FORWARD-LOOKING STATEMENTS
Certain statements contained in this annual report and in documents incorporated by reference 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,” “objective” and similar expressions are intended
to identify forward-looking statements. These forward-looking statements include certain information relating to the Company’s business strategy and future prospects; 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 Annual Report reflect what the Company currently anticipates will happen. What actually happens could differ
materially from what it currently anticipates will happen and caution should be exercised against placing undue reliance upon such statements, which are based only on information currently available to the Company and speak only as of the date
hereof. The Company does not intend to make a public announcement when forward-looking statements in this Annual 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 or climate, including drought conditions or extended periods of heavy precipitation;
|
|
•
|
natural disasters, including pandemics such as the recent outbreak of the novel strain of coronavirus known as “COVID-19” and its variants and the
effectiveness of the Company’s pandemic plans;
|
|
•
|
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.
|
THE YORK WATER COMPANY
PART I
The York Water Company (the “Company”) is the oldest investor-owned water utility in the United States and is duly organized under the laws of the
Commonwealth of Pennsylvania. The Company has operated continuously since 1816. 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 ten wastewater collection and treatment systems. The Company operates within its franchised water and wastewater territory, which covers portions of 56 municipalities within four counties in south-central
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 for its primary system for
York and Adams Counties from both the South Branch and East Branch of the Codorus Creek, which together have an average daily flow of approximately 73.0 million gallons from a combined watershed area of approximately 117 square miles. The Company
has two reservoirs on this primary system, Lake Williams and Lake Redman, which together hold up to approximately 2.2 billion gallons of water. The Company supplements these 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 obtains its water supply for its system for Franklin County from the Roxbury Dam on the Conodoguinet Creek, which has an average
daily flow of approximately 26.0 million gallons from a watershed area of approximately 33 square miles. The Company has a reservoir on this system which holds up to approximately 330 million gallons of water. The Company also owns thirteen wells
which are capable of providing a safe yield of approximately 808,000 gallons per day to supply water to the customers of its groundwater satellite systems in York, Adams, and Lancaster Counties. As of December 31, 2023, the Company’s average daily
availability was 41.0 million gallons, and average daily consumption was approximately 21.8 million gallons. The Company’s service territory had an estimated population of 209,000 as of December 31, 2023. 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 precipitation. 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 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. The Company continues to review and consider opportunities to expand both initiatives.
Competition
As a regulated utility, the Company operates within an exclusive franchised territory that is substantially free from direct competition with other
public utilities, municipalities, and other entities. Although the Company has been granted an exclusive franchise for each of its existing community water and wastewater systems, the ability of the Company to expand or acquire new service
territories may be affected by currently unknown competitors obtaining franchises to surrounding systems by application or acquisition. These competitors may include other investor-owned utilities, nearby municipally-owned utilities and sometimes
competition from strategic or financial purchasers seeking to enter or expand in the water and wastewater industry. The addition of new service territory and the acquisition of other utilities are generally subject to review and approval by the
PPUC.
Water and Wastewater Quality and Environmental Regulations
Provisions of water and wastewater service are subject to regulation under the federal Safe Drinking Water Act, the Clean Water Act and related state
laws, and under federal and state regulations issued under these laws. In addition, the Company is subject to federal and state laws and other regulations relating to solid waste disposal, dam safety and other aspects of its operations.
The federal Safe Drinking Water Act establishes criteria and procedures for the U.S. Environmental Protection Agency, or EPA, to develop national quality
standards. Regulations issued under this Act, and its amendments, set standards on the amount of certain contaminants allowable in drinking water. Current requirements are not expected to have a material impact on the Company’s operations or
financial condition as it already meets or exceeds standards. In the future, the Company may be required to change its method of treating drinking water and may incur additional capital investments if new regulations become effective.
Under the requirements of the Pennsylvania Safe Drinking Water Act, or SDWA, the Pennsylvania Department of Environmental Protection, or DEP, regulates
the quality of the finished water supplied to customers. The DEP requires the Company to submit monthly reports showing the results of daily bacteriological and other chemical and physical analyses. As part of this requirement, the Company
conducts over 70,000 laboratory tests annually. Management believes that the Company complies with the standards established by the agency under the SDWA. The DEP assists the Company by regulating discharges into the Company’s watershed area to
prevent and eliminate pollution.
The federal Groundwater Rule establishes protections against microbial pathogens in community water supplies. This rule requires additional testing of
water from well sources, and under certain circumstances requires demonstration and maintenance of effective disinfection. The Company holds public water supply permits issued by the DEP, which establishes the groundwater source operating
conditions for its wells, including demonstrated 4-log treatment of viruses. All of the groundwater satellite systems operated by the Company are in compliance with the federal Groundwater Rule.
The Clean Water Act regulates discharges from water and wastewater treatment facilities into lakes, rivers, streams, and groundwater. The Company
complies with this Act by obtaining and maintaining all required permits and approvals for discharges from its water and wastewater facilities and by satisfying all conditions and regulatory requirements associated with the permits.
The DEP monitors the quality of wastewater discharge effluent under the provisions of the National Pollutant Discharge Elimination System, or NPDES. The
Company submits monthly reports to the DEP showing the results of its daily effluent monitoring and removal of sludge and biosolids. The Company is not aware of any significant environmental remediation costs necessary from the handling and
disposal of waste material from its wastewater operations.
Lead and copper may enter drinking water primarily through plumbing materials. The Company is required to comply with the Lead and Copper Rule
established by the EPA and administered by the DEP. The Company must monitor drinking water at customer taps for compliance with this rule. If lead concentrations exceed an action level, the Company must undertake a number of additional actions
to control corrosion, inform the public about steps they should take to protect their health and may be required to replace lead service lines under its control. The Company is currently in compliance with standards under the Lead and Copper Rule.
The EPA has published the Lead and Copper Rule Revisions, or LCRR, that includes a requirement to submit a service line inventory and a lead service line
replacement plan to the respective states or agencies by October 16, 2024, as well as provide public education and sampling at elementary schools and childcare facilities. Additionally, the EPA is developing a new regulation, the Lead and Copper
Rule Improvements, or LCRI, to better protect communities from exposure to lead in drinking water. The LCRI is expected to delay the due dates for lead service line replacement plans and result in modifications to other parts of the LCRR. The
Company is executing an implementation plan to comply with the initial LCRR requirement to complete a lead service line inventory and begin additional sampling.
The DEP and the Susquehanna River Basin Commission, or SRBC, regulate the amount of water withdrawn from streams in the watershed to assure that
sufficient quantities are available to meet the needs of the Company and other regulated users. Through its Division of Dam Safety, the DEP regulates the operation and maintenance of the Company’s impounding dams. The Company routinely inspects
its dams and prepares annual reports of their condition as required by DEP regulations. The DEP reviews these reports and inspects the Company’s dams.
Since 1980, the DEP has required any new dam to have a spillway that is capable of passing the design flood without overtopping the dam. The design
flood is either the Probable Maximum Flood, or PMF, or some fraction of it, depending on the size and location of the dam. PMF is very conservative and is calculated using the most severe combination of meteorological and hydrologic conditions
reasonably possible in the watershed area of a dam.
The Company engaged a professional engineer to analyze the spillway capacities at the Lake Williams and Lake Redman dams and validate the DEP’s
recommended flood design for the dams. Management presented the results of the study to the DEP in December 2004, and DEP then requested that the Company submit a proposed schedule for the actions to address the spillway capacities. Thereafter,
the Company retained an engineering firm to prepare preliminary designs for increasing the spillway capacities to pass the PMF through armoring the dams with roller compacted concrete. Management met with the DEP on a regular basis to review the
preliminary design and discuss scheduling, permitting, and construction requirements including their concern regarding the stability of the Lake Williams spillway in light of current design standards. The Company completed the final design and the
permitting process to armor the dam and replace the spillway of the Lake Williams dam and began construction in 2022. The Company completed the dam armoring and spillway replacement in 2023 at a total cost of approximately $40 million. Additional
capital expenditures will be incurred in 2024 to complete the sitework around the dam and reservoir. The Lake Redman dam will be reviewed following the completion of the work on the Lake Williams dam.
Capital expenditures and operating costs required as a result of water quality standards and environmental requirements have been traditionally
recognized by state public utility commissions as appropriate for inclusion in establishing rates. The capital expenditures currently required as a result of water quality standards and environmental requirements have been budgeted in the
Company’s capital program and represent less than 15% of its expected total capital expenditures over the next five years. The Company is currently in compliance with wastewater environmental standards and does not anticipate any major capital
expenditures for its current wastewater business.
Growth
(All dollar amounts are stated in thousands of dollars)
The Company continues to grow its number of customers and distribution facilities.
The growth in the number of customers is due primarily to the acquisition of water and wastewater systems and organic growth. During the year ended
December 31, 2023, the Company increased its number of customers from 76,731 to 77,893. See “Management’s Discussion and Analysis – Acquisitions and Growth” for a discussion of the Company’s recent acquisitions.
The Company continues to grow its water distribution and wastewater collection systems to provide reliable service to its expanding franchised service
territory and the increasing population within that territory. During the year ended December 31, 2023, the Company installed an additional 41,300 feet of water distribution mains and acquired an additional 16,300 feet of water distribution mains
resulting in 1,076 miles of water mains as of December 31, 2023. During the year ended December 31, 2023, the Company acquired an additional 16,400 feet of wastewater collection mains resulting in 102 miles of wastewater mains as of December 31,
2023.
The Company’s growth in revenues is primarily a result of customer growth and increases in water and wastewater rates. During the year ended December
31, 2023, the Company recognized revenue of $71,031, an increase of $10,970, or 18.3%, as compared to $60,061 during the year ended December 31, 2022. In 2023, operating revenue was derived from the following sources and in the following
percentages: residential, 64%; commercial and industrial, 29%; and other, 7%, which is primarily from the provision for fire service but includes other water and wastewater service-related income. See “Management’s Discussion and Analysis – Rate
Matters” for a discussion of the Company’s rate case management.
Information about Our Executive Officers
The Company presently has 130 employees, all but one of which are full time employees including the officers detailed in the information set forth under
the caption “Executive Officers of the Company” of the 2024 Proxy Statement incorporated herein by reference.
