YORK WATER CO (Form: 10-K, Received: 03/08/2011 11:50:12)

The York Water Company

Amended and Restated

DEFERRED COMPENSATION PLAN

(Effective January 1, 2009)

RECITALS

THIS AMENDED AND RESTATED DEFERRED COMPENSATION PLAN (the “Plan”) is hereby adopted as of the 1st day of January, 2009, by The York Water Company, a corporation organized and existing under the laws of the Commonwealth of Pennsylvania (the “Plan Sponsor”).

WHEREAS , the Plan Sponsor has previously adopted and established a non-tax qualified plan of deferred compensation to provide additional retirement benefits for a select group of management and highly compensated employees; and

WHEREAS , effective as of January 1, 2009, the Plan Sponsor has amended and restated the Plan in its entirety and intends that the Plan shall at all times be administered and interpreted in such a manner as to constitute an unfunded nonqualified deferred compensation plan for tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). This Plan is not intended to qualify for favorable tax treatment pursuant to Section 401(a) of the Internal Revenue Code of 1986, as amended (the “Code”), or any successor section or statute. This Plan is intended to comply with the requirements of Section 409A of the Code and the Treasury Regulations (as defined below) or any other authoritative guidance issued under that section.

NOW, THEREFORE , the Plan Sponsor hereby adopts the following Amended and Restated Deferred Compensation Plan.

ARTICLE 1.

Definitions

For the purpose of this Plan, unless otherwise clearly apparent from the context, the following phrases or terms shall have the following indicated meanings:

1.1 “ Account or Accounts ” shall mean a book account reflecting amounts credited to a Participant’s Separation From Service Account, Scheduled Withdrawal Account(s) and Plan Sponsor Contribution Account, as adjusted for deemed investment performance and all distributions or withdrawals made by the Participant or his or her Beneficiary. To the extent that it is considered necessary or appropriate, the Plan Administrator shall maintain separate sub-accounts for each source of contribution under the Plan or shall otherwise provide a means for determining that portion of an Account attributable to each contribution source.

1.2 “ Affiliate ” shall mean any business entity other than the Plan Sponsor that is a member of a controlled group of corporations, within the meaning of Section 414(b) of the Code, of which the Plan Sponsor is a member; all other trade or business (whether or not incorporated) under common control, within the meaning of Section 414(c) of the Code, with the Plan Sponsor; any service organization other than the Plan Sponsor that is a member of an Affiliated service group, within the meaning of Section 414(m) of the Code, of which the Plan Sponsor is a member; and any other organization that is required to be aggregated with the Plan Sponsor under Section 414(o) of the Code and whose Eligible Employees are authorized to participate in this Plan by the Plan Administrator.

1.3 “ Annual Deferral Amount ” shall mean that portion of a Participant’s Base Salary that a Participant elects to defer under the Plan.

1.4 “ Base Salary ” shall mean the annual cash compensation relating to services performed during any Plan Year, (excluding bonuses, commissions, overtime, fringe benefits, incentive payments, SERP compensation, non-monetary awards, relocation expenses, retainers, directors fees and other fees, severance allowances, pay in lieu of vacations, insurance premiums paid by the Plan Sponsor, insurance benefits paid to the Participant or his or her Beneficiary, stock options and grants, and car allowances) paid to a Participant for services rendered to the Plan Sponsor or an Affiliate. Base Salary shall be calculated before reduction for compensation voluntarily deferred or contributed by the Participant pursuant to all qualified or non-qualified plans of the Plan Sponsor or an Affiliate and shall be calculated to include amounts not otherwise included in the Participant’s gross income under Sections 125, 402(e)(3), 402(h), or 403(b) of the Code pursuant to plans established by the Plan Sponsor; provided, however, that all such amounts will be included in compensation only to the extent that, had there been no such plan, the amounts would have been payable in cash to the Participant.

1.5 “ Beneficiary ” shall mean one or more persons, trusts, estates or other entities that are entitled to receive benefits under this Plan upon the death of the Participant.

1.6 “ Board ” shall mean the Board of Directors of Plan Sponsor.

1.7 “ Cause ” shall mean any of the following acts or circumstances:

(a) Willful destruction by the Participant of property of the Plan Sponsor or an Affiliate having a material value to the Plan Sponsor or such Affiliate;

(b) fraud, embezzlement, theft, or comparable dishonest activity committed by the Participant (excluding acts involving a de minimis dollar value and not related to the Plan Sponsor or an Affiliate);

(c) the Participant’s conviction of or entering a plea of guilty or nolo contendere to any crime constituting a felony or any misdemeanor involving fraud, dishonesty or moral turpitude (excluding acts involving a de minimis dollar value and not related to the Plan Sponsor or an Affiliate);

(d) the Participant’s breach, neglect, refusal, or failure to materially discharge the Participant’s duties (other than due to physical or mental illness) commensurate with the Participant’s title and function or the Participant’s failure to comply with the lawful directions of the Board or a senior managing officer of the Plan Sponsor, or of the Board or a senior managing officer of an Affiliate that employs the Participant, in any such case that is not cured within fifteen (15) days after the Participant has received written notice thereof from such Board or senior managing officer;

(e) any willful misconduct by the Participant which may cause substantial economic or reputation injury to the Plan Sponsor, including, but not limited to, sexual harassment, or;

(f) a willful and knowing material misrepresentation to the Board or a senior managing officer of the Plan Sponsor or to the Board or a senior managing officer of an Affiliate that employs the Participant.

1.8 “ Claimant ” shall mean a person who believes that he or she is being denied a benefit to which he or she is entitled hereunder.

1.9 “ Code ” shall mean the Internal Revenue Code of 1986, as amended from time to time, and the Treasury Regulations promulgated thereunder.

1.10 “ Disability ” shall mean a condition of the Participant whereby he or she either: (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Plan Sponsor. Items (i) and (ii) of this Section 1.10 are permitted provided they are in compliance with the requirements of Treasury Regulations Section 1.409A-3(g)(4). A Participant will also be deemed disabled if determined to be totally disabled by the Social Security Administration or in accordance with a disability insurance program, provided that the definition of Disability applied under such disability insurance program complies with the requirements of Treasury Regulations Section 1.409A-3(g)(4).

1.11 “ Effective Date ” of the Plan as amended and restated herein is January 1, 2009.

1.12 “ Election Form ” shall mean the form or forms established from time to time by the Plan Administrator on which the Participant irrevocably elects, prior to the first Plan Year in which it is earned (except as provided under the special rule for newly Eligible Employees set forth in Section 2.3 below), his or her Annual Deferral Amount for the following Plan Year and each of the seven Plan Years thereafter, and the Participant designates his or her Beneficiary, as required on that form and under the terms of the Plan.

1.13 “ Eligible Employee ” shall mean for any Plan Year (or applicable portion of a Plan Year), a person who is determined by the Plan Sponsor, or its designee, to be a member of a select group of management or highly compensated employees of the Plan Sponsor or an Affiliate, and who is designated by the Plan Sponsor, or its designee, to be an Eligible Employee under the Plan. If the Plan Sponsor determines that an individual first becomes an Eligible Employee during a Plan Year, the Plan Sponsor shall notify the individual of its determination and of the date during the Plan Year on which the individual shall first become an Eligible Employee.

1.14 “ Enhanced Benefit ” shall mean with respect to the Participants listed on Appendix A attached hereto, the Participant’s Vested Account balance, multiplied by the Enhancement Factor.

1.15 “ Enhancement Factor ” shall mean the factor listed on Appendix A by which the Vested Account balances for the Participants listed on Appendix A shall be multiplied.

1.16 “ Entry Date ” shall mean with respect to an Eligible Employee, the first day of the pay period following the date on which the Eligible Employee becomes a Participant.

1.17 “ ERISA ” shall mean the Employee Retirement Income Security Act of 1974, as it may be amended from time to time.

1.18 “ FICA Amount ” shall mean the Participant’s share of the tax imposed on a Participant’s Base Salary and Plan Sponsor Contributions, if any, under the Federal Insurance Contributions Act.

1.19 “ Participant ” shall mean (A) any Eligible Employee (i) who is selected to participate in this Plan, (ii) who elects to participate in this Plan by signing a Participation Agreement, (iii) who completes and signs certain Election Form(s) required by the Plan Administrator, and (iv) whose signed Election Form(s) are accepted by the Plan Administrator or (B) a former Eligible Employee who continues to be entitled to a benefit under this Plan. A spouse or former spouse of a Participant shall not be treated as a Participant in this Plan or have an Account balance under this Plan, even if he or she has an interest in the Participant’s benefits under this Plan as a result of applicable law or property settlements resulting from legal separation or marital dissolution or divorce.

1.20 “ Participation Agreement ” shall mean the document executed by the Eligible Employee and Plan Administrator whereby the Eligible Employee agrees to participate in the Plan.

1.21 “ Permissible Payment Event ” shall mean one or more of the following events upon which payment may be made to a Participant or his or her Beneficiary under the terms of the Plan: (i) the Participant’s Separation from Service, (ii) the Participant’s death, (iii) the Participant’s Disability, (iv) upon the occurrence of an Unforeseeable Emergency, or (v) a time or pursuant to a fixed schedule and/or retirement date specified under the Plan, within the meaning of Treasury Regulations Section 1.409A-3(a).

1.22 “ Plan ” shall mean The York Water Company Amended and Restated Deferred Compensation Plan, as set forth herein and amended from time to time.

1.23 “ Plan Administrator ” shall be the Board or its designee. A Participant in the Plan should not serve as a singular Plan Administrator. If a Participant is part of a group of Participants designated as a committee or Plan Administrator, then the Participant may not participate in any activity or decision relating solely to his or her individual benefits under the Plan; matters solely affecting the applicable Participant will be resolved by the remaining Plan Administrator members or by the Board.

1.24 “ Plan Sponsor ” shall mean The York Water Company, a corporation organized and existing under the laws of the Commonwealth of Pennsylvania.

1.25 “ Plan Sponsor Contribution ” shall mean the amount contributed to a Participant’s Plan Sponsor Contribution Account pursuant to Section 3.1.

1.26 “ Plan Sponsor Contribution Account ” shall mean: (i) the sum of the Participant’s Plan Sponsor Contribution amounts, plus (ii) amounts credited (net of amounts debited, which may result in an aggregate negative number) pursuant to Section 3.2.

1.27 “ Plan Year ” shall mean the twelve (12) month period beginning January 1 of each calendar year and continuing through December 31 of such calendar year.

1.28 “ Scheduled Withdrawal Account ” shall mean: (i) the sum of the Participant’s Annual Deferral Amount(s) plus (ii) the sum of the Participant’s Plan Sponsor Contribution Amount(s) plus (iii) amounts credited (net of amounts debited, which may result in an aggregate negative number)[ , ] less (iv) all distributions made to, or withdrawals by, the Participant or his or her Beneficiary, and tax withholding amounts which may have been deducted from the Scheduled Withdrawal Account(s).

1.29 “ Section 409A ” shall mean Section 409A of the Code and the Treasury Regulations or other authoritative guidance issued under that section.

1.30 “ Separation from Service ” shall mean a Participant’s termination of active employment, whether voluntary or involuntary, other than by death, Disability, or leave of absence with the Plan Sponsor or Affiliate(s), within the meaning of Section 409A(a)(2)(A)(i) of the Code, and the Treasury Regulations thereto.

1.31 “ Separation From Service Account ” shall mean (i) the sum of the Participant Annual Deferral Amount(s) plus (ii) amounts credited (net of amounts debited, which may result in an aggregate negative number) pursuant to Section 3.2 less (iii ) all distributions made to or withdrawals by the Participant or his or her Beneficiary that relate to the Participant’s Separation From Service Account, and tax withholdings amounts deducted (if any) from the Participants’ Separation From Service Account.

1.32 “ Specified Employee ” shall mean a key employee (as defined by Section 416(i) of the Code without regard to paragraph (5) thereof), and as further defined in Treasury Regulations Section 1.409A-(1)(i),) of the Plan Sponsor the stock of which is publicly traded on an established securities market or otherwise within the meaning of Section 409A(2)(B)(i). Notwithstanding other provisions of this Plan to the contrary, distributions by the Plan Sponsor to Specified Employees (if any) may not be made before the date which is six (6) months after the date of Separation from Service (or, if earlier, the date of death of the Specified Employee) within the meaning of Treasury Regulations Section 1.409A-3(g)(2). If payments to a Specified Employee are to be made in installments each installment payment to which a Specified Employee is entitled upon a Separation from Service will be delayed by six (6) months. A Participant meeting the definition of Specified Employee on December 31 or during a 12 month period ending December 31 will be treated as a Specified Employee for the 12 month period commencing the following April 1.

1.33 “ Treasury Regulations ” shall mean regulations promulgated by the Internal Revenue Service for the U.S. Department of the Treasury, either proposed, or permanent, and as may be amended from time to time.

1.34 “ Trust ” shall mean one or more grantor trusts, of which the Plan Sponsor is the grantor, within the meaning of subpart E, part I, subchapter J, subtitle A of the Code, to pay benefits under this Plan, that may be established in accordance with the terms of the Plan.

1.35 “ Unforeseeable Emergency ” shall mean a severe financial hardship of the Participant or Beneficiary resulting from an illness or accident of the Participant or Beneficiary, the Participant or Beneficiary’s spouse, or the Participant or Beneficiary’s dependent(s) (as defined in Section 152(a)) of the Code or loss of the Participant or Beneficiary’s property due to casualty or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant or Beneficiary within the meaning of Section 409A.

1.36 “ Vested Account ” shall mean a Participant’s Separation from Service Account balance plus Plan Sponsor Contribution Account balance vested in accordance with Section 4.1 below.

ARTICLE 2.

Selection, Enrollment, Eligibility

2.1 Selection by Plan Sponsor . Participation in this Plan shall be limited to a select group of management or highly compensated employees of the Plan Sponsor, as determined by the Plan Sponsor in its sole and absolute discretion. The initial group of Eligible Employees shall become Participants on the Effective Date of the Plan. Any individual selected by the Plan Administrator as an Eligible Employee after the Effective Date, shall become a Participant on the first Entry Date occurring on or after the date on which he or she becomes an Eligible Employee, provided that the Eligible Employee meets the enrollment requirements set forth in Section 2.3 below.

2.2 Re-Employment . If a Participant who incurs a Separation from Service with the Plan Sponsor or an Affiliate is subsequently re-employed, he or she may, at the sole and absolute discretion of the Plan Administrator, become a Participant in accordance with the provisions of above Section 2.1.

2.3 Enrollment Requirements . As a condition to participation in this Plan, each selected Eligible Employee shall complete, execute, and return to the Plan Administrator a Participation Agreement and Election Form within the time specified by the Plan Administrator, but in no event later than thirty (30) days following the date that an Eligible Employee is first selected by the Plan Sponsor to participate in the Plan in accordance with Section 2.1 above; provided, however, that any Base Salary deferral election shall be effective only with regard to Base Salary earned following submission of the Participation Agreement and Election Form to the Plan Administrator. In addition, the Plan Administrator shall establish such other enrollment requirements as it determines necessary or advisable. All elections to defer Base Salary with respect to a Plan Year shall be irrevocable, except as permitted under Section 5.5 below (Unforeseeable Emergency).

2.4 Plan Aggregation Rules . This Plan shall constitute an “account balance plan” as defined in Treasury Regulations Section 31.3121(v)(2)-1(c)(1)(ii)(A). For purposes of Section 409A, all amounts deferred by or on behalf of a Participant under this Plan shall be aggregated with deferred amounts under other “account balance plans” currently maintained or adopted in the future by the Plan Sponsor, and all amounts shall be treated as deferred under the rules governing a single plan.

