AMENDMENT OF EMPLOYMENT AGREEMENT
Exhibit
10.1
AMENDMENT
OF EMPLOYMENT AGREEMENT
THIS
AMENDMENT OF EMPLOYMENT AGREEMENT (the
“Amendment”) is made and entered into as of the 25th day of January, 2007 by and
among CAPITAL
BANK CORPORATION
(hereinafter
“CBC”), CAPITAL
BANK,
a
wholly-owned subsidiary of CBC (herinafter the “Bank”), and B.
▇▇▇▇▇ ▇▇▇▇▇▇
(hereinafter the “Employee”).
RECITALS
CBC,
the
Bank, and Employee are parties to an employment agreement dated April 21,
2004
(the “Employment Agreement”) employing the Employee as President and Chief
Executive Officer of CBC and the Bank;
CBC
adopted the Capital Bank Defined Benefit Supplemental Executive Retirement
Plan
effective May 24, 2005 (hereinafter the “SERP”) to provide the Employee and
other eligible employees certain supplemental retirement benefits, including
accelerated vesting and accelerated service credit for SERP purposes upon
a
“Change in Control” (as defined in the SERP), without regard to whether such
benefits result in excess parachute payments under Section 280G of the
Internal
Revenue Code of 1986, as amended (the “Code”);
CBC,
the
Bank, and Employee desire to amend the Employment Agreement to modify the
cap on
aggregate benefits provided to Employee in connection with a “Change in Control”
(as defined in the SERP, the Employment Agreement or otherwise in a manner
that
triggers the application of Section 280G of the Code), including accelerated
vesting and service credit under the SERP, to ensure that the Employment
Agreement allows Employee to receive the full Change in Control benefits
provided under the SERP and to otherwise conform the terms of the Employment
Agreement and SERP where appropriate;
CBC,
the
Bank, and Employee desire to amend the Employment Agreement to provide
for the
payment of certain of Employee’s legal fees in certain circumstances, including
in the event Employee either is involuntarily terminated by CBC, the Bank
or
either of their successors or terminates his employment for Good Reason
(as
defined in the Employment Agreement) following a Change in Control (as
defined
in the Employment Agreement) and Employee incurs legal expenses in seeking
to
enforce or defend his rights under the Employment Agreement; and
CBC,
the
Bank, and the Employee further desire to amend the Employment Agreement
to
ensure that severance and other benefits provided to Employee comply with
various new rules imposed under Section 409A of the Code governing nonqualified
deferred compensation;
NOW,
THEREFORE,
in
consideration of the mutual promises, terms, covenants and considerations
set
forth herein, and the performance of each, the parties hereto, intending
legally
to be bound, agree as follows:
-
1
-
AGREEMENT
The
Employment Agreement is hereby amended as follows:
1.
Section
5(d) (“Limitation on Payments”) is restated in its entirety as follows to
provide a modified cap or limitation on the amount of benefits that may
be
provided to Employee under the Employment Agreement or otherwise if such
payments constitute “excess parachute payments” as such term is defined under
Section 280G of the Code:
(d)
Limitation on Payments.
Notwithstanding anything set forth in this Employment Agreement to the
contrary,
in the event any payment or benefit to the Employee or for his benefit
paid or
payable or distributed or distributable pursuant to the terms of this Employment
Agreement, the Capital Bank Defined Benefit Supplemental Executive Retirement
Plan (the “SERP”), or otherwise (a “Payment”) would individually or together
with any other such payment
or
benefit (i) constitute a “parachute payment” within the meaning of Section
280G of the Internal Revenue Code of 1986, as amended (the “Code”) and
(ii) but for this sentence, be subject to the excise tax imposed by Section
4999 of the Code and any related interest or penalties (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the “Excise Tax”), then such Payment shall be reduced (the
“Reduced Amount”) if and to the extent that a reduction in the Payment would
result in Employee retaining, on an after-tax basis (after taking into
account
all applicable federal, state and local employment taxes, income taxes,
and the
Excise Tax computed at the highest applicable marginal rate), a larger
portion
of such Payment than if the Payment were not so reduced. If a reduction
in
payments or benefits (or a cancellation of the acceleration of vesting
of stock
options or equity awards and/or cancellation or other adjustment of accelerated
vesting or service credit for SERP benefits) constituting “parachute payments”
is necessary so that the Payment equals the Reduced Amount, such reduction
and/or cancellation of acceleration shall occur in the order that generally
provides the maximum economic benefit to Employee to the extent practicable
for
the Bank. The foregoing calculations shall be made at the Bank’s expense by an
accounting firm selected by the Bank and reasonably acceptable to the Employee
which is designated as one of the seven (7) largest accounting firms in
the
United States (the “Accounting Firm”); provided, however, that the Accounting
Firm not also be serving as accountant or auditor for the individual, entity
or
group effecting the change in ownership or control that gives rise to the
potential application of the Excise Tax. The Accounting Firm engaged to
make the
calculations under this Section 5(d) shall provide its determination (the
“Determination”), together with detailed supporting documentation, to the Bank
and Employee as soon as practicable after the date on which Employee’s right to
a Payment is triggered or such other time as is reasonably requested by
the Bank
