9
CITIZENS SOUTH BANKING CORPORATION
AMENDED AND RESTATED SEVERANCE AGREEMENT
This AMENDED AND RESTATED SEVERANCE AGREEMENT (this "Agreement") is made
and entered into as of November 17, 2008 by and between Citizens South Banking
Corporation, a Delaware corporation (the "Corporation"), and _________________
(the "Executive").
WHEREAS, the Executive entered into a severance agreement with the
Corporation on ____________ (the "Original Agreement");
WHEREAS, the Corporation desires to amend and restate the Original
Agreement in order to make changes to comply with Section 409A of the Internal
Revenue Code of 1986, as amended (the "Code"), as well as certain other changes;
WHEREAS, the Corporation desires to assure itself of the Executive's
services and desires to establish minimum severance benefits for the Executive
in the event of a change in control;
WHEREAS, the Corporation wishes to ensure that the Executive is not
distracted from discharging his duties if a change in control is proposed or
occurs; and
WHEREAS, none of the conditions or events included in the definition of the
term "golden parachute payment" that is set forth in section 18(k)(4)(A)(ii) of
the Federal Deposit Insurance Act [12 U.S.C. 1828(k)(4)(A)(ii)] and in Federal
Deposit Insurance Corporation Rule 359.1(f)(1)(ii) [12 CFR 359.1(f)(1)(ii)]
exists or, to the best knowledge of the Corporation, is contemplated insofar as
either of the Corporation or any of its subsidiaries is concerned.
NOW THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows.
1. CHANGE IN CONTROL AND TERMINATION OF EMPLOYMENT
(a) Termination of Executive Anytime After a Change in Control. If a Change
in Control occurs during the term of this Agreement and if either of the
following occurs, the Executive shall be entitled to severance benefits
specified in Section 2 of this Agreement -
(1) Termination by the Corporation or a Subsidiary (as defined
herein): if the Executive's employment with the Corporation or
its Subsidiary is involuntarily terminated at anytime after a
Change in Control, except for a termination of employment under
Section 3 of this Agreement, or
(2) Voluntary Termination by the Executive: the Executive voluntarily
terminates his employment for any reason with the Corporation or
Subsidiary at anytime after a Change in Control.
If the Executive is removed from office or if his employment terminates
after discussions with a third party regarding a Change in Control commence, and
if those discussions ultimately conclude with a Change in Control, then for
purposes of this Agreement the removal of the Executive or termination of
employment shall be deemed to have occurred after the Change in Control. For
purposes of this Agreement, "Subsidiary" means an entity in which the
Corporation directly or indirectly beneficially owns 50% or more of the
outstanding voting securities
(b) Definition of Change in Control. For purposes of this Agreement,
"Change in Control" means any of the following events occur -
(1) Merger: the Corporation merges into or consolidates with another
corporation, or merges another corporation into the Corporation,
and as a result less than 50% of the combined voting power of the
resulting corporation immediately after the merger or
consolidation is held by persons who were the holders of the
Corporation's voting securities immediately before the merger or
consolidation. For purposes of this Agreement, the term "person"
means an individual, corporation, partnership, trust,
association, joint venture, pool, syndicate, sole proprietorship,
unincorporated organization or other entity, or
(2) Acquisition of Significant Share Ownership: a report on Schedule
13D, Schedule TO, or another form or schedule (other than
Schedule 13G), is filed or is required to be filed under Sections
13(d) or 14(d) of the Securities Exchange Act of 1934, if the
schedule discloses that the filing person or persons acting in
concert has or have become the beneficial owner of 25% or more of
a class of the Corporation's voting securities (but this clause
(2) shall not apply to beneficial ownership of voting shares held
by a Subsidiary in a fiduciary capacity), or
(3) Change in Board Composition: during any period of two consecutive
years, individuals who constitute the Corporation's board of
directors at the beginning of the two-year period cease for any
reason to constitute at least a majority thereof; provided,
however, that - for purposes of this clause (3) - each director
who is first elected by the board (or first nominated by the
board for election by stockholders) by a vote of at least
two-thirds (2/3) of the directors who were directors at the
beginning of the period shall be deemed to have been a director
at the beginning of the two-year period, or
(4) Sale of Assets: The Corporation sells to a third party
substantially all of the Corporation's assets. For purposes of
this Agreement, sale of substantially all of the Corporation's
assets includes sale of Citizens South Bank alone.
(c) Definition of Separation from Service. For purposes of this Agreement,
termination of the Executive's employment as used herein shall be construed to
require a "Separation from Service" as defined in Code Section 409A and the
Treasury Regulations promulgated thereunder, provided, however, that the
Corporation and the Executive reasonably anticipate that the level of bona fide
services the Executive would perform after termination would permanently
decrease to a level that is less than 50% of the average level of bona fide
services performed (whether as an employee or an independent contractor) over
the immediately preceding 36-month period.
