Employment Agreement
EXHIBIT
10(iii)
This Employment
Agreement (this “Agreement”)
is entered into effective as of this 10 day of September, 2008 by and among
Xxxxxxx X. Xxxxxxx (the “Executive”),
Crescent Financial Corporation, a North Carolina corporation (the “Corporation”),
and Crescent State Bank, a North Carolina-chartered bank and wholly owned
subsidiary of Crescent Financial Corporation (the “Bank”). The
Corporation and the Bank are hereinafter sometimes referred to together or
individually as the “Employer.”
Whereas,
the Executive is the President and Chief Executive Officer of the Corporation
and the Bank, possessing unique skills, knowledge, and experience relating to
their business, and the Executive has made and is expected to continue to make
major contributions to the profitability, growth and financial strength of the
Corporation and affiliates,
Whereas,
the Executive and the Employer intend that this Agreement shall supersede and
replace in its entirety the October 24, 2007 Employment Agreement between the
Executive and the Employer, 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 Employer, is contemplated insofar as the Employer
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.
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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 the Executive’s service in such position. The
indemnification provided to the Executive under this 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 the Employer under this 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 the Employer 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 for 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 the Employer or with reckless disregard for the best interests of the
Employer, 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 the Executive was not
entitled, or
5) any
proceeding initiated by the Executive without the consent or authorization of
the Employer’s board of directors, but this exclusion shall not apply with
respect to any claims brought by the Executive (x) to enforce the Executive’s
rights under this Agreement, or (y) 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.
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3.1 Termination Because of Death or
Disability. (a) Death. The
Executive’s employment shall terminate automatically on the date of the
Executive’s death. If the Executive’s employment terminates because
of the Executive’s death, the Executive’s estate shall receive any sums due the
Executive as Base Salary and reimbursement
of expenses through the end of the month in which death occurred, plus any bonus
earned or accrued through the date of death, including any unvested amounts
awarded for previous years. If the Executive dies in active service
to the Employer, for 12 months after the Executive’s death the Employer shall
provide on a cost-free basis the Executive’s family with continuing health care
coverage under COBRA substantially identical to that provided for the Executive
before death.
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(a) an
act of fraud, embezzlement, or theft by the Executive in the course of
employment, or misconduct involving dishonesty, or
(b) intentional
violation of any law or significant policy of the Employer or an affiliate,
which in the Employer’s sole judgement causes material harm to the Employer or
affiliate, regardless of whether the violation leads to criminal prosecution or
conviction. For purposes of this Agreement applicable laws include
any statute, rule, regulatory order, statement of policy, or final
cease-and-desist order of any governmental agency or body having regulatory
authority over the Employer. 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 Employer, or
(c) the
Executive’s gross negligence or gross neglect in the performance of duties,
or
(d) intentional
wrongful damage by the Executive to the business or property of the Employer or
its affiliates, including without limitation the reputation of the Employer,
which in the Employer’s sole judgment causes material harm to the Employer,
or
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(e) a
breach by the Executive of fiduciary duties as an officer or director of the
Employer, or misconduct involving dishonesty, or
(f) a
breach by the Executive of this Agreement that in the sole judgment of the
Employer is a material breach, which breach is not corrected by the Executive
within ten days after receiving written notice of the breach, or
(g) removal
of the Executive from office or permanent prohibition of the Executive from
participating in the Employer’s affairs by an order issued under section 8(e)(4)
or (g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. 1818(e)(4) or (g)(1),
or
(h) the
occurrence of any event that results in the Executive being excluded from
coverage, or having coverage limited for the Executive as compared to other
executives of the Employer, under the Employer’s blanket bond or other fidelity
or insurance policy covering its directors, officers, or employees,
or
(i) conviction
of the Executive for or plea of no contest to a felony or conviction of or plea
of no contest to a misdemeanor involving moral turpitude, or the actual
incarceration of the Executive for 45 consecutive days or more.
(x) a
voluntary termination by the Executive shall be considered a voluntary
termination with Good Reason if any of the following occur without the
Executive’s advance written consent, and the term Good Reason shall mean the
occurrence of any of the following without the Executive’s advance written
consent –
1) a
material diminution of the Executive’s Base Salary,
2) a
material diminution of the Executive’s authority, duties, or
responsibilities,
3) a
material diminution in the authority, duties, or responsibilities of the
supervisor to whom the Executive is required to report, including a requirement
that the Executive report to a corporate officer or employee instead of
reporting directly to the board of directors,
4) a
material diminution in the budget over which the Executive retains
authority,
5) a
material change in the geographic location at which the Executive must perform
services for the Employer, or
6) any
other action or inaction that constitutes a material breach by the Employer of
this Agreement.
