EXHIBIT
10(xvii)
Crescent
State Bank
Amended
Salary Continuation Agreement
This
Amended Salary
Continuation Agreement (this “Agreement”) is
entered into as of this 10 day of September, 2008 by and between
Crescent State Bank, a North Carolina-chartered commercial bank
(the “Bank”), and Ray D. Vaughn, its Senior Vice
President and Chief Operating Officer (the
“Executive”).
Whereas
, the Executive has contributed
substantially to the Bank’s success and the Bank desires that
the Executive continue in its employ,
Whereas
, to encourage the Executive to
remain an employee, the Bank is willing to provide to the Executive
salary continuation benefits payable from the Bank’s general
assets,
Whereas
, none of the conditions or events
included in the definition of the term “golden parachute
payment” that is set forth in section 18(k)(4)(A)(ii) of the
Federal Deposit Insurance Act [12 U.S.C. 1828(k)(4)(A)(ii)] and in
Federal Deposit Insurance Corporation Rule 359.1(f)(1)(ii) [12 CFR
359.1(f)(1)(ii)] exists or, to the best knowledge of the Bank, is
contemplated insofar as the Bank is concerned,
Whereas
, the parties hereto intend that
this Agreement shall be considered an unfunded arrangement
maintained primarily to provide supplemental retirement benefits
for the Executive, and to be considered a non-qualified benefit
plan for purposes of the Employee Retirement Income Security Act of
1974, as amended (“ERISA”). The Executive is
fully advised of the Bank’s financial status, and
Whereas
, the Bank and the Executive intend
that this Agreement shall amend and restate in its entirety the
October 24, 2007 Salary Continuation Agreement between the Bank and
the Executive.
Now Therefore
, in consideration of these premises
and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Executive and the
Bank hereby agree as follows.
Article
1
Definitions
1.1 “
Accrual Balance ” means the liability that should be
accrued by the Bank under generally accepted accounting principles
(“GAAP”) for the Bank’s obligation to the
Executive under this Agreement, applying Accounting Principles
Board Opinion No. 12, as amended by Financial Accounting Standard
No. 106, and the calculation method and discount rate specified
hereinafter. The Accrual Balance shall be calculated
such that when it is credited with interest each month the Accrual
Balance at Normal Retirement Age (or such later date as the
Executive is entitled under section 2.1 to receive the normal
retirement benefits) equals the present value of the normal
retirement benefits. The discount rate means the rate
used by the Plan Administrator for determining the Accrual
Balance. In its sole discretion the Plan Administrator
may adjust the discount rate to maintain the rate within reasonable
standards according to GAAP.
1.2 “
Beneficiary ” means each designated person, or the
estate of the deceased Executive, entitled to benefits, if any,
upon the death of the Executive, determined according to Article
4.
1.3 “
Beneficiary Designation Form ” means the form
established from time to time by the Plan Administrator that the
Executive completes, signs, and returns to the Plan Administrator
to designate one or more Beneficiaries.
1.4 “
Change in Control ” means a change in control as
defined in Internal Revenue Code section 409A and rules,
regulations, and guidance of general application thereunder issued
by the Department of the Treasury, including –
(a)
Change in ownership : a change in ownership of Crescent
Financial Corporation, a North Carolina corporation of which the
Bank is a wholly owned subsidiary, occurs on the date any one
person or group accumulates ownership of Crescent Financial
Corporation stock constituting more than 50% of the total fair
market value or total voting power of Crescent Financial
Corporation stock,
(b)
Change in effective control : ( x ) any one person or
more than one person acting as a group acquires within a 12-month
period ownership of Crescent Financial Corporation stock possessing
30% or more of the total voting power of Crescent Financial
Corporation stock, or ( y ) a majority of Crescent Financial
Corporation’s board of directors is replaced during any
12-month period by directors whose appointment or election is not
endorsed in advance by a majority of Crescent Financial
Corporation’s board of directors, or
(c)
Change in ownership of a substantial portion of assets : a
change in the ownership of a substantial portion of Crescent
Financial Corporation’s assets occurs if in a 12-month period
any one person or more than one person acting as a group acquires
from Crescent Financial Corporation assets having a total gross
fair market value equal to or exceeding 40% of the total gross fair
market value of all of Crescent Financial Corporation’s
assets immediately before the acquisition or
acquisitions. For this purpose, gross fair market value
means the value of Crescent Financial Corporation’s assets,
or the value of the assets being disposed of, determined without
regard to any liabilities associated with the assets.
