CODORUS VALLEY BANCORP, INC. LONG TERM NURSING CARE AGREEMENT
Exhibit 10.2
CODORUS VALLEY BANCORP, INC.
LONG TERM NURSING CARE AGREEMENT
THIS AGREEMENT (“Agreement”) is made this 27th day December, 2005, between CODORUS VALLEY
BANCORP, INC., a Pennsylvania corporation (the “Corporation”), PEOPLESBANK, A CODORUS VALLEY
COMPANY, a Pennsylvania banking institution (the “Bank”), and XXXXX X. XXXXXX, an adult individual
(the “Executive”).
WITNESSETH
WHEREAS, the Board of Directors of the Corporation, by resolutions duly adopted at a special
meeting of the Board held on May 27, 2003, did authorize the purchase of a long term nursing care
insurance policy for the benefit of the Executive and his spouse; and
WHEREAS, the Corporation did purchase a long term nursing care insurance policy from Lincoln
Benefits Life Company (Policy No. 10700130734W) for the benefit of the Executive and his spouse;
and
WHEREAS, the Board of Directors of the Corporation also authorized the Corporation, by
resolution adopted on May 27, 2003, to enter into a contractual relationship with the Executive to
accelerate the 10-year annual premium payments due under the Long Term Nursing Care Insurance
Policy in the event of a change of corporate control; and
WHEREAS, the Corporation, the Bank and the Executive desire to enter into this Agreement to,
among other things, provide for the acceleration of premium payments due under the Long Term
Nursing Care Insurance Policy in the event of a change in corporate control, all as hereinafter set
forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and
intending to be legally bound hereby, the parties hereto agree as follows:
1. CHANGE OF CONTROL. For purposes of this Agreement, the term “Change of Control”
shall mean: a Change in the Ownership of the Corporation or the Bank, (as defined below), a Change
in the Effective Control of the Corporation or the Bank (as defined below), or a Change in the
Ownership of a Substantial Portion of the Assets of the Corporation or the Bank, (as defined
below).
(a) Change in the Ownership of the Corporation or the Bank. A Change in the
Ownership of the Corporation or the Bank occurs on the date that any one person, or more
than one person acting as a group (as defined below), acquires ownership of stock of the
Corporation or the Bank that, together with stock held by such person or group, constitutes
more than 50 percent of the total fair market value or total voting power of the stock of
the Corporation or the Bank. However, if any one person, or more than one person acting as
a group, is considered to own more than 50 percent of the total fair
market value or total voting power of the stock of the Corporation or the Bank, the
acquisition of additional stock by the same person or persons is not considered to cause a
Change in 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 1(c) if there is a transfer of
assets to an entity that is:
(i) A shareholder of the Corporation or the Bank (immediately before the asset
transfer) in exchange for or with respect to its stock;
(ii) An entity, 50 percent or more of the total value or voting power of which
is owned, directly or indirectly, by the Corporation or the Bank;
(iii) A person, or more than one person acting as a group, that owns, directly
or indirectly, 50 percent or more of the total value or voting power of all the
outstanding stock of the Corporation or the Bank; or
(iv) An entity, at least 50 percent of the total value or voting power of which
is owned, directly or indirectly, by a person described in (i), (ii) or (iii) above.
(d) For purposes of this Paragraph 1, persons will not be considered to be acting as a
group solely because they purchase or own stock or purchase assets of the Corporation or the
Bank at the same time. However, persons will be considered to be acting as a group if they
are owners of a corporation that enters into a merger, consolidation, purchase or
acquisition of assets, or similar transaction, such shareholder is considered to be acting
as a group with other shareholders in a corporation only to the extent of the ownership in
that corporation prior to the transaction giving rise to the change and not with respect to
the ownership interest in the other corporation.
2. ACCELERATION OF ANNUAL PREMIUMS. Following the date of a Change in Control, the
Executive shall be entitled to a lump sum payment equal to the amount of any remaining unpaid
annual premiums ($16,675.22 per annum) under the Long Term Nursing Care Insurance Policy referenced
above (Lincoln Benefits Life Company — Policy No. 10700130734W). At the election of the
Executive, the Corporation shall pay the aggregate amount due directly to the Executive, or to the
Lincoln Benefits Life Company, or any successor thereto, within ten (10) days following the date of
the Change in Control. In the event the amount due is paid directly to the Executive, the
insurance policy shall, with the consent of Lincoln Benefits Life Company, be assigned to the
Executive and his spouse, and, thereafter, the Corporation, the Bank, and any successors thereto by
merger or otherwise, shall have no further obligation or liability for annual premium payments
under the insurance policy.
3. EXCISE TAX MATTERS. In the event that the amounts and benefits payable under this
Agreement, 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.
4. PRIMARY OBLIGOR. The obligation to make payments and provide benefits under this
Agreement shall primarily be those of the Executive’s Employer. 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.
5. KEY EMPLOYEE. Notwithstanding anything in this Agreement 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 or on behalf of such Key Employee
under this Agreement shall not begin earlier than the first day of the seventh month following the
date of the Change in Control. 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.
6. 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.
7. 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.
8. 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.
9. 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.
10. 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.
11. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the parties
relating to the subject matter hereof and supersedes any prior agreement of the parties.
12. 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.
13. 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.
14. 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.
15. 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.
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/ Xxxxx X. Xxxxx
|
By: | /s/ Xxxxxx X. Xxxxx | ||
Secretary |
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| ATTEST: | PEOPLESBANK, | |||
| A CODORUS VALLEY COMPANY | ||||
/s/ Xxxxxxx X. Xxxxx
|
By: | /s/ Xxxxxx X. Xxxxx | ||
Secretary |
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WITNESS: |
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| /s/ Xxxxxxx X. Xxxxxxx | /s/ Xxxxx X. Xxxxxx | |||
| Xxxxx X. Xxxxxx | ||||
