EXHIBIT 10.9
EXECUTIVE SEVERANCE AGREEMENT
THIS AGREEMENT is entered into and effective this 22nd day of August 2002,
("Effective Date") by and between Coastal Bancorp, Inc. (the "Company") and
Coastal Banc ssb (the "Bank") and Xxxxxx X. New (the "Employee").
WHEREAS, the Employee had heretofore been employed by the Company and the
Bank as an executive officer, and the Company and the Bank deems it to be in
their best interest to enter into this Agreement as additional incentive to the
Employee to continue as an executive employee of the Company and the Bank; and
WHEREAS, the parties desire by this writing to set forth their
understanding as to their respective rights and obligations in the event a
"change in control" (as defined herein) occurs with respect to the Bank or the
Company;
NOW, THEREFORE, the undersigned parties AGREE as follows:
1. Defined Terms
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When used anywhere in the Agreement, the following terms shall have
the meaning set forth herein.
(a) "Change in Control" shall mean any one of the following
events: (i) where, during any period of two consecutive years, individuals (the
"Continuing Directors") who at the beginning of such period constitute the Board
of Directors of the Bank or the Company (the "Existing Board") cease for any
reason to constitute at least two-thirds thereof, provided that any individual
whose election or nomination for election as a member of the Existing Board was
approved by a vote of at least two-thirds of the Continuing Directors then in
office shall be considered a Continuing Director following: (A) the acquisition
by a person of ownership, holding or power to vote more than 25% of the Bank's
or the Company's voting stock, (B) the acquisition by any person of the ability
to control the election of a majority of any class or classes of the Bank's or
the Company's directors, or (C) the acquisition of a controlling influence over
the management or policies of the Bank or the Company defined as set forth in 12
C.F.R. 574.4(b),(c) and (d) by any person or to persons acting as a "group"
(within the meaning of Section 13(d) of the Securities Exchange Act of 1934), or
(ii) the sale, exchange, lease, transfer or other disposition (in one or more
transactions) to any person of all or a substantial part of the assets,
liabilities or business of the Company or the Bank, (iii) any merger or
consolidation or share exchange of the Company or the Bank with any other person
which subsequent thereto the Company or the Bank is not the surviving entity, or
(iv) any change in business of the Company or the Bank such that the Company
does not own the voting stock of an insured depository institution or the
business of the Bank is not as an insured depository institution.
Notwithstanding the foregoing, in the case of (i) or (ii) or (iii) hereof,
change of ownership or control of the Bank by the Company itself to or among
direct or indirect wholly-owned subsidiaries of the Company shall not constitute
a Change in Control. For purposes of this paragraph only, the term "person"
refers to an individual or a corporation, limited liability company,
partnership, trust, association, joint venture, pool, syndicate, sole
proprietorship, unincorporated organization or any other form of entity not
specifically listed herein. The decision of the Bank's non-employee directors
as to whether or not a Change in Control, as defined herein, has occurred, and
the date of such occurrence, shall be conclusive and binding.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and as interpreted through applicable rulings and regulations
in effect from time to time.
(c) "Code Sec. 280G Maximum" shall mean product of 2.99 and the "base
amount" as defined in Code Sec. 280G(b)(3).
(d) "Good Reason" shall mean any of the following events, which has not
been consented to in advance by the Employee in writing: (i) the requirement
that the Employee move his personal residence, or perform his principal
executive functions, more than thirty (30) miles from his primary office as of
the date of the Change in Control; (ii) a material (defined to be 10% or more)
reduction in the Employee's base compensation as in effect on the date of the
Change in Control or as the same may be increased from time to time; (III) a
successor to the Company or the Bank fails or refuses to assume the Company's
and the Bank's obligations under this Agreement; (IV) the Company, the Bank or
successor thereto breaches any provision of this Agreement; or (V) the Employee
is terminated for other than just cause after the Change in Control.
