form10k123108.htm

The York Water Company

Amended and Restated

DEFERRED COMPENSATION PLAN

(Effective January 1, 2009)

RECITALS

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

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

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

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

ARTICLE 1.

Definitions

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

ARTICLE 2.

Selection, Enrollment, Eligibility

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

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

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

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

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

ARTICLE 3.

Contributions and Credits

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

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

ARTICLE 4.

Vesting and Taxes

4.1 Vesting of Benefits.

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

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

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

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

4.2 FICA, Withholding and Other Taxes.

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

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

ARTICLE 5.

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

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

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

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

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

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

5.6 Method of Payments.

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

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

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

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

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

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

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

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

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

5.8 Unsecured General Creditor Status of Participant.

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

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

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

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

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

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

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

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

Example:

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

Step 1:

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

Step 2:

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

Step 3:

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

Step 4:

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

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

ARTICLE 6.

Beneficiary Designation

6.1 Designation of Beneficiaries.

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

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

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

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

ARTICLE 7.

Termination, Amendment or Modification

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

ARTICLE 8.

Administration

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

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

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

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

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

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

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

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

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

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

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

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

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

ARTICLE 9.

Claims Procedures

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

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

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

(i) The specific reasons for such denial;

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

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

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

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

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

(i) its decision;

(ii) the specific reasons for the decision;

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

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

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

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

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

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

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

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

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

ARTICLE 10.

The Trust

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

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

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

ARTICLE 11.

Miscellaneous

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

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

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

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

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

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

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

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

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

[Signature Page Follows]

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

ATTEST/WITNESS		For: Participant

(Signature)		(Signature)

(Print Name)		(Print Name)

		(Title)

		(Date)

ATTEST/WITNESS		For: The York Water Company

(Signature)		(Signature)

(Print Name)		(Print Name)

		(Title)

		(Date)

APPENDIX A

Employee	Enhancement Factor

Jeffrey Hines	1.110

PLAN ENROLLMENT KIT

for the

The York Water Company

Deferred Compensation Plan

Contents:

Participant Data

Participation Agreement

Plan Year Initial Enrollment Form

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

RETURN ALL FORMS TO YOUR PLAN ADMINISTRATOR

The York Water Company

Deferred Compensation Plan

PARTICIPANT DATA

INSTRUCTIONS: Please complete all information below.

(Please print)



Last Name	First Name				Middle Initial



Address		City		State		Zip Code



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

The York Water Company

“AMENDED AND RESTATED DEFERRED COMPENSATION PLAN”

PARTICIPATION AGREEMENT
(Please print)

Last Name	First Name	Middle Initial

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

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

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

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

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

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

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

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

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

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

AGREED AND ACCEPTED BY THE PARTICIPANT

Signature of Participant	Date
AGREED AND ACCEPTED BY THE PLAN SPONSOR

For the Plan Sponsor	Date

The York Water Company

Deferred Compensation Plan

ENROLLMENT FORM

(Please print)



Last Name	First Name	Middle Initial

SECTION I: DEFERRAL ELECTIONS

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

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

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

SECTION II: BENEFICIARY DESIGNATION

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

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

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

Name	Percentage of Benefits		Relationship to Participant	Social Security Number


AGREED AND ACCEPTED BY THE PARTICIPANT

Signature of Participant		Date
AGREED AND ACCEPTED BY THE PLAN SPONSOR

For the Plan Sponsor		Date

Schedule 10.21

Name	Enhancement Factor
Jeffrey R. Hines	1.110
Kathleen M. Miller	-
Vernon L. Bracey	-
Bruce C. McIntosh	-

Back to Form 10-K

Notes to Financial Statements

(In thousands of dollars, except per share amounts)

1.	Significant Accounting Policies

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

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

Utility Plant and Depreciation

The cost of additions includes contracted cost, direct labor and fringe benefits, materials, overhead and, for certain utility plant, allowance for funds used during construction. Water systems acquired are recorded at estimated original cost of utility plant when first devoted to utility service and the applicable depreciation is recorded to accumulated depreciation. The difference between the estimated original cost less applicable accumulated depreciation, and the purchase price is recorded as an acquisition adjustment within utility plant. At December 31, 2008 and 2007, utility plant includes a credit acquisition adjustment of $1,364 and $1,184, respectively. The acquisition of Asbury Pointe water assets yielded a negative acquisition adjustment of $207. The net acquisition adjustment is being amortized over the remaining life of the respective assets. Amortization amounted to $27 in 2008, $28 in 2007 and $31 in 2006.

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

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

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

		December 31,		Approximate range
Utility Plant Asset Category		2008	2007	of remaining lives
Mains and accessories		$128,142	$111,500	13 – 84 years
Services, meters and hydrants		49,544	46,556	22 – 54 years
Operations structures, reservoirs and
	water tanks	45,076	35,966	9 – 64 years
Pumping and purification equipment		8,436	7,951	6 – 25 years
Office, transportation and
	operating equipment	9,151	8,676	3- 24 years
Land and other non-depreciable assets		2,821	2,771	-
Utility plant in service		243,170	213,420
Construction work in progress		3,443	10,118	-
Total Utility Plant		$246,613	$223,538

The effective rate of depreciation was 1.94% in 2008, 1.98% in 2007, and 1.72% in 2006 on average utility plant, net of customers' advances and contributions. Larger depreciation provisions are deducted for tax purposes.

Back to Table of Contents

Page 23

Accounts Receivable

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

Revenues

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

Deferred Debt Expense

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

Notes Receivable

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

Regulatory Assets and Liabilities

The Company is subject to the provisions of Statement of Financial Accounting Standards (SFAS) No. 71, “Accounting for the Effects of Certain Types of Regulation.” SFAS No. 71 provides for the recognition of regulatory assets and liabilities as allowed by regulators for costs or credits that are reflected in current customer rates or are considered probable of being included in future rates. The regulatory assets or liabilities are then relieved as the cost or credit is reflected in rates. Regulatory assets represent costs that are expected to be fully recovered from customers in future rates while regulatory liabilities represent amounts that are expected to be refunded to customers in future rates. These deferred costs have been excluded from the Company’s rate base and, therefore, no return is being earned on the unamortized balances.

Regulatory assets and liabilities are comprised of the following:

	December 31,		Remaining Recovery
	2008	2007	Periods
Assets
Income taxes	$3,291	$2,809	Various
Postretirement benefits	9,764	4,323	10-20 years
Unrealized swap losses	2,037	-	1-21 years
Utility plant retirement costs	590	510	5 years
Rate case filing expenses	290	67	1 - 4 years
	$15,972	$7,709

Liabilities
Income taxes	$861	$860	1-50 years

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

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

The regulatory asset for utility plant retirement costs, including cost of removal, represents costs already incurred which are expected to be recovered over a five-year period in rates, through depreciation expense. Rate case filing expenses are deferred and amortized over a period of 1-4 years.

Beginning October 1, 2008, the Company began using regulatory accounting treatment to defer the mark-to-market unrealized gains and losses on its interest rate swap to reflect that the gain or loss is included in the ratemaking formula when the transaction actually settles. The value of the swap as of the Balance Sheet date is recorded as part of other deferred credits. Realized gains or losses on the swap are recorded as interest expense in the statement of income. The deferred unrealized loss on the value of the interest rate swap of $2,037 as of December 31, 2008 is included as a Regulatory Asset for the first time in the Balance Sheet included herein.

