Document:

Exhibit 4.1

Exhibit 4.1

AMENDMENT TO

RIGHTS AGREEMENT

AMENDMENT, dated as of January 9, 2009 (this “Amendment”), to the Rights Agreement, dated as
of November 4, 2005, as amended (the “Rights Agreement”), between Codorus Valley Bancorp, Inc., a
Pennsylvania corporation (the “Company”), and Wells Fargo Bank, N.A., a national banking
association (the “Rights Agent”).

RECITALS

WHEREAS, the Company and the Rights Agent have heretofore executed and entered into the Rights
Agreement.

WHEREAS, the United States Department of the Treasury (the “Investor”) and the Company
contemplate entering into a Letter Agreement, which incorporates the Securities Purchase Agreement
— Standard Terms, pursuant to which the Investor will purchase from the Company shares of Fixed
Rate Cumulative Perpetual Preferred Stock, Series A, par value $2.50 per share, of the Company and
a warrant to purchase common stock, par value $2.50 per share, of the Company.

WHEREAS, pursuant to Section 26 of the Rights Agreement, the Company and the Rights Agent may
from time to time supplement or amend the Rights Agreement subject to the terms of the Rights
Agreement.

WHEREAS, the Board of Directors of the Company has determined that an amendment to the Rights
Agreement as set forth herein is necessary and desirable in connection with the foregoing and the
Company and the Rights Agent desire to evidence such amendment in writing.

WHEREAS, all acts and things necessary to make this Amendment a valid agreement, enforceable
according to its terms have been done and performed, and the execution and delivery of this
Amendment by the Company and the Rights Agent have been in all respects duly authorized by the
Company and the Rights Agent.

Accordingly, the parties agree as follows:

Section 1. Amendment of Section 1. Section 1 of the Rights Agreement is supplemented
to add the following definitions in the appropriate locations:

“Letter Agreement” shall mean the Letter Agreement, dated January 9, 2009, by and
between the Company and the Investor that incorporates the Securities Purchase
Agreement — Standard Terms.

“Investor” shall mean the United States Department of the Treasury.

 

 

 

“Transactions” shall mean the issuance of (x) 16,500 shares of Fixed Rate Cumulative
Perpetual Preferred Stock, Series A, $2,50 par value, of the Company, and (y) the
Warrant, in each case, as contemplated by the Letter Agreement, and the exercise of
the Warrant in accordance with its terms.

“Warrant” shall mean the warrant to purchase 263,859 shares of Common Stock pursuant
to the Letter Agreement.

Section 2. Amendment of the definition of “Acquiring Person”. The definition of
“Acquiring Person” in Section 1 of the Rights Agreement is amended by adding the following sentence
at the end thereof:

“Notwithstanding anything in this Rights Agreement to the contrary, neither Investor
nor any of its Affiliates or Associates shall be deemed to be an Acquiring Person solely as
a result of (i) the execution of the Letter Agreement or the Warrant or (ii) the
consummation of the Transactions or any other transaction contemplated by the Letter
Agreement or the Warrant.”

Section 3. Amendment of the definition of “Stock Acquisition Date”. The definition of
“Stock Acquisition Date” in Section 1 of the Rights Agreement is amended by adding the following
sentence at the end thereof:

“Notwithstanding anything in this Rights Agreement to the contrary, a Stock Acquisition
Date shall not be deemed to have occurred solely as the result of (i) the execution of the
Letter Agreement or the Warrant or (ii) the consummation of the Transactions or any other
transaction contemplated by the Letter Agreement or the Warrant.”

Section 4. Amendment of definition of “Distribution Date”. The definition of
“Distribution Date” in Section 1 of the Rights Agreement is amended by adding the following
sentence at the end thereof:

“Notwithstanding anything in this Rights Agreement to the contrary, a Distribution Date
shall not be deemed to have occurred solely as the result of (i) the execution of the Letter
Agreement or the Warrant or (ii) the consummation of the Transactions or any other
transaction contemplated by the Letter Agreement or the Warrant.”

