YORK WATER CO (Form: 10-Q, Received: 05/07/2019 10:45:18)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended March 31, 2019

☐	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

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.

☒ 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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer ☐	Accelerated filer ☒		Non-accelerated filer ☐

Small Reporting company ☒		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ YES

☒ NO

Securities registered pursuant to Section 12(g) of the Act:

COMMON STOCK, NO PAR VALUE	YORW	The NASDAQ Global Select Market
(Title of Class)	(Trading Symbol)	(Name of Each Exchange on Which Registered)

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common stock, No par value

12,956,282 Shares outstanding

as of May 7, 2019

THE YORK WATER COMPANY

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

THE YORK WATER COMPANY

Balance Sheets (Unaudited)

(In thousands of dollars, except per share amounts)

	Mar. 31, 2019			Dec. 31, 2018
ASSETS
UTILITY PLANT, at original cost	$	384,291		$	380,784
Plant acquisition adjustments		(3,093	)		(3,108	)
Accumulated depreciation		(80,068	)		(78,519	)
Net utility plant		301,130			299,157

OTHER PHYSICAL PROPERTY, net of accumulated depreciation of $415 in 2019 and $410 in 2018		709			714

CURRENT ASSETS:
Cash and cash equivalents		2			2
Accounts receivable, net of reserves of $326 in 2019 and $305 in 2018		4,114			4,811
Unbilled revenues		2,155			2,427
Materials and supplies inventories, at cost		1,040			876
Prepaid expenses		1,339			895
Total current assets		8,650			9,011

OTHER LONG-TERM ASSETS:
Note receivable		255			255
Deferred regulatory assets		32,321			32,353
Other assets		3,665			3,650
Total other long-term assets		36,241			36,258

Total Assets	$	346,730		$	345,140

The accompanying notes are an integral part of these statements.

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THE YORK WATER COMPANY

Balance Sheets (Unaudited)

(In thousands of dollars, except per share amounts)

	Mar. 31, 2019		Dec. 31, 2018

STOCKHOLDERS' EQUITY AND LIABILITIES
COMMON STOCKHOLDERS' EQUITY:
Common stock, no par value, authorized 46,500,000 shares, issued and outstanding 12,954,976 shares in 2019 and 12,943,536 shares in 2018	$	81,703	$	81,305
Retained earnings		45,460		44,890
Total common stockholders' equity		127,163		126,195

PREFERRED STOCK, authorized 500,000 shares, no shares issued		–		–

LONG-TERM DEBT, excluding current portion		94,089		93,328

COMMITMENTS		–		–

CURRENT LIABILITIES:
Short-term borrowings		–		1,000
Current portion of long-term debt		19		30
Accounts payable		2,690		3,030
Dividends payable		2,003		1,999
Accrued compensation and benefits		1,129		1,191
Accrued income taxes		524		150
Accrued interest		1,409		992
Deferred regulatory liabilities		2,211		2,104
Other accrued expenses		395		345
Total current liabilities		10,380		10,841

DEFERRED CREDITS:
Customers' advances for construction		7,214		6,849
Deferred income taxes		37,202		36,962
Deferred employee benefits		4,200		4,715
Deferred regulatory liabilities		24,745		24,710
Other deferred credits		2,010		1,815
Total deferred credits		75,371		75,051

Contributions in aid of construction		39,727		39,725

Total Stockholders' Equity and Liabilities	$	346,730	$	345,140

The accompanying notes are an integral part of these statements.

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THE YORK WATER COMPANY

Statements of Income (Unaudited)

(In thousands of dollars, except per share amounts)

	Three Months Ended March 31
	2019			2018

OPERATING REVENUES:	$	11,831		$	11,644

OPERATING EXPENSES:
Operation and maintenance		2,407			2,354
Administrative and general		1,906			1,995
Depreciation and amortization		1,891			1,841
Taxes other than income taxes		341			314
		6,545			6,504

Operating income		5,286			5,140

OTHER INCOME (EXPENSES):
Interest on debt		(1,327	)		(1,364	)
Allowance for funds used during construction		69			92
Other pension costs		(363	)		(321	)
Other income (expenses), net		(151	)		(82	)
		(1,772	)		(1,675	)

Income before income taxes		3,514			3,465

Income taxes		701			871

Net Income	$	2,813		$	2,594

Basic Earnings Per Share	$	0.22		$	0.20

Diluted Earnings Per Share	$	0.22		$	0.20

Cash Dividends Declared Per Share	$	0.1733		$	0.1666

The accompanying notes are an integral part of these statements.

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THE YORK WATER COMPANY

Statements of Common Stockholders' Equity (Unaudited)

(In thousands of dollars, except per share amounts)

For the Periods Ended March 31, 2019 and 2018

	Common Stock Shares		Common Stock Amount		Retained Earnings			Total
Balance, December 31, 2018		12,943,536	$	81,305	$	44,890		$	126,195
Net income		–		–		2,813			2,813
Dividends		–		–		(2,243	)		(2,243	)
Issuance of common stock under dividend reinvestment, direct stock and employee stock purchase plans		11,440		384		–			384
Stock-based compensation		–		14		–			14
Balance, March 31, 2019		12,954,976	$	81,703	$	45,460		$	127,163

	Common Stock Shares		Common Stock Amount		Retained Earnings			Total
Balance, December 31, 2017		12,872,742	$	79,201	$	40,204		$	119,405
Net income		–		–		2,594			2,594
Dividends		–		–		(2,146	)		(2,146	)
Issuance of common stock under dividend reinvestment, direct stock and employee stock purchase plans		20,056		591		–			591
Stock-based compensation		–		4		–			4
Balance, March 31, 2018		12,892,798	$	79,796	$	40,652		$	120,448

The accompanying notes are an integral part of these statements.

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THE YORK WATER COMPANY

Statements of Cash Flows (Unaudited)

(In thousands of dollars, except per share amounts)

	Three Months Ended March 31
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	2,813		$	2,594
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,891			1,841
Stock-based compensation		14			4
Increase (decrease) in deferred income taxes		(7	)		136
Other		83			71
Changes in assets and liabilities:
Decrease in accounts receivable and unbilled revenues		893			403
Increase in materials and supplies, prepaid expenses, regulatory and other assets		(1,507	)		(1,238	)
Increase in accounts payable, accrued compensation and benefits, accrued expenses, deferred employee benefits, regulatory liabilities, and other deferred credits		618			1,100
Increase in accrued interest and taxes		791			527
Net cash provided by operating activities		5,589			5,438

CASH FLOWS FROM INVESTING ACTIVITIES:
Utility plant additions, including debt portion of allowance for funds used during construction of $39 in 2019 and $51 in 2018		(3,273	)		(3,026	)
Cash received from surrender of life insurance policies		–			108
Net cash used in investing activities		(3,273	)		(2,918	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Customers' advances for construction and contributions in aid of construction		419			423
Repayments of customer advances		(52	)		(112	)
Proceeds of long-term debt issues		25,970			5,072
Debt issuance costs		(180	)		-
Repayments of long-term debt		(25,077	)		(6,213	)
Repayments under short-term line of credit agreements		(1,000	)		–
Changes in cash overdraft position		(541	)		(140	)
Issuance of common stock		384			591
Dividends paid		(2,239	)		(2,141	)
Net cash used in financing activities		(2,316	)		(2,520	)

Net change in cash and cash equivalents		–			–
Cash and cash equivalents at beginning of period		2			2
Cash and cash equivalents at end of period	$	2		$	2

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, net of amounts capitalized	$	843		$	1,159
Income taxes		–			–

Supplemental disclosure of non-cash investing and financing activities:
Accounts payable includes $1,078 in 2019 and $1,557 in 2018 for the construction of utility plant.

The accompanying notes are an integral part of these statements.

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THE YORK WATER COMPANY

Notes to Interim Financial Statements

(In thousands of dollars, except per share amounts)

1. Basis of Presentation

The interim financial statements are unaudited but, in the opinion of management, reflect all adjustments, consisting of only normal recurring accruals, necessary for a fair presentation of results for such periods. Because the financial statements cover an interim period, they do not include all disclosures and notes normally provided in annual financial statements, and therefore, should be read in conjunction with the financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2018.

Operating results for the three months ended March 31, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.

2. Accounts Receivable and Contract Assets

Accounts receivable and contract assets are summarized in the following table:

	As of Mar. 31, 2019			As of Dec. 31, 2018			Change
Accounts receivable – customers	$	4,263		$	4,731		$	(468	)
Other receivables		177			385			(208	)
		4,440			5,116			(676	)
Less: allowance for doubtful accounts		(326	)		(305	)		(21	)
Accounts receivable, net	$	4,114		$	4,811		$	(697	)

Unbilled revenue	$	2,155		$	2,427		$	(272	)

Differences in timing of revenue recognition, billings, and cash collections result in receivables and contract assets. Generally, billing occurs subsequent to revenue recognition, resulting in a contract asset reported as unbilled revenue on the balance sheet. The Company does not receive advances or deposits from customers before revenue is recognized so no contract liabilities are reported. Accounts receivable are recorded when the right to consideration becomes unconditional and are presented separately on the balance sheet. The changes in accounts receivable – customers and in unbilled revenue were primarily due to normal timing difference between performance and the customer’s payments.

3. Common Stock and Earnings Per Share

Net income of $2,813 and $2,594 for the three months ended March 31, 2019 and 2018, respectively, is used to calculate both basic and diluted earnings per share. Basic earnings per share is based on the weighted average number of common shares outstanding. Diluted earnings per share is based on the weighted average number of common shares outstanding plus potentially dilutive shares. The dilutive effect of employee stock-based compensation is included in the computation of diluted earnings per share and is calculated using the treasury stock method and expected proceeds upon exercise or issuance of the stock-based compensation.

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The following table summarizes the shares used in computing basic and diluted earnings per share.

	Three Months Ended March 31
	2019		2018

Weighted average common shares, basic		12,942,342		12,876,514
Effect of dilutive securities:
Employee stock-based compensation		695		110
Weighted average common shares, diluted		12,943,037		12,876,624

On March 11, 2013, the Board of Directors, or the Board, authorized a share repurchase program granting the Company authority to repurchase up to 1,200,000 shares of the Company's common stock from time to time. The stock repurchase program has no specific end date and the Company may repurchase shares in the open market or through privately negotiated transactions. The Company may suspend or discontinue the repurchase program at any time. No shares were repurchased during the three months ended March 31, 2019 and 2018. As of March 31, 2019, 618,004 shares remain authorized for repurchase.

