Exhibit 10.4
CHANGE-IN-CONTROL PROTECTIVE AGREEMENT
--------------------------------------
THIS AGREEMENT entered into this ___ day of __________, 1997, by and
between Home Savings Bank, SSB (the "Bank"), NewSouth Bancorp, Inc. (the
"Company"), and Xxxx X. Xxxx (the "Employee"), effective on the closing date of
the Bank's conversion from mutual to stock form (the "Effective Date").
WHEREAS, the Employee has heretofore been employed by the Bank as an
executive officer, and the Bank deems it to be in its best interest to enter
into this Agreement as an additional incentive to the Employee to continue as an
executive employee of 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 of control occurs with respect to the Bank or the Company.
NOW, THEREFORE, the undersigned parties AGREE as follows:
1. Defined Terms
-------------
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) the acquisition of ownership, holding or power to vote more than 25% of the
voting stock of the Bank or the Company, (ii) the acquisition of the ability to
control the election of a majority of the Bank's or the Company's directors,
(iii) the acquisition of a controlling influence over the management or policies
of the Bank or of the Company by any person or by persons acting as a "group"
(within the meaning of Section 13(d) of the Securities Exchange Act of 1934), or
(iv) 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 of 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. Notwithstanding the
foregoing, the Company's ownership of the Bank shall not of itself constitute a
Change in Control for purposes of the Agreement. For purposes of this paragraph
only, the term "person" refers to an individual or a corporation, partnership,
trust, association, joint venture, pool, syndicate, sole proprietorship,
unincorporated organization or any other form of entity not specifically listed
herein.
(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 (S)280G Maximum" shall mean the product of 2.99 and the
Employee's "base amount" as defined in Code (S)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 her personal residence, or perform her principal
executive functions, more than thirty (30) miles from her primary office as of
the date of the Change in Control; (ii) a material 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) the failure by the Bank or the
Company to continue to provide the Employee with compensation and benefits
provided for on the date of the Change in Control, as the same may be increased
from time to time, or with benefits substantially similar to those provided to
her under any of the employee benefit plans in which the Employee now or
hereafter becomes a participant, or the taking of any action by the Bank or the
Company which would directly or indirectly reduce any of such benefits or
deprive the Employee of any material fringe benefit enjoyed by her at the time
of the Change in Control; (iv) the assignment to the Employee of duties and
responsibilities materially different from those normally associated with her
position; (v) a failure to elect or reelect the Employee to the Board of
Directors of the Bank or the Company, if the Employee is serving on such Board
on the date of the Change in Control; (vi) a material diminution or reduction in
the Employee's responsibilities or authority (including reporting
responsibilities) in connection with her employment with the Bank or the
Company; or (vii) a material reduction in the secretarial or other
administrative support of the Employee.
(e) "Just Cause" shall mean, in the good faith determination of the
Bank's Board 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 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 she has acted, or failed to
act, with an absence of good faith and without a reasonable belief that her
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 second annual
anniversary of the Change in Control or the expiration date of this Agreement.
(g) "Trust" shall mean a grantor trust designed in accordance with
Revenue Procedure 92-64 and having a trustee independent of the Bank and the
Company.
2. Trigger Events
--------------
The Employee shall be entitled to collect the severance benefits set forth
in Section 3 of this Agreement in the event that (i) the Employee voluntarily
terminates employment either for any reason within the 30-day period beginning
on the date of a Change in Control, (ii) the Employee voluntarily terminates
employment within 90 days of an event that both occurs during
-2-
the Protected Period and constitutes Good Reason, or (iii) 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
---------------------------
If the Employee becomes entitled to collect severance benefits pursuant to
Section 2 hereof, the Bank shall pay the Employee a severance benefit equal to
one times the Employee's base annual salary in effect when the Protected Period
begins. In no event, however, will this amount exceed the difference between
(i) the Code (S)280G Maximum and (ii) the sum of any other "parachute payments"
(as defined under Code (S)280G(b)(2)) that the Employee receives on account of
the Change in Control. Said sum shall be paid in one lump sum within ten (10)
days of the later of the date of the Change in Control and the Employee's last
day of employment with the Bank or the Company.
In the event that the Employee and the Bank agree that the Employee has
collected an amount exceeding the Code (S)280G Maximum, the parties may jointly
agree in writing that such excess shall be treated as a loan ab initio which the
-- ------
Employee shall repay to the Bank, on terms and conditions mutually agreeable to
the parties, together with interest at the applicable federal rate provided for
in Section 7872(f)(2)(B) of the Code.
4. Funding of Grantor Trust upon Change in Control
-----------------------------------------------
Not later than ten business days after a Change in Control, the Bank shall
(i) deposit in a Trust an amount equal to the Code (S)280G Maximum, unless the
Employee has previously provided a written release of any claims under this
Agreement, and (ii) provide the trustee of the Trust with a written direction to
hold said amount and any investment return thereon in a segregated account for
the benefit of the Employee, and to follow the procedures set forth in the next
paragraph as to the payment of such amounts from the Trust. Upon the earlier of
the Trust's final payment of all amounts due under the following paragraph or
the date 27 months after the Change in Control, the trustee of the Trust shall
pay to the Bank the entire balance remaining in the segregated account
maintained for the benefit of the Employee. The Employee shall thereafter have
no further interest in the Trust.
During the 27-consecutive month period after a Change in Control, the
Employee may provide the trustee of the Trust with a written notice requesting
that the trustee pay to the Employee an amount designated in the notice as being
payable pursuant to this Agreement. Within three business days after receiving
said notice, the trustee of the Trust shall send a copy of the notice to the
Bank via overnight and registered mail return receipt requested. On the fifth
(5th) business day after mailing said notice to the Bank, the trustee of the
Trust shall pay the Employee the amount designated therein in immediately
available funds, unless prior thereto the Bank provides the trustee with a
written notice directing the trustee to withhold such payment. In the latter
event, the trustee shall submit the dispute to non-appealable binding
arbitration for a determination of the amount payable to the Employee pursuant
to this Agreement, and the costs
-3-
of such arbitration shall be paid by the Bank. The trustee shall choose the
arbitrator to settle the dispute, and such arbitrator shall be bound by the
rules of the American Arbitration Association in making his determination. The
parties and the trustee shall be bound by the results of the arbitration and,
within 3 days of the determination by the arbitrator, the trustee shall pay from
the Trust the amounts required to be paid to the Employee and/or the Bank, and
in no event shall the trustee be liable to either party for making the payments
as determined by the arbitrator.
