Document:

EXHIBIT 10.12 TO CODORUS VALLEY BANCORP, INC. FORM 10-K FOR FISCAL YEAR ENDED 12-31-2009

EXHIBIT 10.12

PEOPLESBANK, A CODORUS VALLEY COMPANY 

OFFICERS GROUP TERM REPLACEMENT PLAN

          Pursuant to
due authorization by its Board, the undersigned duly authorized officer of
PeoplesBank, A Codorus Valley Company, a Pennsylvania banking institution
located in York, Pennsylvania (the “Bank”), and a wholly owned subsidiary of
Codorus Valley Bancorp, Inc. (the “Corporation”), did constitute, establish and
adopt the following Split Dollar Insurance Plan (the “Plan”), effective January
1, 2009. 

          The Bank
wishes to attract and retain highly qualified executives. To further this
objective, the Bank is willing to divide the death proceeds of certain life
insurance policies which are owned by the Bank on the lives of the
participating executives with the designated beneficiary of each insured
participating executive. The Bank will pay the life insurance premiums due
under this Plan from its general assets. 

Article 1

Definitions

          Whenever
used in this Plan, the following terms shall have the meanings specified: 

	
  

 	
  

 
	
 1.1

 	
 “Bank’s Interest” means the benefit set forth in Section 3.1. 

 
	
  

 	
  

 
	
 1.2

 	
 “Beneficiary” means each designated person, or the estate of a
 deceased Participant, entitled to benefits, if any, upon the death of a
 Participant. 

 
	
  

 	
  

 
	
 1.3

 	
 “Beneficiary Designation Form” means the form established from
 time to time by the Plan Administrator that a Participant completes, signs
 and returns to the Plan Administrator to designate one or more Beneficiaries.
 

 
	
  

 	
  

 
	
 1.4

 	
 “Board” means the Board of Directors of the Bank as from time
 to time constituted. 

 
	
  

 	
  

 
	
 1.5

 	
 “Code” means the Internal Revenue Code of 1986, as amended. 

 
	
  

 	
  

 
	
 1.6

 	
 “Election Form” means the form required by the Plan
 Administrator of an eligible Employee to indicate acceptance of participation
 in this Plan. 

 
	
  

 	
  

 
	
 1.7

 	
 “Employee” means an active employee of the Bank. 

 
	
  

 	
  

 
	
 1.8

 	
 “Insured” means the individual Participant whose life is
 insured. 

 
	
  

 	
  

 
	
 1.9

 	
 “Insurer” means the insurance company issuing the Policy on
 the life of the Insured. 

 
	
  

 	
  

 
	
 1.10

 	
 “Net Death Proceeds” means the total death proceeds of the
 Participant’s Policy or Policies minus the greater of (i) cash surrender
 value or (ii) the aggregate premiums paid. 

 
	
  

 	
  

 
	
 1.11

 	
 “Participant” means an Employee (i) who is selected to
 participate in the Plan, (ii) who elects to participate in the Plan, (iii)
 who signs an Election Form and a Beneficiary Designation Form, (iv) whose
 signed Election Form and Beneficiary Designation Form are accepted by the
 Plan Administrator, (v) who commences participation in the Plan, and (vi)
 whose Participation has not terminated. 

 

98

	
  

 	
  

 
	
 1.12

 	
 “Participant’s Interest” means the benefit set forth in
 Section 3.2.1. 

 
	
  

 	
  

 
	
 1.13

 	
 “Plan Administrator” means the plan administrator described in
 Article 12. 

 
	
  

 	
  

 
	
 1.14

 	
 “Policy” or “Policies” means the individual life
 insurance policy or policies adopted by the Plan Administrator for purposes
 of insuring a Participant’s life under this Plan. 

 
	
  

 	
  

 
	
 1.15

 	
 “Separation from Service” means the Participant ceasing to be
 employed by the Bank for any reason other than death. 

 
	
  

 	
  

 
	
 1.16

 	
 “Three Times Base Annual Salary” means the current base annual
 salary of the Participant’s career at the Bank multiplied by a factor of
 three (3). 

 

Article 2 

Participation

	
  

 	
  

 
	
 2.1

 	
 Selection by Plan Administrator.
 Participation in the Plan shall be limited to those Employees of the Bank
 selected by the Plan Administrator, in its sole discretion, to participate in
 the Plan. 

 
	
  

 	
  

 
	
 2.2

 	
 Enrollment Requirements. As a condition to
 participation, each selected Employee shall complete, execute and return to
 the Plan Administrator (i) an Election Form, and (ii) a Beneficiary
 Designation Form. In addition, the Plan Administrator shall establish from
 time to time such other enrollment requirements as it determines in its sole
 discretion are necessary. 