	As of Mar. 31, 2019			As of Dec. 31, 2018

10.17% Senior Notes, Series A, due 2019	$	–		$	6,000
9.60% Senior Notes, Series B, due 2019		–			5,000
1.00% Pennvest Note, due 2019		19			30
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 Refunding Bonds, Series 2008A, due 2029		12,000			12,000
4.75% York County Industrial Development Authority Revenue Bonds, Series 2006, due 2036		10,500			10,500
4.50% Pennsylvania Economic Development Financing Authority Exempt Facilities Revenue Refunding Bonds, Series 2014, due 2038		14,870			14,870
5.00% Monthly Senior Notes, Series 2010A, due 2040		15,000			15,000
4.00% - 4.50% York County Industrial Development Authority Exempt Facilities Revenue Bonds, Series 2015, due 2029 - 2045		10,000			10,000
4.54% Senior Notes, due 2049		20,000			–
Committed Lines of Credit, due 2020		409			8,508
Total long-term debt		96,798			95,908
Less discount on issuance of long-term debt		(201	)		(204	)
Less unamortized debt issuance costs		(2,489	)		(2,346	)
Less current maturities		(19	)		(30	)
Long-term portion	$	94,089		$	93,328

On January 31, 2019, the Company entered into a note purchase agreement with certain institutional investors relating to the private placement of $20,000 aggregate principal amount of the Company’s senior notes. The senior notes bear interest at 4.54% per annum payable semiannually and mature on January 31, 2049. The senior notes are unsecured and unsubordinated obligations of the Company. The Company received net proceeds, after deducting issuance costs, of approximately $19,820. The net proceeds were used to refinance the $11,000 aggregate principal amount of the Company’s 10.17% Series A Senior Notes due February 1, 2019 and the 9.60% Series B Senior Notes due February 1, 2019, and to refinance line of credit borrowings incurred by the Company as interim financing for various capital projects of the Company.

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5. 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 effectively convert the Company's $12,000 variable-rate debt issue to a fixed rate. 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 ($12,000) is not exchanged. The interest rate swap provides that the Company pays the counterparty a fixed interest rate of 3.16% on the notional amount of $12,000. In exchange, the counterparty pays the Company a variable interest rate based on 59% of the U.S. Dollar one-month LIBOR rate on the notional amount. The intent is for the variable rate received from the swap counterparty to approximate the variable rate the Company pays to bondholders on its variable rate debt issue, resulting in a fixed rate being paid to the swap counterparty and reducing the Company's interest rate risk. The Company's net payment rate on the swap was 1.64% and 2.18% during the three months ended March 31, 2019 and 2018, respectively.

The interest rate swap agreement is classified as a financial derivative used for non-trading activities. The accounting standards regarding accounting for derivatives and hedging activities require 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 (see Note 6).

The Company uses regulatory accounting treatment rather than hedge accounting to defer the unrealized gains and losses on its interest rate swap. These unrealized gains and losses are recorded as a regulatory asset. Based on current ratemaking treatment, the Company expects the unrealized gains and losses to be recognized in rates as a component of interest expense as the swap settlements occur. Swap settlements are recorded in the income statement with the hedged item as interest expense. Swap settlements resulted in the reclassification from regulatory assets to interest expense of $50 and $65 during the three months ended March 31, 2019 and 2018, respectively. The overall swap result was a (gain) loss of $244 and $(257) for the three months ended March 31, 2019 and 2018, respectively. The Company expects to reclassify $212 from regulatory assets to interest expense as a result of swap settlements over the next 12 months.

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. On April 5, 2019 Standard & Poor's affirmed the Company's credit rating at A-, with a stable outlook and adequate liquidity. The Company's interest rate swap was in a liability position as of March 31, 2019. If a violation due to credit rating, or some other default provision, were triggered on March 31, 2019, the Company would have been required to pay the counterparty approximately $2,045.

The interest rate swap will expire on October 1, 2029 . Other than the interest rate swap, the Company has no other derivative instruments.

6. Fair Value Measurements

The accounting 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.

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Description		March 31, 2019		Fair Value Measurements at Reporting Date Using Significant Other Observable Inputs (Level 2)
Interest Rate Swap		$2,010		$2,010

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 March 31, 2019. 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 March 31, 2019. The use of the Company's credit rating resulted in a reduction in the fair value of the swap liability of $35 as of March 31, 2019. The fair value of the swap reflecting the Company's credit quality as of December 31, 2018 is shown in the table below.

Description		December 31, 2018		Fair Value Measurements at Reporting Date Using Significant Other Observable Inputs (Level 2)
Interest Rate Swap		$1,815		$1,815

The carrying amount of current assets and liabilities that are considered financial instruments approximates fair value as of the dates presented. The Company's total long-term debt, with a carrying value of $96,798 at March 31, 2019, and $95,908 at December 31, 2018, had an estimated fair value of approximately $110,000 and $105,000, 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. These inputs to this calculation are deemed to be Level 2 inputs. 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 2006 York County Industrial Development Authority issue and the letter of credit on the 2008 Pennsylvania Economic Development Financing Authority Series A issue.

Customers' advances for construction and note receivable had carrying values at March 31, 2019 of $7,214 and $255, respectively. At December 31, 2018, customers' advances for construction and note receivable had carrying values of $6,849 and $255, 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.

7. Commitments

The Company entered into a consent order agreement with the Pennsylvania Department of Environmental Protection in December 2016 after the Company determined it exceeded the action level for lead as established by the Lead and Copper Rule, or LCR, issued by the U.S. Environmental Protection Agency. The Company did not have an exceedance in any subsequent compliance test. Under the agreement, the Company committed to exceed the LCR replacement schedule by replacing all of the remaining known company-owned lead service lines within four years from the agreement. The cost for these service line replacements was approximately $2,365 and $2,341 through March 31, 2019 and December 31, 2018, respectively, and is included in utility plant. As of March 31, 2019, all known company-owned lead service lines have been replaced. Any additional company-owned lead service lines that are discovered will be replaced but are not expected to have a material impact on the financial position of the Company.

The Company was granted approval by the Pennsylvania Public Utility Commission, or PPUC, to modify its tariff to include the cost of the annual replacement of up to 400 lead customer-owned service lines over nine years from the agreement. The tariff modification allows the Company to replace customer-owned service lines at its own initial cost. The Company will record the costs as a regulatory asset to be recovered in future base rates to customers, over a four-year period. The cost for the customer-owned lead service line replacements was approximately $345 and $304 through March 31, 2019 and December 31, 2018, respectively, and is included as a regulatory asset. Based on its experience, the Company estimates that lead customer-owned service lines replacements will cost $910. This estimate is subject to adjustment as more facts become available.

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The following table shows the Company’s revenues disaggregated by service and customer type.

	Three Months Ended March 31
	2019		2018
Water utility service:
Residential	$	7,458	$	7,318
Commercial and industrial		3,163		3,134
Fire protection		734		713
Wastewater utility service:
Residential		253		247
Commercial and industrial		60		61
Billing and revenue collection services		18		16
Collection services		17		18
Other revenue		3		8
Total Revenue from Contracts with Customers		11,706		11,515
Rents from regulated property		125		129
Total Operating Revenue	$	11,831	$	11,644

Utility Service

The Company provides utility service as a distinct and single performance obligation to each of its water and wastewater customers. The transaction price is detailed in the tariff pursuant to an order by the PPUC and made publicly available. There is no variable consideration and no free service, special rates, or subnormal charges to any customer. Due to the fact that the contract includes a single performance obligation, no judgment is required to allocate the transaction price. The performance obligation is satisfied over time through the continuous provision of utility service through a stand-ready obligation to perform and the transfer of water or the collection of wastewater through a series of distinct transactions that are identical in nature and have the same pattern of transfer to the customer. The Company uses an output method to recognize the utility service revenue over time. The stand-ready obligation is recognized through the passage of time in the form of a fixed charge and the transfer of water or the collection of wastewater is recognized at a per unit rate based on the actual or estimated flow through the meter. Each customer is invoiced every month and the invoice is due within twenty days. The utility service has no returns or warranties associated with it. No revenue is recognized from performance obligations satisfied in prior periods and no performance obligations remain unsatisfied as of the end of the reporting period. A contract asset for unbilled revenue is recognized for the passage of time and the actual or estimated usage from the latest meter reading to the end of the accounting period. The methodology is standardized and consistently applied to reduce bias and the need for judgment.

Billing and Revenue Collection Service

The Company provides billing and revenue collection service as distinct performance obligations to four municipalities within the service territory of the Company. The municipalities provide wastewater service to their residents and the Company acts as the billing and revenue collection agent for the municipalities. The transaction price is a fixed amount per bill prepared as established in the contract. There is no variable consideration. Due to the fact that both the billing performance obligation and the revenue collection performance obligation are materially complete by the end of the reporting period, the Company does not allocate the transaction price between the two performance obligations. The performance obligations are satisfied at a point in time when the bills are sent as the municipalities receive all the benefits and bears all of the risk of non-collection at that time. Each municipality is invoiced when the bills are complete and the invoice is due within thirty days. The billing and revenue collection service has no returns or warranties associated with it. No revenue is recognized from performance obligations satisfied in prior periods and no performance obligations remain unsatisfied as of the end of the reporting period.

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Collection Service

The Company provides collection service as a distinct and single performance obligation to several municipalities within the service territory of the Company. The municipalities provide wastewater service to their residents. If those residents are delinquent in paying for their wastewater service, the municipalities request that the Company post for and shut off the supply of water to the premises of those residents. When the resident is no longer delinquent, the Company will restore water service to the premises. The transaction price for each posting, each shut off, and each restoration is a fixed amount as established in the contract. There is no variable consideration. Due to the fact that the contract includes a single performance obligation, no judgment is required to allocate the transaction price. The performance obligation is satisfied at a point in time when the posting, shut off, or restoration is completed as the municipalities receive all the benefits in the form of payment or no longer providing wastewater service. Each municipality is invoiced periodically for the posting, shut offs, and restorations that have been completed since the last billing and the invoice is due within thirty days. The collection service has no returns or warranties associated with it. No revenue is recognized from performance obligations satisfied in prior periods and no performance obligations remain unsatisfied as of the end of the reporting period. A contract asset for unbilled revenue is recognized for postings, shut offs, and restorations that have been completed from the last billing to the end of the accounting period.

Service Line Protection Plan

The Company provides service line protection as a distinct and single performance obligation to current water customers that choose to participate. The transaction price is detailed in the plan’s terms and conditions and made publicly available. There is no variable consideration. Due to the fact that the contract includes a single performance obligation, no judgment is required to allocate the transaction price. The performance obligation is satisfied over time through the continuous provision of service line protection through a stand-ready obligation to perform. The Company uses an output method to recognize the service line protection revenue over time. The stand-ready obligation is recognized through the passage of time. A customer has a choice to prepay for an entire year or to pay in advance each month. The service line protection plan has no returns or extended warranties associated with it. No revenue is recognized from performance obligations satisfied in prior periods and no material performance obligations remain unsatisfied as of the end of the reporting period.

9. Rate Matters

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 30, 2018 and sought an annual increase in water rates of $6,399 and an annual increase in wastewater rates of $289. Effective March 1, 2019, the PPUC authorized an increase in water rates designed to produce approximately $3,361 in additional annual revenues and an increase in wastewater rates designed to produce approximately $289 in additional annual revenues.

As part of a rate order approved by the PPUC, the Company has agreed to return $2,117 to customers as a reconcilable negative surcharge on their bills generated from March 2019 through February 2020 for the benefit of the lower tax rate effective January 1, 2018 resulting from the enactment of the Tax Cuts and Jobs Act of 2017, or 2017 Tax Act. During the three months ended March 31, 2019, the Company increased its regulatory liability by reducing revenue by $284, including the gross-up of revenue necessary to return, in rates, the effect of this temporary tax difference, and reclassified $27 from excess accumulated deferred income taxes on accelerated depreciation recorded at December 31, 2017. The Company returned $257 of the negative surcharges during the three months ended March 31, 2019.

