Document:

exv10w1

 

Exhibit
10.1

HEALTH BENEFITS DIRECT CORPORATION

AMENDMENT NO. 1 TO OPTION

Daniel Brauser

     This AMENDMENT NO. 1 TO OPTION, dated as of February 15, 2007 (the “Amendment Date”), is
delivered by Health Benefits Direct Corporation, a Delaware corporation (the “Corporation”), to
Daniel Brauser (the “Holder”).

RECITALS

     A. On November 10, 2005, the Corporation granted the Holder an option (“Option”) to purchase
at the exercise price of $2.50 per share 500,000 fully paid and non-assessable shares (“Shares”) of
Common Stock (par value $0.001 per share) of the Corporation.

     B. As of the Amendment Date, the Option has vested by its terms with respect to 145,832
Shares, and remains unvested with respect to the remaining 354,168 Shares (the “Unvested Shares”).

     C. The Corporation and the Holder desire to amend the vesting schedule for the Option with
respect to the Unvested Shares.

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

     1. Amendment to Vesting Schedule. Effective as of the Amendment Date, in order to
amend and restate the vesting schedule for the Unvested Shares, the third paragraph of the Option
shall be amended and restated as set forth herein.

          (a) Prior to the effectiveness of this Amendment, the third paragraph of the Option reads as
follows:

     “This Option may not be exercised until the first anniversary from this Option’s date
of grant; twenty-five percent (25%) of the Shares subject to this Option may be purchased on
or after the first anniversary from this Option’s date of grant; 10,416 Shares may be
purchased on or after the last day of each month thereafter; and, 10,440 Shares may be
purchased on or after November 30, 2009, but prior to the Option’s expiration.”

          (b) Upon the effectiveness of this Amendment, the third paragraph of the Option shall read as
follows:

     “This Option may not be exercised until the first anniversary from this Option’s date
of grant; twenty-five percent (25%) of the Shares subject to this Option shall become
exercisable on the first anniversary of this Option’s date of grant; an additional 10,416
Shares subject to this Option shall become exercisable on December 31, 2006; an additional
10,416 Shares shall become exercisable on January 31, 2007; an additional

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19,966 Shares shall become exercisable on February 15, 2007; and an additional 30,382
Shares subject to this Option shall become exercisable on the last day of each month from
February 28, 2007 through December 31, 2007; provided, however, that: (i) in the event that
the Holder is removed as an officer or employee by the Corporation at any time on or before
December 31, 2007, then one hundred percent (100%) of the Shares subject to this Option that
are unexercisable as of the removal date shall become exercisable upon such removal; and
(ii) in the event the Holder resigns as an employee of the Corporation at any time after
March 31, 2007 and before December 31, 2007, then fifty percent (50%) of the Shares subject
to this Option that are unexercisable as of the resignation date shall become exercisable
such resignation. The exercise of this Option shall be subject to the terms of this Option
Certificate and the Plan (as defined below).”

     2. Exercise Period. Upon any termination of the Holder’s employment with the
Corporation, the vested portion of Holder’s Shares as of the date of such termination shall remain
exercisable by the Holder through and including the one-year anniversary of the date of such
termination.

     3. Effect of Amendment. This Amendment shall have no other effect on the terms and
conditions of the Option except as set forth in Sections 1 and 2 of this Amendment.

     IN WITNESS WHEREOF, the Corporation has caused its duly authorized officers to execute and
attest this Amendment, and the Holder has placed his signature hereon, effective as of the
Amendment Date.

	 	 	 	 	 
	 	HEALTH BENEFITS DIRECT CORPORATION

 	 
	 	By:  	/s/ ALVIN H. CLEMENS
 	 
	 	 	Name:  	Alvin H. Clemens 	 
	 	 	Title:  	Chief Executive Officer 	 
	 

I hereby accept the amendment to the Option described in this Amendment, and I agree to be bound by
the terms of this Amendment.

	 	 	 	 	 
	 	HOLDER

 	 
	 	/s/ DANIEL BRAUSER
 	 
	 	Daniel Brauser 	 
	 	 	 
	 

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                                  EXHIBIT 10.1

                          2007 LONG-TERM INCENTIVE PLAN
                                       OF
                          CODORUS VALLEY BANCORP. INC.

                                   ARTICLE I.
                               GENERAL PROVISIONS

1.1  PURPOSES

     The purposes of the 2007 Long-Term Incentive Plan (the "Plan") are to
advance the long-term success of Codorus Valley Bancorp, Inc. (the "Company" or
"Codorus"), and to increase shareholder value by providing the incentive of
long-term stock-based rewards to officers, directors and key employees. The Plan
is designed to: (1) encourage stock ownership by Participants to further align
their interest with the shareholders of the Company, (2) ensure that
compensation practices are competitive in the industry and (3) to assist in the
attraction and retention of key employees vital to the Company's long-term
success.

1.2  DEFINITIONS

     For the purpose of the Plan, the following terms shall have the meanings
     indicated:

          (a) "Board" means the Board of Directors of the Company.

          (b) "Cash Incentive Awards" means a right to receive a cash payment
pursuant to any award made pursuant to Article VII hereof.

