EXHIBIT 10.1
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Employment
Agreement") is made and entered into as of November 17, 2008 by and among
Citizens South Banking Corporation, a Delaware corporation, Citizens South Bank,
a federally chartered savings bank and wholly owned subsidiary of Citizens South
Banking Corporation (the "Company"), and Kim S. Price, President and Chief
Executive Officer (the "EXECUTIVE"). Citizens South Banking Corporation and
Citizens South Bank are hereinafter sometimes collectively or individually
referred to as "CITIZENS SOUTH."
WHEREAS, the Executive is currently employed as the President and Chief
Executive Officer of Citizens South pursuant to an employment agreement between
Citizens South and the Executive originally entered into as of May 17, 2004 (the
"Original Agreement");
WHEREAS, Citizens South 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, Citizens South desires to ensure that Citizens South is assured of
the continued availability of the Executive's services as provided in this
Agreement;
WHEREAS, the Executive is willing to serve Citizens South on the terms and
conditions hereinafter set forth; 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 Citizens South, is contemplated insofar as
Citizens South or any affiliates are concerned;
NOW THEREFORE, in consideration of these premises, the mutual covenants
contained herein, and other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1
EMPLOYMENT
1.1 EMPLOYMENT. Citizens South Banking Corporation and Citizens South Bank
hereby employ the Executive to serve as President and Chief Executive Officer
according to the terms and conditions of this Employment Agreement, effective on
the date first written above (the "Effective Date") and for the period stated in
Article 3. The Executive hereby accepts employment according to the terms and
conditions of this Employment Agreement and for the period stated in Article 3.
The Executive also agrees to serve as an officer or director of any subsidiary
or affiliate of Citizens South, if elected. For purposes of this Employment
Agreement, the term "affiliate" means any entity that directly or indirectly
through one or more intermediaries controls, is controlled by, or is under
common control with Citizens South Bank.
1.2 SERVICE ON THE BOARD OF DIRECTORS.
(a) BOARD OF DIRECTORS OF CITIZENS SOUTH BANKING CORPORATION. The Executive
is currently serving as a director of Citizens South Banking Corporation.
Citizens South Banking Corporation shall nominate the Executive for election as
a director at such times as necessary so that the Executive will, if elected by
stockholders, remain a director of Citizens South Banking Corporation throughout
the term of this Employment Agreement. The Executive hereby consents to serve as
a director of Citizens South Banking Corporation, and the Executive hereby
consents to being named as a director of Citizens South Banking Corporation in
documents filed by Citizens South Banking Corporation with the Securities and
Exchange Commission. The Executive shall be deemed to have resigned as a
director of Citizens South Banking Corporation effective immediately after
termination of the Executive's employment under Article 5 of this Employment
Agreement, regardless of whether the Executive submits a formal, written
resignation as director.
(b) BOARD OF DIRECTORS OF CITIZENS SOUTH BANK. The Executive is currently
serving as a director of Citizens South Bank. The board of directors of Citizens
South Banking Corporation and the board of directors of Citizens South Bank
shall undertake every lawful effort to ensure that the Executive continues
throughout the term of his employment to be elected or reelected as a director
of Citizens South Bank. The Executive shall be deemed to have resigned as a
director of Citizens South Bank effective immediately after termination of the
Executive's employment under Article 5 of this Employment Agreement, regardless
of whether the Executive submits a formal, written resignation as director.
ARTICLE 2
DUTIES
As President and Chief Executive Officer of Citizens South Banking
Corporation, the Executive shall serve under the direction of Citizens South
Banking Corporation's board of directors and in accordance with Citizens South
Banking Corporation's Articles of Incorporation and Bylaws, as each may be
amended or restated from time to time. As President and Chief Executive Officer
of Citizens South Bank, the Executive shall serve under the direction of
Citizens South Bank's board of directors and in accordance with Citizens South
Bank's Charter and Bylaws, as each may be amended or restated from time to time.
The Executive shall report directly to the board of directors. He shall serve
Citizens South faithfully, diligently, competently, and to the best of his
ability, and he shall exclusively devote his full time, energy, and attention to
the business of Citizens South and to the promotion of Citizens South's
interests throughout the term of this Employment Agreement. Without the written
consent of Citizens South Banking Corporation's board of directors, the
Executive shall not render services to or for any person, firm, corporation, or
other entity or organization in exchange for compensation, regardless of the
form in which such compensation is paid and regardless of whether it is paid
directly or indirectly to the Executive. Nothing in this Article 2 shall prevent
the Executive from managing his personal investments and affairs, provided that
doing so does not interfere with the proper performance of his duties and
responsibilities as President and Chief Executive Officer.
ARTICLE 3
TERM OF EMPLOYMENT
The initial term of this Employment Agreement shall be for a period of
three years, commencing on the Effective Date. On the first anniversary of the
Effective Date of this Employment Agreement and on each anniversary thereafter,
this Employment Agreement shall be extended automatically for one additional
year unless Citizens South's board of directors determines that the term shall
not be extended.
If the board of directors determines not to extend the term, it shall
notify the Executive in writing at least ten days before the anniversary date.
If the board decides not to extend the term of this Employment Agreement, this
Employment Agreement shall nevertheless remain in force until its term expires.
The board's decision not to extend the term of this Employment Agreement shall
not - by itself - give the Executive any rights under this Employment Agreement
to claim an adverse change in his position, compensation, or circumstances or
otherwise to claim entitlement to severance or termination benefits under
Articles 6 or 7 of this Employment Agreement. References herein to the term of
this Employment Agreement shall refer to the initial term, as the same may be
extended. Unless sooner terminated, the Executive's employment shall terminate
when he attains age 65.
For one full year after expiration of the term of this Employment Agreement
or termination of the Executive's employment, the Executive shall furnish
information and assistance to Citizens South as may reasonably be required by
Citizens South in any litigation in which Citizens South or any of subsidiary or
affiliate is or may become a party, upon reasonable notice to the Executive.
ARTICLE 4
COMPENSATION AND OTHER BENEFITS
4.1 BASE SALARY. In consideration of the Executive's performance of his
obligations under this Employment Agreement, Citizens South Banking Corporation
shall pay or cause to be paid to the Executive a salary at the annual rate of
not less than $259,375, payable in semi-monthly installments. The Executive's
salary shall be reviewed annually by the Compensation Committee of Citizens
South's board of directors or by such other board committee as has jurisdiction
over executive compensation. The Executive's salary may be increased at the
discretion of the committee having jurisdiction over executive compensation.