Section 5. Amendment of Section 29. Section 29 of the Rights Agreement is amended by
adding the following sentence at the end thereof:

“Nothing in this Agreement shall be construed to give any holder of Rights or any other
Person any legal or equitable rights, remedies or claims under this Agreement by virtue of
(i) the execution of the Letter Agreement or the Warrant or (ii) the consummation of the
Transactions or any other transaction contemplated by the Letter Agreement or the Warrant.”

 

 

 

Section 6. Effectiveness. This Amendment shall be deemed effective as of the date
first written above, as if executed on such date. Except as amended hereby, the Rights Agreement
shall remain in full force and effect and shall be otherwise unaffected hereby.

Section 7. Miscellaneous. This Amendment shall be deemed to be a contract made under
the laws of the Commonwealth of Pennsylvania and for all purposes shall be governed by and
construed in accordance with the laws of such Commonwealth applicable to contracts to be made and
performed entirely within such Commonwealth. This Amendment may be executed in any number of
counterparts, each of such counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute but one and the same instrument. If any provision,
covenant or restriction of this Amendment is held by a court of competent jurisdiction or other
authority to be invalid, illegal or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Amendment shall remain in full force and effect and shall in no
way be effected, impaired or invalidated.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and
attested, all as of the date and year first above written.

	 	 	 	 	 	 	 	 	 
	Attest:	 	CODORUS VALLEY BANCORP, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	 	 	By:	 	 	 	 
	 

	 	 

	 	 	 	 

	 	 
	 

	 	Name: Harry R. Swift
	 	 	 	Name: Larry J. Miller	 	 
	 

	 	Title:   Corporate Secretary
	 	 	 	Title:   President and Chief Executive Officer	 	 
	 
	 	 	 	 	 	 	 	 
	Attest:	 	WELLS FARGO BANK, N.A.	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	 	 	By:	 	 	 	 
	 

	 	 

	 	 	 	 

	 	 
	 

	 	Name:
	 	 	 	Name:	 	 
	 

	 	Title:
	 	 	 	Title:Exhibit 10.1

Exhibit 10.1

EMPLOYMENT AGREEMENT

THIS AGREEMENT (“Agreement”) made as of the 27th day of December, 2005, between
CODORUS VALLEY BANCORP, INC., a Pennsylvania business corporation (the “Corporation”), PEOPLESBANK,
A Codorus Valley Company, a Pennsylvania banking institution (the “Bank”), and LARRY J. MILLER, an
adult individual (the “Executive”).

WITNESSETH

WHEREAS, the Corporation, the Bank and the Executive entered into an Agreement dated as of
January 1, 1993 (the “1993 Agreement”), regarding, among other things, the employment of the
Executive by the Corporation and the Bank; and

WHEREAS, the Corporation, the Bank and the Executive entered into an amendment to the 1993
Agreement dated as of October 1, 1997 (the “1997 Amendment”), which 1997 Amendment modified certain
terms of the 1993 Agreement; and

WHEREAS, the Corporation, the Bank and the Executive desire to enter into a new Agreement
regarding, among other things, the employment of the Executive by the Corporation and by the Bank
and, concurrently therewith, to terminate the 1993 Agreement, as amended, all as hereinafter set
forth.

NOW, THEREFORE, the parties hereto, intending to be legally bound hereby, agree as follows:

1. EMPLOYMENT. The Corporation and the Bank each hereby employ the Executive, and the
Executive hereby accepts employment with the Corporation and the Bank, on the terms and conditions
set forth in this Agreement.

2. TERM OF EMPLOYMENT. The Executive’s employment under this Agreement shall be for a
term of three (3) years beginning on January 1, 2006, and ending on December 31, 2008, subject,
however, to prior termination of this Agreement as set forth below. Furthermore, subject to the
subsequent provisions, upon the expiration of the first twelve (12) full calendar months after the
date first above written, the term hereof shall be extended for another twelve (12) full calendar
months, and upon expiration of each subsequent twelve (12) full calendar months thereafter the term
of this Agreement shall be likewise extended for an additional twelve (12) full calendar months.
Such extension of this Agreement’s terms shall be automatic unless the Corporation and Bank provide
the Executive written notice of their intention not to extend this Agreement, which written notice
shall be given by the Corporation and Bank not less than ninety (90) days before the expiration of
the current twelve (12) month term.