1.5 “
Code ” means the Internal Revenue Code of 1986, as
amended, and rules, regulations, and guidance of general
application issued thereunder by the Department of the
Treasury.
1.6 “
Disability ” means, because of a medically
determinable physical or mental impairment that can be expected to
result in death or that can be expected to last for a continuous
period of at least 12 months, ( x ) the Executive is unable
to engage in any substantial gainful activity, or ( y ) the
Executive is receiving income replacement benefits for a period of
at least three months under an accident and health plan of the
employer. Medical determination of disability may be
made either by the Social Security Administration or by the
provider of an accident or health plan covering employees of the
Bank. Upon request of the Plan Administrator, the
Executive must submit proof to the Plan Administrator of the Social
Security Administration’s or provider’s
determination.
1.7 “
Early Termination ” means Separation from Service
before Normal Retirement Age for reasons other than death,
Disability, or Termination with Cause. Early Termination
excludes a Separation from Service governed by section
2.4.
1.8 “
Effective Date ” means January 1, 2007.
1.9 “
Intentional ,” for purposes of this Agreement, no act
or failure to act on the Executive’s part shall be deemed to
have been intentional if it was due primarily to an error in
judgment or negligence. An act or failure to act on the
Executive’s part shall be considered intentional if it is not
in good faith and if it is without a reasonable belief that the
action or failure to act is in the Bank’s best
interests.
1.10 “
Normal Retirement Age ” means the Executive’s
65 th
birthday.
1.11 “
Plan Administrator ” or “ Administrator
” means the plan administrator described in Article
8.
1.12 “
Plan Year ” means a twelve-month period commencing on
January 1 and ending on December 31 of each year. The
initial Plan Year shall commence on the Effective Date.
1.13 “
Separation from Service ” shall mean a separation from
service as defined in Code section 409A, including termination of
the Executive’s service as an executive and independent
contractor to the Bank and any member of a controlled group, as
defined in Code section 414, for any reason other than because of a
leave of absence approved by the Bank or the Executive’s
death. For purposes of this Agreement, if there is a
dispute about the employment status of the Executive or the date of
the Executive’s Separation from Service, the Bank shall have
the sole and absolute right to decide the dispute unless a Change
in Control shall have occurred.
1.14
“ Termination with Cause ” and
“ Cause ” shall have the same meaning specified
in any effective severance or employment agreement existing on the
date hereof or hereafter entered into between the Executive and the
Bank. If the Executive is not a party to a severance or
employment agreement containing a definition of termination with
cause, Termination with Cause means the Bank terminates the
Executive’s employment for any of the following reasons
–
(a)
the Executive’s gross negligence or
gross neglect of duties or intentional and material failure to
perform stated duties after written notice thereof, or
(b) disloyalty
or dishonesty by the Executive in the performance of the
Executive’s duties, or a breach of the Executive’s
fiduciary duties for personal profit, in any case whether in the
Executive’s capacity as a director or officer, or
(c)
intentional wrongful damage by
the Executive to the business or property of the Bank or its
affiliates, including without limitation the reputation of the
Bank, which in the judgement of the Bank causes material harm to
the Bank or affiliates, or
(d) a
willful violation by the Executive of any applicable law or
significant policy of the Bank or an affiliate that, in the
Bank’s judgement, results in an adverse effect on the Bank or
the affiliate, regardless of whether the violation leads to
criminal prosecution or conviction. For purposes of this
Agreement, applicable laws include any statute, rule, regulatory
order, statement of policy, or final cease-and-desist order of any
governmental agency or body having regulatory authority over the
Bank, or
(e)
the
occurrence of any event that results in the Executive being
excluded from coverage, or having coverage limited for the
Executive as compared to other executives of the Bank,
under the Bank’s blanket bond or other fidelity or insurance
policy covering its directors, officers, or employees,
or
(f)
the Executive is removed from office
or permanently prohibited from participating in the Bank’s
affairs by an order issued under section 8(e)(4) or section 8(g)(1)
of the Federal Deposit Insurance Act, 12 U.S.C. 1818(e)(4) or
(g)(1), or
(g) conviction
of the Executive for or plea of no contest to a felony or
conviction of or plea of no contest to a misdemeanor involving
moral turpitude, or the actual incarceration of the Executive for 5
consecutive days or more.
