Exhibit 10.3
CHANGE OF CONTROL AGREEMENT
AGREEMENT made as of December 27, 2005 by and among CODORUS VALLEY BANCORP,
INC., a Pennsylvania business corporation, (hereinafter referred to as the
“Corporation”), PEOPLESBANK, a Codorus Valley Company, a Pennsylvania state
charted bank (hereinafter referred to as the “Bank”) and JANN A. WEAVER, an
individual residing at 417 Chumleigh Road, Baltimore, Maryland (hereinafter
referred to as “Executive”).
WITNESSETH:
WHEREAS, the Corporation, the Bank and Executive entered into a Change of
Control Agreement dated as of October 1, 1997 (the “1997 Agreement”), regarding,
among other things, certain payments which may be due Executive upon termination
following a Change of Control; and
WHEREAS, Executive is now serving as Treasurer/Chief Financial Officer of the
Corporation and as Executive Vice President/Chief Financial Officer of the Bank,
a wholly-owned subsidiary of the Corporation; and
WHEREAS, the Corporation and the Bank consider the continued services of
Executive to be in the best interests of the Corporation and the Bank; and
WHEREAS, the Corporation, the Bank and Executive desire to enter into this
Agreement whereby the Corporation agrees to make certain payments to Executive
upon termination under specific conditions, in order to induce Executive to
continue in employment, and concurrently herewith, to terminate the 1997
Agreement, all as hereinafter set forth
NOW, THEREFORE, in consideration of the continued employment of Executive and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, intending to be legally bound hereby, Executive, the
Corporation and the Bank agree as follows:
ARTICLE I
TERMINATION PURSUANT TO A CHANGE OF CONTROL
1.1 Definition: Termination Pursuant to a Change of Control. Any of the
following events occurring during the period commencing with the date of any
“Change of Control” (as defined in ARTICLE II hereof) and ending on the second
(2nd) anniversary of the date of the Change of Control, shall constitute a
“Termination Pursuant to a Change of Control”:
(A) Executive’s employment is terminated by the Corporation, the Bank or an
acquiror or successor of either without “Good Cause” (as defined below); or
(B) Any of the following events occurs and Executive thereafter terminates
Executive’s employment:
(i) any reduction in Executive’s responsibilities, including reporting
responsibilities, or authority, including such responsibilities or authorities
as may be increased from time to time; or

 

 

--------------------------------------------------------------------------------

 

(ii) the assignment to Executive of duties inconsistent with Executive’s title
or office, as the same may be increased from time to time; or
(iii) any reassignment of Executive to a principal place of employment which is
more than twenty-five (25) miles form Executive’s principal place of employment
immediately prior to the Change of Control; or
(iv) any reduction in Executive’s annual base salary as the same may be
increased from time to time; or
(v) any failure to provide Executive with benefits at least as favorable as
those enjoyed by Executive under Corporation’s or Bank’s retirement or pension,
life insurance, medical, health and accident, disability or other employee or
incentive compensation plans in which Executive participated or the taking of
any action that would materially reduce any of such benefits, unless such
reduction is part of a reduction applicable in each case to all employees; or
(vi) any requirement that Executive travel in performance of his duties on
behalf of Corporation or Bank for a significantly greater period of time during
any year than was required of Executive during the year preceding the year in
which the Change of Control occurred; or
(vii) Any material breach of this Agreement of any nature whatsoever on the part
of the Corporation or the Bank.
For purposes of this Section 1.1, “Good Cause” shall mean (i) the willful
failure by the Executive to substantially perform his duties as an officer of
the Corporation or Bank after Executive’s receipt of written notice from the
Bank of such failure, other than a failure resulting from the Executive’s
incapacity because of physical or mental illness, or (ii) the willful engaging
by the Executive in misconduct injurious to the Corporation or Bank, or
(iii) the dishonesty or gross negligence of the Executive in the performance of
his duties, or (iv) the breach of Executive’s fiduciary duty involving personal
profit, or (v) the violation of any law, rule or regulation governing banks or
bank officers or any final cease and desist order issued by a bank regulatory
authority, any of which materially jeopardizes the business of the Corporation
or Bank, or (vi) moral turpitude or other conduct on the part of the Executive
which brings public discredit to the Corporation or Bank.