(y) the
Executive must give notice to the Employer of the existence of one or more of
the conditions described in clause (x) within 90 days after the
initial existence of the condition, and the Employer shall have 30 days
thereafter to remedy the condition. In addition, the Executive’s
voluntary termination because of the existence of one or more of the conditions
described in clause (x)
must occur within 24 months after the initial existence of the
condition.
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(b) If
when employment termination occurs the Executive is a specified employee within
the meaning of section 409A of the Internal Revenue Code of 1986, and if
continued Base Salary under section 4.1(a) would be considered deferred
compensation under section 409A, and finally if an exemption from the six-month
delay requirement of section 409A(a)(2)(B)(i) is not available, the Executive’s
continued Base Salary under section 4.1(a) for the first six months after
employment termination shall be paid to the Executive in a single lump sum on
the first day of the seventh month after the month in which the Executive’s
employment terminates. References in this Agreement to section 409A
of the Internal Revenue Code of 1986 include rules, regulations, and guidance of
general application issued by the Department of the Treasury under Internal
Revenue Code section 409A.
(b) If
(x) under the terms of
the applicable policy or policies for the insurance benefits specified in
section 4.2(a) it is not possible to continue the Executive’s coverage, or
(y) when employment
termination occurs the Executive is a specified employee within the meaning of
section 409A of the Internal Revenue Code of 1986, if any of the continued
insurance coverage benefits specified in section 4.2(a) would be considered
deferred compensation under section 409A, and finally if an exemption from the
six-month delay requirement of section 409A(a)(2)(B)(i) is not available for
that particular insurance benefit, instead of continued insurance coverage under
section 4.2(a) the Employer shall pay to the Executive in a single lump sum an
amount in cash equal to the present value of the Employer’s projected cost to
maintain that particular insurance benefit had the Executive’s employment not
terminated, assuming continued coverage for the lesser of 36 months or the
number of months until the Executive attains age 65. The lump-sum
payment shall be made 30 days after employment termination or, if section 4.1(b)
applies and a six-month payment delay is required by Internal Revenue Code
section 409A, on the first day of the seventh month after the month in which the
Executive’s employment terminates.
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(b) In
addition to insurance benefits under section 4.2 to which the Executive may be
entitled after employment termination and the outplacement and other benefits
specified in section 4.3, if after a Change in Control the Executive’s
employment terminates involuntarily without Cause or voluntarily but for Good
Reason the Employer shall cause the Executive to become fully vested in awards
under any stock option, stock incentive, or other non-qualified plans, programs,
or arrangements in which the Executive participated if (x) the plan, program, or
arrangement does not address the effect of a change in control or termination
after a change in control and (y) award vesting occurs
automatically with the passage of time or years of service. Provided
the Executive is at the time a covered employee within the meaning of Internal
Revenue Code section 162(m), accelerated vesting in or entitlement to awards
shall not occur under this section 5.1(b) in the case of any award for which
vesting or entitlement is based on achievement of performance conditions,
whether the conditions have to do with individual performance or corporate
performance measures, including but not limited to stock price or financial
statement or other financial measures.
(a) Change in ownership: a change
in ownership of the Corporation occurs on the date any one person or group
accumulates ownership of Corporation stock constituting more than 50% of the
total fair market value or total voting power of Corporation stock,
(b) Change in effective control:
(x) any one person or
more than one person acting as a group acquires within a 12-month period
ownership of Corporation stock possessing 30% or more of the total voting power
of Corporation stock, or (y) a majority of the
Corporation’s board of directors is replaced during any 12-month period by
directors whose appointment or election is not endorsed in advance by a majority
of the Corporation’s board of directors, or
(c) Change in ownership of a substantial
portion of assets: a change in ownership of a substantial portion of the
Corporation’s assets occurs if in a 12-month period any one person or more than
one person acting as a group acquires from the Corporation assets having a total
gross fair market value equal to or exceeding 40% of the total gross fair market
value of all of the Corporation’s assets immediately before the acquisition or
acquisitions. For this purpose, gross fair market value means the
value of the Corporation’s assets, or the value of the assets being disposed of,
determined without regard to any liabilities associated with the
assets.