1.15
“ Voluntary
Termination with Good Reason ” means a voluntary
Separation from Service by the Executive within 24 months after a
Change in Control if the following conditions ( x ) and (
y ) are satisfied: ( x ) a voluntary Separation from
Service by the Executive will be considered a Voluntary Termination
with Good Reason if any of the following occur without the
Executive’s advance written consent –
1)
a material diminution of the
Executive’s base salary,
2)
a material diminution of the Executive’s
authority, duties, or responsibilities,
3)
a material diminution in the authority, duties, or responsibilities
of the supervisor to whom the Executive is required to
report,
4)
a material diminution in the budget over which the Executive
retains authority,
5)
a material change in the geographic location at which the Executive
must perform services for the Bank, or
6)
any other action or inaction that constitutes a material breach by
the Bank of the agreement under which the Executive provides
services to the Bank.
( y
)
the Executive must give notice to the Bank of the existence
of one or more of the conditions described in clause ( x )
within 90 days after the initial existence of the condition, and
the Bank shall have 30 days thereafter to remedy the
condition. In addition, the Executive’s voluntary
termination because of the existence of one or more of the
conditions described in clause ( x ) must occur within 24
months after the earlier of the initial existence of the condition
or the date of the Change in Control.
Article
2
Lifetime
Benefits
2.1
Normal Retirement . For Separation from Service
on or after the date the Executive attains Normal Retirement Age,
the Bank shall pay to the Executive the benefit described in this
section 2.1 instead of any other benefit under this
Agreement. However, if the Executive’s Separation
from Service is a Termination with Cause or if this Agreement
terminates under Article 5, no benefits shall be paid.
2.1.1
Amount of benefit . The annual benefit under this
section 2.1 is $75,000.
2.1.2
Payment of benefit . Beginning with the seventh
month after the month in which the Executive’s Separation
from Service occurs, the Bank shall pay the annual benefit to the
Executive in equal monthly installments on the first day of each
month. The annual benefit shall be paid to the Executive
for the Executive’s lifetime.
2.2
Early Termination . If Early Termination occurs
on or after the date the Executive attains age 58, the Bank shall
pay to the Executive the benefit described in this section 2.2
instead of any other benefit under this Agreement. If
Early Termination occurs before the Executive attains age 58, no
benefit shall be payable. However, if a Change in
Control occurs before Separation from Service the benefit described
in this section 2.2 for Early Termination shall no longer be
conditional on the Executive having first attained age 58 before
Early Termination occurs. Neither the Bank nor the
Executive shall be entitled to elect in the 24-month period after a
Change in Control between the benefit under this section 2.2 versus
the benefit under section 2.4. If the Executive’s
Separation from Service within 24 months after a Change in Control
is an involuntary termination without Cause or a Voluntary
Termination with Good Reason, no benefit shall be payable under
this section 2.2 and the Executive shall instead be entitled to the
benefit under section 2.4 or, if the Executive first attained
Normal Retirement Age, section 2.1. No benefits shall be
payable under this Agreement if the Executive’s Separation
from Service is a Termination with Cause or if this Agreement
terminates under Article 5.
2.2.1
Amount of benefit . The annual benefit under this
section 2.2 is calculated as the amount that fully amortizes the
Accrual Balance existing at the end of the month immediately before
the month in which Separation from Service occurs, amortizing that
Accrual Balance over the period beginning with the
Executive’s Normal Retirement Age and taking into account
interest at the discount rate or rates established by the Plan
Administrator.