2.5 Termination of Participation . If the Plan Administrator determines that a Participant who has not experienced a Separation from Service no longer qualifies as a member of a select group of management or highly compensated employees or that such a Participant’s participation in the Plan could jeopardize the status of this Plan as “unfunded” and “maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees,” the Plan Administrator shall have the right to terminate any deferral election the Participant has made for any Plan Year following the Plan Year in which the Participant is determined by the Plan Administrator to no longer qualify as a member of a select group of management or highly compensated employees but only to the extent such termination complies with the requirements of Section 409A, and/or to prevent the Participant from making future deferral elections and receiving Plan Sponsor Contribution Amounts under the Plan.

ARTICLE 3.

Contributions and Credits

3.1 Plan Sponsor Discretionary Contributions . The Plan Sponsor may make discretionary contributions to the Participant’s Plan Sponsor Contribution Account as it may determine from time to time and may direct that such contributions be allocated to those Participants that it may select. The amount so credited to a Participant may be smaller or larger than the amount credited to any other Participant, and the amount credited to any Participant for a Plan Year may be zero. No Participant shall have a right to compel the Plan Sponsor to make a Plan Sponsor discretionary contribution under this Article and no Participant shall have the right to share in any such contribution for any Plan Year unless selected by the Plan Sponsor, in its sole and absolute discretion.

3.2 Account Earnings . From time to time, as appropriate, the Plan Sponsor will also credit the Participant’s Plan Sponsor Contribution Account and the Participant’s Separation from Service Account with interest on the existing credit balance at a rate determined at the sole discretion of the Plan Sponsor, said rate to EQUAL THE DECEMBER 31 RATE OF MOODY’S AAA CORPORATE BOND YIELD FORECAST for the first Plan Year and for all subsequent periods unless changed by the Plan Sponsor.

ARTICLE 4.

Vesting and Taxes

4.1 Vesting of Benefits .

(a) A Participant shall be 100% vested in his or her Plan Sponsor Contribution Account and any earnings on the Participant’s Annual Deferral Amounts credited to the Participant’s Separation from Service Account pursuant to Section 3.2, upon attaining the age of sixty (60).

(b) A Participant shall be 100% vested in his or her Annual Deferral Amounts credited to the Participant’s Separation from Service Account (excluding any earnings credited pursuant to Section 3.2) at all times.

(c) Notwithstanding Section 4.1(a) above, a Participant shall be 100% vested in his or her Plan Sponsor Contribution Account and any earnings on the Participant’s Annual Deferral Amounts credited to the Participant’s Separation from Service Account pursuant to Section 3.2 if the Participant’s employment is terminated by reason of his or her death or Disability.

(d) In the event the Participant’s employment is terminated for Cause, no benefits of any kind will be due or payable under the terms of this Plan from amounts credited to a Participant’s Plan Sponsor Contribution Account or any earnings on a Participant’s Annual Deferral Amounts credited to the Participant’s Separation from Service Account pursuant to Section 3.2, and all rights of the Participant, his or her designated Beneficiary, executors, or administrators, or any other person, to receive payments thereof shall be forfeited. This Section 4.1(d) shall apply to a Participant’s Plan Sponsor Contribution Account and any earnings on the Participant’s Annual Deferral Amounts credited to the Participant’s Separation from Service Account pursuant to Section 3.2 whether or not such amounts are vested pursuant to Section 4.1(a) above .

4.2 FICA, Withholding and Other Taxes .

(a) Plan Sponsor Contribution Amounts . When a Participant becomes vested in his or her Plan Sponsor Contribution Amounts, the Plan Sponsor shall withhold from the Participant’s Base Salary in a manner determined in the sole discretion of the Plan Sponsor, the FICA Amount and other employment taxes, as applicable, on such vested Plan Sponsor Contribution Account.

(b) Distributions . The Plan Sponsor, or trustee of the Trust, shall withhold from any payments made to a Participant or Beneficiary under this Plan all federal, state and local income, employment and other taxes required to be withheld by the Plan Sponsor that complies with applicable tax withholding requirements.

ARTICLE 5.

Permissible Payment Events, Changes in Time and Form of Payments, Method of Payments

5.1 Payment Following Death While Actively Employed . In the event of the Participant’s death while actively employed, and provided that the Plan Sponsor is first provided a valid death certificate, the Participant’s Beneficiary shall be paid the higher of (a) $150,000 or (b) the Participant’s Vested Account balance (including gross up as set forth in Section 5.12 below) with payment being made in a single lump sum within ninety (90) days following the date of death of the Participant (without regard to whether the Participant was a Specified Employee) to the Participant’s Beneficiary.

5.2 Payment Following a Separation From Service . A Participant shall be paid his or her Vested Account balance with payments being made or commencing within ninety (90) days following the Participant’s Separation from Service. Notwithstanding the above, if the Participant is a Specified Employee, such payment shall instead be made or commence six (6) months after the Participant’s Separation from Service. If a Participant Separates from Service prior to attaining age sixty (60), the Participant’s Vested Account balance shall be paid in a lump sum. If a Participant Separates from Service on or after attaining age sixty (60), the Participant’s Vested Account balance shall be distributed according to the form of payment set forth in Section 5.6(b) below.

5.3 Payment Following Disability . In the event of a Participant’s Disability, the Participant shall be paid his or her Vested Account balance with payment or payments being made or commencing within ninety (90) days following the determination of a Participant’s Disability. Amounts shall be distributed according to the form of payment set forth in Section 5.6(b) below.

5.4 Payment Following Death After Receiving Payments . In the event of the Participant’s death after he or she begins receiving payments pursuant to the terms of the Plan, and provided that the Plan Sponsor is first provided a valid death certificate , the Participant’s designated Beneficiary shall be paid the Participant’s remaining Vested Account balance in a single lump sum within ninety (90) days following the date of death of the Participant (without regard to whether the Participant was treated as a Specified Employee).

5.5 Payment in the Event of an Unforeseeable Emergency . If the Participant experiences an Unforeseeable Emergency, the Participant may petition the Plan Administrator for payment of an amount that shall not exceed the lesser of: (i) the Participant’s vested Account(s), or (ii) the amount reasonably needed to satisfy the Unforeseeable Emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the payment. A Participant may not receive such a payment to the extent that the Unforeseeable Emergency is or may be relieved: (i) through reimbursement or compensation by insurance or otherwise, or (ii) by liquidation of the Participant’s assets, to the extent the liquidation of such assets would not itself cause severe financial hardship. If the Plan Administrator approves a Participant’s petition for a payment then the Participant shall receive said payment, in lump sum, as soon as administratively feasible after such approval.

5.6 Method of Payments .

(a) Cash . All distributions under the Plan made under the Plan shall be made in cash.

(b) Form of Payment . Upon the occurrence of a Permissible Payment Event, the Account(s) shall be calculated as of the date of said event. Installment payments made after the first payment shall be paid on or about the applicable modal anniversary of the first payment date until all required installments have been paid. Except as otherwise stated in Sections 5.1, 5.2, 5.4 and 5.5 above, which provide for lump sum payments, the amount of each payment shall be determined in accordance with Section 5.12 below. Lump sum payment may not be elected by the Participant.

(c) Lump Sum Payment of Minimum Account Balances . Notwithstanding anything else contained herein to the contrary, if the Vested Account balance for a Participant at the due date of the first installment is ten thousand dollars ($10,000.00) or less, payment of the Account(s) shall be made instead in a lump sum on the due date of the first installment, and no installment payments shall be available.

5.7 No Accelerations . Notwithstanding anything in this Plan to the contrary, no change submitted on a Participant Election Form shall be accepted by the Plan Sponsor. The Plan Sponsor may, however, accelerate certain distributions under the Plan to the extent permitted under Section 409A as follows:

(a) Domestic Relations Order . The Plan will permit direct payment of a Participant’s Vested Account balance to an individual other than a Participant as necessary to fulfill a domestic relations order, as defined in Section 414(p)(1)(B) of the Code.

(b) Conflicts of Interest . The Plan will permit such acceleration of the time or schedule of payment under the Plan as may be necessary to comply with a certificate of divesture.

(c) De Minimis and Specified Amounts . The Plan will permit the acceleration of the time or schedule of payment to a Participant, provided that (i) the payment accompanies the termination in the entirety of the Participant’s interest in the Plan; (ii) the payment is made on or before the later of: (A) December 31 of the Plan Year in which occurs the Participant’s Separation from Service from the Plan Sponsor, or (B) the date is 2 ½ months after the Participant’s Separation from Service from the Plan Sponsor; and (iii) the payment is not greater than $10,000.

(d) Payment of Employment Taxes . The Plan will permit the acceleration of the time or schedule of a payment to pay the FICA Amount. Additionally, the Plan will permit the acceleration of the time or schedule of a payment to pay the income tax on wages imposed as a result of the payment of the FICA amount, and to pay the additional income tax on wages attributable to the pyramiding wages and taxes. However, the total payment under this acceleration provision will not exceed the aggregate of the FICA Amount, and the income tax withholding related to such FICA Amount in accordance with the requirement of Treasury Regulations Section 1.409A-3(j)(4)(vi).

(e) Payment upon Income Inclusion under Section 409A . The Plan will permit the acceleration of the time or schedule of a payment to a Participant at any time the Plan fails to meet the requirements of Section 409A. Such Payment may not exceed the amount required to be included in income as a result of the failure to comply with the requirements of Section 409A.

5.8 Unsecured General Creditor Status of Participant .

(a) Payment to the Participant or any Beneficiary hereunder shall be made from assets which shall continue, for all purposes, to be part of the general, unrestricted assets of the Plan Sponsor and no person shall have any interest in any such asset by virtue of any provision of this Plan. The Plan Sponsor’s obligation hereunder shall be an unfunded and unsecured promise to pay money in the future. To the extent that any person acquires a right to receive payments from the Plan Sponsor under the provisions hereof, such right shall be no greater than the right of any unsecured general creditor of the Plan Sponsor and no such person shall have or acquire any legal or equitable right, interest or claim in or to any property or assets of the Plan Sponsor.

(b) In the event that the Plan Sponsor purchases an insurance policy or policies insuring the life of a Participant or employee, to allow the Plan Sponsor to recover or meet the cost of providing benefits, in whole or in part, hereunder, no Participant or Beneficiary shall have any rights whatsoever in said policy or the proceeds there from. The Plan Sponsor, or Trustee, shall be the primary owner and beneficiary of any such insurance policy or property and shall possess and may exercise all incidents of ownership therein.

(c) In the event that the Plan Sponsor purchases an insurance policy or policies on the life of a Participant as provided for above, then all of such policies shall be subject to the claims of the creditors of the Plan Sponsor.

(d) If the Plan Sponsor chooses to obtain insurance on the life of a Participant in connection with its obligations under this Plan, the Participant hereby agrees to take such physical examinations and to truthfully and completely supply such information as may be required by the Plan Sponsor or the insurance company designated by the Plan Sponsor.

5.9 Facility of Payment . If a distribution is to be made to a minor, or to a person who is otherwise incompetent, then the Plan Administrator may make such distribution: (i) to the legal guardian, or if none, to a parent of a minor payee with whom the payee maintains his or her residence, or (ii) to the conservator or administrator or, if none, to the person having custody of an incompetent payee. Any such distribution shall fully discharge the Plan Sponsor and the Plan Administrator from further liability on account thereof.

5.10 Excise Tax Limitation : In the event that any payment or benefit (within the meaning of Section 280G(b)(2) of the Code) to the Participant or for the Participant’s benefit paid or payable or distributed or distributable (including, but not limited to, the acceleration of the time for the vesting or payment of such benefit or payment) pursuant to the terms of this Plan or otherwise in connection with, or arising out of, the Participant’s employment with the Plan Sponsor or any of its Affiliates or a Change of Control within the meaning of Section 280G of the Code (a “Payment” or “Payments”), would be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the Payments shall be reduced (but not below zero) but only to the extent necessary that no portion thereof shall be subject to the Excise Tax (the “Section 4999 Limit”). The Payments shall be reduced on a nondiscretionary basis in such a way as to minimize the reduction in the economic value deliverable to the Participant. Where more than one payment has the same value for this purpose and they are payable at different times they will be reduced on a pro rata basis.

5.11 Delay in Payment by Plan Sponsor . In the case of payments by the Plan Sponsor to a Participant or Participant’s Beneficiary, the deduction for which would be limited or eliminated by the application of Section 162(m) of the Code, payments that would otherwise violate securities laws, or payments that would violate loan covenants or other contractual terms to which the Participant is a party, and where such a violation would result in material harm to the Plan Sponsor, said payments may be delayed. In the case of deduction limitations imposed by Section 162(m) of the Code, payment will be deferred until the earlier of (i) a date in the first year in which the Plan Sponsor reasonably anticipates that a payment of such amount would not result in a limitation under 162(m) or (ii) the year in which the Participant Separates from Service. Payments delayed for other permissible reasons must be made in the first calendar year in which the Plan Sponsor reasonably anticipates that the payment would not violate the loan contractual terms, the violation would not result in material harm to the Plan Sponsor, or the payment would not result in a violation of Federal securities law or other applicable laws.

5.12 Permissible Payment Event Calculation . The Plan Sponsor agrees that in determining the benefits payable under Articles 5.1 through 5.5 above, that the amount of each monthly payment actually made to the Participant or his or her Beneficiary will be determined by dividing his or her Scheduled Withdrawal Account balance (or Enhanced Benefit described in Section 5.13 below) prior to the first payment by 120 and then increasing the amount by the amount of federal and state income tax saved by the Plan Sponsor (if any) when making each payment. The savings will be calculated based on the marginal federal and state income tax bracket for the Plan Sponsor.

Example:

Scheduled Withdrawal Account Value at age 65 = $100,000.00. Corporate Marginal Tax Rate is 0.4059.

Step 1:

Determine Tax Savings Multiplier (1 minus Tax Bracket %, or 1-.4059 = .5941)

Step 2:

Calculate Actual Benefit To Be Paid (Divide Account Value by the Tax Savings Multiplier, or $100,000 divided by .5941 = $168,321.84)

Step 3:

Actual Benefit to be paid each year: $168,321.84/10 years =$16,832.28

Step 4:

Actual Benefit to be paid each month: $168,321.84/120 = $1,402.68

5.13 Enhanced Benefit . Notwithstanding anything to the contrary in this Article 5, Participants listed on Appendix A shall be entitled to the Enhanced Benefit, which shall be payable at the time and in the forms indicated in Sections 5.1 through 5.7, and Section 5.12, as applicable.

ARTICLE 6.

Beneficiary Designation

6.1 Designation of Beneficiaries .

(a) Each Participant may designate any person or persons (who may be named contingently or successively) to receive any benefits payable under the Plan upon the Participant’s death, and the designation may be changed from time to time by the Participant by filing a new designation. Each designation will revoke all prior designations by the same Participant, shall be in the form prescribed by the Plan Administrator, and shall be effective only when filed in writing with the Plan Administrator during the Participant’s lifetime.

(b) In the absence of a valid Beneficiary designation, or if, at the time any benefit payment is due to a Beneficiary, there is no living Beneficiary validly named by the Participant, the Plan Sponsor shall pay the benefit payment to the Participant’s spouse, if then living, and if the spouse is not then living to the Participant’s then living descendants, if any, per stirpes, and if there are no living descendants, to the Participant’s estate. In determining the existence or identity of anyone entitled to a benefit payment, the Plan Sponsor may rely conclusively upon information supplied by the Participant’s personal representative, executor or administrator.