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

Materials and Supplies Inventories

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

Other Assets

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

Customers' Advances for Construction

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

Contributions in Aid of Construction

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

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Comprehensive Income

Accounting principles generally accepted in the United States of America require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on interest rate swaps, are usually reported as a separate component of the equity section of the balance sheet, such items, along with net income, are components of comprehensive income. As of December 31, 2008, the Company is now using regulatory accounting for its unrealized gains and losses on its interest rate swap, and will no longer report comprehensive income for this item in the future.

Interest Rate Swap Agreement

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

As a derivative, the interest rate swap is recorded on the balance sheet in other deferred credits at fair value. Prior to October 1, 2008, the Company used hedge accounting to record its swap transactions. The effective portion of the gain or loss on a derivative designated and qualifying as a cash flow hedging instrument was initially reported as a component of other comprehensive income and subsequently reclassified into earnings as interest expense in the same period or periods during which the hedged transaction affected earnings. The ineffective portion of the gain or loss on the derivative instrument was recognized in earnings.

Beginning October 1, 2008, the Company began using regulatory accounting treatment rather than hedge accounting to defer the unrealized gains and losses on its interest rate swap. Instead of the effective portion being recorded as other comprehensive income and the ineffective portion being recognized in earnings, the entire unrealized swap value is now recorded as a regulatory asset. Based on current ratemaking treatment, the Company expects the gains and losses to be recognized in rates and interest expense as the swap settlements occur. This change in accounting treatment resulted in the reversal of $224 of long-term interest expense, $189 recorded in deferred income taxes and $277 recorded in accumulated other comprehensive income as of September 30, 2008. During the twelve months ending December 31, 2009, the Company expects to reclassify $313 (before tax) from regulatory assets to interest expense. This additional expense is expected to be partially offset by lower variable interest costs.

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

Income Taxes

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

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

Investment tax credits have been deferred and are being amortized to income over the average estimated service lives of the related assets. As of December 31, 2008 and 2007, deferred investment tax credits amounted to $967 and $1,005, respectively.

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Allowance for Funds Used During Construction

Allowance for funds used during construction (AFUDC) represents the estimated cost of funds used for construction purposes during the period of construction. These costs are reflected as non-cash income during the construction period and as an addition to the cost of plant constructed. AFUDC includes the net cost of borrowed funds and a rate of return on other funds. The PPUC approved rate of 10.04% was applied for 2007 and 2006. We applied a blended rate in 2008 due to our partial use of tax-exempt financing for 2008 construction projects. The tax-exempt borrowing rate of 6.00% was applied to those expenditures so financed, whereas the approved 10.04% rate was applied to the remainder of 2008 expenditures. AFUDC is recovered through water rates as utility plant is depreciated.

Cash and Cash Equivalents

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

The Company had a book overdraft of $362 and $328 at December 31, 2008 and 2007, respectively. The book overdraft represents outstanding checks and other items which had not cleared the bank as of the end of the period. The overdraft is included in accounts payable on the balance sheet and the change in overdraft position is recorded as a financing activity on the statement of cash flows.

Use of Estimates in the Preparation of Financial Statements

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

Reclassifications

Certain 2007 amounts have been reclassified to conform to the 2008 presentation. Such reclassifications had no effect on the statement of income, statement of common stockholders’ equity and comprehensive income, or statement of cash flow category reporting. Contributions in Aid of Construction were reclassified as a separate line within liabilities to be consistent with water industry practice.

As discussed above, the Company changed the accounting treatment for its interest rate swap. For the years ended December 31, 2006 and December 31, 2007, and for the nine months ended September 30, 2008, the Company accounted for the interest rate swap as a cash flow hedge. As of October 1, 2008, management assessed the probability of collecting the unrealized gain or loss value of the swap in rates as the Company is currently reflecting the realized gain or loss as a component of interest expense in the statement of income. This change in accounting treatment resulted in the reversal of $224 of long-term interest expense, $189 recorded in deferred income taxes and $277 recorded in accumulated other comprehensive income as of September 30, 2008. Management determined that the amounts previously reported using the cash flow hedge method of accounting as of the years ended December 31, 2006 and December 31, 2007, and for each of the three quarters and periods ended March 31, 2008, June 30, 2008 and September 30, 2008 were not materially misstated.

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Impact of Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, “Fair Value Measurements,” to eliminate the diversity in practice that exists due to the different definitions of fair value and the limited guidance for applying those definitions. SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price), as opposed to the price that would be paid to acquire the asset or received to assume the liability at the measurement date (an entry price). SFAS No. 157, as originally issued, was effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. In February 2008, the FASB issued FSP FAS 157-2 which delayed the effective date, by one year, of SFAS No. 157 for nonfinancial assets and nonfinancial liabilities with certain exceptions. The Company adopted this standard for financial assets and liabilities in January 2008 and determined that it did not have a material impact on its financial position or results of operations at that time, but required additional disclosures with regard to its interest rate swap. See Note 10 for additional information and disclosures. The Company has reviewed its nonfinancial assets and liabilities for applicability and determined that this statement will not have a material impact on its results of operations or financial position. In October 2008, the FASB issued FSP SFAS No. 157-3, “Determining the Fair Value of a Financial Asset When The Market for That Asset Is Not Active” (FSP 157-3), to clarify the application of the provisions of SFAS 157 in an inactive market and how an entity would determine fair value in an inactive market. FSP 157-3 was effective immediately and applied to our September 30, 2008 financial statements. The application of the provisions of FSP 157-3 did not affect the Company’s results of operations or financial condition as of and for the periods ended September 30, 2008 and December 31, 2008.

In February 2007, the FASB issued SFAS No. 159, “Establishing the Fair Value Option for Financial Assets and Liabilities,” to permit all entities to choose to elect to measure eligible financial instruments at fair value. The decision to elect the fair value option should be made on an instrument-by-instrument basis with certain exceptions. If the fair value option is elected, an entity must report unrealized gains and losses in earnings at each subsequent reporting date, and recognize upfront costs and fees related to those items in earnings as incurred and not deferred. SFAS No. 159 applies to fiscal years beginning after November 15, 2007, with early adoption permitted for an entity that has also elected to apply the provisions of SFAS No. 157, “Fair Value Measurements.” The Company elected not to apply the provisions of SFAS No. 159 for financial instruments not previously recorded at fair value.

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations.” The statement establishes principles and requirements for how the acquirer (1) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree, (2) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase, and (3) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. This statement is effective for annual periods beginning after December 15, 2008. The Company has reviewed this statement and determined that it would not have a material impact on its financial statements going forward.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB No. 51.” SFAS No. 160 requires all entities to report noncontrolling (minority) interests in subsidiaries as equity in the consolidated financial statements and it requires consolidated net income to include amounts attributable to both the parent and noncontrolling interest. This statement is effective for annual periods beginning after December 15, 2008. This statement will not affect the Company’s financial statements as the Company does not have any subsidiaries.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133.” This standard requires companies to provide qualitative disclosures about the objectives and strategies for using derivatives, quantitative data about the fair value of and gains and losses on derivative contracts, and details of credit-risk-related contingent features in their hedged positions. This standard is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged, but not required. The Company is currently researching the additional required disclosures with regard to its interest rate swap and plans to adopt this standard in the first quarter of 2009.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles.” This guidance identifies sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in accordance with U.S. generally accepted accounting principles (GAAP). This statement is effective 60 days after the SEC’s approval of the Public Company Accounting Oversight Board Auditing amendments to SAS No. 69. This statement is not expected to have an impact on the Company’s financial statements.

