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Beneficially
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Outstanding
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(1)
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(2)
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John
L. Finlayson
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67
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Vice
President
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9/2/1993
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17,678
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0.15
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Susquehanna
Real Estate, LP
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|
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May
2006 to date
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Vice
President-Finance and Administration
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Susquehanna
Pfaltzgraff Co.,
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Radio
Stations, Cable TV,
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August
1978 to May 2006
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Thomas
C. Norris*
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69
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Retired,
Chairman of the Board, Glatfelter,
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6/26/2000
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17,427
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(3)
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0.15
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Paper
Manufacturer, May 2000 to date
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Ernest
J. Waters
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58
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York
Area Manager, Met-Ed, a First Energy
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9/25/2007
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100
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0.00
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Company,
Electric Utility
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March
1998 to date
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TO
CONTINUE FOR TERMS EXPIRING IN 2009
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Director
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Full
Shares
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Percent
of
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or
Officer
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Owned
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Total
Shares
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Name
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Age
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Principal
Occupation During Last Five Years
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Since
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Beneficially
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Outstanding
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(1)
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(2)
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George
Hay Kain, III
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59
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Substitute
School Teacher, April 2007 to date
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8/25/1986
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33,956
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(4)
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0.30
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Consultant,
December 2004 to April 2007
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Michael
W. Gang, Esq.*
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57
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Attorney,
Post & Schell PC, Counselors at
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1/22/1996
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8,454
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0.07
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Law,
October 2005 to date
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Post
& Schell PC is counsel to the
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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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George
W. Hodges
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57
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Chairman,
The Wolf Organization, Inc.
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6/26/2000
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6,129
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(5)
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0.05
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February
2008 to date
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Office
of the President, The Wolf
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Organization,
Inc., Distributor of Building
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Products,
January 1986 to February 2008
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Jeffrey
R. Hines, P.E.*
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46
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President
and Chief Executive Officer
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1/28/2008
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27,359
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(6)
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0.24
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March
2008 to date
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Chief
Operating Officer and Secretary
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The
York Water Company, January 2007
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to
March 2008
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Vice
President-Engineering and Secretary
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The
York Water Company, January 2003
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to
December 2006
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TO
CONTINUE FOR TERMS EXPIRING IN 2010
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Director
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Full
Shares
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Percent
of
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or
Officer
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Owned
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Total
Shares
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Name
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Age
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Principal
Occupation During Last Five Years
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Since
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Beneficially
|
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Outstanding
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(1)
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(2)
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William
T. Morris, P.E.*
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70
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Chairman
of the Board, The York Water
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4/19/1978
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33,086
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(7)
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0.29
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Company,
November 2001 to date
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Irvin
S. Naylor*
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72
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Vice
Chairman of the Board, The York Water
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10/31/1960
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87,296
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0.77
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Company,
May 2000 to date
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|
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President/Owner,
Snow Time, Inc., Owns and
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operates
Ski Areas, June 1964 to date
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Jeffrey
S. Osman*
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65
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Retired,
President and Chief Executive Officer
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5/1/1995
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17,996
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(8)
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0.16
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The
York Water Company, January 2003
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to
March 2008
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EXECUTIVE
OFFICERS
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Kathleen
M. Miller
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45
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Chief
Financial Officer and Treasurer, The
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1/1/2003
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3,295
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0.03
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York
Water Company, January 2003
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|
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to
date
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Duane
R. Close
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62
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Vice
President-Operations, The York Water
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5/1/1995
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11,087
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(9)
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0.10
|
|
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Company,
May 1995 to date
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|
|
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Bruce
C. McIntosh
|
55
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Vice
President-Human Resources and
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5/4/1998
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2,298
|
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0.02
|
|
|
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Secretary,
The York Water Company,
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March
2008 to date
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Vice
President-Human Resources, The York
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Water
Company, May 1998 to March
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2008
|
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Vernon
L. Bracey
|
46
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Vice
President-Customer Service
|
3/1/2003
|
190
|
(10)
|
0.00
|
|
|
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The
York Water Company
|
|
|
|
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March
2003 to date
|
|
|
|
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|
|
|
|
|
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All
Directors and Executive Officers as a group
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266,351
|
(11)
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2.36
|
* Members
of the Executive Committee.
(1)
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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.
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(2)
|
The
percentage for each individual or group is based on shares outstanding as
of February 29, 2008.
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(3)
|
Includes
7,371 shares held by Mr. Norris' wife, for which Mr. Norris disclaims
beneficial ownership.
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(4)
|
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 a security for margin loans into which Mr.
Kain enters.
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(5)
|
Includes
4,500 shares held by Mr. Hodges' wife, for which Mr. Hodges disclaims
beneficial ownership.