However, the Executive's salary shall not be reduced. The Executive's salary, as
the same may be increased from time to time, is referred to in this Employment
Agreement as the "BASE SALARY." Nothing in this Employment Agreement is intended
to govern or restrict the kind or amount of compensation the Executive may
receive in his capacity as a director of Citizens South.
4.2 BENEFIT PLANS AND PERQUISITES. The Executive shall be entitled
throughout the term of this Employment Agreement to participate in any and all
officer or employee compensation, bonus, incentive, and benefit plans in effect
from time to time, including without limitation plans providing pension,
medical, dental, disability, and group life benefits, including Citizens South's
401(k) Plan, and to receive any and all other fringe benefits provided from time
to time, provided that the Executive satisfies the eligibility requirements for
any such plans or benefits. Without limiting the generality of the foregoing:
(a) PARTICIPATION IN STOCK PLANS. The Executive shall be eligible to
participate in Citizens South's stock option plans and other stock-based
compensation, incentive, bonus, or purchase plans existing on the date of this
Employment Agreement or adopted during the term of this Employment Agreement.
(b) CLUB DUES. During the term of this Employment Agreement, Citizens South
shall pay or cause to be paid the Executive's membership assessments and dues in
civic clubs and such expenses shall be paid promptly by Citizens South and in
any event no later than March 15 of the year immediately following the year in
which the expenses were incurred.
(c) REIMBURSEMENT OF BUSINESS EXPENSES. The Executive shall be entitled to
reimbursement of all reasonable business expenses incurred in performing his
obligations under this Employment Agreement, including but not limited to all
reasonable business travel and entertainment expenses incurred while acting at
the request of or in the service of Citizens South and reasonable expenses for
attendance at annual and other periodic meetings of trade associations and such
reimbursement shall be paid promptly by Citizens South and in any event no later
than March 15 of the year immediately following the year in which the expenses
were incurred.
(d) USE OF AUTOMOBILE. The Executive shall have the use of an automobile
titled in Citizens South's name for use by the Executive in carrying out his
duties for Citizens South, the insurance and maintenance expenses of which shall
be paid by Citizens South. As additional compensation, the Executive may use
such automobile for personal purposes, provided that the Executive renders an
accounting of his business and personal use to Citizens South in accordance with
regulations under the Code.
4.3 VACATION. The Executive shall be entitled to paid annual vacation and
sick leave in accordance with the policies established from time to time by
Citizens South. The Executive shall not be entitled to any additional
compensation for failure to use allotted vacation or sick leave, nor shall the
Executive be entitled to accumulate unused sick leave from one year to the next
unless authorized by Citizens South's board of directors to do so. Vacation days
not used in a given year may not be carried over from one calendar year to the
next.
4.4 INDEMNIFICATION AND INSURANCE.
(a) INDEMNIFICATION. Citizens South Banking Corporation shall indemnify the
Executive or cause the Executive to be indemnified with respect to his
activities as a director, officer, employee, or agent of Citizens South Banking
Corporation or Citizens South Bank or as a person who is serving or has served
at the request of Citizens South Banking Corporation (a "REPRESENTATIVE") as a
director, officer, employee, agent, or trustee of an affiliated corporation,
joint venture trust or other enterprise, domestic or foreign, in which Citizens
South Banking Corporation has a direct or indirect ownership interest against
expenses (including without limitation attorneys' fees, judgments, fines, and
amounts paid in settlement) actually and reasonably incurred by him ("EXPENSES")
in connection with any claim against the Executive that is the subject of any
threatened, pending, or completed action, suit, or other type of proceeding,
whether civil, criminal, administrative, investigative, or otherwise and whether
formal or informal (a "PROCEEDING"), to which the Executive was, is, or is
threatened to be made a party by reason of the Executive being or having been
such a director, officer, employee, agent, or representative.
The indemnification provided herein shall not be exclusive of any other
indemnification or right to which the Executive may be entitled and shall
continue after the Executive has ceased to occupy a position as an officer,
director, employee, agent or representative with respect to Proceedings relating
to or arising out of the Executive's acts or omissions during his service in
such position. The benefits provided to the Executive under this Employment
Agreement for the Executive's service as a representative shall be payable if
and only if and only to the extent that reimbursement to the Executive by the
affiliated entity with which the Executive has served as a representative,
whether pursuant to agreement, applicable law, articles of incorporation or
association, by-laws or regulations of the entity, or insurance maintained by
such affiliated entity, is insufficient to compensate the Executive for Expenses
actually incurred and otherwise payable by Citizens South under this Employment
Agreement. Any payments in fact made to or on behalf of the Executive directly
or indirectly by the affiliated entity with which the Executive served as a
representative shall reduce the obligation of Citizens South hereunder.
(b) EXCLUSIONS. Anything herein to the contrary notwithstanding, however,
nothing in this section 4.4 requires indemnification, reimbursement, or payment
by Citizens South Banking Corporation or Citizens South Bank, and the Executive
shall not be entitled to demand indemnification, reimbursement or payment
hereunder:
(1) if and to the extent indemnification, reimbursement, or payment
constitutes a "prohibited indemnification payment" within the meaning of
Federal Deposit Insurance Corporation Rule 359.1(l)(1) [12 CFR
359.1(l)(1)], or
(2) for any claim or any part thereof as to which the Executive shall
have been determined by a court of competent jurisdiction, from which no
appeal is or can be taken, by clear and convincing evidence, to have acted
with deliberate intent to cause injury to Citizens South Banking
Corporation or Citizens South Bank or with reckless disregard for the best
interests of Citizens South Banking Corporation, or
(3) for any claim or any part thereof arising under Section 16(b) of
the Securities Exchange Act of 1934 as a result of which the Executive is
required to pay any penalty, fine, settlement, or judgment, or
(4) for any obligation of the Executive based upon or attributable to
the Executive gaining in fact any personal gain, profit, or advantage to
which he was not entitled, or
(5) any proceeding initiated by the Executive without the consent or
authorization of Citizens South Banking Corporation's board of directors,
but this exclusion shall not apply with respect to any claims brought by
the Executive (a) to enforce his rights under this Employment Agreement, or
(b) in any Proceeding initiated by another person or entity whether or not
such claims were brought by the Executive against a person or entity who
was otherwise a party to such proceeding.