          (c) "Change in Control" means A change in control of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A of
regulation 14A and any successor rule or regulation promulgated under the
Securities Exchange Act of 1934 (the "Exchange Act"); provided that, without
limitation, such change in control shall be deemed to have occurred if (1) any
"person" (as that term is used in Sections 13(d) and 14(d) of the Exchange Act),
other than the Company or any "person" who on the effective date hereof is a
director or officer of the Company is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act) directly or indirectly, of
securities of the Company representing twenty-five percent (25%) or more of the
combined voting power of the Company's then outstanding securities, or (2)
during any period of two consecutive years during the term of this Plan,
individuals who on the effective date hereof constituted the Board cease for any
reason to constitute at least a majority unless the election of each director
who was not a director at the beginning of such period has been approved in
advance by directors representing at least two-thirds of the directors then in
office who were directors on the effective date hereof, or (3) the sale or
transfer of all or substantially all of the Company's assets.

          (d) "Code" means the Internal Revenue Code of 1986, as amended,
including any successor law thereto.

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          (e) "Committee" means the Compensation Committee of the Board or the
full Board, as the case may be.

          (f) "Common Stock" means the Common Stock of the Company, par value
$2.50 per share.

          (g) "Company," means Codorus and solely for purposes of determining
(i) eligibility for participation in the Plan, (ii) employment, and (iii) the
establishment of performance goals, shall include any corporation, partnership,
or other organization of which Codorus owns or controls, directly or indirectly,
not less than 50 percent of the total combined voting power of all classes of
stock or other equity interests. For purposes of this Plan, the terms "Codorus"
and "Company" shall include any successor to Codorus.

          (h) "Disability" means total and permanent disability within the
meaning of Section 22(e)(3) of the Code.

          (i) "Dividend Equivalent" means an amount equal to the cash dividend
paid on one share of Common Stock for each Performance Restricted Share granted
during the Performance Period. All Dividend Equivalents will be reinvested in
Performance Restricted Shares at a purchase price equal to the Fair Market Value
on the dividend date.

          (j) "Employment" means with respect to any Non-Employee Director (as
defined herein), service on the Board.

          (k) "Fair Market Value" means as of any date: (i) the average of the
closing bid and asked prices on such date of the Common Stock as quoted by
NASDAQ; or (ii), as the case may be, the last reported sales price of the Common
Stock on such date as reported by the NASDAQ National Market or the principal
national securities exchange on which such stock is listed and traded, or in
each such case where there is no trading on such date, on the first previous
date on which there is such trading.

          (l) "Incentive Stock Option" means a 'Stock Option which meets the
definition under Section 422 of the Code.

          (m) "Key Employee" means an employee who, in the judgment of the
Committee is considered especially important to the future of the Company.

          (n) "Non-Employee Director" means a member of the Board who is not an
employee of the Company.

          (o) "Nonstatutory Stock Option" means a Stock Option which does not
meet the definition of an Incentive Stock Option.

          (p) "Participant" means any officer, director or key employee who has
met the eligibility requirements set forth in Section 1.6 hereof and to whom a
grant has been made and is outstanding under the Plan.

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<PAGE>

          (q) "Performance Measures" shall mean the Performance Measures
described in Section 4.4 of the Plan.

          (r) "Performance Period" means, in relation to Performance Restricted
Shares or Cash Incentive Awards, any period for which performance goals have
been established.

          (s) "Performance Restricted Share" means a right granted to a
Participant pursuant to Article IV.

          (t) "Restricted Stock Award" means an award of Common Stock granted to
a Participant pursuant to Article V which is subject to a Restriction Period.

          (u) "Restriction Period" means in relation to Restricted Stock Awards,
the period of time (if any) during which (i) such shares are subject to
forfeiture pursuant to the Plan and (ii) such shares may not be sold, assigned,
transferred, pledged or otherwise disposed of by the Participant.

          (v) "Retirement" means termination from employment with the Company
after the Participant has attained age 55 and has completed a minimum of five
years of service with the Company or termination of employment under
circumstances which the Committee deems equivalent to retirement.

          (w) "Stock Appreciation Right" means a right granted to a Participant
pursuant to Article III to surrender to the Company all or any portion of the
related Stock Option and to receive in cash or in shares of Common Stock an
amount equal to the excess of the Fair Market Value over the option price on the
date of such exercise.

          (x) "Stock Award" means an award of Common Stock granted to a
Participant pursuant to Article V which is not subject to a Restriction Period.

          (y) "Stock Option" means a right granted to a Participant pursuant to
Article II, to purchase, before a specified date and at a specified price, a
specified number of shares of Common Stock.

1.3  ADMINISTRATION

     The Plan shall be administered by the Compensation Committee of the Board
which shall consist of not fewer than five directors of the Company; provided,
however, that the Board shall administer the Plan as it relates to the terms,
conditions and grant of awards to Non-Employee Directors. For purposes of the
Plan, the term Committee shall refer to the Compensation Committee of the Board
or the full Board, as the case may be. A majority of the Committee shall
constitute a quorum, and the acts of a majority of the members present at any
meeting at which a quorum is present, or acts approved in writing by a majority
of the Committee, shall be deemed the acts of the Committee. Subject to the
provisions of the Plan and to directions by the Board, the Committee is
authorized to interpret the Plan, to adopt administrative rules, regulations,
and guidelines for the Plan, and to impose such terms, conditions, and
restrictions on grants as it deems appropriate. The Committee, in its
discretion, may allow certain optionees holding unexercised Incentive Stock
Options to convert such options to Nonstatutory Stock

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<PAGE>

Options. The Committee may, with respect to Participants who are not subject to
Section 16(b) of the Exchange Act or "covered employees" within the meaning of
Section 162(m) of the Code ("Section 162(m)"), delegate such of its powers and
authority under the Plan as it deems appropriate to designated officers or
employees of the Company.

