EXHIBIT 10.6
FIRST AMENDMENT TO
AMENDED DIRECTOR RETIREMENT AGREEMENT
First Amendment, dated as of _________ __, 2008 (the "Amendment"), to the
Amended Director Retirement Agreement, dated as of March 15, 2004 (as amended,
the "Director Retirement Agreement"), by and among Citizens South Bank (the
"Bank") and _______________ (the "Director"). Capitalized terms which are not
defined herein shall have the same meaning as set forth in the Director
Retirement Agreement.
W I T N E S S E T H:
WHEREAS, the parties desire to amend the Director Retirement Agreement to
comply with the final regulations issued in April 2007 by the Internal Revenue
Service under Section 409A of the Internal Revenue Code of 1986, as amended (the
"Code"); and
WHEREAS, pursuant to Section 8.1 of the Director Retirement Agreement, the
parties to the Director Retirement Agreement desire to amend the Director
Retirement Agreement;
NOW, THEREFORE, in consideration of the premises, the mutual agreements
herein set forth and such other consideration the sufficiency of which is hereby
acknowledged, the Bank and the Director hereby agree as follows:
Section 1. Amendment to Section 1.4 of the Director Retirement Agreement.
The definition of Change in Control in Section 1.4 of the Director Retirement
Agreement is hereby amended to read in its entirety as follows:
"Change in Control means a change in the ownership of Citizens South
Banking Corporation (the "Company") or the Bank, a change in the effective
control of the Company or the Bank or a change in the ownership of a
substantial portion of the assets of the Company or the Bank, in each case
as provided under Section 409A of the Code and the regulations thereunder."
Section 2. Amendment to Section 1.5 of the Director Retirement Agreement.
The definition of Disability in Section 1.5 of the Director Retirement Agreement
is hereby amended to read in its entirety as follows:
"Disability means the Director (i) is unable to engage in any
substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or
can be expected to last for a continuous period of not less than 12 months,
or (ii) is, by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to
last for a continuous period of not less than 12 months, receiving income
replacement benefits for a period of not less than three months under an
accident and health agreement
covering employees of the Bank (or would be receiving such benefits if he
was eligible to participate in such plan)."
Section 3. Amendment to Section 1.16 of the Director Retirement Agreement.
Section 1.16 of the Director Retirement Agreement is hereby amended to read in
its entirety as follows:
"Termination of Service," for purposes of this Director Retirement
Agreement, shall mean a "Separation from Service" as such term is defined
in Section 409A of the Code and the final regulations issued thereunder,
provided that whether a Separation from Service has occurred shall be
determined based on whether the facts and circumstances indicate that the
Bank and the Director reasonably anticipated that no further services would
be performed after a certain date or that the level of bona fide services
the Director would perform after such date (whether as an employee or as an
independent contractor) would permanently decrease to less than fifty
percent (50%) of the average level of bona fide services performed (whether
as an employee or an independent contractor) over the immediately preceding
thirty-six (36) month period (or the full period of services to the Bank if
the Director has been providing services to the Bank less than thirty-six
(36) months)."
Section 4. Amendment to Section 8.1 of the Director Retirement Agreement.
Section 8.1 of the Director Retirement Agreement is hereby amended to read in
its entirety as follows:
"8.1 Amendment and Termination.
(a) This Director Retirement Agreement may be amended solely by a
written agreement signed by the Bank and by the Director, and (b) except as
provided in Article 5, this Director Retirement Agreement may be terminated
solely by a written agreement signed by the Bank and by the Director.
Except as provided in Section 8.1(b), the termination of this Director
Retirement Agreement shall not cause a distribution of benefits under this
Director Retirement Agreement.
(b) Notwithstanding anything to the contrary in Section 8.1(a), if the
Bank irrevocably terminates this Director Retirement Agreement in the
following circumstances:
(i) Within thirty (30) days before a Change in Control, provided
that all distributions are made no later than twelve (12) months
following such irrevocable termination of this Director Retirement
Agreement and further provided that all of the arrangements sponsored
by the Bank that would be aggregated with this Director Retirement
Agreement under Treasury Regulation ss.1.409A-1(c)(2) are terminated
so the Director and all Directors under the other aggregated
arrangements are required to receive all amounts of compensation
deferred under the terminated arrangements within twelve (12) months
of the date the Bank irrevocably takes all necessary action to
terminate such arrangements;
(ii) With twelve (12) months of a dissolution of the Bank taxed
under Section 331 of the Code or with the approval of a bankruptcy
court pursuant to 11
U.S.C. ss.503(b)(1)(A), provided that the amounts deferred under this
Director Retirement Agreement are included in the Director's gross
income in the latest of (i) the calendar year in which this Director
Retirement Agreement terminates; (ii) the calendar year in which the
amount is no longer subject to a substantial risk of forfeiture; or
(iii) the first calendar year in which the distribution is
administratively practicable; or
(iii) Upon the Bank's termination of this and all other
arrangements that would be aggregated with this Director Retirement
Agreement pursuant to Treasury Regulation ss.1.409A-1(c) if the
Director participated in such arrangements ("Similar Arrangements"),
provided that (i) the termination and liquidation does not occur
proximate to a downturn in the financial health of the Bank, (ii) no
payments are made within twelve (12) months of the termination of the
arrangements other than payments that would be payable under the terms
of the arrangements if the termination had not occurred, (iii) all
termination distributions are made no later than twenty-four (24)
months following such termination, and (iv) the Bank does not adopt
any new arrangement that would be a Similar Arrangement for a minimum
of three (3) years following the date the Bank takes all necessary
action to irrevocably terminate and liquidate the Director Retirement
Agreement;
the Bank will distribute (i) the Accrual Balance determined as of
the date of the termination of this Director Retirement Agreement, or
(ii) the Normal Retirement Age Accrual Balance in the event of a
termination pursuant to Section 8.1(b)(i) above, to the Director in a
lump sum subject to the above terms.
Section 5. Amendment to Section 8.13 of the Director Retirement Agreement.
The second to last sentence in Section 8.13 of the Director Retirement Agreement
is hereby amended to read in its entirety as follows:
"The fees and expenses of counsel selected from time to time by the
Director as provided in this section shall be paid or reimbursed to the
Director by the Bank on a regular, periodic basis upon presentation within
thirty (30) days following the Director's presentation of a statement or
statements prepared by such counsel in accordance with such counsel's
customary practices, up to a maximum aggregate amount of $25,000."
Section 6. Effectiveness. This Amendment shall be deemed effective as of
the date first above written, as if executed on such date. Except as expressly
set forth herein, this Amendment shall not by implication or otherwise alter,
modify, amend or in any way affect any of the terms, conditions, obligations,
covenants or agreements contained in the Director Retirement Agreement, all of
which are ratified and affirmed in all respects and shall continue in full force
and effect and shall be otherwise unaffected.
Section 7. Governing Law. This Amendment and the rights and obligations
hereunder shall be governed by and construed in accordance with the laws of the
State of North Carolina.
Section 8. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall for all purposes be deemed an original, and
all of which together shall constitute but one and the same instrument.
Section 9. Compliance with Section 409A. This Director Retirement Agreement
shall be interpreted and administered consistent with Section 409A of the Code.
IN WITNESS WHEREOF, the Bank and the Director have duly executed this
Amendment as of the day and year first written above.
CITIZENS SOUTH BANK
Attest:
By:
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Name: Paul L. Teem, Jr. Name: Kim S. Price
Title: Executive Vice President, Title: President and Chief
Chief Administrative Officer Executive Officer
DIRECTOR
Attest:
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Name: Paul L. Teem, Jr. ---------------------