(c) If a question arises as to the existence or identity of anyone entitled to receive a death benefit payment under the Plan, or if a dispute arises with respect to any death benefit payment under the Plan, the Plan Sponsor may distribute the payment to the Participant’s estate without liability for any tax or other consequences, or may take any other action which the Plan Sponsor deems to be appropriate.

6.2 Information to be Furnished by Participants and Beneficiaries; Inability to Locate Participants or Beneficiaries . Any communication, statement or notice addressed to a Participant or to a Beneficiary at his or her last post office address as shown on the Plan Sponsor’s records shall be binding on the Participant or Beneficiary for all purposes of this Plan. The Plan Sponsor shall not be obligated to search for any Participant or Beneficiary beyond the sending of a registered letter to the last known address.

ARTICLE 7.

Termination, Amendment or Modification

7.1 Plan Termination . The Plan Sponsor reserves the right to terminate the Plan in accordance with one of the following, subject to the restrictions imposed by Section 409A:

(a) Corporate Dissolution or Bankruptcy . Distributions will be made if the Plan is terminated within twelve (12) months of a corporate dissolution taxed under Section 331 of the Code, or with the approval of a bankruptcy court pursuant to 11 U.S.C. Section 503(b)(1)(A), provided that the amounts deferred under the Plan are included in the Participant’s gross income in the latest of:

(i) The calendar year in which the Plan termination occurs;

(ii) The calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or

(iii) The first calendar year in which the payment is administratively practicable.

(b) Discretionary Termination . The Plan Sponsor may also terminate the Plan and make distributions provided that:

(i) All plans sponsored by the Plan Sponsor that would be aggregated with any terminated arrangements under Treasury Regulations Section 1.409A-1(c) are terminated;

(ii) No payments other than payments that would be payable under the terms of the Plan if the termination had not occurred are made within twelve (12) months of the Plan termination;

(iii) All payments are made within twenty-four (24) months of the Plan termination;

(iv) Termination of the Plan does not occur proximate to a downturn in the financial health of the Plan Sponsor; and

(v) The Plan Sponsor does not adopt a new plan that would be aggregated with any terminated plan if the same Participant participated in both arrangements, at any time within three (3) years following the date of termination of the Plan.

The Plan Sponsor also reserves the right to suspend the operation of the Plan for a fixed or indeterminate period of time.

(i) All plans sponsored by the Plan Sponsor that would be aggregated with any terminated arrangements under Treasury Regulations Section 1.409A-1(c) are liquidated and terminated;

(ii) The Plan is terminated within thirty (30) days preceding or twelve (12) months following a change in control that constitutes a “change in control event” within the meaning of such term under Treasury Regulations Section 1.409A-3(i)(5); and

(iii) Participants receive all amounts of deferred compensation from the plans identified in Section 7.1(c)(i) above within twelve (12) months of the date the Plan Sponsor takes all steps to terminate and liquidate the plans identified in Section 7.1(c)(i) above.]

7.2 Amendment . The Plan Sponsor may, at any time, amend or modify this Plan in whole or in part; provided, however, that, except to the extent necessary to bring the Plan into compliance with Section 409A: (i) no amendment or modification shall be effective to decrease the value or vested percentage of a Participant’s Account(s), in existence at the time an amendment or modification is made, and (ii) no amendment or modification shall materially and adversely affect the Participant’s rights to be credited with additional amounts on such Account(s), or otherwise materially and adversely affect the Participant’s rights with respect to such Account(s). The amendment or modification of this Plan shall have no effect on any Participant or Beneficiary who has become entitled to the payment of benefits under this Plan as of the date of the amendment or modification.

ARTICLE 8.

Administration

8.1 Plan Administrator Duties . The Plan Administrator shall be responsible for the management, operation and administration of the Plan. The Plan Administrator shall act at meetings by affirmative vote of a majority of its members. Any action permitted to be taken at a meeting may be taken without a meeting if, prior to such action, a unanimous written consent to the action is signed by all members and such written consent is filed with the minutes of the proceedings of the Plan Administrator. A member shall not vote or act upon any matter which relates solely to himself or herself as a Participant. The Chair or any other member or members of the Plan Administrator designated by the Chair may execute any certificate or other written direction on behalf of the Plan Administrator. When making a determination or calculation, the Plan Administrator shall be entitled to rely on information furnished by a Participant or the Plan Sponsor. No provision of this Plan shall be construed as imposing on the Plan Administrator any fiduciary duty under ERISA or other law, or any duty similar to any fiduciary duty under ERISA or other law.

8.2 Plan Administrator Authority . The Plan Administrator shall enforce this Plan in accordance with its terms, shall be charged with the general administration of this Plan, and shall have all powers necessary to accomplish its purposes, including, but not by way of limitation, the following:

(a) To construe and interpret the terms and provisions of this Plan;

(b) To compute and certify the amount and kind of benefits payable to Participants and their Beneficiaries; to determine the time and manner in which such benefits are paid; and to determine the amount of any withholding taxes to be deducted;

(d) To provide for the disclosure of all information and the filing or provision of all reports and statements to Participants, Beneficiaries or governmental agencies as shall be required by law;

(e) To make and publish such rules for the regulation of this Plan and procedures for the administration of this Plan as are not inconsistent with the terms hereof;

(f) To administer this Plan’s claims procedures;

(g) To approve election forms and procedures for use under this Plan; and

(h) To appoint a plan record keeper or any other agent, and to delegate to them such powers and duties in connection with the administration of this Plan as the Plan Administrator may from time to time prescribe.

8.3 Binding Effect of Decision . The decision or action of the Plan Administrator with respect to any question arising out of or in connection with the administration, interpretation and application of this Plan and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in this Plan.

8.4 Compensation, Expenses and Indemnity . The Plan Administrator shall serve without compensation for services rendered hereunder. The Plan Administrator is authorized at the expense of the Plan Sponsor to employ such legal counsel and/or Plan record keeper as it may deem advisable to assist in the performance of its duties hereunder. Expense and fees in connection with the administration of this Plan shall be paid by the Plan Sponsor.

8.5 Plan Sponsor Information . To enable the Plan Administrator to perform its functions, the Plan Sponsor shall supply full and timely information to the Plan Administrator, on all matters relating to the Base Salary of its Participants, the date and circumstances of the Disability, death, or Separation from Service of its employees who are Participants, and such other pertinent information as the Plan Administrator may reasonably require.

8.6 Periodic Statements . Under procedures established by the Plan Administrator, a Participant shall be provided a statement of account on an annual basis (or more frequently as the Plan Administrator shall determine) with respect to such Participant’s Accounts.

ARTICLE 9.

Claims Procedures

9.1 Claims Procedure . This Article is based on final regulations issued by the Department of Labor and published in the Federal Register on November 21, 2000 and codified in Section 2560.503-1 of the Department of Labor Regulations. If any provision of this Article conflicts with the requirements of those regulations, the requirements of those regulations will prevail.

(a) Claim . A Participant or Beneficiary (hereinafter referred to as a “Claimant”) who believes he or she is entitled to any Plan benefit under this Plan may file a claim with the Plan Administrator. The Plan Administrator shall review the claim itself or appoint an individual or entity to review the claim.

(b) Claim Decision . The Claimant shall be notified within ninety (90) days after the claim is filed whether the claim is allowed or denied (forty-five (45) days in the case of a claim involving Disability benefits), unless, for claims not involving Disability benefits, the Claimant receives written notice from the Plan Administrator or appointee of the Plan Administrator prior to the end of the ninety (90) day period stating that special circumstances require an extension of the time for decision. Such extension is not to extend beyond the day which is one hundred eighty (180) days after the day the claim is filed. In the case of a claim involving Disability benefits, the Plan Administrator will notify the Claimant within the initial forty-five (45) day period that the Plan Administrator needs up to an additional thirty (30) days to review the Claimant’s claim. If the Plan Administrator determines that the additional thirty (30) day period is not sufficient and that additional time is necessary to review the Claimant’s claim for Disability benefits, the Plan Administrator may notify the Claimant of an additional thirty (30) day extension. If the Plan Administrator denies the claim, it must provide to the Claimant, in writing or by electronic communication:

(i) The specific reasons for such denial;

(ii) Specific reference to pertinent provisions of this Plan on which such denial is based;

(iii) A description of any additional material or information necessary for the Claimant to perfect his or her claim and an explanation why such material or such information is necessary;

(iv) In the case of any claim involving Disability benefits, a copy of any internal rule, guideline, protocol, or other similar criterion relied upon in making the initial determination or a statement that such a rule, guideline, protocol, or other criterion was relied upon in making the determination and that a copy of such rule will be provided to the Claimant free of charge at the Claimant’s request; and

(v) A description of the Plan’s appeal procedures and the time limits applicable to such procedures, including a statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA following a denial of the appeal of the denial of the benefits claim.

(c) Review Procedures . A request for review of a denied claim must be made in writing to the Plan Administrator within sixty (60) days after receiving notice of denial (one hundred eighty (180) days in the case of a claim involving Disability benefits). The decision upon review will be made within sixty (60) days after the Plan Administrator’s receipt of a request for review (forty-five (45) days in the case of a claim involving Disability benefits), unless special circumstances require an extension of time for processing, in which case a decision will be rendered not later than one hundred twenty (120) days after receipt of a request for review (ninety (90) days in the case of a claim for Disability benefits). A notice of such an extension must be provided to the Claimant within the initial sixty (60) day period (the initial forty-five (45) day period in the case of a claim for Disability benefits) and must explain the special circumstances and provide an expected date of decision. The reviewer shall afford the Claimant an opportunity to review and receive, without charge, all relevant documents, information and records and to submit issues and comments in writing to the Plan Administrator. The reviewer shall take into account all comments, documents, records and other information submitted by the Claimant relating to the claim regardless of whether the information was submitted or considered in the benefit determination. Upon completion of its review of an adverse initial claim determination, the Plan Administrator will give the Claimant, in writing or by electronic notification, a notice containing:

(i) its decision;

(ii) the specific reasons for the decision;

(iii) the relevant Plan provisions on which its decision is based;

(iv) a statement that the Claimant is entitled to receive, upon request and without charge, reasonable access to, and copies of, all documents, records and other information in the Plan’s files which is relevant to the Claimant’s claim for benefit;

(v) a statement describing the Claimant’s right to bring an action for judicial review under Section 502(a) of ERISA; and

(vi) In the case of any claim involving Disability benefits, a copy of any internal rule, guideline, protocol, or other similar criterion that was relied upon in making the adverse determination on review or a statement that a copy of the rule, guideline, protocol or other similar criterion was relied upon in making the adverse determination on review and that a copy of such rule, guideline, protocol, or similar criterion will be provided without charge to the Claimant upon request.

Unless a Claimant voluntarily avails himself or herself of the procedures set forth in Section 9.2 below, all interpretations, determinations and decisions of the Plan Administrator in respect of any claim shall be made in its sole discretion based on the applicable Plan documents and shall be final, conclusive and binding on all parties.

(d) Calculation of Time Periods . For purposes of the time periods specified in this Article, the period of time during which a benefit determination is required to be made begins at the time a claim is filed in accordance with the Plan procedures without regard to whether all the information necessary to make a decision accompanies the claim. If a period of time is extended due to a Claimant’s failure to submit all information necessary, the period for making the determination shall be tolled from the date the notification is sent to the Claimant until the date the Claimant responds.

(e) Failure of Plan to Follow Procedures . If the Plan fails to follow the claims procedure required by this Article, a Claimant shall be entitled to pursue any available remedy under Section 502(a) of ERISA on the basis that the Plan has failed to provide reasonable claims procedure that would yield a decision on the merits of the claim.

(f) Failure of Claimant to Follow Procedures . A Claimant’s compliance with the foregoing provisions of this Article is a mandatory prerequisite to the Claimant’s right to commence any legal action with respect to any claim for benefits under the Plan.

9.2 Arbitration of Claims . Instead of pursuing his or her claim in court, a Participant may voluntarily agree that all claims or controversies arising out of or in connection with this Plan shall, subject to the initial review provided for in the foregoing provisions of this Article, be resolved through arbitration as provided in this Article. Except as otherwise provided or by mutual agreement of the parties, any arbitration shall be administered under and by the Judicial Arbitration & Mediation Services, Inc. (“JAMS”), in accordance with the JAMS procedure then in effect. The arbitration shall be held in the JAMS office nearest to where the Claimant is or was last employed by the Plan Sponsor or at a mutually agreeable location. The prevailing party in the arbitration shall have the right to recover its reasonable attorney’s fees, disbursements and costs of the arbitration (including enforcement of the arbitration decision), subject to any contrary determination by the arbitrator. If the Claimant voluntarily avails himself or herself of the procedures set forth in this Section 9.2, all determinations of the arbitrators in respect of any claim shall be final, conclusive and binding on all parties.

ARTICLE 10.

The Trust

10.1 Establishment of Trust . The Plan Sponsor may establish a Trust. If the Plan Sponsor establishes a Trust, all benefits payable under this Plan to a Participant shall be paid directly by the Plan Sponsor from the Trust. To the extent such benefits are not paid from the Trust, the benefits shall be paid from the general assets of the Plan Sponsor. The Trust, if any, shall be an irrevocable grantor trust which conforms to the terms of the model trust as described in IRS Revenue Procedure 92-64, I.R.B. 1992-33. If the Plan Sponsor establishes a Trust, the assets of the Trust will be subject to the claims of the Plan Sponsor’s creditors in the event of its insolvency. Except as may otherwise be provided under the Trust, the Plan Sponsor shall not be obligated to set aside, earmark or escrow any funds or other assets to satisfy its obligations under this Plan, and the Participant and/or his or her designated Beneficiaries shall not have any property interest in any specific assets of the Plan Sponsor other than the unsecured right to receive payments from the Plan Sponsor, as provided in this Plan.

10.2 Interrelationship of the Plan and the Trust . The provisions of the Plan shall govern the rights of a Participant to receive distributions pursuant to the Plan. The provisions of the Trust (if established) shall govern the rights of the Participant and the creditors of the Plan Sponsor to the assets transferred to the Trust. Each shall at all times remain liable to carry out its obligations under the Plan. The Plan Sponsor’s obligations under the Plan may be satisfied with Trust assets distributed pursuant to the terms of the Trust.

10.3 Contribution to the Trust . Amounts may be contributed by the Plan Sponsor to the Trust at the sole discretion of the Plan Sponsor.

ARTICLE 11.

Miscellaneous

11.1 Validity . In case any provision of this Plan shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal or invalid provision had never been inserted herein. To the extent any provision of the Plan is determined by the Plan Administrator (acting in good faith), the Internal Revenue Service, the United States Department of the Treasury or a court of competent jurisdiction to fail to comply with Section 409A with respect to any Participant or Participants, such provision shall have no force or effect with respect to such Participant or Participants.

11.2 Nonassignability . Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate, alienate or convey in advance of actual receipt, the amounts, if any, payable hereunder, or any part hereof, which are, and all rights to which are expressly declared to be, unassignable and non-transferable. No part of the amounts payable shall, prior to actual payment, be subject to seizure, attachment, garnishment (except to the extent the Plan Sponsor may be required to garnish amounts from payments due under this Plan pursuant to applicable law) or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, be transferable by operation of law in the event of a Participants’ or any other persons’ bankruptcy or insolvency or be transferable to a spouse as a result of a property settlement or otherwise. If any Participant, Beneficiary or successor in interest is adjudicated bankrupt or purports to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber transfer, hypothecate, alienate or convey in advance of actual receipt, the amount, if any, payable hereunder, or any part thereof, the Plan Administrator, in its discretion, may cancel such distribution or payment (or any part thereof) to or for the benefit of such Participant, Beneficiary or successor in interest in such manner as the Plan Administrator shall direct.

