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Exhibit
10.14
C AROLINA B
ANK
D IRECTOR R
ETIREMENT A GREEMENT
This D
IRECTOR R ETIREMENT A
GREEMENT (this “Agreement”) is
entered into as of this 30th day of May, 2008, by and between
Carolina Bank, a North Carolina-chartered bank (the
“Bank”), and D. Wayne Thomas, a director of the Bank
(the “Director”).
W
HEREAS , to encourage the Director to remain a
member of the Bank’s board of directors, the Bank is willing
to provide to the Director retirement benefits payable from the
Bank’s general assets,
W
HEREAS , the parties hereto intend that this
Agreement shall be considered an unfunded arrangement maintained
primarily to provide supplemental retirement benefits for the
Director, and to be considered a non-qualified benefit plan for
purposes of the Employee Retirement Income Security Act of 1974, as
amended (“ERISA”). The Director is fully advised of the
Bank’s financial status, and
W
HEREAS , 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.
N OW T
HEREFORE , in consideration of the foregoing
premises and other good and valuable consideration, the receipt and
acceptance of which are hereby acknowledged, the Director and the
Bank hereby agree as follows.
A RTICLE
1
D
EFINITIONS
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 Director under this Agreement, applying Accounting Principles
Board Opinion No. 12, as amended by Statement of Financial
Accounting Standards 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 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,
determined according to Article 4, or the estate of the deceased
Director, entitled to benefits, if any, at the Director’s
death.
1.3
“ Beneficiary Designation Form ” means the form
established from time to time by the Plan Administrator that the
Director 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 Carolina Bank Holdings,
Inc., 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 Carolina Bank Holdings, Inc. stock
constituting more than 50% of the total fair market value or total
voting power of Carolina Bank Holdings, Inc. 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 Carolina Bank Holdings, Inc. stock possessing
30% or more of the total voting power of Carolina Bank Holdings,
Inc. stock, or ( y ) a majority of Carolina Bank
Holdings, Inc.’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 Carolina Bank Holdings,
Inc.’s board of directors, or
(c) Change
in ownership of a substantial portion of assets : a change in
ownership of a substantial portion of Carolina Bank Holdings,
Inc.’s assets occurs if in a 12-month period any one person
or more than one person acting as a group acquires from Carolina
Bank Holdings, Inc. assets having a total gross fair market value
equal to or exceeding 40% of the total gross fair market value of
all of Carolina Bank Holdings, Inc.’s assets immediately
before the acquisition or acquisitions. For this purpose, gross
fair market value means the value of Carolina Bank Holdings,
Inc.’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 by the Department of the Treasury under the
Internal Revenue Code of 1986, as amended.
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 Director is
unable to engage in any substantial gainful activity, or ( y
) the Director is receiving income replacement benefits for a
period of at least three months under an accident and health plan.
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 or its subsidiaries.
Upon request of the Plan Administrator, the Director 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.
1.8
“ Effective Date ” means May 30,
2008.
1.9
“ Normal Retirement Age ” means the
Director’s 70 th birthday.
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1.10 “ Plan
Administrator ” or “ Administrator ”
means the plan administrator described in Article 7.
1.11 “ Plan Year
” means a twelve-month period commencing on January 1
and ending on December 31 of each year.
1.12 “ Separation from
Service ” means the Director’s service as a
director and independent contractor to the Bank and any member of a
controlled group, as defined in Code section 414, terminates for
any reason, other than because of a leave of absence approved by
the Bank or the Director’s death. For purposes of this
Agreement, if there is a dispute about the status of the Director
or the date of the Director’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.
1.13 “ Termination with
Cause ” or “ Cause ” means the
Director is not nominated by the board or nominating committee for
reelection as a director after the expiration of the
Director’s current term, or the Director is removed from the
board of directors, in either case –
(a) because of
the Director’s gross negligence or gross neglect of duties,
or
(b) because of
the Director’s commission of a felony, or commission of a
misdemeanor involving moral turpitude, or
(c) because of
the Director’s fraud, disloyalty, dishonesty, or willful
violation of any law or significant policy of the Bank committed in
connection with the Director’s service and resulting in an
adverse effect on the Bank, or a breach of the Director’s
fiduciary duties for personal profit, or
(d) because the
Director is removed from service or permanently prohibited from
participating in the Bank’s affairs by an order issued under
section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act [12
U.S.C. 1818(e)(4) or (g)(1)].