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(6)
|
Includes
1,993 shares held by Mr. Hines’ wife, for which Mr. Hines disclaims
beneficial ownership.
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(7)
|
Includes
shares owned jointly with Mr. Morris' wife, for which he shares voting and
investment power.
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(8)
|
Includes
shares owned jointly with Karen E. Knuepfer, for which he shares voting
and investment power. Shares are held in a brokerage account
under terms that require them to be pledged as a security for margin loans
into which Mr. Osman enters.
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(9)
|
Includes
259 shares held by Mr. Close's wife for which Mr. Close disclaims
beneficial ownership.
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(10)
|
Includes
16 shares held by Mr. Bracey’s step-son for which Mr. Bracey disclaims
beneficial ownership.
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(11)
|
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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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 eight 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.
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 in Marketplace Rule 4200(a)(15) of the
National Association of Securities Directors (NASD):
Ernest
J. Waters
|
George
W. Hodges
|
John
L. Finlayson
|
George
Hay Kain III
|
Michael
W. Gang, Esq.
|
Thomas
C. Norris
|
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company believes that during the
year ended December 31, 2007, 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.
GENERAL
INFORMATION ABOUT OTHER BOARDS OF DIRECTORS
The following member of the Board of
Directors of The York Water Company is a Board member of another publicly held
company as indicated below:
|
|
Publicly
Held Companies
Other
Than
|
Board Members
|
|
The York Water Company
|
Mr.
George W. Hodges
|
|
Fulton
Financial Corp.
|
COMMITTEES
AND FUNCTIONS
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.
Prior to May 7, 2007, the Company had a
Compensation and Nomination Committee and a Corporate Governance
Committee.
On May 7, 2007, the Company’s Board
formed a Compensation Committee. The Compensation Committee consists
of four non-employee Directors. The Compensation Committee is
comprised of the following Directors appointed by the Board: George
W. Hodges, Chairman; John L. Finlayson; George Hay Kain, III; and Thomas C.
Norris. The Board has determined that all the members of the
Compensation Committee are “Independent Directors” as defined in NASD Rule
4200(a)(15).
Also on May 7, 2007, the Company’s
Board formed a Nomination and Corporate Governance Committee. The
Nomination and Corporate Governance Committee consists of four non-employee
Directors. The Nomination and Corporate Governance Committee is
comprised of the following Directors appointed by the Board: Michael
W. Gang, Chairman; George W. Hodges; John L. Finlayson; and Thomas C.
Norris. The Board has determined that all members of the Nomination
and Corporate Governance Committee are “Independent Directors” as defined in
NASD Rule 4200 (a)(15).
The Executive Committee held three (3)
meetings during the fiscal year ended December 31, 2007. 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.; Jeffrey S. Osman; and Jeffrey
R. Hines, P.E.
The Audit Committee held four (4)
meetings during 2007. 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 independent
Directors appointed by the Board: John L. Finlayson, Chairman; Ernest J. Waters;
George W. Hodges; and Thomas C. Norris, all of whom have been determined to be
independent by the Board. 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 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 Committee is composed of the following
Independent Directors appointed by the Board: George W. Hodges,
Chairman; John L. Finlayson; George Hay Kain, III; and Thomas C. Norris, all of
whom have been determined to be independent by the Board. The Board
has adopted a written charter for the Compensation Committee, which it reviews
and reassess 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 Nomination and Corporate Governance
Committee held two (2) meetings during the fiscal year ended December 31,
2007. The Nomination and Corporate Governance Committee 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 Nomination and Corporate Governance
Committee considers candidates for Board membership suggested by its members and
other Board members, as well as management and shareholders. The
Nomination and Corporate Governance 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 Nomination and Corporate Governance
Committee is composed of the following Directors appointed by the
Board: Michael W. Gang, Chairman; George W. Hodges; John L.
Finlayson; and Thomas C. Norris, all of whom have been determined to be
independent by the Board. 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 Nomination and Corporate Governance
Committee develops and makes recommendations to the Board of Directors
concerning corporate governance principles and guidelines.
EXECUTIVE
SESSIONS OF THE BOARD
The independent directors of the Board
schedule regular executive sessions of independent directors in which they meet
without management participation.
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
COMPENSATION
DISCUSSION AND ANALYSIS
Our Named Executive
Officers. This section discusses the compensation we paid to
our named executive officers (as defined by SEC rules) in 2007. They
are:
Name
|
Title
|
Jeffrey
S. Osman
|
President,
Chief Executive Officer and Director
|
Kathleen
M. Miller
|
Chief
Financial Officer
|
Jeffrey
R. Hines
|
Chief
Operating Officer
|
Duane
R. Close
|
Vice
President-Operations
|
Bruce
C. McIntosh
|
Vice
President-Human Resources
|
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. Our compensation setting process consists
of establishing a base salary for each senior manager and designing an annual
cash incentive for such manager to reward the achievement of specific
operational goals.
