EXHIBIT 10.12
PEOPLESBANK, A CODORUS VALLEY COMPANY
GROUP TERM REPLACEMENT PLAN
THIS PLAN, hereby made and entered into this_____ day of__________, 1998,
by and between the PEOPLESBANK, A CODORUS VALLEY BANK, a Pennsylvania state bank
located in York, Pennsylvania (the "Company") and the Participant selected to
participate in this Plan (the "Participant").
INTRODUCTION
The Company wishes to attract and retain highly qualified executives. To
further this objective, the Company is willing to divide the death proceeds of
certain life insurance policies which are owned by the Company on the lives of
the participating executives with the designated beneficiary of each insured
participating executive. The Company will pay the life insurance premiums from
its general assets.
ARTICLE 1
GENERAL DEFINITIONS
The following terms shall have the meanings specified:
1.1 "Benefit Vesting Age" means the earlier of (1) the Participant
attaining the Normal Retirement Age, as defined herein, or (2) the Participant's
age and Years of Service, when added together, totaling the sum of 70 or more.
1.2 "Change of Control" means any of the following:
(a) the first date on which a single person and/or entity, or
group of affiliated persons and/or entities, acquire the beneficial
ownership of twenty-five percent (25%) or more of the Company's voting
securities; or
(b) the date of the transfer of all or substantially all of the
Company or Company's assets; or
(c) the date on which a merger, consolidation or combination is
consummated, as applicable; or
(d) the date on which individuals who formerly constituted a
majority of the Incumbent Board of Directors of the Bank ceased to be a
majority thereof. For these purposes, "Incumbent Board" means the members
of the Board of Directors of the Company on the effective date of the
Plan, provided that any person becoming a member of the Board of Directors
subsequent to such effective date, whose election was approved by a vote
of at least three-quarters of the members of the Board of Directors
comprising the Incumbent Board, or whose nomination for election by
members or stockholders was approved by the same nominating committee
serving under an Incumbent Board, shall be considered as though he were a
member of the Incumbent Board.
1.3 "Date of Change of Control" means any of the following:
(a) the first date on which a single person and/or entity, or
group of affiliated persons and/or entities, acquire the beneficial
ownership of twenty-five (25%) or more of the Company's voting securities;
or
(b) the date of the transfer of all or substantially all of the
Company or Company's assets; or
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(c) the date on which the merger, consolidation or combination is
consummated, as applicable; or
(d) the date on which individuals who formerly constituted a
majority of the Incumbent Board of Directors of the Bank ceased to be a
majority thereof. For these purposes, "Incumbent Board" means the members
of the Board of Directors of the Company on the effective date of the
Plan, provided that any person becoming a member of the Board of Directors
subsequent to such effective date, whose election was approved by a vote
of at least two-thirds of the members of the Board of Directors comprising
the Incumbent Board, or whose nomination for election by members or
stockholders was approved by the same nominating committee serving under
an Incumbent Board, shall be considered at though he were a member of the
Incumbent Board.
1.4 "Compensation Committee" means either the Compensation Committee
designated from time to time by the Company's Board of Directors or a majority
of the Company's Board of Directors, either of which shall hereinafter be
referred to as the Compensation Committee.
1.5 "Corporation" means Codorus Valley Bancorp, Inc.
1.6 "Company" means PeoplesBank, A Codorus Valley Company.
1.7 "Disability" means the Participant's inability to perform
substantially all normal duties of an employee, as determined by the Company's
Board of Directors in its sole discretion. As a condition to any benefits, the
Company may require the Participant to submit to such physical or mental
evaluations and tests as the Board of Directors deems appropriate.
1.8 "Insured" means the individual whose life is insured.
1.9 "Insurer" means the insurance company issuing the life insurance
policy on the life of the insured.
1.10 "Normal Retirement Age" means the Participant attaining the age
specified in Exhibit B attached hereto while employed with the Company.
1.11 "Normal Retirement Date" means the later of the Normal Retirement
Age or the date that the Participant terminates or is terminated for any reason
other than being Terminated for Cause.
1.12 "Participant" means the employee who is designated by the
Compensation Committee as eligible to participate in the Plan, elects in writing
to participate in the Plan using the form attached hereto as Exhibit A, and
signs a Split Dollar Endorsement for the Policy in which he or she is the
Insured.
1.13 "Policy" or "Policies" means the individual insurance policy (or
policies) adopted by the Compensation Committee for purposes of insuring a
Participant's life under this Plan.
1.14 "Plan" means this instrument, including all amendments thereto.