5. Term of the Agreement
---------------------
This Agreement shall remain in effect for the period commencing on the
Effective Date and ending on the earlier of (i) the date 12 months after the
Effective Date, and (ii) the date on which the Employee terminates employment
with the Bank; provided that the Employee's rights hereunder shall continue
following the termination of this employment with the Bank under any of the
circumstances described in Section 2 hereof. Additionally, on each annual
anniversary date from the Effective Date, the term of this Agreement shall be
extended for an additional one-year period beyond the then effective expiration
date provided the Board of Directors of the Bank determines in a duly adopted
resolutions that the performance of the Employee has met the requirements and
standards of the Board, and that this Agreement shall be extended.
6. Termination or Suspension Under Federal Law
-------------------------------------------
(a) 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.
Section 1828(k) and any regulations promulgated thereunder.
(b) If the Employee is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Sections 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act ("FDIA") (12
U.S.C. 1818(e)(4) or (g)(1)), all obligations of the Bank under this Agreement
shall terminate, as of the effective date of the order, but the vested rights of
the parties shall not be affected.
(c) If the Bank is in default (as defined in Section 3(x)(1) of
FDIA), all obligations under this Agreement shall terminate as of the date of
default; however, this Paragraph shall not affect the vested rights of the
parties.
(d) If a notice served under Section 8(e)(3) or (g)(1) of the FDIA
(12 U.S.C. 1818(e)(3) and (g)(1)) suspends and/or temporarily prohibits the
Employee from participating in the conduct of the Bank's affairs, the Bank's
obligations under this Agreement shall be suspended as of the date of such
service, unless stayed by appropriate proceedings. If the charges in the notice
are dismissed, the Bank may in its discretion (i) pay the Employee all or part
of the compensation withheld while its contract obligations were suspended, and
(ii) reinstate (in whole or in part) any of its obligations which were
suspended.
-4-
7. Expense Reimbursement
---------------------
In the event that any dispute arises between the Employee and the Bank as
to the terms or interpretation 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
Bank or the Company, 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
judgement in favor of the Employee in a court of competent jurisdiction or in
binding arbitration under the rules of the American Arbitration Association.
Such reimbursement shall be paid within ten (10) days of Employee's furnishing
to the Bank or the Company written evidence, which may be in the form, among
other things, of a cancelled check or receipt, of any costs or expenses incurred
by the Employee.
8. Consideration from Company: Joint and Several Liability.
-------------------------------------------------------
In lieu of paying the Employee a base salary during the term of this
Agreement, the Company hereby agrees that to the extent permitted by law, it
shall be jointly and severally liable with the Bank for the payment of all
amounts due under the employment agreement of even date herewith between the
Bank and the Employee. Nevertheless, the Board may in its discretion at any
time during the term of this Agreement agree to pay the Employee a base salary
for the remaining term of this Agreement. If the Board agrees to pay such
salary, the Board shall thereafter review, not less often than annually, the
rate of the Employee's salary, and in its sole discretion may decide to increase
her salary.
9. Successors and Assigns
----------------------
(a) This Agreement shall inure to the benefit of and be binding upon
any corporate or other successor of the Bank or Company 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.
(b) Since the Bank is contracting for the unique and personal skills
of the Employee, the Employee shall be precluded from assigning or delegating
her rights or duties hereunder without first obtaining the written consent of
the Bank.
10. Amendments
----------
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.
11. Applicable Law
--------------
Except to the extent preempted by federal law, the laws of the State of
North Carolina shall govern this Agreement in all respects, whether as to its
validity, construction, capacity, performance or otherwise.
-5-
12. Severability
------------
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.
13. 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.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first hereinabove written.
ATTEST: HOME SAVINGS BANK, SSB
By:
----------------------------- -------------------------
Secretary Its President
ATTEST: NEWSOUTH BANCORP, INC.
By:
------------------------------ -------------------------
Secretary Its President
WITNESS:
------------------------------ -------------------------
Xxxx X. Xxxx
-6-
Exhibit 10.4
CHANGE-IN-CONTROL PROTECTIVE AGREEMENT
--------------------------------------
THIS AGREEMENT entered into this ___ day of __________, 1997, by and
between Home Savings Bank, SSB (the "Bank"), NewSouth Bancorp, Inc. (the
"Company"), and Xxxxxx X. Xxxxxxx (the "Employee"), effective on the closing
date of the Bank's conversion from mutual to stock form (the "Effective Date").
WHEREAS, the Employee has heretofore been employed by the Bank as an
executive officer, and the Bank deems it to be in its best interest to enter
into this Agreement as an additional incentive to the Employee to continue as an
executive employee of 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 of control occurs with respect to the Bank or the Company.
NOW, THEREFORE, the undersigned parties AGREE as follows:
1. Defined Terms
-------------
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) the acquisition of ownership, holding or power to vote more than 25% of the
voting stock of the Bank or the Company, (ii) the acquisition of the ability to
control the election of a majority of the Bank's or the Company's directors,
(iii) the acquisition of a controlling influence over the management or policies
of the Bank or of the Company by any person or by persons acting as a "group"
(within the meaning of Section 13(d) of the Securities Exchange Act of 1934), or
(iv) 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 of 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. Notwithstanding the
foregoing, the Company's ownership of the Bank shall not of itself constitute a
Change in Control for purposes of the Agreement. For purposes of this paragraph
only, the term "person" refers to an individual or a corporation, partnership,
trust, association, joint venture, pool, syndicate, sole proprietorship,
unincorporated organization or any other form of entity not specifically listed
herein.
(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 (S)280G Maximum" shall mean the product of 2.99 and the
Employee's "base amount" as defined in Code (S)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 her personal residence, or perform her principal
executive functions, more than thirty (30) miles from her primary office as of
the date of the Change in Control; (ii) a material 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) the failure by the Bank or the
Company to continue to provide the Employee with compensation and benefits
provided for on the date of the Change in Control, as the same may be increased
from time to time, or with benefits substantially similar to those provided to
her under any of the employee benefit plans in which the Employee now or
hereafter becomes a participant, or the taking of any action by the Bank or the
Company which would directly or indirectly reduce any of such benefits or
deprive the Employee of any material fringe benefit enjoyed by her at the time
of the Change in Control; (iv) the assignment to the Employee of duties and
responsibilities materially different from those normally associated with her
position; (v) a failure to elect or reelect the Employee to the Board of
Directors of the Bank or the Company, if the Employee is serving on such Board
on the date of the Change in Control; (vi) a material diminution or reduction in
the Employee's responsibilities or authority (including reporting
responsibilities) in connection with her employment with the Bank or the
Company; or (vii) a material reduction in the secretarial or other
administrative support of the Employee.