(e) "Just Cause" shall mean, in the good faith determination of the
Company's and the Bank's Boards of Directors, the Employee's personal
dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving
personal profit, intentional failure to perform stated duties, willful violation
of any law, rule or regulation (other than traffic violations or similar
offenses) or final cease-and-desist order, or material breach of any provision
of this Agreement. The Employee shall have the right to make a presentation to
the Board of Directors with counsel prior to the rendering of such determination
by the Board. The Employee shall have no right to receive compensation or other
benefits for any period after termination for Just Cause. No act, or failure to
act, on the Employee's part shall be considered "willful" unless he has acted,
or failed to act, with an absence of good faith and without a reasonable belief
that his action or failure to act was in the best interest of the Bank and the
Company.
(f) "Protected Period" shall mean the period that begins on the date
six months before a Change in Control and ends on the later of the third annual
anniversary of the Change in Control or the expiration date of this Agreement.
2. Trigger Events
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The Employee shall be entitled to collect the severance benefits set forth
in Section 3 of this Agreement in the event that (a) a Change of Control has
occurred and the Employee voluntarily terminates his employment within the
30-day period beginning on the first anniversary of the date of the occurrence
of a Change in Control, (b) the Employee voluntarily terminates employment
within 90 days of an event that both occurs during the Protected Period and
constitutes Good Reason, or (c) the Bank, the Company, or their successor(s) in
interest terminate the Employee's employment for any reason other than Just
Cause during the Protected Period.
3. Amount of Severance Benefit
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(a) If the Employee becomes entitled to collect severance benefits
pursuant to Section 2(a) hereof, the Company and/or the Bank shall pay Employee
one (1) times the annual salary and bonus or incentive compensation (not
including stock compensation plans) paid to Employee by the Company and/or the
Bank during the immediately preceding year of the term of employment, such sum
to be paid within five (5) days of the date that Employee's employment actually
ceases.
(b) If the Employee becomes entitled to collect severance benefits
pursuant to Section 2(b) or 2(c) hereof, the Company and/or the Bank shall pay
Employee 2.00 times the annual salary and bonus or incentive compensation (not
including stock compensation plans) paid to Employee by the Company and/or the
Bank during the immediately preceding year of the term of employment, such sum
to be paid within five (5) days of the date that Employee's employment actually
ceases.
(c) The provisions of this Agreement shall not reduce any amounts
otherwise payable to the Employee or in any way diminish the employee's rights,
whether existing now or hereafter under any benefit plan of the Company or the
Bank. The Employee shall not be obligated to mitigate any payments entitled to
be received hereunder.
(d) The foregoing payments and benefits shall be paid to the Employee's
beneficiaries by testate or intestate succession in the event of Employee's
death during the period during which such payments and benefits are being
provided.
(e) In the event that the Employee and the Company or the Bank, as the
case may be (hereinafter, in this Section 3(e), the "Company") agree that the
Employee has collected an amount exceeding the Code Sec.280G Maximum, the
parties agree as follows:
(i) In the calendar year that the Employee is entitled to receive
a payment or benefits under the provisions of this Agreement, the independent
accountants of the Company shall determine if an excess parachute payment (as
defined in Section 4999 of the Code, as amended, and any successor provision
thereto) exists.
Such determination shall be made after taking any reductions
permitted pursuant to Section 280G of the Code and the regulations thereunder.
Any amount determined to be an excess parachute payment after taking into
account such reductions shall be hereafter referred to as the "Initial Excess
Parachute Payment". As soon as practicable after a Change in Control of the
Company, the Initial Excess Parachute Payment shall be determined. Immediately
following a Change in Control of the Company or the Bank, the Company or the
Bank shall pay the Employee, subject to applicable withholding requirements
under applicable state or federal law an amount equal to:
(a) twenty (20) percent of the Initial Excess Parachute Payment (or such
other amount equal to the tax imposed under Section 4999 of the Code), and
(b) such additional amount (tax allowance) as may be necessary to compensate
the Employee for the payment by the Employee of state and federal income and
excise taxes on the payment provided under Clause (a) and on any payments under
this Clause (b). In computing such tax allowance, the payment to be made under
Clause (a) shall be multiplied by the "gross up percentage" ("GUP"). The GUP
shall be determined as follows:
GUP = Tax Rate
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1 - Tax Rate
The Tax Rate for purposes of computing the GUP shall be the highest marginal
federal and state income and employment-related tax rate, including any
applicable excise tax rate, applicable to the Employee in the year in which the
payment under Clause (a) is made.
