ITEM 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers; Compensatory Arrangements of Certain Officers
| (e) | Compensatory Arrangement |
On July 17, 2023, Catalyst Bank (the “Bank”), the wholly owned subsidiary of Catalyst Bancorp, Inc. (the “Company”), entered into an employment agreement (the “Employment Agreement”) with Joseph B. Zanco, President and Chief Executive Officer. The term of the Employment Agreement will commence on August 17, 2023 (upon the expiration of Mr. Zanco’s current employment agreement) and will expire on August 17, 2026, unless renewed or extended. Any such renewal or extension of the agreement will be reflected in an amendment or supplement to such agreement.
Pursuant to the Employment Agreement, Mr. Zanco agrees to continue his service as President and Chief Executive Officer of the Bank for a term of three years ending August 17, 2026. Prior to the expiration of the term of the agreement, the Board of Directors will review the agreement to determine whether to extend the term of the Employment Agreement for three additional years or such other time period mutually agreed upon. The Employment Agreement provides for a base salary of $300,000, which may be increased at the discretion of the Board of Directors of Catalyst Bank.
The Employment Agreement provides that Catalyst Bank will offer Mr. Zanco the maximum allocation allowed for stock options and restricted stock awards under established stock-based benefit plans (currently 25% of the stock compensation pools). In addition to life insurance benefits applicable for all employees, Mr. Zanco will receive additional life insurance of $500,000 payable to his spouse or other beneficiary upon his death. The Employment Agreement also provides that Mr. Zanco will continue to receive a supplemental benefit of $750,000, vesting over 15 years pursuant to his Restricted Executive Benefit Agreement entered into on October 22, 2020.
The Employment Agreement is terminable with or without cause by Catalyst Bank. Mr. Zanco has no right to compensation or other benefits pursuant to the employment agreement for any period after termination for cause, except for benefits that have vested and been earned prior to termination. The employment agreement provides that in the event of an involuntary termination of employment (including a voluntary termination by Mr. Zanco as a result of a material breach of the agreement by Catalyst Bank or for “good reason”, including a change in the executive’s position, salary or duties without his consent), Mr. Zanco would be entitled to (1) a lump sum cash severance payment which is equal to twelve months of his base salary as of the date of termination, subject to Mr. Zanco executing a release of any claims against Catalyst Bank or its affiliates and (2) continued health insurance coverage until the earlier of twelve months or the date he receives substantially similar benefits from another employer.
The Employment Agreement provides that if Mr. Zanco’s employment terminates without cause or with good reason on the effective date of a change in control, as defined in the agreement, or within 30 calendar days after a change in control, then Mr. Zanco would be entitled to (1) a lump sum cash severance payment equal to 36 months of the greater of his base salary at the time of the change in control or the date of his termination and (2) continued health insurance coverage until the earlier of 36 months or the date he receives substantially similar benefits from another employer. If the agreement terminates as a result of Mr. Zanco’s death, his estate or beneficiary will be paid his base salary for twelve weeks and continued health coverage for his family over the same period.
The foregoing description is qualified in its entirety by reference to the full text of the Employment Agreement, a copy of which is attached hereto as an exhibit to this Current Report on Form 8-K and is incorporated herein by reference.