1.15 "Terminated for Cause" means that the Company has terminated the
Participant's employment for any of the following reasons:
(a) Gross negligence or gross neglect of duties;
(b) Commission of a felony or of a gross misdemeanor involving
moral turpitude; or
(c) Fraud, disloyalty, dishonesty or willful violation of any law
or significant Company policy committed in connection with the
Participant's employment and resulting in an adverse effect on the
Company.
1.16 "Three Times Base Annual Salary" means the current base annual
salary of the Participant
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at the highest point of the Participant's career, multiplied by a factor of
three (3), but not to exceed the maximum amount of the Participant's insurance
benefit as set forth on Schedule B attached hereto (this reflects Plan amendment
dated November 27, 2001).
1.17 "Years of Service" means total years of employment with the Company
including any approved leaves of absences.
ARTICLE 2
PARTICIPATION
2.1 Eligibility to Participate. The Compensation Committee in its sole
discretion shall designate from time to time Participants that are eligible to
participate in this Plan.
2.2 Participation. The eligible executive may participate in this Plan
by executing an Election to Participate and a Split Dollar Endorsement. The
Split Dollar Endorsement shall bind the Participant and his or her
beneficiaries, assigns and transferees, to the terms and conditions of this
Plan. An executive's participation is limited to only Policies where he or she
is the Insured. Exhibit B attached hereto sets forth the original Insured
participants and the Policies on their lives.
2.3 Termination of Participation. A Participant's rights under this Plan
shall cease and his or her participation in this Plan shall terminate if any of
the following events occur: (i) the Participant's employment with the Company is
Terminated for Cause; (ii) the Participant's employment with the Company is
terminated prior to the Benefit Vesting Age for reasons other than Disability;
or (iii) the Participant is subject to a final removal or prohibition order
issued by an appropriate federal banking agency pursuant to Section 8(e) of the
Federal Deposit Insurance Act or by the Pennsylvania Department of Banking
pursuant to state law. In the event that the Company decides to maintain the
Policy after the Participant's termination of his or her participation in the
Plan, the Company shall be the direct beneficiary of the entire death proceeds
of the Policy.
2.4 Disability. (A) Except as otherwise provided in paragraph (B) of
this section 2.4 and paragraph 9.1 of Article 9 herein, if the Participant's
employment with the Company is terminated because of the Participant'
Disability, the Company shall maintain the Policy in full force and effect and,
in no event, shall the Company amend, terminate or otherwise abrogate the
Participant's interest in the Policy; provided, however, that at all times the
Policy shall be subject to the claims of the Company's creditors.
(B) Notwithstanding the provisions of paragraph (A) of this
section 2.4, upon the Disabled Participant's gainful employment with an entity
other than the Company, the Company shall have no further obligation to the
Disabled Participant, and the Disabled Participant's rights pursuant to the Plan
shall cease. In the event the Disabled Participant's rights are terminated
hereunder, the Company shall be the direct beneficiary of the entire death
proceeds of the Policy upon the death of the Disabled Participant.
2.5 Vesting. Except as otherwise provided in paragraph 9.1 of Article 9
herein, upon the Participant reaching the Benefit Vesting Age, the Company shall
maintain the Policy in full force and effect and in no event shall the Company
amend, terminate or otherwise abrogate the Participant's interest in the Policy;
provided, however, that at all times the Policy shall be subject to the claims
of the Company's creditors.
ARTICLE 3
POLICY OWNERSHIP/INTERESTS
3.1 Company's Interest. The Company shall own the Policies and shall
have the right to exercise all incidents of ownership and, except as provided in
paragraph 9.1 of Article 9 herein, the Company shall not sell, surrender or
transfer ownership of a Policy so long as a Participant has an interest in the
Policy as described in section 3.1. This provision shall not impair the right of
the Company to terminate this Plan. With respect to each Policy, the Company
shall be the direct beneficiary of an amount of death proceeds equal to the
greatest of: (1) the cash surrender value of the policy; (2) the aggregate
premiums paid on the Policy by the Company less any outstanding
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indebtedness to the Insurer; or (3) the amount in excess of Three Times Base
Annual Salary of the Insured/Participant; provided, however, that if the Company
owns more than one Policy on a Participant's life, all such Policies shall be
aggregated with respect to the amount as calculated in this item (3).
3.2 Participant's Interest. Each Participant, or the Participant's
assignee, shall have the right to designate the beneficiary of the death
proceeds of the Policy remaining after the payment to the Company of its
interests. The Participant shall also have the right to elect and change
settlement options with the consent of the Company and the Insurer.
ARTICLE 4
PREMIUMS
4.1 Premium Payment. The Company shall pay all premiums due on all
Policies.
