EXHIBIT 10.3
CITIZENS BANCORP, INC.
Employment Agreement dated
December 30,2002
With
CHARLES H. UPDEGRAFF, JR.

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TABLE OF CONTENTS
Section Headings
Section 1. Term of Employment
Section 2. Services to be Rendered
Section 3. Compensation
Section 4. Disability
Section 5. Termination for Proper Cause
Section 6. Non-Competition
Section 7. Confidentiality
Section 8. Removal of Documents or Objects
Section 9. Injunctive Relief
Section 10. Merger or Consolidation
Section 11. Notices
Section 12. Governmental Regulation
Section 13. Arbitration
Section 14. Governing Law
Section 15. Divisability
Section 16. Headings
Section 17. Entire Agreement; Amendment; Successors and Assigns

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EMPLOYMENT AGREEMENT
     THIS AGREEMENT, entered into this 30th day of December, 2002, by and
between CHARLES H. UPDEGRAFF, JR., an individual residing in Potter County,
Pennsylvania (“Executive”), and CITIZENS BANCORP, INC., a Pennsylvania
corporation (the “Company”),
WITNESSETH THAT:
     WHEREAS, Executive has served the Company as a senior executive officer and
as a member of its Board of Directors for many years; and
     WHEREAS, the Company desires to assure itself of the benefit of Executive’s
services and experience, and to that end has authorized this Agreement; and
     WHEREAS, Executive is willing to remain in the employ of the Company upon
the terms and conditions herein set forth;
     NOW, THEREFORE, in consideration of the premises and covenants herein
contained, and intending to be legally bound, the parties hereto agree as
follows:
Section 1. Term of Employment.
          (a) Base Term. The term of employment of Executive under this
Agreement shall be the period commencing January I , 2003 and ending on
December 31, 2005.
          (b) Automatic Renewal. At December 31, 2003 and December 31 of each
succeeding calendar year to and including December 31, 201 5, the term of
employment of Executive under this Agreement shall be automatically extended to
December 31 of the third calendar year thereafter. However, each of the parties
shall have the right, exercisable by written notice to the other, to terminate
the automatic renewal and thereby fix the expiration of the term of employment
under this Section 1. In order to exercise its right to terminate the automatic
renewal, the electing party shall deliver such notice no earlier than October 1
nor later than November 30 in any calendar year, commencing in 2003. Notice of
termination of automatic renewal having been given as aforesaid, the term of
employment of Executive under this Section 1 shall continue until December 31 of
the third calendar year after the year in which such notice is so given, but not
thereafter. The term shall not continue after December 31, 2018 whether or not
such notice shall have been given.
          (c) Early Termination. Notwithstanding paragraphs (a) and (b) of this
Section, the term of employment of Executive under this Agreement shall be
subject to
earlier termination upon:

  (i)   dismissal of Executive from his position as Chief Executive Officer
pursuant to resolution of a majority of the full Board of Directors; or     (ii)
  determination of disability of Executive pursuant to Section 4 hereof; or    
(iii)   death of Executive.