Available Information
The Company makes available free of charge, on or through its website (www.yorkwater.com), its annual report on Form 10-K, its quarterly reports on Form
10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after the Company electronically files such material with, or furnishes
it to, the SEC. The SEC also maintains a website at www.sec.gov that contains reports, proxy statements, and other information about SEC registrants, including the Company.
Shareholders may request, without charge, copies of the Company’s financial reports. Such requests, as well as other investor relations inquiries,
should be addressed to:
|
|
The York Water Company
|
(717) 718-2942
|
|
Investor Relations &
|
130 East Market Street
|
(800) 750-5561
|
|
Communications Administrator
|
York, PA 17401
|
|
Not applicable.
|
Item 1B.
|
Unresolved Staff Comments.
|
None.
Risk Management and Strategy
The Company recognizes the critical importance of developing, implementing, and maintaining robust cybersecurity measures to safeguard its information
systems and protect the confidentiality, integrity, and availability of its data.
Managing Material Risks & Integrated Overall Risk Management
The Company embraces risk management across the company, to include cybersecurity risk. This comprehensive approach ensures that cybersecurity
considerations are an integral part of its decision-making processes at every level. The Company’s risk management team works closely with its IT department to continuously evaluate and address cybersecurity risks in alignment with its business
objectives and operational needs.
Engage Third Parties on Risk Management
To address the evolving nature and complexity of cybersecurity threats, the Company engages with a range of external experts, including cybersecurity
assessors, consultants, and auditors in evaluating and testing its risk management systems. These partnerships enable the Company to leverage specialized knowledge and insights with respect to its cybersecurity strategies and processes. The
collaboration with these third parties includes regular audits, threat assessments, penetration testing, and consultation on security enhancements.
Oversee Third-party Risk
The Company recognizes that cybersecurity threats and risks are amplified with the addition of third-party digital service providers. In response, the
Company implements stringent processes to oversee and manage these risks. It conducts thorough security assessments of all third-party providers before engagement and maintains ongoing monitoring to ensure compliance with its cybersecurity
standards. This process is also intended to provide for the security and integrity of the Company’s data that may be stored on third-party systems. The monitoring includes quarterly assessments made by the contracted Chief Information Officer,
or CIO, and on an ongoing basis by its dedicated cybersecurity staff. This approach is designed to mitigate risks related to data breaches or other security incidents originating from third parties.
Identified Material Risks
To date, the Company has not encountered cybersecurity challenges, risks, or breaches that have materially impaired its business strategy, operations,
or its financial standing.
Board of Directors Oversight of Cybersecurity Material Risks – Governance
The Board of Directors, or the Board, is keenly aware of the critical nature of cybersecurity risks, particularly in its business as a public utility
providing a life sustaining product. The Board, in partnership with the Executive team, has created a robust cybersecurity program, with meaningful oversight measures and tools for tracking and managing cyber risks and threats. The Company
understands the importance of its product and services to the communities that it serves and is dedicated to maintaining high stakeholder confidence in its operations.
Board Oversight
The Audit Committee is the lead Board committee with oversight of the cybersecurity program and bears the primary responsibility for this aspect of the
business. The Audit Committee is comprised of Board members with diverse professional backgrounds, such as accounting/finance, utility security, risk management, and business performance integration. The breadth of experience in this Committee
enables it to be the most appropriate lead in oversight of cybersecurity risks and capability.
Management Role
The Chief Administrative Officer and General Counsel has primary oversight of the IT Department and the cybersecurity program, with a direct
reporting relationship to the President and Chief Executive Officer. The Chief Administrative Officer and General Counsel also reports to the Audit Committee at least two times per calendar year and presents a report to the Board at least once
per calendar year. These briefings include both educational and program status information, including:
|
•
|
Current cybersecurity risks, including qualitative rating based upon underlying objective measures;
|
|
•
|
Status of ongoing cybersecurity initiatives and strategies;
|
|
•
|
Incident and response reports and lessons learned from any cybersecurity event; and
|
|
•
|
Compliance report with regulatory requirements and industry standards.
|
In addition to scheduled presentations described above, the IT Department contracted CIO, the Chief Administrative Officer and General Counsel, and
the President and Chief Executive Officer maintain constant dialogue regarding emerging or potential cybersecurity risks and threats. The Chief Administrative Officer and General Counsel is in regular contact with the Audit Committee Chair
related to these risks so that the oversight by the Board can be both proactive and responsive. The Audit Committee has the authority to actively participate in strategic decisions related to cybersecurity and offers guidance and approval for
major initiatives. As a result, cybersecurity considerations can be integrated into the foundation of broader corporate objectives. The Audit Committee and the Board conduct an annual review of the Company’s cybersecurity risk position and
the effectiveness of its risk management strategies and measures. From this review at the Board level, the Company is able to identify areas where there exist improvement opportunities and can set goals for the following year.
Risk Management Personnel
Primary responsibility for assessing, monitoring, and managing cybersecurity risks rests with the CIO, who has oversight over the IT Department,
including one dedicated cybersecurity staff person and select specialized contractors. This group of contractors includes a Chief Information Security Officer, Chief Technology Officer, Cybersecurity Analysts, Network Engineers, and Network
Administrators.
Monitor Cybersecurity Risks
The cybersecurity team actively monitors for cybersecurity risks by employing the use of endpoint detection and response solutions with immediate
alert notifications, vulnerability scanning solutions that proactively identify risks, and by monitoring the logs of network devices.
Reporting to the Board
The Chief Administrative Officer and General Counsel has primary responsibility to report to the President and Chief Executive Officer and to the
Board and presents with the CIO where appropriate for the content of the presentation and/or to facilitate a substantive discussion. The CIO, through the Chief Administrative Officer and General Counsel, ensures that the highest levels of the
Company remain informed about the cybersecurity posture, potential risks, events, and response if they occur. Material cybersecurity matters, and significant strategic risk management processes and decisions are elevated to the Board by the
Chief Administrative Officer and General Counsel, ensuring that the Board has effective and substantive oversight and may provide input and guidance on critical cybersecurity measures and issues.
Source of Water Supply
The Company obtains the bulk of its water supply for its primary system for York and Adams Counties from both the South Branch and East Branch of the
Codorus Creek, which together have an average daily flow of approximately 73.0 million gallons from a combined watershed area of approximately 117 square miles. The Company owns two impounding dams on this primary system located in York and
Springfield Townships adjoining the Borough of Jacobus to the south. The lower dam, the Lake Williams Impounding Dam, creates a reservoir covering approximately 165 acres containing about 870 million gallons of water. The upper dam, the Lake
Redman Impounding Dam, creates a reservoir covering approximately 290 acres containing about 1.3 billion gallons of water. The Company supplements these 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 per day, or MGD.
The Company obtains its water supply for its system for Franklin County from the Roxbury Dam on the Conodoguinet Creek, which has an average daily flow
of approximately 26.0 million gallons from a watershed area of approximately 33 square miles. The Company has a reservoir on this system which holds up to approximately 330 million gallons of water.
The Company also owns satellite groundwater systems in York, Adams, and Lancaster Counties. The systems consist of thirteen wells capable of providing a
combined safe yield of approximately 808,000 gallons per day.
As of December 31, 2023, the Company’s present average daily availability was 41.0 million gallons, and daily consumption was approximately 21.8 million
gallons.
Pumping Stations
The Company’s main pumping station is located in Spring Garden Township, York County, on the south branch of the Codorus Creek about four miles
downstream from the Company’s lower impounding dam. The pumping station houses pumping equipment with a combined permitted capacity of 42.0 MGD. A large diesel backup generator is installed to provide power to the pumps in the event of an
emergency. The untreated water is pumped approximately two miles to the filtration plant through pipes owned by the Company.
The Susquehanna River Pumping Station is located on the western shore of the Susquehanna River in York County, several miles south of Wrightsville. The
pumping station houses pumping equipment with a combined permitted capacity of 12.0 MGD. The pumping station pumps water from the Susquehanna River approximately 15 miles through a combination of 30 inch and 36 inch ductile iron main to the
Company’s upper impounding dam, located at Lake Redman.
The Lake Redman Pumping Station is located in York Township, York County, adjacent to Lake Redman. The pumping station is designed to provide a
redundant source with permitted capacity to pump 20.0 MGD of untreated water through a company-owned 36 inch force main approximately 3.5 miles to the filtration plant, meeting the Company’s daily consumption needs.
Treatment Facilities
The Company’s primary water filtration plant is located in Spring Garden Township, York County, about one-half mile south of the City of York. Water at
this plant is filtered through twelve dual media filters having a rated capacity of 39.0 MGD, with a maximum supply of 42.0 MGD for short periods if necessary.
The Company’s sediment recycling facility is located adjacent to this water filtration plant. This state of the art facility employs cutting edge
technology to remove fine, suspended solids from untreated water. The Company estimates that through this energy-efficient, environmentally friendly process, approximately 600 tons of sediment will be removed annually, thereby improving the
quality of the Codorus Creek watershed.
The Company also operates a water filtration plant in Greene Township, Franklin County. Water at this plant is filtered through filters having a rated
capacity of 1.16 MGD.
Based on a total average daily consumption in 2023 of approximately 21.8 million gallons, the Company believes the water pumping and filtering facilities
are adequate to meet present and anticipated demands.
The Company has ten wastewater treatment facilities located in four counties within south-central Pennsylvania. The wastewater treatment plants range
from small extended aeration package plants to three larger facilities that utilize Biological Nutrient Removal/tertiary treatment technology, and have a combined permitted flow capacity of 922,500 gallons. With a projected maximum daily demand of
389,000 gallons, the plants’ flow paths offer both capacity and operational redundancy for maintenance, high flow events, and potential growth.
Distribution and Collection
The distribution systems of the Company have approximately 1,076 miles of water main lines which range in diameter from 2 inches to 36 inches. The
distribution systems include booster stations and standpipes and reservoirs capable of storing approximately 59.7 million gallons of potable water. All booster stations are equipped with at least two pumps for protection in case of mechanical
failure. Following a deliberate study of customer demand and pumping capacity, the Company installed standby generators at all critical booster stations to provide an alternate energy source or emergency power in the event of an electric utility
interruption.
The thirteen wastewater collection systems of the Company have approximately 102 miles of gravity collection mains and pressure force mains along with
redundant sewage pumping stations.
Other Properties
The Company’s distribution center and material and supplies warehouse are located in Springettsbury Township and are composed of three one-story concrete
block buildings aggregating 30,680 square feet.