(e) "Just Cause" shall mean, in the good faith determination of the
Bank's Board 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 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 she has acted, or failed to
act, with an absence of good faith and without a reasonable belief that her
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 second annual
anniversary of the Change in Control or the expiration date of this Agreement.
(g) "Trust" shall mean a grantor trust designed in accordance with
Revenue Procedure 92-64 and having a trustee independent of the Bank and the
Company.
2. Trigger Events
--------------
The Employee shall be entitled to collect the severance benefits set forth
in Section 3 of this Agreement in the event that (i) the Employee voluntarily
terminates employment either for any reason within the 30-day period beginning
on the date of a Change in Control, (ii) the Employee voluntarily terminates
employment within 90 days of an event that both occurs during
-2-
the Protected Period and constitutes Good Reason, or (iii) 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
---------------------------
If the Employee becomes entitled to collect severance benefits pursuant to
Section 2 hereof, the Bank shall pay the Employee a severance benefit equal to
1.5 times the Employee's base annual salary in effect when the Protected Period
begins. In no event, however, will this amount exceed the difference between
(i) the Code (S)280G Maximum and (ii) the sum of any other "parachute payments"
(as defined under Code (S)280G(b)(2)) that the Employee receives on account of
the Change in Control. Said sum shall be paid in one lump sum within ten (10)
days of the later of the date of the Change in Control and the Employee's last
day of employment with the Bank or the Company.
In the event that the Employee and the Bank agree that the Employee has
collected an amount exceeding the Code (S)280G Maximum, the parties may jointly
agree in writing that such excess shall be treated as a loan ab initio which the
-- ------
Employee shall repay to the Bank, on terms and conditions mutually agreeable to
the parties, together with interest at the applicable federal rate provided for
in Section 7872(f)(2)(B) of the Code.
4. Funding of Grantor Trust upon Change in Control
-----------------------------------------------
Not later than ten business days after a Change in Control, the Bank shall
(i) deposit in a Trust an amount equal to the Code (S)280G Maximum, unless the
Employee has previously provided a written release of any claims under this
Agreement, and (ii) provide the trustee of the Trust with a written direction to
hold said amount and any investment return thereon in a segregated account for
the benefit of the Employee, and to follow the procedures set forth in the next
paragraph as to the payment of such amounts from the Trust. Upon the earlier of
the Trust's final payment of all amounts due under the following paragraph or
the date 27 months after the Change in Control, the trustee of the Trust shall
pay to the Bank the entire balance remaining in the segregated account
maintained for the benefit of the Employee. The Employee shall thereafter have
no further interest in the Trust.
During the 27-consecutive month period after a Change in Control, the
Employee may provide the trustee of the Trust with a written notice requesting
that the trustee pay to the Employee an amount designated in the notice as being
payable pursuant to this Agreement. Within three business days after receiving
said notice, the trustee of the Trust shall send a copy of the notice to the
Bank via overnight and registered mail return receipt requested. On the fifth
(5th) business day after mailing said notice to the Bank, the trustee of the
Trust shall pay the Employee the amount designated therein in immediately
available funds, unless prior thereto the Bank provides the trustee with a
written notice directing the trustee to withhold such payment. In the latter
event, the trustee shall submit the dispute to non-appealable binding
arbitration for a determination of the amount payable to the Employee pursuant
to this Agreement, and the costs
-3-
of such arbitration shall be paid by the Bank. The trustee shall choose the
arbitrator to settle the dispute, and such arbitrator shall be bound by the
rules of the American Arbitration Association in making his determination. The
parties and the trustee shall be bound by the results of the arbitration and,
within 3 days of the determination by the arbitrator, the trustee shall pay from
the Trust the amounts required to be paid to the Employee and/or the Bank, and
in no event shall the trustee be liable to either party for making the payments
as determined by the arbitrator.
5. Term of the Agreement
---------------------
This Agreement shall remain in effect for the period commencing on the
Effective Date and ending on the earlier of (i) the date 12 months after the
Effective Date, and (ii) the date on which the Employee terminates employment
with the Bank; provided that the Employee's rights hereunder shall continue
following the termination of this employment with the Bank under any of the
circumstances described in Section 2 hereof. Additionally, on each annual
anniversary date from the Effective Date, the term of this Agreement shall be
extended for an additional one-year period beyond the then effective expiration
date provided the Board of Directors of the Bank determines in a duly adopted
resolutions that the performance of the Employee has met the requirements and
standards of the Board, and that this Agreement shall be extended.
6. Termination or Suspension Under Federal Law
-------------------------------------------
(a) 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.
Section 1828(k) and any regulations promulgated thereunder.
(b) If the Employee is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Sections 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act ("FDIA") (12
U.S.C. 1818(e)(4) or (g)(1)), all obligations of the Bank under this Agreement
shall terminate, as of the effective date of the order, but the vested rights of
the parties shall not be affected.
(c) If the Bank is in default (as defined in Section 3(x)(1) of FDIA),
all obligations under this Agreement shall terminate as of the date of default;
however, this Paragraph shall not affect the vested rights of the parties.
(d) If a notice served under Section 8(e)(3) or (g)(1) of the FDIA (12
U.S.C. 1818(e)(3) and (g)(1)) suspends and/or temporarily prohibits the Employee
from participating in the conduct of the Bank's affairs, the Bank's obligations
under this Agreement shall be suspended as of the date of such service, unless
stayed by appropriate proceedings. If the charges in the notice are dismissed,
the Bank may in its discretion (i) pay the Employee all or part of the
compensation withheld while its contract obligations were suspended, and (ii)
reinstate (in whole or in part) any of its obligations which were suspended.
-4-
7. Expense Reimbursement
---------------------
In the event that any dispute arises between the Employee and the Bank as
to the terms or interpretation 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
Bank or the Company, 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
judgement in favor of the Employee in a court of competent jurisdiction or in
binding arbitration under the rules of the American Arbitration Association.
Such reimbursement shall be paid within ten (10) days of Employee's furnishing
to the Bank or the Company written evidence, which may be in the form, among
other things, of a cancelled check or receipt, of any costs or expenses incurred
by the Employee.