1.4  TYPES OF GRANTS UNDER THE PLAN

     Grants under the Plan may be in the form of any one or more of the
     following:

          (a)  Nonstatutory Stock Options;

          (b)  Incentive Stock Options;

          (c)  Stock Appreciation Rights;

          (d)  Performance Restricted Shares;

          (e)  Restricted Stock Awards;

          (f)  Stock Awards;

          (g)  Cash Incentive Awards.

1.5  SHARES SUBJECT TO THE PLAN AND INDIVIDUAL AWARD LIMITATION

          (a) A maximum of 175,000 shares of Common Stock may be issued under
the Plan. All such shares may be granted in the form of Incentive Stock Options,
Nonstatutory Stock Options, Stock Appreciation Rights, Performance Restricted
Shares, Restricted Stock Awards and Stock Awards. The total number of shares
authorized is subject to adjustment as provided in Section 8.1 hereof. Shares of
Common Stock issued under the Plan may be treasury shares or authorized but
unissued shares. No fractional shares shall be issued under the Plan.

          (b) If any Stock Option granted under the Plan expires or terminates,
the underlying shares of Common Stock may again be made available for the
purposes of the Plan. Any shares of Common Stock that have been granted as
Restricted Stock Awards, or that have been reserved for distribution in payment
for Performance Restricted Shares but are later forfeited or for any other
reason are not payable under the Plan, may again be made available for the
purposes of the Plan. Furthermore, shares of Common Stock that are: (i) tendered
or withheld in payment of the exercise price of any Stock Option or in
satisfaction of withholding tax obligations arising from any Award; and (ii)
shares of Common Stock repurchased by the Company that have been designated for
allocation to the Plan, shall be available for issuance under the Plan.

1.6  ELIGIBILITY AND PARTICIPATION

     Participation in the Plan shall be limited to officers, who may also be
members of the Board, other key employees of the Company who are so designated
by the Committee in its discretion and Non-Employee Directors.

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<PAGE>

                                   ARTICLE II.
                                  STOCK OPTIONS

2.1  GRANT OF STOCK OPTIONS

     The Committee may from time to time, subject to the provisions of the Plan,
grant Stock Options to Participants. The Committee shall determine the number of
shares of Common Stock to be covered by each Stock Option and shall have the
authority to grant Incentive Stock Options, Nonstatutory Stock Options or a
combination thereof; provided, however, that Incentive Stock Options may be
granted only to Participants who are employees of the Company and may not be
granted to Non-Employee Directors. Furthermore, the Committee may grant a Stock
Appreciation Right in connection with a Stock Option, as provided in Article
III.

2.2  INCENTIVE STOCK OPTION EXERCISE LIMITATIONS

     The aggregate Fair Market Value (determined at the time an Incentive Stock
Option is granted) of the shares of Common Stock with respect to which an
Incentive Stock Option is exercisable for the first time by a Participant during
any calendar year (under all plans of the Company) shall not exceed $100,000 or
such other limit as may be established from time to time under the Code.

2.3  OPTION DOCUMENTATION

     Each Stock Option shall be evidenced by a written Stock Option agreement
between the Company and the Participant to whom such option is granted,
specifying the number of shares of Common Stock that may be acquired by its
exercise and containing such terms and conditions consistent with the Plan as
the Committee shall determine.

2.4  EXERCISE PRICE

     The price at which each share covered by a Stock Option may be acquired
shall be determined by the Committee at the time the option is granted and shall
not be less than the Fair Market Value of the underlying shares of Common Stock
on the day the Stock Option is granted. If an Incentive Stock Option is granted
to an employee who, at the time such Option is granted, owns shares of the
Company possessing more than 10 percent of the total combined voting power of
all classes of shares of the Company or its subsidiaries ("10% Shareholder"),
the exercise price of such Option shall not be less than 110% of the Fair Market
Value of the underlying shares of Common Stock on the day such Option is
granted. The exercise price will be subject to adjustment in accordance with the
provisions of Section 8.1 of the Plan.

2.5  EXERCISE OF STOCK OPTIONS

          (a) Exercisability. Stock Options shall become exercisable at such
times and upon the satisfaction of such conditions and in such installments as
the Committee may provide at the time of grant.

          (b) Option Period. For each Stock Option granted the Committee shall
specify the period during which the Stock Option may be exercised, provided that
(i) no Stock

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Option shall be exercisable after the expiration of ten years from the date the
option was granted and (ii) in the case of a 10% Shareholder, no Stock Option
shall be exercisable after the expiration of five years from the date the option
was granted.

          (c) Exercise in the Event of Termination of Employment.

               (i) Death: Unless otherwise provided by the Committee at the time
of grant, in the event of the death of the Participant, the option must be
exercised by the Participant's estate or beneficiaries within one year following
the death of the Participant and prior to its expiration. Each option may be
exercised as to all or any portion thereof regardless of whether or not fully
exercisable under the terms of the grant.

               (ii) Disability: Unless otherwise provided by the Committee at
the time of grant, in the event of the Disability of the Participant, the option
must be exercised within one year following the Participant's termination of
employment and prior to its expiration. Each option may be exercised as to all
or any portion thereof regardless of whether or not fully exercisable under the
terms of the grant.