(c) INSURANCE. Citizens South Banking Corporation shall maintain or cause
to be maintained liability insurance covering the Executive throughout the term
of this Employment Agreement.
ARTICLE 5
TERMINATION OF EMPLOYMENT
5.1 TERMINATION BY THE EMPLOYER.
(a) DEATH OR DISABILITY. The Executive's employment shall terminate
automatically on the date of the Executive's death. If the Executive dies in
active service to Citizens South, his estate, legal representatives, or named
beneficiaries (as directed by Executive in writing) shall for one year after the
date of the Executive's death be paid the Base Salary at the rate in effect at
the time Executive's death which shall commence within 30 days following the
date of the Executive's death, and Citizens South shall continue to provide
non-taxable medical and dental benefits normally provided for an executive's
family for one year after the Executive's death.
By delivery of written notice 30 days in advance to the Executive, Citizens
South may terminate the Executive's employment if the Executive is disabled. For
purposes of this Employment Agreement, the Executive shall be deemed to be
"DISABLED" if: (i) the Executive is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
that can be expected to result in death, or last for a continuous period of not
less than 12 months; (ii) by reason of any medically determinable physical or
mental impairment that can be expected to result in
death, or last for a continuous period of not less than 12 months, the Executive
is receiving income replacement benefits for a period of not less than three
months under an accident and health plan covering employees of the Citizens
South; or (iii) Executive is determined to be totally disabled by the Social
Security Administration. If the Executive is terminated by either of Citizens
South Banking Corporation or Citizens South Bank because of disability, his
employment with the other shall also terminate at the same time.
(b) TERMINATION WITHOUT CAUSE. With written notice to the Executive 60 days
in advance, Citizens South may terminate the Executive's employment without
Cause. If the Executive is terminated without Cause by either of Citizens South
Banking Corporation or Citizens South Bank, he shall be deemed also to have been
terminated without Cause by the other.
(c) TERMINATION WITH CAUSE. Effective on the date on which termination
notice is given to the Executive and without the requirement of advance notice
to the Executive, Citizens South may terminate the Executive's employment with
Cause. If the Executive is terminated for Cause by either of Citizens South
Banking Corporation or Citizens South Bank, he shall be deemed also to have been
terminated for Cause by the other. The Executive shall not be deemed to have
been terminated for Cause under this Employment Agreement unless and until there
is delivered to him a copy of a resolution duly adopted at a meeting of the
board of directors called and held for such purpose, which resolution shall (1)
contain findings that, in the good faith opinion of the board, the Executive has
committed an act constituting Cause, and (2) specify the particulars thereof.
The resolution shall be deemed to have been duly adopted if and only if it is
adopted by the affirmative vote of at least 75% of the directors of Citizens
South Banking Corporation then in office or 75% of the directors of Citizens
South Bank then in office, in either case excluding the Executive, at a meeting
duly called and held for that purpose. Notice of the meeting and the proposed
termination for Cause shall be given to the Executive a reasonable amount of
time before the board's meeting. The Executive and his counsel (if the Executive
chooses to have counsel present) shall have a reasonable opportunity to be heard
by the board at the meeting. Nothing in this Employment Agreement limits the
Executive's or his beneficiaries' right to contest the validity or propriety of
the board's determination of Cause.
(d) DEFINITION OF CAUSE. For purposes of this Employment Agreement, "CAUSE"
means termination because of the Executive's personal dishonesty, incompetence,
willful misconduct, breach of fiduciary duty involving personal profit, material
breach of Citizens South's Code of Ethics, material violation of the
Sarbanes-Oxley requirements for officers of public companies that in the
reasonable opinion of the directors of Citizens South will likely cause
substantial financial harm or substantial injury to the reputation of Citizens
South, willfully engaging in actions that in the reasonable opinion of the
directors of Citizens South will likely cause substantial financial harm or
substantial injury to the business reputation of Citizens South, intentional
failure to perform stated duties, willful violation of any law, rule or
regulation (other than routine traffic violations or similar offenses) or final
cease-and-desist order, or material breach of any provision of the contract.
5.2 TERMINATION BY THE EXECUTIVE. The Executive may terminate his
employment with written notice to Citizens South Banking Corporation 60 days in
advance, whether with or without Good Reason. If the Executive terminates with
Good Reason, the termination will take effect at the conclusion of the 60-day
period unless the event or circumstance constituting Good Reason is cured by
Citizens South or unless the notice of termination for Good Reason is revoked by
the Executive within the 60-day period. For purposes of this Agreement, "GOOD
REASON" means any of the following events occur -
(a) Reduced Base Salary: involuntary reduction of the Executive's Base
Salary,
(b) Participation in Benefit Plans Reduced or Terminated: involuntary
reduction of the Executive's bonus, incentive, and other compensation award
opportunities under Citizens South Banking Corporation's benefit plans and
Citizens South Bank's benefit plans, unless in the case of either company a
company-wide reduction of all officers' award opportunities occurs
simultaneously, or involuntary termination of the Executive's participation in
any officer or employee benefit plan maintained by Citizens South Banking
Corporation or by Citizens South Bank, unless the plan is terminated because of
changes in law or loss of tax deductibility to Citizens South with respect to
contributions to the plan, or unless the plan is terminated as a matter of
Citizens South Banking Corporation policy or Citizens South Bank policy applied
equally to all participants in the plan,
(c) Reduced Responsibilities or Status:
(1) assignment to the Executive of duties that are materially
inconsistent with the Executive's position as Citizens South Banking
Corporation's principal executive officer or that represent a reduction of
his authority,
(2) failure to appoint or reappoint the Executive as President and
Chief Executive Officer of Citizens South Banking Corporation,
(3) failure to nominate the Executive as a director of Citizens South
Banking Corporation, or
(4) failure to elect or reelect the Executive or cause the Executive
to be elected or reelected to the board of directors of Citizens South Bank
in accordance with Section 1.2(b) of this Employment Agreement, without the
Executive's written consent,
(d) Failure to Obtain Assumption Agreement: failure to obtain an assumption
of Citizens South's obligations under this Employment Agreement by any successor
to Citizens South Banking Corporation, regardless of whether such entity becomes
a successor to Citizens South Banking Corporation as a result of a merger,
consolidation, sale of assets, or other form of reorganization,
(e) Material Breach: a material breach of this Employment Agreement by
Citizens South that is not corrected within a reasonable time, or
(f) Relocation of the Executive: relocation of Citizens South Banking
Corporation's principal executive offices, or requiring the Executive to change
his principal work location, to any location that is more than 15 miles from the
location of Citizens South Banking Corporation's principal executive offices on
the date of this Employment Agreement.
