Exhibit 10.1
EXECUTION COPY
EMPLOYMENT
AGREEMENT
THIS EMPLOYMENT AGREEMENT (this
“Agreement”) dated as of December 31, 2008, is
made by and between CommunitySouth Financial Corporation, a South
Carolina corporation (the “Company”), CommunitySouth
Bank and Trust (the “Bank”), a South Carolina state
bank and wholly owned subsidiary of the Company (the Company and
the Bank collectively referred to herein as the
“Employer”), and C. Allan Ducker, III, an
individual resident of South Carolina (the
“Executive”).
The Employer presently employs the
Executive as the Chief Executive Officer of the Bank and the
Company. The Employer recognizes that the Executive’s
contribution to the growth and success of the Bank and the Company
is substantial. The Employer desires to provide for the
continued employment of the Executive and to make certain changes
in the Executive’s employment arrangements which the Employer
has determined will reinforce and encourage the continued
dedication of the Executive to the Employer and will promote the
best interests of the Employer and the Company’s
shareholders. The Executive is willing to terminate his
interests and rights under the existing employment agreement with
the Employer and to continue to serve the Employer on the terms and
conditions herein provided. Certain terms used in this
Agreement are defined in Section 17 hereof.
In consideration of the foregoing,
the mutual covenants contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound,
hereby agree as follows:
1.
Employment . The Employer shall continue to employ the
Executive, and the Executive shall continue to serve the Employer,
as Chief Executive Officer of the Company and the Bank upon the
terms and conditions set forth herein. The Executive shall
have such authority and responsibilities consistent with his
position as are set forth in the Company’s or the
Bank’s Bylaws or assigned by the Company’s or the
Bank’s Board of Directors (collectively, the
“Board”) from time to time. The Executive shall
devote his full business time, attention, skill and efforts to the
performance of his duties hereunder, except during periods of
illness or periods of vacation and leaves of absence consistent
with Bank policy. The Executive may devote reasonable periods
to service as a director or advisor to other organizations, to
charitable and community activities, and to managing his personal
investments; provided that, such activities do not
materially interfere with the performance of his duties hereunder
and are not in conflict or competitive with, or adverse to, the
interests of the Company or the Bank.
The Executive is currently serving
as a director of each of the Company and the Bank. The
Company shall nominate the Executive for election as a director at
such times as necessary so that the Executive will, if elected by
shareholders, remain a director of the Company throughout the term
of this Agreement. The Executive hereby consents to serving
as a director and to being named as a director of the Company in
documents filed with the Securities and Exchange Commission.
The Board shall undertake every lawful effort to ensure that the
Executive continues throughout the term of employment to be elected
or reelected as a director of the Bank.
2.
Term . Unless earlier terminated as provided herein,
the Executive’s employment under this Agreement shall
commence on the date hereof and be for a term (the
“Term”) of three years. At the end of each day of
the Term, the Term shall be extended for an additional day so that
the remaining term shall continue to be three years;
provided that, the Executive or the Employer may at any
time, by written notice, fix the Term to a finite term of three
years commencing with the date of the notice. Notwithstanding
the foregoing, the Term of employment hereunder will end on the
date that the Executive attains the retirement age, if any,
specified in the Bylaws of the Bank for directors of the
Bank.
3.
Compensation and Benefits .
(a) The Employer shall
pay the Executive an initial annual base salary of $195,000, which
shall be paid in accordance with the Employer’s standard
payroll procedures. The Board or the Compensation
Committee
shall review the Executive’s
performance and salary at least annually and the Board may increase
the Executive’s base salary if it determines in its sole
discretion that an increase is appropriate.
(b) The Executive shall
participate in the Employer’s long-term equity incentive
program and be eligible for the grant of stock options, restricted
stock, and other awards thereunder or under any similar plan
adopted by the Company. Any options or similar awards shall
be issued to Executive at an exercise price of not less than the
stock’s current fair market value as of the date of grant,
and the number of shares subject to such grant shall be fixed on
the date of grant.