 
	
  

 	
  

 
	
 2.3

 	
 Eligibility; Commencement of Participation.
 Provided an Employee selected to participate in the Plan has met all
 enrollment requirements set forth in this Plan and required by the Plan
 Administrator, and provided that the Policy or Policies on a such Employee
 have been issued by the Insurer(s), that Employee will become a Participant,
 be covered by the Plan and will be eligible to receive benefits at the time
 and in the manner provided hereunder, subject to the provisions of the Plan.
 A Participant’s participation is limited to only issued Policies where the
 Participant is the Insured. 

 
	
  

 	
  

 
	
 2.4

 	
 Termination of Participation. A
 Participant’s rights under this Plan shall automatically cease and his or her
 participation in this Plan shall automatically terminate if the Plan or any
 Participant’s rights under the Plan are terminated in accordance with Article
 11 or if the Participant notifies the Bank in writing that the Participant
 wishes to withdrawal participation under the Plan. In the event that the Bank
 decides to maintain the Policy after the Participant’s termination of
 participation in the Plan, the Bank shall be the direct beneficiary of the
 entire death proceeds of the Policy. 

 

Article 3 

Policy Ownership/Interests

	
  

 	
  

 
	
 3.1

 	
 Bank’s Interest. The Bank shall own the
 Policies and shall have the right to exercise all incidents of ownership and
 may terminate a Policy without the consent of the Insured. The Bank shall be
 the beneficiary of the remaining death proceeds of the Policies after the
 Participant’s Interest is determined according to Section 3.2. 

 
	
  

 	
  

 
	
 3.2

 	
 Participant’s Interest. The Participant, or
 the Participant’s assignee, shall have the right to designate the Beneficiary
 of an amount of death proceeds as specified in Section 3.2.1. The Participant
 shall also have the right to elect and change settlement options with respect
 to the 

 

99

	
  

 	
  

 	
  

 
	
  

 	
 Participant’s Interest by providing written notice to the Bank and
 the Insurer. 

 
	
  

 	
  

 
	
  

 	
 3.2.1

 	
 Death Prior to Separation from Service. If
 the Participant dies prior to Separation from Service, the Beneficiary shall
 be entitled to a benefit equal to the lesser of (i) the amount set forth on
 the Election Form or (ii) Net Death Proceeds. 

 
	
  

 	
  

 	
  

 
	
  

 	
 3.2.2

 	
 Death After Separation from Service. If the
 Participant dies after Separation from Service, the Beneficiary shall not be
 entitled to a benefit under this Plan. 

 

Article 4 

Premiums And Imputed Income

	
  

 	
  

 
	
 4.1

 	
 Premium Payment. The Bank shall pay all
 premiums due on all Policies. 

 
	
  

 	
  

 
	
 4.2

 	
 Economic Benefit. The Plan Administrator
 shall determine the economic benefit attributable to any Participant based on
 the life insurance premium factor for the Participant’s age multiplied by the
 aggregate death benefit payable to the Participant’s Beneficiary. The “life
 insurance premium factor” is the minimum amount required to be imputed under
 IRS Reg. §1.61-22(d)(3)(ii) or any subsequent applicable authority. 

 
	
  

 	
  

 
	
 4.3

 	
 Imputed Income. The Bank shall impute the
 economic benefit to the Participant on an annual basis, by adding the
 economic benefit to the Participant’s W-2, or if applicable, Form 1099. 

 
	
  

 
	
 Article 5 

 Comparable Coverage

 
	
  

 	
  

 
	
 5.1

 	
 Insurance Policies. The Bank may provide
 such benefit through the Policies purchased at the commencement of this Plan,
 or, if later, the Participant’s commencement of participation in the Plan, or
 may provide comparable insurance coverage to the Participant through whatever
 means the Bank deems appropriate. If the Participant waives or forfeits his
 or her right to the insurance benefit, the Bank shall choose to cancel the
 Policy or Policies on the Participant, or may continue such coverage and
 become the direct beneficiary of the entire death proceeds. 

 
	
  

 	
  

 
	
 5.2

 	
 Offer to Purchase. If the Bank discontinues
 a Policy on a Participant, the Bank shall give the Participant at least
 thirty (30) days to purchase such Policy. The purchase price shall be the
 fair market value of the Policy, as determined under Treasury Reg.
 §1.61-22(g)(2) or any subsequent applicable authority. Such notification
 shall be in writing. 

 
	
  

 	
  

 
	
 Article 6 

 General Limitations

 
	
  

 	
  

 
	
 6.1

 	
 Removal. Notwithstanding any provision of
 this Plan to the contrary, the Participant’s rights in the Plan shall
 terminate if the Participant is subject to a final removal or prohibition
 order issued by an appropriate federal banking agency pursuant to Section
 8(e) of the Federal Deposit Insurance Act. 