4.2 Imputed Income. The Company shall impute income to the Participant in
an amount equal to the current term rate for the Participant's age multiplied by
the aggregate death benefit payable to the Participant's beneficiary. The
"current term rate" is the minimum amount required to be imputed under Revenue
Rulings 64-328 and 66-110, or any subsequent applicable authority.
4.3 Cash Payment. The Company shall make the following cash payment to the
Participant:
(1) If Termination of Employment occurs on or after the Normal
Retirement Age, the Company shall annually pay to the Participant an
amount calculated by dividing a numerator equal to the current term
rate imputed to the Participant multiplied by the Company's highest
marginal tax bracket for the calendar year immediately preceding the
payment to the Participant by a denominator of an amount equal to
the sum of one (1) minus the Company's tax bracket. Such payments
shall be made to the Participant until the earlier of (i) the death
of the Participant or (ii) the date the Policy is no longer owned by
the Company or (iii) until the amount accrued by the Company for the
payment of this benefit has been reduced to zero (0) when applying
the interest method of APB 12 and using a discount rate of 8%.
(2) If Termination of Employment occurs before the Normal Retirement Age
but after the Participant has attained the Benefit Vesting Age, the
Company shall annually pay to the Participant an amount calculated
by dividing a numerator equal to the current term rate imputed to
the Participant multiplied by the Company's highest marginal tax
bracket for the calendar year immediately preceding the payment to
the Participant by a denominator of an amount equal to the sum of
one (1) minus the Company's tax bracket. Such payments shall be made
to the Participant until the earlier of (i) the death of the
Participant or (ii) the date the Policy is no longer owned by the
Company or (iii) until the amount accrued by the Company for the
payment of this benefit has been reduced to zero (0) when applying
the interest method of APB 12 and using a discount rate of 8%.
(3) If Termination of Employment occurs before the Normal Retirement Age
and before the Participant has attained the Benefit Vesting Age, the
Company shall make no cash payment to the Participant as provided
hereunder.
ARTICLE 5
ASSIGNMENT
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5.1 Any Participant may assign without consideration all interests in his
or her Policy and in this Plan to any person, entity or trust. In the event a
Participant shall transfer all of his/her interest in the Policy, then all of
that Participant's interest in his or her Policy and in the Plan shall be vested
in his/her transferee, who shall be substituted as a party hereunder, and that
Participant shall have no further interest in his or her Policy or in this Plan.
ARTICLE 6
INSURER
6.1 The Insurer shall be bound only by the terms of their corresponding
Policy. Any payments the Insurer makes or actions it takes in accordance with a
Policy shall fully discharge it from all claims, suits and demands of all
persons relating to that Policy. The Insurer shall not be bound by the
provisions of this Plan. The Insurer shall have the right to rely on the
Company's representations with regard to any definitions, interpretations, or
Policy interests as specified under this Plan.
ARTICLE 7
CLAIMS PROCEDURE
7.1 Claims Procedure. The Company shall notify any person or entity that
makes a claim against this Plan (the "Claimant"), in writing, within ninety (90)
days of Claimant's written application for benefits, of Claimant's eligibility
or ineligibility for benefits under this Plan. If the Company determines that
Claimant is not eligible for benefits or full benefits, the notice shall set
forth (1) the specific reasons for such denial, (2) a specific reference to the
provisions of this Plan on which the denial is based, (3) a description of any
additional information or material necessary for the Claimant to perfect
Claimant's claim, and a description of why it is needed, and (4) an explanation
of this Plan's claims review procedure and other appropriate information as to
the steps to be taken if the Claimant wishes to have the claim reviewed. If the
Company determines that there are special circumstances requiring additional
time to make a decision, the Company shall notify the Claimant of the special
circumstances and the date by which a decision is expected to be made, and may
extend the time for up to an additional ninety-day period.
7.2 Review Procedure. If a Claimant is determined by the Company not to be
eligible for benefits, or if the Claimant believes that Claimant is entitled to
greater or different benefits, the Claimant shall have the opportunity to have
such claim reviewed by the Company by filing a petition for review with the
Company within sixty (60) days after receipt of the notice issued by the
Company. Said petition shall state the specific reasons which the Claimant
believes entitle Claimant to benefits or to greater or different benefits.
Within sixty (60) days after receipt by the Company of the petition, the Company
shall afford the Claimant (and counsel, if any) an opportunity to present
Claimant's position to the Company verbally or in writing, and the Claimant (or
counsel) shall have the right to review the pertinent documents. The Company
shall notify the Claimant of its decision in writing within the sixty-day
period, stating specifically the basis of its decision, written in a manner
calculated to be understood by the Claimant and the specific provisions of this
Plan on which the decision is based. If, because of the need for a hearing, the
sixty-day period is not sufficient, the decision may be deferred for up to
another sixty-day period at the election of the Company, but notice of this
deferral shall be given to the Claimant.