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In September 2008, the FASB ratified EITF Issue No. 08-5, “Issuer’s Accounting for Liabilities Measured at Fair Value With a Third-Party Credit Enhancement” (EITF 08-5). EITF 08-5 provides guidance for measuring liabilities issued with an attached third-party credit enhancement (such as a guarantee). It clarifies that the issuer of a liability with a third-party credit enhancement should not include the effect of the credit enhancement in the fair value measurement of the liability. EITF 08-5 is effective for the first reporting period beginning after December 15, 2008. Earlier application is permitted. The Company applied this pronouncement to its long-term debt issues which included bond insurance or letters of credit in calculating the fair market value of debt disclosed in footnote 10.

In November 2008, the SEC released a proposed roadmap regarding the potential use by U.S. issuers of financial statements prepared in accordance with International Financial Reporting Standards (IFRS). IFRS is a comprehensive series of accounting standards published by the International Accounting Standards Board (“IASB”). Under the proposed roadmap, the Company may be required to prepare financial statements in accordance with IFRS as early as 2014. The SEC will make a determination in 2011 regarding the mandatory adoption of IFRS. The Company is currently assessing the impact that this potential change would have on its financial statements, and it will continue to monitor the development of the potential implementation of IFRS.

In December 2008, the FASB issued FSP FAS 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets.” This FSP amends SFAS 132(R), “Employers’ Disclosures about Pensions and Other Postretirement Benefits,” to provide guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. The disclosures about plan assets required by this FSP shall be provided for fiscal years ending after December 15, 2009. The Company is currently reviewing the effect this new pronouncement will have on its consolidated financial statements.

2.	Acquisitions

On January 5, 2007, the Company closed the acquisition of the water system of Abbottstown Borough which served approximately 400 customers in Adams County, Pennsylvania. The purchase price of approximately $900 was less than the depreciated original cost of these assets. The Company has recorded a negative acquisition adjustment of approximately $131 and is amortizing this credit over the remaining life of the acquired assets. The purchase was funded through internally-generated funds and short-term borrowings. The Company began serving the customers of Abbottstown Borough in January 2007.

On May 16, 2007, the Company announced that it had entered into an agreement to acquire the water system of West Manheim Township in York County, Pennsylvania. This acquisition resulted in the addition of 1,800 customers at a purchase price of approximately $2,075. The Company began serving the customers of West Manheim Township in December 2008 through an interconnection with its current distribution system. Closing on this acquisition took place in January 2009.

On November 24, 2008 the Company completed the acquisition of the water facilities of Asbury Pointe Water Company in York County, Pennsylvania. The Company acquired and is using Asbury Pointe’s distribution system through an interconnection with its current distribution system. This acquisition resulted in the addition of approximately 250 customers and the purchase price was approximately $242, which is less than the depreciated original cost of the assets. The Company recorded a negative acquisition adjustment of approximately $207 and will amortize it over the remaining life of the underlying assets.

The Company began to include the operating results of the acquired systems in its operating results on the acquisition dates. The results have been immaterial to total company results.

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3.	Income Taxes

The provisions for income taxes consist of:

	2008	2007	2006
Federal current	$1,157	$1,946	$1,295
State current	559	603	404
Federal deferred	1,954	1,170	1,507
State deferred	(3)	12	28
Federal investment tax credit, net of current utilization	(39)	(39)	(38)
Total income taxes	$3,628	$3,692	$3,196

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

	2008	2007	2006
Statutory Federal tax provision	$3,420	$3,436	$3,158
State income taxes, net of Federal benefit	367	407	285
Tax-exempt interest	(39)	(21)	(75)
Amortization of investment tax credit	(39)	(39)	(38)
Cash value of life insurance	(29)	(29)	(34)
Domestic production deduction	(62)	(73)	(42)
Other, net	10	11	(58)
Total income taxes	$3,628	$3,692	$3,196

The tax effects of temporary differences between book and tax balances that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31, 2008 and 2007 are summarized in the following table:

			2008	2007
Deferred tax assets:
	Reserve for doubtful accounts		$79	$78
	Deferred compensation		949	829
	Customers' advances and contributions		152	201
	Deferred taxes associated with the gross-up
		of revenues necessary to return, in rates, the effect of temporary differences	81	70
	Pensions		3,077	868
	Unrealized loss on interest rate swap		-	191
	Costs deducted for book, not for tax		78	59
Total deferred tax assets			4,416	2,296
Deferred tax liabilities:
	Accelerated depreciation		17,958	15,707
	Investment tax credit		574	597
	Deferred taxes associated with the gross-up
		of revenues necessary to recover, in rates, the effect of temporary differences	1,067	861
	Tax effect of pension regulatory asset		3,964	1,755
	Costs deducted for tax, not for book		269	208
Total deferred tax liabilities			23,832	19,128
Net deferred tax liability			$19,416	$16,832

Reflected on balance sheets as:
	Current deferred tax asset		$(133)	$(132)
	Noncurrent deferred tax liability		19,549	16,964
Net deferred tax liability			$19,416	$16,832

No valuation allowance is required for deferred tax assets as of December 31, 2008 and 2007. In assessing the soundness of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and the current regulatory environment, management believes it is more likely than not the Company will realize the benefits of these deductible differences.

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The Company adopted FASB Interpretation (FIN) No. 48, “Accounting for Uncertainty in Income Taxes,” in January 2007. The Company determined that there were no uncertain tax positions meeting the recognition and measurement test of FIN No. 48 recorded in the years that remain open for review by taxing authorities. The Federal income tax returns and the state income tax returns for the years 2005 through 2007 remain open. The Company has not yet filed tax returns for 2008, but has not taken any new positions in its 2008 income tax provision.

The Company’s policy is to recognize interest and penalties related to income tax matters in other expenses. The Company recorded interest and penalties of $5 for the year ended December 31, 2007. There were no interest or penalties for the years ended December 31, 2008 and 2006.

4.	Long-Term Debt and Short-Term Borrowings

Long-term debt as of December 31, 2008 and 2007 is summarized in the following table:

			2008	2007
3.60% Industrial Development Authority Revenue
	Refunding Bonds, Series 1994, due 2009		$2,700	$2,700
3.75% Industrial Development Authority Revenue
	Refunding Bonds, Series 1995, due 2010		4,300	4,300
4.05% Pennsylvania Economic Development Financing Authority
	Exempt Facilities Revenue Bonds, Series A, due 2016		2,350	2,350
5.00% Pennsylvania Economic Development Financing Authority
	Exempt Facilities Revenue Bonds, Series A, due 2016		4,950	4,950
10.17% Senior Notes, Series A, due 2019			6,000	6,000
9.60% Senior Notes, Series B, due 2019			5,000	5,000
1.00% Pennvest Loan, due 2019			455	495
10.05% Senior Notes, Series C, due 2020			6,500	6,500
8.43% Senior Notes, Series D, due 2022			7,500	7,500
Variable Rate Pennsylvania Economic Development Financing
	Authority Exempt Facilities Revenue Bonds, Series B, due 2029		-	12,000
Variable Rate Pennsylvania Economic Development Financing
	Authority Exempt Facilities Revenue Bonds, Series A, due 2029		12,000	-
4.75% Industrial Development Authority Revenue
	Bonds, Series 2006, due 2036		10,500	10,500
6.00% Pennsylvania Economic Development Financing Authority
	Exempt Facilities Revenue Bonds, Series A, due 2038		15,000	-
Committed Line of Credit, due 2010			9,098	8,210
		Total long-term debt	86,353	70,505
		Less current maturities	(2,741)	(12,040)
		Long-term portion	$83,612	$58,465

Payments due by year:

2009	2010	2011	2012	2013
$2,741	$25,439	$41	$42	$42

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Payments due in 2009 include the 3.6% Industrial Development Authority Revenue Refunding Bonds, Series 1994, which have a mandatory tender date of May 15, 2009. The Company plans to meet its $2,700 obligation using funds available under its lines of credit or a potential equity transaction.