(c) The Executive shall
participate in all retirement, medical, welfare and other benefit
plans or programs of the Employer now or hereafter applicable
generally to employees of the Employer or to a class of employees
that includes senior executives of the Employer. Employer
will cover the cost of premium payments for medical, dental, vision
and disability insurance for the Executive and medical, dental, and
vision insurance for his dependents. The Executive shall also
be eligible to receive directors’ fees in the same amount as
outside directors as determined by the Board in its sole discretion
from time to time. The Employer shall pay such fees in
accordance with the Employer’s standard payroll
procedures.
(d) The Employer shall
provide the Executive with a term life insurance policy providing
for death benefits totaling $500,000 payable to the
Executive’s spouse and heirs and $500,000 payable to the
Employer, and the Executive shall cooperate with the Employer in
the securing and maintenance of such policy. If Executive is
taxed by state or federal authorities with respect to
Employer’s payment of the key man life insurance policy,
Executive’s compensation payable hereunder shall be
increased, on a tax gross-up basis, so as to reimburse the
Executive for the additional tax payable by the Executive as a
result of Employer’s payment of the key man life insurance
premiums taking into account all taxes payable by the Executive
with respect to such tax gross-up payments hereunder, so that the
Executive shall be, after payment of all taxes, in the same
financial position as if no taxes with respect to the key man life
insurance policy had been imposed upon him. The Employer
shall require and pay the cost of an annual physical for the
Executive.
(e) The Employer shall
provide the Executive with an automobile either owned or leased by
the Company or the Bank of a make and model appropriate to the
Executive’s status. The monthly payment of this
automobile shall not exceed $750 per month. Insurance, taxes
and other related automobile expenses shall also be paid by the
Bank.
(f) The Employer
shall pay the dues pertaining to area country, social, and civic
clubs and shall designate the Executive as the authorized user of
such membership for so long as the Executive remains the Chief
Executive Officer of the Employer and this Agreement remains in
force.
(g) The Employer shall
reimburse the Executive for reasonable travel and other expenses,
including cell phone expenses related to the Executive’s
duties, which are incurred and accounted for in accordance with the
normal practices of the Employer. The Employer shall
reimburse the Executive for such expenses within 60 days of
Executive’s incurring such expense.
(h) The Employer shall
provide the Executive with four weeks’ annual paid time off,
which includes sick leave, in accordance with any banking
rules or regulations governing paid time off leave. Any
payments made by the Employer to the Executive as compensation for
paid time off days shall be paid in accordance with the
Employer’s standard payroll procedures.
(i) The Executive
shall be eligible to receive cash bonuses based on the
Executive’s achievement of specified goals and
criteria. These goals and criteria may include both annual
and long-term goals, may provide for vesting over a specified time
period, and shall be established annually by the Board (or an
appropriate committee of the Board). Any bonus payment made
pursuant to this Section 3(i) shall be determined by the
Board and made by the earlier of (i) 70 days after the
previous year end for which the bonus was earned by the Executive
or (ii) the first pay period following the Employer’s
press release announcing its previous year’s financial
performance.
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4.
Termination .
(a) The
Executive’s employment under this Agreement may be terminated
prior to the end of the Term only as provided in this
Section 4.
(b) The Agreement will
be terminated upon the death of the Executive. In this event,
the Employer shall pay Executive’s estate any sums due him as
base salary and/or reimbursement of expenses through the end of the
month during which death occurred in accordance with the
Employer’s standard payroll procedures. The Employer
shall also pay the Executive’s estate any bonus earned
through the date of death. Any bonus for previous years which
was not yet paid will be paid pursuant to the terms as set forth in
Section 3(i) above. Any bonus that is earned in the
year of death will be paid on the earlier of (i) 70 days after
the year end in which the Executive died or (ii) the first pay
period following the Employer’s press release announcing its
financial performance for the year in which the Executive
died. To the extent that the bonus is performance-based, the
amount of the bonus will be calculated by taking into account the
performance of the Company and the Bank for the entire year and
prorated through the date of Executive’s death.