The PPUC permits water utilities to collect a distribution system improvement charge, or DSIC. The DSIC allows the Company to add a charge to customers' bills for qualified replacement costs of certain infrastructure without submitting a rate filing. This surcharge mechanism typically adjusts periodically based on additional qualified capital expenditures completed or anticipated in a future period. The DSIC is capped at 5% of base rates, and is reset to zero when new base rates that reflect the costs of those additions become effective or when a utility's earnings exceed a regulatory benchmark. The DSIC reset to zero when the new base rates took effect March 1, 2019. The DSIC provided revenues of $249 and $480 for the three months ended March 31, 2019 and 2018, respectively.

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Components of Net Periodic Pension Cost

	Three Months Ended March 31
	2019			2018

Service cost	$	212		$	254
Interest cost		411			379
Expected return on plan assets		(683	)		(698	)
Amortization of actuarial loss		105			101
Amortization of prior service credit		(3	)		(3	)
Rate-regulated adjustment		533			542
Net periodic pension expense	$	575		$	575

Pension service cost is recorded in operating expenses. All other components of net periodic pension cost are recorded as other pension costs in other income (expenses).

Employer Contributions

The Company previously disclosed in its financial statements for the year ended December 31, 2018 that it expected to contribute $2,300 to its pension plans in 2019. For the three months ended March 31, 2019 , contributions of $575 have been made. The Company expects to contribute the remaining $1,725 during the final three quarters of 2019.

11. Stock-Based Compensation

On May 2, 2016, the Company’s stockholders approved The York Water Company Long-Term Incentive Plan, or LTIP. The LTIP was adopted to provide the incentive of long-term stock-based awards to officers, directors and key employees. The LTIP provides for the granting of nonqualified stock options, incentive stock options, stock appreciation rights, performance restricted stock grants and units, restricted stock grants and units, and unrestricted stock grants. A maximum of 100,000 shares of common stock may be issued under the LTIP over the ten-year life of the plan. The maximum number of shares of common stock subject to awards that may be granted to any participant in any one calendar year is 2,000. Shares of common stock issued under the LTIP may be treasury shares or authorized but unissued shares. The LTIP will be administered by the Compensation Committee of the Board, or the full Board, provided that the full Board will administer the LTIP as it relates to awards to non-employee directors of the Company. The Company filed a registration statement with the Securities and Exchange Commission on May 11, 2016 covering the offering of stock under the LTIP. The LTIP was effective on July 1, 2016.

On November 20, 2018, the Board accelerated the vesting period for restricted stock granted in 2016, 2017, and 2018 to one retiring officer from three years to that officer’s 2019 retirement date, which has been fully recognized as of March 31, 2019.

The restricted stock awards provide the grantee with the rights of a shareholder, including the right to receive dividends and to vote such shares, but not the right to sell or otherwise transfer the shares during the restriction period. As a result, the awards are included in common shares outstanding on the balance sheet. Restricted stock awards result in compensation expense valued at the fair market value of the stock on the date of the grant and are amortized ratably over the restriction period.

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The following tables summarize the stock grant amounts and activity for the three months ended March 31, 2019.

	Number of Shares			Grant Date Weighted Average Fair Value
Nonvested at beginning of the period		3,080			$33.85
Granted		–			–
Vested		(261	)		$33.99
Forfeited		–			–
Nonvested at end of the period		2,819			$33.84

For the three months ended March 31, 2019 and 2018, the statement of income includes $14 and $4 of stock-based compensation, respectively, and related recognized tax benefits of $4 and $1, respectively. The total fair value of the shares vested in the three months ended March 31, 2019 was $9. Total stock based compensation related to nonvested awards not yet recognized is $95 which will be recognized over the remaining three year vesting period.

12. Income Taxes

The Company filed for a change in accounting method under the Internal Revenue Service tangible property regulations, or TPR, effective in 2014. Under the change in accounting method, the Company is permitted to deduct the costs of certain asset improvements that were previously being capitalized and depreciated for tax purposes as an expense on its income tax return. This ongoing deduction results in a reduction in the effective income tax rate, a net reduction in income tax expense, and a reduction in the amount of income taxes currently payable. It also results in increases to deferred tax liabilities and regulatory assets representing the appropriate book and tax basis difference on capital additions.

The Company’s effective tax rate was 19.9% and 25.1% for the three months ended March 31, 2019 and 2018, respectively. The lower effective tax rate is primarily due to higher deductions from the TPR and lower state income taxes. The effective tax rate will vary depending on the level of eligible asset improvements expensed for tax purposes under TPR each period.

13. Impact of Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2016-02, Leases (Topic 842) , which replaces the existing guidance in Accounting Standard Codification 840 – Leases. This ASU requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use asset and a corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset, and for operating leases, the lessee would recognize a straight-line total lease expense. This ASU is effective for fiscal years beginning after December 15, 2018, and for interim periods within those fiscal years. The Company adopted the standard on January 1, 2019. The Company did not identify any material leases under this standard, and therefore the adoption did not have a material effect on its financial position, results of operations or cash flows.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

(In thousands of dollars, except per share amounts)

Forward-looking Statements

Certain statements contained in this report on Form 10-Q constitute “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933. Words such as "may," "should," "believe," "anticipate," "estimate," "expect," "intend," "plan" and similar expressions are intended to identify forward-looking statements. These forward-looking statements include certain information relating to the Company’s business strategy; statements including, but not limited to:

●	the amount and timing of rate changes and other regulatory matters including the recovery of costs recorded as regulatory assets;
●	expected profitability and results of operations;
●	trends;
●	goals, priorities and plans for, and cost of, growth and expansion;
●	strategic initiatives;
●	availability of water supply;
●	water usage by customers; and
●	the ability to pay dividends on common stock and the rate of those dividends.

The forward-looking statements in this report reflect what the Company currently anticipates will happen. What actually happens could differ materially from what it currently anticipates will happen. The Company does not intend to make a public announcement when forward-looking statements in this report are no longer accurate, whether as a result of new information, what actually happens in the future or for any other reason. Important matters that may affect what will actually happen include, but are not limited to:

●	changes in weather, including drought conditions or extended periods of heavy rainfall;
●	levels of rate relief granted;
●	the level of commercial and industrial business activity within the Company's service territory;
●	construction of new housing within the Company's service territory and increases in population;
●	changes in government policies or regulations, including the tax code;
●	the ability to obtain permits for expansion projects;
●	material changes in demand from customers, including the impact of conservation efforts which may impact the demand of customers for water;
●	changes in economic and business conditions, including interest rates;
●	loss of customers;
●	changes in, or unanticipated, capital requirements;
●	the impact of acquisitions;
●	changes in accounting pronouncements;
●	changes in the Company’s credit rating or the market price of its common stock; and
●	the ability to obtain financing.

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General Information

The primary business of the Company is to impound, purify to meet or exceed safe drinking water standards and distribute water. The Company also owns and operates three wastewater collection systems and two treatment systems. The Company operates within its franchised water territory, which covers 39 municipalities within York County, Pennsylvania and nine municipalities within Adams County, Pennsylvania. The Company’s wastewater operations include portions of four municipalities in York County, Pennsylvania. The Company is regulated by the Pennsylvania Public Utility Commission, or PPUC, for both water and wastewater in the areas of billing, payment procedures, dispute processing, terminations, service territory, debt and equity financing and rate setting. The Company must obtain PPUC approval before changing any practices associated with the aforementioned areas.

Water service is supplied through the Company's own distribution system. The Company obtains the bulk of its water supply from both the South Branch and East Branch of the Codorus Creek, which together have an average daily flow of 73.0 million gallons. This combined watershed area is approximately 117 square miles. The Company has two reservoirs, Lake Williams and Lake Redman, which together hold up to approximately 2.2 billion gallons of water. The Company supplements its reservoirs with a 15-mile pipeline from the Susquehanna River to Lake Redman which provides access to an additional supply of 12.0 million gallons of untreated water per day. The Company also owns seven wells which are capable of providing a safe yield of approximately 366,000 gallons per day to supply water to its customers in Carroll Valley Borough and Cumberland Township, Adams County. As of March 31, 2019, the Company's average daily availability was 35.4 million gallons, and average daily consumption was approximately 19.7 million gallons. The Company's service territory had an estimated population of 199,000 as of December 31, 2018. Industry within the Company's service territory is diversified, manufacturing such items as fixtures and furniture, electrical machinery, food products, paper, ordnance units, textile products, air conditioning systems, laundry detergent, barbells and motorcycles.

The Company's water business is somewhat dependent on weather conditions, particularly the amount and timing of rainfall. Revenues are particularly vulnerable to weather conditions in the summer months. Prolonged periods of hot and dry weather generally cause increased water usage for watering lawns, washing cars, and keeping golf courses and sports fields irrigated. Conversely, prolonged periods of dry weather could lead to drought restrictions from governmental authorities. Despite the Company’s adequate water supply, customers may be required to cut back water usage under such drought restrictions which would negatively impact revenues. The Company has addressed some of this vulnerability by instituting minimum customer charges which are intended to cover fixed costs of operations under all likely weather conditions.

The Company’s business does not require large amounts of working capital and is not dependent on any single customer or a very few customers for a material portion of its business. Increases in revenues are generally dependent on the Company’s ability to obtain rate increases from the PPUC in a timely manner and in adequate amounts and to increase volumes of water sold through increased consumption and increases in the number of customers served. The Company continuously looks for water and wastewater acquisition and expansion opportunities both within and outside its current service territory as well as additional opportunities to enter into bulk water contracts with municipalities and other entities to supply water.

The Company has agreements with several municipalities to provide sewer billing and collection services. The Company also has a service line protection program on a targeted basis in order to further diversify its business. Under this optional program, customers pay a fixed monthly fee, and the Company will repair or replace damaged customer service lines, as needed, subject to an annual maximum dollar amount. Opportunities to expand both initiatives are being pursued.

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Results of Operations

Three Months Ended March 31, 2019 Compared

With Three Months Ended March 31, 2018

Net income for the first quarter of 2019 was $2,813, an increase of $219, or 8.4%, from net income of $2,594 for the same period of 2018. The primary contributing factors to the increase were lower income taxes and higher operating revenues which were partially offset by higher expenses.

Operating revenues for the first quarter of 2019 increased $187, or 1.6%, from $11,644 for the three months ended March 31, 2018 to $11,831 for the corresponding 2019 period. The primary reason for the increase was a rate increase effective March 1, 2019. The Company reduced revenue by $284 in the first quarter of 2019 and $411 in the same period of 2018, by recording a regulatory liability for the benefit of the lower tax rate effective January 1, 2018 resulting from the enactment of the 2017 Tax Act, which it has agreed to give back to customers as part of the new rate order, including the gross-up of revenue necessary to return the effect of the temporary tax difference. Growth in the customer base also added to revenues. The average number of customers served in 2019 increased as compared to 2018 by 658 customers, from 69,699 to 70,357 customers. The increased revenues were partially offset by a $231 decrease from a lower distribution system improvement charge, or DSIC, allowed by the PPUC. The DSIC reset to zero on March 1, 2019 when the rate order took effect. Total per capita consumption for the first quarter of 2019 was approximately 1.6% lower than the same period of last year. For the remainder of the year, the Company expects revenues to increase due to the increase in rates, higher summer demand and an increase in the number of water and wastewater customers from acquisitions and growth within the Company’s service territory. Other regulatory actions and weather patterns could impact results.