The administrative and executive offices of the Company are located in one three-story and one two-story brick and masonry buildings, containing a total
of approximately 21,861 square feet, in the City of York, Pennsylvania.
All of the Company’s properties described above are held in fee by the Company. There are no material encumbrances on such properties.
In 1976, the Company entered into a Joint Use and Park Management Agreement with York County under which the Company licensed use of certain of its lands
and waters for public park purposes for a period of 50 years. Under the agreement, York County has agreed not to erect a dam upstream on the East Branch of the Codorus Creek or otherwise obstruct the flow of the creek.
|
Item 3.
|
Legal Proceedings.
|
There are no material legal proceedings involving the Company.
|
Item 4.
|
Mine Safety Disclosures.
|
Not applicable.
PART II
|
Item 5.
|
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
|
Market Information
The common stock of The York Water Company is traded on the NASDAQ Global Select Market under the symbol YORW.
Shareholders of record (excluding individual participants in securities positions listings) as of December 31, 2023 numbered approximately 1,824.
Securities Authorized for Issuance under Equity Compensation Plans
The information required by this item with respect to securities authorized for issuance under equity compensation plans is set forth in Part III, Item
12 of this Annual Report.
Purchases of Equity Securities by the Company
The Company did not repurchase any of its securities during the fourth quarter of 2023.
|
Item 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
(All dollar amounts are stated in thousands of dollars.)
Overview
The York Water Company (the “Company”) is the oldest investor-owned water utility in the United States, operated continuously since 1816. The Company
also owns and operates three wastewater collection systems and ten wastewater collection and treatment systems. The Company is a purely regulated water and wastewater utility. Profitability is largely dependent on water revenues. Due to the size
of the Company and the limited geographic diversity of its service territory, weather conditions, particularly precipitation, economic, and market conditions can have an adverse effect on revenues. The Company experienced increased revenues in
2023 compared to 2022 primarily due to a rate increase effective March 1, 2023 and an increase in the number of customers, which was partially offset by lower revenues from the distribution system improvement charge, or DSIC.
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. In 2023, operating revenue was derived from the following sources and in the following percentages: residential, 64%; commercial and industrial, 29%; and other, 7%, which is primarily from the provision for fire
service, but includes other water and wastewater service-related income. The diverse customer mix helps to reduce volatility in consumption.
The Company seeks to grow revenues by increasing the volume of water sold and wastewater service provided through increases in the number of customers,
making timely and prudent investments in infrastructure replacements, expansion and improvements, and timely filing for rate increases. The Company continuously looks for acquisition and expansion opportunities both within and outside its current
service territory as well as through contractual services and bulk water supply.
The Company has entered into agreements with municipalities to provide billing and collection services. The Company also has a service line protection
program on a targeted basis. The Company continues to review and consider opportunities to expand both initiatives to further diversify the business.
In addition to increasing revenue, the Company consistently focuses on minimizing costs without sacrificing water quality or customer service. Paperless
billing, expanding online services, negotiation of favorable electric, banking, and other costs, as well as taking advantage of the Tax Cuts and Jobs Act of 2017, or the 2017 Tax Act, and the Internal Revenue Service, or IRS, tangible property
regulations, or TPR, are examples of the Company’s recent efforts to minimize costs.
Performance Measures
Company management uses financial measures including operating revenues, net income, earnings per share and return on equity to evaluate its financial
performance. Additional statistical measures including number of customers, customer complaint rate, annual customer rates and the efficiency ratio are used to evaluate performance quality. These measures are calculated on a regular basis and
compared with historical information, budget and the other publicly-traded water and wastewater companies.
The Company’s performance in 2023 was strong under the above measures. Operating revenues increased in 2023 compared to 2022 primarily due to a rate
increase effective March 1, 2023 and an increase in the number of customers, which was partially offset by the lower revenues from the DSIC. The increase in operating revenues offset the increases in operating expenses. The Company incurred
higher income taxes primarily due to higher income before income taxes. The overall effect was an increase in net income in 2023 over 2022 of 21.3% and a return on year end common equity of 10.7%. The return on year end common equity was strong
and higher than the 2022 result of 9.5% which included an increase in common equity from an underwritten public stock offering completed in 2022. The 2023 results were in line with the five year historical average return on year end common equity
of 10.7%.
The efficiency ratio, which is calculated as net income divided by revenues, is used by management to evaluate its ability to control expenses. Over the
five previous years, the Company’s ratio averaged 30.0%. In 2023, the ratio was higher than the average at 33.4% due primarily to the increase in operating revenues and lower income taxes than are included in the historical average. Management is
confident that its ratio will compare favorably to that of its peers. Management continues to look for ways to decrease expenses and increase efficiency as well as to file for rate increases promptly when needed.
2023 Compared with 2022
Net income for 2023 was $23,757, an increase of $4,177, or 21.3%, from net income of $19,580 for 2022. The primary contributing factors to the increase
were higher operating revenues, which were partially offset by higher operating expenses and income taxes.
Operating revenues for 2023 increased $10,970, or 18.3%, from $60,061 for 2022 to $71,031 for 2023. The primary reason for the increase was a rate
increase effective March 1, 2023. Growth in the customer base also added to revenues. The average number of water customers served in 2023 increased as compared to 2022 by 996 customers, from 70,420 to 71,416 customers. The average number of
wastewater customers served in 2023 increased as compared to 2022 by 390 customers, from 5,609 to 5,999 customers, primarily due to acquisitions. Total per capita consumption for 2023 was approximately 0.3% higher than last year. The increased
revenues were partially offset by a $1,994 decrease from a lower DSIC allowed by the PPUC. The DSIC reset to zero on March 1, 2023 when the rate order took effect. In 2024, the Company expects revenues to show a modest increase over 2023 due to a
full year at the new rates and an increase in the number of water and wastewater customers from acquisitions and growth within the Company’s service territory. Other regulatory actions, drought warnings or restrictions, weather patterns, and
economic conditions could impact results.
Operating expenses for 2023 increased $5,922, or 16.6%, from $35,578 for 2022 to $41,500 for 2023. The increase was primarily due to higher expenses of
approximately $1,607 for depreciation and amortization, $975 for water treatment, $713 for wages, $683 for wastewater treatment as the prior year included a one-time reimbursement not repeated in the current year, $362 for insurance, $282 for
distribution system maintenance, $281 for outside services, $213 for billing and revenue collection services, $202 for fuel to pump raw water from the Susquehanna River, $189 for reduced capitalized overhead, $106 for an increased allowance for
uncollectible accounts, and $89 for source maintenance. Other operating expenses increased by a net of $220. In 2024, the Company expects depreciation and amortization expense to continue to rise due to additional investment in utility plant, and
other expenses to increase as costs to treat water and wastewater, and to maintain and extend the distribution system, continue to rise. Drought conditions and weather patterns could further increase operating expenses.
Interest on debt for 2023 increased $1,933, or 37.8%, from $5,114 for 2022 to $7,047 for 2023. The increase was primarily due to an increase in
long-term debt outstanding and higher interest rates. The average debt outstanding under the lines of credit was $16,316 for 2023 and $13,428 for 2022. The weighted average interest rate on the lines of credit was 5.36% for 2023 and 2.11% for
2022. Interest expense for 2024 is expected to be higher due to continued borrowings and continued higher interest rates.
Allowance for funds used during construction increased $2,652, from $1,501 in 2022 to $4,153 in 2023 due to a higher volume of eligible construction.
Allowance for funds used during construction in 2024 is expected to decrease based on the completion of the Lake Williams Dam project and a projected decrease in the amount of eligible construction.
Other income (expenses), net for 2023 reflects increased expenses of $521 as compared to 2022. Higher retirement expenses of approximately $843 were the
primary reason for the increase. Lower charitable contributions of approximately $288 partially offset the increase. Other expenses decreased by a net of $34.
In 2024, other income (expenses) will be largely determined by the change in market returns and discount rates for retirement programs and related assets.
Income tax expense for 2023 increased $1,262 compared to 2022 primarily due to higher income before income taxes partially offset by higher deductions
from the IRS TPR. The Company’s effective tax rate was 5.1% for 2023 and 0.1% for 2022. The Company’s effective tax rate for 2024 will be largely determined by income before income taxes and the level of eligible asset improvements expensed for
tax purposes under TPR each period.
Rate Matters
See Note 10 to the Company’s financial statements included herein for a discussion of its rate matters.
The Company does not expect to file a rate increase request in 2024.
Acquisitions and Growth
See Note 2 to the Company’s financial statements included herein for a discussion of completed acquisitions included in financial results.
On February 7, 2024, the Company signed an agreement to purchase the wastewater collection assets of Margaretta Mobile Home Park in Lower Windsor
Township, York County, Pennsylvania. Completion of the acquisition is contingent upon receiving approval from all required regulatory authorities. Closing is expected in 2025 at which time the Company will add approximately 65 wastewater
customers.
On July 17, 2023, the Company signed an agreement to purchase the wastewater collection and treatment assets of York Haven Sewer Authority in York Haven
Borough, 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 2024 at which time the Company will add approximately
230 wastewater customers.
On June 1, 2023, the Company signed an agreement to purchase the water assets of Longstown Mobile Estates in Windsor Township, York County,
Pennsylvania. Completion of the acquisition is contingent upon receiving approval from all required regulatory authorities. Closing is expected in the first quarter of 2024 at which time the Company will add approximately 90 water customers. The
water customers are currently served by the Company through a single customer connection to the mobile home park.
On May 23, 2023, the Company signed an agreement to purchase the Brookhaven Mobile Home Park water assets of ATG Properties, LLC in Hellam Township, York
County, Pennsylvania. Completion of the acquisition is contingent upon receiving approval from all required regulatory authorities. Closing is expected in the second half of 2024 at which time the Company will add approximately 150 water
customers.
On May 18, 2023, the Company signed an agreement to purchase the water assets of Houston Run Community Water System, LLC in Salisbury Township, Lancaster
County, Pennsylvania. Completion of the acquisition is contingent upon receiving approval from all required regulatory authorities. Closing is expected in the second quarter of 2024 at which time the Company will add approximately 15 water
customers.
On March 27, 2023, the Company signed an agreement to purchase the water assets of Pine Run Retirement Community in Hamilton Township, Adams County,
Pennsylvania. Completion of the acquisition is contingent upon receiving approval from all required regulatory authorities. Closing is expected in the second half of 2024 at which time the Company will add approximately 100 water customers.