5.3 NOTICE. Any purported termination by Citizens South or by the Executive
shall be communicated by written notice of termination to the other. The notice
must state the specific termination provision of this Employment Agreement
relied upon. The notice must also state the date on which termination shall
become effective, which shall be a date not earlier than the date of the
termination notice. If termination is for Cause or with Good Reason, the notice
must state in reasonable detail the facts and circumstances forming the basis
for termination of the Executive's employment.
ARTICLE 6
COMPENSATION AND BENEFITS AFTER TERMINATION
6.1 CAUSE. If the Executive's employment terminates for Cause, the
Executive shall receive the salary to which he was entitled through the date on
which termination became effective and any other benefits that may be available
to him under Citizens South's benefit plans and policies in effect on the date
of termination. All unvested stock options held by the Executive shall become
null and void effective immediately upon the Executive's receipt of notice of
termination for Cause.
6.2 TERMINATION BY THE EXECUTIVE OTHER THAN FOR GOOD REASON. If the
Executive terminates employment other than for Good Reason, the Executive shall
receive the salary to which he is entitled through the date on which his
termination becomes effective and any other benefits that may be available to
him under Citizens South's benefit plans and policies.
6.3 CONTINUED BASE SALARY IN THE CASE OF TERMINATION BECAUSE OF DISABILITY.
If the Executive's employment terminates because of disability, the Executive
shall receive the benefits provided under any disability program sponsored by
Citizens South. To the extent that such benefits are less than Executive's Base
Salary, Citizens South shall pay the Executive an amount equal to the difference
between such disability plan benefits and the amount of the Executive's Base
Salary for the remaining term of this Employment Agreement or for one year,
whichever is longer. Accordingly, any payments required hereunder shall commence
within thirty (30) days from the Executive's termination due to disability and
be payable in semi-monthly installments.
6.4 TERMINATION WITHOUT CAUSE AND TERMINATION FOR GOOD REASON.
(a) CONTINUED SALARY. If Citizens South terminates the Executive's
employment without Cause or if the Executive terminates employment for Good
Reason, the Executive shall continue to receive the Base Salary for the
unexpired term of this Employment Agreement, but he shall not be entitled to
continued participation in Citizens South's or a subsidiary's 401(k) retirement
plan or any stock-based plans. Payments of Base Salary under this Section 6.4(a)
shall not be reduced or offset by any other compensation the Executive receives
through other employment after termination of his employment with Citizens
South. The provisions of this Section 6.4 are subject to Article 9 of this
Employment Agreement. Payments of Base Salary shall be made in semi-monthly
installments and shall commence within 30 days following the Executive's
termination of employment pursuant to this Section 6.4. Notwithstanding the
foregoing, in the event the Executive is a Specified Employee (within the
meaning of Treasury Regulations ss.1.409A-1(i)), then, to the extent necessary
to avoid penalties under Code Section 409A, any payments to which Executive is
entitled for the first six months following termination of employment shall be
held and shall be paid to the Executive on the first day of the seventh month
following termination of the Executive's employment. The withheld payments plus
interest at six percent (6%) shall be paid to the Executive on the first day of
the seventh month following the Executive's termination of employment pursuant
to this Section 6.4.
Citizens South and the Executive acknowledge and agree that the
compensation and benefits under this Section 6.4 shall not be payable if
compensation and benefits are payable or shall have been previously paid to the
Executive under Article 7 of this Agreement. That is, the parties acknowledge
and agree that the Executive shall not be entitled to duplicative compensation
and benefit payments under this Section 6.4 and under Article 7 if the
Executive's employment is terminated without Cause or if the Executive
terminates employment with Good Reason.
(b) CASH-OUT OF VALUE OF UNVESTED STOCK OPTIONS. If Citizens South
terminates the Executive's employment without Cause or if the Executive
terminates employment with Good Reason before full vesting of stock options then
held by him, the Executive shall be entitled to receive from Citizens South an
amount in cash equal to the value of the unvested stock options as of the
effective date of termination. Amounts payable under this paragraph (b) shall be
paid in a single lump sum at the same time the first payment is made pursuant to
Section 6.4(a) above.
(c) CASH-OUT OF THE EXECUTIVE'S 401(K) RETIREMENT PLAN ACCOUNT. If Citizens
South terminates the Executive's employment without Cause or if the Executive
terminates employment with Good Reason before full vesting of the amounts
credited to his account as a result of matching or discretionary contributions
by Citizens South under Citizens South's 401(k) Plan, the Executive shall be
entitled to receive from Citizens South an amount in cash equal to the value of
any unvested contributions payable at the same time the first payment is made
pursuant to Section 6.4(a) above.
(d) SEPARATION FROM SERVICE. For purposes of Section 6.4, termination of
the Executive's employment without Cause and the Executive's termination of
employment for Good Reason 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 Citizens South 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.
6.5 POST-TERMINATION LIFE AND MEDICAL COVERAGE. If the Executive's
employment terminates involuntarily but without Cause, or voluntarily but with
Good Reason, or because of disability, until expiration of the remaining term of
this Employment Agreement Citizens South shall continue, or cause to be
continued at Citizens South's expense, life insurance and non-taxable medical
and dental coverage substantially identical to the coverage maintained by
Citizens South Bank for the Executive prior to his termination; provided,
however, that such benefits shall not be provided if they would constitute an
unsafe or unsound banking practice relating to executive compensation and
employment contracts according to 12 CFR 563.39 and 12 CFR 563.161, as in effect
currently or as in effect hereafter.
6.6 SUPPLEMENTAL RETIREMENT PLAN. Citizens South and the Executive have
entered into a Salary Continuation Agreement dated as of January 1, 2004 (as may
be amended from time to time). Unless the Salary Continuation Agreement
explicitly provides otherwise, whether benefits are properly payable to the
Executive under the Salary Continuation Agreement shall be determined solely by
reference to that agreement.