Operating expenses for the first quarter of 2019 increased $41, or 0.6%, from $6,504 for the first quarter of 2018 to $6,545 for the corresponding 2019 period. The increase was primarily due to higher expenses of approximately $97 for wages, $50 for depreciation, $42 for purchased power, $29 for technology upgrades, and $27 for taxes other than income taxes. The increase was partially offset by reduced expenses of approximately $90 for health insurance, $38 for wastewater operating expenses, and $32 for water treatment. Other expenses decreased by a net of $44. For the remainder of the year, the Company expects depreciation expense to continue to rise due to additional investment in utility plant, and other expenses to increase at a moderate rate as costs to treat water and to maintain and extend the distribution system continue to rise.

Interest on debt for the first quarter of 2019 decreased $37, or 2.7%, from $1,364 for the first quarter of 2018 to $1,327 for the corresponding 2019 period. The decrease was primarily due to lower interest on long-term debt due to the refinancing of the 10.17% and 9.60% Senior Notes with 4.54% Senior Notes. The average debt outstanding under the lines of credit was $4,612 for the first quarter of 2019 and $6,583 for the first quarter of 2018. The weighted average interest rate on the lines of credit was 3.71% for the quarter ended March 31, 2019 and 2.83% for the quarter ended March 31, 2018. Interest expense for the remainder of the year is expected to increase due to continued borrowings under lines of credit, partially offset by the refinancing of the Company’s Senior Notes.

Allowance for funds used during construction decreased $23, from $92 in the first quarter of 2018 to $69 in the corresponding 2019 period, due to a planned lower volume of eligible construction. Eligible 2018 construction expenditures included the completion of an additional raw water pumping station. Allowance for funds used during construction for the remainder of the year is expected to increase based on a projected increase in the amount of eligible construction.

Other income (expenses), net for the first quarter of 2019 reflects increased expenses of $69 as compared to the same period of 2018. Lower earnings on life insurance policies of approximately $78 were the primary reason for the decrease. Other expenses decreased by a net of $9. For the remainder of the year, other income (expenses) will be largely determined by the change in market returns and discount rates for retirement programs and related assets.

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Income taxes for the first quarter of 2019 decreased $170, or 19.5%, compared to the same period of 2018 primarily due to higher deductions from the Internal Revenue Service, or IRS, tangible property regulations, or TPR, and lower state income taxes. The Company’s effective tax rate was 19.9% for the first quarter of 2019 and 25.1% for the first quarter of 2018. The Company's effective tax rate for the remainder of 2019 will largely be determined by the level of eligible asset improvements expensed for tax purposes under TPR each period.

Rate Matters

See Note 9 to the financial statements included herein for a discussion of rate matters.

The Company does not expect to collect a distribution system improvement charge or file a rate increase request in 2019.

Acquisitions and Growth

On October 8, 2013, the Company signed an agreement to purchase the wastewater assets of SYC WWTP, L.P. in Shrewsbury and Springfield Townships, York County, Pennsylvania. Completion of the acquisition is contingent upon receiving approval from all required regulatory authorities. Closing is expected in 2019, at which time the Company will add approximately 30 commercial and industrial wastewater customers.

On October 25, 2018, the Company signed an agreement to purchase the wastewater collection assets of the Jacobus Borough Sewer Authority in York County, Pennsylvania. Completion of the acquisition is contingent upon receiving approval from all required regulatory authorities. Closing is expected in the third quarter of 2019 at which time the Company will add approximately 700 wastewater customers.

On December 28, 2018, the Company signed an agreement to purchase the wastewater collection and treatment assets of Felton Borough in York County Pennsylvania. Completion of the acquisition is contingent upon receiving approval from all required regulatory authorities. Closing is expected in 2019 at which time the Company will add approximately 130 wastewater customers.

On March 4, 2019, the Company signed an agreement to purchase the wastewater collection assets of West Manheim Township in York County, Pennsylvania. Completion of the acquisition is contingent upon receiving approval from all required regulatory authorities. Closing is expected in 2020 at which time the Company will add approximately 1,800 wastewater customers. These wastewater customers are currently water customers of the Company.

In total, these acquisitions are expected to be immaterial to Company results. The Company is also pursuing other bulk water contracts and acquisitions in and around its service territory to help offset any further declines in per capita water consumption and to grow its business.

On May 10, 2017, the Company signed an emergency interconnect agreement with Dallastown-Yoe Water Authority. The effectiveness of this agreement is contingent upon receiving approval from all required regulatory authorities. Approval is expected to be granted in 2019 at which time the Company will begin construction of a water main extension to a single point of interconnection and either supply a minimum agreed upon amount of water to the authority, receive a payment in lieu of water, or provide water during an emergency, at current tariff rates.

Capital Expenditures

For the three months ended March 31, 2019, the Company invested $3,273 in construction expenditures for routine items as well as various replacements and improvements to infrastructure. The Company was able to fund construction expenditures using internally-generated funds, line of credit borrowings, proceeds from its stock purchase plans and customer advances and contributions.

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The Company anticipates construction expenditures for the remainder of 2019 of approximately $17,000 exclusive of any potential acquisitions not yet approved. In addition to routine transmission and distribution projects, a portion of the anticipated expenditures will be for additional main extensions, dam and spillway improvements, replacing a water storage tank, expansion of a wastewater treatment plant, and various replacements and improvements to infrastructure. The Company intends to use primarily internally-generated funds for its anticipated construction and fund the remainder through line of credit borrowings, proceeds from its stock purchase plans and customer advances and contributions. Customer advances and contributions are expected to account for between 5% and 10% of funding requirements during the remainder of 2019. The Company believes it will have adequate credit facilities and access to the capital markets, if necessary, to meet its anticipated capital needs in the remainder of 2019.

Liquidity and Capital Resources

Cash

The Company manages its cash through a cash management account that is directly connected to one of its lines of credit. Excess cash generated automatically pays down outstanding borrowings under the line of credit arrangement. If there are no outstanding borrowings, the cash is used as an earnings credit to reduce banking fees. Likewise, if additional funds are needed beyond what is generated internally for payroll, to pay suppliers, to fund capital expenditures, or to pay debt service, funds are automatically borrowed under the line of credit. As of March 31, 2019, the Company has borrowed $409 on its lines of credit and incurred a cash overdraft on its cash management account of $529. The cash management facility and other lines of credit are expected to provide the necessary liquidity and funding for the Company's operations, capital expenditures, acquisitions and potential buybacks of stock for the foreseeable future.

Accounts Receivable

The accounts receivable balance tends to follow the change in revenues but is also affected by the timeliness of payments by customers and the level of the reserve for doubtful accounts. In the three months ended March 31, 2019, lower revenue as compared to the end of 2018 as well as the negative surcharge to return to customers the benefit of the lower tax rate resulted in a decrease in accounts receivable – customers. Other receivables decreased due to the receipt of a large receivable to fund a capital project, outstanding at December 31, 2018. A reserve is maintained at a level considered adequate to provide for losses that can be reasonably anticipated based on inactive accounts with outstanding balances. Management periodically evaluates the adequacy of the reserve 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. If the status of these factors deteriorates, the Company may incur additional expenses for uncollectible accounts and experience a reduction in its internally-generated funds.

Internally-generated Funds

The amount of internally-generated funds available for operations and construction depends on the Company’s ability to obtain timely and adequate rate relief, changes in regulations including taxes, customers’ water usage, weather conditions, customer growth and controlled expenses. During the first three months of 2019, the Company generated $5,589 internally from operations as compared to the $5,438 it generated during the first three months of 2018 primarily due to lower interest paid.

Credit Lines

Historically, the Company has borrowed $15,000 to $20,000 under its lines of credit before refinancing with long-term debt or equity capital. As of March 31, 2019, the Company maintained unsecured lines of credit aggregating $41,500 with four banks at interest rates of LIBOR plus 1.15% to LIBOR plus 1.25%. The Company had $409 in outstanding borrowings under its lines of credit as of March 31, 2019. The weighted average interest rate on line of credit borrowings as of March 31, 2019 was 3.75%. The Company plans to renew its committed line of credit in the amount of $10,000 that expires in 2019 for an additional year, as well as extend the maturity for its three committed lines of credit aggregating $31,500 into 2021, under similar terms and conditions.

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The Company has taken steps to manage the risk of reduced credit availability. It has maintained committed lines of credit that cannot be called on demand and obtained a 2-year revolving maturity on most of its facilities. There is no guarantee that the Company will be able to obtain sufficient lines of credit with favorable terms in the future. If the Company is unable to obtain sufficient lines of credit or to refinance its line of credit borrowings with long-term debt or equity when necessary, it may have to eliminate or postpone capital expenditures. Management believes the Company will have adequate capacity under its current lines of credit to meet anticipated financing needs throughout 2019.

Long-term Debt

The Company’s loan agreements contain various covenants and restrictions. Management believes it is currently in compliance with all of these restrictions. See Note 6 to the Company's Annual Report on Form 10-K for the year ended December 31, 2018 for additional information regarding these restrictions.

The Company’s total long-term debt as a percentage of the total capitalization, defined as total common stockholders’ equity plus total long-term debt, was 43.2% as of March 31, 2019 and December 31, 2018. The Company expects the debt to total capitalization ratio to increase with additional line of credit borrowings. The Company expects to allow the debt percentage to trend upward until it approaches fifty percent before considering additional equity. A debt to total capitalization ratio between forty-six and fifty percent has historically been acceptable to the PPUC in rate filings. Due to its ability to generate more cash internally, the Company has been able to keep its ratio below fifty percent.

Income Taxes, Deferred Income Taxes and Uncertain Tax Positions

The Company filed for a change in accounting method under the IRS TPR effective in 2014. Under the change in accounting method, the Company is permitted to deduct the costs of certain asset improvements that were previously being capitalized and depreciated for tax purposes as an expense on its income tax return. This ongoing deduction results in a reduction in the effective income tax rate, a net reduction in income tax expense, and a reduction in the amount of income taxes currently payable. It also results in increases to deferred tax liabilities and regulatory assets representing the appropriate book and tax basis difference on capital additions.

The Company’s effective tax rate will largely be determined by the level of eligible asset improvements expensed for tax purposes that would have been capitalized for tax purposes prior to the implementation of TPR.

The Company has a substantial deferred income tax asset primarily due to the excess accumulated deferred income taxes on accelerated depreciation from the 2017 Tax Act and the differences between the book and tax balances of the pension and deferred compensation plans. The Company does not believe a valuation allowance is required due to the expected generation of future taxable income during the periods in which those temporary differences become deductible.

The Company has seen an increase in its deferred income tax liability amounts primarily as a result of the accelerated and bonus depreciation deduction available for federal tax purposes which creates differences between book and tax depreciation expense. The Company expects this trend to continue as it makes significant investments in capital expenditures subject to accelerated depreciation or TPR, but at a more modest rate due to the elimination of bonus depreciation on qualified water and wastewater property.

The Company has determined there are no uncertain tax positions that require recognition as of March 31, 2019.

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Common Stock

Common stockholders’ equity as a percent of the total capitalization was 56.8% as of March 31, 2019 and December 31, 2018. The volume of share repurchases and line of credit borrowings, among other things, could reduce this percentage in the future. It is the Company’s general intent to target a ratio between fifty and fifty-four percent.

Credit Rating

On April 5, 2019, Standard & Poor’s affirmed the Company’s credit rating at A-, with a stable outlook and adequate liquidity. The Company’s ability to maintain its credit rating depends, among other things, on adequate and timely rate relief, which it has been successful in obtaining, its ability to fund capital expenditures in a balanced manner using both debt and equity and its ability to generate cash flow. The Company’s objectives are to continue to maximize its funds provided by operations and maintain a strong capital structure in order to be able to attract capital.