 
	
  

 	
  

 
	
 6.2

 	
 Suicide or Misstatement. No benefits shall
 be payable if the Participant commits suicide within two (2) years after the
 date of entry into the Plan, or if the insurance company denies coverage (i)
 for material misstatements of fact made by the Participant on any application
 for life insurance purchased by the Bank, or (ii) for any other reason;
 provided, however that the Bank shall evaluate the reason for the denial, and
 upon advice of legal counsel and in its sole discretion, consider judicially
 challenging any denial. 

 

100

Article 7 

Beneficiaries

	
  

 	
  

 
	
 7.1

 	
 Beneficiary. The Participant shall have the
 right, at any time, to designate a Beneficiary to receive any benefits
 payable under the Plan upon the death of the Participant. The Beneficiary
 designated under this Plan may be the same as or different from the
 beneficiary designated under any other Plan of the Bank in which the
 Participant participates. 

 
	
  

 	
  

 
	
 7.2

 	
 Beneficiary Designation; Change. The
 Participant shall designate a Beneficiary by completing and signing the
 Beneficiary Designation Form, and delivering it to the Bank or its designated
 agent. The Participant’s beneficiary designation shall be deemed
 automatically revoked if the Beneficiary predeceases the Participant or if
 the Participant names a spouse as Beneficiary and the marriage is
 subsequently dissolved. The Participant shall have the right to change a Beneficiary
 by completing, signing and otherwise complying with the terms of the
 Beneficiary Designation Form and the Bank’s rules and procedures, as in
 effect from time to time. Upon the acceptance by the Bank of a new
 Beneficiary Designation Form, all Beneficiary designations previously filed
 shall be cancelled. The Bank shall be entitled to rely on the last
 Beneficiary Designation Form filed by the Participant and accepted by the
 Bank prior to the Participant’s death. 

 
	
  

 	
  

 
	
 7.3

 	
 Acknowledgment. No designation or change in
 designation of a Beneficiary shall be effective until received, accepted and
 acknowledged in writing by the Bank or its designated agent. 

 
	
  

 	
  

 
	
 7.4

 	
 No Beneficiary Designation. If the
 Participant dies without a valid designation of beneficiary, or if all
 designated Beneficiaries predecease the Participant, then the Participant’s
 surviving spouse shall be the designated Beneficiary. If the Participant has
 no surviving spouse, the benefits shall be made payable to the Participant’s
 estate. 

 
	
  

 	
  

 
	
 7.5

 	
 Facility of Payment. If the Bank determines
 in its discretion that a benefit is to be paid to a minor, to a person
 declared incompetent, or to a person incapable of handling the disposition of
 that person’s property, the Bank may direct payment of such benefit to the
 guardian, legal representative or person having the care or custody of such
 minor, incompetent person or incapable person. The Bank may require proof of
 incompetence, minority or guardianship as it may deem appropriate prior to
 distribution of the benefit. Any payment of a benefit shall be a payment for
 the account of the Participant and the Participant’s Beneficiary, as the case
 may be, and shall be a complete discharge of any liability under the Plan for
 such payment amount. 

 

Article 8 

Assignment

          Any
Participant may assign without consideration all of such Participant’s Interest
in this Plan to any person, entity or trust. In the event a Participant shall
transfer all of such Participant’s Interest, then all of that Participant’s Interest
in this Plan shall be vested in his or her transferee, subject to such
transferee executing agreements binding them to the provisions of this Plan,
who shall be substituted as a party hereunder, and that Participant shall have
no further interest in this Plan. 

101

Article 9 

Insurer

          The Insurer
shall be bound only by the terms of its given Policy. The Insurer shall not be
bound by or deemed to have notice of the provisions of this Plan. The Insurer
shall have the right to rely on the Plan Administrator’s representations with
regard to any definitions, interpretations or Policy interests as specified
under this Plan. 

Article 10 

Claims And Review Procedure

	
  

 	
  

 	
  

 	
  

 
	
 10.1

 	
 Claims Procedure. A Participant or
 Beneficiary (“claimant”) who has not received benefits under the Plan that he
 or she believes should be paid shall make a claim for such benefits as
 follows: 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 10.1.1

 	
 Initiation – Written Claim. The claimant
 initiates a claim by submitting to the Plan Administrator a written claim for
 the benefits. If such a claim relates to the contents of a notice received by
 the claimant, the claim must be made within sixty (60) days after such notice
 was received by the claimant. All other claims must be made within one
 hundred eighty (180) days of the date on which the event that caused the
 claim to arise occurred. The claim must state with particularity the
 determination desired by the claimant. 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 10.1.2

 	
 Timing of Plan Administrator Response. The
 Plan Administrator shall respond to such claimant within ninety (90) days
 after receiving the claim. If the Plan Administrator determines that special
 circumstances require additional time for processing the claim, the Plan
 Administrator can extend the response period by an additional ninety (90)
 days by notifying the claimant in writing, prior to the end of the initial
 ninety (90) day period, that an additional period is required. The notice of
 extension must set forth the special circumstances and the date by which the
 Plan Administrator expects to render its decision. 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 10.1.3