ARTICLE 7
CHANGE IN CONTROL BENEFITS
7.1 CHANGE IN CONTROL BENEFITS.
(a) CHANGE IN CONTROL BENEFITS. If a Change in Control occurs during the
term of this Employment Agreement, Citizens South shall make or cause to be made
a lump-sum payment to the Executive in an amount in cash equal to three times
the Executive's annual compensation within thirty (30) days following the
effective date of the Change in Control. For this purpose, annual compensation
means (1) the Executive's Base Salary at the time of the Change in Control plus
(2) the average of the cash bonuses and cash incentive compensation earned for
the three calendar years immediately preceding the year in which the Change in
Control occurs, regardless of when the bonus or incentive compensation is paid
and regardless of whether all or part of the bonus or incentive compensation is
subject to elective deferral. For this purpose bonus and incentive compensation
includes cash bonus and cash incentive compensation only and specifically
excludes the value of stock-based compensation, including stock options and
restricted stock. The amount payable to the Executive hereunder shall not be
reduced to account for the time value of money or discounted to present value.
(b) BENEFIT PLANS: In addition to life insurance and non-taxable medical
and dental coverage under Section 6.5 of this Employment Agreement and any
benefits to which the Executive may be entitled under the Salary Continuation
Agreement referred to in Section 6.6 of this Employment Agreement, if a Change
in Control occurs, Citizens South shall (1) cause the Executive to become fully
vested in any 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, and (2) pay the Executive a lump sum cash amount
equal to the amount of the matching and profit sharing contributions that would
have been contributed to the Executive's 401(k) plan account, if any, that would
have been made had the Executive's employment not terminated before the end of
the plan year, with such payment to be made within thirty (30) days following
the effective date of a Change in Control.
7.2 DEFINITION OF CHANGE IN CONTROL
For purposes of this Employment Agreement, "CHANGE IN CONTROL" means any
one of the following events occurs -
(a) CHANGE IN THE OWNERSHIP OF THE COMPANY OR THE BANK. A change in the
ownership of the Company or the Bank (collectively, as applicable, the
"Employers") shall occur on the date that any one person, or more than one
person acting as a group (as defined in Treasury Regulation Section
1.409A-3(i)(5)(v)(B)), acquires ownership of stock of the Employers 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
Employers. 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 Employers, the acquisition of additional
stock by the same person or persons is not considered to cause a change in the
ownership of the Employers (or to cause a change in the effective control of the
Employers (within the meaning of paragraph (b) below). 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 Employers acquires its stock in exchange
for property will be treated as an acquisition of stock for purposes of this
section. This paragraph (a) applies only when there is a transfer of stock of a
corporation (or issuance of stock of a corporation) and stock in such
corporation remains outstanding after the transaction
(b) CHANGE IN THE EFFECTIVE CONTROL OF THE COMPANY OR THE BANK. A change in
the effective control of the Employers shall occur on the date that either (i)
any one person, or more than one person acting as a group (as defined in
Treasury Regulation Section 1.409A-3(i)(5)(v)(B)), 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 possessing 30
percent or more of the total voting power of the stock of such corporation; 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, provided that for purposes of
this paragraph (b)(ii), the term corporation refers solely to a corporation for
which no other corporation is a majority shareholder. In the absence of an event
described in paragraph (i) or (ii), a change in the effective control of a
corporation will not have occurred. If any one person, or more than one person
acting as a group, is considered to effectively control a corporation (within
the meaning of this paragraph (b)), the acquisition of additional control of the
corporation by the same person or persons is not considered to cause a change in
the effective control of the corporation (or to cause a change in the ownership
of the corporation within the meaning of paragraph (a)). Persons will not be
considered to be acting as a group solely because they purchase or own stock of
the same corporation at the same time, or as a result of the same public
offering.
(c) CHANGE IN THE OWNERSHIP OF A SUBSTANTIAL PORTION OF THE COMPANY'S OR
BANK'S ASSETS. A change in the ownership of a substantial portion of the
Employer's assets shall occur on the date that any one person, or more than one
person acting as a group (as defined in Treasury Regulation Section
1.409A-3(i)(5)(vii)(C)), 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 that have a total gross fair market value equal to
or more than 40% of the total gross fair market value of all of the assets of
the corporation immediately prior to such acquisition or acquisitions. For this
purpose, gross fair market value means the value of the assets of the
corporation, 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 (c) when there is a transfer to an entity that is
controlled by the shareholders of the transferring corporation immediately after
the transfer.
Each of the subparagraphs (a) through (c) of this Section shall be construed and
interpreted consistent with the requirements of Code Section 409A and any
Treasury Regulations or other guidance issued thereunder.
7.3 NO MULTIPLE SEVERANCE PAYMENTS. If the Executive receives payment under
Section 7.1 he shall not be entitled to any additional severance benefits under
Section 6.4 of this Employment Agreement.
7.4 GROSS-UP FOR TAXES.
(a) Reimbursement to Account for Excise Taxes. If the Executive receives
the lump sum payment under Section 7.1 of this Employment Agreement and
acceleration of benefits under any other benefit, compensation, or incentive
plan or arrangement with Citizens South (collectively, the "TOTAL BENEFITS"),
and if any part of the Total Benefits is subject to the Excise Tax under Code
Section 280G and Code Section 4999(the "EXCISE TAX"), Citizens South shall
reimburse the Executive the following additional amounts, consisting of (1) a
payment equal to the Excise Tax payable by the Executive under Code Section 4999
on the Total Benefits (the "EXCISE TAX PAYMENT") and (2) a payment equal to the
amount necessary to provide the Excise Tax Payment net of all income, payroll,
and excise taxes. Together, the additional amounts described in clauses (1) and
(2) are referred to in this Employment Agreement as the "GROSS-UP PAYMENT
AMOUNT." Payment of the Gross-Up Payment Amount shall be made within thirty (30)
days following the effective date of the Change in Control.