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In the event of termination pursuant to clause (i), the Company shall thereafter
be obligated to pay to Executive the compensation and benefits provided for
under Section 3(e) hereof. In the event of termination pursuant to clause
(ii) the provisions of Section 4 hereof shall apply. In the event of termination
pursuant to clause (iii), the Company shall be obligated to pay Executive’s
estate or designated beneficiary the compensation reserved under Section 3(a)
hereof until the end of the twelfth calendar month following his death, plus
pro-rata portions of annual and long-term incentive bonus awards described in
Section 3(b) hereof (when and if payable) under any plan or program in which
Executive was then a participant.
Section 2. Services to be Rendered.
The Company hereby agrees to employ Executive as the Company’s Chief Executive
Officer at the headquarters office located in Potter County. Pennsylvania,
subject to the terms, conditions and provisions of this Agreement. Executive
hereby accepts such employment, and agrees (i) to perform all senior executive
and managerial duties as may be required of him by the Company (ii) to serve as
a member of the Board of Directors of the Company and as the Chief Executive
Officer and a member of the Board of Directors of any majority-owned subsidiary
of the Company based in Potter County, Pennsylvania, and (iii) that he shall
apply his efforts on a full-time basis and with substantially the same degree of
skill and diligence as he has applied during his past employment with the
Company. In connection therewith, Executive shall report to and be subject to
the direction of the Company’s Board of Directors. Notwithstanding the
foregoing, Executive may devote a reasonable amount of his time to his personal
investments and business affairs (including service as a director of
unaffiliated companies) and to civic and charitable activities, within the
limits of and subject to the Company’s policies in effect from time to time.
Section 3. Compensation.
     In consideration for services rendered to the Company (and any and all
subsidiaries to which he may be assigned) under this Agreement, the Company
shall pay and provide to Executive the following compensation and benefits.
     (a) Salary. The Company shall pay Executive a base salary at an annual rate
equal to his current base salary rate during the base and each renewal term (if
any) provided for in paragraphs (a) and (b) of Section 1, to be paid in
accordance with the Company’s normal payroll practice. Such base salary rate
shall be increased or decreased from time to time at such intervals and by the
same percentages as may be authorized by the Board of Directors generally with
respect to base salary increases or decreases for executive officers of the
Company.
     (b) Incentive Programs. In addition to base salary under paragraph (a),
Executive shall also be entitled to participate in such annual bonus plans,
long- term incentive bonus plans and stock option and restricted stock plans as
may be adopted by the Company, in each case at such levels and in such amounts
as the Board of Directors determines to be fair, equitable and consistent with
the purposes of such plans.
     (c) Insurance. Executive shall be entitled to participation in all

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Company-sponsored group life, health and disability insurance coverage plans and
programs, consistent with the compensation and benefits policies and practices
of the Company from time to time prevailing with respect to executive officers
of the Company.
     (d) Retirement Benefits. Executive shall be entitled to participate in all
retirement benefit plans and programs sponsored by the Company upon the same
terms and conditions as are made available to executive officers of the Company
generally. If, however, Executive does not receive any one or more of the
maximum matching contributions under the Company-sponsored “401 (k) plan” (or
plans) by reason of the anti-discrimination requirements of §401 (m) of the
Internal Revenue Code, the Company shall make Executive whole by means of a
credit (or credits) in equivalent amounts under a non-qualified deferred
compensation plan to be established by the Company.
     (e) Continuation After Termination.
          (i) If the employment of Executive is terminated pursuant to Section 1
(c)(i) hereof without proper cause (as defined in Section 5 hereof), the Company
shall continue to be obligated, for the remainder of the base or renewal term
(as the case may be) then in effect, to pay to Executive the base salary and
bonus amounts to which he otherwise would have been entitled under paragraphs
(a) and (b) of this Section 3 but for such early termination, and also to
continue his participation in the other benefit plans and programs referred to
in paragraphs (c) and (d) of this Section 3, if and to the extent permitted by
the terms of such plans and programs (or, if and to the extent not so permitted,
to pay or reimburse to Executive an amount equal to the cost that would have
been incurred by the Company in providing such benefits but for such early
termination).
          (ii) If the employment of Executive is terminated pursuant to Section
(1)( c)(i) hereof for proper cause (as defined in Section 5 hereof) or as a
result of his voluntary resignation from his position as Chief Executive Officer
and member of the Board of Directors of the Company, the Company shall thereupon
be relieved of its obligations to pay all compensation and benefits under this
Agreement (except for accrued and unpaid base salary). The Company’s election to
terminate for proper cause shall not be deemed to modify or abrogate any vested
rights of Executive under any deferred compensation or retirement plan of the
Company except as expressly set forth therein.
     (f) Emoluments. The Company shall make no reduction or downward adjustment
in Executive current emoluments of employment (including vacation time,
automobile and office location/furnishings) without his written consent.
Section 4. Disability.
     The term of employment of Executive may be terminated at the election of
the Company upon a determination by the Board of Directors of the Company, made
in its sole discretion, that Executive will be unable, by reason of physical or
mental incapacity, to perform his reasonably expected or customary duties under
this Agreement on a substantially full-time basis for a period longer than six
consecutive months or more than nine months in any consecutive twelve-month
period. In the