A RTICLE
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L IFETIME B
ENEFIT
2.1 Normal
Retirement . Unless Separation from Service occurs before
Normal Retirement Age and unless the Director shall have received
the benefit under section 2.4 after a Change in Control, when the
Director attains Normal Retirement Age the Bank shall pay to the
Director the benefit described in this section 2.1 instead of any
other benefit under this Agreement. If the Director’s
Separation from Service after payment of benefits under this
section 2.1 commences is a Termination with Cause or if this
Agreement terminates under Article 5, no further benefits shall be
paid to the Director.
2.1.1 Amount of
benefit . The annual benefit under this section 2.1 is
$10,000.
2.1.2 Payment of
benefit . Beginning with the month immediately after the month
in which the Director attains Normal Retirement Age, the Bank shall
pay the annual benefit to the Director in equal monthly
installments on the first day of each month. The annual benefit
shall be paid to the Director for ten years.
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2.2 Early
Termination . Unless the Director shall have received the
benefit under section 2.4 after a Change in Control, upon Early
Termination the Bank shall pay to the Director the benefit
described in this section 2.2 instead of any other benefit under
this Agreement. However, no benefits shall be payable 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 ten years 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 month immediately after the month
in which the Director attains Normal Retirement Age, the Bank shall
pay the annual benefit to the Director in equal monthly
installments on the first day of each month. However, if when
Separation from Service occurs the Director is a specified employee
within the meaning of Code section 409A, payment shall begin on the
later of ( x ) the seventh month after the month in
which the Director’s Separation from Service occurs or (
y ) the month immediately after the month in which the
Director attains Normal Retirement Age. The annual benefit shall be
paid to the Director for ten years.
2.3 Disability
. Unless the Director shall have received the benefit under section
2.4 after a Change in Control, upon the Director’s Separation
from Service because of Disability before Normal Retirement Age the
Bank shall pay to the Director 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 ten years 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 month immediately after the month
in which the Director attains Normal Retirement Age, the Bank shall
pay the annual benefit to the Director in equal monthly
installments on the first day of each month. However, if when
Separation from Service occurs the Director is a specified employee
within the meaning of Code section 409A, payment shall begin on the
later of ( x ) the seventh month after the month in
which the Director’s Separation from Service occurs or (
y ) the month immediately after the month in which the
Director attains Normal Retirement Age. The annual benefit shall be
paid to the Director for ten years.
2.4 Change in
Control . If a Change in Control occurs both before the
Director’s Normal Retirement Age and before the
Director’s Separation from Service, the Bank shall pay to the
Director the benefit described in this section 2.4 instead of any
other benefit under this Agreement.
2.4.1 Amount of
benefit . The benefit under this section 2.4 is the Accrual
Balance on the date of the Change in Control.
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2.4.2 Payment of
benefit . The Bank shall pay the benefit under this section 2.4
to the Director in a single lump sum within three business days
after the Change in Control. If the Director receives the benefit
under this section 2.4 because of the occurrence of a Change in
Control, the Director shall not be entitled to claim additional
benefits under section 2.4 if an additional Change in Control
occurs thereafter.
2.5 Lump-Sum
Payout of Remaining Normal Retirement Benefit, Early Termination
Benefit, or Disability Benefit When a Change in Control Occurs
. If a Change in Control occurs while the Director is receiving the
Normal Retirement Age benefit under section 2.1, the Bank shall pay
the remaining benefits to the Director in a single lump sum within
three business days after the Change in Control. If a Change in
Control occurs after Separation from Service but while the Director
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
benefits to the Director in a single lump sum within three business
days after the Change in Control or, if the Director is a specified
employee within the meaning of Code section 409A, 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 Director’s Separation from Service occurs. The lump-sum
payment due to the Director 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 Annual
Benefit Statement . Within 120 days after the end of each Plan
Year the Plan Administrator shall provide or cause to be provided
to the Director an annual benefit statement showing benefits
payable or potentially payable to the Director under this
Agreement. Each annual benefit statement shall supersede the
previous year’s annual benefit statement. If there is a
contradiction between this Agreement and the annual benefit
statement concerning the amount of a particular benefit payable or
potentially payable to the Director under sections 2.2, 2.3, or 2.4
hereof, the amount of the benefit determined under the Agreement
shall control.
2.7 Savings
Clause Relating to Compliance with Code Section 409A .
Despite any contrary provision of this Agreement, if when the
Director’s Separation from Service occurs the Director is a
specified employee, as defined in Code section 409A, and if any
payments under Article 2 of this Agreement will result in
additional tax or interest to the Director because of section 409A,
the Director shall not be entitled to the payments under Article 2
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