2010 payments include the payback of the committed line of credit. The committed line of credit is reviewed annually, and upon favorable outcome, could be extended for another year. Also included in payments due by period in 2010 are payments of $12,000 on the variable rate bonds (due 2029) which would only be payable if all of the bonds were tendered and could not be remarketed.

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

Borrowings under the loan agreement bear interest at a variable rate as determined by PNC Capital Markets, as remarketing agent, on a periodic basis elected by us. We have currently elected that the interest rate be determined on a weekly basis. The remarketing agent determines the interest rate based on then current market conditions in order to determine the lowest interest rate which would cause the Series A Bonds to have a market value equal to the principal amount thereof plus accrued interest thereon. The variable interest rate under the loan agreement averaged 2.22% in 2008. As of December 31, 2008, the interest rate was 1.28%.

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

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

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

Our interest rate swap agreement provides that we pay the counterparty a fixed interest rate of 3.16% on the notional amount of $12,000. In exchange, the counterparty pays us a floating interest rate (based on 59% of the U.S. Dollar one-month LIBOR rate) on the notional amount. The floating interest rate paid to us is intended, over the term of the swap, to approximate the variable interest rate on the loan agreement and the interest rate paid to bondholders, thereby managing our exposure to fluctuations in prevailing interest rates. As of December 31, 2008, there was a spread of 62 basis points which equated to an effective rate of 3.78% (including variable interest and swap payments). The interest rate swap will terminate on the maturity date of the 2008 Series A Bonds (which is the same date as the maturity date of the loan under the loan agreement), unless sooner terminated pursuant to its terms. In the event the interest rate swap terminates prior to the maturity date of the 2008 Series A Bonds, either we or the swap counterparty may be required to make a termination payment to the other based on market conditions at such time. Notwithstanding the terms of the swap agreement, we are ultimately obligated for all amounts due and payable under the loan agreement.

The Company is exposed to credit-related losses in the event of nonperformance by the counterparty. The Company controls the credit risk of its financial contracts through credit approvals, limits and monitoring procedures, and does not expect the counterparty to default on its obligations.

On October 15, 2008, the PEDFA issued $15,000 aggregate principal amount of PEDFA Exempt Facilities Revenue Refunding Bonds, Series B of 2008 (The York Water Company Project) (the “2008 Series B Bonds”) for our benefit pursuant to the terms of a trust indenture, dated as of October 1, 2008, between the PEDFA and Manufacturers and Traders Trust Company, as trustee. The PEDFA then loaned the proceeds of the offering of the 2008 Series B Bonds to us pursuant to a loan agreement, dated as of October 1, 2008, between the Company and the PEDFA. The loan agreement provides for a $15,000 loan bearing interest at a rate of 6.00% with a maturity date of November 1, 2038. Amounts outstanding under the loan agreement are the Company’s direct general obligations. The proceeds of the loan, net of issuance costs, were used to pay down a portion of the Company’s short-term borrowings incurred for capital improvements, replacements and equipment for the Company’s water system. The 2008 Series B Bonds are subject to redemption at the direction of the Company, in whole or in part at any time on or after November 1, 2013. In addition, other special redemption requirements may apply as defined in the loan agreement.

The terms of the debt agreements carry certain covenants and limit in some cases the Company's ability to borrow additional funds, to prepay its borrowings and include certain restrictions with respect to declaration and payment of cash dividends and acquisition of the Company's stock. Under the terms of the most restrictive agreements, the Company cannot borrow in excess of 60% of its utility plant, and cumulative payments for dividends and acquisition of stock since December 31, 1982 may not exceed $1,500 plus net income since that date. As of December 31, 2008, none of the earnings retained in the business are restricted under these provisions. Our 1.00% Pennvest Loan is secured by $800 of receivables. Other than this loan, our debt is unsecured.

As of December 31, 2008, the Company maintained unsecured lines of credit aggregating $24,500 with two banks. Loans granted up to $20,500 under these lines bear interest based on LIBOR plus 0.70%. The remaining $4,000 bears interest at 4.00% or LIBOR plus 0.70%, whichever is greater. One line of credit, amounting to $7,500 is payable upon demand. The Company had $6,000 outstanding under this line as of December 31, 2008 and $3,000 outstanding as of December 31, 2007. The second line includes a $4,000 portion which is payable on demand, and a $13,000 committed portion with a revolving 2-year maturity. As of December 31, 2008, $9,098 was outstanding under the committed portion and none was outstanding under the on-demand portion. As of December 31, 2007, $8,210 was outstanding under the committed portion and none was outstanding under the on-demand portion. The weighted average interest rate on line of credit borrowings as of December 31, 2008 was 2.32% compared to 5.62% as of December 31, 2007. The Company is not required to maintain compensating balances on its lines of credit.

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Page 33

Average borrowings outstanding under our lines of credit were $16,128 in 2008 and $3,897 in 2007. The average cost of borrowings under both lines during 2008 and 2007 was 3.61% and 5.96%, respectively.

In January 2009, we increased our $7,500 line of credit to $11,000. In addition, this line of credit became a committed facility rather than payable on demand and requires a $500 compensating balance. The interest rate increased from LIBOR plus 0.70% to LIBOR plus 1.50%.

5.	Common Stock and Earnings Per Share

Earnings per share are based upon the weighted average number of shares outstanding of 11,298,215 in 2008, 11,225,822 in 2007 and 10,475,173 in 2006. The Company does not have dilutive securities outstanding.

Under the employee stock purchase plan, all full-time employees who have been employed at least six consecutive months may purchase shares of the Company's common stock through payroll deductions limited to 10% of gross compensation. The purchase price is 95% of the fair market value (as defined). Shares issued during 2008, 2007 and 2006 were 6,841, 5,398 and 5,747, respectively. As of December 31, 2008, 51,688 authorized shares remain unissued under the plan.

In June 2008, the Company modified its Dividend Reinvestment Plan to include direct stock purchase and sale options. These options are subject to certain restrictions and are available to both current shareholders and the general public. Purchases are made weekly at 100% of the stock’s fair market value, as defined in the Prospectus contained in Amendment No. 1 to Securities and Exchange Commission Form S-3, filed by the Company on June 26, 2008. As of December 31, 2008, $295 in equity proceeds had been realized.