               (iii) Retirement: Unless otherwise provided by the Committee at
the time of grant, in the event of the Retirement of the Participant the option
must be exercised within one year following the Participant's termination of
employment and prior to its expiration. An unexercised Incentive Stock Option
will cease to be treated as such and will become a Nonstatutory Stock Option
three months following the date of Retirement. Each option may be exercised as
to all or any portion thereof regardless of whether or not fully exercisable
under the terms of the grant.

               (iv) Other Terminations: Unless otherwise provided by the
Committee at the time of grant, in the event a Participant ceases to be an
employee of the Company for any reason other than death, Disability, or
Retirement, options which are exercisable on the date of termination must be
exercised within three months after termination and prior to the expiration date
of any such option. All options which are not exercisable on the date of
termination shall be canceled.

               (v) Extension of Exercise Period: Notwithstanding all other
provisions under Section 2.5(c) in the event a Participant's employment is
terminated, the Committee may, in its sole discretion, extend the
post-termination period during which the option may be exercised, provided
however that such period may not extend beyond the original option period.

          (d) Exercise In the Event of Change in Control. In the event of any
Change in Control, all Stock Options shall immediately become exercisable
without regard to the exercise period set forth in 2.5(a).

2.6  METHOD OF EXERCISE

     The option may be exercised in whole or in part from time to time by
written request received by the Secretary of the Company. The option price of
each share acquired pursuant to an option shall be paid in full at the time of
each exercise of the option either (i) in cash, (ii) by

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<PAGE>

delivering to the Company previously-owned shares of Common Stock or (iii) in
the discretion of the Committee, by delivering to the Secretary of the Company a
notice of exercise with an irrevocable direction to a broker-dealer registered
under the Securities Exchange Act of 1934, as amended, to sell a sufficient
portion of the shares and deliver the sale proceeds directly to the Company to
pay the exercise price; (iv) in the discretion of the Committee, through an
election to have shares of Common Stock otherwise issuable to the Participant
withheld to pay the exercise price of such option; or (v) in the discretion of
the Committee, through any combination of the payment procedures set forth in
(i) through (iv) above. However, shares of Common Stock previously acquired by
the Participant under the Plan or any other incentive plan of the Company shall
not be utilized for purposes of payment upon the exercise of an option unless
those shares have been owned by the Participant for a six-month period or such
longer period as the Committee may determine.

                                  ARTICLE III.
                            STOCK APPRECIATION RIGHTS

3.1  GRANT OF STOCK APPRECIATION RIGHTS

     The Committee may, in its discretion, grant Stock Appreciation Rights in
connection with all or any part of an option granted under the Plan. Any Stock
Appreciation Right granted in connection with an option shall be governed by the
terms of the Stock Option agreement and the Plan.

3.2  EXERCISE OF STOCK APPRECIATION RIGHTS

     Stock Appreciation Rights shall become exercisable under the Stock Option
terms set forth in Section 2.5 but shall be exercisable only when the Fair
Market Value of the shares subject thereto exceeds the option price of the
related option.

3.3  METHOD OF EXERCISE

          (a) Stock Appreciation Rights shall permit the Participant, upon
exercise of such rights, to surrender the related option, or any portion
thereof, and to receive, without payment to the Company (except for applicable
withholding taxes), an amount equal to the excess of the Fair Market Value over
the option price. Such amount shall be paid in shares of Common Stock valued at
Fair Market Value on the date of exercise or in cash, or any combination of
shares and cash, as determined by the Committee in its discretion.

          (b) Upon the exercise of a Stock Appreciation Right and surrender of
the related option, or portion thereof, such option, to the extent surrendered,
shall be terminated, and the shares covered by the option so surrendered shall
no longer be available for purposes of the Plan.

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<PAGE>

                                   ARTICLE IV.
                          PERFORMANCE RESTRICTED SHARES

4.1  GRANT OF PERFORMANCE RESTRICTED SHARES

     The Committee may from time to time grant Performance Restricted Shares to
Participants under which payment may be made in shares of Common Stock if the
performance of the Company meets certain goals established by the Committee.
Such Performance Restricted Shares shall be subject to the provisions of the
Plan terms and conditions, and, if earned, a vesting period as the Committee
shall determine.

4.2  PERFORMANCE RESTRICTED SHARE AGREEMENT

     Each grant of Performance Restricted Shares shall be evidenced by a written
agreement between the Company and Participant to whom such shares are granted.
The agreement shall specify the number of Performance Restricted Shares granted,
the terms and conditions of the grant, the duration of the Performance Period,
the performance goals to be achieved, and the vesting period applicable to
shares of Common Stock earned.

4.3  COMMON STOCK EQUIVALENT

     Each Performance Restricted Share shall be credited to an account to be
maintained for each such Participant during the Performance Period and shall be
deemed to be the equivalent of one share of Common Stock. At the conclusion of
the Performance Period, Performance Restricted Shares earned, if any, shall be
converted to shares of Common Stock subject to a vesting period.