On November 9, 2022, the Company signed an agreement to purchase the wastewater collection and treatment assets of CMV Sewage Co., Inc. in Chanceford
Township, York County, Pennsylvania. Completion of the acquisition is contingent upon receiving approval from all required regulatory authorities. Closing is expected in the second half of 2024 at which time the Company will add approximately 280
wastewater customers.
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 potential 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 2024 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
During 2023, the Company invested $64,640 in construction expenditures for armoring and replacing the spillway of the Lake Williams dam, wastewater
treatment plant construction as well as various replacements and improvements to infrastructure and routine items. In addition, the Company invested $625 in the acquisition of water and wastewater systems. The Company replaced approximately
50,200 feet of water main and 500 feet of wastewater main in 2023. 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 from developers, municipalities, customers, or builders. See Notes 1, 4 and 5 to the Company’s financial statements included herein.
The Company anticipates construction and acquisition expenditures for 2024 and 2025 of approximately $42,200 and $46,100, respectively, exclusive of any
acquisitions not yet approved. In addition to routine transmission and distribution projects, a portion of the anticipated 2024 and 2025 expenditures will be for additional main extensions, completion of armoring and replacing the spillway of the
Lake Williams dam, wastewater treatment plant construction, an upgrade to the enterprise software system, and various replacements of infrastructure. The Company intends to use primarily internally-generated funds for its anticipated 2024 and 2025
construction and fund the remainder through line of credit borrowings, potential debt and equity offerings, proceeds from its stock purchase plans and customer advances and contributions (see Note 1 to the Company’s financial statements included
herein). Customer advances and contributions are expected to account for between 5% and 10% of funding requirements in 2024 and 2025. The Company believes it will have adequate credit facilities and access to the capital markets, if necessary,
during 2024 and 2025, to fund anticipated construction and acquisition expenditures.
Liquidity and Capital Resources
Cash
The Company manages its cash through a cash management account that is directly connected to its line 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 December 31, 2023, the Company borrowed $30,273 under its line of credit and incurred
a cash overdraft on its cash management account of $1,547, which was recorded in accounts payable. The cash management facility connected to the line of credit is expected to provide the necessary liquidity and funding for the Company’s
operations, capital expenditures, and acquisitions 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 2023, higher revenue levels as compared to 2022 resulted in an increase in accounts receivable – customers. A reserve is maintained at a level considered adequate to provide for expected credit losses.
Expected credit losses are based on historical write-offs combined with an evaluation of current conditions and reasonable and supportable forecasts including inactive accounts with outstanding balances, the aging of balances in payment agreements,
adverse situations that may affect a customer’s ability to pay, economic conditions, and other relevant factors applied to the current aging of receivables. Customer accounts are written off when collection efforts have been exhausted. If the
status of the evaluated factors deteriorate, 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, customers’ water usage, weather conditions, customer growth and controlled expenses. In 2023, the Company generated $31,908 internally as compared to $22,018 in 2022. The increase from 2022 was primarily due to the
increase in net income and the increase in depreciation and amortization, a non-cash expense.
Common Stock
Common stockholders’ equity as a percent of the total capitalization was 54.8% as of December 31, 2023, compared with 59.3% as of December 31, 2022. The
ratio decreased in 2023 due to higher debt primarily from increased capital expenditures. The Company expects to use long-term debt for its future financing needs and allow the debt percentage to trend upward until it approaches fifty percent
before considering additional equity. It is the Company’s general intent to target equity between fifty and fifty-five percent of total capitalization.
The Company has the ability to issue approximately $4,000 of additional shares of its common stock or debt securities remaining under an effective
“shelf” Registration Statement on Form S-3 on file with the Securities and Exchange Commission subject to market conditions at the time of any such offering.
Credit Line
Historically, the Company has borrowed under its lines of credit before refinancing with long-term debt or equity capital. As of December 31, 2023, the
Company maintained a $50,000, unsecured, committed line of credit at an interest rate of the Secured Overnight Financing Rate, or SOFR, plus 1.17% with an unused commitment fee and an interest rate floor. The Company had $30,273 in outstanding
borrowings under its line of credit as of December 31, 2023. The interest rate on line of credit borrowings as of December 31, 2023 was 6.51%. In the third quarter of 2023, the Company renewed its committed line of credit and extended the
maturity date to September 2025. No other terms or conditions of the line of credit agreement were modified. On January 1, 2023, the interest rate changed from LIBOR plus 1.05% to a successor rate of the SOFR plus 1.17% in advance of the
discontinuation of LIBOR in 2023. The Company expects to renew this line of credit as it matures under similar terms and conditions.
The Company has taken steps to manage the risk of reduced credit availability. It has established a committed line of credit with a 2-year revolving
maturity that cannot be called on demand. 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 line of credit to meet financing
needs throughout 2024.
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 financial statements included herein for additional information regarding these restrictions.
On February 24, 2023, the Company entered into a note purchase agreement with certain institutional investors relating to the private placement of
$40,000 aggregate principal amount of the Company’s senior notes. The senior notes bear interest at 5.50% per annum payable semiannually and mature on February 24, 2053. The senior notes are unsecured and unsubordinated obligations of the
Company. The Company received net proceeds, after deducting issuance costs, of approximately $39,829. The net proceeds were used to refinance line of credit borrowings incurred by the Company as interim financing for various capital projects of
the Company.
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 45.2% as of December 31, 2023, compared with 40.7% as of December 31, 2022. The Company expects to use long-term debt for its future financing needs and allow the debt percentage to trend upward. A debt to total capitalization ratio between
forty-five and fifty percent has historically been acceptable to the PPUC in rate filings. See Note 6 to the Company’s financial statements included herein for the details of its long-term debt outstanding as of December 31, 2023.
Income Taxes, Deferred Income Taxes and Uncertain Tax Positions
Under the IRS TPR, 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 expects to continue to expense these asset improvements in the future.
The Company’s effective tax rate will largely be determined by income before income taxes and the level of eligible asset improvements expensed for tax
purposes that would have been capitalized for tax purposes prior to the implementation of the TPR.
On July 8, 2022, the Pennsylvania budget for the fiscal year ending June 30, 2023 was signed into law. A provision within the tax code bill included
with the budget provides for an annual phase-down of the Pennsylvania corporate net income tax rate of one percentage point in the first year beginning January 1, 2023 from 9.99% to 8.99%, and a one-half percentage point each year thereafter until
it reaches 4.99% beginning January 1, 2031. The Company has remeasured the state portion of the Company’s deferred income taxes. The effect, net of the federal benefit recognized in income for the years ended December 31, 2023 and 2022, was
immaterial. Deferred income taxes for differences that are recognized for ratemaking purposes on a cash or flow-through basis were remeasured with offsetting changes to regulatory assets and liabilities on the balance sheet as of December 31, 2023
and 2022. The Company expects any savings in its Pennsylvania current income taxes to be returned to its customers through the rate making process or as a future negative surcharge on their bills.
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 customers’ advances for construction and contributions in aid of construction 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 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.
The Company has determined there are no uncertain tax positions that require recognition as of December 31, 2023. See Note 14 to the Company’s financial
statements included herein for additional details regarding income taxes.
Credit Rating
On July 26, 2023, 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. In 2024, 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 the Company’s 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.
Environmental Matters
The Company was granted approval by the 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 date of 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 $1,762 and $1,518 through December 31, 2023 and 2022, respectively, and is included as a regulatory asset. Based on
its experience, the Company estimates that lead customer-owned service lines replacements will cost $1,900. This estimate is subject to adjustment as more facts become available.
Drought
On January 26, 2024, Pennsylvania state officials moved York County to a drought watch, moved Lancaster County to normal status, and continued the
drought watch for Adams County and the drought warning for Franklin County. The warning calls for a voluntary reduction in nonessential water use of 10 to 15 percent and the watch calls for a voluntary reduction in nonessential water use of 5 to
10 percent. In addition, the Company has implemented a voluntary restriction on nonessential water use within its service territory. These measures could potentially impact future revenues, operating expenses, and net income depending on the
length and severity of the dry conditions.
Dividends
During 2023, the Company’s dividend payout ratios relative to net income and net cash provided by operating activities were 49.3% and 36.3%,
respectively. During 2022, the Company’s dividend payout ratios relative to net income and net cash provided by operating activities were 56.2% and 48.5%, respectively. During the fourth quarter of 2023, the Board increased the dividend by 4.00%
from $0.2027 per share to $0.2108 per share per quarter.
The Company’s Board declared a dividend in the amount of $0.2108 per share at its January 2024 meeting. The dividend is payable on April 15, 2024 to
shareholders of record as of February 29, 2024. While the Company expects to maintain this dividend amount in 2024, future dividends will be dependent upon the Company’s earnings, financial condition, capital demands and other factors and will be
determined by the Company’s Board. See Note 6 to the Company’s financial statements included herein for restrictions on dividend payments.
Inflation
The Company is affected by inflation, most notably by the continually increasing costs incurred to maintain and expand its service capacity. The
cumulative effect of inflation results in significantly higher facility replacement costs which must be recovered from future cash flows. The ability of the Company to recover this increased investment in facilities is dependent upon future rate
increases, which are subject to approval by the PPUC. The Company can provide no assurances that its rate increases will be approved by the PPUC; and, if approved, the Company cannot guarantee that these rate increases will be granted in a timely
or sufficient manner to cover the investments and expenses for which the rate increase was sought.
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:
revenue recognition and accounting for its pension plans.
Revenue Recognition
Operating revenues include amounts billed to metered water and certain wastewater customers on a cycle basis and unbilled amounts based on both actual
and estimated usage from the latest meter reading to the end of the accounting period. Estimates are based on average daily usage for those particular customers. The unbilled revenue amount is recorded as a current asset on the balance sheet.
Actual results could differ from these estimates and would result in operating revenues being adjusted in the period in which the actual usage is known. Based on historical experience, the Company believes its estimate of unbilled revenues is
reasonable.
Pension Accounting
Accounting for defined benefit pension plans requires estimates of future compensation increases, mortality, the discount rate, and expected return on
plan assets as well as other variables. These variables are reviewed annually with the Company’s pension actuary. The Company used compensation increases of 2.5% to 3.0% in 2022 and 2023.