 	
 Notice of Decision. If the Plan
 Administrator denies part or the entire claim, the Plan Administrator shall
 notify the claimant in writing of such denial. The Plan Administrator shall
 write the notification in a manner calculated to be understood by the
 claimant. The notification shall set forth: 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (a)

 	
 The specific reasons for the denial; 

 
	
  

 	
  

 	
 (b)

 	
 A reference to the specific provisions of the Plan on which the
 denial is based;

 
	
  

 	
  

 	
 (c)

 	
 A description of any additional information or material necessary for
 the claimant to perfect the claim and an explanation of why it is needed; 

 
	
  

 	
  

 	
 (d)

 	
 An explanation of the Plan’s review procedures and the time limits
 applicable to such procedures; and 

 
	
  

 	
  

 	
 (e)

 	
 A statement of the claimant’s right to bring a civil action under
 ERISA Section 502(a) following an adverse benefit determination on review.

 
	
  

 	
  

 	
  

 	
  

 
	
 10.2

 	
 Review Procedure. If the Plan Administrator
 denies part or all of the claim, the claimant shall have the opportunity for
 a full and fair review by the Plan Administrator of the denial, as follows: 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 10.2.1

 	
 Initiation – Written Request. To initiate
 the review, the claimant, within sixty (60) days after receiving the Plan
 Administrator’s notice of denial, must file with the Plan Administrator a
 written request for review. 

 

102

	
  

 	
  

 	
  

 	
  

 
	
  

 	
 10.2.2

 	
 Additional Submissions – Information Access.
 The claimant shall then have the opportunity to submit written comments,
 documents, records and other information relating to the claim. The Plan Administrator
 shall also provide the claimant, upon request and free of charge, reasonable
 access to, and copies of, all documents, records and other information
 relevant (as defined in applicable ERISA regulations) to the claimant’s claim
 for benefits. 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 10.2.3

 	
 Considerations on Review. In considering the
 review, the Plan Administrator shall take into account all materials and
 information the claimant submits relating to the claim, without regard to
 whether such information was submitted or considered in the initial benefit
 determination. 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 10.2.4

 	
 Timing of Plan Administrator’s Response. The
 Plan Administrator shall respond in writing to such claimant within sixty
 (60) days after receiving the request for review. If the Plan Administrator
 determines that special circumstances require additional time for processing
 the claim, the Plan Administrator can extend the response period by an
 additional sixty (60) days by notifying the claimant in writing, prior to the
 end of the initial sixty (60) day period, that an additional period is
 required. The notice of extension must set forth the special circumstances
 and the date by which the Plan Administrator expects to render its decision. 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 10.2.5

 	
 Notice of Decision. The Plan Administrator
 shall notify the claimant in writing of its decision on review. The Plan
 Administrator shall write the notification in a manner calculated to be
 understood by the claimant. The notification shall set forth: 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (a)

 	
 The specific reasons for the denial; 

 
	
  

 	
  

 	
 (b)

 	
 A reference to the specific provisions of the Plan on which the
 denial is based; 

 
	
  

 	
  

 	
 (c)

 	
 A statement that the claimant is entitled to receive, upon request
 and free of charge, reasonable access to, and copies of, all documents,
 records and other information relevant (as defined in applicable ERISA
 regulations) to the claimant’s claim for benefits; and 

 
	
  

 	
  

 	
 (d)

 	
 A statement of the claimant’s right to bring a civil action under
 ERISA Section 502(a).

 

Article 11

Amendments And Termination

          The Bank
may amend or terminate the Plan at any time, or may amend or terminate a
Participant’s rights under the Plan at any time prior to Separation from
Service, by providing written notice of such to the Participant. In the event
that the Bank decides to maintain the Policy after the Participant’s
termination of participation in the Plan, the Bank shall be the direct
beneficiary of the entire death proceeds of the Policy. A Participant may, in
the Participant’s sole and absolute discretion, waive his or her rights under the
Plan at any time. Any waiver permitted under this Article 11 shall be in
writing and delivered to the Board. 

Article 12 

Administration

	
  

 	
  

 
	
 12.1

 	
 Plan Administrator Duties. This Plan shall
 be administered by a Plan Administrator which shall consist of the Board, or
 such committee or persons as the Board may choose. The Plan Administrator
 shall also have the discretion and authority to (i) make, amend, interpret
 and 

 

103

	
  

 	
  

 
	
  

 	
 enforce all appropriate rules and regulations for the administration
 of this Plan and (ii) decide or resolve any and all questions including
 interpretations of this Plan, as may arise in connection with the Plan.

 
	
  

 	
  

 
	
 12.2

 	
 Agents. In the administration of this Plan,
 the Plan Administrator may employ agents and delegate to them such administrative
 duties as it sees fit, (including acting through a duly appointed
 representative), and may from time to time consult with counsel who may be
 counsel to the Bank. 