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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,
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1)
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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 Agreement or any other agreement or any other benefit plan
or arrangement with the Employer, any person whose actions result in a
Change in Control, or any person affiliated with the Employer or such
person) shall be treated as “parachute
payments” within the meaning of section 280G(b)(2) of the Internal
Revenue Code, and all “excess
parachute payments” within the meaning of 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 the Employer 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 section 280G(b)(4) of the Internal
Revenue Code in excess of the base amount (as defined in section
280G(b)(3) of the Internal Revenue Code), or are otherwise not subject to
the Excise Tax,
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2)
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Calculation of benefits
subject to the 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 (x) 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 (y) the amount of excess
parachute payments within the meaning of section 280G(b)(1) (after
applying clause (1), above), and
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3)
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Value of noncash benefits and
deferred payments: the value of any noncash benefits or
any deferred payment or benefit shall be determined by the Accounting Firm
in accordance with the principles of sections 280G(d)(3) and (4) of the
Internal Revenue Code.
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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 state and local taxes (calculated
by assuming that any reduction under section 68 of the Internal Revenue Code in
the amount of itemized deductions allowable to the Executive applies first to
reduce the amount of 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 initially determined under this
Agreement, the Executive shall repay to the Employer – 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).
If the Excise Tax is later determined
to be more than the amount initially determined under this Agreement (due, for
example, to a payment whose existence or amount cannot be determined at the time
of the Gross-Up Payment Amount), the Employer shall make an additional payment
to the Executive for that excess (plus any interest, penalties or additions
payable by the Executive for the excess) when the amount of the excess is
finally determined.
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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 the
Employer. The Employer 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 the Employer and the
Executive. Because of the uncertainty when the Determination is made
whether any of the Total Benefits will be subject to the Excise Tax, it is
possible that a Gross-Up Payment Amount that should have been made will not have
been made by the Employer (“Underpayment”)
or that a Gross-Up Payment Amount will be made that should not have been made by
the Employer (“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. The Underpayment (together with interest at the
rate provided in section 1274(d)(2)(B) of the Internal Revenue Code) shall be
paid promptly by the Employer to or for the benefit of the
Executive. If the Gross-Up Payment Amount exceeds the amount
necessary to reimburse the Executive for the Excise Tax according to section
5.3(a), the Accounting Firm shall determine the amount of the
Overpayment. The Overpayment (together with interest at the rate
provided in section 1274(d)(2)(B) of the Internal Revenue Code) shall be paid
promptly by the Executive to or for the benefit of the
Employer. Provided that the Executive’s expenses are reimbursed by
the Employer, the Executive shall cooperate with any reasonable requests by the
Employer 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 Agreement shall be deemed to refer to the
accounting firm appointed by the Executive).
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(a) the
whole or any portion or phase of any business plans, financial information,
purchasing data, supplier data, accounting data, or other financial
information,
(b) the
whole or any portion or phase of any research and development information,
design procedures, algorithms or processes, or other technical
information,
(c) the
whole or any portion or phase of any marketing or sales information, sales
records, customer lists, prices, sales projections, or other sales information,
and
(d) trade
secrets, as defined from time to time by the laws of the State of North
Carolina.
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Despite the foregoing, confidential
information excludes information that – as of the date hereof or at any time
after the date hereof – is published or disseminated without obligation of
confidence or that becomes a part of the public domain (x) by or through action
of the Employer or (y) otherwise than by or
at the Executive’s direction. This section 6.1 does not prohibit
disclosure required by an order of a court having jurisdiction or a subpoena
from an appropriate governmental agency or disclosure made by the Executive in
the ordinary course of business and within the scope of the Executive’s
authority.
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(b) This Agreement is enforceable by the
Executive’s heirs. This Agreement shall 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 Agreement is personal and is
not assignable. This Agreement is personal in
nature. Without written consent of the other parties, no party shall
assign, transfer, or delegate this Agreement or any rights or obligations under
this Agreement except as expressly permitted. 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 7.1, the Employer
shall have no liability to pay any amount to the assignee or
transferee.