(c) The Employer may
terminate the Executive’s employment upon the Disability of
the Executive for a period of 180 days. During the period of
any Disability leading up to the termination of the
Executive’s employment under this provision, the Employer
shall continue to pay the Executive his full base salary at the
rate then in effect and all perquisites and other benefits (other
than any bonus) in accordance with the Employer’s standard
payroll procedures until the Executive becomes eligible for
benefits under any long-term disability plan or insurance program
maintained by the Employer; provided that, the amount of any such
payments to the Executive shall be reduced by the sum of the
amounts, if any, payable to the Executive for the same period under
any other disability benefit or pension plan covering the
Executive. Furthermore, the Employer shall pay the Executive
any bonus earned through the date of Disability. Any bonus
for previous years which was not yet paid will be paid pursuant to
the terms as set forth in Section 3(i) above. Any
bonus that is earned in the year of Disability will be paid on the
earlier of (i) 70 days after the year end in which Executive
became Disabled or (ii) the first pay period following the
Employer’s press release announcing its financial performance
for the year in which the Executive became Disabled. To the
extent that the bonus is performance-based, the amount of the bonus
will be calculated by taking into account the performance of the
Company and the Bank for the entire year and prorated based on the
number of days the Executive worked during the year of
Executive’s Disability. Nothing herein shall prohibit
the Employer from hiring an acting chief executive officer prior to
the expiration of this 180-day period.
(d) The Employer may
terminate the Executive’s employment for Cause upon delivery
of a Notice of Termination to the Executive. If the
Executive’s employment is terminated for Cause under this
provision, the Executive shall receive only any sums due him as
base salary and/or reimbursement of expenses through the date of
termination, which shall be paid in accordance with the
Employer’s standard payroll procedures.
(e) The Employer may
terminate the Executive’s employment without Cause upon
delivery of a Notice of Termination to the Executive. If the
Executive’s employment is terminated without Cause under this
provision, subject to the possibility of a six-month delay
described below in this Section 4(e), beginning on the first
day of the month following date of the Executive’s
termination, and continuing on the first day of the month for the
next 24 months, the Employer shall pay to the Executive severance
compensation in an amount equal to 100% of his then current monthly
base salary. Employer shall also pay the Executive any bonus
earned through the date of termination (including any amounts
awarded for previous years but which were not yet paid). Any
bonus for previous years which was not yet paid will be paid
pursuant to the terms as set forth in
Section 3(i) above. Any bonus that is earned in the
year of the Executive’s termination will be paid on the
earlier of (i) 70 days after the year end in which the
Executive was terminated or (ii) the first pay period
following the Employer’s press release announcing its
previous year’s financial performance. To the
extent that the bonus is performance-based, the amount of the bonus
will be calculated by taking into account the performance of the
Company and the Bank for the entire year and prorated through the
date of Executive’s termination of employment.
If when Executive’s employment
terminates he is a specified employee within the meaning of
Section 409A of the Code, and if the benefits under this
Section 4(e) would be considered deferred compensation
under Section 409A, and finally if an exemption from the
six-month delay requirement of
Section 409A(a)(2)(B)(i) is not available, the
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following benefits under this
Section 4(e) shall be paid to the Executive as follows:
severance compensation in an amount equal to 7 times his then
current monthly base salary, any bonus for previous years which was
not yet paid will be paid in a single lump sum on the date that is
six months and one day following date of Executive’s
termination; thereafter on the first day of the month for the next
17 months, the Employer shall pay to the Executive severance
compensation in an amount equal to 100% of his then current monthly
base salary. Any bonus that is earned in the year of the
Executive’s termination will be paid pursuant to the terms as
set forth in Section 3(i) above.
In addition, for the next 24 months
following date of the Executive’s termination, the Employer
shall continue to provided the Executive with an automobile either
owned or leased by the Company or the Bank as well as insurance,
taxes and other related automobile expenses as stated above in
Section 3(e); provided that such total monthly expenses shall
not exceed the monthly cost of such benefits during the
Executive’s employment.