Under the optional dividend reinvestment portion of the plan, holders of the Company's common stock may purchase additional shares instead of receiving cash dividends. The purchase price is 95% of the fair market value (as defined). Shares issued under the newly titled Dividend Reinvestment and Direct Stock Purchase and Sale Plan, during 2008, 2007, and 2006 were 95,484, 58,406 and 55,695, respectively. As of December 31, 2008, 870,135 authorized shares remain unissued under the plan.

On August 28, 2006, the Company’s Board of Directors declared a three-for-two split of its common stock in the form of a stock dividend. The split was effected on September 11, 2006 to shareholders of record as of September 1, 2006. One additional share of common stock was issued for every two shares issued and outstanding as of September 1, 2006. The transaction had no effect on total shareholders’ equity. Accordingly, the financial statements as well as share and per share amounts in this report have been restated to reflect the stock split.

In December 2006, the Company closed an underwritten public offering of 645,000 shares and an over-allotment of 94,750 shares of its common stock. Janney Montgomery Scott LLC was the sole underwriter in the offering. The Company received net proceeds in the offering, after deducting offering expenses and underwriter’s discounts and commissions, of approximately $12.5 million. The net proceeds were used to repay the Company’s remaining short-term borrowings and to fund operations and capital expenditures.

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6.	Employee Benefit Plans

The Company maintains two defined benefit pension plans covering substantially all of its employees. The benefits are based upon years of service and compensation over the last five years of service. The Company's funding policy is to contribute annually the amount permitted by the PPUC to be collected from customers in rates, but in no case less than the minimum Employee Retirement Income Security Act (ERISA) required contribution.

The following table sets forth the plans' funded status as of December 31, 2008 and 2007. The measurement of assets and obligations of the plans is as of December 31, 2008 and 2007.

Obligations and Funded Status At December 31	2008	2007
Change in Benefit Obligation
Pension benefit obligation beginning of year	$19,220	$19,620
Service cost	617	724
Interest cost	1,209	1,150
Plan amendments	-	81
Actuarial (gain) loss	1,185	(1,540)
Benefit payments	(949)	(815)
Pension benefit obligation end of year	21,282	19,220
Change in Plan Assets
Fair value of plan assets beginning of year	17,082	15,725
Actual return on plan assets	(3,327)	1,372
Employer contributions	896	800
Benefits paid	(949)	(815)
Fair value of plan assets end of year	13,702	17,082

Funded status of plans at end of year

$(7,580)

$(2,138)

SFAS No. 158 requires that the funded status of defined benefit pension plans be fully recognized in the balance sheet. SFAS No. 158 also calls for the unrecognized actuarial gain or loss, the unrecognized prior service cost and the unrecognized transition costs which were previously netted with the funded status in a liability account, to be adjustments to shareholders’ equity (accumulated other comprehensive income). Due to a rate order granted by the PPUC, the Company is permitted under SFAS 71 to defer the charges to accumulated other comprehensive income as a regulatory asset. We believe these costs will be recovered in future rates charged to customers.

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

	2008	2007
Net actuarial loss arising during the period	$5,703	$(1,815)
Recognized actuarial loss	(12)	(107)
Prior service cost arising during the period	-	82
Recognized prior service cost	(17)	(265)
Total changes in regulatory asset during the year	$5,674	$(2,105)

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

	2008	2007
Net actuarial loss	$7,126	$1,434
Prior service cost	137	155
Regulatory asset	$7,263	$1,589

Components of Net Periodic Benefit Cost are as follows:

	2008	2007	2006
Service cost	$617	$724	$685
Interest cost	1,209	1,150	1,059
Expected return on plan assets	(1,192)	(1,097)	(982)
Amortization of loss	12	107	225
Amortization of prior service cost	17	265	268
Rate-regulated adjustment	233	(349)	(703)
Net periodic benefit cost	$896	$800	$552

The rate-regulated adjustment set forth above is required in order to reflect pension expense for the Company in accordance with the method used in establishing water rates. The Company is permitted by rate order of the PPUC to expense pension costs to the extent of contributions and defer the remaining expense to regulatory assets to be collected in rates at a later date as additional contributions are made. During 2008, the deferral was reduced by $233.

The estimated costs for the defined benefit pension plans relating to the December 31, 2008 balance sheet that will be amortized from regulatory assets into net periodic benefit cost over the next fiscal year are $353. The Company plans to contribute $1,218 to the plans in 2009.

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

2009	2010	2011	2012	2013	2014-2018
$1,081	$1,089	$1,067	$1,068	$1,113	$7,359

The accumulated benefit obligation for both defined benefit pension plans was $18,141and $16,517 at December 31, 2008 and 2007, respectively. The following table shows the accumulated benefit obligation, the projected benefit obligation and the fair value of plan assets for each plan:

	General and Administrative Plan		Union-Represented Plan
	2008	2007	2008	2007
Accumulated benefit obligation	$11,612	$10,557	$6,529	$5,960
Projected benefit obligation	13,769	12,449	7,513	6,771
Fair value of plan assets	8,484	10,527	5,218	6,555

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

	2008	2007
Discount rate	6.00%	6.50%
Rate of compensation increase	4.00 - 5.00%	4.00 - 5.00%

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

	2008	2007	2006
Discount rate	6.50%	5.90%	5.50%
Expected long-term return on plan assets	7.00%	7.00%	7.00%
Rate of compensation increase	4.00 - 5.00%	5.00%	5.00%

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

The Company's pension plans' weighted-average asset allocations at December 31, 2008 and 2007, by asset category are as follows:

	Plan Assets at December 31
	2008	2007
Asset Category
Equity securities	48%	61%
Fixed income securities	40%	35%
Cash equivalents	12%	4%
Total	100%	100%

The investment objective of the Company's defined benefit pension plans is that of Balanced Growth. Our weighted-average target asset allocations are 50% to 70% equity securities, 30% to 50% fixed income securities and 0% to 10% reserves (cash equivalents). Our investment performance objectives are to exceed the annual rate of inflation as measured by the Consumer Price Index by 3%, and to exceed the annualized total return of specified benchmarks applicable to the funds within the asset categories.

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

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

Equity securities include the York Water Company Common Stock in the amounts of $234 (1.7% of total plan assets) and $299 (1.8% of total plan assets) at December 31, 2008 and 2007, respectively.

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The Company has a savings plan pursuant to the provisions of section 401(k) of the Internal Revenue Code. The plan provides for elective employee contributions of up to 15% of compensation and Company matching contributions of 70% of the participant's contribution, up to a maximum annual Company contribution of $2 for each employee. The Company's contributions to the plan amounted to $168 in 2008, $171 in 2007, and $139 in 2006.

The Company has non-qualified deferred compensation and supplemental retirement agreements with certain members of senior management. The future commitments under these arrangements are offset by corporate-owned life insurance policies. At December 31, 2008 and 2007, the present value of the future obligations was approximately $2,342 and $2,000, respectively. The insurance policies included in other assets had a total cash value of approximately $3,092 and $2,900, respectively, at December 31, 2008 and 2007. The Company’s expenses under the plans amounted to $490 in 2008, $11 in 2007 and $11 in 2006.

