Exhibit 10.2
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 David A. Miller, an individual
resident of South Carolina (the
“Executive”).
The Employer presently employs the
Executive as its President and Chief Operations 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 President and Chief Operations 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 $190,000, 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 President or the Chief Operations 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 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 President 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
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409A, and finally if an exemption from the
six-month delay requirement of
Section 409A(a)(2)(B)(i) is not available, the 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 the 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
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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 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
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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
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 any benefits paid to
the Exe