2.2.2
Payment of benefit . Beginning with the later of
( x ) the seventh month after the month in which the
Executive’s Separation from Service occurs, or ( y )
the month immediately after the month in which the Executive
attains Normal Retirement Age, the Bank shall pay the annual
benefit to the Executive in equal monthly installments on the first
day of each month. The annual benefit shall be paid to
the Executive for the Executive’s lifetime.
2.3
Disability . If Separation from Service occurs
because of Disability before Normal Retirement Age, the Bank shall
pay to the Executive the benefit described in this section 2.3
instead of any other benefit under this Agreement.
2.3.1
Amount of benefit . The annual benefit under this
section 2.3 is calculated as the amount that fully amortizes the
Accrual Balance existing at the end of the month immediately before
the month in which Separation from Service occurs, amortizing that
Accrual Balance over the period beginning with the
Executive’s Normal Retirement Age and taking into account
interest at the discount rate or rates established by the Plan
Administrator.
2.3.2
Payment of benefit . Beginning with the later of
( x ) the seventh month after the month in which the
Executive’s Separation from Service occurs, or ( y )
the month immediately after the month in which the Executive
attains Normal Retirement Age, the Bank shall pay the annual
benefit to the Executive in equal monthly installments on the first
day of each month. The annual benefit shall be paid to
the Executive for the Executive’s lifetime.
2.4
Change in Control . If the Executive’s
Separation from Service is an involuntary termination without Cause
or a Voluntary Termination with Good Reason, in either case within
24 months after a Change in Control, the Bank shall pay to the
Executive the benefit described in this section 2.4 instead of any
other benefit under this Agreement. Neither the Bank nor
the Executive shall be entitled to elect in the 24-month period
after a Change in Control between the benefit under this section
2.4 versus the Early Termination benefit under section
2.2. If the Executive’s Separation from Service
within 24 months after a Change in Control is an involuntary
termination without Cause or a Voluntary Termination with Good
Reason, no benefit shall be payable under section 2.2 and the
Executive shall instead be entitled to the benefit under this
section 2.4. But if the Executive shall have attained
Normal Retirement Age when Separation from Service within 24 months
after a Change in Control occurs, whether Separation from Service
is voluntary or involuntary for any reason other than Termination
with Cause, the Executive shall be entitled solely to the benefit
provided by section 2.1, not this section 2.4 or section
2.2. No benefits shall be payable under this Agreement
if the Executive’s Separation from Service is a Termination
with Cause or if this Agreement terminates under Article
5.
2.4.1
Amount of benefit . The benefit under this
section 2.4 is the greater of ( x ) $525,487 or ( y )
the Accrual Balance when the Change in Control occurs, in either
case without reduction for the time value of money or other
discount.
2.4.2
Payment of benefit . The Bank shall pay the
benefit under this section 2.4 to the Executive in a single lump
sum on the first day of the seventh month after the month in which
the Executive’s Separation from Service occurs.
2.5
Change-in-Control Payout of Normal Retirement Benefit, Early
Termination Benefit, or Disability Benefit Being Paid to the
Executive at the Time of a Change in Control . If a
Change in Control occurs while the Executive is receiving the
Normal Retirement Age benefit under section 2.1 or is receiving or
is entitled at Normal Retirement Age to receive the Early
Termination benefit under section 2.2 or the Disability benefit
under section 2.3, the Bank shall pay the remaining salary
continuation benefits to the Executive in a single lump sum on the
later of ( x ) the date of the Change in Control or (
y ) the first day of the seventh month after the month in
which the Executive’s Separation from Service
occurs. The lump-sum payment due to the Executive as a
result of a Change in Control shall be an amount equal to the
Accrual Balance amount corresponding to the particular benefit when
the Change in Control occurs.
2.6
Contradiction Between the Agreement and Schedule A
. If there is a contradiction between this Agreement and
Schedule A attached hereto concerning the amount of a particular
benefit due the Executive under section 2.2, 2.3, or 2.4 hereof,
the amount of the benefit determined under this Agreement shall
control.
2.7
Savings Clause Relating to Compliance with Code Section 409A
. Despite any contrary provision of this