Base Salary. To
assist us in establishing base salary in 2007, the Compensation and Nomination
Committee engaged SAJE, a nationally recognized consulting firm, to provide a
survey of the compensation of senior management at York and at ten comparable
investor-owned water utilities. These comparables included American
Water, Aqua America, Inc., Aquarion Water Company, Baton Rouge Water, California
Water Service 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.
Based upon our 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 below the 25th
percentile of the ten comparable investor-owned water utilities.
Bonuses and Equity
Compensation. We do not provide bonuses or equity compensation
to senior management.
Cash
Incentives. Our practice is to use cash awards to incentivize
our senior managers to create value for our customers. 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 and standards for incentive
awards. An example of possible standards is strategic business
criteria, consisting of meeting specified water quality standards, environmental
or safety standards, affordability or 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 2007 on January 22,
2007. For 2007, the Compensation Committee determined that the amount
of the target cash incentive award would be 5% of the base salary for each
management employee, including senior management employees. The 2007
performance objectives as determined by the Compensation Committee were: develop
mobile home hook-up template, construct distribution center addition, install
filter plant back-up generator, install pumping station generator, obtain
regulatory approval of municipal contract, design and permit dam spillway,
design and permit residual handling facilities, install radio-frequency drive-by
meter reading system, rehabilitate infrastructure, design and permit filter
expansion, select pension plan asset manager, establish retail lockbox service,
conduct customer demand feasibility study, establish disaster recovery alternate
site, consolidate billing cycles and renegotiate labor contract.
On January 28, 2008, the Compensation
Committee determined that our management had achieved the performance objectives
for 2007 and awarded the senior managers the amounts set forth on the 2007
Grants of Plan Based Awards Table below, which was the target incentive amount
for each senior manager.
On January 28, 2008, the Compensation
Committee determined performance objectives and target incentive amounts to be
awarded under the plan for 2008. The performance objectives were:
rehabilitate infrastructure, design and permit filter expansion, consolidate
billing cycles, complete geotech surveys of dams, construct distribution center,
obtain regulatory approval of municipal contract, install residual handling
facilities, issue tax exempt debt, complete an equity offering, complete a major
rate case, integrate West Manheim acquisition, establish direct stock purchase
plan, and implement eproxy process. The target incentive amounts for
2008, as determined by the Compensation Committee are 5% of senior managers'
annual salary for 2008.
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
times 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 60 months
immediately preceding 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. 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.
Osman
|
$1,389
|
Ms.
Miller
|
1,394
|
Mr.
Hines
|
1,444
|
Mr.
Close
|
1,235
|
Mr.
McIntosh
|
1,754
|
The estimated annual benefit payable to
Mr. Osman, Ms. Miller, Mr. Close and Mr. McIntosh at normal retirement age under
the supplemental retirement program is $33,333. The estimated annual
benefit payable to Mr. Hines at normal retirement age under the supplemental
retirement program is $53,333. Benefits are paid
monthly. Senior managers who terminate their employment prior to the
age of 55 forfeit their supplemental retirement benefits.
The
pension value of our traditional defined benefit pension and supplemental
retirement pension are based upon a 6.50% discount rate.
We also provide a deferred compensation
program to senior 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. Ms. Miller is the only senior management member currently
deferring salary and in 2007, she received annual matching benefits of
$189. Our deferred compensation program does not provide above-market
or
preferential
earnings. Payouts from this plan on retirement, termination,
disability or death are described in detail below in the narrative discussion
accompanying the 2007 Nonqualified Deferred Compensation Table.
All senior managers participate in our
401(k) savings plan on the same terms as other employees. We provide
an annual maximum matching contribution of $1,950 per employee. Mr.
Osman has elected to receive a matching contribution of $1,772 during
2007. All other senior managers have elected to receive the maximum
matching contribution of $1,950 during 2007.
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 2003 we entered into 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 between six months and
one year corresponding to termination benefits. 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 $10,000 or more.
Senior management also participates in
York Water's other benefit plans on the same terms as other
employees. These plans include medical and health insurance, life
insurance and employee stock plan discount.