 

 

 

3. POSITION AND DUTIES. The Executive shall serve as the President and Chief
Executive Officer of the Corporation and Bank and a member of the Board of Directors of the
Corporation and Bank, reporting only to the Board of Directors of the Corporation and Bank and
shall have supervision and control over, and responsibility for, the general management and
operation of the Corporation and Bank, and shall have such other powers and duties as may from time
to time be prescribed by the Board of Directors of the Corporation and Bank, provided that such
powers and duties are consistent with the Executive’s position as the Chief Executive Officer in
charge of the general management of the Corporation and Bank.

4. ENGAGEMENT IN OTHER EMPLOYMENT. The Executive shall devote all his working time,
ability and attention to the business of the Corporation and Bank during the term of this
Agreement. The Executive shall notify the Board of Directors of the Corporation and Bank in
writing and receive written approval from the Corporation and Bank before the Executive engages in
any other business or commercial duties or pursuits, including, but not limited to, directorships
of other companies. Under no circumstances may the Executive engage in any business or commercial
activities, duties or pursuits which compete with the business or commercial activities of the
Corporation or Bank, nor may the Executive serve as a director or officer or in any other capacity
in a company which competes with the Corporation or Bank. Executive shall not be precluded,
however, upon written notification to the Boards of Directors, from engaging in voluntary or
philanthropic endeavors, from engaging in activities designed to maintain and improve his
professional skills, or from engaging in activities incident or necessary to personal investments,
so long as they are, in the Boards’ reasonable opinion, not in conflict with or detrimental to the
Executive’s rendition of services on behalf of the Bank and Corporation.

5. COMPENSATION.

(a) ANNUAL DIRECT SALARY: As compensation for services rendered to the
Corporation and Bank under this Agreement, the Executive shall be entitled to receive from
the Bank an annual direct salary of Two Hundred Twenty Thousand ($220,000) Dollars per year,
(the “Annual Direct Salary”) payable in substantially equal bi-monthly installments (or such
other intervals of the Bank’s payroll policy) prorated for any partial employment period.
The Annual Direct Salary shall be reviewed annually, no later than December 30 of the then
calendar year and shall be subject to such annual change (but not reduced below $220,000
without the Executive’s written consent) as may be set by the Board of Directors of the
Corporation and Bank taking into account the position and duties of the Executive and the
performance of the Corporation and Bank under the Executive’s leadership.

(b) ANNUAL BUSINESS PLAN. The Executive shall prepare a business plan
establishing the financial and business goals of the Corporation and Bank prior to the start
of each fiscal year. The business plan prepared by the Executive shall be reviewed promptly
by the Board of Directors of the Corporation and Bank, which may in its sole discretion
alter or modify such plan prior to its adoption.

(c) BONUS. The Board of Directors of the Corporation and Bank in its sole
discretion may provide for payment of a periodic bonus to the Executive in such an
amount or nature as it may deem appropriate to provide incentive to the Executive and
to reward the Executive for his performance.

 

 

 

(d) DIRECTOR FEES. The Executive shall not be entitled to any director’s fee
or other compensation as paid to other members of the Board of Directors of the Bank and/or
Corporation or subsidiaries of either. The Executive also agrees to serve on any committee
of the Board of Directors of the Bank and/or Corporation or subsidiary of either without any
additional compensation or fees.

6. FRINGE BENEFITS, VACATION, EXPENSES, AND PERQUISITES.

(a) EMPLOYEE BENEFIT PLANS. The Executive shall be entitled to participate in
or receive benefits under all Bank employment benefit plans including, but not limited to,
any pension plan, profit-sharing plan, savings plan, life insurance plan or disability
insurance plan as made available by the Bank to its employees, subject to and on a basis
consistent with terms, conditions and overall administration of such plans and arrangements.