2. SEVERANCE BENEFITS
(a) Severance Benefits. The severance benefits to which the Executive is
entitled under Section 1 are as follows -
(1) Lump Sum Payment: The Corporation shall make or cause to be made
a lump sum payment to the Executive in an amount in cash equal to
1.5 times the Executive's annual compensation. For purposes of
this Agreement, annual compensation means (a) the Executive's
annual base salary on the date of the Change in Control or the
Executive's termination of employment, whichever amount is
greater, plus (b) any cash bonuses or cash incentive compensation
earned for the calendar year immediately before the year in which
the Change in Control occurred or immediately before the year in
which termination of employment occurred, whichever amount is
greater, regardless of when the bonus or incentive compensation
is or was paid. The Corporation recognizes that the bonus and
incentive compensation earned by the Executive for a particular
year's service might be paid in the year after the calendar year
in which the bonus or incentive compensation is earned. The
amount payable to the Executive hereunder shall not be reduced to
account for the time value of money or discounted to present
value. The payment required under this Section 2(a)(1) is payable
no later than 5 business days after the date the Executive's
employment terminates, or in the event the Executive is a
Specified Employee (within the meaning of Treasury Regulations
ss.1.409A-1(i)), and to the extent necessary to avoid penalties
under Code Section 409A, payment shall be made to the Executive
on the first day of the seventh month following the date the
Executive's employment terminates.
(2) Retirement Benefit Plans: The Corporation shall cause the
Executive to become fully vested in any qualified and
non-qualified plans, programs or arrangements in which the
Executive participated if the plan, program, or arrangement does
not address the effect of a change in control. The Corporation
also shall contribute or cause a Subsidiary to contribute to any
account of the Executive under a 401(k) plan, retirement plan, or
profit-sharing plan the matching and voluntary contributions, if
any, that would have been made had the Executive's employment not
terminated before the end of the plan year. In the event
the Corporation is unable to fully vest the Executive in a
qualified plan that does not address the effect of a change in
control due to operation of law, the Executive will be paid in a
single cash lump sum distribution the present value of the cash
equivalent of the amount of benefits the Executive would have
received if he were fully vested in such plan, with such payment
made at the same time the cash severance is payable pursuant to
Section 2(a)(1) of this Agreement.
(3) Other Benefit Plans: The Corporation shall cause to be continued
life insurance and non-taxable medical and dental coverage
substantially identical to the coverage maintained by the
Corporation for the Executive prior to his severance. Such
coverage and payments shall cease after 18 months, or sooner if
the Executive becomes employed elsewhere.
(b) Mitigation Is Not Required. The Corporation hereby acknowledges that it
will be difficult and could be impossible (1) for the Executive to find
reasonably comparable employment after his employment terminates, and (2) to
measure the amount of damages the Executive suffers as a result of termination.
Additionally, the Corporation acknowledges that its general severance pay plans
do not provide for mitigation, offset or reduction of any severance payment
received thereunder. Accordingly, the Corporation further acknowledges that the
payment of severance benefits by the Corporation under this Agreement is
reasonable and will be liquidated damages, and the Executive shall not be
required to mitigate the amount of any payment provided for in this Agreement by
seeking other employment or otherwise, nor will any profits, income, earnings or
other benefits from any source whatsoever create any mitigation, offset,
reduction or any other obligation on the part of the Executive hereunder or
otherwise.
3. TERMINATION FOR WHICH NO SEVERANCE BENEFITS ARE PAYABLE
(a) No Severance for Termination for Cause. The Bank may terminate the
Executive's employment at any time. Anything in this Agreement to the contrary
notwithstanding, under no circumstance shall the Executive be entitled to
severance benefits if his employment terminates for Cause.