Board Process. The
Compensation Committee of the Board of Directors approves all compensation and
awards to executive officers, which include the Chief Executive, Chief Financial
Officer, Chief Operating Officer and three vice presidents. The
Compensation Committee reviews the performance and compensation of the Chief
Executive and, following discussions with that individual, and a review of the
data provided by SAJE, establishes his compensation level. For the
remaining executive officers, the Chief Executive Officer makes recommendations
to the Compensation Committee that generally are approved. With
respect to the cash incentive awards, the Compensation Committee grants cash
incentives, generally based upon the recommendation of the Chief Executive
Officer.
COMPENSATION
COMMITTEE REPORT
The Compensation Committee has reviewed
and discussed the foregoing Compensation Discussion and Analysis with
management, and based on that review and discussion, the Compensation Committee
recommended to the board of directors that the Compensation Discussion and
Analysis be included in this proxy statement.
THE
COMPENSATION COMMITTEE
|
George
W. Hodges
John
L. Finlayson
|
George
Hay Kain III
Thomas
C. Norris
|
SUMMARY
COMPENSATION TABLE
The following table sets forth
information concerning compensation paid by the Company to senior managers or
accrued by the Company for the senior managers in 2007.
|
|
|
|
Change
in
|
|
|
|
|
|
|
Pension
Value
|
|
|
|
|
|
|
&
Nonqualified
|
|
|
|
|
|
Non-Equity
|
Deferred
|
|
|
Name
and
|
|
|
Incentive
Plan
|
Compensation
|
All
Other
|
|
Principal Position
|
Year
|
Salary ($)
|
Compensation ($)
|
Earnings ($)
|
Compensation ($)
|
Total ($)
|
|
|
|
|
|
|
|
Jeffrey
S. Osman
|
|
|
|
|
|
|
President,
Chief
|
|
|
|
|
|
|
Executive
Officer
|
|
|
|
|
|
|
and
Director
|
2007
|
286,953
|
|
14,348
|
|
|
116,003
|
|
1,772
|
419,076
|
|
2006
|
269,083
|
|
13,714
|
|
|
178,177
|
|
1,950
|
462,924
|
|
|
|
|
|
|
|
Kathleen
M. Miller
|
|
|
|
|
|
|
Chief
Financial
|
|
|
|
|
|
|
Officer
|
2007
|
103,232
|
|
5,162
|
|
|
4,637
|
|
2,429
|
115,460
|
|
2006
|
96,968
|
|
4,925
|
|
|
8,307
|
|
3,223
|
113,426
|
|
|
|
|
|
|
|
Jeffrey
R. Hines
|
|
|
|
|
|
|
Chief
Operating
|
|
|
|
|
|
|
Officer
|
2007
|
146,914
|
|
7,415
|
|
|
463
|
|
2,240
|
157,032
|
|
2006
|
124,450
|
|
6,314
|
|
|
20,711
|
|
1,950
|
153,425
|
|
|
|
|
|
|
|
Duane
R. Close
|
|
|
|
|
|
|
Vice
President-
|
|
|
|
|
|
|
Operations
|
2007
|
126,440
|
|
6,322
|
|
|
37,105
|
|
2,240
|
172,107
|
|
2006
|
119,305
|
|
6,053
|
|
|
65,456
|
|
1,950
|
192,764
|
|
|
|
|
|
|
|
Bruce
C. McIntosh
|
|
|
|
|
|
|
Vice
President-
|
|
|
|
|
|
|
Human
Resources
|
2007
|
99,412
|
|
4,971
|
|
|
9,080
|
|
2,240
|
115,703
|
|
2006
|
96,022
|
|
4,826
|
|
|
20,077
|
|
1,950
|
122,875
|
2007
GRANTS OF PLAN BASED AWARDS TABLE
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. The following table sets forth awards granted to our
senior managers in 2007 pursuant to our incentive plan.
Name and Principal Position
|
|
Estimated
Possible Payouts Under
Non-Equity
Incentive
Plan Awards Target ($)
|
Jeffrey
S. Osman
President,
Chief Executive Officer and Director
|
|
14,348
|
Kathleen
M. Miller
Chief
Financial Officer
|
|
5,162
|
Jeffrey
R. Hines
Chief
Operating Officer
|
|
7,415
|
Duane
R. Close
Vice
President-Operations
|
|
6,322
|
Bruce
C. McIntosh
Vice
President-Human Resources
|
|
4,971
|
The awards appearing in this table also
appear in the Summary Compensation Table.
We do not grant equity incentive plan
awards.
2007
PENSION BENEFITS TABLE
The table below sets forth the present
value of accumulated benefits payable to each senior manager, including the
number of years of credited service, under the Company's General and
Administrative Pension Plan (a defined benefit pension plan) and its
Supplemental Executive Retirement Plan. Detailed information on these
plans can be found in the Compensation Discussion and Analysis above, under the
heading "Retirement Plans."