Physical and Cyber Security

The Company maintains security measures at its facilities, and collaborates with federal, state and local authorities and industry trade associations regarding information on possible threats and security measures for water and wastewater utility operations. The costs incurred are expected to be recoverable in water and wastewater rates and are not expected to have a material impact on its business, financial condition, or results of operations.

The Company relies on information technology systems in connection with the operation of the business, especially with respect to customer service, billing, accounting, and in some cases, the monitoring and operation of treatment, storage and pumping facilities. In addition, the Company relies on these systems to track utility assets and to manage maintenance and construction projects, materials and supplies, and human resource functions. The information technology systems may be vulnerable to damage or interruption from cyber security attacks or other cyber-related events, including, but not limited to, power loss, computer systems failures, internet, telecommunications or data network failures, physical and electronic loss of data, computer viruses, intentional security breaches, hacking, denial of service actions, misappropriation of data, and similar events. In some cases, administration of certain functions may be outsourced to third-party service providers that could also be targets of cyber security attacks. A loss of these systems, or major problems with the operation of these systems, could harm the business, financial condition, and results of operations of the Company through the loss or compromise of customer, financial, employee, or operational data, disruption of billing, collections or normal field service activities, disruption of electronic monitoring and control of operational systems, and delays in financial reporting and other normal management functions.

Possible impacts associated with a cyber security attack or other events may include remediation costs related to lost, stolen, or compromised data, repairs to data processing systems, increased cyber security protection costs, adverse effects on our compliance with regulatory and environmental laws and regulation, including standards for drinking water, litigation, and reputational damage.

The Company has implemented processes, procedures and controls to prevent or limit the effect of these possible events, and maintains insurance to help defray costs associated with cyber security attacks. The Company has not experienced a material impact on business or operations from these attacks. Although the Company does not believe its systems are at a materially greater risk of cyber security attacks than other similar organizations and despite the implementation of robust security measures, the Company cannot provide assurance that the insurance will fully cover the costs of a cyber security event, and its robust security measures do not guarantee that reputation and financial results will not be adversely affected by such an incident.

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Environmental Matters

The Company entered into a consent order agreement with the Pennsylvania Department of Environmental Protection in December 2016 after the Company determined it exceeded the action level for lead as established by the Lead and Copper Rule, or LCR, issued by the U.S. Environmental Protection Agency . The Company did not have an exceedance in any subsequent compliance test. Under the agreement, the Company committed to exceed the LCR replacement schedule by replacing all of the remaining known company-owned lead service lines within four years from the agreement. The cost for these service line replacements was approximately $2,365 and $2,341 through March 31 , 2019 and December 31, 2018, respectively, and is included in utility plant. As of March 31, 2019, all known company-owned lead service lines have been replaced. Any additional company-owned lead service lines that are discovered will be replaced but are not expected to have a material impact on the financial position of the Company.

The Company was granted approval by the Pennsylvania Public Utility Commission, or PPUC, to modify its tariff to include the cost of the annual replacement of up to 400 lead customer-owned service lines over nine years from the agreement. The tariff modification allows the Company to replace customer-owned service lines at its own initial cost. The Company will record the costs as a regulatory asset to be recovered in future base rates to customers, over a four-year period. The cost for the customer-owned lead service line replacements was approximately $345 and $304 through March 31 , 2019 and December 31, 2018, respectively, and is included as a regulatory asset. Based on its experience, the Company estimates that lead customer-owned service lines replacements will cost $910. This estimate is subject to adjustment as more facts become available.

Critical Accounting Estimates

The methods, estimates, and judgments the Company used in applying its accounting policies have a significant impact on the results reported in its financial statements. The Company’s accounting policies require management to make subjective judgments because of the need to make estimates of matters that are inherently uncertain. The Company’s most critical accounting estimates include regulatory assets and liabilities, revenue recognition and accounting for its pension plans. There has been no significant change in accounting estimates or the method of estimation during the quarter ended March 31, 2019.

Off-Balance Sheet Arrangements

The Company does not use off-balance sheet transactions, arrangements or obligations that may have a material current or future effect on financial condition, results of operations, liquidity, capital expenditures, capital resources or significant components of revenues or expenses. The Company does not use securitization of receivables or unconsolidated entities. For risk management purposes, the Company uses a derivative financial instrument, an interest rate swap agreement discussed in Note 5 to the financial statements included herein. The Company does not engage in trading or other risk management activities, does not use other derivative financial instruments for any purpose, has no guarantees and does not have material transactions involving related parties.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

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Item 4.

Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

The Company's management, with the participation of the Company's President and Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company's disclosure controls and procedures as of the end of the period covered by this report. Based upon this evaluation, the Company's President and Chief Executive Officer along with the Chief Financial Officer concluded that the Company's disclosure controls and procedures as of the end of the period covered by this report are effective such that the information required to be disclosed by the Company in reports filed under the Securities Exchange Act of 1934, as amended, is (i) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (ii) accumulated and communicated to the Company’s management, including the President and Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

No change in the Company's internal control over financial reporting occurred during the Company's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 6.	Exhibits.
Exhibit No.	Description
3	Amended and Restated Articles of Incorporation. Incorporated herein by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 4, 2010.
3.1	Amended and Restated By-Laws. Incorporated herein by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 26, 2012.
10.1	Form of Amended and Restated Change in Control Agreement made as of November 5, 2008 between The York Water Company and each of the individuals listed on a schedule attached thereto, which plans are identical in all material respects except as indicated in the attached schedule.
10.2	Form of Amended and Restated Deferred Compensation Plan made as of January 1, 2016 between The York Water Company and each of the individuals listed on a schedule attached thereto, which plans are identical in all material respects except as indicated in the attached schedule.
31.1	Certification of Chief Executive Officer, pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934.
31.2	Certification of Chief Financial Officer, pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934.
32.1	Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	THE YORK WATER COMPANY


	/s/ Jeffrey R. Hines
Date: May 7, 2019	Jeffrey R. Hines Principal Executive Officer



	/s/ Matthew E. Poff
Date: May 7, 2019	Matthew E. Poff Principal Financial and Accounting Officer

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Page 26

I, Jeffrey R. Hines, certify that:

I have reviewed this quarterly report on Form 10-Q of The York Water Company;

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;

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;

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:

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;

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;

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

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

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 the registrant's board of directors (or persons performing the equivalent function):

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

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.

/s/ Jeffrey R. Hines

I, Matthew E. Poff, certify that:

I have reviewed this quarterly report on Form 10-Q of The York Water Company;

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.

Chief Financial Officer

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of The York Water Company (the “Company”) on Form 10-Q for the period ending March 31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jeffrey R. Hines, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a)); and

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

THE YORK WATER COMPANY

/s/ Jeffrey R. Hines

Chief Executive Officer

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of The York Water Company (the “Company”) on Form 10-Q for the period ending March 31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Matthew E. Poff, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a)); and

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

THE YORK WATER COMPANY

Chief Financial Officer

AMENDED AND RESTATED

AGREEMENT

This Amended and Restated Agreement (this “Agreement”) made as of ____________________, between The York Water Company, a Pennsylvania corporation (the “Company”), and ________________ (“Employee”).

WHEREAS, Employee is the ______________________ of the Company and devotes substantially all of his business time and efforts to the Company’s affairs;

WHEREAS, the Company recognizes that the departure or distraction of key management personnel would be detrimental to the business of the Company;

WHEREAS, the Board of Directors of the Company has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of key members of the Company’s management to their assigned duties without distraction;

WHEREAS, in consideration of Employee’s continued employment with the Company and his agreement not to compete with the Company as set forth in this Agreement, the Company agrees that Employee shall receive the compensation set forth in this Agreement against the adverse financial and career impact on Employee if his employment with the Company is terminated under certain circumstances;

WHEREAS, the Company wishes to reward the dedication and loyalty of Employee by providing for certain bonus payments to be made to Employee based upon Employee’s tenure, the Company agrees that Employee shall receive the payments set forth in this Agreement upon the achievement of certain temporal milestones;

WHEREAS, the Company and Employee previously entered into this Agreement on ____________ (the “Prior Agreement”); and

WHEREAS, the parties now wish to amend and restate the Prior Agreement on the terms set forth herein to make this Agreement compliant with the applicable requirements of Section 409A of the Code (as defined below) and the regulations promulgated thereunder.

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements hereinafter set forth and intending to be legally bound hereby, the parties hereto agree as follows:

1. Definitions. For all purposes of this Agreement, the following terms shall have the meanings specified in this Section unless the context clearly otherwise requires:

(a) “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act.

(b) A Person shall be deemed the “Beneficial Owner” of any securities: (i) that such Person or any of such Person’s Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in writing) or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise; provided, however, that a Person shall not be deemed the “Beneficial Owner” of securities tendered pursuant to a tender or exchange offer made by such Person or any of such Person’s Affiliates or Associates until such tendered securities are accepted for payment, purchase or exchange; (ii) that such Person or any of such Person’s Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or has “beneficial ownership” of (as determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange Act), including without limitation, pursuant to any agreement, arrangement or understanding, whether or not in writing; provided, however, that a Person shall not be deemed the “Beneficial Owner” of any security under this clause (ii) as a result of an oral or written agreement, arrangement or understanding to vote such security if such agreement, arrangement or understanding (A) arises solely from a revocable proxy given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the General Rules and Regulations under the Exchange Act, and (B) is not then reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report); or (iii) that are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person (or any of such Person’s Affiliates or Associates) has any agreement, arrangement or understanding (whether or not in writing) for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in the proviso to clause (ii) above) or disposing of any voting securities of the Company; provided, however, that nothing in this Section 1(b) shall cause a Person engaged in business as an underwriter of securities to be the “Beneficial Owner” of any securities acquired through such Person’s participation in good faith in a firm commitment underwriting until the expiration of 40 days after the date of such acquisition.

(d) “Business Combination” shall mean a reorganization, merger or consolidation of the Company.

(e) “Cause” shall mean (i) misappropriation of funds or any act of common law fraud, (ii) habitual insobriety or substance abuse, (iii) conviction of a felony or any crime involving moral turpitude, (iv) willful misconduct or gross negligence by Employee in the performance of his duties, (v) the willful failure of Employee to perform a material function of Employee’s duties hereunder, or (vi) Employee engaging in a conflict of interest or other breach of fiduciary duty.