(1) "Cause" Means Commission of Any of the Following Acts: For
purposes of this Agreement, "Cause" means the Executive shall
have committed any of the following acts -
(a) Fraud, Embezzlement, Theft or Other Crime: an act of fraud,
embezzlement, or theft in connection with his duties or in
the course of his employment with the Corporation or a
Subsidiary, or commission of a felony or commission of a
misdemeanor involving moral turpitude, or
(b) Damage to Property: intentional wrongful damage to the
business or property of the Corporation or Subsidiary(ies),
which, in the Corporation's sole judgment, causes material
harm to the Corporation or Subsidiary(ies), or
(c) Negligence and Other Actions: gross negligence,
insubordination, disloyalty, or dishonesty in the
performance of his duties as an officer of the Corporation
or Subsidiary(ies), or
(d) Violation of Law or Policy: intentional violation of any law
or significant policy of the Corporation or Subsidiary(ies)
committed in connection with the Executive's employment,
which, in the Corporation's sole judgment, has an adverse
effect on the Corporation or Subsidiary(ies), or
(e) Disclosure of Trade Secrets: intentional wrongful disclosure
of secret processes or confidential information of the
Corporation or a Subsidiary, which, in the Corporation's
sole judgment, causes material harm to the Corporation or
the Subsidiary, or
(f) Competing with the Corporation: intentional wrongful
engagement in any competitive activity. For purposes of this
Agreement, competitive activity means the Executive's
participation, without the written consent of a senior
executive officer of the Corporation, in the management of
any business enterprise if (1) the enterprise engages in
substantial and direct competition with the Corporation, (2)
the enterprise's revenues derived from any product or
service competitive with any product or service of the
Corporation or Subsidiary(ies) amounted to 10% or more of
the enterprise's revenues for its most recently completed
fiscal year, and (3) the Corporation's revenues from the
product or service amounted to 10% of the Corporation's
revenues for its most recently completed fiscal year. A
competitive activity does not include mere ownership of
securities in an enterprise and the exercise of rights
appurtenant thereto, provided the Executive's share
ownership does not give his practical or legal control of
the enterprise. For this purpose, ownership of less than 5%
of the enterprise's outstanding voting securities shall
conclusively be presumed to be insufficient for practical or
legal control, and ownership of more than 50% shall
conclusively be presumed to constitute practical and legal
control.
If the Executive is now or hereafter becomes subject to an
agreement not to compete with the Corporation or
Subsidiary(ies), a breach by the Executive of that other
non-competition agreement shall be grounds for denial of
severance benefits for Cause under this clause (f) of
Section 3(a)(1). However, if the Executive engages in a
competitive activity under circumstances justifying denial
of severance benefits for Cause under
this clause (f), that shall not necessarily be grounds for
concluding that the Executive has also breached the other
non-competition agreement to which he is or may become
subject. This clause (f) is not intended to and shall not be
construed to supersede or amend any provision of an
employment or non-competition agreement to which the
Executive is or may become subject. This clause (f) does not
grant to the Executive any right or privilege to engage in
other activities or enterprises, whether in competition with
the Corporation or otherwise, or
(g) Termination for Cause under an Employment Agreement: any
actions that have caused the Executive to be terminated for
Cause under any employment agreement existing on the date
hereof or hereafter entered into between the Executive and
the Corporation or a Subsidiary.
(2) Definition of "Intentional": For purposes of this Agreement, no
act or failure to act on the part of the Executive shall be
deemed to have been intentional if it was due primarily to an
error in judgment or negligence. An act or failure to act on the
Executive's part shall be considered intentional if it is not in
good faith and if it is without a reasonable belief that the
action or failure to act is in the best interests of the
Corporation or a Subsidiary.
(b) The Executive's Right to Severance Is Subject to Regulatory
Considerations. Payments made to the Executive under this Agreement or otherwise
are subject to and conditioned upon their compliance with 12 U.S.C. section
1828(k) and any regulations promulgated thereunder.
(c) No Severance under this Agreement for the Executive's Death or
Disability. Anything in this Agreement to the contrary notwithstanding, under no
circumstance shall the Executive be entitled to severance benefits under this
Agreement if -
(1) Death: the Executive dies while actively employed by the
Corporation or a Subsidiary, or
(2) Disability: the Executive becomes totally disabled while actively
employed by the Corporation or a Subsidiary. For purposes of this
Agreement, the term "totally disabled" means that, because of
injury or sickness, the Executive is unable to perform his
duties.
The benefits, if any, payable to the Executive or his beneficiary(ies) or estate
relating to his death or disability shall be determined solely by such benefit
plans or arrangements as
the Corporation or Subsidiary may have with the Executive relating to death or
disability, not by this Agreement.
4. TERM OF AGREEMENT
The initial term of this Agreement shall be for a period of three years,
commencing on November 1, 2008 (the "Effective Date"). On the first anniversary
of the Effective Date of this Agreement, and on each anniversary thereafter,
this Agreement shall be extended automatically for one additional year unless
the Corporation's board of directors gives notice to the Executive in writing at
least 90 days before the anniversary that the term of this Agreement will not be
extended. If the board of directors determines not to extend the term, it shall
promptly notify the Executive. References herein to the term of this Agreement
mean the initial term and extensions of the initial term. Unless terminated
earlier, this Agreement shall terminate when the Executive reaches age 65. If
the board of directors decides not to extend the term of this Agreement, this
Agreement shall nevertheless remain in force until its term expires. The board's
decision not to extend the term of this Agreement shall not - by itself - give
the Executive any rights under this Agreement to claim an adverse change in his
position, compensation or circumstances or otherwise to claim entitlement to
severance benefits under this Agreement.