11.3 Not a Contract of Employment . The terms and conditions of this Plan shall not be deemed to constitute a contract of employment between the Plan Sponsor and the Participant. Nothing in this Plan shall be deemed to give a Participant the right to be retained in the service of the Plan Sponsor as an employee or to interfere with the right of the Plan Sponsor to discipline or discharge the Participant at any time.

11.4 Governing Law . Subject to ERISA, the provisions of this Plan shall be construed and interpreted according to the internal laws of the Commonwealth of Pennsylvania, without regard to its conflicts of laws principles.

11.5 Notice . Any notice, consent or demand required or permitted to be given under the provisions of this Plan shall be in writing and shall be signed by the party giving or making the same. If such notice, consent or demand is mailed, it shall be sent by United States certified mail, postage prepaid, addressed to the addressee’s last known address as shown on the records of the Plan Sponsor. The date of such mailing shall be deemed the date of notice consent or demand. Any person may change the address to which notice is to be sent by giving notice of the change of address in the manner aforesaid.

11.6 Coordination with Other Benefits . The benefits provided for a Participant and Participant’s Beneficiary under the Plan are in addition to any other benefits available to such Participant under any other plan or program for Employees of the Plan Sponsor. The Plan shall supplement and shall not supersede, modify or amend any other such plan or program except as may otherwise be expressly provided.

11.7 Compliance . A Participant shall have no right to receive payment with respect to the Participant’s Account balance until all legal and contractual obligations of the Plan Sponsor relating to establishment of the Plan and the making of such payments shall have been complied with in full.

11.8 Successor Company . The Plan will be continued after a sale of assets of the Plan Sponsor, or a merger or consolidation of the Plan Sponsor into another corporation or entity.

11.9 Section 409A Compliance . The Plan is intended to comply with the applicable requirements of Section 409A, and shall be administered in accordance with Section 409A to the extent Section 409A applies to the Plan. Notwithstanding anything in the Plan to the contrary, distributions from the Plan may only be made in a manner, and upon an event, permitted by Section 409A. If a payment is not made by the designated payment date under the Plan, the payment shall be made by December 31 of the calendar year in which the designated payment date occurs. Each installment payment shall be treated as a separate payment for purposes of Section 409A. To the extent that any provision of the Plan would cause a conflict with the applicable requirements of Section 409A, or would cause the administration of the Plan to fail to satisfy the applicable requirements of Section 409A, such provision shall be deemed null and void. In no event shall a Participant, directly or indirectly, designate the calendar year of payment. Notwithstanding anything in the Plan to the contrary, this Plan may be amended by the Plan Sponsor at any time, retroactively if required, to the extent required to conform the Plan to Section 409A. No election made by a Participant hereunder, and no change made by a Participant to a previous election shall be accepted by the Plan Sponsor if the Plan Sponsor determines that acceptance of such election or change could violate any of the requirements of Section 409A, resulting in early taxation and penalties.

[Signature Page Follows]

IN WITNESS WHEREOF , the Plan Sponsor has signed this Plan document as of ____________________________, 20___.

ATTEST/WITNESS		For: Participant

(Signature)		(Signature)

(Print Name)		(Print Name)

		(Title)

		(Date)

ATTEST/WITNESS		For: The York Water Company

(Signature)		(Signature)

(Print Name)		(Print Name)

		(Title)

		(Date)

APPENDIX A

Employee	Enhancement Factor
Jeffrey Hines	1.110
John Strine	2.036

PLAN ENROLLMENT KIT

for the

The York Water Company

Deferred Compensation Plan

Contents:

Participant Data

Participation Agreement

Plan Year Initial Enrollment Form

PLEASE COMPLETE EACH FORM INCLUDED IN THIS KIT. PLEASE PRINT IN INK. UPON COMPLETION OF THIS PLAN ENROLLMENT KIT, PLEASE REVIEW TO ENSURE THAT EACH FORM IS COMPLETELY FILLED OUT AND THAT YOU HAVE SIGNED WHERE APPLICABLE.

RETURN ALL FORMS TO YOUR PLAN ADMINISTRATOR

The York Water Company

Deferred Compensation Plan

PARTICIPANT DATA

INSTRUCTIONS : Please complete all information below.

(Please print)



Last Name	First Name				Middle Initial



Address		City		State		Zip Code



Date of Birth (mm/dd/yyyy)			Date of Hire (mm/dd/yyyy)

The York Water Company

“AMENDED AND RESTATED DEFERRED COMPENSATION PLAN”

PARTICIPATION AGREEMENT
(Please print)

Last Name	First Name	Middle Initial

The Plan Sponsor and the Plan Administrator designate the above named Eligible Employee as a Plan Participant. All capitalized terms used herein are defined in the The York Water Company Amended and Restated Deferred Compensation Plan.

In consideration of his or her designation as a Participant, the undersigned Eligible Employee hereby agrees and acknowledges as follows:

1.	I have received a copy of The York Water Company Amended and Restated Deferred Compensation Plan, as currently in effect.

2.	I agree to be bound by all of the terms and conditions of the Plan, including the determinations of the Plan Administrator, and to perform any and all acts required by me hereunder.

3.	I have the right to designate the Beneficiary or Beneficiaries, and thereafter to change the Beneficiary or Beneficiaries, of any death benefit payable under the Plan, by completing and delivering to the Plan Administrator a form designating his or her Beneficiary.

4.	I understand that the Plan may have to be amended to comply with Section 409A, and I hereby agree to execute any documents necessary to make such amendments.

5.	I understand that my participation in the Plan can have tax and financial consequences for my Beneficiaries and me. I have had the opportunity to consult with my own tax, financial and legal advisors before deciding to participate in the Plan.

6.	I understand that my Plan benefits are subject to the claims of my Plan Sponsor’s creditors should my Plan Sponsor become bankrupt or insolvent.

7.	I understand that the Plan Sponsor Contributions (if any) shall vest based on Article 4.1 of the Plan.

8 .

I understand that the Plan Agreement and any accompanying forms shall be interpreted in accordance with, and incorporate the terms and conditions required by Section 409A. I further understand that the Plan Administrator may, in its discretion, adopt such amendments to the Plan and any accompanying forms or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, as the Plan Administrator determines are necessary or appropriate to comply with the requirements of Section 409A. Finally, I understand that the time or form of distributions that I may be allowed to elect (if any) may not be accelerated except as otherwise permitted by Section 409A.

AGREED AND ACCEPTED BY THE PARTICIPANT

Signature of Participant	Date
AGREED AND ACCEPTED BY THE PLAN SPONSOR

For the Plan Sponsor	Date

The York Water Company

Deferred Compensation Plan

ENROLLMENT FORM

(Please print)



Last Name	First Name	Middle Initial

SECTION I: DEFERRAL ELECTIONS

I hereby elect to defer my Base Salary as indicated below. I understand that this deferral election is subject to all of the applicable terms of the Plan, including the requirement that I may not change my election once made for the current Plan Year. I further understand that I am obligated to continue this deduction for eight (8) years. All capitalized terms used herein are defined in the The York Water Company Amended and Restated Deferred Compensation Plan, unless otherwise indicated by the context.

¨ I elect to defer Base Salary for the period indicate above.

Base Salary deferral: _______% (2.5.% ______ OR 5.0% _______)

SECTION II: BENEFICIARY DESIGNATION

I designate the Beneficiary(ies) below to receive any benefits payable under this Plan on account of my death:

PRIMARY BENEFICIARY(IES) : Name	Percentage of Benefits	Relationship to Participant	Social Security Number

CONTINGENT BENEFICIARY(IES) (Will receive indicated portions of my Vested Account balance if no primary Beneficiaries survive the Participant.)

Name	Percentage of Benefits		Relationship to Participant	Social Security Number


AGREED AND ACCEPTED BY THE PARTICIPANT

Signature of Participant		Date
AGREED AND ACCEPTED BY THE PLAN SPONSOR

For the Plan Sponsor		Date

Schedule 10.19

Name	Enhancement Factor
Jeffrey R. Hines	1.110
Kathleen M. Miller	-
Joseph T. Hand	-
Vernon L. Bracey	-
Bruce C. McIntosh	-
Mark S. Snyder	-
John H. Strine	2.036

THE YORK WATER COMPANY

Statements of Income
(In thousands of dollars, except per share amounts)


	Year Ended December 31
	2010			2009			2008

WATER OPERATING REVENUES:
Residential	$	24,478		$	23,299		$	20,572
Commercial and industrial		11,440			10,734			9,671
Other		3,087			3,010			2,595
		39,005			37,043			32,838

OPERATING EXPENSES:
Operation and maintenance		6,760			7,067			6,749
Administrative and general		6,725			7,101			6,685
Depreciation and amortization		4,592			4,412			3,622
Taxes other than income taxes		1,161			1,075			1,102
		19,238			19,655			18,158

Operating income		19,767			17,388			14,680

OTHER INCOME (EXPENSES):
Interest on debt		(4,906	)		(4,990	)		(4,759	)
Allowance for funds used during construction		111			210			647
Other income (expenses), net		(465	)		(517	)		(509	)
		(5,260	)		(5,297	)		(4,621	)

Income before income taxes		14,507			12,091			10,059

Income taxes		5,578			4,579			3,628

Net Income	$	8,929		$	7,512		$	6,431

Basic Earnings Per Share	$	0.71		$	0.64		$	0.57

Cash Dividends Declared Per Share	$	0.515		$	0.506		$	0.489


The accompanying notes are an integral part of these statements.

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Page 20

THE YORK WATER COMPANY

Statements of Common Stockholders' Equity and Comprehensive Income
(In thousands of dollars, except per share amounts)
For the Years Ended December 31, 2010, 2009 and 2008

						Accumulated
						Other
	Common		Retained			Comprehensive
	Stock		Earnings			Income (Loss)			Total

Balance, December 31, 2007	$	56,566	$	10,986		$	(280	)	$	67,272
Net income		-		6,431			-			6,431
Other comprehensive income:
Reclassification adjustment for unrealized loss
on interest rate swap to regulatory asset,
net of $191 income tax		-		-			280			280
Comprehensive income										6,711
Dividends ($0.489 per share)		-		(5,526	)		-			(5,526	)
Issuance of common stock under
dividend reinvestment, direct stock and
employee stock purchase plans		1,309		-			-			1,309
Balance, December 31, 2008		57,875		11,891			-			69,766
Net income		-		7,512			-			7,512
Dividends ($0.506 per share)		-		(6,050	)		-			(6,050	)
Issuance of 1,070,000 shares of common stock		14,094		-			-			14,094
Issuance of common stock under
dividend reinvestment, direct stock and
employee stock purchase plans		1,600		-			-			1,600
Balance, December 31, 2009		73,569		13,353			-			86,922
Net income		-		8,929			-			8,929
Dividends ($0.515 per share)		-		(6,506	)		-			(6,506	)
Issuance of common stock under
dividend reinvestment, direct stock and
employee stock purchase plans		1,912		-			-			1,912
Balance, December 31, 2010	$	75,481	$	15,776		$	-		$	91,257

The accompanying notes are an integral part of these statements.

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Page 21

THE YORK WATER COMPANY

Statements of Cash Flows
(In thousands of dollars, except per share amounts)


		Year Ended December 31
		2010			2009			2008

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	8,929		$	7,512		$	6,431
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			4,592			4,412			3,622
Increase in deferred income taxes			2,591			2,515			1,911
Other			99			39			(166	)
Changes in assets and liabilities:
	(Increase) decrease in accounts receivable, unbilled revenues and recoverable income taxes		(1,127	)		440			(816	)
	Decrease in materials and supplies and prepaid expenses		97			50			105
	Increase in accounts payable, accrued expenses, regulatory
	and other liabilities, and deferred employee benefits and credits		705			666			870
	Increase (decrease) in accrued interest and taxes		(420	)		352			221
	Increase in regulatory and other assets		(711	)		(185	)		(651	)
	Net cash provided by operating activities		14,755			15,801			11,527

CASH FLOWS FROM INVESTING ACTIVITIES:
Utility plant additions, including debt portion of allowance for funds used
	during construction of $62 in 2010, $117 in 2009 and $427 in 2008		(10,541	)		(12,535	)		(24,438	)
Acquisitions of water systems			-			(2,236	)		(259	)
Increase in compensating balance			-			(500	)		-
Decrease in notes receivable			69			60			74
	Net cash used in investing activities		(10,472	)		(15,211	)		(24,623	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Customers' advances for construction and contributions in aid of construction			428			443			804
Repayments of customer advances			(544	)		(926	)		(1,489	)
Proceeds of long-term debt issues			39,491			23,659			52,308
Debt issuance costs			(703	)		-			(950	)
Repayments of long-term debt			(34,886	)		(32,444	)		(36,460	)
Borrowings (repayments) under short-term line of credit agreements			(2,000	)		(1,000	)		3,000
Changes in cash overdraft position			(195	)		(167	)		34
Issuance of common stock			1,912			15,694			1,309
Dividends paid			(6,459	)		(5,849	)		(5,460	)
	Net cash (used in) provided by financing activities		(2,956	)		(590	)		13,096

Net change in cash and cash equivalents			1,327			-			-
Cash and cash equivalents at beginning of year			-			-			-
	Cash and cash equivalents at end of year	$	1,327		$	-		$	-

Supplemental disclosures of cash flow information:
Cash paid during the year for:
	Interest, net of amounts capitalized	$	4,797		$	4,911		$	4,200
	Income taxes		3,513			1,284			1,611

Supplemental schedule of non-cash investing and financing activities:
	Accounts payable includes $726 in 2010, $292 in 2009 and $950 in 2008 for the construction of utility plant.
	Accounts payable and other deferred credits includes $19 in 2009 and $93 in 2008 for the acquisition of water systems.
	Contributions in aid of construction includes $51 of contributed land in 2008.
	Short-term line of credit borrowings amounting to $3,000 were reclassified as long-term borrowings in 2010.

The accompanying notes are an integral part of these statements.

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Notes to Financial Statements

(In thousands of dollars, except per share amounts)

1.	Significant Accounting Policies

The business of The York Water Company is to impound, purify and distribute water. The Company operates within its franchised territory located in York and Adams Counties, Pennsylvania, and is subject to regulation by the Pennsylvania Public Utility Commission, or PPUC.

The following summarizes the significant accounting policies employed by The York Water Company.

Utility Plant and Depreciation

The cost of additions includes contracted cost, direct labor and fringe benefits, materials, overhead and, for certain utility plant, allowance for funds used during construction. In accordance with regulatory accounting requirements, water systems acquired are recorded at estimated original cost of utility plant when first devoted to utility service and the applicable depreciation is recorded to accumulated depreciation. The difference between the estimated original cost less applicable accumulated depreciation, and the purchase price is recorded as an acquisition adjustment within utility plant. At December 31, 2010 and 2009, utility plant includes a credit acquisition adjustment of $2,709 and $2,759, respectively. The net acquisition adjustment is being amortized over the remaining life of the respective assets. Amortization amounted to $50 in 2010, $49 in 2009, and $27 in 2008.

Upon normal retirement of depreciable property, the estimated or actual cost of the asset is credited to the utility plant account, and such amounts, together with the cost of removal less salvage value, are charged to the reserve for depreciation. To the extent the Company recovers cost of removal or other retirement costs through rates after the retirement costs are incurred, a regulatory asset is reported. Gains or losses from abnormal retirements are reflected in income currently.