 
	
  

 	
  

 
	
 12.3

 	
 Binding Effect of Decisions. 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
 the Plan and the rules and regulations promulgated hereunder shall be final
 and conclusive and binding upon all persons having any interest in the Plan. 

 
	
  

 	
  

 
	
 12.4

 	
 Indemnity of Plan Administrator. The Bank
 shall indemnify and hold harmless the members of the Plan Administrator
 against any and all claims, losses, damages, expenses or liabilities arising
 from any action or failure to act with respect to this Plan, except in the
 case of willful misconduct by the Plan Administrator or any of its members. 

 
	
  

 	
  

 
	
 12.5

 	
 Information. To enable the Plan
 Administrator to perform its functions, the Bank shall supply full and timely
 information to the Plan Administrator on all matters relating to the
 Separation from Service or death of its Participants, and such other
 pertinent information as the Plan Administrator may reasonably require. 

 
	
  

 	
  

 
	
 Article 13
Miscellaneous

 
	
  

 	
  

 
	
 13.1

 	
 Binding Effect. This Plan shall bind each
 Participant and the Bank, their beneficiaries, survivors, executors,
 administrators and transferees and any Beneficiary. 

 
	
  

 	
  

 
	
 13.2

 	
 No Guarantee of Employment. This Plan is not
 an employment policy or contract. It does not give a Participant the right to
 remain an Employee of the Bank, nor does it interfere with the Bank’s right
 to discharge a Participant. It also does not require a Participant to remain
 an Employee nor interfere with a Participant’s right to terminate employment
 at any time. 

 
	
  

 	
  

 
	
 13.3

 	
 Applicable Law. The Plan and all rights
 hereunder shall be governed by and construed according to the laws of the
 Commonwealth of Pennsylvania, except to the extent preempted by the laws of
 the United States of America. 

 
	
  

 	
  

 
	
 13.4

 	
 Reorganization. The Bank shall not merge or
 consolidate into or with another company, or reorganize, or sell
 substantially all of its assets to another company, firm or person unless
 such succeeding or continuing company, firm or person agrees to assume and
 discharge the obligations of the Bank under this Plan. Upon the occurrence of
 such event, the term “Bank” as used in this Plan shall be deemed to refer to
 the successor or survivor company. 

 
	
  

 	
  

 
	
 13.5

 	
 Notice. Any notice or filing required or
 permitted to be given to the Plan Administrator under this Plan shall be
 sufficient if in writing and hand-delivered, or sent by registered or
 certified mail, to the address below: 

 

104

	
  

 
	
 PeoplesBank, A Codorus Valley 

 
	
 Company

 
	
 105 Leader Heights Road

 
	
 York, Pennsylvania 17403

 
	
  

 

	
  

 	
  

 
	
  

 	
 Such notice shall be deemed given as of the date of delivery or, if
 delivery is made by mail, as of the date shown on the postmark or the receipt
 for registration or certification.

 
	
  

 	
  

 
	
  

 	
 Any notice or filing required or permitted to be given to a
 Participant under this Plan shall be sufficient if in writing and
 hand-delivered, or sent by mail, to the last known address of the
 Participant.

 
	
  

 	
  

 
	
 13.6

 	
 Entire Agreement. This Plan, along with a
 Participant’s Election Form, Beneficiary Designation Form and any agreement
 in writing between the Bank and any Participant, constitute the entire
 agreement between the Bank and the Participant as to the subject matter
 hereof. No rights are granted to the Participant under this Plan other than
 those specifically set forth herein.

 

          IN WITNESS
WHEREOF, the Bank and Corporation adopt this Plan as of the date indicated
above.

	
  

 	
  

 
	
  

 	
 PeoplesBank,
 a Codorus Valley Company

 
	
  

 	
  

 
	
  

 	
 By
 ______________________________________

 
	
  

 	
  

 
	
  

 	
 Title
 _____________________________________

 
	
  

 	
  

 
	
  

 	
 Codorus
 Valley Bancorp, Inc.

 
	
  

 	
  

 
	
  

 	
 By
 ______________________________________

 
	
  

 	
  

 
	
  

 	
 Title
 _____________________________________

 
	
  

 	
  

 

105EXHIBIT 10.13 TO CODORUS VALLEY BANCORP, INC. FORM 10-K FOR FISCAL YEAR ENDED 12-31-2009

EXHIBIT 10.13

PEOPLESBANK, A CODORUS VALLEY COMPANY 

DIRECTOR GROUP TERM REPLACEMENT PLAN

          THIS
PLAN, hereby made and entered into this 1st day of December, 1998,
by and between PEOPLESBANK, A CODORUS VALLEY COMPANY, a Pennsylvania state bank
located in York, Pennsylvania (the “Company”), CODORUS VALLEY BANCORP,INC. (the
“Corporation”), and _______________________ (the “Participant”) selected to
participate in this Plan. 

