Exhibit 10.3






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)