Name
and
Principal
Position
|
Plan
Name
|
Years
of
Credited
Service
|
Present
Value
of Accumulated Benefit
($)
|
Jeffrey
S. Osman
President,
Chief Executive Officer
and
Director
|
General
and Administrative Pension Plan
|
24
|
759,803
|
|
Jeffrey
S. Osman
President,
Chief Executive Officer
and
Director
|
Supplemental
Executive Retirement Plan
|
24
|
310,232
|
|
Kathleen
M. Miller
Chief
Financial Officer
|
General
and Administrative Pension Plan
|
11
|
49,576
|
|
Kathleen
M. Miller
Chief
Financial Officer
|
Supplemental
Executive Retirement Plan
|
4
|
14,956
|
|
Jeffrey
R. Hines
Chief
Operating Officer
|
General
and Administrative Pension Plan
|
17
|
93,982
|
|
Jeffrey
R. Hines
Chief
Operating Officer
|
Supplemental
Executive Retirement Plan
|
17
|
76,132
|
|
Duane
R. Close
Vice
President-Operations
|
General
and Administrative Pension Plan
|
30
|
437,764
|
|
Duane
R. Close
Vice
President-Operations
|
Supplemental
Executive Retirement Plan
|
24
|
228,289
|
|
Bruce
C. McIntosh
Vice
President-Human Resources
|
General
and Administrative Pension Plan
|
11
|
79,619
|
|
Bruce
C. McIntosh
Vice
President-Human Resources
|
Supplemental
Executive Retirement Plan
|
9
|
78,286
|
|
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 2007 Annual Report to Shareholders.
2007
NONQUALIFIED DEFERRED COMPENSATION TABLE
The table set forth below presents
contributions, earnings and the balance at year-end 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
|
Balance
at
Year-End
|
Jeffrey
S. Osman,
President,
Chief Executive Officer
and
Director
|
|
|
601
|
66,239
|
Kathleen
M. Miller,
Chief
Financial Officer
|
189
|
189
|
950
|
42,421
|
Jeffrey
R. Hines,
Chief
Operating Officer
|
|
|
1,818
|
81,405
|
Duane
R. Close,
Vice
President-Operations
|
|
|
508
|
71,153
|
Bruce
C. McIntosh,
Vice
President-Human Resources
|
|
|
769
|
42,473
|
Amounts reported as Executive
Contributions and Company Contributions were reported on the Summary
Compensation Table in the Salary and All Other Compensation columns,
respectively.
PAYOUT
OF DEFERRED COMPENSATION ACCOUNTS
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 marginal Federal and State income tax bracket for the Company's fiscal
year ending immediately prior to retirement). Assuming a federal
income tax rate of 34% and state income tax rate of 9.99% for 2007, and assuming
all senior managers were eligible for retirement as of December 31, 2007, the
senior managers would receive the following monthly benefits:
Name
and
Principal
Position
|
|
Deferred
Income
Account Percentage (%)
|
|
Monthly
Retirement Amount ($)
|
Jeffrey
S. Osman, President, Chief Executive Officer and Director
|
|
2.039
|
|
1,351
|
|
Kathleen
M. Miller,
Chief
Financial Officer
|
|
0.651
|
|
276
|
|
Jeffrey
R. Hines,
Chief
Operating Officer
|
|
1.110
|
|
904
|
|
Duane
R. Close
Vice
President-Operations
|
|
2.032
|
|
1,446
|
|
Bruce
C. McIntosh, Vice President-Human Resources
|
|
0.664
|
|
282
|
|
Payouts Upon Termination of
Employment. If a senior manager's employment with the Company
is terminated other than by death or disability before he or she is eligible for
retirement, the amount of his or her contributions plus accumulated interest, if
any, without the Company's matching contribution credited to the deferred income
account shall be distributed to such senior manager immediately upon his or her
termination in a lump sum. Assuming each senior manager were
terminated as of December 31, 2007, such senior managers would be entitled to
receive the following lump sum payments:
Name
and
Principal
Position
|
|
Lump
Sum Payment Upon Termination ($)
|
Jeffrey
S. Osman, President, Chief Executive Officer and Director
|
|
28,349
|
Kathleen
M. Miller,
Chief
Financial Officer
|
|
14,986
|
Jeffrey
R. Hines,
Chief
Operating Officer
|
|
39,250
|
Duane
R. Close
Vice
President-Operations
|
|
28,778
|
Bruce
C. McIntosh, Vice President-Human Resources
|
|
15,209
|
Payouts Upon
Disability. If a senior manager becomes disabled before his or
her deferred income account has been distributed, he or she may request, and be
granted an acceleration of the payments due to the senior manager, to the extent
necessary to relieve any financial hardship caused by such
disability. The amount of the deferred income account will be equal
to the amount of the cash value of the insurance policy maintained by the
Company for the senior manager at the date that he or she is found to be