The Company adopted a new mortality table in 2019, the Pri-2012, using the white collar table for the administrative and general plan and the blue collar
table for the union plan. In 2021, the Company adopted the MP-2021 mortality improvement scale, which slightly increased the life expectancy of pension plan participants, resulting in a slight increase to the pension benefit obligation, and
ultimately, a decrease in the Company’s funded status of the plans.
The Company selected its December 31, 2023 and 2022 discount rates based on the FTSE Pension Liability Index. This index uses spot rates for durations
out to 30 years and matches them to expected disbursements from the plan over the long term. The Company believes this index most appropriately matches its pension obligations. The present values of the Company’s future pension obligations were
determined using a discount rate of 4.75% at December 31, 2023 and 5.00% at December 31, 2022.
Adopting a new mortality table that represents a change in life expectancy and choosing a different discount rate normally changes the amount of pension
expense and the corresponding liability. In the case of the Company, these items change its liability, but do not have an impact on its pension expense. The PPUC, in a previous rate settlement, agreed to grant recovery of the Company’s
contribution to the pension plans in customer rates. As a result, under the accounting standards regarding rate-regulated activities, expense in excess of the Company’s pension plan contribution can be deferred as a regulatory asset and expensed
as contributions are made to the plans and are recovered in customer rates. Therefore, these changes affect regulatory assets rather than pension expense.
In 2023, the Company modified its investment policy statements. The Company’s estimate of the expected return on plan assets is primarily based on the
historic returns and projected future returns of the asset classes represented in its plans. The target allocation of pension assets is 70% to 90% fixed income securities, 10% to 30% equity securities, and 0% to 10% cash reserves. The Company
used 5.00% as its expected rate of return in 2023, a decrease from the 6.50% used in 2022 based on the modified investment policy statements. A decrease in the expected pension return would normally cause an increase in pension expense; however
due to the aforementioned rate settlement, the Company’s expense would continue to be equal to its contributions to the plans. The change would instead be recorded in regulatory assets.
Lower discount rates and underperformance of assets could cause future required contributions and expense to increase substantially. If this were to
happen, the Company would have to consider changes to its pension plan benefits and possibly request additional recovery of expenses through increased rates charged to customers. See Note 11 to the Company’s financial statements included herein
for additional details regarding the pension plans.
Off-Balance Sheet Transactions
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 7 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 material lease obligations, no guarantees and does not have material transactions involving related parties.
Impact of Recent Accounting Pronouncements
There are currently no recent accounting pronouncements that are expected to have a material impact to the Company’s financial statements.
|
Item 7A.
|
Quantitative and Qualitative Disclosures About Market Risk.
|
Not applicable.
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement (this “Agreement”) is made as of this _____ day of ________, 2022 (the “Effective Date”) by and between The York Water Company, a Pennsylvania
corporation (the “Company”) and ________________________ (the “Executive”).
RECITALS
WHEREAS, the Company wishes to retain the Executive and to assure the present and future continuity, objectivity
and dedication of the Executive in the event of any Change of Control and to protect short and long term interests of our investors through a Change of Control; and
WHEREAS, the Company believes it is imperative to diminish the inevitable distraction of Executive by virtue of the
personal uncertainties and risks created by a pending or threatened Change of Control; and
WHEREAS, the Company wishes to provide Executive with compensation and benefits upon a Change of Control which
ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other corporations.
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. Termination of Prior Agreement. Company and Executive agree that by entering into this
Agreement the parties are terminating that Amended and Restated Agreement (the “Prior Agreement”) dated as of ___________, 20__ by and between the Company
and Executive.
2. Definitions. For all purposes of this Agreement, the following terms shall have the
meanings specified in this Section unless the context clearly requires otherwise:
(a) “Accrued Benefits” has the meaning given to it at Section 3(b).
(b) “Affiliate” and “Associate” have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act.
(c) A Person is 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) “Board” means the Board of Directors of the Company.
(e) “Business Combination” means a reorganization, merger or consolidation of the Company.
(f) “Cause” means (i) Executive’s misappropriation of
funds or any act of common law fraud, (ii) Executive’s habitual insobriety or substance abuse, (iii) Executive’s conviction of a felony or any crime involving moral turpitude, (iv) willful misconduct or gross negligence by Executive in the
performance of Executive’s duties, (v) the willful failure of Executive to perform a material function of Executive’s duties hereunder, or (vi) Executive engaging in a conflict of interest or other breach of fiduciary duty.
(g) “Change of Control” means:
(i) Any Person (except Executive, Executive’s 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.
Provided that a Change of Control under this Agreement must, in all events, constitute a change in the ownership or effective control of,
or in the ownership of a substantial portion of the assets of, the Company (as determined in accordance with Treas. Reg. Sec. 1.409A-3(i)(5)(v), (vi) and (vii)).
(h) “Code” means the Internal Revenue Code of 1986, as amended, and the regulations
promulgated thereunder.
(i) “Company Voting Securities” means the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the election of directors.
(j) “Compensation” means the sum of the Executive’s current annual base rate of pay and
the Executive’s annual bonus compensation at target level of achievement payable in cash to the Executive.
(k) “Disability” means, in the good faith judgment of the Company’s Board of Directors,
despite reasonable accommodation, the Executive is unable due to a physical or mental incapacity to perform the essential functions of Executive’s most recent position for: (x) a period of one hundred eighty (180) consecutive days or (y) an
aggregate of six (6) months in any twelve (12) consecutive month period.
(l) “Exchange Act” means the Securities Exchange Act of 1934, as amended.
(m) “Good Reason Termination” means a Termination of Employment initiated by the Executive
following a Change of Control and based on the occurrence of one or more of the following events or circumstance, or such Termination of Employment occurs within six (6) months prior to a Change of Control if such event or circumstance occurred at
the insistence of a third party in connection with the Change of Control or was otherwise made in connection with the Change of Control, in each case without the consent of the Executive:
(i) any action or inaction that constitutes a material breach by the Company of this Agreement;
(ii) any material reduction by the Company of the authority, duties or responsibilities of Executive’s principal assignment with the Company;
(iii) any material reduction in Executive's Compensation;
(iv) any removal by the Company of Executive from the employment grade or officer positions the Executive holds as of the Effective Date hereof, except in connection with promotions
to higher office; provided, however, that such removal results in a material diminution in Executive's authority, duties or responsibilities; or
(v) a material adverse change in the principal geographic location at which Executive must perform services; provided that a transfer of Executive to a location that is more than
seventy (70) miles from the Executive’s principal place of business immediately preceding a Change of Control shall constitute a material adverse change in the geographic location.
Notwithstanding the preceding definition of Good Reason Termination, Executive shall have a Good Reason Termination
for purposes of this Agreement only if (i) Executive provides written notice to the Company identifying the event or circumstance constituting the basis for the Good Reason Termination not more than sixty (60) days following the initial occurrence of
such event or circumstance, (ii) the notice provides the Company the opportunity (but the Company shall have no obligation) to cure such events or conditions that give rise to the Good Reason Termination within not less than thirty (30) days
following such notice, and (iii) if the Company fails to cure the events or conditions giving rise to Executive’s Good Reason Termination, Executive actually terminates within ninety (90) days after the Company’s period to cure.
(n) “Incumbent Board” means 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.
(o) “Outstanding Company Common Stock” means the then outstanding shares of common stock
of the Company.
(p) “Person” means 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.
(q) “Subsidiary” means 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.
(r) “Termination Date” means the date of Executive’s Termination of Employment.
(s) “Termination of Employment” means Executive’s “separation from service” (within the
meaning of such term under Section 409A of the Code) with the Company.
3. Termination of Employment.
(a) Notice of Termination. Any Termination of Employment subject to this Agreement shall
be communicated by a Notice of Termination in accordance with Section 9 hereof. For purposes of this Agreement, a “Notice of Termination” means a written
notice which, in the case of a Good Reason Termination by Executive (i) indicates the specific reasons for the termination, (ii) briefly summarizes the facts and circumstances deemed to provide a basis for termination of Executive’s employment, and
(iii) 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 ninety (90) days after the Company’s cure period ends).
(b) Accrued Benefits. In all events Executive shall be entitled to receive any payments or
benefits accrued for Executive 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 Executive
under any severance pay plan for the Company’s employees (collectively, the “Accrued Benefits”).
4. Compensation Upon Termination. In the event of Executive’s Termination of Employment
following a Change of Control, or six months prior to a Change of Control, Executive shall be entitled to the Executive’s Accrued Benefits and, and subject to Section 4(e), the payments and benefits provided in this Section 4, as applicable.
(a) Termination by the Company without Cause or Executive’s Good Reason Termination. In
the event of Executive’s Termination of Employment by the Company without Cause or the Executive’s Good Reason Termination, in either case, (i) following a Change of Control or (ii) if such Termination of Employment was at the insistence of a third
party in connection with the Change of Control or otherwise was in connection with the Change of Control, during the period six months prior to a Change of Control, the Company shall pay or provide to the Executive:
(i) Severance Pay. An amount equal to [3x for CEO; 2x for C Suite; 1x for
VPs] times the Executive’s Compensation, payable in equal periodic payments in accordance with the Company’s normal and customary payroll procedures over [24 for CEO/C Suite; 12 for VPs] months following the later of the Executive’s Termination
Date or the date of the Change of Control.
(ii) Pro-rated annual bonus. If the Executive
has completed at least six (6) months of employment during the fiscal year, a lump sum amount equal to the annual bonus that would have become payable in cash to the Executive for that fiscal year if Executive’s employment had not terminated and
based on achievement at the target level of performance, multiplied by a fraction, the numerator of which is the number of days the Executive was employed in the fiscal year of termination and the denominator of which is the total number of days in
the fiscal year of termination, payable within 60 days of Executive’s Termination Date, or if later, the date of the Change of Control.
(iii) Equity Awards. All unvested equity-based
incentive compensation awards held by Executive on Executive’s Termination Date will immediately vest, provided that with respect to any performance-based awards such awards will vest and be determined by assuming achievement at the target level of
performance, with payments made in accordance with the terms of the applicable award.
(iv) COBRA. If the Executive is eligible for and timely and properly elects group health plan continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), the Company shall reimburse the Executive for the monthly COBRA premium paid by the Executive for the Executive and the Executive’s dependents. Such reimbursement shall be paid
to the Executive no later than the end of the month immediately following the month in which the Executive timely remits the COBRA premium payment. The Executive shall be eligible to receive such reimbursement for up to eighteen (18) months
following the Termination Date, to the extent permitted under the terms of the Company’s group health plans; provided, however, that if the Executive becomes eligible to receive healthcare coverage from a subsequent employer (and Executive agrees
to promptly notify the Company of such eligibility) or the Executive is no longer eligible to receive COBRA continuation coverage, then the Company’s obligation to reimburse COBRA premiums described herein shall be terminated.