(ii) Notwithstanding the foregoing, if it shall subsequently be
determined in a final judicial determination or a final administrative
settlement to which the Employee is a party that the excess parachute payment is
defined in Section 4999 of the Code, reduced as described above, is different
from the Initial Excess Parachute Payment (such different amount being hereafter
referred to as the "Determinative Excess Parachute Payment") then the Company's
independent accountants shall determine the amount (the "Adjustment Amount") the
Employee must pay to the Company or the Bank or the Company or the Bank must pay
to the Employee in order to put the Employee (or the Company or the Bank, as the
case may be) in the same position the Employee (or the Company or the Bank, as
the case may be) would have been if the Initial Excess Parachute Payment had
been equal to the Determinative Excess Parachute Payment. In determining the
Adjustment Amount, the independent accountants shall take into account any and
all taxes (including any penalties and interest) paid by or for the Employee or
refunded to the Employee or for the Employee's benefit. As soon as practicable
after the Adjustment Amount has been so determined, the Company or the Bank
shall pay the Adjustment Amount to the Employee or the Employee shall repay the
Adjustment Amount to the Company or the Bank, as the case may be.
(iii) In any calendar year that the Employee receives payments of
benefits under this Agreement, the Employee shall report on his state and
federal income tax returns such information as is consistent with the
determination made by the independent accountants of the Company as described
above. The Company and the Bank shall indemnify and hold the Employee harmless
from any and all losses, costs and expenses (including without limitation,
reasonable attorney's fees, interest, fines and penalties) which the Employee
incurs as a result of so reporting such information. Employee shall promptly
notify the Company and the Bank in writing whenever the Employee receives notice
of the institution of a judicial or administrative proceeding, formal or
informal, in which the federal tax treatment under Section 4999 of the Code of
any amount paid or payable under this the Employment Agreement is being reviewed
or is in dispute. The Company or the Bank shall assume control at its expense
over all legal and accounting matters pertaining to such federal tax treatment
(except to the extent necessary or appropriate for the Employee to resolve any
such proceeding with respect to any matter unrelated to amounts paid or payable
pursuant to this contract) and the Employee shall cooperate fully with the
Company or the Bank in any such proceeding. The Employee shall not enter into
any compromise or settlement or otherwise prejudice any rights the Company or
the Bank may have in connection therewith without prior consent of the Company
or the Bank.
4. Term of the Agreement
------------------------
This Agreement shall remain in effect for the period commencing on the
Effective Date and ending either (i) the date on which the Board of Directors
terminates this Agreement by giving one year prior written notice or (ii) the
date on which the Employee terminates employment with the Company or the Bank;
provided that the Employee's rights hereunder shall continue following the
termination of his employment with the Company or the Bank under any of the
circumstances described in Section 2 hereof.
5. Termination or Suspension Under Federal Law
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Any payments made to the Employee pursuant to this Agreement, or otherwise,
are subject to and conditioned upon their compliance with 12 U.S.C. Sec.1828(k)
and any regulations promulgated thereunder.
6. Expense Reimbursement
----------------------
In the event that any dispute arises between the Employee and the Company
or the Bank as to the terms or interpretations of this Agreement, whether
instituted by formal legal proceedings or otherwise, including any action that
the Employee takes to enforce the terms of this Agreement or to defend against
any action taken by the Company or the Bank, the Employee shall be reimbursed
for all costs and expenses, including reasonable attorneys' fees, arising from
such dispute, proceedings or actions, provided that the Employee shall obtain a
final judgment in favor of the Employee in a court or competent jurisdiction or
in binding arbitration under the rules of the American Arbitration Association.