4.4  PERFORMANCE GOALS

     Performance Restricted Share awards shall be conditioned upon the Company's
attainment of a specified goal with respect to one or more of the following
performance measures: (i) total shareholder return; (ii) return on average
shareholders' equity; (iii) return on capital; (iv) earnings per share;
(v)return on average assets; (vi) earnings; (vii) cash flow; (viii) operating
income;; and (ix) Fair Market Value of Common Stock. The Committee shall
determine a minimum performance level below which no Performance Restricted
Shares shall be payable and a performance schedule under which the number of
shares earned may be less than, equal to, or greater than the number of
Performance Restricted Shares granted based upon the Company's performance. The
Committee may adjust the performance goals and measurements to reflect
significant unforeseen events; provided, however, that the Committee may not
make any such adjustment with respect to any award of Performance Restricted
Shares to an individual who is then a "covered employee" as such term is defined
in Regulation 1.162-27 (c) (2) promulgated under Section 162 (m), if such
adjustment would cause compensation pursuant to such Performance Restricted
Share award to cease to be performance-based compensation under Section 162(m).

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<PAGE>

4.5  PERFORMANCE PERIOD

     The Committee shall establish a Performance Period applicable to each grant
of Performance Restricted Shares. Each such Performance Period shall commence on
January 1 of the calendar year in which grants are made. There shall be no
limitation on the number of Performance Periods established by the Committee,
and more than one Performance Period may encompass the same calendar year. The
Committee may shorten any Performance Period if it determines that unusual or
unforeseen events so warrant.

4.6  DIVIDEND EQUIVALENTS DURING PERFORMANCE PERIOD

     During the Performance Period, a Participant shall be entitled to receive
Dividend Equivalents which shall be deemed to have been reinvested in additional
Performance Restricted Shares at the same time as such underlying Common Stock
cash dividend is paid. Performance Restricted Shares granted through such
reinvestment shall be credited to the Participant's account and shall be payable
to the Participant in the same manner and at the same time as the Performance
Restricted Shares with respect to which such Dividend Equivalents were issued.

4.7  CONVERSION OF PERFORMANCE RESTRICTED SHARES

          (a) At the conclusion of the Performance Period, the Committee shall
determine the number of Performance Restricted Shares, if any, which have been
earned on the basis of Company performance in relation to the established
performance goals.

          (b) Performance Restricted Shares earned shall be converted to shares
of Common Stock and shall be represented by a stock certificate registered in
the name of the Participant. Certificates evidencing such shares shall be held
in custody by the Company until the restrictions thereon are no longer in
effect.

4.8  VESTING PERIOD

     At the time a Performance Restricted Share grant is made, the Committee
shall establish a vesting period applicable to such shares earned, if any, which
shall begin at the end of the Performance Period. After the lapse or waiver of
the restrictions imposed, the Company shall deliver in the Participant's name
one or more stock certificates, evidencing the shares of Common Stock earned
through the end of the Performance Period. The Committee may accelerate or waive
the performance goals attached to a particular grant, in whole or in part, based
on service and such other factors as the Committee may determine.

4.9  OTHER TERMS AND CONDITIONS

     Performance Restricted Shares shall be subject to the following terms and
conditions:

          (a) Except as otherwise provided in the Plan or in the Performance
Restricted Share agreement, the Participant shall not have the rights of a
shareholder of the Company, including the right to vote the shares.

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<PAGE>

          (b) Cash dividends paid with respect to Performance Restricted Shares
shall be reinvested to purchase additional shares of Common Stock that shall be
subject to the same terms, conditions, and restrictions that apply to the
Performance Restricted Shares with respect to which such dividends were issued.

4.10 TERMINATION OF EMPLOYMENT PROVISIONS DURING A PERFORMANCE PERIOD

          (a) In the event a Participant terminates employment during a
Performance Period by reason of death, Disability, or Retirement, and the
Participant had completed a minimum of one year of employment during the
Performance Period, the Participant shall be entitled to that number of shares
earned (if any) determined by multiplying the full number of shares earned (if
any) by a fraction, the numerator of which is the number of full months of
employment the Participant had completed in such Performance Period and the
denominator of which are the total number of full months in such Performance
Period. All applicable restrictions shall lapse with respect to such shares and
such shares of Common Stock shall be issued to the Participant or the
Participant's designated beneficiary following the Performance Period. In the
event the Participant had not completed one year of employment during the
Performance Period, the Participant shall forfeit all rights to earn such
Performance Restricted Shares.

          (b) If a Participant terminates employment during a Performance Period
for any reason other than death, Disability, or Retirement, the Participant
shall forfeit all rights to earn such Performance Restricted Shares.

          (c) Notwithstanding Sections 4.10(a) and 4.10(b), in the event a
Participant's employment is terminated during a Performance Period under special
circumstances, the Committee may, in its sole discretion, continue a
Participant's rights to earn any or all Performance Restricted Shares and waive
in whole or in part any or all remaining restrictions.

4.11 TERMINATION OF EMPLOYMENT PROVISIONS FOLLOWING A PERFORMANCE PERIOD

          (a) In the event a Participant terminates employment following a
Performance Period by reason of death, Disability, or Retirement, all shares of
Common Stock (formerly Performance Restricted Shares) shall immediately vest and
shares of Common Stock shall be issued to the Participant or the Participant's
designated beneficiary.

          (b) If a Participant terminates employment following a Performance
Period for any reason other than death, Disability, or Retirement, the
Participant shall forfeit all shares of Common Stock (formerly Performance
Restricted Shares) which have not yet vested. Shares of Common Stock which have
vested shall be issued to the Participant.