(b) VACATION, HOLIDAYS, SICK DAYS AND PERSONAL DAYS. The Executive shall be
entitled to the number of paid vacation days in each calendar year determined by the Bank
from time to time for its senior executive officers, but not less than six (6) weeks (two
weeks of which shall be in sequence unless excused from such requirement by the Board of
Directors) in any calendar year (prorated in any calendar year during which the Executive is
employed hereunder for less than the entire such year in accordance with the number of days
in such calendar year during which he is so employed). The Executive shall also be entitled
to all paid holidays, sick days and personal days given by the Bank to its employees.

(c) BUSINESS EXPENSES. During the term of his employment hereunder, the
Executive shall be entitled to receive prompt reimbursement for all reasonable expenses
incurred by him (in accordance with the policies and procedures established by the Board of
Directors of the Bank for expense reimbursement) in performing services hereunder, provided
that the Executive properly accounts therefore in accordance with Bank policy.

(d) AUTOMOBILE. The Executive shall be entitled to the use of a Bank purchased
or leased automobile of the following make and model, or such comparable model as may be
agreed upon by the Board of Directors and the Executive: Volvo XC 90. The Executive shall
also be entitled to reimbursement for all operating expenses of the automobile, including,
but not limited to, oil, maintenance, repairs and insurance.

(e) MEMBERSHIP DUES. While serving as President and Chief Executive Officer of
the Corporation and Bank, Executive shall be reimbursed for membership dues to the Outdoor
Country Club of York and the Lafayette Club of York along with reasonable club expenses
incurred during the conduct of Bank or Corporation business.

 

 

 

(f) OTHER BENEFITS. Commencing on the date of Executive’s retirement as an
employee of the Corporation, the Bank or any respective Successors thereto, and
until the death of the Executive and his spouse, the Corporation and the Bank agree to
pay all of the Executive’s and the Executive’s spouse’s medical, dental and vision insurance
premium expenses for insurance coverage under the group plan in effect from time to time for
executives of the Corporation and the Bank; provided, however, that if coverage for the
Executive and his spouse under any such plans becomes unavailable for any reason, the
Corporation and the Bank shall reimburse the Executive and his spouse for their costs in
obtaining reasonably comparable coverage to the unavailable group coverage, provided that
such reimbursement shall not exceed the amount that would have been paid by the Corporation
and the Bank if the group coverage were available, adjusted to take into account the change
from the pre-tax to after tax status of such benefit as well as the availability of any tax
deduction to the Executive as an employee or independent contractor, as appropriate. The
Executive and, after the Executive’s death, the Executive’s spouse, shall be responsible for
arranging for other coverage for themselves if participation in the Corporation’s or the
Bank’s group plans is not available at any time.

No termination of this Agreement, other than a termination of Executive for “Cause,” as
defined herein, shall terminate the Corporation’s and the Bank’s obligation to provide the
benefits provided in this subparagraph 6(f).

7. LIABILITY INSURANCE. The Corporation shall be required to obtain insurance
coverage for the Executive under an insurance policy covering officers and directors of the Bank
against lawsuits, arbitrations or other legal or regulatory proceedings

8. UNAUTHORIZED DISCLOSURE. During the term of his employment hereunder, or at any
later time, the Executive shall not, without the written consent of the Board of Directors of the
Corporation or Bank or a person authorized thereby, knowingly disclose to any person, other than an
employee of the Corporation or Bank or a person whom disclosure is reasonably necessary or
appropriate in connection with the performance by the Executive of his duties as an executive of
the Corporation or Bank, any material confidential information obtained by him while in the employ
of the Corporation or Bank with respect to any of the Corporation or Bank’s services, products,
improvements, formulas, designs or styles, processes, customers, methods of business or any
business practices the disclosure of which could be or will be materially damaging to the
Corporation or Bank provided, however, that confidential information shall not include any
information known generally to the public (other than as a result of unauthorized disclosure by the
Executive or any person with the assistance, consent or direction of the Executive) or any
information of a type not otherwise considered confidential by persons engaged in the same business
or a business similar to that conducted by the Corporation or Bank or any information that must be
disclosed as required by law.