The Company charges to maintenance expense the cost of repairs and replacements and renewals of minor items of property. Maintenance of transportation equipment is charged to clearing accounts and apportioned therefrom in a manner similar to depreciation. The cost of replacements, renewals and betterments of units of property is capitalized to the utility plant accounts.

The straight-line remaining life method is used to compute depreciation on utility plant cost, exclusive of land and land rights. Annual provisions for depreciation of transportation and mechanical equipment included in utility plant are computed on a straight-line basis over the estimated service lives. Such provisions are charged to clearing accounts and apportioned therefrom to operating expenses and other accounts in accordance with the Uniform System of Accounts as prescribed by the PPUC.

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The following remaining lives are used for financial reporting purposes:

		December 31,		Approximate range
Utility Plant Asset Category		2010	2009	of remaining lives
Mains and accessories		$142,162	$138,738	12 – 85 years
Services, meters and hydrants		54,970	53,195	21 – 53 years
Operations structures, reservoirs and
	water tanks	40,387	39,928	8 – 64 years
Pumping and purification equipment		20,563	16,167	6 – 25 years
Office, transportation and
	operating equipment	9,424	9,212	3- 23 years
Land and other non-depreciable assets		2,973	2,963	-
Utility plant in service		270,479	260,203
Construction work in progress		2,086	2,395	-
Total Utility Plant		$272,565	$262,598

The effective rate of depreciation was 2.06% in 2010, 2.10% in 2009, and 1.94% in 2008 on average utility plant, net of customers' advances and contributions. Larger depreciation provisions resulting from allowable accelerated methods are deducted for tax purposes.

Accounts Receivable

Accounts receivable are stated at outstanding balances, less a reserve for doubtful accounts. The reserve for doubtful accounts is established through provisions charged against income. Accounts deemed to be uncollectible are charged against the reserve and subsequent recoveries, if any, are credited to the reserve. The reserve for doubtful accounts is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. Management's periodic evaluation of the adequacy of the reserve is based on past experience, agings of the receivables, adverse situations that may affect a customer's ability to pay, current economic conditions, and other relevant factors. This evaluation is inherently subjective. Unpaid balances remaining after the stated payment terms are considered past due.

Revenues

Revenues include amounts billed to customers on a cycle basis and unbilled amounts based on actual and estimated usage from the latest meter reading to the end of the accounting period.

Deferred Debt Expense

Deferred debt expense is amortized on a straight-line basis over the term of the related debt.

Notes Receivable

Notes receivable are recorded at cost and represent amounts due from various municipalities for construction of water mains into their particular municipality. Management, considering current information and events regarding the borrowers' ability to repay their obligations, considers a note to be impaired when it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the note agreement. When a note is considered to be impaired, the carrying value of the note is written down. The amount of the impairment is measured based on the present value of expected future cash flows discounted at the note's effective interest rate.

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Regulatory Assets and Liabilities

The Company is subject to the provisions of generally accepted accounting principles regarding rate-regulated entities. The professional standards provide for the recognition of regulatory assets and liabilities as allowed by regulators for costs or credits that are reflected in current customer rates or are considered probable of being included in future rates. The regulatory assets or liabilities are then relieved as the cost or credit is reflected in rates. Regulatory assets represent costs that are expected to be fully recovered from customers in future rates while regulatory liabilities represent amounts that are expected to be refunded to customers in future rates. These deferred costs have been excluded from the Company’s rate base and, therefore, no return is being earned on the unamortized balances.

Regulatory assets and liabilities are comprised of the following:

	December 31,		Remaining Recovery
	2010	2009	Periods
Assets
Income taxes	$4,008	$3,706	Various
Postretirement benefits	9,454	8,632	10-20 years
Unrealized swap losses	1,310	949	1-19 years
Utility plant retirement costs	843	600	5 years
Rate case filing expenses	206	123	2 years
	$15,821	$14,010

Liabilities
Income taxes	$830	$853	1-50 years

Certain items giving rise to deferred state income taxes, as well as a portion of deferred federal income taxes related primarily to differences between book and tax depreciation expense, are recognized for ratemaking purposes on a cash or flow-through basis and will be recovered in rates as they reverse.

Postretirement benefits include (a) deferred pension expense in excess of contributions made to the plans, and (b) the underfunded status of the pension plans. The underfunded status represents the excess of the projected benefit obligation over the fair market value of the assets. Both are expected to be recovered in future years as additional contributions are made. The recovery period is dependent on contributions made to the plans, plan asset performance and the discount rate used to value the obligations. The period is estimated at between 10 and 20 years.

Beginning October 1, 2008, the Company began using regulatory accounting treatment to defer the mark-to-market unrealized gains and losses on its interest rate swap to reflect that the gain or loss is included in the ratemaking formula when the transaction actually settles. The value of the swap as of the balance sheet date is recorded as part of other deferred credits. Realized gains or losses on the swap will be recorded as interest expense in the statement of income over its remaining life of 19 years.

The regulatory asset for utility plant retirement costs, including cost of removal, represents costs already incurred which are expected to be recovered over a five-year period in rates, through depreciation expense. Rate case filing expenses are deferred and amortized over a period of two years.

Regulatory liabilities relate mainly to deferred investment tax credits, and additionally to deferred taxes related to postretirement death benefits and bad debts. These liabilities will be given back to customers in rates as tax deductions occur over the next 1-50 years. Regulatory liabilities are part of other accrued expenses and other deferred credits on the balance sheets.

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Materials and Supplies Inventories

Materials and supplies inventories are stated at cost. Costs are determined using the average cost method.

Other Assets

Other assets consist mainly of the cash value of life insurance policies held as an investment by the Company for reimbursement of costs and benefits associated with its supplemental retirement and deferred compensation programs.

Customers' Advances for Construction

Customer advances are cash payments from developers, municipalities, customers or builders for construction of utility plant, and are refundable upon completion of construction, as operating revenues are earned. If the Company loaned funds for construction to the customer, the refund amount is credited to the note receivable rather than paid out in cash. After all refunds to which the customer is entitled are made, any remaining balance is transferred to contributions in aid of construction. From 1986 to 1996 when customer advances were taxable income to the Company, additional funds were collected from customers to cover the taxes. Those funds were recorded as a liability within Customer Advances and are being amortized as deferred income over the tax life of the underlying assets.

Contributions in Aid of Construction

Contributions in Aid of Construction is composed of (i) direct, non-refundable contributions from developers, customers or builders for construction of water infrastructure and (ii) customer advances that have become non-refundable. Contributions in aid of construction are deducted from the Company’s rate base, and therefore, no return is earned on property financed with contributions. The PPUC requires that contributions received remain on the Company’s balance sheet indefinitely as a long-term liability.

Comprehensive Income

Accounting principles generally accepted in the United States of America require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on interest rate swaps, are usually reported as a separate component of the equity section of the balance sheet, such items, along with net income, are components of comprehensive income. Since October 1, 2008, the Company has used regulatory accounting for its unrealized gains and losses on its interest rate swap, and will no longer report comprehensive income for this item in the future.

Interest Rate Swap Agreement

The Company is exposed to certain risks relating to its ongoing business operations. The primary risk managed by using derivative instruments is interest rate risk. The Company utilizes an interest rate swap agreement to convert a portion of its variable-rate debt to a fixed rate. The Company had designated the interest rate swap agreement as a cash flow hedge. Interest rate swaps are contracts in which a series of interest rate cash flows are exchanged over a prescribed period. The notional amount on which the interest payments are based is not exchanged. The interest rate swap agreement is classified as a financial derivative used for non-trading activities.

The professional standards regarding accounting for derivatives and hedging activities requires companies to recognize all derivative instruments as either assets or liabilities at fair value on the balance sheet. In accordance with the standards, the interest rate swap is recorded on the balance sheet in other deferred credits at fair value. Prior to October 1, 2008, the Company used hedge accounting to record its swap transactions. The effective portion of the gain or loss on a derivative designated and qualifying as a cash flow hedging instrument was initially reported as a component of other comprehensive income and subsequently reclassified into earnings as interest expense in the same period or periods during which the hedged transaction affected earnings. The ineffective portion of the gain or loss on the derivative instrument was recognized in earnings.

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The Company began using regulatory accounting treatment rather than hedge accounting to defer the unrealized gains and losses on its interest rate swap on October 1, 2008. Instead of the effective portion being recorded as other comprehensive income and the ineffective portion being recognized in earnings, the entire unrealized swap value is now recorded as a regulatory asset. Based on current ratemaking treatment, the Company expects the gains and losses to be recognized in rates and in interest expense as the swap settlements occur. Swap settlements are recorded in the income statement with the hedged item as interest expense. During the year ended December 31, 2010, $360 was reclassified from regulatory assets to interest expense as a result of swap settlements. The overall swap result was a loss of $722 for the year ended December 31, 2010. During the twelve months ending December 31, 2011, the Company expects to reclassify $351 (before tax) from regulatory assets to interest expense.

The interest rate swap will expire on October 1, 2029.

Income Taxes

Certain income and expense items are accounted for in different time periods for financial reporting than for income tax reporting purposes.

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. To the extent such income taxes increase or decrease future rates, an offsetting regulatory asset or liability has been recorded.

Investment tax credits have been deferred and are being amortized to income over the average estimated service lives of the related assets. As of December 31, 2010 and 2009, deferred investment tax credits amounted to $890 and $928, respectively.

Allowance for Funds Used During Construction

Allowance for funds used during construction (AFUDC) represents the estimated cost of funds used for construction purposes during the period of construction. These costs are reflected as non-cash income during the construction period and as an addition to the cost of plant constructed. AFUDC includes the net cost of borrowed funds and a rate of return on other funds. The PPUC approved rate of 10.04% was applied for 2010 and 2009. We applied a blended rate in 2008 due to our partial use of tax-exempt financing for 2008 construction projects. The tax-exempt borrowing rate of 6.00% was applied to those expenditures so financed, whereas the approved 10.04% rate was applied to the remainder of 2008 expenditures. AFUDC is recovered through water rates as utility plant is depreciated.

Cash and Cash Equivalents

For the purposes of the statements of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents except for those instruments earmarked to fund construction expenditures or repay long-term debt.

The Company had a book overdraft of $0 and $195 at December 31, 2010 and 2009, respectively. The book overdraft represents outstanding checks and other items which had not cleared the bank as of the end of the period. The overdraft is included in accounts payable on the balance sheet and the change in overdraft position is recorded as a financing activity on the statement of cash flows.

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Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications

As discussed above, the Company changed the accounting treatment for its interest rate swap. For the nine months ended September 30, 2008, the Company accounted for the interest rate swap as a cash flow hedge. As of October 1, 2008, management assessed the probability of collecting the unrealized gain or loss value of the swap in rates as the Company is currently reflecting the realized gain or loss as a component of interest expense in the statement of income. This change in accounting treatment resulted in the reversal of $224 of long-term interest expense, $189 recorded in deferred income taxes and $277 recorded in accumulated other comprehensive income as of September 30, 2008. Management determined that the amounts previously reported using the cash flow hedge method of accounting for each of the three quarters and periods ended March 31, 2008, June 30, 2008 and September 30, 2008 were not materially misstated.

During the first quarter of 2009, the Company determined that it had understated the amount of accrued vacation recorded in its financial statements. As a result, the Company recorded additional salary and wage expense of $257 in accordance with the professional standards regarding accounting for compensated absences. The additional accrual, amounting to $152 after taxes, represents an error correction from prior periods. Management determined that the financial statements as of and for the year ended December 31, 2008 were not materially misstated.

Impact of Recent Accounting Pronouncements

In November 2008, the Securities and Exchange Commission (SEC) released a proposed roadmap regarding the potential use by U.S. issuers of financial statements prepared in accordance with International Financial Reporting Standards (IFRS). IFRS is a comprehensive series of accounting standards published by the International Accounting Standards Board (IASB). In February 2010, the SEC expressed support for a single set of high-quality globally accepted accounting standards and established a work plan that sets forth specific areas and factors before transitioning to IFRS. The SEC will make a determination in 2011 regarding the mandatory adoption of IFRS with the expectation that any decision to adopt IFRS would allow issuers four to five years to prepare for the transition. The Company is currently assessing the impact that this potential change would have on its financial statements, and it will continue to monitor the development of the potential implementation of IFRS.

2.	Acquisitions

On November 24, 2008, the Company completed the acquisition of the water facilities of Asbury Pointe Water Company in York County, Pennsylvania. The Company acquired and is using Asbury Pointe’s distribution system through an interconnection with its current distribution system. This acquisition resulted in the addition of approximately 250 customers and the purchase price was approximately $242, which is less than the depreciated original cost of the assets. The Company recorded a negative acquisition adjustment of approximately $207 as of December 31, 2008. Additional acquisition expenditures during the first quarter of 2009 of approximately $22 resulted in a reduction of the negative acquisition adjustment to $185. The Company is amortizing the negative acquisition adjustment over the remaining life of the underlying assets.

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On January 9, 2009, the Company completed the acquisition of the water system of West Manheim Township in York County, Pennsylvania. The Company had begun serving the customers of West Manheim Township in December 2008 through an interconnection with its current distribution system. This acquisition resulted in the addition of 1,800 customers at a purchase price of approximately $2,075, which is less than the depreciated original cost of the assets. The Company recorded a negative acquisition adjustment of approximately $1,440 and is amortizing it over the remaining life of the underlying assets.

On November 12, 2009, the Company completed the acquisition of the water system of Beaver Creek Village in Adams County, Pennsylvania. The Company acquired and is using Beaver Creek Village’s distribution facilities through an interconnection with its current distribution system. This acquisition resulted in the addition of 167 customers at a purchase price of approximately $70, which is less than the depreciated original cost of the assets. The Company recorded a negative acquisition adjustment of approximately $26 and is amortizing it over the remaining life of the underlying assets.

The Company began to include the operating results of the Asbury Pointe and Beaver Creek Village acquisitions in its operating results on the acquisition dates. The West Manheim acquisition was included in operating results prior to the closing date as indicated above. The results have been immaterial to total company results.

3.	Income Taxes

The provisions for income taxes consist of:

	2010	2009	2008
Federal current	$1,872	$1,176	$1,157
State current	1,115	888	559
Federal deferred	2,645	2,564	1,954
State deferred	(16)	(10)	(3)
Federal investment tax credit, net of current utilization	(38 )	(39 )	(39 )
Total income taxes	$5,578	$4,579	$3,628

A reconciliation of the statutory Federal tax provision (34%) to the total provision follows:

	2010	2009	2008
Statutory Federal tax provision	$4,933	$4,111	$3,420
State income taxes, net of Federal benefit	725	579	367
Tax-exempt interest	(37)	(39)	(39)
Amortization of investment tax credit	(38)	(39)	(39)
Cash value of life insurance	70	68	(29)
Domestic production deduction	(127)	(79)	(62)
Other, net	52	(22)	10
Total income taxes	$5,578	$4,579	$3,628

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The tax effects of temporary differences between book and tax balances that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31, 2010 and 2009 are summarized in the following table:

			2010	2009
Deferred tax assets:
	Reserve for doubtful accounts		$99	$91
	Compensated absences		188	166
	Deferred compensation		1,091	995
	Customers' advances and contributions		81	111
	Deferred taxes associated with the gross-up
		of revenues necessary to return, in rates, the effect of temporary differences	90	89
	Pensions		2,951	2,617
	Costs deducted for book, not for tax		33	39
Total deferred tax assets			4,533	4,108
Deferred tax liabilities:
	Accelerated depreciation		23,673	20,801
	Investment tax credit		529	551
	Deferred taxes associated with the gross-up
		of revenues necessary to recover, in rates, the effect of temporary differences	1,379	1,247
	Tax effect of pension regulatory asset		3,838	3,504
	Costs deducted for tax, not for book		384	358
Total deferred tax liabilities			29,803	26,461

Net deferred tax liability			$25,270	$22,353

Reflected on balance sheets as:
	Current deferred tax asset		$(167)	$(154)
	Noncurrent deferred tax liability		25,437	22,507
Net deferred tax liability			$25,270	$22,353

No valuation allowance is required for deferred tax assets as of December 31, 2010 and 2009. In assessing the soundness of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and the current regulatory environment, management believes it is more likely than not that the Company will realize the benefits of these deductible differences.