7.	Rate Increases

The Company increased rates as approved by the PPUC in September 2006 (9.2%). The new rates became effective September 15, 2006 and were designed to produce approximately $2,600 in additional annual operating revenues. The Company subsequently increased rates as approved by the PPUC in October 2008 (17.9%). The new rates became effective October 9, 2008 and were designed to produce approximately $5,950 in additional annual operating revenues. The Company does not expect to file a base rate increase request in 2009.

8.	Notes Receivable and Customers' Advances for Construction

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

In March of 2007, the Company corrected a miscalculation of a note receivable with one of the water districts served. While this recalculation was deemed immaterial to operations as a whole, it reduced notes receivable by $544, customer advances by $473 and interest income by $71. The income reduction was applicable to the years 2003-2006. In June 2007, this same water district paid off its note receivable in the amount of $543.

The Company has recorded interest income of $114 in 2008, $62 in 2007 and $220 in 2006. Interest rates on the notes outstanding at December 31, 2008 vary from 6.75% to 7.5%.

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Included in the accompanying balance sheets at December 31, 2008 and 2007 were the following amounts related to these projects.

	2008	2007
Notes receivable, including interest	$536	$610
Customers' advances for construction	1,047	1,079

The Company has other customers' advances for construction totaling $17,211 and $20,742 at December 31, 2008 and 2007, respectively.

9.	Commitments

Based on its capital budget, the Company plans to spend approximately $18,594 in 2009 and $22,345 in 2010 on construction. These capital expenditures are net of amounts financed by customer advances. The Company plans to finance ongoing capital expenditures with internally-generated funds, borrowings against the Company’s lines of credit, proceeds from the issuance of common stock under its dividend reinvestment and direct stock purchase and sale plan and ESPP, potential common stock or debt issues and the distribution surcharge allowed by the PPUC. The distribution surcharge allows the Company to add a charge to customers’ bills for qualified replacement costs of certain infrastructure without submitting a rate filing.

As of December 31, 2008, the Company had remaining capital commitments with regard to the West Manheim Township acquisition and a new Thomasville Standpipe. None of the total committed of approximately $2,989, was paid as of December 31, 2008.

As of December 31, 2008, the Company employed 110 full time people, 41 under union contract. The current contract was ratified during 2007 and expires on April 30, 2010.

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

10.	Fair Value of Financial Instruments

The Company partially adopted Statement of Financial Accounting Standard (SFAS) No. 157, “Fair Value Measurements,” in January, 2008. SFAS No. 157 establishes a fair value hierarchy which indicates the extent to which inputs used in measuring fair value are observable in the market. Level 1 inputs include quoted prices for identical instruments and are the most observable. Level 2 inputs include quoted prices for similar assets and observable inputs such as interest rates, commodity rates and yield curves. Level 3 inputs are not observable in the market and include management’s own judgments about the assumptions market participants would use in pricing the asset or liability.

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The Company has recorded its interest rate swap liability at fair value in accordance with SFAS No. 157. The liability is recorded under the caption “Other deferred credits” on the balance sheet. The table below illustrates the fair value of the interest rate swap as of the end of the reporting period.

($ in 000s)		Fair Value Measurements at Reporting Date Using
Description	December 31, 2008	Significant Other Observable Inputs (Level 2)
Interest Rate Swap	$2,037	$2,037

Fair values are measured as the present value of all expected future cash flows based on the LIBOR-based swap yield curve as of the date of the valuation. These inputs to this calculation are deemed to be level 2 inputs. The balance sheet carrying value reflects the credit quality of York Water. That is, the Company used a rate of 7.4 percent in discounting all prospective cash flows anticipated to be made under this swap. This rate reflects a representation of the yield to maturity for 30-year debt on utilities rated A- as of December 31, 2008. The use of the Company’s credit quality resulted in a reduction in the swap liability of $947. The fair value of the swap was a loss of $473 as of December 31, 2007 which reflects the estimated amounts that the Company would pay to terminate the contract.

The carrying amount of current assets and liabilities that are considered financial instruments approximates their fair value as of the dates presented. The Company's long-term debt, with a carrying value of $86,353 at December 31, 2008, and $70,505 at December 31, 2007, had an estimated fair value of approximately $89,000 and $80,000 in 2008 and 2007, respectively. The 2008 estimated fair value of debt was calculated in accordance with SFAS No. 157, using a discounted cash flow technique that incorporates a market interest yield curve with adjustments for duration and risk profile. The Company considered its A- credit rating in determining the yield curve, and in accordance with EITF 08-5, did not factor in third party credit enhancements including bond insurance on the 2004 PEDFA Series A and 2006 Industrial Development Authority issues, and the letter of credit on the 2008 PEDFA Series A issue. The weighted average rates used to calculate the 2007 estimated fair value were based on a multiple of the 2, 5, 10, 15 and 30-year Municipal Bond yields which ranged from 3.10% to 5.76%.

The Company's customers' advances for construction and notes receivable have carrying values at December 31, 2008 of $18,258 and $536, respectively. At December 31, 2007, customers’ advances for construction and notes receivable had carrying values of $21,821 and $610, respectively. The relative fair values of these amounts cannot be accurately estimated since the timing of future payment streams is dependent upon several factors, including new customer connections, customer consumption levels and future rate increases.

11.	Taxes Other than Income Taxes

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

	2008	2007	2006
Regulatory Assessment	$194	$170	$152
Property	266	214	308
Payroll, net of amounts capitalized	421	411	374
Capital Stock	155	146	245
Other	2	2	3
Total taxes other than income taxes	$1,038	$943	$1,082

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12.	Shareholder Rights Plan

On January 24, 2009, the Company entered into a Shareholder Rights Agreement with American Stock Transfer and Trust Company, LLC designed to protect the Company's shareholders in the event of an unsolicited, unfair offer to acquire the Company. This plan replaced the previous Shareholder Rights Plan which expired on January 24, 2009. Each outstanding common share is entitled to one Right, which is evidenced by the common share certificate. In the event any person acquires 20% or more of the outstanding common shares or commences a tender or exchange offer which, if consummated, would result in a person owning 20% or more of the outstanding common shares, the Rights will begin to trade independently from the common shares, and would entitle the holder to purchase the Company’s common shares at a substantial discount from the market price. If the Company is involved in a merger or other business combination at any time after the Rights become exercisable, the Rights will entitle the holder to acquire shares of the acquiring company at a substantial discount from the market price. The Rights are redeemable by the Company at a redemption price of $0.01 per Right at any time before the Rights become exercisable. The Rights will expire on January 24, 2019, unless redeemed prior to such date.

13.	Selected Quarterly Financial Data (Unaudited)

	First	Second	Third	Fourth	Year
2008
Water operating revenue	$7,506	$7,862	$8,566	$8,904	$32,838
Water operating income	2,992	3,397	4,025	4,330	14,744
Net income *	1,206	1,520	1,740	1,965	6,431
Basic earnings per share	.11	.13	.15	.18	.57
Dividends per share	.121	.121	.121	.126	.489
2007
Water operating revenue	$7,385	$7,962	$8,280	$7,806	$31,433
Water operating income	3,192	3,603	3,914	3,455	14,164
Net income	1,326	1,661	1,757	1,670	6,414
Basic earnings per share	.12	.15	.15	.15	.57
Dividends per share	.118	.118	.118	.121	.475

*Fourth quarter net income includes $224 ($133 after tax) which resulted from the reversal of third quarter unrealized swap losses which are now part of regulatory assets.