or Employee. If the Accounting Firm determines that no Excise Tax is payable
with respect to a Payment, either before or after the application of the
Reduced
Amount, it shall furnish the Bank an opinion reasonably acceptable to Employee
that no Excise Tax will be imposed with respect to such Payment. Within
ten (10)
days of the delivery of the Determination to the Bank, the Employee shall
have
the right to dispute the Determination (the “Dispute”). Upon the final
resolution of a Dispute, the Bank shall pay to the Employee any additional
amount required by such resolution in order to provide the Employee the
maximum
benefit possible pursuant to this Section 5(d). If there is no Dispute,
the
Determination shall be binding, final, and conclusive upon the Bank and
Employee. Employee shall remain solely liable for all income taxes, Excise
Taxes, or other amounts assessed on any Payments under this Section 5(d)
and
nothing in this Employment Agreement or otherwise shall be interpreted
as
obligating CBC, the Bank, or any successors thereto, to pay (or reimburse
Employee for) any income taxes, Excise Taxes, or other taxes or amounts
assessed
against or incurred by Employee in connection with his receipt of such
Payments.
-
2
-
2. A
new
Section 5(e) as follows is added to provide for the payment or reimbursement,
if
necessary, of certain legal fees and expenses incurred by Employee in seeking
to
enforce or defend his rights under the Employment Agreement following a
Change
in Control as such term is defined in Section 5(a) of the Employment
Agreement:
(e)
Payment of Legal Fees.
The Bank
is aware that after a “Change in Control” as such term is defined in Section
5(a) of this Employment Agreement, management could cause or attempt to
cause
Bank to refuse to comply with its obligations under this Employment Agreement,
or could institute or cause or attempt to cause Bank to institute litigation
seeking to have this Employment Agreement declared unenforceable, or could
take
or attempt to take other action to deny Employee the benefits intended
under
this Employment Agreement. In these circumstances, the purpose of this
Employment Agreement would be frustrated. It is the Bank’s intention that the
Employee not be required to incur the expenses associated with the enforcement
or defense of his rights under this Employment Agreement, whether by litigation
or other legal action, because the cost and expense thereof would substantially
detract from the benefits intended to be granted to the Employee hereunder.
It
is Bank’s intention that the Employee not be forced to negotiate settlement of
his rights under this Employment Agreement under threat of incurring expenses.
Accordingly, if after a Change in Control occurs it appears to the Employee
that
(a) Bank has failed to comply with any of its obligations under this
Employment Agreement or a dispute arises between Employee and Bank as to
the
terms of this Agreement, or (b) Bank or any other person has taken or
threatened to take any action to declare this Employment Agreement void
or
unenforceable, or instituted any litigation or other action designed to
deny,
diminish, or to recover from the Employee the benefits intended to be provided
to the Employee hereunder, Bank authorizes the Employee to retain counsel
of his
choice, at Bank’s expense pursuant to the limitations set forth in this Section
5(e), to represent the Employee in connection with the enforcement or defense
of
his rights under this Employment Agreement, including without limitation
the
initiation or defense of any claim, demand, litigation or other legal action,
whether by or against Bank or any director, officer, stockholder, or other
person affiliated with Bank, in any jurisdiction. Notwithstanding any existing
or previous attorney-client relationship between Bank and any counsel chosen
by
the Employee under this Section 5(e), Bank irrevocably consents to the
Employee
entering into an attorney-client relationship with that counsel, and Bank
and
the Employee agree that a confidential relationship shall exist between
the
Employee and that counsel. Bank agrees to promptly pay or reimburse the
Employee
for, as the case may be, all attorneys’ fees and related costs and expenses
incurred by the Employee in connection with the enforcement or defense
of his
rights under this Employment Agreement as described above, up to a maximum
aggregate amount of $125,000, whether suit be brought or not and whether
or not
incurred in trial, bankruptcy, or appellate proceedings; provided, however,
that
Employee obtains either a written settlement or a final judgment of a court
of
competent jurisdiction substantially in his favor or the matter is otherwise
resolved substantially in his favor. The fees and expenses of counsel selected
from time to time by the Employee as provided in this Section 5(e) shall
be paid
directly to counsel or reimbursed to the Employee by Bank within thirty
(30)
days following presentation by the Employee of a statement or statements
prepared by such counsel in accordance with such counsel’s customary billing
practices, Bank’s obligation to pay the Employee’s legal fees provided by this
Section 5(e) operates separately from, and in addition to, any legal fee
reimbursement obligation Bank may have with the Employee under any separate
severance or other agreement. Anything in this Section 5(e) to the contrary
notwithstanding, however, Bank shall not be required to pay or reimburse
Employee’s legal expenses if doing so would violate Section 18(k) of the Federal
Deposit Insurance Act (12 U.S.C. § 1828(k)) and Part 359 of the Federal Deposit
Insurance Corporation (12 C.F.R. § 359.0 et
seq.).