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The Company determined that there were no uncertain tax positions meeting the recognition and measurement test of the professional standards recorded in the years that remain open for review by taxing authorities. The federal income tax returns and the state income tax returns for the years 2007 through 2009 remain open. The Company has not yet filed tax returns for 2010, but has not taken any new positions in its 2010 income tax provision.

The Company’s policy is to recognize interest and penalties related to income tax matters in other expenses. There were no interest or penalties for the years ended December 31, 2010, 2009 and 2008.

4.	Long-Term Debt and Short-Term Borrowings

Long-term debt as of December 31, 2010 and 2009 is summarized in the following table:

			2010	2009
3.75% Industrial Development Authority Revenue
	Refunding Bonds, Series 1995, due 2010		$ -	$ 4,300
4.05% Pennsylvania Economic Development Financing Authority
	Exempt Facilities Revenue Bonds, Series A, due 2016		2,350	2,350
5.00% Pennsylvania Economic Development Financing Authority
	Exempt Facilities Revenue Bonds, Series A, due 2016		4,950	4,950
10.17% Senior Notes, Series A, due 2019			6,000	6,000
9.60% Senior Notes, Series B, due 2019			5,000	5,000
1.00% Pennvest Loan, due 2019			373	414
10.05% Senior Notes, Series C, due 2020			6,500	6,500
8.43% Senior Notes, Series D, due 2022			7,500	7,500
Variable Rate Pennsylvania Economic Development Financing Authority
	Exempt Facilities Revenue Bonds, Series 2008A, due 2029		12,000	12,000
4.75% Industrial Development Authority Revenue
	Bonds, Series 2006, due 2036		10,500	10,500
6.00% Pennsylvania Economic Development Financing Authority
	Exempt Facilities Revenue Bonds, Series 2008B, due 2038		15,000	15,000
5.00% Monthly Senior Notes, Series 2010A, due 2040			15,000	-
Committed Lines of Credit, due 2012			-	3,054
		Total long-term debt	85,173	77,568
		Less current maturities	(41)	(4,341)
		Long-term portion	$85,132	$73,227

Payments due by year:

2011	2012	2013	2014	2015
$41	$12,042	$42	$43	$43

Payments due in 2012 include payments of $12,000 on the variable rate bonds (due 2029) which would only be payable if all of the bonds were tendered and could not be remarketed. There is currently no such indication of this happening.

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On October 8, 2010, the Company issued $15,000 aggregate principal amount of 5.00% Monthly Senior Notes Series 2010A due October 1, 2040 (the “Senior Notes”) pursuant to the terms of an indenture, as supplemented by a first supplemental indenture, each dated as of October 1, 2010, between the Company and Manufacturers and Traders Trust Company, as trustee. The Senior Notes bear interest at a rate of 5.00% payable monthly with a maturity date of October 1, 2040. The Senior Notes are direct, unsecured and unsubordinated obligations of the Company. The Company received net proceeds, after deducting issuance costs, of approximately $14,300. The net proceeds were used to pay off the Company’s line of credit borrowings incurred for capital expenditures and acquisitions, to retire maturing long-term debt issues, and for general corporate purposes. The Senior Notes are subject to redemption at the direction of the Company, in whole or in part, at any time on or after October 1, 2015.

The 3.75% Industrial Development Authority Revenue Refunding Bonds, Series 1995, had a mandatory tender date of June 1, 2010. The Company retired the $4,300 obligation using funds available under its lines of credit.

On May 7, 2008, the PEDFA issued $12,000 aggregate principal amount of PEDFA Exempt Facilities Revenue Refunding Bonds, Series A of 2008 (York Water Company Project) (the “Series A Bonds”) for our benefit pursuant to the terms of a trust indenture, dated as of May 1, 2008, between the PEDFA and Manufacturers and Traders Trust Company, as trustee. The PEDFA then loaned the proceeds of the offering of the Series A Bonds to us pursuant to a loan agreement, dated as of May 1, 2008, between us and the PEDFA. The loan agreement provides for a $12,000 loan with a maturity date of October 1, 2029. Amounts outstanding under the loan agreement are our direct general obligations. The proceeds of the loan were used to redeem the PEDFA Exempt Facilities Revenue Bonds, Series B of 2004 (the “2004 Series B Bonds”). The 2004 Series B Bonds were redeemed because the bonds were tendered and could not be remarketed due to the downgrade of the bond insurer’s credit rating.

Borrowings under the loan agreement bear interest at a variable rate as determined by PNC Capital Markets, as remarketing agent, on a periodic basis elected by us. We have currently elected that the interest rate be determined on a weekly basis. The remarketing agent determines the interest rate based on then current market conditions in order to determine the lowest interest rate which would cause the Series A Bonds to have a market value equal to the principal amount thereof plus accrued interest thereon. The variable interest rate under the loan agreement averaged 0.30% in 2010 and 0.51% in 2009. As of December 31, 2010 and 2009, the interest rate was 0.38% and 0.26%, respectively.

The holders of the $12,000 variable rate PEDFA Series A Bonds may tender their bonds at any time. When the bonds are tendered, they are subject to an annual remarketing agreement, pursuant to which a remarketing agent attempts to remarket the tendered bonds pursuant to the terms of the indenture. In order to keep variable interest rates down and to enhance the marketability of the Series A Bonds, the Company entered into a Reimbursement, Credit and Security Agreement with PNC Bank, National Association (“the bank”) dated as of May 1, 2008. This agreement provides for a three-year direct pay letter of credit issued by the bank to the trustee for the Series A Bonds. The bank is responsible for providing the trustee with funds for the timely payment of the principal and interest on the Series A Bonds and for the purchase price of the Series A Bonds that have been tendered or deemed tendered for purchase and have not been remarketed. The Company’s responsibility is to reimburse the bank the same day as regular interest payments are made, and within fourteen months for the purchase price of tendered bonds that have not been remarketed. The reimbursement period for the principal is immediate at maturity, upon default by the Company, or if the Bank does not renew the Letter of Credit. The Letter of Credit is a three-year agreement with a one-year extension evaluated annually. The current expiration date is May 6, 2012.

The Company may elect to have the Series A Bonds redeemed, in whole or in part, on any date that interest is payable for a redemption price equal to 100% of the principal amount thereof plus accrued interest to the date of redemption. The Series A Bonds are also subject to mandatory redemption for the same redemption price in the event that the Internal Revenue Service determines that the interest payable on the Series A Bonds is includable in gross income of the holders of the bonds for federal tax purposes.

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In connection with the issuance of the PEDFA 2004 Series B Bonds, the Company entered into an interest rate swap agreement with a counterparty, in the notional principal amount of $12,000. We elected to retain the swap agreement for the PEDFA Series A Bonds of 2008. Interest rate swap agreements derive their value from underlying interest rates. These transactions involve both credit and market risk. The notional amounts are amounts on which calculations, payments, and the value of the derivative are based. Notional amounts do not represent direct credit exposure. Direct credit exposure is limited to the net difference between the calculated amounts to be received and paid, if any. Such difference, which represents the fair value of the swap, is reflected on the Company’s balance sheet. See Note 10 for additional information regarding the fair value of the swap.

The interest rate swap will terminate on the maturity date of the 2008 Series A Bonds (which is the same date as the maturity date of the loan under the loan agreement), unless sooner terminated pursuant to its terms. In the event the interest rate swap terminates prior to the maturity date of the 2008 Series A Bonds, either we or the swap counterparty may be required to make a termination payment to the other based on market conditions at such time. The Company is exposed to credit-related losses in the event of nonperformance by the counterparty. The Company controls the credit risk of its financial contracts through credit approvals, limits and monitoring procedures, and does not expect the counterparty to default on its obligations. Notwithstanding the terms of the swap agreement, we are ultimately obligated for all amounts due and payable under the loan agreement.

The interest rate swap agreement contains provisions that require the Company to maintain a credit rating of at least BBB- with Standard & Poor’s. If the Company’s rating were to fall below this rating, it would be in violation of these provisions, and the counterparty to the derivative could request immediate payment if the derivative was in a liability position. The Company’s interest rate swap was in a liability position as of December 31, 2010. If a violation were triggered on December 31, 2010, the Company would have been required to pay the counterparty approximately $1,457.

Our interest rate swap agreement provides that we pay the counterparty a fixed interest rate of 3.16% on the notional amount of $12,000. In exchange, the counterparty pays us a floating interest rate (based on 59% of the U.S. Dollar one-month LIBOR rate) on the notional amount. The floating interest rate paid to us is intended, over the term of the swap, to approximate the variable interest rate on the loan agreement and the interest rate paid to bondholders, thereby managing our exposure to fluctuations in prevailing interest rates. The Company’s net payment rate on the swap averaged 3.00% in 2010 and 2.98% in 2009.

As of December 31, 2010, there was a spread of 23 basis points between the variable rate paid to bondholders and the variable rate received from the swap counterparty, which equated to an overall effective rate of 3.39% (including variable interest and swap payments). As of December 31, 2009, there was a spread of 12 basis points which equated to an overall effective rate of 3.28% (including variable interest and swap payments).

The terms of the debt agreements carry certain covenants and limit in some cases the Company's ability to borrow additional funds, to prepay its borrowings and include certain restrictions with respect to declaration and payment of cash dividends and acquisition of the Company's stock. Under the terms of the most restrictive agreements, the Company cannot borrow in excess of 60% of its utility plant, and cumulative payments for dividends and acquisition of stock since December 31, 1982 may not exceed $1,500 plus net income since that date. As of December 31, 2010, none of the earnings retained in the business are restricted under these provisions. Our 1.00% Pennvest Loan is secured by $800 of receivables. Other than this loan, our debt is unsecured.

As of December 31, 2010, the Company maintained unsecured lines of credit aggregating $33,000 with three banks. One line of credit includes a $4,000 portion which is payable upon demand and carries an interest rate of LIBOR plus 2.00%, and a $13,000 committed portion with a revolving 2-year maturity (currently May 2012), which carries an interest rate of LIBOR plus 2.00%. The Company had no outstanding borrowings under the committed portion and no on-demand borrowings under this line of credit as of December 31, 2010. The Company had $3,054 in outstanding borrowings under the committed portion and no on-demand borrowings under this line of credit as of December 31, 2009. The second line of credit, in the amount of $11,000, is a committed line of credit, which matures in May 2012 and carries an interest rate of LIBOR plus 1.50%. This line of credit has a compensating balance requirement of $500. In 2010, the outstanding borrowings were reclassified to long-term debt based on a renewal that extended the maturity date more than one year. The corresponding compensating balance was also reclassified from current assets to long-term assets due to the extended maturity date. The Company had no outstanding borrowings under this line as of December 31, 2010 and $3,000 outstanding under this line as of December 31, 2009. The third line of credit, in the amount of $5,000, is a committed line of credit, which matures in June 2011 and carries an interest rate of LIBOR plus 2.00%. The Company had no outstanding borrowings under this line as of December 31, 2010 and $2,000 outstanding under this line as of December 31, 2009. The weighted average interest rate on line of credit borrowings as of December 31, 2009 was 1.56%.

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Average borrowings outstanding under our lines of credit were $7,191 in 2010 and $16,848 in 2009. The average cost of borrowings under our lines of credit during 2010 and 2009 was 1.54% and 1.41%, respectively.

Our lines of credits require us to maintain a minimum equity to total capitalization ratio (defined as the sum of equity plus funded debt) and a minimum interest coverage ratio (defined as net income plus interest expense plus income tax expense divided by interest expense). The Company is currently in compliance with these covenants.

5.	Common Stock and Earnings Per Share

Earnings per share are based upon the weighted average number of shares outstanding of 12,626,660 in 2010, 11,695,155 in 2009 and 11,298,215 in 2008. The Company does not have dilutive securities outstanding.

Under the employee stock purchase plan, all full-time employees who have been employed at least six consecutive months may purchase shares of the Company's common stock through payroll deductions limited to 10% of gross compensation. The purchase price is 95% of the fair market value (as defined). Shares issued during 2010, 2009 and 2008 were 6,968, 6,860 and 6,841, respectively. As of December 31, 2010, 37,860 authorized shares remain unissued under the plan.

In June 2008, the Company modified its Dividend Reinvestment Plan to include direct stock purchase and sale options. These options are subject to certain restrictions and are available to both current shareholders and the general public. Purchases are made weekly at 100% of the stock’s fair market value, as defined in the Prospectus contained in Amendment No. 1 to Securities and Exchange Commission Form S-3, filed by the Company on June 26, 2008. The Company received $905 in 2010, $592 in 2009 and $295 in 2008 of equity proceeds for shares issued under the plan.

Under the optional dividend reinvestment portion of the plan, holders of the Company's common stock may purchase additional shares instead of receiving cash dividends. The purchase price is 95% of the fair market value (as defined). Shares issued under the Dividend Reinvestment and Direct Stock Purchase and Sale Plan, during 2010, 2009 and 2008 were 126,361, 114,616 and 95,484, respectively. As of December 31, 2010, 629,158 authorized shares remain unissued under the plan.

In September 2009, the Company closed an underwritten public offering of 950,000 shares of its common stock. In October 2009, the underwriters exercised an over-allotment of 120,000 shares. Boenning & Scattergood, Inc. and J.J.B. Hilliard, W.L. Lyons, LLC were the underwriters in the offering. The Company received net proceeds in the offering, after deducting offering expenses and underwriter’s discounts and commissions, of approximately $14.1 million. The net proceeds were used to repay a portion of the Company’s borrowings under its line of credit agreements incurred to fund capital expenditures and acquisitions, and for general corporate purposes.

6.	Employee Benefit Plans

Pensions

The Company maintains two defined benefit pension plans, a general and administrative plan and a union-represented plan, covering substantially all of its employees hired prior to May 1, 2010. Employees hired after May 1, 2010 are eligible for an enhanced 401k plan rather than a defined benefit plan. The benefits under the defined benefit plans are based upon years of service and compensation over the last five years of service. The Company's funding policy is to contribute annually the amount permitted by the PPUC to be collected from customers in rates, but in no case less than the minimum Employee Retirement Income Security Act (ERISA) required contribution.

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The following table sets forth the plans' funded status as of December 31, 2010 and 2009. The measurement of assets and obligations of the plans is as of December 31, 2010 and 2009.

Obligations and Funded Status At December 31	2010	2009
Change in Benefit Obligation
Pension benefit obligation beginning of year	$23,235	$21,282
Service cost	777	793
Interest cost	1,335	1,311
Actuarial loss	2,190	833
Benefit payments	(991)	(984)
Pension benefit obligation end of year	26,546	23,235
Change in Plan Assets
Fair value of plan assets beginning of year	16,787	13,702
Actual return on plan assets	2,200	2,686
Employer contributions	1,280	1,383
Benefits paid	(991)	(984)
Fair value of plan assets end of year	19,276	16,787
Funded Status of Plans at End of Year	$(7,270)	$(6,448)

The professional standards require that the funded status of defined benefit pension plans be fully recognized in the balance sheet. They also call for the unrecognized actuarial gain or loss, the unrecognized prior service cost and the unrecognized transition costs which were previously netted with the funded status in a liability account, to be adjustments to shareholders’ equity (accumulated other comprehensive income). Due to a rate order granted by the PPUC, the Company is permitted under the professional standards to defer the charges to accumulated other comprehensive income as a regulatory asset. We believe these costs will be recovered in future rates charged to customers. The funded status of our pension plans is recorded in “Deferred employee benefits” on our balance sheet.