(f) “Change of Control” shall mean:

(i) Any Person (except Employee, his Affiliates and Associates, the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company, or any Person or entity organized, appointed or established by the Company for or pursuant to the terms of any such employee benefit plan), together with all Affiliates and Associates of such Person, becomes the Beneficial Owner in the aggregate of 50 percent or more of either (A) the Outstanding Company Common Stock or (B) the Company Voting Securities , in either case unless a majority of the members of the Board in office immediately prior to such acquisition determine within five business days of the receipt of actual notice of such acquisition that the circumstances do not warrant the implementation of the provisions of this Agreement;

(ii) The Incumbent Board ceases for any reason to constitute at least a majority of the Board, provided that any individual becoming a director subsequent to the beginning of such period whose election or nomination for election by the Company’s shareholders was approved by a vote of at least a majority of the directors then constituting the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the Directors of the Company (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act);

(iii) Consummation by the Company of a Business Combination, in each case, with respect to which all or substantially all of the individuals and entities who were the respective Beneficial Owners of the Outstanding Company Common Stock and Company Voting Securities immediately prior to such Business Combination are not, following such Business Combination, Beneficial Owners, directly or indirectly, of more than 50 percent of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination in substantially the same proportion as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and Company Voting Securities, as the case may be, in any such case unless a majority of the members of the Board in office immediately prior to such Business Combination determines at the time of such Business Combination that the circumstances do not warrant the implementation of the provisions of this Agreement; or

(iv) (A) Consummation of a complete liquidation or dissolution of the Company or (B) sale or other disposition of all or substantially all of the assets of the Company other than to a corporation with respect to which, following such sale or disposition, individuals and entities that are the Beneficial Owners of more than 50 percent of, respectively, the Outstanding Company Common Stock and the Company Voting Securities are substantially the same as the individuals and entities who were the Beneficial Owners, respectively, of the Outstanding Company Common Stock and Company Voting Securities immediately prior to such sale or disposition in substantially the same proportion as their ownership of the Outstanding Company Common Stock and Company Voting Securities, as the case may be, immediately prior to such sale or disposition, in any such case unless a majority of the members of the Incumbent Board in office immediately prior to such sale or disposition determines at the time of such sale or disposition that the circumstances do not warrant the implementation of the provisions of this Agreement.

(g) “Code” shall mean the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.

(h) “Company Voting Securities” shall mean the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors.

(i) “Compensation” shall mean the sum of base compensation and annual bonus compensation payable in cash to Employee during the twelve months preceding any date of determination under this Agreement.

(j) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

(k) “Good Reason Termination” shall mean a Termination of Employment initiated by Employee following a Change of Control and the occurrence of one or more of the following events, without the consent of Employee:

(i) any action or inaction that constitutes a material breach by the Company of this Agreement, including but not limited to a breach of Section 6 hereof;

(ii) any material reduction by the Company of the authority, duties or responsibilities of Employee’s principal assignment with the Company;

(iii)

any material reduction in Employee's base compensation;

(iv) any removal by the Company of Employee from the employment grade or officer positions which Employee holds as of the effective date hereof except in connection with promotions to higher office; provided, however, that such removal results in a diminution in Employee's authority, duties or responsibilities; or

(v) a material change in the geographic location at which Employee must perform services; provided that a transfer of Employee to a location that is more than 50 miles from his principal place of business immediately preceding the Change of Control shall constitute a material change in the geographic location.

Notwithstanding the preceding definition of Good Reason Termination, Employee shall only have a Good Reason Termination for purposes of this Agreement if he provides written notice to the Company identifying the event or omission constituting the reason for the Good Reason Termination not more than 30 days following the occurrence of such event. Within 30 days after notice has been provided, the Company shall have the opportunity, but shall have no obligation, to cure such events or conditions that give rise to the Good Reason Termination. If the Company fails to cure the events or conditions giving rise to Employee’s Good Reason Termination, Employee must actually terminate within 60 days thereafter for the termination to be a Good Reason Termination.

(l) “Incumbent Board” shall mean those individuals who, as of any date of determination under the Agreement, are individuals who have constituted the Board during the preceding 12-month period.

(m) “Outstanding Company Common Stock” shall mean the then outstanding shares of common stock of the Company.

(n) “Person” shall mean any natural person, business trust, corporation, partnership, limited liability company, joint stock company, proprietorship, association, trust, joint venture, unincorporated association or any other legal entity of whatever nature.

(o) “Phase Out Date” shall mean the first day of the calendar month coincident with or next following Employee’s 65th birthday.

(p) “Subsidiary” shall mean any corporation in which the Company, directly or indirectly, owns at least a 50 percent interest or an unincorporated entity of which the Company, directly or indirectly, owns at least 50 percent of the profits or capital interests.

(q) “Termination Date” shall mean the date of Employee’s Termination of Employment.

(r) “Termination of Employment” shall mean Employee’s “separation from service” within the meaning of such term under Section 409A of the Code) with the Company.

2. Notice of Termination. Any Termination of Employment shall be communicated by a Notice of Termination in accordance with Section 17 hereof. For purposes of this Agreement, a “Notice of Termination” means a written notice which, in the case of a Good Reason Termination by Employee (a) indicates the specific reasons for the termination, (b) briefly summarizes the facts and circumstances deemed to provide a basis for termination of Employee’s employment, and (c) if the Termination Date is other than the date of receipt of such notice, specifies the Termination Date (which date shall not be more than 15 days after the giving of such notice).

3. Severance Compensation upon Termination; Bonus Payments upon Certain Circumstances.

(a) In the event of (i) an involuntary Termination of Employment for any reason other than Cause or (ii) a Good Reason Termination, in either case within one year following a Change of Control or six months prior to a Change of Control, the Company shall pay to Employee, within 60 days after the later of the Termination Date or the date of the Change of Control, a single sum cash payment equal to _____ multiplied by Employee’s Compensation and on the first payroll date of the seventh month following Employee’s Termination Date with the Company, in accordance with the requirements set forth in Section 14(c), an additional single sum cash payment equal to one-fourth (25 percent) multiplied by Employee’s Compensation, both payments subject to Employee’s execution and non-revocation of a release in form and substance reasonably satisfactory to the Chairman of the Board and customary employment taxes and statutory deductions.

(b) In the event of Employee’s voluntary Termination of Employment for any reason other than a Good Reason Termination, within (i) three months after a Change of Control, Employee shall not be entitled to any payment; or (ii) three months and one day to 12 months following a Change of Control, the Company shall pay to Employee on the first payroll date of the seventh month following Employee’s Termination Date with the Company, in accordance with the requirements set forth in Section 14(c), subject to Employee’s execution and non-revocation of a release in form and substance reasonably satisfactory to the Chairman of the Board, a single sum cash payment equal to one-fourth (25 percent) of Employee’s Compensation, subject to customary employment taxes and statutory deductions.

(c) If on the date 12 months and one day following a Change of Control there has not been a Termination of Employment, then the Company shall pay to Employee, within 60 days after such date, a single sum in cash equal to one-half (50 percent) multiplied by Employee’s Compensation, subject to customary employment taxes and statutory deductions; provided that the foregoing amount shall only be paid if the transaction constituting a Change of Control hereunder also constitutes a “change in control event” as such term is defined in Section 409A of the Code.

(d) Notwithstanding paragraph (a) or (b) above and without regard to the fact that payment is to be made in a single sum, until the earlier of the Phase Out Date or 36 months after the Termination Date, Employee shall be entitled to continued coverage under the Company’s medical, dental and other welfare benefit plans at the same level of coverage (and required employee contributions, if any) as Employee was receiving at the time of his Termination Date, subject to the Company’s right to make changes to such plans for all of its executive level employees generally; provided, however, that this obligation of the Company shall cease upon Employee’s obtaining new employment that provides Employee with eligibility for comparable medical benefits without a pre-existing condition limitation; and, provided, further, that such extended coverage shall be in addition to, and not as a substitute for, Employee’s COBRA rights which shall apply at the end of such extended coverage. All other benefit plan coverages, retirement benefit accruals and fringe benefit eligibility shall cease on the Termination Date subject to applicable rights under ERISA and COBRA.

4. Other Payments. The payment due under Section 3 hereof shall be in addition to and not in lieu of any payments or benefits accrued for Employee through the Termination Date under any plan, policy or program of the Company, including the Supplemental Retirement Plan and the Deferred Compensation Agreement, except that no payments shall be due to Employee under any severance pay plan for the Company’s employees.

5. Enforcement.

(a) In the event that the Company shall fail or refuse to make payment of any amounts due Employee under Sections 3 and 4 hereof within the respective time periods provided therein, the Company shall pay to an escrow agent, who shall invest such sum with interest to be paid to the prevailing party, any amount remaining unpaid under Section 3 or 4. In such event, the parties shall engage in arbitration in the City of Harrisburg, Pennsylvania, in accordance with the National Rules for the Resolution of Employment Disputes then in effect of the American Arbitration Association, before a panel of three arbitrators, one of whom shall be selected by the Company and one by Employee, and the third of whom shall be selected by the other two arbitrators. Any award entered by the arbitrators shall be final, binding and nonappealable and judgment may be entered thereon by either party in accordance with applicable law in any court of competent jurisdiction. This arbitration provision shall be specifically enforceable. The arbitrators shall have no authority to modify any provision of this Agreement or to award a remedy for a dispute involving this Agreement other than a benefit specifically provided under or by virtue of the Agreement. The delayed payment will be treated as paid on the date specified under this Agreement if Employee accepts any portion of the payment that the Company is willing to make, Employee makes prompt and reasonable, good faith efforts to collect the remaining portion of the payment and the remainder of the payment is made no later than the end of the Company’s first taxable year in which the arbitrators reach a decision, the Company and Employee enter into a legally binding settlement of the dispute over the payment or the date the Company concedes the payment is due to Employee. For Employee’s efforts to collect payment to be considered prompt, reasonable and in good faith, Employee must provide notice to the Company within 90 days of the latest date that payment could have been made in accordance with the terms of this Agreement and, if not paid, Employee must take further enforcement measures within 180 days after such date.

(b) The Company shall pay Employee on demand the amount necessary to reimburse Employee in full for all reasonable expenses (including reasonable attorneys’ fees and expenses) incurred by Employee in enforcing any of the obligations of the Company under this Agreement subject to Employee’s duty to repay such sums to the Company in the event that Employee does not prevail on any material issue which is the subject of such arbitration. If Employee prevails on at least one material issue which is the subject of such arbitration, the Company shall be responsible for all of the fees of the American Arbitration Association and the arbitrators and any expenses relating to the conduct of the arbitration (including Employee’s reasonable attorneys’ fees and expenses). Otherwise, each party shall be responsible for his or its own expenses relating to the conduct of the arbitration (including reasonable attorneys’ fees and expenses) and shall equally share the fees of the American Arbitration Association. Any reimbursement or in-kind benefits under this Section 5 shall be paid or provided to Employee within 30 days of the date Employee is finally determined to have prevailed on at least one material issue, which was the subject of the arbitration.

6. Material Breach. The parties agree that it shall constitute a material breach of this agreement by the Company if Employee’s annual bonus compensation opportunity is significantly reduced from the level effective as of the date the parties enter into this Agreement.

7. No Mitigation. Employee shall not be required to mitigate the amount of any payment or benefit provided for in this Agreement by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for herein be reduced by any compensation earned by other employment or otherwise.

8. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit Employee’s continuing or future participation in or rights under any benefit, bonus, incentive or other plan or program provided by the Company or any of its Subsidiaries or Affiliates and for which Employee may qualify, from the date hereof through the Termination Date.

9. No Set-Off. The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company may have against Employee or others.

10. Taxes. Any payment required under this Agreement shall be subject to all requirements of law with regard to the withholding of taxes, filing, making of reports and the like, and the Company shall use its best efforts to satisfy promptly all such requirements.

11. Confidential Information. Employee recognizes and acknowledges that, by reason of his employment by and service to the Company, he has had and will continue to have access to confidential information of the Company, including, without limitation, information and knowledge pertaining to products and services offered, innovations, designs, ideas, plans, trade secrets, proprietary information, distribution and sales methods and systems, sales and profit figures, customer and client lists, and relationships between the Company and its Subsidiaries and Affiliates and other distributors, customers, clients, suppliers and others who have business dealings with the Company (“Confidential Information”). Employee acknowledges that such Confidential Information is a valuable and unique asset and covenants that he will not, either during or after his employment by the Company, disclose or use any such Confidential Information to any person for any reason whatsoever without the prior written authorization of the Board, unless such information is in the public domain through no fault of Employee or except as may be required by law.