8. Consideration from Company: Joint and Several Liability.
-------------------------------------------------------
In lieu of paying the Employee a base salary during the term of this
Agreement, the Company hereby agrees that to the extent permitted by law, it
shall be jointly and severally liable with the Bank for the payment of all
amounts due under the employment agreement of even date herewith between the
Bank and the Employee. Nevertheless, the Board may in its discretion at any
time during the term of this Agreement agree to pay the Employee a base salary
for the remaining term of this Agreement. If the Board agrees to pay such
salary, the Board shall thereafter review, not less often than annually, the
rate of the Employee's salary, and in its sole discretion may decide to increase
her salary.
9. Successors and Assigns
----------------------
(a) This Agreement shall inure to the benefit of and be binding upon
any corporate or other successor of the Bank or Company 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.
(b) Since the Bank is contracting for the unique and personal skills
of the Employee, the Employee shall be precluded from assigning or delegating
her rights or duties hereunder without first obtaining the written consent of
the Bank.
10. Amendments
----------
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.
11. Applicable Law
--------------
Except to the extent preempted by federal law, the laws of the State of
North Carolina shall govern this Agreement in all respects, whether as to its
validity, construction, capacity, performance or otherwise.
-5-
12. Severability
------------
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.
13. 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.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first hereinabove written.
ATTEST: HOME SAVINGS BANK, SSB
By:
------------------------- -------------------------
Secretary Its President
ATTEST: NEWSOUTH BANCORP, INC.
By:
-------------------------- --------------------------
Secretary Its President
WITNESS:
-------------------------- -------------------------
Xxxxxx X. Xxxxxxx
-6-
Exhibit 10.4
CHANGE-IN-CONTROL PROTECTIVE AGREEMENT
--------------------------------------
THIS AGREEMENT entered into this ___ day of __________, 1997, by and
between Home Savings Bank, SSB (the "Bank"), NewSouth Bancorp, Inc. (the
"Company"), and Xxxxxxx X. Xxxxxxx (the "Employee"), effective on the closing
date of the Bank's conversion from mutual to stock form (the "Effective Date").
WHEREAS, the Employee has heretofore been employed by the Bank as an
executive officer, and the Bank deems it to be in its best interest to enter
into this Agreement as an additional incentive to the Employee to continue as an
executive employee of 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 of control occurs with respect to the Bank or the Company.
NOW, THEREFORE, the undersigned parties AGREE as follows:
1. Defined Terms
-------------
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) the acquisition of ownership, holding or power to vote more than 25% of the
voting stock of the Bank or the Company, (ii) the acquisition of the ability to
control the election of a majority of the Bank's or the Company's directors,
(iii) the acquisition of a controlling influence over the management or policies
of the Bank or of the Company by any person or by persons acting as a "group"
(within the meaning of Section 13(d) of the Securities Exchange Act of 1934), or
(iv) 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 of 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. Notwithstanding the foregoing,
the Company's ownership of the Bank shall not of itself constitute a Change in
Control for purposes of the Agreement. For purposes of this paragraph only, the
term "person" refers to an individual or a corporation, partnership, trust,
association, joint venture, pool, syndicate, sole proprietorship, unincorporated
organization or any other form of entity not specifically listed herein.
(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 (S)280G Maximum" shall mean the product of 2.99 and the
Employee's "base amount" as defined in Code (S)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 her personal residence, or perform her principal
executive functions, more than thirty (30) miles from her primary office as of
the date of the Change in Control; (ii) a material 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) the failure by the Bank or the
Company to continue to provide the Employee with compensation and benefits
provided for on the date of the Change in Control, as the same may be increased
from time to time, or with benefits substantially similar to those provided to
her under any of the employee benefit plans in which the Employee now or
hereafter becomes a participant, or the taking of any action by the Bank or the
Company which would directly or indirectly reduce any of such benefits or
deprive the Employee of any material fringe benefit enjoyed by her at the time
of the Change in Control; (iv) the assignment to the Employee of duties and
responsibilities materially different from those normally associated with her
position; (v) a failure to elect or reelect the Employee to the Board of
Directors of the Bank or the Company, if the Employee is serving on such Board
on the date of the Change in Control; (vi) a material diminution or reduction in
the Employee's responsibilities or authority (including reporting
responsibilities) in connection with her employment with the Bank or the
Company; or (vii) a material reduction in the secretarial or other
administrative support of the Employee.
(e) "Just Cause" shall mean, in the good faith determination of the
Bank's Board 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 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 she has acted, or failed to
act, with an absence of good faith and without a reasonable belief that her
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 second annual
anniversary of the Change in Control or the expiration date of this Agreement.
(g) "Trust" shall mean a grantor trust designed in accordance with
Revenue Procedure 92-64 and having a trustee independent of the Bank and the
Company.
2. Trigger Events
--------------
The Employee shall be entitled to collect the severance benefits set forth
in Section 3 of this Agreement in the event that (i) the Employee voluntarily
terminates employment either for any reason within the 30-day period beginning
on the date of a Change in Control, (ii) the Employee voluntarily terminates
employment within 90 days of an event that both occurs during
-2-
the Protected Period and constitutes Good Reason, or (iii) 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
---------------------------
If the Employee becomes entitled to collect severance benefits pursuant to
Section 2 hereof, the Bank shall pay the Employee a severance benefit equal to
one times the Employee's base annual salary in effect when the Protected Period
begins. In no event, however, will this amount exceed the difference between (i)
the Code (S)280G Maximum and (ii) the sum of any other "parachute payments" (as
defined under Code (S)280G(b)(2)) that the Employee receives on account of the
Change in Control. Said sum shall be paid in one lump sum within ten (10) days
of the later of the date of the Change in Control and the Employee's last day of
employment with the Bank or the Company.
In the event that the Employee and the Bank agree that the Employee has
collected an amount exceeding the Code (S)280G Maximum, the parties may jointly
agree in writing that such excess shall be treated as a loan ab initio which the
-- ------
Employee shall repay to the Bank, on terms and conditions mutually agreeable to
the parties, together with interest at the applicable federal rate provided for
in Section 7872(f)(2)(B) of the Code.