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exercise of its discretion, the Board of Directors may give due consideration
to, among such other factors as it deems appropriate to the best interests of
the Company, the opinion of Executive’s personal physician or physicians and to
the opinion of any physician or physicians selected by the Board of Directors
for these purposes. Executive shall submit to examination by any physician or
physicians so selected by the Board of Directors, and to otherwise cooperate
with the Board of Directors in making the determination contemplated hereunder
(such cooperation to include, without limitation, consenting to the release of
information by any such physicians to the Board of Directors). In the event of
such termination, the Company shall thereupon be relieved of its obligations to
pay compensation and benefits under Section 3 hereof (except for accrued and
unpaid items, including a pro rata portion of the cash bonuses described in
Section 3(b) hereof) but shall be obligated to pay to (or for the benefit of)
Executive the following:
     (a) From and after the date such termination is effective, a monthly
disability income benefit in an amount equal to the monthly disability income
benefit allowed by the group disability income insurance policy maintained by
the Company for its executives at the time of such determination. It is
understood and agreed that the Company will procure and maintain, at its sole
cost and expense, throughout the term of this Agreement, one or more such
policies with rights and benefits to the covered executives no less than those
provided for by the policy in effect on the date of this Agreement. Executive’s
rights under this paragraph (a) shall terminate upon the earlier of his death or
attainment of normal retirement age under the Company’s retirement plan.
     (b) The life insurance benefits referred to in Section 3(c) hereof unless
and until Executive shall have accepted other employment.
     (c) Health insurance premiums for comparable coverages and with comparable
contributory features provided from time to time by the Company for its
executive officers, unless and until Executive shall have accepted other
employment in which health insurance is available to him.
Section 5. Termination for Proper Cause.
The occurrence of any of the following events shall constitute “proper cause”
for termination, at the election of a majority of the full Board of Directors of
the Company, of the term of employment of Executive under this Agreement, to
wit:
     (a) Executive shall voluntarily resign as a director, officer or employee
of the Company or any of its subsidiaries or affiliates without approval of the
Board of Directors of the Company;
     (b) Executive shall breach this Agreement in any material respect and, if
curable, shall fail to cure such breach within 30 calendar days after receiving
written notice of such breach from the Company;
     (c) the perpetration of defalcations, fraud or theft by Executive involving
the Company or any of its subsidiaries or affiliates, or any other substantial
violation by Executive of any provision of the laws, rules, regulations or
orders of any

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governmental agency applicable to the Company or any of its subsidiaries, which
violation is deemed by a majority of the full Board sf Directors materially
injurious to the Company’s business or reputation; or
     (d) the willful and repeated failure of Executive to comply with reasonable
policies or directives of the Board of Directors;
provided, however the inability of Executive to achieve performance goals and/or
favorable results of operations for reasons essentially unrelated to those set
forth in paragraphs (a), (b), (c) and (d) of this Section 5 shall not be deemed
to constitute proper cause for termination hereunder.
Section 6. Non-Competition.
     Executive agrees that during the term of his employment hereunder and for
the Restricted Period (hereinafter defined) after his employment hereunder
terminates or is terminated, he will not, directly or indirectly, hold more than
4.9% of the equity securities or any debt securities of, nor directly or
indirectly manage, operate, control, accept employment or a consulting position
with or otherwise advise or assist, any Competitive Enterprise (hereinafter
defined) at any time during the Restricted Period. For purposes of this
Section 6:
     (a) “Restricted Period” means the greater of (i) the period of two years
next following the termination of Executive’s employment for proper cause, or
(ii) the period of time during which Executive is entitled to receive payments
from the Company pursuant to Section 3(e) or 4 hereof (as the case may be); and
     (b) “Competitive Enterprise” means any person, firm or corporation that
directly or indirectly (i) is engaged in consumer and/or commercial banking, or
(ii) renders personal and/or corporate trust services, and (iii) conducts such
banking or trust activities described in clause (i) or (ii) above in the
Pennsylvania counties of Potter, McKean, Cameron and/or Tioga, or in any county
(within or without Pennsylvania) in which the Company or any of its present or
future subsidiaries, during the Restricted Period, maintains a branch, trust
office and/or loan production office.
Without limitation of the Company’s rights and remedies under this Agreement or
as otherwise provided by law or in equity, it is understood and agreed between
the parties that the right of Executive to receive any payments otherwise due to
him under this Agreement and any deferred compensation plan shall be suspended
and canceled if and for so long as he shall be in violation of the foregoing
covenant not to compete If and when Executive cures such violation, such right
shall be automatically reinstated but only for the remainder of the period
during which such payments are due him.
Section 7. Confidentiality. For purposes of this Agreement, “proprietary
information shall mean any material information relating to the business of the
Company and its subsidiaries that has not previously been publicly released by
duly authorized representatives of the Company and shall include (but shall not
be limited to) information encompassed in all marketing and sates plans,
financial information, costs, pricing information, and all methods, concepts, or
ideas in or reasonably related to the business of the Company and its
subsidiaries and not in the public domain.