(v) Stipend. Beginning with the month following the end of the Executive’s
eighteen-month COBRA continuation coverage period, Executive shall receive an amount equal to $3,000 times [18 for CEO; 6 for C suite and VPs] payable in equal periodic payments in accordance with the Company’s normal and customary payroll
procedures over [18 months for CEO; 6 months for C suite and VPs] months following the end of Executive’s eighteen-month COBRA continuation coverage period.
(vi) Notwithstanding the foregoing provisions of this Section 4(a), the Company shall not be obligated to make any payment or provide the benefits described in this Section 4(a)
after the date the Executive first violates any of the restrictive covenants set forth in this Agreement, including Section 10 and Section 12 hereof.
(b) Termination by the Company for Cause. If the Executive’s employment is terminated by
the Company for Cause, the Company will only be required to pay the Executive such Executive’s Accrued Benefits.
(c) Termination by Executive in the Twenty Fifth Month after Change of Control. [NOTE THIS CAUSES ALL OF THE SEVERANCE TO BE SUBJECT TO THE DEFERRED COMPENSATION RULES OF SECTION 409A, INCLUDING THE 6 MONTH SUSPENSION FOR SPECIFIED
EMPLOYEES.] In the event Executive incurs a Termination of Employment (other than on account of the Executive’s death or Disability, or by the Company for Cause) following the twenty four (24) month anniversary of a Change of Control but
not later than the twenty five (25) month anniversary of a Change of Control, the Company shall pay or provide to the Executive:
(i) Severance Pay. An amount equal to [3x for CEO; 2x for C suite; 1x for
VPs] times the Executive’s Compensation, payable in equal periodic payments in accordance with the Company’s normal and customary payroll procedures over [24 for CEO/C Suite; 12 for VPs] months following the Executive’s Termination Date.
(ii) Pro-rated annual bonus. If the Executive
has completed at least six (6) months of employment during the fiscal year, a lump sum amount equal to the annual bonus that would have become payable in cash to the Executive for that fiscal year if Executive’s employment had not terminated and
based on achievement at the target level of performance, multiplied by a fraction, the numerator of which is the number of days the Executive was employed in the fiscal year of termination and the denominator of which is the total number of days in
the fiscal year of termination, payable within 60 days of Executive’s Termination Date.
(iii) Equity Awards. All unvested equity-based
incentive compensation awards held by Executive on Executive’s Termination Date will immediately vest, provided that with respect to any performance-based awards such awards will vest and be determined by assuming achievement at the target level of
performance, with payments made in accordance with the terms of the applicable award.
(iv) COBRA. If the Executive is eligible for and timely and properly elects group health plan continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), the Company shall reimburse the Executive for the monthly COBRA premium paid by the Executive for the Executive and the Executive’s dependents. Such reimbursement shall be paid
to the Executive no later than the end of the month immediately following the month in which the Executive timely remits the COBRA premium payment. The Executive shall be eligible to receive such reimbursement for up to eighteen (18) months
following the Termination Date, to the extent permitted under the terms of the Company’s group health plans; provided, however, that if the Executive becomes eligible to receive healthcare coverage from a subsequent employer (and Executive agrees
to promptly notify the Company of such eligibility) or the Executive is no longer eligible to receive COBRA continuation coverage, then the Company’s obligation to reimburse COBRA premiums described herein shall be terminated.
(v) Stipend. Beginning with the month following the end of the Executive’s
eighteen-month COBRA continuation coverage period, Executive shall receive an amount equal to $3,000 times [18 months for CEO; 6 for C suite and VPs] payable in equal periodic payments in accordance with the Company’s normal and customary payroll
procedures over [18 months for CEO; 6 months for C suite and VPs] months following the end of Executive’s eighteen-month COBRA continuation coverage period.
(vi) Notwithstanding the foregoing provisions of this Section 4(c), the Company shall not be obligated to make any payment or provide the benefits described in this Section 4(c)
after the date the Executive first violates any of the restrictive covenants set forth in this Agreement, including Section 10 and Section 12 hereof.
(d) Termination on Account of Death or Disability. If the Executive’s employment is
terminated on account of the Executive’s Disability or death, the Company shall pay or provide to the Executive the following:
(i) Pro-rated annual bonus. If the Executive has completed at least six (6)
months of employment during the fiscal year, a lump sum amount equal to the annual bonus that would have become payable in cash to the Executive for that fiscal year if Executive’s employment had not terminated and based on achievement at the
target level of performance, multiplied by a fraction, the numerator of which is the number of days the Executive was employed in the fiscal year of termination and the denominator of which is the total number of days in the fiscal year of
termination, payable within 60 days of Executive’s Termination Date.
(ii) Equity awards. All unvested equity-based incentive compensation awards
held by Executive on Executive’s Termination Date will immediately vest, provided that with respect to any performance-based awards such awards will vest and be determined by assuming achievement at the target level of performance, with payments
made in accordance with the terms of the applicable award.
(iii) COBRA. If the Executive is (or in the event of the Executive’s death,
the Executive’s surviving spouse and/or dependents are) eligible for and timely and properly elects group health plan continuation coverage under COBRA, the Company shall reimburse the Executive (or in the event of the Executive’s death, the
Executive’s surviving spouse and/or dependents) for the monthly COBRA premium paid by the Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) for the Executive and the Executive’s
spouse/dependents. Such reimbursement shall be paid to the Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) no later than the end of the month immediately following the month in which the
Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) timely remits the COBRA premium payment. The Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or
dependents) shall be eligible to receive such reimbursement for up to eighteen (18) months following the Termination Date, to the extent permitted under the terms of the Company’s group health plans; provided, however, that if the Executive becomes
eligible to receive healthcare coverage from a subsequent employer (and Executive agrees to promptly notify the Company of such eligibility) or the Executive is (or the Executive’s surviving spouse and/or dependents in the event of the Executive’s
death are) no longer eligible to receive COBRA continuation coverage, then the Company’s obligation to reimburse COBRA premiums described herein shall be terminated.
(e) Release. The payments and benefits provided under Sections 4(a), (c) and (d) are
subject to and conditioned upon (A) the Executive (or, in the event of the Executive’s death, the representative of the Executive’s estate) executing a timely and valid release of claims (“Release”), in substantially the form attached hereto as Exhibit A, waiving all claims the Executive (or,
in the event of the Executive’s death, the representative of the Executive’s estate) may have against the Company, it successors, assigns, affiliates, executives, officers and directors, (B) the Executive (or, in the event of the Executive’s death,
the representative of the Executive’s estate) delivering the executed Release to the Company within sixty (60) days following the Executive’s Termination Date (the “Release
Period”), (C) such Release and the waiver contained therein becoming effective, and (D) the Executive’s (or, in the event of the Executive’s death, the representative of the Executive’s estate) compliance with the restrictive
covenants contained in Section 10 and Section 12 of this Agreement. In the event that the Release Period spans two calendar years and such payments or benefits are treated as deferred compensation subject to Section 409A of the Code, such payments
and benefits provided under Section 4(a), (c) and (d) must be made in the second of the two calendar years. Any severance payments or reimbursements under Section 4(a), (c) or (d) accruing during the period from the Termination Date through the
date the Company makes the first periodic payment will be paid with such first payment.
(f) Tax Withholding. The Company shall have the right to withhold from any amount payable
hereunder any Federal, state and local taxes the Company reasonably determines are required in order for the Company to satisfy any withholding tax obligation it may have under any applicable law or regulation.
(g) Payment to Beneficiary. In the event Executive dies after the Executive is entitled
to payment of severance, bonus, or stipend amounts under Section 4(a), (c) or (d) but prior to completion of the payment, such payments will continue to the Executive’s Beneficiary. For this purpose, the Executive’s “Beneficiary” is the Executive’s surviving spouse, and if no surviving spouse, then the Executive’s surviving children, and if there is no surviving child, the Executive’s estate.
5. No Mitigation. Executive 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.
6. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit
Executive’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 Executive may qualify, from the date hereof
through the Termination Date.
7. Code Section 409A. This Agreement is intended to be exempt from, or comply with, the
requirements of Section 409A of the Code, and shall be interpreted, construed and administered in a manner consistent with such intent. In that regard:
(a) The payments to the Executive pursuant to this Agreement are intended to be exempt from Section 409A of the Code to the maximum extent possible, under either the separation pay
exemption pursuant to Treasury regulation §1.409A-1(b)(9)(iii) or as short-term deferrals pursuant to Treasury regulation §1.409A-1(b)(4).
(b) If any payment is or becomes subject to the requirements of Section 409A, the Agreement, as it relates to such payment, is intended to comply with the requirements of Section
409A. In the event the terms of this Agreement would subject the Executive to taxes or penalties under Section 409A of the Code (“409A Penalties”), the
Company and the Executive shall cooperate diligently to amend the terms of the Agreement to avoid such 409A Penalties, to the extent possible; provided that such amendment shall not increase or reduce (in the aggregate) the amounts payable to the
Executive hereunder.
(c) Any taxable reimbursement payable to the Executive pursuant to this Agreement shall be paid to the Executive no later than the last day of the calendar year following the
calendar year in which the Executive incurred the reimbursable expense. Any amount of expenses eligible for taxable reimbursement, during a calendar year shall not affect the amount of such expenses eligible for reimbursement, during any other
calendar year. The right to such reimbursement pursuant to this Agreement shall not be subject to liquidation or exchange for any other benefit.
(d) Any right to a series of installment payments pursuant to this Agreement is to be treated as a right to a series of separate payments.
(e) If any payment is deferred compensation subject to Section 409A of the Code that is payable on account of the Executive’s “separation from service,” and the Executive is a
“specified employee” under Section 409A of the Code, such payment will not be made until the date that is one day following the six (6) month anniversary of the Executive’s “separation from service”, or if earlier, upon the Executive’s death.
