FIRST AMENDMENT TO
AMENDED DEFERRED COMPENSATION
AND INCOME CONTINUATION AGREEMENT
First Amendment, dated as of November 17, 2008 (the "Amendment"), to the
Amended Deferred Compensation and Income Continuation Agreement, dated as of
March 15, 2004 (as amended, the "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 Agreement.
W I T N E S S E T H:
WHEREAS, the parties desire to amend the 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 Agreement, the parties to the
Agreement desire to amend the 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 Agreement. The definition of
Change in Control in Section 1.4 of the 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 Agreement. The definition of
Disability in Section 1.5 of the 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 1.14 of the Agreement. Section 1.14 of the
Agreement is hereby amended to read in its entirety as follows:
"Termination of Service," for purposes of this 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 Agreement. Section 8.1 of the
Agreement is hereby amended to read in its entirety as follows:
8.1 Amendment and Termination.
(a) This 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 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 Agreement shall not cause a distribution of benefits
under this Agreement.
(b) Notwithstanding anything to the contrary in Section 8.1(a), if the
Bank irrevocably terminates this 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 Agreement and further
provided that all of the arrangements sponsored by the Bank that would
be aggregated with this 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 Agreement are included in the Director's gross
income in the latest of (i) the calendar year in which this 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 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 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 Agreement. The second to last
sentence in Section 8.13 of the 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 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 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.
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