          (c) Notwithstanding Sections 4.11(a) and 4.11{b), in the event a
Participant's employment is terminated following a Performance Period under
special circumstances, the Committee may, in its sole discretion, accelerate the
remaining vesting period (if any) associated with that grant.

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<PAGE>

4.12 CHANGE IN CONTROL PROVISIONS

     In the event of any Change in Control, (i) all Performance Restricted
Shares granted, including those granted pursuant to Dividend Equivalents, shall
be deemed to have been earned to the maximum extent permitted pursuant to
Section 4.4 for any Performance Period not yet completed as of the effective
date of such Change in Control and (ii) all shares of Common Stock (which have
been converted from Performance Restricted Shares earned) not otherwise vested
shall immediately vest as of the date of such Change in Control.

                                   ARTICLE V.
                    RESTRICTED STOCK AWARDS AND STOCK AWARDS

5.1  AWARD OF RESTRICTED STOCK AND STOCK AWARDS

     The Committee may grant Restricted Stock Awards and unrestricted Stock
Awards to officers and key employees of the Company subject to such terms and
conditions as the Committee shall determine, provided that each Restricted Stock
Award shall be subject to a Restriction Period. Restricted Stock Awards and
Stock Awards shall be used for the purposes of recruitment, recognition, and
retention of key employees vital to the Company's success. The Committee may, in
its sole discretion, require a Participant to deliver consideration in form of
services or cash as a condition to the grant of a Restricted Stock Award or
Stock Award.

5.2  STOCK AWARD AND RESTRICTED STOCK AWARD AGREEMENTS

     Each Restricted Stock Award and Stock Award shall be evidenced by a written
agreement between the Company and the Participant to whom such award is granted.
The agreement shall specify the number of shares awarded, the terms and
conditions of the award and, in the case of a Restricted Stock Award, the
Restriction Period, and the consequences of forfeiture.

5.3  AWARDS AND CERTIFICATES

     Shares of Common Stock awarded pursuant to a Restricted Stock Award or a
Stock Award shall be registered in the name of the Participant. Certificates
evidencing Restricted Stock Awards shall be held in custody by the Company until
the restrictions thereon are no longer in effect. After the lapse or waiver of
the restrictions imposed upon the Restricted Stock Award, the Company shall
deliver in the Participant's name one or more stock certificates, free of
restrictions, evidencing the shares of Common Stock subject to the Restricted
Stock Award to which the restrictions have lapsed or been waived.

5.4  RESTRICTION PERIOD

     At the time a Restricted Stock Award is made, the Committee shall establish
a Restriction Period applicable to such award. The Committee may provide for the
lapse of such restrictions in installments and may accelerate or waive such
restrictions, in whole or in part, based on service and such other factors as
the Committee may determine.

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5.5  OTHER TERMS AND CONDITIONS OF RESTRICTED STOCK AWARDS

     Shares of Common Stock subject to Restricted Stock Awards shall be subject
to the following terms and conditions:

          (a) Except as otherwise provided in the Plan or in the Restricted
Stock Award agreement, the Participant shall have all the rights of a
shareholder of the Company, including the right to vote the shares.

          (b) Cash dividends paid with respect to Common Stock subject to a
Restricted Stock Award shall be reinvested to purchase additional shares of
Common Stock that shall be subject to the same terms, conditions, and
restrictions that apply to the Restricted Stock Award with respect to which such
dividends were issued.

5.6  TERMINATION OF EMPLOYMENT

          (a) In the event a Participant terminates employment during the
Restriction Period by reason of death, Disability or Retirement, and the
Participant had completed a minimum of one year of employment during the
Restriction Period, restrictions shall lapse on that number of shares (if any)
determined by multiplying the full number of shares subject to restriction by a
fraction, the numerator of which is the number of full months of employment the
Participant had completed in such Restriction Period and the denominator of
which is the total number of full months in such Restriction Period.

          (b) If a Participant terminates employment for any reason other than
death, Disability, or Retirement, the Participant shall forfeit all shares
subject to restriction.

          (c) Notwithstanding Sections 5.6(a) and 5.6(b), in the event a
Participant's employment is terminated under special circumstances, the
Committee may, in its sole discretion, waive in whole or in part any or all
remaining restrictions.

5.7  CHANGE IN CONTROL PROVISIONS

     In the event of any Change in Control, all restrictions applicable to any
outstanding Restricted Stock Award shall lapse as of the date of such Change in
Control.

                                   ARTICLE VI.
                     TAX WITHHOLDING AND DEFERRAL OF PAYMENT

6.1  TAX WITHHOLDING

          (a) The Company may withhold from any payment of cash or Stock to a
Participant or other person pursuant to the Plan an amount sufficient to satisfy
any required withholding taxes, including the Participant's social security and
Medicare taxes and federal, state and local income tax with respect to income
arising from the payment of the Award. The Company shall have the right to
require the payment of any such taxes before delivering payment or issuing Stock
pursuant to the Award.

                                       12

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          (b) At the discretion of the Committee, under the terms of any grant
of Stock Options, Stock Appreciation Rights, Performance Restricted Shares and
Restricted Stock Award, a Participant may have the right to elect to satisfy, in
whole or in part, any required tax withholding obligations in connection with
the issuance of shares of Common Stock earned under the Plan by requesting that
the Company either:

               (i) withhold shares of common Stock otherwise issuable to the
Participant, or

               (ii) by accepting delivery of shares of Common Stock previously
owned by the Participant.