 

 

--------------------------------------------------------------------------------

 

The burden of establishing the validity of any termination for Good Cause shall
rest upon the Corporation or the Bank.
1.2 Compensation Upon Termination Pursuant to a Change of Control. If
Executive’s employment is terminated and such termination is a Termination
Pursuant to a Change of Control (as defined in Section 1.1), the Executive shall
be entitled to receive the following:
(A) Executive’s compensation shall be continued for a period of one (1) year,
commencing as of the Termination Pursuant to the Change of Control. For purposes
of this Section 1.2, compensation shall mean (i) the highest of Executive’s
annualized base salary at the time of or during one of the three calendar years
immediately preceding the Termination Pursuant to a Change of Control, plus
(ii) the highest bonus earned by Executive with respect to one of the three
calendar years immediately preceding the date of the Termination Pursuant to a
Change of Control. Notwithstanding the provisions of the preceding sentence,
Executive, at his/her option, may choose to receive, within thirty (30) days
after termination of Executive’s employment, a lump sum equal to the present
value of the amount otherwise payable hereunder, determined by using the
short-term applicable federal rate under Section 1274 of the Internal Revenue
Code of 1986, as amended, in effect on the date of termination of employment;
and
(B) For a period of one (1) year, commencing as of the Termination Pursuant to
the Change of Control, the Bank also shall maintain in full force and effect,
for the continued benefit of the Executive, all employee benefit plans and
programs to which the Executive was entitled prior to the date of termination,
if the Executive’s continued participation is possible under the general terms
and provisions of such plans, and programs, except that if the Executive’s
participation in any health, medical, life insurance, or disability plan or
program is barred, the Bank shall obtain and pay for, on the Executive’s behalf,
individual insurance plans, policies or programs which provide to the Executive
health, medical, life and disability insurance coverage which is substantially
equivalent to the insurance coverage to which Executive was entitled prior to
the date of termination.
1.3 Other Benefits. The payments provided by this ARTICLE I shall not affect
Executive’s rights to receive any payments or benefits to which Executive may be
or become entitled under any other existing or future agreement or arrangement
of the Corporation, the Bank or any successor of either with the Executive, or
under any existing or future benefit plan or arrangement of the Corporation, the
Bank or any successor in which Executive is or becomes a participant, or under
which Executive has or obtains rights, including without limitation, any
qualified or nonqualified deferred compensation or retirement plans or programs
or any outstanding stock options or similar agreements. Any such rights of
Executive shall be determined in accordance with the terms and conditions of the
applicable agreement, arrangement or plan and applicable law, provided, however,
that Executive shall not be entitled to any severance payments in addition to
those provided hereunder.
1.4 Withholding for Taxes. All payments required to be made under this Agreement
will be made in accordance with the Corporation’s or other payor’s normal
payroll schedule except to the extent the Executive elects to receive payments
in a lump sum as permitted by Section 1.2, and will be subject to withholding of
such amounts relating to tax and/or other payroll deductions as may be required
by law.

 

 

--------------------------------------------------------------------------------

 

1.5 Key Employee Status. Notwithstanding anything in this Section to the
contrary, in the event Executive is determined to be a Key Employee, as that
term is defined in Section 409A of the Internal Revenue Code and the regulations
promulgated thereunder, payments to such Key Employee hereunder, shall not begin
earlier than the first day of the seventh month after the date of termination.
For the purposes of the foregoing, the date upon which a determination is made
as to the Key Employee status of the Executive, the Indemnification Date (as
defined in Section 490A of the Code and the regulations promulgated thereunder)
shall be December 31.
ARTICLE II
DEFINITION OF CHANGE OF CONTROL
2.1 CHANGE OF CONTROL. For purposes of this Agreement, the term “Change of
Control” shall mean: a Change in the Ownership of the Corporation or the Bank,
(as defined below), a Change in the Effective Control of the Corporation or the
Bank (as defined below), or a Change in the Ownership of a Substantial Portion
of the Assets of the Corporation or the Bank, (as defined below).
(A) Change in the Ownership of the Corporation or the Bank. A Change in the
Ownership of the Corporation or the Bank occurs on the date that any one person,
or more than one person acting as a group (as defined below), acquires ownership
of stock of the Corporation or the Bank that, together with stock held by such
person or group, constitutes more than 50 percent of the total fair market value
or total voting power of the stock of the Corporation or the Bank. However, if
any one person, or more than one person acting as a group, is considered to own
more than 50 percent of the total fair market value or total voting power of the
stock of the Corporation or the Bank, the acquisition of additional stock by the
same person or persons is not considered to cause a Change in Ownership of the
Corporation or the Bank. An increase in the percentage of stock owned by any one
person or persons acting as a group, as a result of a transaction in which the
Corporation or Bank acquires its stock in exchange for property will be treated
as an acquisition of stock for these purposes. A change in ownership of the
Corporation or the Bank only occurs when there is a transfer or issuance of
stock of the Corporation or the Bank and the stock remains outstanding after the
transaction.
(B) Change in Effective Control of the Corporation or the Bank. A Change in
Effective Control of the Corporation or the Bank occurs only on the date that
either:
(i) Any one person, or more than one person acting as a group (as defined
below), acquires (or has acquired during the 12-month period ending on the date
of the most recent acquisition by such person or persons) ownership of stock of
the Corporation or the Bank possessing 35 percent or more of the total voting
power or the stock of the Corporation or the Bank; or