 

 

 

9. RESTRICTIVE COVENANT. The Executive covenants and agrees that the Executive shall
not, directly or indirectly, within the marketing area of the Bank (defined as an area within fifty
(50) miles of the registered office of the Bank), enter into or engage generally in direct or
indirect competition with the Corporation or Bank or any subsidiary of the Corporation, either as
an individual on his own or as a partner or joint venturer, or as a director, officer, shareholder,
employee, agent, independent contractor, lessor or creditor of or for any person, for a period of
one year after the date of termination of his employment if the Executive’s
employment is terminated for any reason whatsoever, provided, however, that the restrictions
in this paragraph 9 shall not apply in the event the termination of Executive’s employment occurs
following a Change in Control, as defined herein. The foregoing restriction shall not be construed
to prohibit the ownership by Executive of not more than five percent (5%) of any class of
securities of any corporation which is in competition with the Bank or Corporation, provided that
such ownership represents a passive investment and that neither Executive nor any group of persons
including Executive in any way, either directly or indirectly, manages or exercises control of any
such corporation, guarantees any of its financial obligations, otherwise takes any part in its
business, other than exercising his rights as a shareholder, or seek to do any of the foregoing.
The existence of any claim or cause of action of the Executive against the Corporation or Bank,
whether predicated on this Agreement or otherwise, shall not constitute a defense to the
enforcement by the Corporation or Bank of this covenant. The Executive agrees that any breach of
the restrictions set forth in paragraphs 8 and 9 will result in irreparable injury to the
Corporation or Bank for which it shall have no adequate remedy at law and the Corporation or Bank
shall be entitled to injunctive relief in order to enforce the provisions hereof. In the event
that this paragraph shall be determined by any court of competent jurisdiction to be unenforceable
in part by reason of it being too great a period of time or covering too great a geographical area,
it shall be in full force and effect as to the period of time or geographical area determined to be
reasonable by the court.

10. TERMINATION.

(a) The Executive’s employment hereunder shall terminate upon his death.

(b) If the Executive becomes disabled because of sickness, physical or mental
disability, or any other reason, the Corporation or Bank shall have the option to terminate
this Agreement by giving written notice of termination to the Executive. Executive shall be
deemed to have become “disabled” only in the event and at such time as he qualifies (after
expiration of any applicable waiting period) to receive benefits for total disability under
the employee disability insurance benefit plan referred to in paragraph 6(a) above.

(c) The Corporation or Bank may terminate the Executive’s employment hereunder for
cause. For the purposes of this Agreement, the Corporation or Bank shall have “Cause” to
terminate the Executive’s employment hereunder upon (i) the willful failure by the Executive
to substantially perform his duties hereunder after the 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 willful violation
by the Executive of the provisions of paragraphs 4 or 8 hereof, after written notice from
the Bank and a failure to cure such violation within thirty (30) days of said notice, or if
said violation cannot be cured within thirty (30) days, within a reasonable time thereafter
if the Executive is diligently attempting to cure the violation, or (iv) the dishonesty or
gross negligence of the Executive in the performance of his duties, or (v) the breach of
Executive’s fiduciary duty involving personal profit, or (vi) 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 (vii) moral turpitude or other
conduct on the part of Executive which brings public discredit to the Corporation or
Bank, or (viii) the Executive’s failure to be elected and serve as a member of the Board of
Directors of the Corporation.

 

 

 

(d) The Executive may terminate his employment hereunder if (1) his health should
become impaired to an extent that it makes continued performance of his duties hereunder
hazardous to his physical or mental health or his life or (2) for “Good Reason”.