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Page 41


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

FORM 10-K
(Mark One)
ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2008
OR
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from __________to____________

Commission file number 0-690

THE YORK WATER COMPANY
(Exact name of registrant as specified in its charter)

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

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

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

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

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

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
¨ YES					ýNO
The aggregate market value of the Common Stock, no par value, held by nonaffiliates of the registrant on June 30, 2008 was $164,638,626.

As of March 9, 2009 there were 11,373,415 shares of Common Stock, no par value, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 2008 Annual Report to Shareholders are incorporated by reference into Parts I and II.
Portions of the Proxy Statement for the Company's 2009 Annual Meeting of Shareholders are incorporated by reference into Part III.

(In thousands of dollars)	For the Years Ended December 31,
	2008	2007	2006	2005	2004
Revenues
Residential	$20,572	$19,722	$17,972	$16,737	$13,789
Commercial and industrial	9,671	9,290	8,497	8,009	6,893
Other	2,595	2,421	2,189	2,059	1,822
Total	$32,838	$31,433	$28,658	$26,805	$22,504
Average daily consumption (gallons per day)	18,298,000	19,058,000	18,769,000	18,657,000	18,116,000
Miles of mains at year-end	884	845	817	786	752
Additional distribution mains installed/acquired (ft.)	206,140	147,803	159,330	212,702	114,658
Number of customers at year-end	61,527	58,890	57,578	55,731	53,134
Population served at year-end	176,000	171,000	166,000	161,000	158,000

	2003	2004	2005	2006	2007	2008
The York Water Company	100.00	109.99	150.67	160.27	142.90	115.53
S & P 500 Index	100.00	108.99	112.26	127.55	132.06	81.23
Peer Group*	100.00	115.61	150.75	150.63	145.01	140.29

(In thousands of dollars)	Expected Maturity Date
Liabilities	2009	2010	2011	2012	2013	Thereafter	Total	Fair Value

Long-term debt:
Fixed Rate	$2,741	$4,341	$41	$42	$42	$58,048	$65,255	$68,000
Average interest rate	3.56%	3.72%	1.00%	1.00%	1.00%	7.10%	6.71%

Variable Rate	-	$21,098	-	-	-	-	$21,098	$21,000
Average interest rate	2.19%	2.19%	-	-	-	-	2.19%

(In thousands of dollars)	Expected Maturity Date
Interest Rate Derivatives	2009	2010	2011	2012	2013	Thereafter	Total	Fair Value
Interest Rate Swap – Notional Value $12,000								$2,037
Variable to Fixed *	$313	$224	$198	$260	$184	$2,605	$3,784
Average pay rate	3.16%	3.16%	3.16%	3.16%	3.16%	3.16%	3.16%
Average receive rate	0.93%	2.16%	2.52%	1.69%	2.71%	2.99%	2.75%

*Represents undiscounted net payments.

* SJW, ARTNA, CTWS, MSEX, PNNW, SWWC, AWR, CWT, WTR
Source: FactSet Research Systems Inc.

Management’s Report on Internal Controls Over Financial Reporting		Page 18
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting		Page 19
Report of Independent Registered Public Accounting Firm		Page 20
Balance Sheets as of December 31, 2008 and 2007		Page 21
Statements of Income for Years Ended December 31, 2008, 2007 and 2006		Page 22
Statements of Common Stockholders’ Equity and Comprehensive Income
	for Years Ended December 31, 2008, 2007 and 2006	Page 23
Statements of Cash Flows for Years Ended December 31, 2008, 2007 and 2006		Page 24
Notes to Financial Statements		Page 25

Schedule	Schedule	Page
Number	Description	Number

II	Valuation and Qualifying Accounts	17
	for the years ended December 31, 2008, 2007 and 2006


/s/Beard Miller Company LLP
Beard Miller Company LLP
York, Pennsylvania
March 11, 2009

		Additions
Description	Balance at Beginning Of Year	Charged to Cost and Expenses	Recoveries	Deductions	Balance At End Of Year
FOR THE YEAR ENDED DECEMBER 31, 2008 Reserve for uncollectible accounts	$193,000	$176,534	$38,224	$212,758	$195,000

FOR THE YEAR ENDED DECEMBER 31, 2007 Reserve for uncollectible accounts	$173,000	$153,855	$20,831	$154,686	$193,000

FOR THE YEAR ENDED DECEMBER 31, 2006 Reserve for uncollectible accounts	$135,000	$209,914	$15,253	$187,167	$173,000

	THE YORK WATER COMPANY
	(Registrant)


Dated: March 9, 2009	By: /s/Jeffrey R. Hines
	Jeffrey R. Hines
	President and CEO



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

Dated: March 9, 2009	Dated: March 9, 2009

Directors:	Date:

By: /s/Thomas C. Norris	March 9, 2009
Thomas C. Norris

By: /s/Cynthia A. Dotzel	March 9, 2009
Cynthia A. Dotzel

By: /s/John L. Finlayson	March 9, 2009
John L. Finlayson

By: /s/Michael W. Gang	March 9, 2009
Michael W. Gang

By: /s/Jeffrey R. Hines	March 9, 2009
Jeffrey R. Hines

By: /s/George W. Hodges	March 9, 2009
George W. Hodges

By: /s/George Hay Kain, III	March 9, 2009
George Hay Kain, III

By: /s/William T. Morris	March 9, 2009
William T. Morris

By: /s/Jeffrey S. Osman	March 9, 2009
Jeffrey S. Osman

By: /s/Ernest J. Waters	March 9, 2009
Ernest J. Waters

Exhibit Number	Exhibit Description	Page Number of Incorporation By Reference
3	Amended and Restated Articles of Incorporation	Incorporated herein by reference. Filed previously with the Securities and Exchange Commission as Exhibit 3.1 to Form 8-K dated August 30, 2006.
3.1	By-Laws	Incorporated herein by reference. Filed previously with the Securities and Exchange Commission as Exhibit 3.1 to Form 8-K dated January 24, 2007.
4.1	Dividend Reinvestment and Direct Stock Purchase and Sale Plan	Incorporated herein by reference. Filed previously with the Securities and Exchange Commission as the Prospectus included in Post-Effective Amendment No. 1 to Form S-3 dated June 26, 2008 (File No. 333-59072).
4.2	Shareholder Rights Agreement	Incorporated herein by reference. Filed previously with the Securities and Exchange Commission as Exhibit 4.1 to Form 8-K dated January 26, 2009.
10.1	Articles of Agreement Between The York Water Company and Springettsbury Township relative to Extension of Water Mains dated April 17, 1985	Incorporated herein by reference. Filed previously with the Securities and Exchange Commission as Exhibit 10.1 to the Company's 1989 Form 10-K.
10.2	Articles of Agreement Between The York Water Company and Windsor Township relative to Extension of Water Mains dated February 9, 1989	Incorporated herein by reference. Filed previously with the Securities and Exchange Commission as Exhibit 10.2 to the Company's 1989 Form 10-K.
10.3	Articles of Agreement Between The York Water Company and York Township relative to Extension of Water Mains dated December 29, 1989	Incorporated herein by reference. Filed previously with the Securities and Exchange Commission as Exhibit 10.5 to the Company's 1990 Form 10-K.
10.4	Note Agreement relative to the $6,000,000 10.17% Senior Notes, Series A and $5,000,000 9.60% Senior Notes, Series B dated January 2, 1989	Incorporated herein by reference. Filed previously with the Securities and Exchange Commission as Exhibit 4.5 to the Company's 1989 Form 10-K.
10.5	Note Agreement relative to the $6,500,000 10.05% Senior Notes, Series C dated August 15, 1990	Incorporated herein by reference. Filed previously with the Securities and Exchange Commission as Exhibit 4.6 to the Company's 1990 Form 10-K.