disabled. Assuming each senior manager became disabled as of December
31, 2007 and was granted an acceleration of all payments due him or her due to
the resulting financial hardship, such senior managers would be entitled to
receive the following lump sum payments:
Name
and
Principal
Position
|
|
Lump
Sum Payment Upon Becoming Disabled ($)
|
Jeffrey
S. Osman, President, Chief Executive Officer and Director
|
|
58,517
|
Kathleen
M. Miller,
Chief
Financial Officer
|
|
18,293
|
Jeffrey
R. Hines,
Chief
Operating Officer
|
|
38,065
|
Duane
R. Close
Vice
President-Operations
|
|
53,410
|
Bruce
C. McIntosh, Vice President-Human Resources
|
|
17,880
|
Payouts Upon
Death. If a senior manager were to die before distribution of
his or her deferred income account has commenced, his or her beneficiary would
receive a death benefit in an amount equal to the proceeds of the insurance
policy maintained by the Company on his or her life as an investment of the
amounts credited to the account, plus an amount which, when added to the
proceeds of such insurance policy or policies, would be deductible by the
Company for federal corporation income tax purposes at the corporate tax rate in
effect in the year of the senior manager's death, and, at such rate, would
reduce the Company's net after-tax cost of the death benefit to the proceeds of
such insurance policy or policies. The death benefit determined as
above will be paid to beneficiaries in a lump sum or in ten annual
installments. Assuming death benefits for each senior manager become
payable as of December 31, 2007, such senior managers' respective beneficiaries
would be entitled to receive the following lump sum payments:
Name
and
Principal
Position
|
|
Beneficiary
Death Benefit ($)
|
Jeffrey
S. Osman, President, Chief Executive Officer and Director
|
|
189,900
|
Kathleen
M. Miller,
Chief
Financial Officer
|
|
240,039
|
Jeffrey
R. Hines,
Chief
Operating Officer
|
|
425,014
|
Duane
R. Close
Vice
President-Operations
|
|
190,497
|
Bruce
C. McIntosh, Vice President-Human Resources
|
|
155,226
|
POTENTIAL
PAYMENTS UPON TERMINATION OR A CHANGE IN CONTROL
Description of Change in Control
Agreements. We have entered into 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);
|
·
|
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, Close and McIntosh, and Ms. Miller
are entitled to payment of “stay bonuses” if they remain employed by 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 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, 2007.
Name
|
|
Multiple
of Base Pay
|
|
Lump
Sum Payment Amount ($)
|
|
Health and Other Insurance
Benefits ($) (1)
|
|
Total
($)
|
Kathleen
M. Miller
|
|
|
|
|
|
|
|
|
Involuntary
termination or good reason termination.
|
|
.5
times
|
|
54,197
|
|
5,305
|
|
59,502
|
Voluntary
termination more than 3 months but less than one year after a change in
control.
|
|
.25
times
|
|
27,099
|
|
5,305
|
|
32,404
|
Continuing
employment for one year after a change in control.
|
|
.5
times
|
|
54,197
|
|
5,305
|
|
59,502
|
Jeffrey
R. Hines
|
|
|
|
|
|
|
|
|
Involuntary
termination or good reason termination.
|
|
.5
times
|
|
77,165
|
|
2,186
|
|
79,351
|
Voluntary
termination more than 3 months but less than one year after a change in
control.
|
|
.25
times
|
|
38,582
|
|
2,186
|
|
40,768
|
Continuing
employment for one year after a change in control.
|
|
.5
times
|
|
77,165
|
|
2,186
|
|
79,351
|
Duane
R. Close
|
|
|
|
|
|
|
|
|
Involuntary
termination or good reason termination.
|
|
.5
times
|
|
66,381
|
|
4,677
|
|
71,058
|
Voluntary
termination more than 3 months but less than one year after a change in
control.
|
|
.25
times
|
|
33,191
|
|
4,677
|
|
37,868
|
Continuing
employment for one year after a change in control.
|
|
.5
times
|
|
66,381
|
|
4,677
|
|
71,058
|
Name
|
|
Multiple
of Base Pay
|
|
Lump
Sum Payment Amount ($)
|
|
Health and Other Insurance
Benefits ($) (1)
|
|
Total
($)
|
Bruce
C. McIntosh
|
|
|
|
|
|
|
|
|
Involuntary
termination or good reason termination.
|
|
.5
times
|
|
52,057
|
|
4,566
|
|
56,623
|
Voluntary
termination more than 3 months but less than one year after a change in
control.
|
|
.25
times
|
|
26,028
|
|
4,566
|
|
30,594
|
Continuing
employment for one year after a change in control.
|
|
.5
times
|
|
52,057
|
|
4,566
|
|
56,623
|
(1) The
value of health benefits was determined using the estimated rates applicable
under the Comprehensive Omnibus Budget Reconciliation Act (COBRA) for terminated
employees.