(e) The Executive may resign for “Good Reason” (as herein defined) at any time during
the term of employment, as hereinafter set forth. As used in this Agreement, “Good Reason”
means any of the following:

(i) Any reduction in title or a reduction in the Executive’s responsibilities
or authority which are inconsistent with, or the assignment to the Executive of
duties inconsistent with, the Executive’s status as President and Chief Executive
Officer of the Corporation and the Bank;

(ii) Any reassignment of the Executive which requires the Executive to move his
principal residence more than twenty-five (25) miles from the Corporation’s
principal executive office on the date of this Agreement;

(iii) Any removal of the Executive from office except for any termination of
the Executive’s employment for Cause;

(iv) Any reduction in the Executive’s Annual Direct Salary as in effect on the
date hereof or as the same may be increased from time to time;

(v) Any failure by the Corporation to provide the Executive with benefits at
least as favorable as those enjoyed by the Executive under any of the pension, life
insurance, medical, health and accident, disability or other employee plans of the
Corporation or of the Bank in which the Executive participated on the date hereof,
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;

(vi) Any delivery by the Corporation or the Bank to the Executive of the
written notice of nonextension provided for in paragraph 2 hereof; and

(vii) Any material breach of this Agreement of any nature whatsoever on the
part of the Corporation or of the Bank.

11. PAYMENTS UPON TERMINATION.

(a) If the Executive’s employment shall be terminated because of death, disability or
for Cause, the Bank shall pay the Executive or his fiduciary his full Annual Direct Salary
through the date of termination at the rate in effect at the time of termination, plus any
accrued benefits at the time of termination, and the Corporation and Bank shall have no
further obligation to the Executive under this Agreement.

 

 

 

(b) If the Executive’s employment is terminated by the Corporation or Bank (other than
pursuant to paragraphs 10(a) or 10(b) or 10(c) hereof), then the Bank shall pay the
Executive his full Annual Direct Salary (as defined in this Agreement) from the date of
termination through the last day of the term of this Agreement or an amount equal to his
current Annual Direct Salary, whichever is greater. Such amount will be paid in a lump sum
within ten (10) days following the date of termination of employment. In addition,
Executive shall be entitled to a continuation of employee benefits, in the manner described
in paragraph 11(d)(ii) hereof, for a period of one year following Executive’s termination of
employment under this paragraph 11(b).

(c) If the Executive terminates his employment for “Good Reason”, other than following
a Change in Control, as defined herein, then the Bank shall pay the Executive an amount
equal to his Annual Direct Salary. Such amount shall be paid in a lump sum within ten (10)
days following the date of termination of employment. In addition, Executive shall be
entitled to a continuation of employee benefits, in the manner described in paragraph
11(d)(ii) hereof, for a period of one year following Executive’s termination of employment
under this paragraph 11(c).

(d) If the Executive terminates his employment for “Good Reason” during the period
commencing with the date of any “Change in Control”, as defined herein, and ending on the
second anniversary of the date of the Change in Control, then the Executive shall be
entitled to receive the following payments and benefits:

(i) Basic Payments. The Executive will be paid an amount equal to
three times the sum of (A) his then current Annual Direct Salary, and (B) the
highest bonus paid to him with respect to one of the three calendar years
immediately preceding the year of termination. Such amount will be paid to the
Executive in a lump sum within ten (10) days following the date of termination of
employment.

(ii) Continuation of Employee Benefits. For a period of three (3)
years from the date of termination of employment, 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.