In addition, for the next 24 months
following date of the Executive’s termination, the Employer
shall reimburse the Executive for the cost of COBRA medical,
dental, vision and disability insurance coverage for himself and
his dependents for the duration of the Executive’s COBRA
period, provided the Executive timely elects COBRA coverage;
provided, however, (A) if the Executive’s COBRA period
ends within 24 months of Executive’s termination, the
Employer shall reimburse the Executive for the monthly cost of
medical, dental, vision and disability insurance coverage obtained
for himself and his dependents, provided such reimbursements shall
not exceed the monthly cost of coverage under COBRA during the
Executive’s COBRA period; (B) if the Executive becomes
eligible for coverage under another group health or dental
insurance plan at any time within 24 months of Executive’s
termination, the Employer shall only be required to reimburse the
Executive for any out-of-pocket and deductible expenses the
Executive incurs with respect to such coverages for himself and his
dependents; and, in the case of both clause (A) and
(B) above, such reimbursements shall be paid as soon as
administratively practicable, but in no event shall any
reimbursement be paid after the last day of the calendar year
following the calendar year in which the expense was
incurred.
At the time of Termination of
Employment, and as a condition to the Employer’s obligation
to provide any severance benefits as stated in this
Section 4(e), the Employer and the Executive shall enter into
the release attached hereto as Exhibit A acknowledging such
remaining obligations and discharging both parties, as well as the
Employer’s officers, directors and employees with respect to
their actions for or on behalf of the Employer, from any other
claims or obligations arising out of or in connection with the
Executive’s employment by the Employer, including the
circumstances of such termination.
(f) The Executive
may terminate his employment at any time by delivering a Notice of
Termination at least 14 days prior to such termination, and such
termination shall not in and of itself be, nor shall it be deemed
to be, a breach of this Agreement. If the Executive
terminates his employment under this provision, the Executive shall
receive any sums due him as base salary and/or reimbursement of
expenses through the date of such termination, which shall be paid
in accordance with the Employer’s standard payroll
procedures.
(g) Upon the occurrence
of a Change in Control, and regardless of whether the Executive
remains employed by the Employer or its successor following a
Change in Control, the Executive shall be entitled to the
following:
(i)
within 15 days, the Employer shall pay the Executive cash
compensation in an amount equal to 2.99 times his base amount (as
defined under Section 280G of the Code) as well as any bonus
earned through the date of Change in Control (equal to a pro rata
portion of the Executive’s previous year’s bonus based
on the number of days the Executive was employed during the year of
the Change in Control) and any bonus awarded for a previous year
but which was not yet paid, subject to the provisions of
Section 4(k) and (l) below;
(ii)
for a period of three years, the Employer shall at its expense
continue on behalf of the Executive and his dependents and
beneficiaries the life insurance, disability, medical, dental, and
hospitalization benefits provided (x) to the Executive at any
time during the 90-day period prior to the Change in Control or at
any time thereafter or (y) to other similarly situated
executives who continue in the employ of the Employer. Such
coverage and benefits (including deductibles and
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costs) shall be no less favorable to
the Executive and his dependents and beneficiaries than the most
favorable of such coverages and benefits referred to above.
The Employer’s obligation hereunder with respect to the
foregoing benefits shall be limited to the extent that the
Executive obtains any such benefits pursuant to a subsequent
employer’s benefit plans, in which case the Employer may
reduce the coverage of any benefits it is required to provide the
Executive hereunder as long as the aggregate coverages and benefits
of the combined benefit plans are no less favorable to the
Executive than the coverages and benefits required to be provided
hereunder. This subsection (ii) shall not be interpreted
so as to limit any benefits to which the Executive or his
dependents or beneficiaries may be entitled under any of the
Employer’s employee benefit plans, programs, or practices
following the Executive’s termination of employment,
including, without limitation, retiree medical and life insurance
benefits; and
(iii)
the restrictions on any outstanding incentive awards (including
restricted stock) granted to the Executive under the
Company’s or the Bank’s long-term equity incentive
program or any other incentive plan or arrangement shall lapse and
such awards shall become 100% vested, all stock options and stock
appreciation rights granted to the Executive shall become
immediately exercisable and shall become 100% vested, all
performance units granted to the Executive shall become 100% vested
(except to the extent such acceleration of vesting of any such
award would make compensation payable to the Executive
non-deductible under Section 162(m) of the Code), and the
restrictive covenants contained in Section 9 shall not apply
to the Executive.