INTRODUCTION

          To
encourage the individual to remain a director of the Company, the Company is
willing to divide the death proceeds of a life insurance policy on the
Director’s life. The Company will pay life insurance premiums from its general
assets. 

Article 1 

General Definitions

The following
terms shall have the meanings specified: 

          1.1
“Company” means PeoplesBank, A
Codorus Valley Company. 

          1.2
“Corporation” means Codorus
Valley Bancorp, Inc... 

          1.3
“Participant” means a member of
the Board of Directors of the Company. 

          1.4
“Insurer” means the insurance
company issuing the life insurance policy or policies on the life of the
insured. 

          1.5
“Policy” or “Policies” means the individual insurance
policy (or policies) issued by the Insurer for purposes of insuring a Participant’s
life under this Plan. 

          1.6
“Insured” means the individual
Director/Participant whose life is insured. 

          1.7
“Normal Retirement Age” means the
earlier of (1) the Participant attaining the age of 70, or (2) the
Participant’s age and Years of Service, when added together, totaling the sum
of 75 or more. 

          1.8
“Termination of Service” means
the Plan Participant ceasing to be a member of the Company’s Board of Directors
for any reason whatsoever, other than by reason of an approved leave of
absence. 

Article 2

Policy Ownership/Interests

          2.1
Company Ownership. The Company is
the sole owner of the Policies and shall have the right to exercise all
incidents of ownership. The Company shall be the direct beneficiary of an amount
of death proceeds equal to the greatest of (1) the cash surrender value of the
policies; (2) the aggregate premiums paid on the Policies by the Company less
any outstanding indebtedness to the Insurer; or (3) 

106

the amount in
excess of $100,000; provided, however, that if the Company owns more than one
policy on a Participant’s life, all such Policies shall be aggregated in
calculating the amount set forth in this item (3). 

          2.2
Participant’s Interest. The
Participant shall have the right to designate the beneficiary of any remaining
death proceeds of the Policies. The Participant shall also have the right to
elect and change settlement options that may be permitted. Provided, however,
the Participant, the Participant’s transferee or the Participant’s beneficiary
shall have no rights or interests in the Policies with respect to that portion
of the death proceeds designated in this section 2.2 upon the Participant’s
Termination of Service prior to Normal Retirement Age. 

Article 3 

Premiums

          3.1
Premium Payment. The Company
shall pay any premiums due on the Policies. 

          3.2
Imputed Income. The Company shall
impute income to the Participant in an amount equal to the current term rate
for the Participant’s age multiplied by the aggregate death benefit payable to
the Participant’s beneficiary. The “current term rate” is the minimum amount
required to be imputed under Revenue Rulings 64-328 and 66-110, or any
subsequent applicable authority. 

Article 4 

Assignment

          4.1
The Participant may assign without consideration all interests in his or her
Policy or Policies and in this Plan to any person, entity or trust. In the
event the Participant transfers all of his or her interest in the Policy or
Policies, then all of the Participant’s interest in such Policies and in the
Plan shall be vested in the his or her transferee, who shall be substituted as
a party hereunder, and the Participant shall have no further interest in the
Policies or in this Plan. 

Article 5 

Insurer

          5.1
The Insurer shall be bound only by the terms of the Policies. Any payments the
Insurer makes or actions it takes in accordance with the Policies shall fully
discharge it from all claims, suits and demands of all entities or persons. The
Insurer shall not be bound by or be deemed to have notice of the provisions of
this Plan. The Insurer shall have the right to rely on the Company’s
representations with regard to any definitions, interpretations, or Policy
interests as specified under this Plan. 

Article 6

Claims Procedure

          6.1
Claims Procedure. The Company
shall notify any person or entity that claims a right to an interest against
this Group Term Replacement Plan (the “Claimant”) in writing, within ninety
(90) days of his or her written application for benefits, of his or her
eligibility or ineligibility for benefits under this Plan. If the Company
determines that the Claimant is not eligible for benefits or full benefits, the
notice shall set forth (1) the specific reasons for such denial, (2) a specific
reference to the provisions of this Plan on which the denial is based, (3) a
description of any additional information or material necessary for the
Claimant to perfect his or her claim, and a description of why it is needed,
and (4) an explanation of this Plan’s claims review procedure and other
appropriate information as to the steps to be taken if the Claimant wishes to
have the claim reviewed. If the Company determines that there are special
circumstances requiring additional time to make a decision, the Company shall
notify the 

107

Claimant of
the special circumstances and the date by which a decision is expected to be
made, and may extend the time for up to an additional ninety-day period. 