CALCULATING THE EXCISE TAX. For purposes of determining whether any of the
Total Benefits will be subject to the Excise Tax and for purposes of determining
the amount of the Excise Tax,
(1) Determination of "Parachute Payments" Subject to the Excise Tax:
any other payments or benefits received or to be received by the Executive
in connection with a Change in Control or the Executive's termination of
employment (whether under the terms of this Employment Agreement or any
other agreement or any other benefit plan or arrangement with Citizens
South, any person whose actions result in a Change in Control, or any
person affiliated with Citizens South or such person) shall be treated as
"PARACHUTE PAYMENTS" within the meaning of Code Section 280G(b)(2), and all
"EXCESS PARACHUTE PAYMENTS" within the meaning of Code Section 280G(b)(1)
shall be treated as subject to the Excise Tax, unless in the opinion of the
certified public accounting firm that is
retained by Citizens South as of the date immediately before the Change in
Control (the "ACCOUNTING FIRM") such other payments or benefits do not
constitute (in whole or in part) parachute payments, or such excess
parachute payments represent (in whole or in part) reasonable compensation
for services actually rendered within the meaning of Code Section
280G(b)(4) in excess (as defined in Code Section 280G(b)(3)), or are
otherwise not subject to the Excise Tax,
(2) Calculation of Benefits Subject to Excise Tax: the amount of the
Total Benefits that shall be treated as subject to the Excise Tax shall be
equal to the lesser of (a) the total amount of the Total Benefits reduced
by the amount of such Total Benefits that in the opinion of the Accounting
Firm are not parachute payments, or (b) the amount of excess parachute
payments within the meaning of Code Section 280G(b)(1) (after applying
clause (1), above), and
(3) Value of Noncash Benefits and Deferred Payments: the value of any
non-cash benefits or any deferred payment or benefit shall be determined by
the Accounting Firm in accordance with the principles of Code Sections
280G(d)(3) and (4).
ASSUMED MARGINAL INCOME TAX RATE. For purposes of determining the Gross-Up
Payment Amount, the Executive shall be deemed to pay federal income taxes at the
highest marginal rate of federal income taxation in the calendar years in which
the Gross-Up Payment Amount is to be made and state and local income taxes at
the highest marginal rate of taxation in the state and locality of the
Executive's residence on the date of termination of employment, net of the
reduction in federal income taxes that can be obtained from deduction of such
state and local taxes (calculated by assuming that any reduction under Code
Section 68 in the amount of itemized deductions allowable to the Executive
applies first to reduce the amount of such state and local income taxes that
would otherwise be deductible by the Executive, and applicable federal FICA and
Medicare withholding taxes).
RETURN OF REDUCED EXCISE TAX PAYMENT OR PAYMENT OF ADDITIONAL EXCISE TAX.
If the Excise Tax is later determined to be less than the amount taken into
account hereunder when the Executive's employment terminated, the Executive
shall repay to Citizens South - when the amount of the reduction in Excise Tax
is finally determined - the portion of the Gross-Up Payment Amount attributable
to the reduction (plus that portion of the Gross-Up Payment Amount attributable
to the Excise Tax, federal, state and local income taxes and FICA and Medicare
withholding taxes imposed on the Gross-Up Payment Amount being repaid by the
Executive to the extent that the repayment results in a reduction in Excise Tax,
FICA and Medicare withholding taxes and/or a federal, state or local income tax
deduction). The Executive shall repay Citizens South as soon as practicable, but
no later than two and one-half months after the end of the year in which the
reimbursement amount has been so determined.
If the Excise Tax is later determined to be more than the amount taken into
account hereunder when the Executive's employment terminated (due, for example,
to a payment whose existence or amount cannot be determined at the time of the
Gross-Up Payment Amount), Citizens South shall reimburse the Executive for that
excess (plus any interest, penalties or additions payable by the Executive for
the excess) within thirty (30) days of such determination.
(b) Responsibilities of the Accounting Firm and Citizens South.
DETERMINATIONS SHALL BE MADE BY THE ACCOUNTING FIRM. Subject to the
provisions of Section 7.4(a), all determinations required to be made under this
Section 7.4(b) - including whether and when a Gross-Up Payment Amount is
required, the amount of the Gross-Up Payment Amount and the assumptions to be
used to arrive at the determination (collectively, the "DETERMINATION") - shall
be made by the Accounting Firm, which shall provide detailed supporting
calculations both to Citizens South and the Executive within 15 business days
after receipt of notice from Citizens South or the Executive that there has been
a Gross-Up Payment Amount, or such earlier time as is requested by Citizens
South.
FEES AND EXPENSES OF THE ACCOUNTING FIRM AND AGREEMENT WITH THE ACCOUNTING
FIRM. All fees and expenses of the Accounting Firm shall be borne solely by
Citizens South. Citizens South shall enter into any agreement requested by the
Accounting Firm in connection with the performance of its services hereunder.
ACCOUNTING FIRM'S OPINION. If the Accounting Firm determines that no Excise
Tax is payable by the Executive, the Accounting Firm shall furnish the Executive
with a written opinion to that effect, and to the effect that failure to report
Excise Tax, if any, on the Executive's applicable federal income tax return will
not result in the imposition of a negligence or similar penalty.
ACCOUNTING FIRM'S DETERMINATION IS BINDING; UNDERPAYMENT AND OVERPAYMENT.
The Determination by the Accounting Firm shall be binding on Citizens South and
the Executive. Because of the uncertainty in determining whether any of the
Total Benefits will be subject to the Excise Tax at the time of the
Determination, it is possible that a Gross-Up Payment Amount that should have
been made will not have been made by Citizens South ("UNDERPAYMENT"), or that a
Gross-Up Payment Amount will be made that should not have been made by Citizens
South ("OVERPAYMENT"). If, after a Determination by the Accounting Firm, the
Executive is required to make a payment of additional Excise Tax, the Accounting
Firm shall determine the amount of the Underpayment that has occurred. The
Underpayment (together with interest at the rate provided in Code Section
1274(d)(2)(B) of the) shall be paid promptly by Citizens South to or for the
benefit of the Executive. If the Gross-Up Payment Amount exceeds the amount
necessary to reimburse the Executive for his Excise Tax according to Section
7.4(a), the Accounting Firm shall determine the amount of the Overpayment that
has been made. The Overpayment (together with interest at the rate provided in
Code Section 1274(d)(2)(B)) shall be paid promptly by the Executive to or for
the benefit of Citizens South. Provided that his expenses are reimbursed by
Citizens South, the Executive shall cooperate with any reasonable requests by
Citizens South in any contests or disputes with the Internal Revenue Service
relating to the Excise Tax.
ACCOUNTING FIRM CONFLICT OF INTEREST. If the Accounting Firm is serving as
accountant or auditor for the individual, entity, or group effecting the Change
in Control, the Executive may appoint another nationally recognized public
accounting firm to make the Determinations required hereunder (in which case the
term "Accounting Firm" as used in this Employment Agreement shall be deemed to
refer to the accounting firm appointed by the Executive under this paragraph).
ARTICLE 8
MISCELLANEOUS
8.1 SUCCESSORS AND ASSIGNS.
(a) This Employment Agreement Is Binding on Citizens South's Successors.