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 in 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 2007 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, 2007) our senior managers have
earned monthly benefits under the pension plan and supplemental retirement plan
as follows:
Name
|
Plan Name
|
Monthly
Benefit ($)
|
Jeffrey
S. Osman
|
General
and Administrative Pension Plan
|
6,647
|
Jeffrey
S. Osman
|
Supplemental
Executive Retirement Plan
|
2,778
|
Kathleen
M. Miller
|
General
and Administrative Pension Plan
|
1,423
|
Kathleen
M. Miller
|
Supplemental
Executive Retirement Plan
|
465
|
Jeffrey
R. Hines
|
General
and Administrative Pension Plan
|
2,934
|
Jeffrey
R. Hines
|
Supplemental
Executive Retirement Plan
|
2,162
|
Duane
R. Close
|
General
and Administrative Pension Plan
|
4,865
|
Duane
R. Close
|
Supplemental
Executive Retirement Plan
|
2,469
|
Bruce
C. McIntosh
|
General
and Administrative Pension Plan
|
1,456
|
Bruce
C. McIntosh
|
Supplemental
Executive Retirement Plan
|
1,316
|
Our senior managers will also be
entitled to be paid the amounts described in the narrative discussion
accompanying the 2007 Nonqualified Deferred Compensation Table above in the
manner described in that section.
2007
DIRECTOR COMPENSATION TABLE
Director
|
Fees
Earned
Paid in Cash
|
All
Other
Compensation
|
Total
Compensation
|
|
|
|
|
William
T. Morris
|
|
|
|
Chairman
of the Board
|
22,870
|
28,358
|
51,228
|
|
|
|
|
Irvin
S. Naylor
|
|
|
|
Vice
Chairman of the Board
|
22,200
|
15,448
|
37,648
|
|
|
|
|
John
L. Finlayson
|
26,315
|
|
26,315
|
|
|
|
|
Michael
W. Gang
|
25,215
|
|
25,215
|
|
|
|
|
Thomas
C. Norris
|
26,690
|
|
26,690
|
|
|
|
|
George
W. Hodges
|
22,500
|
|
22,500
|
|
|
|
|
Chloè
R. Eichelberger
|
5,390
|
|
5,390
|
|
|
|
|
George
Hay Kain III
|
18,410
|
|
18,410
|
|
|
|
|
Ernest
J. Waters
|
7,450
|
|
7,450
|
Director Fees
Earned. The bylaws of the Company require directors to be
shareholders. In consideration of the services they provide to us,
directors who are not regular full-time employees are entitled to receive
$10,500 per year plus $650 for attendance at each regular and special meeting of
the Board of Directors. Audit Committee members are entitled to
receive $700 for attendance at each regular or special meeting of the Audit
Committee. The chairperson of the Audit Committee receives $1,000 for
attendance at each Audit Committee meeting. All other committee
members who are not regular full-time employees are entitled to receive $650 for
attendance at each Committee meeting. The chairperson of each
Committee receives $800 for attendance at Committee meetings.
The Chairman and Vice Chairman of the
Board are designated as officers of the Company by the Standing Resolutions of
the Board. The Board has established a base salary for the Chairman
and Vice Chairman of $25,920 and $13,010, respectively, to compensate them for
the duties they perform and responsibilities they fulfill. The base
salary for the Chairman and Vice Chairman are shown in the All Other
Compensation column.
In addition, the Vice Chairman
participates in our traditional defined benefit pension plan. During
2007, the Vice Chairman had a reduction in the present value of his defined
benefit pension of $1,313.
The Chairman and Vice Chairman
participate in our 401(k) savings plan on the same basis as other
employees. In 2007, we provided matching contributions of $1,950 for
each of their accounts. The 401(k) matching contributions are shown
in the All Other Compensation Column.
The Chairman and Vice Chairman also
participate in York's other benefit plans on the same terms as other
employees. These plans include medical and health insurance and
employee stock purchase plan discount.
No perquisites are provided to
Directors.
There were 14 Board of Directors'
Meetings during calendar year 2007. All Directors attended at least
75% of the scheduled Board of Directors and committee meetings.