8. Code Section 280G. Notwithstanding anything to the contrary in this Agreement, in any
other agreement between or among the Executive, the Company or any of its Affiliates or in any plan maintained by the Company or any Affiliate, if there is a 280G Change in Control (as defined in Section 8(g)(i) below), the following rules shall
apply:
(a) Except as otherwise provided in Section 8(b) below, if it is determined in accordance with Section (d) below that any portion of the Payments (as defined in Section 8(g)(ii)
below) that otherwise would be paid or provided to the Executive or for the Executive’s benefit in connection with the 280G Change in Control would be subject to the excise tax imposed under Section 4999 of the Code (“Excise Tax”), then such Payments shall be reduced by the smallest total amount necessary in order for the aggregate present value of all such Payments after such reduction, as
determined in accordance with the applicable provisions of Section 280G of the Code and the regulations issued thereunder, not to exceed the Excise Tax Threshold Amount (as defined in Section 8(g)(iii) below).
(b) No reduction in any of the Executive’s Payments shall be made pursuant to Section 8(a) above if it is determined in accordance with Section 8(d) below that the After Tax Amount
of the Payments payable to the Executive without such reduction would exceed the After Tax Amount of the reduced Payments payable to the Executive in accordance with Section 8(a) above. For purposes of the foregoing, (i) the “After Tax Amount” of the Payments, as computed with, and as computed without, the reduction provided for under Section 8(a) above, shall mean the amount of the
Payments, as so computed, that the Executive would retain after payment of all taxes (including without limitation any federal, state or local income taxes, the Excise Tax or any other excise taxes, any Medicare or other employment taxes, and any
other taxes) imposed on such Payments in the year or years in which payable; and (ii) the amount of such taxes shall be computed at the rates in effect under the applicable tax laws in the year in which the 280G Change in Control occurs, or if then
ascertainable, the rates in effect in any later year in which any Payment is expected to be paid following the 280G Change in Control, and in the case of any income taxes, by using the maximum combined federal, state and (if applicable) local
income tax rates then in effect under such laws.
(c) Any reduction in the Executive’s Payments required to be made pursuant to Section 8(a) above (the “Required
Reduction”) shall be made as follows: first, any Payments that became fully vested prior to the 280G Change in Control and
that pursuant to paragraph 8(b) of Treas. Reg. §1.280G-1, Q/A 24 are treated as Payments solely by reason of the acceleration of their originally scheduled dates of payment shall be reduced, by cancellation of the acceleration of their dates of
payment; second, any severance payments or benefits, performance-based cash or performance-based equity incentive awards, or other Payments, in
all cases the full amounts of which are treated as contingent on the 280G Change in Control pursuant to paragraph 8(a) of Treas. Reg. §1.280G-1, Q/A 24, shall be reduced; and third, any cash or equity incentive awards, or non-qualified deferred compensation amounts, that vest solely based on the Executive’s continued service with the Company or any of its Affiliates, and that
pursuant to paragraph (c) of Treas. Reg. §1.280G-1, Q/A 24 are treated as contingent on the 280G Change in Control because they become vested as a result of the 280G Change in Control, shall be reduced, first by cancellation of any acceleration of
their originally scheduled dates of payment (if payment with respect to such items is not treated as automatically occurring upon the vesting of such items for purposes of Section 280G) and then, if necessary, by canceling the acceleration of their
vesting. In each case, the amounts of the Payments shall be reduced in the inverse order of their originally scheduled dates of payment or vesting, as applicable, and shall be so reduced only to the extent necessary to achieve the Required
Reduction.
(d) A determination as to whether any Excise Tax is payable with respect to the Executive’s Payments and if so, as to the amount thereof, and a determination as to whether any
reduction in the Executive’s Payments is required pursuant to the provisions of Sections 8(a) and 8(b) above, and if so, as to the amount of the reduction so required, shall be made by no later than fifteen (15) days prior to the closing of the
transaction or the occurrence of the event that constitutes the 280G Change in Control, or as soon thereafter as administratively practicable. Such determinations, and the assumptions to be utilized in arriving at such determinations, shall be made
by an independent auditor (the “Auditor”) selected by the Company, all of whose fees and expenses shall be borne and directly paid solely by the Company.
The Auditor shall provide a written report of its determinations, including detailed supporting calculations, both to the Executive and to the Company. If the Auditor determines that no Excise Tax is payable with respect to the Executive’s
Payments, either as a result of any Required Reduction the Auditor has determined should be made thereto or because the Auditor has determined that no Required Reduction must be made thereto, the written report which the auditor furnishes to the
Executive and to the Company pursuant to the preceding sentence shall be accompanied by an opinion reasonably acceptable to the Executive that no Excise Tax will be imposed with respect to the Executive’s Payments. Except as otherwise provided in
Section 8(e) or Section 8(f) below, the determinations made by the Auditor pursuant to this Section 8(d) shall be binding upon the Executive and the Company and its Affiliates.
(e) If, notwithstanding (i) any determination made pursuant to
Section 8(d) above that a reduction in the Executive’s Payments is not required pursuant to Section 8(a) above or (ii) any reduction in the Executive’s Payments made pursuant to Section 8(a) above, the United States Internal Revenue Service
(the “IRS”) subsequently
asserts that the Executive is liable for the Excise Tax with respect to such Payments, the Payments then remaining to be paid or provided to the Executive shall be reduced as provided in Sections 8(a) and 8(b) above or shall be further reduced
as provided in Section 8(a) above, and (if still necessary after such reduction or further reduction) any Payments already made to the Executive shall be repaid to the Company or its Affiliates, to the extent necessary to eliminate the Excise Tax asserted by the IRS to be payable by the Executive. Any such reduction or further reduction or repayment (i)
shall be made only if the IRS agrees that such reduction or further reduction or repayment will be effective to avoid the imposition of any Excise Tax with respect to the Executive’s Payments as so reduced or repaid and agrees not to impose
such Excise Tax against the Executive if such reduction or further reduction or repayment is made, and (ii) shall be made in the manner described in Section 8(c) above.
(f) Notwithstanding anything to the contrary in the foregoing provisions of this Section 8, if (i) the Executive’s Payments have been reduced pursuant to Section 8(a) above and the
IRS nevertheless subsequently determines that Excise Tax is payable with respect to the Executive’s Payments, and (ii) if the After Tax Amount of the Payments payable to the Executive, determined without any further reduction or repayment as
provided in Section 8(e) above, and without any initial reduction as provided in Section 8(a) above, would exceed the After Tax Amount of the Payments payable to the Executive as reduced in accordance with Section 8(a), then (A) no such further
reduction or repayment shall be made with respect to the Executive’s Payments pursuant to Section 8(e) above, and (B) the Company or its Affiliate shall pay to the Executive an amount equal to the reduction in the Executive’s Payments that was
initially made pursuant to Section 8(a). Such amount shall be paid to the Executive in a cash lump sum by no later than the fifteenth (15th) day of the third (3rd) month following the close of the calendar year in which the
IRS makes its final determination that Excise Tax is due with respect to the Executive’s Payments, provided that by such day the Executive has paid the Excise Tax so determined to be due.
(g) For purposes of the foregoing, the following terms shall have the following respective meanings:
(i) “280G Change in Control” shall mean a change in the ownership or effective control of
the Company or in the ownership of a substantial portion of the assets of the Company, as determined in accordance with Section 280G(b)(2) of the Code and the regulations issued thereunder.
(ii) “Payment” shall mean any payment or benefit in the nature of compensation that is to
be paid or provided to the Executive or for the Executive’s benefit in connection with a 280G Change in Control, to the extent that such payment or benefit is “contingent” on the 280G Change in Control within the meaning of Section 280G(b)(2)(A)(i)
of the Code and the regulations issued thereunder.
(iii) “Excise Tax Threshold Amount” means an
amount equal to three (3) times the Executive’s “base amount” within the meaning of Section 280G(b)(3) of the Code and the regulations issued thereunder, less $1,000.
9. 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 Executive, to:
[name]
[Address]
or to such other names or addresses as the Company or Executive, 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
10. Restrictive Covenants.
(a) Confidential Information. Executive recognizes and acknowledges that, by reason of
Executive’s employment by and service to the Company, Executive 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”).
Executive acknowledges that such Confidential Information is a valuable and unique asset and covenants that Executive will not, either during or after Executive’s Termination of Employment, 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 Executive or except as may be required by law.
(b) Limitation on Restrictions. The restrictions in Paragraph (b) and (c) shall not be
construed to prohibit the ownership by Executive 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 Executive nor any group of persons including Executive, 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 her rights as a shareholder, or seeks to do any of the foregoing.
11. Equitable Relief.
(a) Executive acknowledges that the restrictions contained in Sections 10 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 that Section will result in irreparable injury to the Company. Executive represents that
Executive’s experience and capabilities are such that the restrictions contained in Section 10 hereof will not prevent Executive from obtaining employment or otherwise earning a living at the same general level of economic benefit as anticipated by
this Agreement. Executive further represents and acknowledges that (i) Executive has been advised by the Company to consult Executive’s own legal counsel in respect of this Agreement, and (ii) that Executive has had full opportunity, prior to
execution of this Agreement, to review thoroughly this Agreement and understands its terms and conditions.
(b) Executive 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 Section 10 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 Section 10 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) Executive irrevocably and unconditionally (i) agrees that any suit, action or other legal proceeding arising out of Section 10 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 Executive may have to the
laying of venue of any such suit, action or proceeding in any such court. Executive 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 9 hereof.
(d) Executive agrees that Executive will provide, and that the Company may similarly provide, a copy of Section 10 hereof to any business or enterprise (i) which Executive 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 Executive may be connected as an officer, director, employee, partner,
principal, agent, representative, consultant or otherwise, or in connection with which she may use or permit her name to be used; provided, however, that this provision shall not apply in respect of Section 10 hereof after expiration of the time
period set forth therein.
12. Mutual Non-Disparagement. Executive shall not, while employed by the Company or during the five (5) years following the Executive’s Termination of Employment, make, directly or indirectly, any public or private statements, gestures, signs, signals or other verbal or nonverbal communications that belittle, disparage or
otherwise express disapproval of the Company or any of its Affiliates or their respective businesses, or any of their past or present officers, directors, employees, advisors, agents, policies, procedures, practices, decision-making, conduct, professionalism or compliance with standards. The
Company shall not, and shall use commercially reasonably efforts to make a
one-time instruction to its executive officers and directors to not, during the five (5) years following the Executive’s Termination of Employment, make, directly or indirectly, any public or private statements, gestures, signs, signals or other verbal or nonverbal communications that belittle, disparage or otherwise
express disapproval of the Executive.