This Employment Agreement shall be binding upon Citizens South Banking
Corporation and any successor to Citizens South Banking Corporation, including
any persons acquiring directly or indirectly all or substantially all of the
business or assets of Citizens South Banking 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
Employment Agreement. But this Employment Agreement and Citizens South's
obligations under this Employment Agreement are not otherwise assignable,
transferable, or delegable by Citizens South. By agreement in form and substance
satisfactory to the Executive, Citizens South Banking Corporation shall require
any successor to all or substantially all of the business or assets of Citizens
South Banking Corporation expressly to assume and agree to perform this
Employment Agreement in the same manner and to the same extent Citizens South
would be required to perform if no such succession had occurred.
(b) This Employment Agreement Is Enforceable by the Executive and His
Heirs. This Employment Agreement will inure to the benefit of and be enforceable
by the Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, and legatees.
(c) This Employment Agreement Is Personal in Nature and Is Not Assignable.
This Employment Agreement is personal in nature. Without written consent of the
other parties, no party shall assign, transfer, or delegate this Employment
Agreement or any rights or obligations under this Employment Agreement, except
as expressly provided herein. 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 the 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 9.1, Citizens South shall have no liability to
pay any amount to the assignee or transferee.
8.2 GOVERNING LAW, JURISDICTION AND FORUM. This Employment Agreement shall
be construed under and governed by the internal laws of the State of North
Carolina, without giving effect to any conflict of laws provision or rule
(whether of the State of North Carolina or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
North Carolina. By entering into this Employment Agreement, the Executive
acknowledges that he is subject to the jurisdiction of both the federal and
state courts in the State of North Carolina. Any actions or proceedings
instituted under this Employment Agreement shall be brought and tried solely in
courts located in Gaston County, North Carolina or in the federal court having
jurisdiction in Gastonia, North Carolina. The Executive expressly waives his
rights to have any such actions or proceedings brought or tried elsewhere.
8.3 ENTIRE AGREEMENT. This Employment Agreement sets forth the entire
agreement of the parties concerning the employment of the Executive by Citizens
South, and any oral or written statements, representations, agreements, or
understandings made or entered into prior to or contemporaneously with the
execution of this Employment Agreement, are hereby rescinded, revoked, and
rendered null and void by the parties. The Salary Continuation Agreement (as may
be amended from time to time) and the Split Dollar Agreement and Endorsement (as
may be amended from time to time) and the parties' rights and obligations
thereunder shall remain in full force and effect according to the terms thereof,
as the same may be amended and restated after the date of this Employment
Agreement. Benefits payable under this Employment Agreement shall not be reduced
by any benefits payable under the Salary Continuation Agreement, and benefits
payable under the Salary Continuation Agreement shall not be reduced by any
benefits payable under this Employment Agreement.
Without limiting the generality of the foregoing, the parties hereto
acknowledge and agree that this Employment Agreement supersedes in its entirety
the 2004 employment agreements entered into by the Executive and Citizens South,
as amended or supplemented. The 2004 employment agreement shall hereafter be
void and of no force or effect.
8.4 NOTICES. Any notice under this Employment Agreement shall be deemed to
have been effectively made or given if in writing and personally delivered,
delivered by mail properly addressed in a sealed envelope, postage prepaid by
certified or registered mail, delivered by a reputable overnight delivery
service, or sent by facsimile. Unless otherwise changed by notice, notice shall
be properly addressed to the Executive if addressed to the address of the
Executive on the books and records of Citizens South Banking Corporation at the
time of the delivery of such notice, and properly addressed to Citizens South
Banking Corporation if addressed to Citizens South Banking Corporation at 519
South New Hope Road, Gastonia, North Carolina 28054-4040, Attention: Corporate
Secretary.
8.5 SEVERABILITY. In the case of conflict between any provision of this
Employment Agreement and any statute, regulation, or judicial precedent, the
latter shall prevail, but the affected provisions of this Employment Agreement
shall be curtailed and limited solely to the extent necessary to bring them
within the requirements of law. If any provision of this Employment Agreement is
held by a court of competent jurisdiction to be indefinite, invalid, void or
voidable, or otherwise unenforceable, the balance of this Employment Agreement
shall continue in full force and effect unless such construction would clearly
be contrary to the intentions of the parties or would result in an injustice.
8.6 CAPTIONS AND COUNTERPARTS. The captions in this Employment Agreement
are solely for convenience. The captions in no way define, limit, or describe
the scope or intent of this Employment Agreement. This Employment Agreement may
be executed in several counterparts, each of which shall be deemed to be an
original but all of which together shall constitute one and the same instrument.
8.7 NO DUTY TO MITIGATE. Citizens South hereby acknowledges that it will be
difficult and could be impossible (a) for the Executive to find reasonably
comparable employment after his employment terminates, and (b) to measure the
amount of damages the Executive may suffer as a result of termination.
Additionally, Citizens South acknowledges that its general severance pay plans
do not provide for mitigation, offset, or reduction of any severance payment
received thereunder. Accordingly, Citizens South further acknowledges that the
payment of severance and termination benefits under this Employment Agreement is
reasonable and shall be liquidated damages. The Executive shall not be required
to mitigate the amount of any payment provided for in this Employment Agreement
by seeking other employment. Moreover, the amount of any payment provided for in
this Employment Agreement shall not be reduced by any compensation earned or
benefits provided as the result of employment of the Executive or as a result of
the Executive being self-employed after termination of his employment.
8.8 AMENDMENT AND WAIVER. This Employment Agreement may not be amended,
released, discharged, abandoned, changed, or modified in any manner, except by
an instrument in writing signed by each of the parties hereto. The failure of
any party hereto to enforce at any time any of the provisions of this Employment
Agreement shall in no way be construed to be a waiver of any such provision, nor
in any way to affect the validity of this Employment Agreement or any part
thereof or the right of any party thereafter to enforce each and every such
provision. No waiver or any breach of this Employment Agreement shall be held to
be a waiver of any other or subsequent breach.