ARTICLE 8
AMENDMENTS AND TERMINATION
8.1 Amendment or Termination of Plan. Except as otherwise provided in
sections 2.3, 2.4, 2.5 and 8.2: (i) the Company may amend or terminate the Plan
at any time, and (ii) the Company may amend or terminate a Participant's rights
under the Plan at any time prior to a Participant's death by written notice to
the Participant.
8.2 Amendment or Termination of Plan Upon Change of Control.
Notwithstanding the provisions of section 8.1, in the event of a Change of
Control, the Company or its successor shall maintain in full force and effect
each Policy that is in existence on the date the Change of Control occurs and,
shall not terminate or otherwise abrogate a Participant's interest in the
Policy, provided,
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however, that at all times the Policy shall be subject to the claims of the
Company's creditors. This section 8.2 shall apply to all Participants in the
Plan on the date the Change of Control occurs, including but not limited to (i)
a Participant who has a vested interest in the Policy pursuant to section 2.5;
(ii) a Disabled Participant who has an interest in the Policy pursuant to
section 2.4; and (iii) a Participant whose employment is terminated as a result
of a Change of Control.
8.3 Participant's Waiver. A Participant may, in the Participant's sole and
absolute discretion, waive his or her rights under the Plan at any time. Any
waiver permitted under this section 8.3 shall be in writing and delivered to the
Board of Directors of the Company.
ARTICLE 9
MISCELLANEOUS
9.1 Option to Purchase. Notwithstanding anything herein to the contrary,
if the Company decides to sell, surrender or transfer ownership of the Policy
while this Plan is in effect, the Company shall first give notice of such
intention to the Participant or the Participant's transferee and shall allow the
Participant or the Participant's transferee the option to purchase the Policy
for a period of sixty (60) days from written notice of such intention. The
purchase price shall be an amount equal to the greater of the cash surrender
value of the Policy or the aggregate premiums paid on the Policies by the
Company less any outstanding indebtedness to the Insurer, unless the Participant
would otherwise forfeit the benefit pursuant to Section 2.3 if the benefit were
vested. This provision shall not impair the right of the Company to terminate
this Agreement. If the Participant or the Participant's transferee does not
exercise the option to purchase, the Company may sell, surrender or transfer
ownership of the Policy, provided, however, that if the Participant has attained
the Benefit Vesting Age, the Company must provide an insurance policy comparable
to cover the benefit provided under this Agreement. The Participant or the
Participant's transferee shall not have an option to purchase, and the
Participant or the Participant's transferee shall forfeit rights under the Plan
in the event the Participant is subject to a final removal or prohibition order
issued by an appropriate federal banking agency pursuant to Section 8(e) of the
Federal Deposit Insurance Act or by the Pennsylvania Department of Banking
pursuant to state law.
9.2 Binding Effect. This Plan in conjunction with each Split Dollar
Endorsement shall bind each Participant and the Company, their beneficiaries,
survivors, executors, administrators and transferees and any Policy beneficiary.
9.3 No Guarantee of Employment. This Plan is not an employment policy or
contract. It does not give a Participant the right to remain an employee of the
Company, nor does it interfere with the Company's right to discharge a
Participant. It also does not require a Participant to remain an employee nor
interfere with a Participant's right to terminate employment at any time.
9.4 Named Fiduciary. For purposes of the Employee Retirement Income
Security Act of 1974, if applicable, the Company shall be the named fiduciary
and plan administrator under the Plan. The named fiduciary may delegate to
others certain aspects of the management and operation responsibilities of the
plan including the employment of advisors and the delegation of ministerial
duties to qualified individuals.
9.5 Applicable Law. The Plan and all rights hereunder shall be governed by
and construed according to the laws of the Commonwealth of Pennsylvania, except
to the extent preempted by the laws of the United States of America.
9.6 Notice. Any notice, consent or demand required or permitted to be
given under the provisions of this Plan by one party to another shall be in
writing, shall be signed by the party giving or making the same, and may be
given either by delivering the same to such other party personally, or by
mailing the same, by United States certified mail, postage prepaid, to such
party, addressed to his/her last known address as shown on the records of the
Company. The date of such mailing shall be deemed the date of such mailed
notice, consent or demand.