13. Enforcement.
(a) In the event that the Company shall fail or refuse to make payment of any amounts due Executive under Section 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 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
Executive, and the third of whom shall be selected by the other two arbitrators. Any award entered by the arbitrators shall be final, binding and non-appealable 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 Executive accepts any portion of the payment that the Company is willing to
make, Executive 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 Executive enter into a legally binding settlement of the dispute over the payment or the date the Company concedes the payment is due to Executive. For Executive’s efforts to collect payment to be considered prompt,
reasonable and in good faith, Executive 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, Executive must take further enforcement
measures within 180 days after such date.
(b) The Company shall pay Executive on demand the amount necessary to reimburse Executive in full for all reasonable expenses (including reasonable attorneys’ fees and expenses)
incurred by Executive in enforcing any of the obligations of the Company under this Agreement subject to Executive’s duty to repay such sums to the Company in the event that Executive does not prevail on any material issue which is the subject of
such arbitration. If Executive 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 Executive’s reasonable attorneys’ fees and expenses). Otherwise, each party shall be responsible for their 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 13 shall be paid or provided to Executive within 30 days of the date Executive is
finally determined to have prevailed on at least one material issue, which was the subject of the arbitration.
14. Amendment.
This Agreement may be amended or modified only by a written instrument signed by the Executive and by an expressly authorized officer of the Company.
15. General.
(a) Successor. 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 Executive, 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. This Agreement shall inure to the benefit of and be binding upon the Company and its successors, and assigns. This
Agreement is personal to the Executive and shall not be assignable by the Executive other than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal
representatives.
(b) 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.
(c) No Right of Employment. Nothing in this Agreement shall be construed as giving the
Executive any right to be retained in the employ of the Company or shall interfere in any way with the right of the Company to terminate the Executive’s employment at any time, with or without Cause.
(d) Unfunded Obligation. The obligations under this Agreement shall be unfunded.
Benefits payable under this Agreement shall be paid from the general assets of the Company. The Company shall have no obligation to establish any fund or to set aside any assets to provide benefits under this Agreement.
(e) 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.
(f) 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 Executive or
others.
(g) Non-waiver. The waiver by any Party of a breach of any provision of this Separation
Agreement by the other Party shall not operate or be construed as a waiver of any subsequent breach.
(h) Counterparts. This Agreement may be executed in duplicate counterparts, each of which
shall be deemed an original, and all of which taken together shall constitute one and the same instrument. Facsimile, electronic (Adobe Acrobat, etc.) and other copies or duplicates of this Agreement are valid and enforceable as originals. This
Agreement may be executed with an ink or electronic signature, including via DocuSign.
IN WITNESS WHEREOF,
the parties have executed this Agreement effective as of the Effective Date.
|
THE YORK WATER COMPANY
|
EXECUTIVE
|
|
|
By: ___________________________________
Name: ________________________________
Title: __________________________________
|
_________________________________
Title: _____________________________
|
Exhibit A
You should consult with an attorney before signing this release of claims.
Release
1. In consideration of the payments and benefits to be made under the Change of Control Agreement, dated as of [_______], 2022 (the “Change of Control Agreement”), by and between ________________(the “Executive”) and The York Water Company
(the “Company”) thereof (each of the Executive and the Company, a “Party”
and collectively, the “Parties”), the sufficiency of which the Executive acknowledges, the Executive, with the intention of binding the Executive and the
Executive’s heirs, executors, administrators and assigns, does hereby release, remise, acquit and forever discharge the Company and each of its subsidiaries and affiliates (the “Company Affiliated Group”), their present and former officers, directors, executives, shareholders, agents, attorneys, employees and employee benefit plans (and the fiduciaries thereof), and the successors, predecessors and
assigns of each of the foregoing (collectively, the “Company Released Parties”), of and from any and all claims, actions, causes of action, complaints,
charges, demands, rights, damages, debts, sums of money, accounts, financial obligations, suits, expenses, attorneys’ fees and liabilities of whatever kind or nature in law, equity or otherwise, whether accrued, absolute, contingent, unliquidated
or otherwise and whether now known or unknown, suspected or unsuspected, which the Executive, individually or as a member of a class, now has, owns or holds, or has at any time heretofore had, owned or held, arising on or prior to the date hereof,
against any Company Released Party, including claims arising out of, or relates to, the Change of Control Agreement and any employment agreement or other similar agreement between the Executive and the Company, the Executive’s employment with the
Company or any of its subsidiaries and affiliates, or any termination of such employment, including claims (i) for severance or vacation benefits, unpaid wages, salary or incentive payments, (ii) for breach of contract, wrongful discharge,
impairment of economic opportunity, defamation, intentional infliction of emotional harm or other tort, (iii) for any violation of applicable state and local labor and employment laws (including, without limitation, all laws concerning unlawful and
unfair labor and employment practices) and (iv) for employment discrimination under any applicable federal, state or local statute, provision,
order or regulation, and including, without limitation, any claim under Title VII of the Civil Rights Act of 1964 (“Title VII”), the Civil Rights Act of
1988, the Fair Labor Standards Act, the Americans with Disabilities Act (“ADA”), the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), the Age Discrimination in Employment Act (“ADEA”), the
Genetic Information Nondiscrimination Act (“GINA”), the Family and Medical Leave Act (“FMLA”), and any similar or analogous state statute or local ordinance, excepting only:
|
A.
|
rights of the Executive arising under, or preserved by, this Release;
|
|
B.
|
the right of the Executive to receive COBRA continuation coverage in accordance with applicable law;
|
|
C.
|
claims for benefits under any health, disability, retirement, life insurance or other, similar employee benefit plan (within
the meaning of Section 3(3) of ERISA) of the Company Affiliated Group;
|
|
D.
|
rights to indemnification the Executive has or may have under the organizing documents of any member of the Company
Affiliated Group or as an insured under any director’s and officer’s liability insurance policy now or previously in force; and
|
|
E.
|
rights granted to the Executive as an equity holder of the Company, if any.
|
2. The Executive acknowledges and agrees that this Release is not to be construed in any way as an admission of any liability whatsoever by any Company Released Party, any such
liability being expressly denied.
3. This Release applies to any relief no matter how called, including, without limitation, wages, back pay, front pay, compensatory damages, liquidated damages, punitive damages,
damages for pain or suffering, costs, and attorneys’ fees and expenses.
4. The Executive specifically acknowledges that the Executive’s acceptance of the terms of this Release is, among other things, a specific waiver of the Executive’s rights, claims
and causes of action under Title VII, ADEA, ADA, GINA, FMLA and any state or local law or regulation in respect of discrimination of any kind; provided, however, that nothing herein shall be deemed, nor does anything contained herein purport, to be a waiver of any right or claim or cause of action which by law
the Executive is not permitted to waive.
5. The Executive acknowledges that the Executive has been given a period of [twenty-one
(21)] [forty-five (45)] days to consider whether to execute this Release. If the Executive accepts the terms hereof and executes this Release, the Executive may thereafter, for a period of seven (7) days following (and not including) the
date of execution, revoke this Release. If the seventh day falls on a weekend or federal holiday, the revocation period is extended to the next business day. If no such revocation occurs, this Release shall become irrevocable in its entirety, and
binding and enforceable against the Executive, on the day next following the day on which the foregoing seven-day period has elapsed. If such a revocation occurs, the Executive shall irrevocably forfeit any right to payment of the compensation
under the Change of Control Agreement.
6. The Executive acknowledges and agrees that the Executive has not, with respect to any transaction or state of facts existing prior to the date hereof, filed any complaints,
charges or lawsuits against any Company Released Party with any governmental agency, court or tribunal.
7. The Executive acknowledges that the Executive has been advised to seek, and has had the opportunity to seek, the advice and assistance of an attorney with regard to this Release
and has been given a sufficient period within which to consider this Release.
8. The Executive acknowledges that this Release relates only to claims that exist as of the date of this Release.
9. The Executive acknowledges that the benefits the Executive is receiving in connection with this Release and the Executive’s obligations under this Release are in addition to
anything of value to which the Executive is entitled from the Company.
10. Each provision hereof is severable from this Release, and if one or more provisions hereof are declared invalid, the remaining provisions shall nevertheless remain in full force
and effect. If any provision of this Release is so broad, in scope, or duration or otherwise, as to be unenforceable, such provision shall be interpreted to be only so broad as is enforceable.
11. This Release constitutes the complete agreement of the Parties in respect of the subject matter hereof and shall supersede all prior agreements between the Parties in respect of
the subject matter hereof except to the extent set forth herein. For the avoidance of doubt, however, nothing in this Release shall constitute a waiver of any Company Released Party’s right to enforce any obligations of the Executive under the
Change of Control Agreement and any employment agreement or other similar agreement between the Executive and the Company that survive the termination of Executive’s employment, including without limitation, any non-competition covenant,
non-solicitation covenant or any other restrictive covenants contained therein.
12. The failure to enforce at any time any of the provisions of this Release or to require at any time performance by another party of any of the provisions hereof shall in no way
be construed to be a waiver of such provisions or to affect the validity of this Release, or any part hereof, or the right of any party thereafter to enforce each and every such provision in accordance with the terms of this Release.
13. This Release may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.
Signatures delivered by facsimile or .pdf shall be deemed effective for all purposes.
14. This Release shall be binding upon any and all successors and assigns of the Executive and the Company.
15. Except for issues or matters as to which federal law is applicable, this Release shall be governed by and construed and enforced in accordance with the laws of the Commonwealth
of Pennsylvania without giving effect to the conflicts of law principles thereof.
[signature page follows]
IN WITNESS WHEREOF, this Release has been signed by or on behalf of each of the Parties, all as of
____________________.
| |
The York Water Company
|
| |
By:
|
|
| |
|
Name:
|
| |
|
Title:
|
| |
|
|
| |
|
|
| |
Executive
|
| |
|
Name:
Title:
Schedule 10.1
|
Name
|
Agreement Date
|
|
Vernon L. Bracey
|
August 1, 2022
|
|
Alexandra C. Chiaruttini
|
August 1, 2022
|
|
Joseph T. Hand
|
August 1, 2022
|
|
Matthew E. Poff
|
August 1, 2022
|
|
Matthew J. Scarpato
|
July 31, 2023
|
|
Mark S. Snyder
|
August 1, 2022
|