12.	Non-Competition.

(a) During his employment by the Company and for a period of one year thereafter, Employee will not, unless acting with the prior written consent of the Board, directly or indirectly, own, manage, operate, join, control, finance or participate in the ownership, management, operation, control or financing of, or be connected as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise with or use or permit his name to be used in connection with, any business or enterprise engaged in by the Company or any of its Affiliates, either during his employment by the Company or on the Termination Date, as applicable, in the geographic area comprising the Company’s franchised service territory (the “Geographic Area”). It is recognized by Employee that the business of the Company and its Affiliates and Employee’s connection therewith is or will be involved in activity throughout the Geographic Area, and that more limited geographical limitations on this non-competition covenant would not be appropriate. Employee also shall not, directly or indirectly, during such one year period (a) solicit or attempt to convert any account or customer of the Company or its Affiliates existing on the Termination Date to another supplier, or (b) following Employee’s employment, solicit or attempt to hire any then employee of the Company or its Affiliates.

(b) The foregoing restriction shall not be construed to prohibit the ownership by Employee of less than five percent of any class of securities of any corporation which is engaged in any of the foregoing businesses having a class of securities registered pursuant to the Exchange Act, provided that such ownership represents a passive investment and that neither Employee nor any group of persons including Employee, either directly or indirectly, manages or exercises control of any such corporation, guarantees any of its financial obligations, otherwise takes any part in its business, other than exercising his rights as a shareholder, or seeks to do any of the foregoing.

13.	Equitable Relief.

(a) Employee acknowledges that the restrictions contained in Sections 11 and 12 hereof are reasonable and necessary to protect the legitimate interests of the Company and its Affiliates, that the Company would not have entered into this Agreement in the absence of such restrictions, and that any violation of any provision of those Sections will result in irreparable injury to the Company. Employee represents that his experience and capabilities are such that the restrictions contained in Section 12 hereof will not prevent Employee from obtaining employment or otherwise earning a living at the same general level of economic benefit as anticipated by this Agreement. Employee further represents and acknowledges that (i) he has been advised by the Company to consult his own legal counsel in respect of this Agreement, and (ii) that he has had full opportunity, prior to execution of this Agreement, to review thoroughly this Agreement and understands its terms and conditions.

(b) Employee agrees that the Company shall be entitled to preliminary and permanent injunctive relief, without the necessity of proving actual damages, as well as an equitable accounting of all earnings, profits and other benefits arising from any violation of Sections 11 or 12 hereof, which rights shall be cumulative and in addition to any other rights or remedies to which the Company may be entitled. In the event that any of the provisions of Sections 11 or 12 hereof should ever be adjudicated to exceed the time, geographic, service, or other limitations permitted by applicable law in any jurisdiction, then such provisions shall be deemed reformed in such jurisdiction to the maximum time, geographic, service, or other limitations permitted by applicable law.

(c) Employee irrevocably and unconditionally (i) agrees that any suit, action or other legal proceeding arising out of Section 11 or 12 hereof, including, without limitation, any action commenced by the Company for preliminary and permanent injunctive relief or other equitable relief, may be brought in the United States District Court for the Middle District of Pennsylvania, or if such court does not have jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in York County, Pennsylvania, consents to the non-exclusive jurisdiction of any such court in any such suit, action or proceeding, and (iii) waives any objection which Employee may have to the laying of venue of any such suit, action or proceeding in any such court. Employee also irrevocably and unconditionally consents to the service of any process, pleadings, notices or other papers in a manner permitted by the notice provisions of Section 17 hereof.

(d) Employee agrees that he will provide, and that the Company may similarly provide, a copy of Sections 11 and 12 hereof to any business or enterprise (i) which he may directly or indirectly own, manage, operate, finance, join, control or participate in the ownership, management, operation, financing, control or control of, or (ii) with which he may be connected as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise, or in connection with which he may use or permit his name to be used; provided, however, that this provision shall not apply in respect of Section 13 hereof after expiration of the time period set forth therein.

14.	Application of Section 409A.

(a) This Agreement is intended to comply with the applicable provisions of Section 409A of the Code and shall be interpreted to avoid any penalty sanctions under Section 409A of the Code. If any payment or benefit cannot be provided or made at the time specified herein without incurring sanctions under Section 409A of the Code, then such benefit or payment shall be provided in full at the earliest time thereafter when such sanctions will not be imposed. For purposes of Section 409A of the Code, all payments to be made upon a termination of employment under this Agreement may only be made upon Employee's “separation from service” (within the meaning of such term under Section 409A of the Code), each payment made under this Agreement shall be treated as a separate payment and the right to a series of installment payments under this Agreement shall be treated as a right to a series of separate payments. In no event shall Employee, directly or indirectly, designate the calendar year of payment.

(b) All reimbursements and in kind benefits provided under this Agreement shall be made or provided in accordance with the requirements of Section 409A of the Code, including, where applicable, the requirement that (i) any reimbursement or in kind benefit is for expenses incurred during Employee’s lifetime (or during a shorter period of time specified in this Agreement), (ii) the amount of expenses eligible for reimbursement, or in kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement, or in kind benefits to be provided, in any other calendar year, (iii) the reimbursement or payment of an eligible expense will be made on or before the last day of the calendar year following the year in which the expense is incurred, and (iv) the right to reimbursement or in kind benefits is not subject to liquidation or exchange for another benefit.

(c) If, at the time of Employee’s termination of employment with the Company, the Company has securities which are publicly traded on an established securities market and Employee is a “specified employee” (as defined in Section 409A of the Code) and it is necessary to postpone the commencement of any payments or benefits otherwise payable pursuant to this Agreement as a result of such termination of employment to prevent any accelerated or additional tax under Section 409A of the Code, then the Company will postpone the commencement of the payment of any such payments or benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided to Employee) that are not otherwise paid within the short-term deferral exception under Treas. Reg. §1.409A-1(b)(4), and the separation pay exception under Treas. Reg. §1.409A-1(b)(9)(iii) , until the first payroll date that occurs after the date that is six months following Employee’s separation of service with the Company. If any payments or benefits are postponed due to such requirements, such amounts will be paid in a lump sum to Employee on the first payroll date that occurs after the date that is six months following Employee’s separation of service with the Company. If Employee dies during the postponement period prior to the payment of the postponed amount, the amounts withheld on account of Section 409A of the Code shall be paid to the personal representative of Employee’s estate within 60 days after the date of Employee’s death.

15. Term of Agreement. The term of this Agreement shall be for five years commencing on the date hereof and shall automatically be renewed for additional periods of one year until the Company notifies Employee in writing, at least 90 days in advance of expiration, that this Agreement will not be renewed. If any notice of non-renewal occurs within two years after a Change of Control, such notice shall constitute an involuntary Termination of Employment for purposes of Section 3 above. Notwithstanding anything herein to the contrary, this Agreement (other than the provisions of Sections 11 through 12 hereof) shall terminate on the Phase-Out Date or if the employment of Employee by the Company shall terminate for any reason other than as provided herein.

16. Successor Company. The Company shall require any successor or successors (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to Employee, to acknowledge expressly that this Agreement is binding upon and enforceable against the Company in accordance with the terms hereof, and to become jointly and severally obligated with the Company to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession or successions had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement. As used in this Agreement, the Company shall mean the Company as herein defined and any such successor or successors to its business and/or assets, jointly and severally.

17. Notice. All notices and other communications required or permitted hereunder or necessary or convenient in connection herewith shall be in writing and shall be delivered personally or mailed by registered or certified mail, return receipt requested, or by overnight express courier service, as follows:

If to the Company, to:

The York Water Company

130 East Market Street

York, PA 17405-7089

Attention: Chairman of the Board

If to Employee, to:

____________________

or to such other names or addresses as the Company or Employee, as the case may be, shall designate by notice to the other party hereto in the manner specified in this Section. Any such notice shall be deemed delivered and effective when received in the case of personal delivery, five days after deposit, postage prepaid, with the U.S. Postal Service in the case of registered or certified mail, or on the next business day in the case of overnight express courier service.

18. Governing Law. This Agreement shall be governed by and interpreted under the laws of the Commonwealth of Pennsylvania without giving effect to any conflict of laws provisions.

19.	Contents of Agreement, Amendment and Assignment.

(a) This Agreement supersedes all prior agreements, sets forth the entire understanding between the parties hereto with respect to the subject matter hereof and cannot be changed, modified, extended or terminated except upon written amendment executed by Employee and the Company and only if approved by the Board. The provisions of this Agreement may provide for payments to Employee under certain compensation or bonus plans under circumstances where such plans would not provide for payment thereof. It is the specific intention of the parties that the provisions of this Agreement shall supersede any provisions to the contrary in such plans, and such plans shall be deemed to have been amended to correspond with this Agreement without further action by the Company.

(b) Nothing in this Agreement shall be construed as giving Employee any right to be retained in the employ of the Company.

(c) All of the terms and provisions of this Agreement shall be binding upon, inure to the benefit of, and be enforceable by the respective heirs, representatives, successors and assigns of the parties hereto, except that the duties and responsibilities of Employee and the Company hereunder shall not be assignable in whole or in part.

20. Severability. If any provision of this Agreement or application thereof to anyone or under any circumstances shall be determined to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions or applications of this Agreement, which can be given effect without the invalid or unenforceable provision or application.

21. Remedies Cumulative; No Waiver. No right conferred upon Employee by this Agreement is intended to be exclusive of any other right or remedy, and each and every such right or remedy shall be cumulative and shall be in addition to any other right or remedy given hereunder or now or hereafter existing at law or in equity. No delay or omission by Employee in exercising any right, remedy or power hereunder or existing at law or in equity shall be construed as a waiver thereof.

22. Miscellaneous. All section headings are for convenience only. This Agreement may be executed in several counterparts, each of which is an original. It shall not be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts.

23. Employee’s Acknowledgment. By executing this Agreement as of the date first above written, Employee acknowledges that he has no grounds for asserting that a Good Reason Termination exists as of that date and, therefore, that no obligation under Section 3 exists at the current time.

IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have executed this Agreement as of the date first above written.

	THE YORK WATER COMPANY

By:
Witness	President and CEO


Witness	Employee

Schedule 10.1

Name	Original Agreement Date	Multiple of Base Pay for Involuntary Termination or Good Reason Termination
Jeffrey R. Hines	January 26, 1999	2.99
Joseph T. Hand	November 5, 2008	.50
Vernon L. Bracey	December 15, 2003	.50
Mark S. Snyder	January 25, 2011	.50
Matthew E. Poff	February 9, 2018	.50
Natalee Colón	March 15, 2019	.50
Mark J. Hardman	March 15, 2019	.50

The York Water Company DEFERRED COMPENSATION PLAN

FOR EMPLOYEES INELIGIBLE FOR THE DEFINED BENEFIT PENSION PLAN

(Effective January 1, 2016)

RECITALS

THIS DEFERRED COMPENSATION PLAN (the “Plan”) is hereby adopted as of the 1st day of January, 2016, 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 adopt and establish 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, the Plan Sponsor shall permit otherwise eligible employees who are Participants in any other York Water Company deferred compensation plan to terminate their participation in said plan and become a Participant in this Plan, including Account Balances from the prior plan, the Deferred Compensation Plan for Employees not Eligible for a Defined Benefit Pension Plan.