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     Executive agrees to regard and preserve as confidential all proprietary
information pertaining to the business of the Company and its subsidiaries that
has been or may hereafter be obtained by Executive in the course of his
employment with the Company, whether he has such information in his memory or in
writing or other physical form. Executive shall not, without written authority
from the Company to do so, use for his benefit or purposes, nor disclose to
others, either during the term of his employment or thereafter, except as
required by the conditions of his employment with the Company (or any
subsidiary), any proprietary information connected with the business or
development of the Company and its subsidiaries. This provision shall not apply
after the proprietary information has been voluntarily disclosed to the public,
independently developed and disclosed by others, or otherwise enters the public
domain through lawful means.
Section 8. Removal of Documents or Objects.
     Executive agrees not to remove from the premises of the Company, except as
an employee of the Company in pursuit of the business of the Company or any of
its subsidiaries, or except as specifically permitted in writing by the Company,
any document or object containing or reflecting any proprietary information of
the Company. Executive recognizes that all such documents and objects, whether
developed by him or by someone else, are the exclusive property of the Company.
Section 9. lnjunctive Relief.
     It is understood and agreed by and between the parties hereto that the
services to be rendered by Executive hereunder are of a special, unique,
extraordinary and intellectual character, which gives them a peculiar value, the
loss of which may not be reasonably or adequately compensated in damages and
additionally that a breach by Executive of the covenants set out in Sections 6,
7 and 8 of this Agreement will cause the Company great and irreparable injury
and damage. Executive hereby expressly agrees that the Company shall be entitled
to the remedies of injunction, specific performance and other equitable relief
to prevent a breach of Sections 6, 7 and 8 of this Agreement by Executive. This
provision shall not, however, be construed as a waiver of any of the rights
which the Company may have for damages or otherwise.
Section 10. Merger or Consolidation.
In the event of the merger or consolidation of the Company with any unrelated
corporation or corporations, or of the sale by the Company of a major portion of
its assets or of its business and good will to an unrelated third party, this
Agreement shall remain in effect and be assigned and transferred to the
Company’s successor in interest as an asset of the Company, and the Company
shall cause such assignee to assume the Company’s obligations hereunder; and in
such event Executive hereby confirms his agreement to continue to perform his
duties and obligations according to the terms and conditions hereof for such
assignee or transferee of this Agreement. It is understood and agreed, however,
that the scope of Executive’s services under Section 2 hereof may be
appropriately modified, at the election of such successor, to cover the segment
of such successor’s enterprise represented by the assets and operations in which
Executive is involved at the time of such aforementioned transaction.