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7.2 Governing Law, Jurisdiction and
Forum. This 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 North
Carolina. By entering into this Agreement, the Executive acknowledges
that the Executive is subject to the jurisdiction of both the federal and state
courts in North Carolina. Any actions or proceedings instituted under
this Agreement shall be brought and tried solely in courts located in Wake
County, North Carolina or in the federal court having jurisdiction in Cary,
North Carolina. The Executive expressly waives the right to have any
such actions or proceedings brought or tried elsewhere.
7.3 Entire
Agreement. This Agreement sets forth the entire agreement of
the parties concerning the employment of the Executive. Any oral or
written statements, representations, agreements, or understandings made or
entered into before or contemporaneously with the execution of this Agreement
are hereby rescinded, revoked, and rendered null and void by the
parties. Benefits payable under this Agreement shall not be reduced
by any benefits payable under the Salary Continuation Agreement between the
Executive and the Bank, as that agreement may be amended, and benefits payable
under the Salary Continuation Agreement likewise shall not be reduced by any
benefits payable under this Agreement. This Agreement supersedes and
replaces in its entirety the October 24, 2007 Employment Agreement entered into
by the Executive, the Bank, and the Corporation.
7.4 Notices. Any notice
under this 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 the
Employer at the time of the delivery of such notice, and properly addressed to
the Employer if addressed to Crescent Financial Corporation, 0000 Xxxx Xxxxx
Xxxx, Xxxx, Xxxxx Xxxxxxxx 00000, Attention: Corporate Secretary.
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7.9 Payment of Legal
Fees. The Employer is aware that after a Change in Control
management of the Employer could cause or attempt to cause the Employer to
refuse to comply with its obligations under this Agreement, or could institute
or cause or attempt to cause the Employer to institute litigation seeking to
have this Agreement declared unenforceable, or could take or attempt to take
other action to deny Executive the benefits intended under this
Agreement. In these circumstances the purpose of this Agreement would
be frustrated. The Employer
desires that the Executive not be required to incur the expenses associated with
the enforcement of rights under this 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. The Employer desires that the Executive not be forced to
negotiate settlement of rights under this Agreement under threat of incurring
expenses. Accordingly, if after a Change in Control occurs it appears
to the Executive that (x) the Employer has failed to
comply with any of its obligations under this Agreement, or (y) the Employer or any other
person has taken any action to declare this 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, the Employer irrevocably authorizes the Executive from time
to time to retain counsel of the Executive’s choice, at the Employer’s expense
as provided in this section 7.9, to represent the Executive in the initiation or
defense of any litigation or other legal action, whether by or against the
Employer or any director, officer, stockholder, or other person affiliated with
the Employer, in any jurisdiction. Despite any existing or previous
attorney-client relationship between the Employer and any counsel chosen by the
Executive under this section 7.9, the Employer irrevocably consents to the
Executive entering into an attorney-client relationship with that counsel, and
the Employer 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 the Employer on a
regular, periodic basis upon 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 $250,000, whether suit be brought
or not, and whether or not incurred in trial, bankruptcy, or appellate
proceedings. The Employer’s obligation to pay the Executive’s legal
fees provided by this section 7.9 operates separately from and in addition to
any legal fee reimbursement obligation the Employer may have with the Executive
under any separate employment, severance, or other agreement between the
Executive and the Employer. Despite anything in this section 7.9 to
the contrary however, the Employer shall not be required to pay or reimburse the
Executive’s legal expenses if doing so would violate section 18(k) of the
Federal Deposit Insurance Act [12 U.S.C. 1828(k)] and Rule 359.3 of the Federal
Deposit Insurance Xxxxxxxxxxx [00 XXX 359.3].
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In Witness
Whereof, the parties have executed this Employment Agreement as of the
date first written above.
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Witnesses
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Crescent
Financial Corporation
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By:
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Its:
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Witnesses
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Crescent
State Bank
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By:
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Its:
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Witnesses
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Executive
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/s/
Xxxxxxx X. Xxxxxxx
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Xxxxxxx X. Xxxxxxx
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County
of Wake
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)
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)
ss:
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State of
North Carolina)
Before me this ___ day of
_______________, 2008, personally appeared the above named ____________________
and Xxxxxxx X. Xxxxxxx, who acknowledged that they did sign the foregoing
instrument and that the same was their free act and deed.
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(Notary
Seal)
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Notary
Public
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My
Commission Expires:
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