     In either case, the Fair Market Value of such shares of Common Stock will
generally be determined on the date the Participant elects to satisfy such
withholding tax obligations in such manner.

          (c) Notwithstanding any other provision hereof to the contrary, the
Committee, in its sole discretion may at any time suspend, terminate, or
disallow any or all entitlements to make the tax withholding election described
in subparagraph (b)to the extent previously granted or extended to any
Participant.

6.2  DEFERRAL OF PAYMENT

     At the discretion of the Committee, a Participant may be offered the right
to defer the receipt of all or any portion of Performance Restricted Shares or
Restricted Stock Awards otherwise distributable to such Participant. Such right
shall be exercised by execution of a written agreement by the Participant (i)
with respect to Restricted Stock Awards, prior to the expiration of the
applicable Restriction Period and (ii) with respect to Performance Restricted
Shares, prior to the expiration of the applicable vesting period. Upon any such
deferral, the number of shares of Common Stock subject to the deferral shall be
converted to stock units and a stock unit account shall be maintained by the
Company on behalf of the Participant. Such stock units shall represent only a
contractual right and shall not represent any interest in or title to Common
Stock. Such units shall be entitled to earn dividend equivalents. All other
terms and conditions of deferred payments shall be as contained in said written
agreement.

                                  ARTICLE VII.
                              CASH INCENTIVE AWARDS

7.1  GRANTING OF AWARDS

     The Committee, in its discretion, may grant Cash Incentive Awards to
participants. Each Cash Incentive Award shall be conditioned upon the Company's
achievement of one or more Performance Goals with respect to the Performance
Measure(s) beginning with the applicable Performance Period and set forth in the
Award agreement evidencing such Cash Incentive Award. An award may be made in
conjunction with the grant hereunder of Stock Options, Stock Appreciation
Rights, Performance Restricted Shares, Restricted Stock Awards or Stock Awards.
In making a Cash Incentive Award, the Committee shall establish a performance
level below which the Cash Incentive Award shall not be payable. The Committee
may adjust the

                                       13

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performance goals and measurements to reflect significant unforeseen events;
provided, however, that the Committee may not make any such adjustment with
respect to any award to an individual who is then a "covered employee" as such
term is defined under Section 162(m), if such adjustment would cause
compensation pursuant to such award to cease to be performance-based
compensation under Section 162(m).

7.2  OTHER AWARD TERMS

     The Committee may, in its sole discretion, establish certain additional
performance based conditions that must be satisfied by the Company, a business
unit or the Participant as a condition precedent to the payment of all or a
portion of any Cash Incentive Awards. Such conditions precedent may include,
among other things, the receipt by a Participant of a specified annual
performance rating and the achievement of specified performance goals by the
Company, business unit or Participant.

7.3  MAXIMUM AMOUNT AVAILABLE FOR AWARDS

     The aggregate maximum amount of cash incentives paid under all Company
plans to a Participant in any calendar year shall not exceed 35% of his or her
annual base compensation.

                                  ARTICLE VIII.
                                OTHER PROVISIONS

8.1  ADJUSTMENT IN NUMBER OF SHARES AND OPTION PRICES

     Grants of Stock Options, Stock Appreciation Rights, Performance Restricted
Shares, and Restricted Stock Awards and Stock Awards shall be subject to
adjustment by the Committee as to the number and price of shares of Common Stock
or other considerations subject to such grants in the event of changes in the
outstanding shares by reason of stock dividends, stock splits,
recapitalizations, reorganizations, mergers, consolidations, combinations,
exchanges, or other relevant changes in capitalization occurring after the date
of grant. In the event of any such change in the outstanding shares, the
aggregate number of shares available under the Plan may be appropriately
adjusted by the Committee.

8.2  NO RIGHT TO EMPLOYMENT

     Nothing contained in the Plan, or in any grant pursuant to the Plan, shall
confer upon any Participant any right with respect to continuance of employment
by the Company or its subsidiaries, nor interfere in any way with the right of
the Company or its subsidiaries to terminate the employment or change the
compensation of any employee at any time.

8.3  NONTRANSFERABILITY

     A Participant's rights under the Plan, including the right to any shares or
amounts payable may not be assigned, pledged, or otherwise transferred except,
in the event of a Participant's death, to the Participant's designated
beneficiary or, in the absence of such a designation, by will or by the laws of
descent and distribution; provided, however, that the Committee may, in its
discretion, at the time of grant of a Nonstatutory Stock Option or by amendment
of an option

                                       14

<PAGE>

agreement for an Incentive Stock Option or a Nonstatutory Stock Option, provide
that Stock Options granted to or held by a Participant may be transferred, in
whole or in part, to one or more transferees and exercised by any such
transferee, provided further that (i) any such transfer must be without
consideration, (ii) each transferee must be a member of such Participant's
"immediate family" or a trust, family limited partnership or other estate
planning vehicle established for the exclusive benefit of one or more members of
the Participant's immediate family; and (iii) such transfer is specifically
approved by the Committee following the receipt of a written request for
approval of the transfer; and provided further that any Incentive Stock Option
which is amended to permit transfers during the lifetime of the Participant
shall, upon the effectiveness of such amendment, be treated thereafter as a
Nonstatutory Stock Option. In the event a Stock Option is transferred as
contemplated in this Section, such transfer shall become effective when approved
by the Committee and such Stock Option may not be subsequently transferred by
the transferee other than by will or the laws of descent and distribution. Any
transferred Stock Option shall continue to be governed by and subject to the
terms and conditions of this Plan and the relevant option agreement, and the
transferee shall be entitled to the same rights as the Participant as if no
transfer had taken place. As used in this Section, "immediate family" shall
mean, with respect to any person, any spouse, child, stepchild or grandchild,
and shall include relationships arising from legal adoption.