Changes in plan assets and benefit obligations recognized in regulatory assets are as follows:

	2010	2009
Net loss (gain) arising during the period	$1,155	$(909)
Recognized net actuarial loss	(213)	(404)
Recognized prior service cost	(17)	(18)
Total changes in regulatory asset during the year	$ 925	$(1,331)

Amounts recognized in regulatory assets that have not yet been recognized as components of net periodic benefit cost consist of the following at December 31:

	2010	2009
Net loss	$6,755	$5,812
Prior service cost	102	120
Regulatory asset	$6,857	$5,932

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Components of Net Periodic Benefit Cost are as follows:

	2010	2009	2008
Service cost	$777	$793	$617
Interest cost	1,335	1,311	1,209
Expected return on plan assets	(1,165)	(944)	(1,192)
Amortization of loss	213	404	12
Amortization of prior service cost	17	18	17
Rate-regulated adjustment	103	(199)	233
Net periodic benefit cost	$1,280	$1,383	$896

The rate-regulated adjustment set forth above is required in order to reflect pension expense for the Company in accordance with the method used in establishing water rates. The Company is permitted by rate order of the PPUC to expense pension costs to the extent of contributions and defer the remaining expense to regulatory assets to be collected in rates at a later date as additional contributions are made. During 2010, the deferral declined by $103.

The estimated costs for the defined benefit pension plans relating to the December 31, 2010 balance sheet that will be amortized from regulatory assets into net periodic benefit cost over the next fiscal year are as follows:

Net loss	$293
Net prior service cost	17
	$310

The Company plans to contribute $1,593 to the plans in 2011.

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid in each of the next five years and the subsequent five years in the aggregate:

2011	2012	2013	2014	2015	2016-2020
$1,097	$1,106	$1,158	$1,250	$1,484	$8,658

The accumulated benefit obligation for both defined benefit pension plans was $23,244 and $19,793 at December 31, 2010 and 2009, respectively. The following table shows the accumulated benefit obligation, the projected benefit obligation and the fair value of plan assets for each plan:

	General and Administrative Plan		Union-Represented Plan
	2010	2009	2010	2009
Accumulated benefit obligation	$14,683	$12,654	$8,561	$7,139
Projected benefit obligation	16,936	15,010	9,610	8,225
Fair value of plan assets	12,106	10,449	7,170	6,338

Weighted-average assumptions used to determine benefit obligations at December 31:

	2010	2009
Discount rate	5.35%	6.00%
Expected long-term return on plan assets	7.00%	7.00%
Rate of compensation increase	3.50 – 4.00%	4.00 - 5.00%

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Weighted-average assumptions used to determine net periodic benefit cost for years ended December 31:

	2010	2009	2008
Discount rate	6.00%	6.00%	6.50%
Expected long-term return on plan assets	7.00%	7.00%	7.00%
Rate of compensation increase	4.00 - 5.00%	4.00 - 5.00%	4.00 - 5.00%

The selected long-term rate of return on plan assets (7.0%) was primarily based on the asset allocation of the plan's assets (approximately 50% to 70% equity securities and 30% to 50% fixed income securities). Analysis of the historic returns of these asset classes and projections of expected future returns were considered in setting the long-term rate of return.

The investment objective of the Company's defined benefit pension plans is that of Growth and Income. Our weighted-average target asset allocations are 50% to 70% equity securities, 30% to 50% fixed income securities and 0% to 10% reserves (cash and cash equivalents). Within the equity category, our target allocation is approximately 45 - 50% large cap, 15% mid cap, 10% small cap, 15% international, 5% emerging markets and 5 – 10% inflation hedge. Within the debt category, our target allocation is approximately 30% U.S. Treasury and Agency securities, 40% U.S. corporate bonds, 10% mortgage-backed securities, 10% international, and 10% high yield bonds. Our investment performance objectives over a three to five year period are to exceed the annual rate of inflation as measured by the Consumer Price Index by 3%, and to exceed the annualized total return of specified benchmarks applicable to the funds within the asset categories.

Further guidelines within equity securities include: (1) holdings in any one company cannot exceed 5% of the portfolio; (2) a minimum of 20 individual stocks must be included in the domestic stock portfolio; (3) a minimum of 30 individual stocks must be included in the international stock portfolio; (4) equity holdings in any one industry cannot exceed 20-25% of the portfolio; and (5) only U.S.-denominated currency securities are permitted.

Further guidelines for debt securities include: (1) fixed income holdings in a single issuer are limited to 5% of the portfolio; (2) acceptable investments include money market securities, U.S. Government and its agencies and sponsored entities' securities, mortgage-backed and asset-backed securities, corporate securities and mutual funds offering high yield bond portfolios; (3) purchases must be limited to investment grade or higher; (4) non-U.S. dollar denominated securities are not permissible; and (5) high risk derivatives are prohibited.

The fair values of the Company's pension plan assets at December 31, 2010 and 2009 by asset category and fair value hierarchy level are as follows. The majority of the valuations are based on quoted prices on active markets (Level 1), 86% in 2010 and 82% in 2009, with the remaining 14% and 18%, respectively, based on broker/dealer quotes, active market makers, models, and yield curves (Level 2).

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	Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
Asset Category	2010	2009	2010	2009	2010	2009
Cash and Money Market Funds (a)	$ 346	$ 341	$ 346	$ 341	$ -	$ -
Equity Securities :
Common Equity Securities (b)	3,714	5,296	3,714	5,296	-	-
Equity Mutual Funds (c)	8,967	6,745	8,967	6,745	-	-
Fixed Income Securities:
U.S. Treasury Obligations	856	850	-	-	856	850
U.S. Government Agencies	935	773	-	-	935	773
Corporate and Foreign Bonds (d)	923	1,391	-	-	923	1,391
Fixed Income Mutual Funds (e)	3,535	1,391	3,535	1,391	-	-
Total Plan Assets	$19,276	$16,787	$ 16,562	$13,773	$ 2,714	$3,014

(a)

The portfolios are designed to keep approximately three months of distributions in immediately available funds.

(b)

This category includes investments in 100% U.S. common stocks widely distributed among consumer discretionary, consumer staples, healthcare, information technology, financial services, telecommunications, industrials, energy and utilities. The individual stocks are primarily large cap stocks which track with the S&P 500 with the exception of $334 (1.7% of total plan assets) which are invested in York Water Company common stock.

(c)

This category includes investments in approximately 10% U.S. commodity mutual funds used primarily as an inflation hedge, 13% international mutual funds, and the remaining 77% in closed-end mutual funds which give the portfolio exposure to small, mid and large cap index funds as well as international diversified index funds.

(d)

This category currently includes only U.S. corporate bonds and notes equitably distributed to the food and staples, financial and information technology sectors.

(e)

This category includes fixed income investments in mutual funds which include municipal, government, corporate and mortgage securities of both the U.S. and other countries. The mortgage and asset-backed securities and non-U.S. corporate and sovereign investments add further diversity to the fixed income portion of the portfolio.

Defined Contribution Plan

The Company has a savings plan pursuant to the provisions of section 401(k) of the Internal Revenue Code. For employees hired before May 1, 2010, this plan provides for elective employee contributions of up to 15% of compensation and Company matching contributions of 100% of the participant's contribution, up to a maximum annual Company contribution of $2.8 for each employee. The maximum annual Company contribution was increased by $0.6 during 2010.

Employees hired after May 1, 2010 are entitled to an enhanced feature of the plan. This feature provides for elective employee contributions of up to 15% of compensation and Company matching contributions of 100% of the participant’s contribution, up to a maximum of 4% of the employee’s compensation. In addition, the Company will make an annual contribution of $1.2 to each employee’s account whether or not they defer their own compensation. Employees eligible for this enhanced 401k plan feature are not eligible for the defined benefit plans. As of December 31, 2010, no employees were participating in the enhanced feature of the plan. The Company's contributions to the plan amounted to $187 in 2010, $146 in 2009, and $168 in 2008.

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Deferred Compensation

The Company has non-qualified deferred compensation and supplemental retirement agreements with certain members of management. The future commitments under these arrangements are offset by corporate-owned life insurance policies. At December 31, 2010 and 2009, the present value of the future obligations was approximately $2,692 and $2,454, respectively. The insurance policies included in other assets had a total cash value of approximately $3,430 and $3,173, respectively, at December 31, 2010 and 2009. The Company’s expenses under the plans amounted to $360 in 2010, $413 in 2009 and $490 in 2008.

7.	Rate Increases

From time to time, the Company files applications for rate increases with the PPUC and is granted rate relief as a result of such requests. The most recent rate request was filed by the Company on May 14, 2010 and sought an increase of $6,220, which would have represented a 15.9% increase in rates. Effective November 4, 2010, the PPUC authorized an average increase of 8.7% in rates designed to produce approximately $3,400 in additional annual revenues. The Company does not expect to file a base rate increase request in 2011.

8.	Notes Receivable and Customers' Advances for Construction

The Company has agreements with three municipalities to extend water service into previously formed water districts. The Company loaned funds to the municipalities to cover the costs related to the projects. The municipalities concurrently advanced these funds back to the Company in the form of customers' advances for construction. The municipalities are required by enacted ordinances to charge application fees and water revenue surcharges (fees) to customers connected to the system, which are remitted to the Company. The note principal and the related customer advance are reduced periodically as operating revenues are earned by the Company from customers connected to the system and refunds of advances are made. There is no due date for the notes or expiration date for the advances.

The Company has recorded interest income of $110 in 2010, $116 in 2009 and $114 in 2008. Interest rates on the notes outstanding at December 31, 2010 vary from 6.75% to 7.5%.

Included in the accompanying balance sheets at December 31, 2010 and 2009 were the following amounts related to these projects.

	2010	2009
Notes receivable, including interest	$407	$476
Customers' advances for construction	967	1,013

The Company has other customers' advances for construction totaling $14,064 and $15,175 at December 31, 2010 and 2009, respectively.

9.	Commitments

Based on its capital budget, the Company plans to spend approximately $12,800 in 2011 and $13,415 in 2012 on construction. The Company plans to finance ongoing capital expenditures with internally-generated funds, borrowings against the Company’s lines of credit, proceeds from the issuance of common stock under its dividend reinvestment and direct stock purchase and sale plan and ESPP, potential common stock or debt issues, customer advances and the distribution surcharge allowed by the PPUC. The distribution surcharge allows the Company to add a charge to customers’ bills for qualified replacement costs of certain infrastructure without submitting a rate filing.

The Company has committed a total of approximately $2,905 for upgrades to the water treatment facilities. As of December 31, 2010, $179 remained to be incurred.

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As of December 31, 2010, the Company employed 111 full time people, including 42 under union contract. The current contract was ratified during 2010 and expires on April 30, 2013.

The Company is involved in certain legal and administrative proceedings before various courts and governmental agencies concerning water service and other matters. The Company expects that the ultimate disposition of these proceedings will not have a material effect on the Company's financial position, results of operations and cash flows.

10.	Fair Value of Financial Instruments

The professional standards regarding fair value measurements establish a fair value hierarchy which indicates the extent to which inputs used in measuring fair value are observable in the market. Level 1 inputs include quoted prices for identical instruments and are the most observable. Level 2 inputs include quoted prices for similar assets and observable inputs such as interest rates, commodity rates and yield curves. Level 3 inputs are not observable in the market and include management’s own judgments about the assumptions market participants would use in pricing the asset or liability.

The Company has recorded its interest rate swap liability at fair value in accordance with the standards. The liability is recorded under the caption “Other deferred credits” on the balance sheet. The table below illustrates the fair value of the interest rate swap as of the end of the reporting period.

		Fair Value Measurements at Reporting Date Using
Description	December 31, 2010	Significant Other Observable Inputs (Level 2)
Interest Rate Swap	$1,341	$1,341

Fair values are measured as the present value of all expected future cash flows based on the LIBOR-based swap yield curve as of the date of the valuation. These inputs to this calculation are deemed to be Level 2 inputs. The balance sheet carrying value reflects the Company’s credit quality as of December 31, 2010. The rate used in discounting all prospective cash flows anticipated to be made under this swap reflects a representation of the yield to maturity for 30-year debt on utilities rated A- as of December 31, 2010. The use of the Company’s credit quality resulted in a reduction in the swap liability of $116. The fair value of the swap reflecting the Company’s credit quality as of December 31, 2009 is shown in the table below.

		Fair Value Measurements at Reporting Date Using
Description	December 31, 2009	Significant Other Observable Inputs (Level 2)
Interest Rate Swap	$979	$979

The carrying amount of current assets and liabilities that are considered financial instruments approximates fair value as of the dates presented. The Company's long-term debt (including current maturities), with a carrying value of $85,173 at December 31, 2010, and $77,568 at December 31, 2009, had an estimated fair value of approximately $94,000 and $91,000 at December 31, 2010 and 2009, respectively. The estimated fair value of debt was calculated using a discounted cash flow technique that incorporates a market interest yield curve with adjustments for duration and risk profile. The Company recognized its credit rating in determining the yield curve, and did not factor in third party credit enhancements including bond insurance on the 2004 PEDFA Series A and 2006 Industrial Development Authority issues, and the letter of credit on the 2008 PEDFA Series A issue.

Customers' advances for construction and notes receivable have carrying values at December 31, 2010 of $15,031 and $407, respectively. At December 31, 2009, customers’ advances for construction and notes receivable had carrying values of $16,188 and $476, respectively. The relative fair values of these amounts cannot be accurately estimated since the timing of future payment streams is dependent upon several factors, including new customer connections, customer consumption levels and future rate increases.

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11.	Taxes Other than Income Taxes

The following table provides the components of taxes other than income taxes:

	2010	2009	2008
Regulatory Assessment	$205	$210	$194
Property	321	311	266
Payroll, net of amounts capitalized	430	419	421
Capital Stock	203	133	219
Other	2	2	2
Total taxes other than income taxes	$1,161	$1,075	$1,102

12.	Selected Quarterly Financial Data (Unaudited)

	First	Second	Third	Fourth	Year
2010
Water operating revenues	$9,016	$9,748	$10,487	$9,754	$39,005
Water operating income	4,275	5,045	5,604	4,843	19,767
Net income	1,839	2,344	2,670	2,076	8,929
Basic earnings per share	0.15	0.18	0.21	0.17	0.71
Dividends declared per share	0.128	0.128	0.128	0.131	0.515

2009
Water operating revenues	$8,774	$9,210	$9,750	$9,309	$37,043
Water operating income	3,971	4,228	4,836	4,353	17,388
Net income	1,497	1,913	2,091	2,011	7,512
Basic earnings per share	0.13	0.17	0.18	0.16	0.64
Dividends declared per share	0.126	0.126	0.126	0.128	0.506

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
(Mark One)
ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2010
OR
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from __________to____________

Commission file number 001-34245
THE YORK WATER COMPANY
(Exact name of registrant as specified in its charter)

PENNSYLVANIA				23-1242500
(State or other jurisdiction of incorporation or organization)				(I.R.S. Employer Identification No.)