(h) With the exceptions
of the provisions of this Section 4, and the express terms of
any benefit plan under which the Executive is a participant, it is
agreed that, upon Executive’s Termination of Employment, the
Employer shall have no obligation to the Executive for, and the
Executive waives and relinquishes, any further compensation or
benefits (exclusive of COBRA benefits). Unless otherwise
stated in this Section 4, the effect of termination on any
outstanding incentive awards, stock options, stock appreciation
rights, performance units, or other incentives shall be governed by
the terms of the applicable benefit or incentive plan and/or the
agreements governing such incentives.
(i) In the event
that the Executive’s employment is terminated for any reason,
as a condition to the Employer’s obligation to pay any
severance hereunder, the Executive shall resign as a director of
the Company and the Bank effective upon his termination of
employment.
(j) The Company is
aware that upon the occurrence of a Change in Control, the Board or
a shareholder of the Company may then cause or attempt to cause the
Company to refuse to comply with its obligations under this
Agreement, or may cause or attempt to cause the Company to
institute, or may institute, litigation seeking to have this
Agreement declared unenforceable, or may take, or attempt to take,
other action to deny the Executive the benefits intended under this
Agreement. In these circumstances, the purpose of this Agreement
could be frustrated. It is the intent of the parties that the
Executive not be required to incur the legal fees and expenses
associated with the protection or enforcement of the
Executive’s rights under this Agreement by litigation or
other legal action because such costs would substantially detract
from the benefits intended to be extended to the Executive
hereunder, nor be bound to negotiate any settlement of the
Executive’s rights hereunder under threat of incurring such
costs. Accordingly, if at any time after a Change in Control, it
should appear to the Executive that the Company is acting or has
acted contrary to or is failing or has failed to comply with any of
its obligations under this Agreement for the reason that it regards
this Agreement to be void or unenforceable or for any other reason,
or that the Company has purported to terminate the
Executive’s employment for Cause or is in the course of doing
so in either case contrary to this Agreement, or in the event that
the Company or any other person takes any action to declare this
Agreement void or unenforceable, or institutes any litigation or
other legal action designed to deny, diminish or recover (other
than as required by law) from the Executive the benefits provided
or intended to be provided to the Executive hereunder, and the
Executive has acted in good faith to perform the Executive’s
obligations under this Agreement, the Company irrevocably
authorizes the Executive from time to time to retain counsel of the
Executive’s choice at the expense of the Company to represent
the Executive in connection with the protection and enforcement of
the Executive’s rights hereunder, including without
limitation representation in connection with termination of the
Executive’s employment contrary to this Agreement or with the
initiation or defense of any litigation or other legal action,
whether by or against the Executive or the Company or any director,
officer, shareholder or other person
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affiliated with the Company, in any
jurisdiction. The reasonable fees and expenses of counsel selected
from time to time by the Executive as hereinabove provided shall be
paid or reimbursed to the Executive by the Company on a regular,
periodic basis upon presentation by the Executive of a statement or
statements prepared by such counsel. If other officers or key
executives of the Company have retained counsel in connection with
the protection and enforcement of their rights under similar
agreements between them and the Company, and, unless in the
Executive’s sole judgment use of common counsel could be
prejudicial to the Executive or would not be likely to reduce the
fees and expenses chargeable hereunder to the Company, the
Executive agrees to use the Executive’s best efforts to agree
with such other officers or executives to retain common
counsel.
(k) The parties intend
that the severance payments and other compensation provided for
herein are reasonable compensation for the Executive’s
services to the Employer and shall not constitute “excess
parachute payments” within the meaning of Section 280G
of the Code. In the event that the Employer’s
independent accountants acting as auditors for the Employer on the
date of a Change in Control determine that the payments provided
for herein constitute “excess parachute payments,” then
the compensation payable hereunder shall be reduced to an amount
the value of which is $1.00 less than the maximum amount that could
be paid to the Executive without the compensation being treated as
“excess parachute payments” under
Section 280G. The allocations of the reduction required
hereby among the termination benefits payable to the Executive
shall be determined by the Executive.
(l)
Notwithstanding any other provision in this Agreement, if the
Executive is determined by the Board, as of the date of termination
of employment with the Bank, to be a “specified
employee,” as such term is defined in Treasury Regulation
§ 1.409A-1(i), and if an