Such reimbursement, which may be in advance of any final judgment or
determination in arbitration, if requested in writing by the Employee, shall be
paid within ten (10) days of Employee's furnishing to the Company or the Bank
written evidence, which may be in the form, among other things, or a canceled
check or receipt, of any costs or expenses incurred by the Employee.
7. Successors and Assigns
------------------------
(a) This Agreement shall inure to the benefit of and be binding upon
any corporate or other successor or assign of the Company or the Bank which
shall acquire, directly or indirectly, by merger, consolidation, purchase or
otherwise, all or substantially all of the assets or stock of the Bank or
Company. This Agreement shall inure to the benefit of and be enforceable by the
Employee's personal and legal representatives, executors, administrators,
successors, heirs, devisees and legatees. If the Employee should die while any
amounts are still payable to him/her hereunder, all such amounts shall be paid
in accordance with the terms of this Agreement to the Employee's devisee,
legatee or other designee, or if there be no such designee, to the Employee's
Estate.
(b) Since the Company and the Bank are contracting for the unique and
personal skills of the Employee, the Employee shall be precluded from assigning
or delegating his rights or duties hereunder without first obtaining the written
consent of the Company or the Bank.
8. Amendments
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No amendments or additions to this Agreement shall be binding unless made
in writing and signed by all of the parties, except as herein otherwise
specifically provided. No waiver by either party hereto at any time of any
breach by the other party hereto, or of compliance with, any condition or
provision of this Agreement to be performed by such other party will be deemed
to be a waiver of similar or dissimilar provisions or conditions, at the same or
any prior or subsequent time.
9. Applicable Law
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Except to the extent preempted by Federal law, the laws of the State of
Texas shall govern this Agreement in all respects, whether as to its validity,
construction, capacity, performance or otherwise.
10. Severability
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The provisions of this Agreement shall be deemed severable and the
invalidity or unenforceability of any provision shall not affect the validity or
enforceability of the other provisions hereof.
11. Entire Agreement
-----------------
This Agreement, together with any understanding or modifications thereof as
agreed to in writing by the parties, shall constitute the entire agreement
between the parties hereto.
12. Notices
-------
For purposes of this Agreement, notices and other communications provided
for in this Agreement shall be in writing and shall be deemed to have been duly
given when delivered or mailed by U.S. registered or certified mail, return
receipt requested, postage prepaid, as follows: If to the Company or the Bank:
Chairman/CEO, Coastal Bancorp, Inc., 0000 Xxxxxxxxxx, Xxxxx 000, Xxxxxxx, Xxxxx
00000. If to the Employee:
Employee Name & Address
Signature Page to Follow
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first herein above written.
ATTEST: COASTAL BANCORP, INC.
/s/ Xxxxx X. Xxxxxxx By: /s/ Xxxxxx X. Xxxxx
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Secretary Xxxxxx X. Xxxxx
Chairman and Chief Executive Officer
By: /s/ Xxxxxx Xxxxxxx, Jr.
--------------------------
Xxxxxx Xxxxxxx, Jr.
Chairman, Compensation Committee
ATTEST: COASTAL Banc ssb
/s/ Xxxxx X. Xxxxxxx By: /s/ Xxxxxx X. Xxxxx
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Secretary Xxxxxx X. Xxxxx
Chairman and Chief Executive Officer
By: /s/ Xxxxxx Xxxxxxx, Jr.
--------------------------
Xxxxxx Xxxxxxx, Jr.
Chairman, Compensation Committee
WITNESS
/s/ Xxxxxxxxx X. Xxxxx /s/ Xxxxxx X. New
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Xxxxxx X. New