4. Funding of Grantor Trust upon Change in Control
-----------------------------------------------
Not later than ten business days after a Change in Control, the Bank shall
(i) deposit in a Trust an amount equal to the Code (S)280G Maximum, unless the
Employee has previously provided a written release of any claims under this
Agreement, and (ii) provide the trustee of the Trust with a written direction to
hold said amount and any investment return thereon in a segregated account for
the benefit of the Employee, and to follow the procedures set forth in the next
paragraph as to the payment of such amounts from the Trust. Upon the earlier of
the Trust's final payment of all amounts due under the following paragraph or
the date 27 months after the Change in Control, the trustee of the Trust shall
pay to the Bank the entire balance remaining in the segregated account
maintained for the benefit of the Employee. The Employee shall thereafter have
no further interest in the Trust.
During the 27-consecutive month period after a Change in Control, the
Employee may provide the trustee of the Trust with a written notice requesting
that the trustee pay to the Employee an amount designated in the notice as being
payable pursuant to this Agreement. Within three business days after receiving
said notice, the trustee of the Trust shall send a copy of the notice to the
Bank via overnight and registered mail return receipt requested. On the fifth
(5th) business day after mailing said notice to the Bank, the trustee of the
Trust shall pay the Employee the amount designated therein in immediately
available funds, unless prior thereto the Bank provides the trustee with a
written notice directing the trustee to withhold such payment. In the latter
event, the trustee shall submit the dispute to non-appealable binding
arbitration for a determination of the amount payable to the Employee pursuant
to this Agreement, and the costs
-3-
of such arbitration shall be paid by the Bank. The trustee shall choose the
arbitrator to settle the dispute, and such arbitrator shall be bound by the
rules of the American Arbitration Association in making his determination. The
parties and the trustee shall be bound by the results of the arbitration and,
within 3 days of the determination by the arbitrator, the trustee shall pay from
the Trust the amounts required to be paid to the Employee and/or the Bank, and
in no event shall the trustee be liable to either party for making the payments
as determined by the arbitrator.
5. Term of the Agreement
---------------------
This Agreement shall remain in effect for the period commencing on the
Effective Date and ending on the earlier of (i) the date 12 months after the
Effective Date, and (ii) the date on which the Employee terminates employment
with the Bank; provided that the Employee's rights hereunder shall continue
following the termination of this employment with the Bank under any of the
circumstances described in Section 2 hereof. Additionally, on each annual
anniversary date from the Effective Date, the term of this Agreement shall be
extended for an additional one-year period beyond the then effective expiration
date provided the Board of Directors of the Bank determines in a duly adopted
resolutions that the performance of the Employee has met the requirements and
standards of the Board, and that this Agreement shall be extended.
6. Termination or Suspension Under Federal Law
-------------------------------------------
(a) 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.
Section 1828(k) and any regulations promulgated thereunder.
(b) If the Employee is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Sections 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act ("FDIA") (12
U.S.C. 1818(e)(4) or (g)(1)), all obligations of the Bank under this Agreement
shall terminate, as of the effective date of the order, but the vested rights of
the parties shall not be affected.
(c) If the Bank is in default (as defined in Section 3(x)(1) of FDIA),
all obligations under this Agreement shall terminate as of the date of default;
however, this Paragraph shall not affect the vested rights of the parties.
(d) If a notice served under Section 8(e)(3) or (g)(1) of the FDIA (12
U.S.C. 1818(e)(3) and (g)(1)) suspends and/or temporarily prohibits the Employee
from participating in the conduct of the Bank's affairs, the Bank's obligations
under this Agreement shall be suspended as of the date of such service, unless
stayed by appropriate proceedings. If the charges in the notice are dismissed,
the Bank may in its discretion (i) pay the Employee all or part of the
compensation withheld while its contract obligations were suspended, and (ii)
reinstate (in whole or in part) any of its obligations which were suspended.
-4-
7. Expense Reimbursement
---------------------
In the event that any dispute arises between the Employee and the Bank as
to the terms or interpretation 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
Bank or the Company, 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
judgement in favor of the Employee in a court of competent jurisdiction or in
binding arbitration under the rules of the American Arbitration Association.
Such reimbursement shall be paid within ten (10) days of Employee's furnishing
to the Bank or the Company written evidence, which may be in the form, among
other things, of a cancelled check or receipt, of any costs or expenses incurred
by the Employee.
8. Consideration from Company: Joint and Several Liability.
-------------------------------------------------------
In lieu of paying the Employee a base salary during the term of this
Agreement, the Company hereby agrees that to the extent permitted by law, it
shall be jointly and severally liable with the Bank for the payment of all
amounts due under the employment agreement of even date herewith between the
Bank and the Employee. Nevertheless, the Board may in its discretion at any time
during the term of this Agreement agree to pay the Employee a base salary for
the remaining term of this Agreement. If the Board agrees to pay such salary,
the Board shall thereafter review, not less often than annually, the rate of the
Employee's salary, and in its sole discretion may decide to increase her salary.
9. Successors and Assigns
----------------------
(a) This Agreement shall inure to the benefit of and be binding upon
any corporate or other successor of the Bank or Company 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.
(b) Since the Bank is contracting for the unique and personal skills
of the Employee, the Employee shall be precluded from assigning or delegating
her rights or duties hereunder without first obtaining the written consent of
the Bank.
10. Amendments
----------
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.
11. Applicable Law
--------------
Except to the extent preempted by federal law, the laws of the State of
North Carolina shall govern this Agreement in all respects, whether as to its
validity, construction, capacity, performance or otherwise.
-5-
12. Severability
------------
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.
13. 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.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year
first hereinabove written.
ATTEST: HOME SAVINGS BANK, SSB
By:
-------------------------- -----------------------------
Secretary Its President
ATTEST: NEWSOUTH BANCORP, INC.
By:
-------------------------- -----------------------------
Secretary Its President
WITNESS:
-------------------------- ---------------------------------
Xxxxxxx X. Xxxxxxx
-6-
Exhibit 10.4
CHANGE-IN-CONTROL PROTECTIVE AGREEMENT
--------------------------------------
THIS AGREEMENT entered into this ___ day of __________, 1997, by and
between Home Savings Bank, SSB (the "Bank"), NewSouth Bancorp, Inc. (the
"Company"), and Xxxxxx X. House (the "Employee"), effective on the closing date
of the Bank's conversion from mutual to stock form (the "Effective Date").
WHEREAS, the Employee has heretofore been employed by the Bank as an
executive officer, and the Bank deems it to be in its best interest to enter
into this Agreement as an additional incentive to the Employee to continue as an
executive employee of 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 of control occurs with respect to the Bank or the Company.