8.4  COMPLIANCE WITH GOVERNMENT REGULATIONS

          (a) The Company shall not be required to issue or deliver shares or
make payment upon any right granted under the Plan prior to complying with the
requirements of any governmental authority in connection with the authorization,
issuance, or sale of such shares.

          (b) The Plan shall be construed and its provisions enforced and
administered in accordance with the laws of the Commonwealth of Pennsylvania
applicable to contracts entered into and performed entirely in such State.

8.5  RIGHTS AS A SHAREHOLDER

     The recipient of any grant under the Plan shall have no rights as a
shareholder with respect thereto unless and until certificates for shares of
Common Stock are issued in the name of such recipient.

8.6  UNFUNDED PLAN

     Unless otherwise determined by the Committee, the Plan shall be unfunded
and shall not create (or be construed to create) a trust or separate funds. With
respect to any payment not yet made to a Participant, nothing contained herein
shall give any Participant any rights that are greater than those of a general
creditor of the Company.

8.7  OTHER COMPENSATION PLANS

     Nothing contained in this Plan shall prevent the Company from adopting
other or additional compensation arrangements, subject to shareholder approval
if such approval is required.

                                       15

<PAGE>

8.8  TERMINATION OF EMPLOYMENT -- CERTAIN FORFEITURES

     Notwithstanding any other provision of the Plan (other than provisions
regarding Change in Control, including without limitation Sections 2.5(d), 4.12
and 5.7 which shall apply in all events) and except for Performance Restricted
Shares or Restricted Stock Awards which would otherwise be free of restrictions
and the receipt of which has been deferred pursuant to Section 6.2, a
Participant shall have no right to exercise any Stock Option or Stock
Appreciation Right or receive payment of any Performance Restricted Share or
Restricted Stock Award if the Participant is discharged for willful, deliberate,
or gross misconduct as determined by the Committee in its sole discretion.
Furthermore, notwithstanding any other provision of the Plan to the contrary, in
the event that a Participant receives or is entitled to cash or the delivery or
vesting of Stock pursuant to an Award during the 12 month period prior to the
Participant's termination of employment with the Company, then the Committee, in
its sole discretion, may require the Participant to return or forfeit the cash
and/or Stock received with respect to an Award (or its economic value as of (i)
the date of the exercise of Stock Options or Stock Appreciation Rights; (ii) the
date immediately following the end of the Restricted Period for Restricted Stock
Awards or the end of the vesting period for Performance Restricted Shares, (iii)
the date of grant or payment with respect to Stock Awards or Cash Awards, as the
case may be) in the event that the Participant: (y) is discharged for willful,
deliberate or gross misconduct, as determined by the Committee in its sole
discretion, or (z) engages in any business or enters into any employment which
the Committee in its sole discretion determines to be (1) directly or indirectly
competitive with the business of the Company or (2) substantially injurious to
the Company's financial interest. A Participant may request the Committee in
writing to determine whether any proposed business or employment activity would
justify such a forfeiture. Such a request shall fully describe the proposed
activity and the Committee's determination shall be limited to the specific
activity so described. The Committee's right to require forfeiture under this
Section 8.9 must be exercised within 90 days after the discovery of an
occurrence triggering the Committee's right to require forfeiture but in no
event later than 24 months after the Participant's termination of employment
with the Company.

8.9  NON-EMPLOYEE DIRECTOR ATTENDANCE REQUIREMENTS

     A Non-Employee Director shall not be entitled to receive any award under
this Plan for any calendar year during which he or she has failed to attend at
least 75% of the total number of meetings of the Boards of Directors of the
Company, of its principal subsidiary, PeoplesBank, a Codorus Valley Company, and
of any committees of the foregoing of which he or she is a member. The Committee
may, in its discretion, waive the attendance requirement for good cause.

                                   ARTICLE IX.
                            AMENDMENT AND TERMINATION

9.1  AMENDMENT AND TERMINATION

     The Board of Directors may modify, amend, or terminate the Plan at any time
except that, to the extent then required by applicable law, rule, or regulation,
approval of the holders of a majority of shares of Common Stock represented in
person or by proxy at a meeting of the

                                       16

<PAGE>

shareholders will be required to increase the maximum number of shares of Common
Stock available for distribution under the Plan (other than increases due to
adjustments in accordance with the Plan). No modification, amendment, or
termination of the Plan shall adversely affect the rights of a Participant under
a grant previously made to him without the consent of such Participant.

                                   ARTICLE X.
                       EFFECTIVE DATE AND DURATION OF PLAN

10.1 EFFECTIVE DATE AND DURATION OF PLAN

     The Plan shall become effective as of February 13, 2007, subject to its
approval and adoption at the Annual Meeting of the shareholders on May 15, 2007.
All rights granted under the Plan must be granted within ten years from its
adoption date by the shareholders of the Company. Any rights outstanding ten
years after the adoption of the Plan may be exercised within the periods
prescribed under or pursuant to the Plan.

                                       17

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