8.9 PAYMENT OF LEGAL FEES. Citizens South is aware that after a Change in
Control management could cause or attempt to cause Citizens South to refuse to
comply with its obligations under this Employment Agreement, or could institute
or cause or attempt to cause Citizens South to institute litigation seeking to
have this Employment Agreement declared unenforceable, or could take or attempt
to take other action to deny Executive the benefits intended under this
Employment Agreement. In these circumstances, the purpose of this Employment
Agreement would be frustrated. It is Citizens South's intention that
the Executive not be required to incur the expenses associated with the
enforcement 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 Executive hereunder. It
is Citizens South's intention that the Executive 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 Executive that (a) Citizens South has failed to comply with any of its
obligations under this Employment Agreement, or (b) Citizens South or any other
person has taken any action to declare this Employment Agreement void or
unenforceable, or instituted any litigation or other legal action designed to
deny, diminish, or to recover from the Executive the benefits intended to be
provided to the Executive hereunder, Citizens South irrevocably authorizes the
Executive from time to time to retain counsel of his choice, at Citizens South's
expense as provided in this Section 8.9, to represent the Executive in
connection with the initiation or defense of any litigation or other legal
action, whether by or against Citizens South or any director, officer,
stockholder, or other person affiliated with Citizens South, in any
jurisdiction. Notwithstanding any existing or previous attorney-client
relationship between Citizens South and any counsel chosen by the Executive
under this Section 8.9, Citizens South irrevocably consents to the Executive
entering into an attorney-client relationship with that counsel, and Citizens
South and the Executive agree that a confidential relationship shall exist
between the Executive and that counsel. The fees and expenses of counsel
selected from time to time by the Executive as provided in this section shall be
paid or reimbursed to the Executive by Citizens South on a regular, periodic
basis within 30 days following the presentation by the Executive of a statement
or statements prepared by such counsel in accordance with such counsel's
customary practices, up to a maximum aggregate amount of $500,000. Citizens
South's obligation to pay the Executive's legal fees provided by this Section
8.9 operates separately from and in addition to any legal fee reimbursement
obligation Citizens South Banking Corporation or Citizens South Bank may have
with the Executive under any separate severance or other agreement.
ARTICLE 9
REQUIRED PROVISIONS
9.1 CITIZENS SOUTH'S RIGHT TO TERMINATE THE EXECUTIVE'S EMPLOYMENT.
Citizens South's board of directors may terminate the Executive's employment at
any time, but any termination by the board of directors, other than termination
for Cause, shall not prejudice the Executive's right to compensation or other
benefits under this Employment Agreement. The Executive shall not have the right
to receive compensation or other benefits for any period after termination for
Cause.
9.2 SUSPENSION OF CITIZENS'S SOUTH OBLIGATIONS IF THE EXECUTIVE IS
SUSPENDED. If the Executive is suspended from office or temporarily prohibited
from participating in Citizens South Bank's affairs by a notice served under
section 8(e)(3) (12 U.S.C. 1818(e)(3)) or 8(g) (12 U.S.C. 1818(g)) of the
Federal Deposit Insurance Act, Citizens South's obligations under this
Employment Agreement shall be suspended as of the date of service, unless stayed
by appropriate proceedings. If the charges in the notice are dismissed, Citizens
South may in its discretion (1) pay the Executive all or part of the
compensation withheld while Citizens South's obligations were suspended and (2)
reinstate in whole or in part any of the obligations that were suspended.
9.3 TERMINATION OF CITIZENS SOUTH'S OBLIGATIONS IF THE EXECUTIVE IS
REMOVED. If the Executive is removed or permanently prohibited from
participating in Citizens South Bank's affairs by an order issued under section
8(e) (12 U.S.C. 1818(e)) or 8(g) (12 U.S.C. 1818(g)) of the Federal Deposit
Insurance Act, all obligations of Citizens South under this Employment Agreement
shall terminate as of the effective date of the order, but vested rights of the
parties shall not be affected.
9.4 TERMINATION IF CITIZENS SOUTH BANK IS IN DEFAULT. If Citizens South
Bank is in default as defined in section 3(x) (12 U.S.C. 1813(x)(1)) of the
Federal Deposit Insurance Act, all obligations of Citizens South under this
Employment Agreement shall terminate as of the date of default, but this
paragraph (d) shall not affect any vested rights of the parties.
9.5 TERMINATION ASSOCIATED WITH REGULATORY ACTION. All obligations of
Citizens South under this Employment Agreement shall terminate, except to the
extent determined that continuation of the contract is necessary for the
continued operation of the institution, (1) by the Director of the OTS or the
Director's designee, when the Federal Deposit Insurance Corporation ("FDIC")
enters into an agreement to provide assistance to or on behalf of Citizens South
Bank under the authority contained in section 13(c) of the Federal Deposit
Insurance Act (12 U.S.C. 1823(c)), or (2) by the Director or the Director's
designee when the OTS approves a supervisory merger to resolve problems related
to the operations of Citizens South Bank or when Citizens South Bank is
determined by the OTS or by the FDIC to be in an unsafe or unsound condition.
Vested rights of the parties shall not be affected, however.
9.6 PAYMENTS ARE SUBJECT TO COMPLIANCE WITH 12 USC 1828(K). Any payments
made to the Executive under this Employment Agreement or otherwise are subject
to and conditioned upon their compliance with section 18(k) of the Federal
Deposit Insurance Act (12 U.S.C. 1828(k)) and any regulations promulgated
thereunder.
IN WITNESS WHEREOF, the parties have executed this Employment Agreement as
of the date first written above.
WITNESSES CITIZENS SOUTH BANKING CORPORATION
/s/ Paul L. Teem, Jr. By: /s/ David W. Hoyle, Sr.
- ---------------------------- ----------------------------------
Paul L. Teem, Jr. David W. Hoyle, Sr.
/s/ Gary F. Hoskins Its: Chairman of the Board of Directors
- ---------------------------- ----------------------------------
Gary F. Hoskins
WITNESSES CITIZENS SOUTH BANK
/s/ Paul L. Teem, Jr. By: /s/ David W. Hoyle, Sr.
- ---------------------------- -----------------------------------
Paul L. Teem, Jr.
/s/ Gary F. Hoskins Its: Chairman of the Board of Directors
- ---------------------------- -----------------------------------
Gary F. Hoskins
WITNESSES EXECUTIVE
/s/ Paul L. Teem, Jr. /s/ Kim S. Price
- ---------------------------- ----------------------------------------
Paul L. Teem, Jr. Kim S. Price
County of Gaston)
ss:
State of North Carolina)
Before me this 17th day of November, 2008, personally appeared the above
named and Kim S. Price, who acknowledged that they did sign the foregoing
instrument and that the same was their free act and deed.
/s/ Brendy Pogorzelski
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(Notary Seal) Notary Public
My Commission Expires: May 30, 2009
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