          6.2
Review Procedure. If the Claimant
is determined by the Company not to be eligible for benefits, or if the
Claimant believes that he or she is entitled to greater or different benefits,
the Claimant shall have the opportunity to have such claim reviewed by the
Company by filing a petition for review with the Company within sixty (60) days
after receipt of the notice issued by the Company. Said petition shall state
the specific reasons which the Claimant believes entitle him or her to benefits
or to greater or different benefits. Within sixty (60) days after receipt by
the Company of the petition, the Company shall afford the Claimant (and
counsel, if any) an opportunity to present his or her position to the Company
orally or in writing, and the Claimant (or counsel) shall have the right to review
the pertinent documents. The Company shall notify the Claimant of its decision
in writing within the sixty-day period, stating specifically the basis of its
decision, written in a manner calculated to be understood by the Claimant and
the specific provisions of this Plan on which the decision is based. If,
because of the need for a hearing, the sixty-day period is not sufficient, the
decision may be deferred for up to another sixty-day period at the election of
the Company, but notice of this deferral shall be given to the Claimant. 

Article 7

Amendments and Termination

          7.1
Except as provided in paragraph 8.1 of Article 8 herein, the Company may amend
or terminate this Plan at any time. Unless otherwise agreed to by the Company
and the Participant, the Participant’s participation in this Plan will
automatically terminate upon the Participant’s Termination of Service prior to
Normal Retirement Age. 

Article 8 

Miscellaneous

          8.1
Option to Purchase. Notwithstanding
anything herein to the contrary, if the Company decides to sell, surrender or
transfer ownership of the Policies while this Plan is in effect, the Company
shall first give notice of such intention to the Participant or the
Participant’s transferee and shall allow the Participant or the Participant’s
transferee the option to purchase the Policies for a period of sixty (60) days
from written notice of such intention. The purchase price shall be an amount
equal to the greater of the cash surrender value of the Policies or the aggregate
premiums paid on the Policies by the Company less any outstanding indebtedness
to the Insurer. This provision shall not impair the right of the Company to
terminate this Plan. If the Participant or the Participant’s transferee does
not exercise the option to purchase, the Company may sell, surrender or
transfer ownership of the Policies; provided, however, that if the Participant
has attained the Normal Retirement Age, the Company must provide an insurance
policy comparable to cover the benefit provided under this Plan. The
Participant or the Participant’s transferee shall not have an option to
purchase, and the Participant or the Participant’s transferee shall forfeit all
rights under the Plan in the event the Participant is subject to a final removal
or prohibition order issued by an appropriate federal banking agency pursuant
to Section 8(e) of the Federal Deposit Insurance Act or by the Pennsylvania
Department of Banking pursuant to state law. 

          8.2
Binding Effect. This Plan in
conjunction with each Split Dollar Endorsement shall bind each Participant and
the Company, their beneficiaries, survivors, executors, administrators and
transferees, and any Policy beneficiary. 

          8.3
No Guarantee of Service. This
Plan is not a contract for director services. It does not give the Participant
the right to remain a director of the Company, nor does it interfere with the
Company’s right to remove the Participant. It also does not require the
Participant to remain a director nor interfere with the Participant’s right to
terminate his or her directorship at any time. 

108

          8.4 Applicable Law. The Plan and all rights
hereunder shall be governed by and construed according to the laws of the
Commonwealth of Pennsylvania, except to the extent preempted by the laws of the
United States of America. 

          8.5 Reorganization. The Company shall not
merge or consolidate into or with another company, or reorganize, or sell
substantially all of its assets to another company, firm or person unless such
succeeding or continuing company, firm or person agrees to assume and discharge
the obligations of the Company. 

          8.6
Notice. Any notice, consent or
demand required or permitted to be given under the provisions of this Plan by
one party to another shall be in writing, shall be signed by the party giving
or making the same, and may be given either by delivering the same to such
other party personally, or by mailing the same, by United States certified
mail, postage prepaid, to such party, addressed to his or her last known
address as shown on the records of the Company. The date of such mailing shall
be deemed the date of such mailed notice, consent or demand. 

          8.7
Entire Agreement. This Plan
constitutes the entire agreement between the Company and the Participant as to
the subject matter hereof. No rights are granted to the Participant by virtue
of this Plan other than those specifically set forth herein. 

          8.8
Administration. The Company shall
have powers which are necessary to administer this Plan, including but not
limited to: 

	
  

 	
  

 	
  

 
	
  

 	
 (a)

 	
 Interpreting
 the provisions of the Plan; 

 
	
  

 	
  

 	
  

 
	
  

 	
 (b)

 	
 Establishing
 and revising the method of accounting for the Plan; 

 
	
  

 	
  

 	
  

 
	
  

 	
 (c)

 	
 Maintaining
 a record of benefit payments; and 

 
	
  

 	
  

 	
  

 
	
  

 	
 (d)

 	
 Establishing
 rules and prescribing any forms necessary or desirable to administer the
 Plan. 