 

 

 

(e) In the event that the amounts and benefits payable under this paragraph, when added
to other amounts and benefits which may become payable to the Executive by the Corporation
and/or Bank, are such that he becomes subject to the excise tax provisions of Section 4999
of the Internal Revenue Code of 1986, as amended (the
“Code”), the Corporation and the Bank shall pay him such additional amount or amounts
as will result in his retention (after the payment of all federal, state and local excise,
employment, and income taxes on such payments and the value of such benefits) of a net
amount equal to the net amount he would have retained had the initially calculated payments
and benefits been subject only to income and employment taxation. For purposes of the
preceding sentence, the Executive shall be deemed to be subject to the highest marginal
federal, state and local tax rates. All calculations required to be made under this
subparagraph shall be made by the Corporation’s independent certified public accountants,
subject to the right of Executive’s representative to review the same. All such amounts
required to be paid shall be paid at the time any withholding may be required under
applicable law, and any additional amounts to which the Executive may be entitled shall be
paid or reimbursed no later than fifteen (15) days following confirmation of such amount by
the Corporation’s accountants. In the event any amounts paid hereunder are subsequently
determined to be in error because estimates were required or otherwise, the parties agree to
reimburse each other to correct such error, as appropriate, and to pay interest thereon at
the applicable federal rate (as determined under Code Section 1274A for the period of time
such erroneous amount remained outstanding and unreimbursed). The parties recognize that
the actual implementation of the provisions of this subparagraph are complex and agree to
deal with each other in good faith to resolve any questions or disagreements arising
hereunder.

(f) 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 Code and the
regulations promulgated thereunder, payments to such Key Employee under paragraphs 11(b),
11(c) or 11(d), shall not begin earlier than the first day of the seventh month after the
date of termination.

For 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 409A
of the Code and the regulations promulgated thereunder) shall be December 31.

12. 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 the 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 the 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 of
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 in Control under this Paragraph 12(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 12, 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
that corporation prior to the transaction giving rise to the change and not with respect to
the ownership interest in the other corporation.

13. PRIMARY OBLIGOR. The obligation to make payments and provide benefits under this
Agreement shall primarily be those of the Executive’s Employer as of the date of his termination of
employment. In the event the Employer is not the Corporation or the Bank, the Corporation will
cause such Employer to make required payments and provide required benefits. To the extent the
Corporation fails or is unable to do so, it shall make such payments and provide such benefits.

14. LEGAL EXPENSES. The Corporation will pay (or cause to be paid) to the Executive
all reasonable legal fees and expenses when incurred by the Executive in seeking to obtain or
enforce any right or benefit provided by this Agreement, provided he acts in good faith with
respect to issues raised.

15. RABBI TRUST. The Corporation is establishing contemporaneously herewith a rabbi
trust (the “Trust”), to which it is contributing an initial corpus of $100. In the event of a
change of control as defined herein, the Corporation shall, in accordance with the terms of the
Trust, contribute thereto the amount described in Section 1(e) thereof. Thereafter, amounts
payable hereunder shall be paid first from the assets of such Trust and the income thereon. To the
extent that the assets of the Trust and the income thereon are insufficient, the Corporation or any
successor of the Corporation shall pay Executive the amount due hereunder.

16. NOTICES. Any notice required or permitted to be given under this Agreement will,
to be effective hereunder, be given to the Corporation, in the case of notices given by the
Executive, and will, to be effective hereunder, be given by the Corporation, in the case of notices
given to the Executive. Any such notice will be deemed properly given if in writing and if mailed
by registered or certified mail, postage prepaid with return receipt requested, to the last known
residence address of the Executive, in the case of notices to the Executive, and to the principal
office of the Corporation, in the case of notice to the Corporation.

17. WAIVER. No provision of this Agreement may be modified, waived, or discharged
unless such waiver, modification, or discharge is agreed to in writing and signed by the Executive
and an executive officer of the Corporation designated for such purpose by the
Board of Directors of the Corporation. No waiver by any party hereto at any time of any
breach by another party hereto of, or compliance with, any condition or provision of this Agreement
to be performed by such other party will be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.

 

 

 

18. ASSIGNMENT. This Agreement is not assignable by any party hereto, except by the
Corporation and the Bank to any successor in interest to the respective business of the Corporation
and the Bank.

19. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the parties
relating to the subject matter hereof and, in accordance with the provisions of paragraph 28
supersedes any prior agreement of the parties.