5. THIS AGREEMENT IS NOT AN EMPLOYMENT CONTRACT
The parties hereto acknowledge and agree that (a) this Agreement is not a
management or employment agreement and (b) nothing in this Agreement shall give
the Executive any rights or impose any obligations to continued employment by
the Corporation or any Subsidiary or successor of the Corporation, nor shall it
give the Corporation any rights or impose any obligations for the continued
performance of duties by the Executive for the Corporation or any Subsidiary or
successor of the Corporation.
6. WITHHOLDING OF TAXES
The Corporation may withhold from any benefits payable under this Agreement
all Federal, state, local or other taxes as may be required by law, governmental
regulation or ruling.
7. SUCCESSORS AND ASSIGNS
(a) This Agreement Is Binding on the Corporation's Successors. This
Agreement shall be binding upon the Corporation and any successor to the
Corporation, including any persons acquiring directly or indirectly all or
substantially all of the business or assets of the Corporation by purchase,
merger, consolidation, reorganization, or otherwise. Any such successor shall
thereafter be deemed to be "Citizens South Banking Corporation" for purposes of
this Agreement. However, this Agreement and the Corporation's obligations under
this Agreement are not otherwise assignable, transferable or delegable by the
Corporation. By agreement in form and substance satisfactory to the Executive,
the Corporation shall require any successor to all or substantially all of the
business or assets of the Corporation expressly to assume and agree to perform
this Agreement in the same manner and to the same extent the Corporation would
be required to perform if no such succession had occurred.
(b) This Agreement Is Enforceable by the Executive and His Heirs. This
Agreement will inure to the benefit of and be enforceable by the Executive's
personal or legal representatives, executors, administrators, successors, heirs,
distributes and legatees.
(c) This Agreement Is Personal in Nature and Is Not Assignable. This
Agreement is personal in nature. Without written consent of the other party,
neither party shall assign, transfer, or delegate this Agreement or any rights
or obligations under this Agreement except as expressly provided in this Section
7. Without limiting the generality or effect of the foregoing, the Executive's
right to receive payments hereunder is not assignable or transferable, whether
by pledge, creation of a security interest, or otherwise, except for a transfer
by Executive's will or by the laws of descent and distribution. If the Executive
attempts an assignment or transfer that is contrary to this Section 7, the
Corporation shall have no liability to pay any amount to the assignee or
transferee.
8. NOTICES
All notices, requests, demands and other communications hereunder shall be
in writing and shall be deemed to have been duly given if delivered by hand or
mailed, certified or registered mail, return receipt requested, with postage
prepaid (a) to the Corporation at ▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 28053-2249, Attn: Corporate Secretary, (b) to the
Executive at the address appearing on the Corporation's records, or (c) to such
other address as the party may designate by like notice.
9. CAPTIONS AND COUNTERPARTS
The headings and subheadings used in this Agreement are included solely for
convenience and shall not affect the interpretation of this Agreement. This
Agreement may be executed in one or more counterparts, each of which shall be
deemed to be an original, but all of which together shall constitute one and the
same agreement.
10. AMENDMENTS AND WAIVERS
No provision of this Agreement may be modified or amended except in a
writing signed by the Executive and by the Corporation. No waiver by either
party of any breach by the other or waiver of compliance with any condition or
provision of this Agreement shall be deemed a waiver of similar provisions or
conditions at the same time or at any other time.
11. SEVERABILITY
The provisions of this Agreement shall be deemed severable. The invalidity
or unenforceability of any provision shall not affect the validity or
enforceability of the
other provisions of this Agreement. Any provision held to be invalid or
unenforceable shall be reformed to the extent (and only to the extent) necessary
to make it valid and enforceable.
12. GOVERNING LAW
The validity, interpretation, construction and performance of this
Agreement shall be governed by and construed in accordance with the substantive
laws of the State of North Carolina, without giving effect to the principles of
conflict of laws of such State.
13. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the Corporation and
the Executive concerning the subject matter hereof. No rights are granted to the
Executive under this Agreement other than those specifically set forth herein.
No agreements or representations, oral or otherwise, expressed or implied
concerning the subject matter of this Agreement have been made by either party
that are not set forth expressly in this Agreement.
Without limiting the generality of the foregoing, the parties hereto
acknowledge and agree that this Agreement supersedes in its entirety any prior
Merger/Acquisition Protection Agreement entered into by the Executive and the
Corporation or by the Executive and Citizens South Bank, as amended or
supplemented. Any Merger/Acquisition Protection Agreement entered into prior to
this Agreement shall hereafter be void and of no force or effect.
IN WITNESS WHEREOF, the parties have executed this Severance Agreement as
of the date first written above.
CITIZENS SOUTH BANKING CORPORATION
By:
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Its:
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EXECUTIVE
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