-
3
-
3. A
new
Section 14 of the Employment Agreement as follows is added to ensure that
certain benefits provided under the Employment Agreement comply, to the
extent
applicable, with the new deferred compensation laws and regulations under
Code
Section 409A:
14.
Compliance with Internal Revenue Code Section 409A.
Bank and
Employee intend that their exercise of authority or discretion under this
Employment Agreement shall comply with Code Section 409A. If when the Employee’s
employment terminates, the Employee is a “specified employee,” as defined in
Code Section 409A(a)(2)(B)(i) and, as a result, the postponement of any
payments
under this Employment Agreement or otherwise is necessary to avoid additional
tax or interest to the Employee because of Code Section 409A, then despite
any
provision of this Employment Agreement or other plan or agreement to the
contrary, the Employee will not be entitled to the payments until the earliest
of: (a) the date that is at least six months after the Employee’s
separation from service (within the meaning of Code Section 409A) for reasons
other than the Employee’s death, (b) the date of the Employee’s death, or
(c) any earlier date that does not result in additional tax or interest to
the Employee under Code Section 409A. As promptly as possible after the
end of
the period during which payments are delayed under this provision (the
“Delay
Period”), the entire amount of the delayed payments shall be paid to the
Employee in a single lump sum with any remaining payments to commence in
accordance with the terms of this Employment Agreement or other applicable
plan
or agreement. Notwithstanding the foregoing, to the extent that the Delay
Period
applies to the provision of any ongoing or substitute welfare benefits
to
Employee, Bank and Employee shall mutually cooperate to restructure such
arrangement, to the extent practicable, so that no disruption in benefits
occurs, the original intent and economic benefit of the arrangement is
preserved, and Bank is not subjected to additional costs or expenses (e.g.,
if
no delay would be required if Employee paid the premiums for such welfare
benefits, Employee shall pay such premiums during the Delay Period and
Bank
shall reimburse Employee for such amounts immediately following expiration
of
the Delay Period). If any provision of this Employment Agreement does not
satisfy the requirements of Code Section 409A, such provision shall nevertheless
be applied in a manner consistent with those requirements. If any provision
of
this Employment Agreement would subject the Employee to additional tax
or
interest under Code Section 409A, Bank shall, after consulting with the
Employee, reform the provision to comply with Code Section 409A. In reforming
any such provision, Bank shall maintain, to the maximum extent practicable,
the
original intent and economic benefit of the applicable provision without
subjecting Employee to additional tax or interest; provided, however, Bank
shall
not be obligated to incur any additional costs or expenses as a result
of
reforming any provision. References in this Employment Agreement to Code
Section
409A include rules, regulations, and guidance of general application issued
by
the Department of the Treasury under Code Section 409A.
4. Except
as
amended by this Amendment, the Employment Agreement shall remain in full
force
and effect without modification or revision.
[Signature
Page Follows]
-
4
-
[Signature
Page to Amendment of Employment Agreement]
IN
WITNESS WHEREOF, the
parties hereto have caused this Amendment to be duly executed as of the
date
first written above.
|
CAPITAL
BANK CORPORATION
|
|
|
By: /s/ ▇.
▇. ▇▇▇▇▇▇, III
|
|
|
▇.
▇. ▇▇▇▇▇▇, III
|
|
|
Chairman
|
|
|
CAPITAL
BANK
|
|
|
By: /s/ ▇.
▇. ▇▇▇▇▇▇, III
|
|
|
▇.▇.
▇▇▇▇▇▇, III
|
|
|
Chairman
|
|
|
EMPLOYEE
|
|
|
By: /s/ B.
▇▇▇▇▇ ▇▇▇▇▇▇
|
|
|
B.
▇▇▇▇▇ ▇▇▇▇▇▇
|
|
-
5
-