DISCLOSURE
OF RELATED PARTY TRANSACTIONS
The Board has adopted a policy setting
forth procedures for the review, approval and monitoring of transactions
involving the Company and related persons (directors, nominees for directors, 5%
security holders, and executive officers or their immediate family
members). Under the policy, the Audit Committee is responsible for
reviewing and approving all related party transactions involving directors and
executive officers or an immediate family member of a director or executive
officer. 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. Pursuant
to our Audit Committee Charter, any transaction between us and our officers and
directors or holders of 5% of more of our common stock that should be avoided
pursuant to these policies must be reviewed and approved by the Audit
Committee.
The Company does not have any material
related party transactions in which a related person has a direct or indirect
benefit.
We have reviewed the related party
transactions between Director Michael W. Gang, Esquire and Post & Schell PC,
counsel to the Company, and with Jeffrey S. Osman, Retired President and Chief
Executive Officer, and have determined that these interests are not
material. The Company paid Post & Schell PC $76,442 for legal
services during 2007. Mr. Gang is partner with Post & Schell
PC. Mr. Osman will provide regulatory consulting services to the
Company in 2008, the value of which is anticipated to be less than
$50,000.
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, 2002 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.,
California Water Service, Connecticut Water Service, Inc., Middlesex Water
Company, Pennichuck Corporation, Aqua America, Inc., San Jose Water Company, and
Southwest Water Co.
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. 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 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. Mr.
Finlayson is a 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.
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 the standards of
the Public Company Accounting Oversight Board (United States) 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 and the letter 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 accountants 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, 2007 for filing with the SEC.
John
L. Finlayson, Chairman
|
|
George
W. Hodges, Member
|
Ernest
J. Waters, 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
2008. Beard Miller Company LLP audited the Company’s financial
statements for the years ended December 31, 2007, 2006 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 2008.
The following table presents fees for
services provided by Beard Miller Company LLP were as follows for 2007 and
2006:
|
|
2007
|
|
2006
|
Audit
Fees (1)
|
|
99,900
|
|
137,525
|
Audit
Related Fees
|
|
0
|
|
0
|
Tax
Fees (2)
|
|
9,100
|
|
8,750
|
All
Other Fees
|
|
0
|
|
0
|
|
|
109,000
|
|
146,275
|
(1) Professional services rendered for
2007 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, and (c) the audit of the effectiveness of internal control over
financial reporting. Professional services rendered for 2006 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 audits of management's assessment and effectiveness of internal
control over financial reporting, and (d) consent and comfort letters in
connection with registration and debt offering 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
2007 and 2006, there were no exceptions to the Audit Committee's pre-approval
requirements.
Representatives of Beard Miller Company
LLP are expected to be present at the Annual Meeting. Representatives
of Beard Miller Company 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 Company 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 2009 Annual Meeting of Shareholders must be received by the Company in
writing prior to February 3, 2009.
OTHER
MATTERS
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 2007. 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.
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, 2007, 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.
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 instructions 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 SHAREHOLDER COMMUNICATIONS
If
you would like to reduce the costs incurred by The York Water 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 shareholder communications 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 The York Water Company, c/o
Broadridge, 51 Mercedes Way, Edgewood, NY
11717
|
THIS
PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
THE
YORK WATER COMPANY
|
|
|
|
|
|
Directors
recommend a vote FOR all the nominees listed.
|
|
|
|
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:
|
|
|
|
|
|
|
|
01)
|
John
L. Finlayson
|
|
O
|
O
|
O
|
|
|
02)
|
Thomas
C. Norris
|
|
|
|
|
|
|
03)
|
Ernest
J. Waters
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Vote
On Proposal
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For
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Against
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Abstain
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2.
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Appoint
Beard Miller Company LLP as auditors.
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O
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O
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O
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3.
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DISCRETIONARY
AUTHORITY
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To
transact such other business as may properly come before the Meeting and
any adjournment
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thereof
according to the proxies’ discretion and in their
discretion.
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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.
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O
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Please
indicate if you plan to attend this meeting.
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O
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O
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Yes
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No
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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.
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Signature
(PLEASE SIGN WITHIN BOX)
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Date
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Signature
(Joint Owners)
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Date
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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
5, 2008
The
undersigned, a Shareholder of The York Water Company, a Pennsylvania corporation
(the "Company"), does hereby appoint George Hay Kain, III, Michael W. Gang,
Esq., and George W. Hodges, and each of them, the true and lawful attorneys and
proxies with full power of substitution, for and in the name, place and stead of
the undersigned, to vote all of the shares of Common Stock of the Company which
the undersigned would be entitled to vote if personally present at the Annual
Meeting of Shareholders of the Company to be held Monday, May 5, 2008 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 2.
(Continued
and to be signed on reverse side)