 

 

--------------------------------------------------------------------------------

 

(ii) A majority of members of the Corporation’s Board of Directors is replaced
during any 12-month period by directors whose appointment or election is not
endorsed by a majority of the members of the Corporation’s Board of Directors
prior to the date of the appointment or election.
If any one person, or more than one person acting as a group, is considered to
effectively control the Corporation or the Bank, the acquisition of additional
control of the Corporation or the Bank by the same person or persons is not
considered to cause a Change in the Effective Control of the Corporation or the
Bank.
(C) Change in Ownership of a Substantial Portion of the Corporation’s or the
Bank’s Assets. A Change in Ownership of a Substantial Portion of the
Corporation’s or the Bank’s Assets occurs on the date that any one person, or
more than one person acting as a group (as defined below), acquires (or has
acquired during the 12-month period ending on the date of the most recent
acquisition by such person or persons) assets from the Corporation or the Bank
that have a total gross fair market value equal to or more than 40 percent of
the total gross fair market value of all of the assets of the Corporation or the
Bank immediately prior to such acquisition or acquisitions. For this purpose,
gross fair market value means the value of assets of the Corporation or the
Bank, or the value of the assets being disposed of, determined without regard to
any liabilities associated with such assets.
There is no Change of Control under this Paragraph 2.1(C) if there is a transfer
of assets to an entity that is:
(i) A shareholder of the Corporation or the Bank (immediately before the asset
transfer) in exchange for or with respect to its stock;
(ii) An entity, 50 percent or more of the total value or voting power of which
is owned, directly or indirectly, by the Corporation or the Bank;
(iii) A person, or more than one person acting as a group, that owns, directly
or indirectly, 50 percent or more of the total value or voting power of all the
outstanding stock of the Corporation or the Bank; or
(iv) An entity, at least 50 percent of the total value or voting power of which
is owned, directly or indirectly, by a person described in (i), (ii), or
(iii) above.

 

 

--------------------------------------------------------------------------------

 

(D) For purposes of this Paragraph 2.1, persons will not be considered to be
acting as a group solely because they purchase or own stock or purchase assets
of the Corporation or the Bank at the same time. However, persons will be
considered to be acting as a group if they are owners of a corporation that
enters into a merger, consolidation, purchase or acquisition of assets, or
similar transaction, such shareholder is considered to be acting as a group with
other shareholders in a corporation only to the extent of the ownership in the
corporation prior to the transaction giving rise to the change and not with
respect to the ownership interest in the other corporation.
2.2 Notwithstanding anything else to the contrary set forth in this Agreement,
if (i) an agreement is executed by the Corporation or the Bank providing for any
of the transactions or events constituting a Change of Control pursuant to this
ARTICLE II or an announcement concerning a tender offer or exchange offer is
made constituting a Change of Control pursuant to this Article II, and the
agreement, tender offer or exchange offer subsequently expires or is terminated
without the transaction or event being consummated, and (ii) a “Termination
Pursuant to a Change of Control” (as defined in ARTICLE I hereof) has not
occurred prior to such expiration or termination, then for purposes of this
Agreement (including, without limitation, ARTICLE I hereof) it shall be as
though such agreement was never executed or such tender offer or exchange offer
was never announced and no Change of Control event shall be deemed to have
occurred as a result.
2.3 The expiration of the two-year period after any Change of Control event
without the occurrence of a Termination Pursuant to a Change of Control shall
not have any effect on this Agreement, which shall remain in full force and
effect until its termination by written agreement of the parties or the earlier
termination of Executive’s employment under circumstances not constituting a
Termination Pursuant to a Change of Control.
ARTICLE III
EXPENSES
3.1 Legal Action. If Executive determines in good faith that the Corporation or
any successor has failed to comply with its obligations under this Agreement, or
if the Corporation or any successor or any other person takes any action to
declare this Agreement void or unenforceable, or institutes any legal action or
arbitration proceeding with respect to this Agreement, the Corporation hereby
irrevocably authorizes Executive from time to time to retain counsel of
Executive’s choice, at the expense of the Corporation or such successor, to
represent Executive in connection with any and all actions and proceedings,
whether by or against the Corporation, any acquiror or successor, or any
director, officer, stockholder or other person affiliated with any of the
foregoing.
3.2 Excise Tax Matters. It is the intention of the Corporation that Executive
not be required to incur any expenses associated with determination of the
amount of any “excess parachute payment” under Internal Revenue Code
Section 280G or the amount of any excise tax imposed on Executive pursuant to
Internal Revenue Code Section 4999 (or any successor provisions thereto).
Therefore, the Corporation agrees to pay all expenses, including the expenses of
the Corporation’s independent certified accountant and tax counsel, related to
the determination of any excess parachute payment and excise tax.