	THE YORK WATER COMPANY

By:
Witness	President and CEO


Witness	Employee

Name	Original Agreement Date	Multiple of Base Pay for Involuntary Termination or Good Reason Termination
Jeffrey R. Hines	January 26, 1999	2.74
Kathleen M. Miller	December 15, 2003	.25
Vernon L. Bracey	December 15, 2003	.25
Joseph T. Hand	November 5, 2008	.25
Bruce C. McIntosh	January 26, 1999	.25

Name	Date Credited Service Began	Normal Monthly Retirement Unit	Pre-Retirement Death Benefit
Jeffrey R. Hines	December 31, 1989	120.12	3208.33
Kathleen M. Miller	December 31, 2003	116.14	6666.70
Vernon L. Bracey	December 31, 2003	122.55	6430.66
Bruce C. McIntosh	December 31, 1998	146.20	4316.66

Highlights of Our 193rd Year	2
Shareholder Information	3
Management’s Discussion and Analysis	4
Management’s Report on Internal Control Over Financial Reporting	15
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting	16
Report of Independent Registered Public Accounting Firm	17
Balance Sheets	18
Statements of Income	20
Statements of Common Stockholders’ Equity and Comprehensive Income	21
Statements of Cash Flows	22
Notes to Financial Statements	23

	Summary of Operations
For the Year	2008	2007	2006	2005	2004

Water operating revenue	$32,838	$31,433	$28,658	$26,805	$22,504
Operating expenses	18,094	17,269	15,754	14,017	12,595
Operating income	14,744	14,164	12,904	12,788	9,909
Interest expense	4,112	3,916	3,727	3,423	2,132
Gain on sale of land	-	-	-	-	743
Other income (expenses), net	(573)	(142)	110	(149)	(168)
Income before income taxes	10,059	10,106	9,287	9,216	8,352
Income taxes	3,628	3,692	3,196	3,383	3,051
Net income	$ 6,431	$ 6,414	$ 6,091	$ 5,833	$ 5,301

Per Share of Common Stock
Book value	$6.14	$5.97	$5.84	$4.85	$4.65
Basic earnings per share	.57	.57	.58	.56	.53
Dividends	.489	.475	.454	.424	.394
Weighted average number of shares
outstanding during the year	11,298,215	11,225,822	10,475,173	10,359,374	9,937,836

Utility Plant
Original cost, net of acquisition adj.	$245,249	$222,354	$202,020	$181,756	$163,701
Construction expenditures *	24,438	18,154	20,678	15,562	25,689

Other
Total assets	$240,442	$210,969	$196,064	$172,296	$156,066
Long-term debt including current maturities	86,353	70,505	62,335	51,874	51,913

	2008			2007
	High	Low	Dividend*	High	Low	Dividend*
1st Quarter	$16.28	$14.19	$0.121	$18.15	$16.12	$0.118
2nd Quarter	16.50	14.51	0.121	18.55	16.60	0.118
3rd Quarter	15.00	6.23	0.121	18.40	16.70	0.118
4th Quarter	13.31	10.25	0.126	17.30	15.45	0.121

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

	Payments due by period
	Total	2009	2010	2011	2012	2013	Thereafter
Long-term debt obligations (a)	$86,353	$2,741	$25,439	$41	$42	$42	$58,048

Interest on long-term debt (b)	70,996	4,319	4,188	4,121	4,120	4,120	50,128

Short-term borrowings (c)	6,000	6,000

Purchase obligations (d)	5,632	5,632

Defined benefit obligations (e)	1,218	1,218	-	-	-	-	-

Deferred employee benefits (f)	4,485	258	228	223	217	189	3,370

Other deferred credits (g)	3,784	313	224	198	260	184	2,605
Total	$178,468	$20,481	$30,079	$4,583	$4,639	$4,535	$114,151

(a)	Represents debt maturities including current maturities. Included in the table is a payment of $12,000 in 2010 on the variable rate bonds which would only be due if the bonds were unable to be remarketed. There is currently no indication of this happening.
(b)	Excludes interest on the $12,000 variable rate debt as these payments cannot be reasonably estimated. Also excludes interest on the committed line of credit due to the variability of both the outstanding amount and the interest rate.
(c)	Represents obligations under the Company’s short-term line of credit.
(d)	Represents an approximation of open purchase orders at period end and obligations under contracts relating to the West Manheim Township water asset acquisition and the construction of a new standpipe.
(e)	Represents contributions expected to be made to qualified defined benefit plans. The amount of required contributions in 2010 and thereafter is not currently determinable.
(f)	Represents the obligations under the Company’s Supplemental Retirement and Deferred Compensation Plans for executives.
(g)	Represents the estimated settlement payments to be made under the Company’s interest rate swap contract.


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

THE YORK WATER COMPANY

Statements of Common Stockholders' Equity and Comprehensive Income
(In thousands, except per share amounts)
For the Years Ended December 31, 2008, 2007 and 2006


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

Balance, December 31, 2005	$	42,015	$	8,633		$	(233	)	$	50,415
Net income		-		6,091			-			6,091
Other comprehensive income (loss):
Unrealized gain on interest rate swap,
net of $82 income tax		-		-			120			120
Reclassification adjustment for amounts
recognized in income, net of $8 income tax		-		-			12			12
Comprehensive income										6,223
Dividends ($.454 per share)		-		(4,820	)		-			(4,820	)
Issuance of 739,750 shares of common stock		12,482		-			-			12,482
Issuance of common stock under
dividend reinvestment and
employee stock purchase plans		1,061		-			-			1,061
Balance, December 31, 2006		55,558		9,904			(101	)		65,361
Net income		-		6,414			-			6,414
Other comprehensive income (loss):
Unrealized loss on interest rate swap,
net of $125 income tax		-		-			(183	)		(183	)
Reclassification adjustment for amounts
recognized in income, net of $3 income tax		-		-			4			4
Comprehensive income										6,235
Dividends ($.475 per share)		-		(5,332	)		-			(5,332	)
Issuance of common stock under
dividend reinvestment and
employee stock purchase plans		1,008		-			-			1,008
Balance, December 31, 2007		56,566		10,986			(280	)		67,272
Net income		-		6,431			-			6,431
Other comprehensive income (loss):
Reclassification adjustment for unrealized loss
on interest rate swap to regulatory asset
net of $191 income tax		-		-			280			280
Comprehensive income										6,711
Dividends ($.489 per share)		-		(5,526	)		-			(5,526	)
Issuance of common stock under
dividend reinvestment, direct stock and
employee stock purchase plans		1,309		-			-			1,309
Balance, December 31, 2008	$	57,875	$	11,891		$	-		$	69,766


The accompanying notes are an integral part of these statements.

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



Date: March 11, 2009	By:	/s/Jeffrey R. Hines
		Jeffrey R. Hines
		President and CEO

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

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

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