WHEREAS , effective as of January 1, 2016, the Plan Sponsor 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 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 Percentage ” shall mean that portion of a Participant’s Base Salary that a Participant elects to defer under the plan during any Plan Year. The Participant may elect to defer between zero (0) and five (5) percent of his or her Base Salary as of January 1 of each Plan Year. The annual deferral percentage may not be changed during the Plan Year.

1.4

“ Annual Deferral Percentage Election ” shall mean that annual percentage, between zero (0) percent and five (5) percent of the Participant’s base salary he or she elects to defer under the Plan in any given year. The Participant may make election changes for any subsequent plan year prior to the beginning of said year. Participant’s initial annual deferral amount election shall continue in each subsequent plan year unless, and until, the Participant changes his or her election.

1.5

“ 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.

1.6	“ 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.

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

1.8	“ 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.

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

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

1.11

“ 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).

1.12	“ Effective Date ” of the Plan is January 1, 2016.

1.13

“ Election Form ” shall mean the form or forms established from time to time by the Plan Administrator on which the Participant 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 the Participant designates his or her Beneficiary, as required on that form and under the terms of the Plan.

1.14

“ 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, but in no case will an employee become eligible prior to one (1) complete year of service.

1.15	“ 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.

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

1.17	“ 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.

1.18

“ 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.

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

1.20

“ 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).

1.21	“ Plan ” shall mean The York Water Company Deferred Compensation Plan For Employees Ineligible for the Defined Benefit Pension Plan, as set forth herein and amended from time to time.

1.22	“ 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.

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

1.24	“ Plan Sponsor Contribution ” shall mean the amount contributed to a Participant’s Plan Sponsor Contribution Account pursuant to Section 3.1 and 3.2.

1.25	“ 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 3.3.

1.26	“ 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.

1.27

“ 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, pursuant to Sections 3.3)[ , ] 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).

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

1.29

“ 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.

1.30

“ 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 3.3 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.

1.31

“ 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.

1.32	“ 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.

1.33	“ 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.

1.34

“ 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.

1.35	“ Vested Account ” shall mean a Participant’s Separation from Service Account balance plus Plan Sponsor Contribution Account balance plus other amounts 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 5.8 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	Plan Sponsor Non-Discretionary Contributions The Plan Sponsor shall make a non-discretionary contribution/match equal to, but not to exceed, 5% of the Participant’s base salary, Section 1.5.

3.3

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. In no case shall the Plan Sponsor credit interest of more than a six (6) percent rate in any plan year to the Participant’s Plan Sponsor Contribution Account and the Participant’s Separation from Service Account. No interest shall be credited to any Participant’s account(s) after a Separation from Service.

3.4

Contributions and Account Earnings after Age 65 The Participant may not make any contributions to any Account after obtaining the age of 65 and actively employed by the Plan Sponsor. The Plan Sponsor may not make any non-discretionary contributions to any of the Participant’s accounts after the Participant obtains the age of sixty-five (65). The Plan sponsor may not credit any of the Participant’s accounts with any interest after the Participant obtains the age of sixty-five (65).

ARTICLE 4.

Vesting and Taxes

4.1	Vesting of Benefits .

(a)	A Participant shall be 100% vested in his or her Separation from Service Account, Section 1.30 at all times.

(b)	A Participant shall be 100% vested in Plan Sponsor Contribution Account, Section 1.25 after ten (10) complete years of plan participation.

(c)	A Participant shall be 100% vested in the Permissible Payment Event Calculation, Section 5.15(b), after fifteen (15) complete years of plan participation.

(d)	Notwithstanding Section 4.1, (b), (c), a Participant shall be 100% vested in all accounts (including gross up as set forth in Section 5.15 below) when the Participant attains the age of 60.

(e)

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 nor shall the Permissible Payment Event Calculation be engaged to determine any Participant benefit 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(e) shall apply to a Participant’s Plan Sponsor Contribution Account and Permissible Payment Event Calculation whether or not such amounts or calculations are vested pursuant to Section 4.1 (b), (c), (d).

4.2	FICA, Withholding and Other Taxes .

(a)

Pre-Distribution Tax Withholdings . The Plan Sponsor, or trustee of the Trust, shall withhold the FICA amount and other employment taxes from the Participant’s Base Salary in a manner determined in the sole discretion of the Plan Sponsor as a Participant becomes vested in his or her accounts and calculation pursuant to Section 4.1 (a), (b), (c) and (d), as applicable.

(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 5.15 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 with Less Than Ten Complete Years in the Plan . If a Participant Separates from Service prior to attaining ten (10) complete years in the Plan, the Participant’s Separation from Service Account balance in accordance with Section 4.1(a) shall be paid in a lump sum within ninety (90) days following the Participant’s Separation from Service. Notwithstanding the above, if the Participant is a Specified Employee, Section 1.31 such payment shall instead be made or commence six (6) months after the Participant’s Separation from Service.

5.3

Payment Following a Separation From Service with Ten Complete Years in the Plan, but Less Than Fifteen Complete Years in the Plan and Less Than Sixty Years of Age . A Participant shall be paid his or her Scheduled Withdrawal Account balance in accordance with Section 4.1 with payments being made or commencing within ninety (90) days following the Participant’s Separation from Service and the attainment of age sixty (60). Notwithstanding the above, if the Participant is a Specified Employee, Section 1.31 such payment shall instead be made or commence six (6) months after the Participant’s Separation from Service.

5.4

Payment Following a Separation From Service with Fifteen or More Complete Years in the Plan and Less Than Sixty Years of Age . A Participant shall be paid his or her Scheduled Withdrawal Account balance in accordance with Section 4.1 with payments being made or commencing within ninety (90) days following the Participant’s Separation from Service and the attainment of age sixty (60). Notwithstanding the above, if the Participant is a Specified Employee, Section 1.31 such payment shall instead be made or commence six (6) months after the Participant’s Separation from Service.

5.5

Payment Following a Separation From Service at Age Sixty or More . A Participant shall be paid his or her Vested Account balance in accordance with Section 4.1 with payments being made or commencing within ninety (90) days following the Participant’s Separation from Service at age sixty (60) or more. Notwithstanding the above, if the Participant

is a Specified Employee, Section 1.31 such payment shall instead be made or commence six (6) months after the Participant’s Separation from Service.

5.6

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 5.9(b) below.

5.7

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).

5.8

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.

5.9	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, and 5.2 above, which provide for lump sum payments, the amount of each payment shall be determined in accordance with Section 5.15 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 fity thousand dollars ($50,000.00) 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.

5.10	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)	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.

(b)

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 $50,000.

(c)

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).

(d)

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.

5.11	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.

5.12	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.

5.13

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.

5.14

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.

5.15	Permissible Payment Event Calculation .

The Plan Sponsor agrees that in determining the benefits payable under Section 5.3, 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 prior to the first payment by 240.

The Participant may request the benefit be paid over a fifteen (15) year period (180 equal payments) instead of the benefit being paid over a twenty (20) year period (240 equal payments) which is the default payment schedule. The Participant must make a written request to the Plan Sponsor no less than three (3) months prior to receiving the first payment of the benefit.

Example Without Tax Savings:

Scheduled Withdrawal Account Value at age 60 = $500,000 (Participant Separated from Service Prior to vesting of Tax Saving Multiplier)

Step 1: Actual Benefit to be paid each year: $500,000/20 years = $25,000 Step 2: Actual Benefit to be paid each month: $500,000/240 = $2,083.34

(b) The Plan Sponsor agrees that in determining the benefits payable under Sections 5.1, 5.4, 5.5, and 5.6 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 prior to the first payment by 240 and then increasing the amount by the amount of federal and state income tax saved by the Plan Sponsor, if any. The savings will be calculated based on the marginal federal and state income tax bracket for the Plan Sponsor at the time the Participant initially enters the Plan.

Example With Tax Savings:

Scheduled Withdrawal Account Value at age 60 = $500,000 Corporate Marginal Tax Rate is 0.4059. Participant Separated at age 60.

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 $500,000 divided by .5941 =

$841,609.16)

Step 3: Actual Benefit to be paid each year: $841,609.16/20 years =

$42,080.45

Step 4:

Actual Benefit to be paid each month: $841,609.16/240=$3,506.70 Beneficiary Designation

5.16	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.

5.17

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 6.

Termination, Amendment or Modification

6.1	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.

(c)	[Change in Control. 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 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.]

6.2

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 7.

Administration

7.1

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.

7.2	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;

(c)	To maintain all records that may be necessary for the administration of this Plan;

(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.

7.3

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.

7.4

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.

7.5

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.

7.6	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 8.

Claims Procedures

8.1

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.

8.2

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 9.

The Trust

9.1

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.

9.2

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.

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

ARTICLE 10.

Miscellaneous

10.1

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.

10.2

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.

10.3

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.

10.4	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.

10.5

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.

10.6

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.

10.7	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.

10.8	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.

10.9

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)

PLAN ENROLLMENT KIT

for the

The York Water Company

Deferred Compensation Plan For Employees Ineligible For A Defined Benefit Pension 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 For Employees Ineligible For A Defined Benefit Pension 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)

DEFERRED COMPENSATION PLAN FOR EMPLOYEES INELIGIBLE FOR A DEFINED BENEFIT 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 Deferred Compensation Plan For Employees Not Eligible For A Defined Benefit Pension 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 Deferred Compensation Plan For Employees Not Eligible For A Defined Benefit Pension 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, Account Earnings and Tax Savings (if any) shall vest based on Section 4.1 of the Plan.

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 For Employees Not Eligible For a Defined Benefit Pension 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 during a Plan Year. I understand that my election will continue until, and unless, I change my election in accordance to the provisions of the Plan. All capitalized terms used herein are defined in the The York Water Company Deferred Compensation Plan For Employees Not Eligible For a Defined Benefit Pension Plan , unless otherwise indicated by the context.

☐	I elect to defer percent of my Base Salary as of the beginning of each Plan Year until I elect a different deferral percentage in accordance with the provisions of the Plan.

I understand that the Company will contribute a percentage equal to my deferral election, not to exceed 5.0%, in accordance pursuant to section 3.2.

SECTION II: MARGINAL FEDERAL AND STATE TAX RATE

The marginal federal and state tax rate for the term of this contract shall be .

SECTION III: DISTRIBUTION ELECTION

☐	I hereby elect that following my Separation From Service my vested benefit be paid to me, unless prohibited by 409a regulations, in one hundred and eighty (180) equal monthly payments beginning at the later of age 60 or my Separation From Service date.

☐	I hereby elect that following my Separation From Service my vested benefit be paid to me, unless prohibited by 409a regulations, in two-hundred and forty (240) equal monthly payments beginning at the later of age 60 or my Separation From Service date.

I understand that distribution election changes must be made more than twelve (12) months in advance of the initial distribution date.

AGREED AND ACCEPTED BY THE PARTICIPANT
Signature of Participant		Date
AGREED AND ACCEPTED BY THE PLAN SPONSOR
For the Plan Sponsor		Date

SECTION IV: 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 10.2

Name	Marginal Federal and State Tax Rate
Natalee Colón	0.4059

PART I	Financial Information

Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4.	Controls and Procedures	24

PART II	Other Information

Item 6.	Exhibits	25

Signatures		26