9.7 Entire Agreement. This Plan constitutes the entire agreement between
the Company and the Participant as to the subject matter hereof. No rights are
granted to the Participant by virtue of
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this Plan other than those specifically set forth herein.
9.8 Administration The Company shall have powers which are necessary to
administer this Plan, including but not limited to:
(a) Interpreting the provisions of the Plan;
(b) Establishing and revising the method of accounting for the
Plan;
(c) Maintaining a record of benefit payments; and
(d) Establishing rules and prescribing any forms necessary or
desirable to administer the Plan.
IN WITNESS WHEREOF, the Company executes this Plan as of the date indicated
above.
COMPANY:
PEOPLESBANK, A CODORUS VALLEY CO.
BY ______________________________
TITLE ___________________________
CORPORATION:
CODORUS VALLEY BANCORP, INC.
BY ______________________________
TITLE ___________________________
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EXHIBIT A
ELECTION TO PARTICIPATE
I, (Participant), an eligible employee as determined in section 2.1 of the
Peoplesbank, a Codorus Valley Company, Group Term Replacement Plan (the "Plan")
dated December 1, 1998, hereby elect to become a Participant of the Plan in
accordance with Section 2.2 of the Plan. Additionally, I acknowledge that I have
read the Plan document and agree to be bound by its terms.
Executed this 1st day of December, 1998.
_______________________ _______________________
Witness Participant
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EXHIBIT B
LIST OF PARTICIPANTS
NORMAL INSURANCE
PARTICIPANT INSURER POLICY NUMBER RETIREMENT AGE BENEFIT
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SPLIT DOLLAR POLICY ENDORSEMENT
PEOPLESBANK, A CODORUS VALLEY COMPANY
GROUP TERM REPLACEMENT PLAN
Policy No. ___________________ Insured: (Participant)
Supplementing and amending the application of PEOPLESBANK, A CODORUS VALLEY
COMPANY on ________________, 1998 to _________________________ ("Insurer"), the
applicant requests and directs that:
BENEFICIARIES
1. The PEOPLESBANK, A CODORUS VALLEY COMPANY, a Pennsylvania state bank
located in York, Pennsylvania (the "Company"), shall be the direct beneficiary
of an amount of death proceeds equal to the greatest of: (1) the cash surrender
value of the Policy; (2) the aggregate premiums paid on the Policy by the
Company less any outstanding indebtedness to the Insurer; or (3) the amount in
excess of Three Times Base Annual Salary of the Participant as provided in the
Peoplesbank, A Codorus Valley Company Group Term Replacement Plan dated December
1, 1998; provided, however, that if the Company owns more than one Policy on a
Participant's life, all such Policies shall be aggregated with respect to the
amount calculated in this item (3).
2. The beneficiary of any remaining death proceeds shall be designated
by the Insured or his/her transferee.
OWNERSHIP
3. The Owner of the policy shall be the Company. The Owner shall have
all ownership rights in the Policy except as may be specifically granted to the
Insured or his/her transferee in paragraph (4) of this endorsement.
4. The Insured or his/her transferee shall have the right to assign all
rights and interests in the policy with respect to that portion of the death
proceeds designated in paragraph (2) of this endorsement, and to exercise all
settlement options with respect to such death proceeds.
MODIFICATION OF ASSIGNMENT PROVISIONS OF THE POLICY
Upon the death of the Insured, the interest of any collateral assignee of the
Owner of the policy designated in paragraph (3) above shall be limited to the
portion of the proceeds described in paragraph (1) above.
OWNERS AUTHORITY
The Insurer is hereby authorized to recognize the Owner's claim to rights
hereunder without investigating the reason for any action taken by the Owner,
including its statement of the amount of premiums it has paid on the policy. The
signature of the Owner shall be sufficient for the exercise of any rights under
this Endorsement and the receipt of the Owner for any sums received by it shall
be a full discharge and release to the Insurer. Any transferee's rights shall be
subject to this Endorsement.
Signed at _______________, Pennsylvania, this _____ day of ______________, 1998.
COMPANY:
PEOPLESBANK, A CODORUS VALLEY COMPANY
By__________________________________
Its_________________________________
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CORPORATION:
CODORUS VALLEY BANCORP, INC.
By ______________________________________
Title ___________________________________
Acceptance and Beneficiary Designation
The Insured accepts and agrees to the foregoing and, subject to the rights of
the Owner as stated above, designates __________________________________________
as primary beneficiary and _____________________________________________________
as secondary/contingent beneficiary of the portion of the proceeds described in
paragraph (1) above.
Signed at _______________, Pennsylvania, this ______ day of _____________, 1998.
INSURED
_______________________________________
Signature
_______________________________________
(Print Name)
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