20. SUCCESSORS; BINDING EFFECT.

(a) Successors. The Corporation will require any successor (whether direct or
indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of
the business and/or assets of the Corporation and/or the Bank to expressly assume and agree
to perform this Agreement (or cause it to be performed) in the same manner and to the same
extent that the Corporation, the Bank or any affiliated company of either would be required
to perform it if no such succession had taken place. Failure by the Corporation to obtain
such assumption and agreement prior to the effectiveness of any such succession shall
constitute a material breach of this Agreement. As used in this Agreement, the
“Corporation” and the “Bank” means the Corporation and the Bank as hereinbefore defined and
any successor to the business and/or assets of the Corporation and/or the Bank as aforesaid
which assumes and agrees to perform this Agreement by operation of law, or otherwise.

(b) Binding Effect. This Agreement shall inure to the benefit of and be
enforceable by the Executive’s personal or legal representatives, executors, administrators,
heirs, distributes, devisees, and legatees. If the Executive should die while any amount
is payable to the Executive under this Agreement if the Executive had continued to live, all
such amounts, unless otherwise provided herein, will be paid in accordance with the terms of
this Agreement to the Executive’s devisee, legatee, or other designee, or, if there is no
such person, to the Executive’s estate.

21. CONTINUATION OF CERTAIN PROVISIONS. Any termination of Executive’s employment
under this Agreement or of this Agreement will not affect the benefit, confidential information and
non-competition provisions of paragraphs 6, 8 and 9, which will, if relevant, survive any such
termination and remain in full force and effect in accordance with their respective terms.

22. NO MITIGATION OR OFFSET. The Executive shall not be required to mitigate the
amount of any payment or benefit provided for in this Agreement by seeking employment or otherwise;
nor shall any amounts or benefits payable or provided hereunder be reduced in the event he does
secure employment.

 

 

 

23. VALIDITY. The invalidity or unenforceability of any provisions of this Agreement
shall not affect the validity or enforceability of any other provision of this Agreement. which
will remain in full force and effect.

24. APPLICABLE LAW. Except to the extent preempted by federal law, this Agreement
shall be governed by and construed in accordance with the domestic internal law of the Commonwealth
of Pennsylvania.

25. NUMBER. Words used herein in the singular shall be construed as being used in the
plural, as the context requires, and vice versa.

26. HEADINGS. The headings of the paragraphs and subparagraphs of this Agreement are
for convenience only and shall not control or affect the meaning or construction or limit the scope
or intent of any of the provisions of this Agreement.

27. REFERENCE TO ENTITIES. All references to the Corporation shall be deemed to
include references to the Bank, or any affiliate of either, as appropriate in the relevant context,
and vice versa; provided, however, that this paragraph shall not be construed in
the manner that results in a determination that a transaction constitutes a Change in Control
unless such transaction is literally described in the definition of such term.

28. EFFECTIVE DATE; TERMINATION OF PRIOR AGREEMENTS. This Agreement shall become
effective immediately upon the execution and delivery of the same 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.

29. WITHHOLDING FOR TAXES. All amounts and benefits paid or provided hereunder shall
be subject to withholding for taxes as required by law.

IN WITNESS WHEREOF, the parties, each intending to be legally bound, have executed the
Agreement as of this date, month and year first above written.

	 	 	 	 	 	 	 
	ATTEST:	 	CODORUS VALLEY BANCORP, INC.	 	 
	 
	 	 	 	 	 	 
	/s/ Harry R. Swift
 

	 	By:
	 	/s/ Rodney L. Krebs
 

	 	 
	 
	 	 	 	 	 	 
	ATTEST:	 	PEOPLESBANK,	 	 
	 	 	A CODORUS VALLEY COMPANY	 	 
	 
	 	 	 	 	 	 
	/s/ Barbara J. Myers
 

Secretary

	 	By:
	 	/s/ Rodney L. Krebs
 

	 	 
	 
	 	 	 	 	 	 
	WITNESS:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	/s/ Matthew A. Clemens	 	/s/ Larry J. Miller	 	 
	 	 	 	 	 
	 	 	Larry J. Miller

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