NOW, THEREFORE, the undersigned parties AGREE as follows:
1. Defined Terms
-------------
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) the acquisition of ownership, holding or power to vote more than 25% of the
voting stock of the Bank or the Company, (ii) the acquisition of the ability to
control the election of a majority of the Bank's or the Company's directors,
(iii) the acquisition of a controlling influence over the management or policies
of the Bank or of the Company by any person or by persons acting as a "group"
(within the meaning of Section 13(d) of the Securities Exchange Act of 1934), or
(iv) 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 of 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. Notwithstanding the foregoing,
the Company's ownership of the Bank shall not of itself constitute a Change in
Control for purposes of the Agreement. For purposes of this paragraph only, the
term "person" refers to an individual or a corporation, partnership, trust,
association, joint venture, pool, syndicate, sole proprietorship, unincorporated
organization or any other form of entity not specifically listed herein.
(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 (S)280G Maximum" shall mean the product of 2.99 and the
Employee's "base amount" as defined in Code (S)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 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) the failure by the Bank or the
Company to continue to provide the Employee with compensation and benefits
provided for on the date of the Change in Control, as the same may be increased
from time to time, or with benefits substantially similar to those provided to
him under any of the employee benefit plans in which the Employee now or
hereafter becomes a participant, or the taking of any action by the Bank or the
Company which would directly or indirectly reduce any of such benefits or
deprive the Employee of any material fringe benefit enjoyed by him at the time
of the Change in Control; (iv) the assignment to the Employee of duties and
responsibilities materially different from those normally associated with his
position; (v) a failure to elect or reelect the Employee to the Board of
Directors of the Bank or the Company, if the Employee is serving on such Board
on the date of the Change in Control; (vi) a material diminution or reduction in
the Employee's responsibilities or authority (including reporting
responsibilities) in connection with his employment with the Bank or the
Company; or (vii) a material reduction in the secretarial or other
administrative support of the Employee.
(e) "Just Cause" shall mean, in the good faith determination of the
Bank's Board 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 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 second annual
anniversary of the Change in Control or the expiration date of this Agreement.
(g) "Trust" shall mean a grantor trust designed in accordance with
Revenue Procedure 92-64 and having a trustee independent of the Bank and the
Company.
2. Trigger Events
--------------
The Employee shall be entitled to collect the severance benefits set forth
in Section 3 of this Agreement in the event that (i) the Employee voluntarily
terminates employment either for any reason within the 30-day period beginning
on the date of a Change in Control, (ii) the Employee voluntarily terminates
employment within 90 days of an event that both occurs during
-2-
the Protected Period and constitutes Good Reason, or (iii) 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
---------------------------
If the Employee becomes entitled to collect severance benefits pursuant to
Section 2 hereof, the Bank shall pay the Employee a severance benefit equal to
1.5 times the Employee's base annual salary in effect when the Protected Period
begins. In no event, however, will this amount exceed the difference between
(i) the Code (S)280G Maximum and (ii) the sum of any other "parachute payments"
(as defined under Code (S)280G(b)(2)) that the Employee receives on account of
the Change in Control. Said sum shall be paid in one lump sum within ten (10)
days of the later of the date of the Change in Control and the Employee's last
day of employment with the Bank or the Company.
In the event that the Employee and the Bank agree that the Employee has
collected an amount exceeding the Code (S)280G Maximum, the parties may jointly
agree in writing that such excess shall be treated as a loan ab initio which the
-- ------
Employee shall repay to the Bank, on terms and conditions mutually agreeable to
the parties, together with interest at the applicable federal rate provided for
in Section 7872(f)(2)(B) of the Code.
4. Funding of Grantor Trust upon Change in Control
-----------------------------------------------
Not later than ten business days after a Change in Control, the Bank shall
(i) deposit in a Trust an amount equal to the Code (S)280G Maximum, unless the
Employee has previously provided a written release of any claims under this
Agreement, and (ii) provide the trustee of the Trust with a written direction to
hold said amount and any investment return thereon in a segregated account for
the benefit of the Employee, and to follow the procedures set forth in the next
paragraph as to the payment of such amounts from the Trust. Upon the earlier of
the Trust's final payment of all amounts due under the following paragraph or
the date 27 months after the Change in Control, the trustee of the Trust shall
pay to the Bank the entire balance remaining in the segregated account
maintained for the benefit of the Employee. The Employee shall thereafter have
no further interest in the Trust.
During the 27-consecutive month period after a Change in Control, the
Employee may provide the trustee of the Trust with a written notice requesting
that the trustee pay to the Employee an amount designated in the notice as being
payable pursuant to this Agreement. Within three business days after receiving
said notice, the trustee of the Trust shall send a copy of the notice to the
Bank via overnight and registered mail return receipt requested. On the fifth
(5th) business day after mailing said notice to the Bank, the trustee of the
Trust shall pay the Employee the amount designated therein in immediately
available funds, unless prior thereto the Bank provides the trustee with a
written notice directing the trustee to withhold such payment. In the latter
event, the trustee shall submit the dispute to non-appealable binding
arbitration for a determination of the amount payable to the Employee pursuant
to this Agreement, and the costs
-3-
of such arbitration shall be paid by the Bank. The trustee shall choose the
arbitrator to settle the dispute, and such arbitrator shall be bound by the
rules of the American Arbitration Association in making his determination. The
parties and the trustee shall be bound by the results of the arbitration and,
within 3 days of the determination by the arbitrator, the trustee shall pay from
the Trust the amounts required to be paid to the Employee and/or the Bank, and
in no event shall the trustee be liable to either party for making the payments
as determined by the arbitrator.
5. Term of the Agreement
---------------------
This Agreement shall remain in effect for the period commencing on the
Effective Date and ending on the earlier of (i) the date 12 months after the
Effective Date, and (ii) the date on which the Employee terminates employment
with the Bank; provided that the Employee's rights hereunder shall continue
following the termination of this employment with the Bank under any of the
circumstances described in Section 2 hereof. Additionally, on each annual
anniversary date from the Effective Date, the term of this Agreement shall be
extended for an additional one-year period beyond the then effective expiration
date provided the Board of Directors of the Bank determines in a duly adopted
resolutions that the performance of the Employee has met the requirements and
standards of the Board, and that this Agreement shall be extended.
6. Termination or Suspension Under Federal Law
-------------------------------------------
(a) 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.
Section 1828(k) and any regulations promulgated thereunder.
(b) If the Employee is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Sections 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act ("FDIA")
(12 U.S.C. 1818(e)(4) or (g)(1)), all obligations of the Bank under this
Agreement shall terminate, as of the effective date of the order, but the vested
rights of the parties shall not be affected.