130 EAST MARKET STREET, YORK, PENNSYLVANIA				17401
(Address of principal executive offices)				(Zip Code)

Registrant's telephone number, including area code (717) 845-3601

Securities registered pursuant to Section 12(b) of the Act:
None
(Title of Each Class)			(Name of Each Exchange on Which Registered)

Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, NO PAR VALUE
(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
¨ YES					ý NO
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
¨ YES					ý NO
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
ý YES					¨ NO
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
¨ YES					¨ NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one):
		Large accelerated filer ¨	Accelerated filer ý
		Non-accelerated filer ¨	Small Reporting Company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
¨ YES					ý NO
The aggregate market value of the Common Stock, no par value, held by nonaffiliates of the registrant on June 30, 2010 was $179,516,943 .
As of March 7, 2011 there were 12,696,512 shares of Common Stock, no par value, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 2010 Annual Report to Shareholders are incorporated by reference into Parts I and II.
Portions of the Proxy Statement for the Company's 2011 Annual Meeting of Shareholders are incorporated by reference into Part III.

(In thousands of dollars)	For the Years Ended December 31,
	2010	2009	2008	2007	2006
Revenues
Residential	$24,478	$23,299	$20,572	$19,722	$17,972
Commercial and industrial	11,440	10,734	9,671	9,290	8,497
Other	3,087	3,010	2,595	2,421	2,189
Total	$39,005	$37,043	$32,838	$31,433	$28,658
Average daily consumption
(gallons per day)	18,875,000	18,233,000	18,298,000	19,058,000	18,769,000
Miles of mains
at year-end	925	922	884	845	817
Additional distribution mains
installed/acquired (ft.)	19,886	200,439	206,140	147,803	159,330
Number of customers
at year-end	62,505	62,186	61,527	58,890	57,578
Population served
at year-end	182,000	180,000	176,000	171,000	166,000

(In thousands of dollars)	Expected Maturity Date
Interest Rate Derivatives	2011	2012	2013	2014	2015	Thereafter	Total	Fair Value

Interest Rate Swap – Notional Value $12,000								$1,341
Variable to Fixed *	$351	$307	$226	$157	$103	$458	$1,602
Average pay rate	3.16%	3.16%	3.16%	3.16%	3.16%	3.16%	3.16%
Average receive rate	0.24%	0.63%	1.27%	1.84%	2.30%	2.89%	2.45%

*Represents undiscounted net payments.

Management’s Report on Internal Control Over Financial Reporting		Page 18
Report of Independent Registered Public Accounting Firm
	on Internal Control Over Financial Reporting	Page 19
Report of Independent Registered Public Accounting Firm		Page 20
Balance Sheets as of December 31, 2010 and 2009		Page 21
Statements of Income for Years Ended December 31, 2010, 2009 and 2008		Page 22
Statements of Common Stockholders’ Equity and Comprehensive Income
	for Years Ended December 31, 2010, 2009 and 2008	Page 23
Statements of Cash Flows for Years Ended December 31, 2010, 2009 and 2008		Page 24
Notes to Financial Statements		Page 25

Name	Age	Principal Occupation During Last Five Years		Officer Since

Jeffrey R. Hines, P.E.	49	President and Chief Executive Officer,		5/1/1995
			The York Water Company, March 2008 to date
		Chief Operating Officer and Secretary,
			The York Water Company, January 2007 to March 2008
		Vice President-Engineering and Secretary,
			The York Water Company, May 1995 to January 2007

Joseph T. Hand	48	Chief Operating Officer,		3/3/2008
			The York Water Company, March 2008 to date
		Chief, Navigation Branch, Baltimore District,
			U.S. Army Corps of Engineers, September 2006
			to February 2008
		Deputy Commander and Deputy District Engineer,
			Baltimore District, U.S. Army Corps of Engineers,
			June 2003 to September 2006

Kathleen M. Miller	48	Chief Financial Officer and Treasurer,		1/1/2003
			The York Water Company, January 2003 to date

Vernon L. Bracey	49	Vice President-Customer Service,		3/1/2003
			The York Water Company, March 2003 to date

Bruce C. McIntosh	58	Vice President-Human Resources, Secretary and Assistant Treasurer,		5/4/1998
			The York Water Company, March 2008 to date
		Vice President-Human Resources and Assistant Treasurer,
			The York Water Company, January 2003 to February 2008

Mark S. Snyder, P.E.	40	Vice President-Engineering,		5/1/2009
			The York Water Company, May 2009 to date
		Engineering Manager,
			The York Water Company, December 2006 to May 2009
		Project Engineer, Buchart Horn, Inc., York, PA,
			an international engineering firm, April 2001 to
			December 2006

John H. Strine	54	Vice President-Operations,		5/1/2009
			The York Water Company, May 2009 to date
		Operations Manager,
			The York Water Company, February 2008 to May 2009
		Maintenance and Grounds Superintendent,
			The York Water Company, August 1991 to February 2008

Schedule	Schedule	Page
Number	Description	Number

II	Valuation and Qualifying Accounts	20
	for the years ended December 31, 2010, 2009 and 2008

		Additions
Description	Balance at Beginning of Year	Charged to Cost and Expenses	Recoveries	Deductions	Balance at End of Year
FOR THE YEAR ENDED DECEMBER 31, 2010 Reserve for uncollectible accounts	$225,000	$223,185	$31,026	$234,211	$245,000

FOR THE YEAR ENDED DECEMBER 31, 2009 Reserve for uncollectible accounts	$195,000	$231,974	$27,914	$229,888	$225,000

FOR THE YEAR ENDED DECEMBER 31, 2008 Reserve for uncollectible accounts	$193,000	$176,534	$38,224	$212,758	$195,000

	THE YORK WATER COMPANY
	(Registrant)


Dated: March 7, 2011	By: /s/Jeffrey R. Hines
	Jeffrey R. Hines
	President and CEO



By: /s/Jeffrey R. Hines	By: /s/Kathleen M. Miller
Jeffrey R. Hines	Kathleen M. Miller
(Principal Executive Officer and Director)	(Principal Accounting Officer and Chief Financial Officer)

Dated: March 7, 2011	Dated: March 7, 2011

Directors:	Date:

By: /s/Thomas C. Norris	March 7, 2011
Thomas C. Norris

By: /s/Cynthia A. Dotzel	March 7, 2011
Cynthia A. Dotzel

By: /s/John L. Finlayson	March 7, 2011
John L. Finlayson

By: /s/Michael W. Gang	March 7, 2011
Michael W. Gang

By: /s/Jeffrey R. Hines	March 7, 2011
Jeffrey R. Hines

By: /s/George W. Hodges	March 7, 2011
George W. Hodges

By: /s/George Hay Kain, III	March 7, 2011
George Hay Kain, III

By: /s/Jeffrey S. Osman	March 7, 2011
Jeffrey S. Osman

By: _________________	March 7, 2011
Steven R. Rasmussen

By: /s/Ernest J. Waters	March 7, 2011
Ernest J. Waters

Exhibit Number	Exhibit Description	Page Number of Incorporation By Reference
3	Amended and Restated Articles of Incorporation	Incorporated herein by reference. Filed previously with the Securities and Exchange Commission as Exhibit 3.1 to Form 8-K dated May 4, 2010.
3.1	By-Laws	Incorporated herein by reference. Filed previously with the Securities and Exchange Commission as Exhibit 3.1 to Form 8-K dated January 24, 2007.
4.1	Dividend Reinvestment and Direct Stock Purchase and Sale Plan	Incorporated herein by reference. Filed previously with the Securities and Exchange Commission as the Prospectus included in Post-Effective Amendment No. 1 to Form S-3 dated June 26, 2008 (File No. 333-59072).
4.2	Indenture, dated as of October 1, 2010, by and between The York Water Company and Manufacturers and Traders Trust Company, as trustee, relative to the $15,000,000 5.0% Monthly Senior Notes	Incorporated herein by reference. Filed previously with the Securities and Exchange Commission as Exhibit 4.1 to the Company's October 8, 2010 Form 8-K.
4.3	First Supplemental Indenture, dated as of October 1, 2010, by and between The York Water Company and Manufacturers and Traders Trust Company, as trustee (which includes the form of Note)	Incorporated herein by reference. Filed previously with the Securities and Exchange Commission as Exhibit 4.2 to the Company's October 8, 2010 Form 8-K.
10.1	Articles of Agreement Between The York Water Company and Springettsbury Township relative to Extension of Water Mains dated April 17, 1985	Incorporated herein by reference. Filed previously with the Securities and Exchange Commission as Exhibit 10.1 to the Company's 1989 Form 10-K.
10.2	Articles of Agreement Between The York Water Company and Windsor Township relative to Extension of Water Mains dated February 9, 1989	Incorporated herein by reference. Filed previously with the Securities and Exchange Commission as Exhibit 10.2 to the Company's 1989 Form 10-K.
10.3	Articles of Agreement Between The York Water Company and York Township relative to Extension of Water Mains dated December 29, 1989	Incorporated herein by reference. Filed previously with the Securities and Exchange Commission as Exhibit 10.5 to the Company's 1990 Form 10-K.
10.4	Note Agreement relative to the $6,000,000 10.17% Senior Notes, Series A and $5,000,000 9.60% Senior Notes, Series B dated January 2, 1989	Incorporated herein by reference. Filed previously with the Securities and Exchange Commission as Exhibit 4.5 to the Company's 1989 Form 10-K.

	THE YORK WATER COMPANY

By:	_____________________
Witness __________________________	President and CEO

	_____________________
Witness __________________________	Employee

Name	Original Agreement Date	Multiple of Base Pay for Involuntary Termination or Good Reason Termination
Jeffrey R. Hines	January 26, 1999	2.99
Kathleen M. Miller	December 15, 2003	.50
Joseph T. Hand	November 5, 2008	.50
Vernon L. Bracey	December 15, 2003	.50
Bruce C. McIntosh	January 26, 1999	.50
Mark S. Snyder	January 25, 2011	.50
John H. Strine	January 25, 2011	.50

ATTEST:	THE YORK WATER COMPANY




_____________________________________	____________________________________
Secretary	President



	____________________________________
(SEAL)	Employee

Name	Date Credited Service Began	Normal Monthly Retirement Unit	Pre-Retirement Death Benefit
Jeffrey R. Hines	December 31, 1989	120.12	800,000
Kathleen M. Miller	December 31, 2003	116.14	500,000
Joseph T. Hand	December 31, 2009	163.40	500,000
Vernon L. Bracey	December 31, 2003	122.55	500,000
Bruce C. McIntosh	December 31, 1998	146.20	500,000
Mark S. Snyder	December 31, 2009	111.11	500,000
John H. Strine	December 31, 2009	231.48	500,000

Highlights of Our 195th Year	1
Shareholder Information	2
Management’s Discussion and Analysis	4
Management’s Report on Internal Control Over Financial Reporting	15
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting	16
Report of Independent Registered Public Accounting Firm	17
Balance Sheets	18
Statements of Income
Statements of Common Stockholders’ Equity and Comprehensive Income	20
Statements of Cash Flows	21
Notes to Financial Statements	22

	Summary of Operations
For the Year	2010	2009	2008	2007	2006

Water operating revenues	$39,005	$37,043	$32,838	$31,433	$28,658
Operating expenses	19,238	19,655	18,158	17,333	15,754
Operating income	19,767	17,388	14,680	14,100	12,904
Interest expense	4,795	4,780	4,112	3,916	3,727
Other income (expenses), net	(465)	(517)	(509)	(78)	110
Income before income taxes	14,507	12,091	10,059	10,106	9,287
Income taxes	5,578	4,579	3,628	3,692	3,196
Net income	$ 8,929	$ 7,512	$ 6,431	$ 6,414	$ 6,091

Per Share of Common Stock
Book value	$7.19	$6.92	$6.14	$5.97	$5.84
Basic earnings per share	0.71	0.64	0.57	0.57	0.58
Cash dividends declared per share	0.515	0.506	0.489	0.475	0.454
Weighted average number of shares
outstanding during the year	12,626,660	11,695,155	11,298,215	11,225,822	10,475,173

Utility Plant
Original cost,
net of acquisition adjustments	$269,856	$259,839	$245,249	$222,354	$202,020
Construction expenditures	10,541	12,535	24,438	18,154	20,678

Other
Total assets	$259,931	$248,837	$240,442	$210,969	$196,064
Long-term debt
including current portion	85,173	77,568	86,353	70,505	62,335

	2010			2009
	High	Low	Dividend*	High	Low	Dividend*
1 st Quarter	$15.00	$13.04	$0.128	$13.50	$9.74	$0.126
2 nd Quarter	15.60	12.83	0.128	16.26	11.75	0.126
3 rd Quarter	16.40	13.42	0.128	17.95	13.75	0.126
4 th Quarter	18.00	15.52	0.131	15.24	13.65	0.128

	2005	2006	2007	2008	2009	2010
The York Water Company	100.00	106.37	94.84	76.67	95.34	117.43
S&P 500 Index	100.00	113.62	117.63	72.36	89.33	100.75
Peer Group*	100.00	100.19	96.79	97.25	88.32	106.26

Kathleen M. Miller	The York Water Company	(717) 845-3601
Chief Financial Officer	P. O. Box 15089	(800) 750-5561
	York, PA 17405-7089	kathym@yorkwater.com

	Payments due by period
	Total	2011	2012	2013	2014	2015	Thereafter
Long-term debt obligations (a)	$85,173	$41	$12,042	$42	$43	$43	$72,962

Interest on long-term debt (b)	84,863	4,871	4,870	4,870	4,869	4,869	60,514

Purchase obligations (c)	1,053	1,053	-	-	-	-	-

Defined benefit obligations (d)	3,186	1,593	1,593	-	-	-	-

Deferred employee benefits (e)	4,629	225	239	230	241	240	3,454

Other deferred credits (f)	1,601	351	307	226	157	103	457
Total	$180,505	$8,134	$19,051	$5,368	$5,310	$5,255	$137,387

(a)	Represents debt maturities including current maturities. Included in the table is a payment of $12,000 in 2012 on the variable rate bonds which would only be due if the bonds were unable to be remarketed. There is currently no such indication of this happening.
(b)	Excludes interest on the $12,000 variable rate debt as these payments cannot be reasonably estimated. The interest rate on this issue is reset weekly by the remarketing agent based on then current market conditions. Also excludes interest on the committed line of credit due to the variability of both the outstanding amount and the interest rate.
(c)	Represents an approximation of open purchase orders at year end.
(d)	Represents contributions expected to be made to qualified defined benefit plans. The contribution may increase if the minimum required contribution as calculated under Employee Retirement Income Security Act (ERISA) standards is higher than these amounts but in no case will the amount be less. The amount of required contributions in 2013 and thereafter is not currently determinable.
(e)	Represents the obligations under the Company’s Supplemental Retirement and Deferred Compensation Plans for executives.
(f)	Represents the estimated settlement payments to be made under the Company’s interest rate swap contract.


/s/Jeffery R. Hines			/s/Kathleen M. Miller
Jeffrey R. Hines			Kathleen M. Miller
President, Chief Executive Officer			Chief Financial Officer

/s/ParenteBeard LLC
ParenteBeard LLC
York, Pennsylvania
March 8, 2011

I, Jeffrey R. Hines, certify that:
1.	I have reviewed this report on Form 10-K of The York Water Company;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)	evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d)	disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
	a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



Date: March 8, 2011	By:	/s/ Jeffrey R. Hines
		Jeffrey R. Hines
		President and CEO

I, Kathleen M. Miller, certify that:
1.	I have reviewed this report on Form 10-K of The York Water Company;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)	evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d)	disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
	a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



Date: March 8, 2011	By:	/s/ Kathleen M. Miller
		Kathleen M. Miller
		Chief Financial Officer

(1)	The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.