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If such successor, assignee or transferee imposes or threatens to impose,
without Executive’s written consent, (i) a material reduction in Executive’s
authority or responsibilities beyond that expressly permitted by the preceding
sentence, or (ii) any other substantial modification of his working conditions,
Executive shall then have the right to declare a material breach of this
Agreement and to resign his employment hereunder, in which case such successor,
assignee or transferee shall be obligated to pay and provide to Executive the
compensation and benefits described in Section 3(e)(i) hereof.
Section 11. Notices.
     All notices and other communications which are required or may be given
under this Agreement shall be in writing and shall be deemed to have been given
if delivered personally or sent by registered or certified mail, return receipt
requested, postage prepaid:
(a) If to the Company, to it at the following address:
Citizens Bancorp, Inc.
10 North Main St.
Coudersport, PA 16915
Attention: Chairman of the Compensation Committee of the Board of Directors
(b) If to Executive, to him at the following address:
Charles H. Updegraff, Jr.
28 Prosser Hollow Road
Coudersport, PA 16915
or to such other place as either party shall have specified by notice in writing
to the other.
Section 12. Governmental Regulation.
     Nothing contained in this Agreement shall be construed so as to require the
commission of any act contrary to law and whenever there is any conflict between
any provision of this Agreement and any statute, law, ordinance, order or
regulation, the latter shall prevail, but in such event any such provision of
this Agreement shall be curtailed and limited only to the extent necessary to
bring it within the legal requirements.
Section 13. Arbitration.
     Any claim, controversy or dispute arising with respect to this Agreement
between or among any of the parties hereto (a “Dispute”), other than a Dispute
to which Section 9 hereof applies, shall be submitted to final and binding
arbitration in accordance with the following:

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     Any party to an unresolved Dispute may file a written Demand for
Arbitration pursuant to this Section 13 with the Pittsburgh Office of the
American Arbitration Association, and shall simultaneously send a copy of such
Demand to the other party or parties to such Dispute.
     Arbitration proceedings under this Section 13 shall be conducted in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, except that all decisions and awards rendered shall be accompanied
by a written opinion setting forth the rationale for such decisions and awards.
Venue for all evidentiary hearings conducted in such proceedings shall be in
Allegheny County, Pennsylvania.
     Unless otherwise agreed by the parties thereto, arbitration proceedings
under this Section 13 shall be conducted before one impartial arbitrator
selected through the procedures of the American Arbitration Association. On all
matters, the decisions and awards of the arbitrator shall be determinative.
     To the extent practicable, the arbitration proceedings under this
Section 13 shall be conducted in such manner as will enable completion within
sixty (60) days after the filing of the Demand for Arbitration hereunder.
     The arbitrator may award attorney’s fees and costs of arbitration to the
substantially prevailing party. Unless and except to the extent so awarded, the
costs of arbitration shall be shared equally by the parties, and each party
shall bear the fees and expenses of its own attorney. Punitive damages shall not
be allowed by the arbitrator. The award may be enforced in such manner as
allowed by law.
Section 14. Governing Law.
     This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Pennsylvania.
Section 15. Divisability.
     Should a court or arbitrator declare any provision hereof to be invalid,
such declaration shall not affect the validity of the Agreement as a whole or
any part thereof, other than the specific portion declared to be invalid.
Section 16. Headings.
     The headings to the Sections and paragraphs hereof are placed herein for
convenience of reference only and in case of any conflict the text of this
Agreement, rather than the headings, shall control.
Section 17. Entire Agreement, Amendment; Successors and Assigns.
     This Agreement sets forth the entire understanding of the parties in
respect of

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the subject matter contained herein and supersedes all prior agreements,
arrangements and understandings relating to the subject matter and may only be
amended by a written agreement signed by both parties hereto or their duly
authorized representatives. This Agreement shall bind and inure to the benefit
of the undersigned parties and their respective heirs, administrators,
successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.

            EXECUTIVE
      /s/ Charles H. Updegraff, Jr.       Charles H. Updegraff, Jr.             
CITIZENS BANCORP, INC.
      By:   /s/ Robert C. Smith         Title: CHAIRMAN PERSONNEL/COMPENSATION
COM.             

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