(c) If the Bank is in default (as defined in Section 3(x)(1) of FDIA),
all obligations under this Agreement shall terminate as of the date of default;
however, this Paragraph shall not affect the vested rights of the parties.
(d) If a notice served under Section 8(e)(3) or (g)(1) of the FDIA
(12 U.S.C. 1818(e)(3) and (g)(1)) suspends and/or temporarily prohibits the
Employee from participating in the conduct of the Bank's affairs, the Bank's
obligations under this Agreement shall be suspended as of the date of such
service, unless stayed by appropriate proceedings. If the charges in the notice
are dismissed, the Bank may in its discretion (i) pay the Employee all or part
of the compensation withheld while its contract obligations were suspended, and
(ii) reinstate (in whole or in part) any of its obligations which were
suspended.
-4-
7. Expense Reimbursement
---------------------
In the event that any dispute arises between the Employee and the Bank as
to the terms or interpretation 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
Bank or the Company, 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
judgement in favor of the Employee in a court of competent jurisdiction or in
binding arbitration under the rules of the American Arbitration Association.
Such reimbursement shall be paid within ten (10) days of Employee's furnishing
to the Bank or the Company written evidence, which may be in the form, among
other things, of a cancelled check or receipt, of any costs or expenses incurred
by the Employee.
8. Consideration from Company: Joint and Several Liability. In lieu of
-------------------------------------------------------
paying the Employee a base salary during the term of this Agreement, the Company
hereby agrees that to the extent permitted by law, it shall be jointly and
severally liable with the Bank for the payment of all amounts due under the
employment agreement of even date herewith between the Bank and the Employee.
Nevertheless, the Board may in its discretion at any time during the term of
this Agreement agree to pay the Employee a base salary for the remaining term of
this Agreement. If the Board agrees to pay such salary, the Board shall
thereafter review, not less often than annually, the rate of the Employee's
salary, and in its sole discretion may decide to increase his salary.
9. Successors and Assigns
----------------------
(a) This Agreement shall inure to the benefit of and be binding upon
any corporate or other successor of the Bank or Company 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.
(b) Since the Bank is 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 Bank.
10. Amendments
----------
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.
11. Applicable Law
--------------
Except to the extent preempted by federal law, the laws of the State of
North Carolina shall govern this Agreement in all respects, whether as to its
validity, construction, capacity, performance or otherwise.
-5-
12. Severability
------------
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.
13. 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.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first hereinabove written.
ATTEST: HOME SAVINGS BANK, SSB
By:
-------------------------------- ---------------------------
Secretary Its President
ATTEST: NEWSOUTH BANCORP, INC.
By:
-------------------------------- ---------------------------
Secretary Its President
WITNESS:
-------------------------------- -------------------------------
Xxxxxx X. House
-6-
Exhibit 10.4
CHANGE-IN-CONTROL PROTECTIVE AGREEMENT
--------------------------------------
THIS AGREEMENT entered into this ___ day of __________, 1997, by and
between Home Savings Bank, SSB (the "Bank"), NewSouth Bancorp, Inc. (the
"Company"), and Xxxxxxx X. Xxxxxxx (the "Employee"), effective on the closing
date of the Bank's conversion from mutual to stock form (the "Effective Date").
WHEREAS, the Employee has heretofore been employed by the Bank as an
executive officer, and the Bank deems it to be in its best interest to enter
into this Agreement as an additional incentive to the Employee to continue as an
executive employee of 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 of control occurs with respect to the Bank or the Company.
NOW, THEREFORE, the undersigned parties AGREE as follows:
1. Defined Terms
-------------
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) the acquisition of ownership, holding or power to vote more than 25% of the
voting stock of the Bank or the Company, (ii) the acquisition of the ability to
control the election of a majority of the Bank's or the Company's directors,
(iii) the acquisition of a controlling influence over the management or policies
of the Bank or of the Company by any person or by persons acting as a "group"
(within the meaning of Section 13(d) of the Securities Exchange Act of 1934), or
(iv) 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 of 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. Notwithstanding the
foregoing, the Company's ownership of the Bank shall not of itself constitute a
Change in Control for purposes of the Agreement. For purposes of this paragraph
only, the term "person" refers to an individual or a corporation, partnership,
trust, association, joint venture, pool, syndicate, sole proprietorship,
unincorporated organization or any other form of entity not specifically listed
herein.
(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 (S)280G Maximum" shall mean the product of 2.99 and the
Employee's "base amount" as defined in Code (S)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 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) the failure by the Bank or the
Company to continue to provide the Employee with compensation and benefits
provided for on the date of the Change in Control, as the same may be increased
from time to time, or with benefits substantially similar to those provided to
him under any of the employee benefit plans in which the Employee now or
hereafter becomes a participant, or the taking of any action by the Bank or the
Company which would directly or indirectly reduce any of such benefits or
deprive the Employee of any material fringe benefit enjoyed by him at the time
of the Change in Control; (iv) the assignment to the Employee of duties and
responsibilities materially different from those normally associated with his
position; (v) a failure to elect or reelect the Employee to the Board of
Directors of the Bank or the Company, if the Employee is serving on such Board
on the date of the Change in Control; (vi) a material diminution or reduction in
the Employee's responsibilities or authority (including reporting
responsibilities) in connection with his employment with the Bank or the
Company; or (vii) a material reduction in the secretarial or other
administrative support of the Employee.
(e) "Just Cause" shall mean, in the good faith determination of the
Bank's Board 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 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 second annual
anniversary of the Change in Control or the expiration date of this Agreement.
(g) "Trust" shall mean a grantor trust designed in accordance with
Revenue Procedure 92-64 and having a trustee independent of the Bank and the
Company.
2. Trigger Events
--------------
The Employee shall be entitled to collect the severance benefits set forth
in Section 3 of this Agreement in the event that (i) the Employee voluntarily
terminates employment either for any reason within the 30-day period beginning
on the date of a Change in Control, (ii) the Employee voluntarily terminates
employment within 90 days of an event that both occurs during
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the Protected Period and constitutes Good Reason, or (iii) 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
---------------------------
If the Employee becomes entitled to collect severance benefits pursuant to
Section 2 hereof, the Bank shall pay the Employee a severance benefit equal to
1.5 times the Employee's base annual salary in effect when the Protected Period
begins. In no event, however, will this amount exceed the difference between
(i) the Code (S)280G Maximum and (ii) the sum of any other "parachute payments"
(as defined under Code (S)280G(b)(2)) that the Employee receives on account of
the Change in Control. Said sum shall be paid in one lump sum within ten (10)
days of the later of the date of the Change in Control and the Employee's last
day of employment with the Bank or the Company.