 

	
  

 	
  

 	
  

 
	
  

 	
 8.9

 	
 Named Fiduciary. For purposes of the
 Employee Retirement Income Security Act of 1974, if applicable, the Company
 shall be the named fiduciary and plan administrator under the Plan. The named
 fiduciary may delegate to others certain aspects of the management and
 operation responsibilities of the plan including the employment of advisors
 and the delegation of ministerial duties to qualified individuals 

 

IN WITNESS WHEREOF, the
Company executes this Plan the day and year first above written.

	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 COMPANY:

 	
  

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 PEOPLESBANK,
 A CODOROUS VALLEY CO.

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 By

 	
  

 	
  

 
	
  

 	
  

 	
 Title

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 CORPORATION:

 	
  

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 CODOROUS
 VALLEY BANCORP, INC.

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 By

 	
  

 	
  

 
	
  

 	
  

 	
 Title

 	
  

 	
  

 

109

SPLIT DOLLAR POLICY ENDORSEMENT

PEOPLESBANK, A CODORUS VALLEY COMPANY

DIRECTOR GROUP TERM REPLACEMENT PLAN

	
  

 	
  

 
	
 Policy No.
 _____________

 	
 Insured: 

 

Supplementing and amending the application of ________________________,
1998, to ________ ______________________________________ (“Insurer”), the
applicant requests and directs that: 

BENEFICIARIES

          1.
PEOPLESBANK, A CODORUS VALLEY COMPANY, a Pennsylvania state bank located in
York, Pennsylvania (the “Company”), shall be the direct beneficiary of death proceeds
equal to the greatest of (1) the cash surrender value of the policy; (2) the
aggregate premiums paid on the Policy by the Company less any outstanding
indebtedness to the Insurer; or (3) the amount in excess of $100,000. 

          2. The
beneficiary of any remaining death proceeds shall be designated by the Insured
or the Insured’s transferee, subject to the provisions of paragraph (5) below. 

OWNERSHIP

          3. The
Owner of the policy shall be the Company. The Owner shall have all ownership
rights in the Policy except as may be specifically granted to the Insured or
the Insured’s transferee in paragraph (4) of this endorsement. 

          4. The
Insured or the Insured’s transferee shall have the right to assign all rights
and interests in the Policy with respect to that portion of the death proceeds
designated in paragraph (2) of this endorsement, and to exercise all settlement
options with respect to such death proceeds. 

          5.
Notwithstanding the provisions of paragraph (4) above, the Insured or the
Insured’s transferee shall have no rights or interests in the Policy with
respect to that portion of the death proceeds designated in paragraph (2) of
this endorsement if the Insured ceases to be a member of the Company’s Board of
Directors for any reason whatsoever (other than by reason of a leave of absence
which is approved by the Company), unless otherwise agreed to by the Company
and the Insured. 

MODIFICATION OF ASSIGNMENT PROVISIONS OF THE
POLICY

Upon the death of the Insured, the interest of any collateral assignee
of the Owner of the Policy designated in (3) above shall be limited to the
portion of the proceeds described in paragraph (1) above. 

OWNERS AUTHORITY

The Insurer is hereby authorized to recognize the Owner’s claim to
rights hereunder without investigating the reason for any action taken by the
Owner, including its statement of the amount of premiums it has paid on the
Policy. The signature of the Owner shall be sufficient for the exercise of any
rights under this Endorsement and the receipt of the Owner for any sums
received by it shall be a full discharge and release therefore to the Insurer. 

110

Any transferee’s rights shall be subject to this Endorsement. 

Signed at ____________________, Pennsylvania, this _______ day of ______________,
1998. 

COMPANY: 

PEOPLESBANK, A CODORUS VALLEY COMPANY 

	
  

 	
  

 	
  

 	
  

 
	
 By 

 	
  

 	
  

 
	
 Its 

 	
  

 	
  

 	
  

 

CORPORATION: 

CODORUS VALLEY BANCORP, INC. 

	
  

 	
  

 	
  

 	
  

 
	
 By 

 	
  

 	
  

 
	
 Its 

 	
  

 	
  

 	
  

 

The Insured accepts and agrees to the foregoing and, subject to the
rights of the Owner as stated above, designates
________________________________________________________________ as primary
beneficiary and _________________________________________________________ as
secondary beneficiary of the portion of the proceeds described in (2) above. 

Signed at
____________________, Pennsylvania, this ________ day of _____________, 1998. 

THE INSURED: 

	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 

EXHIBIT A

PEOPLESBANK, A CODORUS VALLEY COMPANY

DIRECTOR GROUP TERM REPLACEMENT PLAN

ELECTION TO PARTICIPATE

          I,
_______________, an eligible Participant of the Peoplesbank, a Codorus Valley
Company Group Term Replacement Plan (the “Plan”) dated December 1, 1998, hereby
elect to become a Participant of the Plan in accordance with Section 2.2 of the
Plan. Additionally, I acknowledge that I have read the Plan document and agree
to be bound by its terms. 

Executed this
1st day of December, 1998. 

	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 
	
 Witness

 	
  

 	
 Participant

 

111

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