 

 

--------------------------------------------------------------------------------

 

ARTICLE IV
MISCELLANEOUS
4.1 Termination of Employment. This Agreement shall not in any way obligate
either the Corporation or the Bank to continue the employment of Executive, nor
shall this Agreement limit the right of the Corporation or the Bank to terminate
Executive’s employment for any reason.
4.2 Binding Effect; Assignment. This Agreement shall be binding upon and inure
to the benefit of the parties hereto, their respective heirs, executors,
administrators, successors and, to the extent permitted hereunder, assigns. All
of the obligations of the Corporation and the Bank hereunder shall be legally
binding on any successor to the Corporation or the Bank, including without
limitation, any successor as a result of the consummation of a Change of
Control. The right of Executive to receive payments hereunder may not be
assigned, alienated, pledged or otherwise encumbered by Executive and any
attempt to do so shall be void and of no force or effect.
4.3 Entire Agreement; Amendment. This Agreement represents the entire
understanding between the parties hereto with respect to the subject matter
hereof and may be amended only by an instrument in writing signed by the parties
hereto. Upon the execution and delivery of this Agreement, any prior agreement
relating to the subject matter hereof will be deemed automatically terminated
and be of no further force or effect
4.4 Jurisdiction. The parties hereto consent to the exclusive jurisdiction of
the courts of the Commonwealth of Pennsylvania in any and all actions arising
hereunder.
4.5 Governing Laws. This Agreement shall be governed and construed under the
laws of the Commonwealth of Pennsylvania, without regard to the conflict of laws
principles thereof.
4.6 Rabbi Trust. The Corporation and the Bank have established a rabbi trust. In
the event of a Change of Control, the Corporation and the Bank shall, in
accordance with the terms of the trust, contribute the amounts described
therein. Thereafter, amounts payable under this Agreement shall be paid first
from the assets of such trust and the income thereon. Notwithstanding
establishment of such trust, the Corporation and the Bank shall remain obligated
to make the necessary payments under this Agreement to the extent the trust does
not, at any time, have adequate assets to pay benefits when due under this
Agreement.
4.7 Unfunded Obligations. The obligations to make payments hereunder shall be
unfunded and Executive’s rights to receive any payments hereunder shall be the
same as any other unsecured general creditor.
4.8 Individual Agreement. This Agreement constitutes an agreement solely between
the Corporation, the Bank and Executive named herein. This Agreement is intended
to constitute a non-qualified arrangement for the benefit of the Executive and
shall be construed and interpreted in a manner consistent with such intention.
4.9 Headings. All headings preceding the text of the several paragraphs hereof
are inserted solely for reference and shall not constitute a part of this
Agreement, nor affect its meaning, construction or effect.

 

 

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the Corporation and the Bank have each caused this Agreement
to be executed and attested to on its behalf by a duly authorized officer, and
Executive hereunto has set his hand and seal as of the day and year first above
written.

              ATTEST:   CODORUS VALLEY BANCORP, INC.    
 
           
/s/ Harry R. Swift
 
Secretary
  By:   /s/ Rodney L. Krebs
 
   
 
           
(SEAL)
           
 
            ATTEST:   PEOPLESBANK, a Codorus Valley Company    
 
           
/s/ Barbara J. Myers
 
Secretary
  By:   /s/ Rodney L. Krebs
 
   
 
           
(SEAL)
           
 
            WITNESS:   EXECUTIVE       /s/ Matthew A. Clemens   /s/ Jann A.
Weaver   (SEAL)