In the event that the Employee and the Bank agree that the Employee has
collected an amount exceeding the Code (S)280G Maximum, the parties may jointly
agree in writing that such excess shall be treated as a loan ab initio which the
-- ------
Employee shall repay to the Bank, on terms and conditions mutually agreeable to
the parties, together with interest at the applicable federal rate provided for
in Section 7872(f)(2)(B) of the Code.
4. Funding of Grantor Trust upon Change in Control
-----------------------------------------------
Not later than ten business days after a Change in Control, the Bank shall
(i) deposit in a Trust an amount equal to the Code (S)280G Maximum, unless the
Employee has previously provided a written release of any claims under this
Agreement, and (ii) provide the trustee of the Trust with a written direction to
hold said amount and any investment return thereon in a segregated account for
the benefit of the Employee, and to follow the procedures set forth in the next
paragraph as to the payment of such amounts from the Trust. Upon the earlier of
the Trust's final payment of all amounts due under the following paragraph or
the date 27 months after the Change in Control, the trustee of the Trust shall
pay to the Bank the entire balance remaining in the segregated account
maintained for the benefit of the Employee. The Employee shall thereafter have
no further interest in the Trust.
During the 27-consecutive month period after a Change in Control, the
Employee may provide the trustee of the Trust with a written notice requesting
that the trustee pay to the Employee an amount designated in the notice as being
payable pursuant to this Agreement. Within three business days after receiving
said notice, the trustee of the Trust shall send a copy of the notice to the
Bank via overnight and registered mail return receipt requested. On the fifth
(5th) business day after mailing said notice to the Bank, the trustee of the
Trust shall pay the Employee the amount designated therein in immediately
available funds, unless prior thereto the Bank provides the trustee with a
written notice directing the trustee to withhold such payment. In the latter
event, the trustee shall submit the dispute to non-appealable binding
arbitration for a determination of the amount payable to the Employee pursuant
to this Agreement, and the costs
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of such arbitration shall be paid by the Bank. The trustee shall choose the
arbitrator to settle the dispute, and such arbitrator shall be bound by the
rules of the American Arbitration Association in making his determination. The
parties and the trustee shall be bound by the results of the arbitration and,
within 3 days of the determination by the arbitrator, the trustee shall pay from
the Trust the amounts required to be paid to the Employee and/or the Bank, and
in no event shall the trustee be liable to either party for making the payments
as determined by the arbitrator.
5. Term of the Agreement
---------------------
This Agreement shall remain in effect for the period commencing on the
Effective Date and ending on the earlier of (i) the date 12 months after the
Effective Date, and (ii) the date on which the Employee terminates employment
with the Bank; provided that the Employee's rights hereunder shall continue
following the termination of this employment with the Bank under any of the
circumstances described in Section 2 hereof. Additionally, on each annual
anniversary date from the Effective Date, the term of this Agreement shall be
extended for an additional one-year period beyond the then effective expiration
date provided the Board of Directors of the Bank determines in a duly adopted
resolution that the performance of the Employee has met the requirements and
standards of the Board, and that this Agreement shall be extended.
6. Termination or Suspension Under Federal Law
-------------------------------------------
(a) 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.
Section 1828(k) and any regulations promulgated thereunder.
(b) If the Employee is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Sections 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act ("FDIA") (12
U.S.C. 1818(e)(4) or (g)(1)), all obligations of the Bank under this Agreement
shall terminate, as of the effective date of the order, but the vested rights of
the parties shall not be affected.
(c) If the Bank is in default (as defined in Section 3(x)(1) of FDIA),
all obligations under this Agreement shall terminate as of the date of default;
however, this Paragraph shall not affect the vested rights of the parties.
(d) If a notice served under Section 8(e)(3) or (g)(1) of the FDIA (12
U.S.C. 1818(e)(3) and (g)(1)) suspends and/or temporarily prohibits the Employee
from participating in the conduct of the Bank's affairs, the Bank's obligations
under this Agreement shall be suspended as of the date of such service, unless
stayed by appropriate proceedings. If the charges in the notice are dismissed,
the Bank may in its discretion (i) pay the Employee all or part of the
compensation withheld while its contract obligations were suspended, and (ii)
reinstate (in whole or in part) any of its obligations which were suspended.
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7. Expense Reimbursement
---------------------
In the event that any dispute arises between the Employee and the Bank as
to the terms or interpretation 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
Bank or the Company, 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
judgement in favor of the Employee in a court of competent jurisdiction or in
binding arbitration under the rules of the American Arbitration Association.
Such reimbursement shall be paid within ten (10) days of Employee's furnishing
to the Bank or the Company written evidence, which may be in the form, among
other things, of a cancelled check or receipt, of any costs or expenses incurred
by the Employee.
8. Consideration from Company: Joint and Several Liability.
-------------------------------------------------------
In lieu of paying the Employee a base salary during the term of this
Agreement, the Company hereby agrees that to the extent permitted by law, it
shall be jointly and severally liable with the Bank for the payment of all
amounts due under the employment agreement of even date herewith between the
Bank and the Employee. Nevertheless, the Board may in its discretion at any
time during the term of this Agreement agree to pay the Employee a base salary
for the remaining term of this Agreement. If the Board agrees to pay such
salary, the Board shall thereafter review, not less often than annually, the
rate of the Employee's salary, and in its sole discretion may decide to increase
his salary.
9. Successors and Assigns
----------------------
(a) This Agreement shall inure to the benefit of and be binding upon
any corporate or other successor of the Bank or Company 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.
(b) Since the Bank is 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 Bank.
10. Amendments
----------
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.
11. Applicable Law
--------------
Except to the extent preempted by federal law, the laws of the State of
North Carolina shall govern this Agreement in all respects, whether as to its
validity, construction, capacity, performance or otherwise.
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12. Severability
------------
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.
13. 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.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first hereinabove written.
ATTEST: HOME SAVINGS BANK, SSB
By:
------------------------------ ------------------------
Secretary Its President
ATTEST: NEWSOUTH BANCORP, INC.
By:
------------------------------ ------------------------
Secretary Its President
WITNESS:
------------------------------ ------------------------
Xxxxxxx X. Xxxxxxx
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