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EXHIBIT 10.03
S EVERANCE A GREEMENT
This S EVERANCE A GREEMENT is
entered into as of this 22nd day of November, 2006, by and among
Cape Fear Bank Corporation, a North Carolina corporation formerly
known as Bank of Wilmington Corporation (the "
Corporation "), Cape Fear Bank, formerly known as
Bank of Wilmington, a North Carolina bank, and Betty V. Norris, its
Senior Vice President/Treasurer and Chief Financial Officer of the
Corporation and the Bank (the "Executive").
W HEREAS , the
Executive has made and is expected to continue to make substantial
contributions to the profitability, growth, and financial strength
of Cape Fear Bank Corporation and its subsidiary bank, Cape Fear
Bank, a North Carolina-chartered bank,
W HEREAS , Cape Fear
Bank Corporation desires to assure itself of the current and future
continuity of management and, establishing minimum severance
benefits for certain officers and other key employees, including
the Executive, desires to ensure that officers and other key
employees are not practically disabled from discharging their
duties if a proposed or actual change in control arises,
W HEREAS , Cape Fear
Bank Corporation wishes to provide additional inducement for the
Executive to remain in the employ of the Bank,
W HEREAS , Cape Fear
Bank Corporation and the Executive intend that this Severance
Agreement shall supersede and replace in its entirety the Change of
Control Agreement dated as of March 22, 1999 by and between
Bank of Wilmington and the Executive, as amended, and that from and
after the date of this Severance Agreement the Change of Control
Agreement dated as of March 22, 1999, as amended, shall be of
no further force or effect, 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 Cape Fear Bank Corporation, is contemplated
insofar as either of Cape Fear Bank Corporation or any of its
subsidiaries is concerned.
N OW T
HEREFORE , in consideration of
these premises and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows.
1 . C HANGE IN C ONTROL
S EVERANCE . (a) Involuntary Termination Without Cause or
Voluntary Termination for Good Reason Within One Year after a
Change in Control . Cape Fear Bank Corporation shall make a
lump-sum payment to the Executive in an amount in cash
equal to two times the Executive’s annual
compensation if the Executive’s employment with Cape Fear
Bank Corporation and subsidiaries is involuntarily terminated
within 12 months after a Change in Control, except for termination
under section 4 of this Severance Agreement, or if the Executive
terminates employment with Cape Fear Bank Corporation and
subsidiaries for Good Reason within 12 months after a Change in
Control. Subject to section 17, the payment required under this
section 1(a) is payable no later than three business days after the
date the Executive’s employment terminates and shall not be
reduced to account for the time value of money or discounted to
present value. If the Executive terminates employment for Good
Reason, the date of termination shall be the date specified by the
Executive in the notice of termination. If the Executive is removed
from office or if the Executive’s employment terminates
before the Change in Control occurs but after discussions with a
third party regarding a Change in Control commence, and if those
discussions ultimately conclude with a Change in Control, then for
purposes of this Severance Agreement the removal of the Executive
or termination of the Executive’s employment shall be deemed
to have occurred after the Change in Control.
For purposes of this Severance Agreement, annual compensation
means ( x ) the Executive’s annual base salary on
the date of the Change in Control or on the date of the
Executive’s employment termination (at whichever date the
Executive’s current annual base salary is greater, but
excluding any compensation earned in the Executive’s capacity
as a director), plus ( y ) any bonus earned for the
most recent whole calendar year before the year in which the Change
in Control occurred or for the most recent whole calendar year
before the year in which employment termination occurred (whichever
is greater), regardless of whether the bonus is paid in the year
earned or in a later calendar year. The term bonus means cash or
non-cash compensation of the type that is required to be reported
as bonus by the Securities and Exchange Commission’s rules
governing tabular disclosure of executive compensation,
specifically Regulation S-K Item 402 (17 CFR 229.402 (2006),
currently Item 402(c)(2)(iv)). For purposes of this Severance
Agreement, the term subsidiary means any entity in which Cape Fear
Bank Corporation directly or indirectly beneficially owns 50% or
more of the outstanding voting securities.
(b) Additional Severance Benefits . In addition to the
severance payment due under paragraph (a) of this section 1,
if the Executive is entitled to a lump-sum severance payment under
paragraph (a) after employment termination Cape Fear Bank
Corporation shall ( x ) cause the Executive to become
fully vested in any qualified and non-qualified plans, programs, or
arrangements in which the Executive participated if the plan,
program, or arrangement does not address the effect of a change in
control, and (y ) contribute or cause to be contributed
to the Executive’s 401(k) plan account the matching and
profit-sharing contributions, if any, that the Executive is
entitled to based upon all W-2 income earned by the Executive for
the plan year.
2 . D EFINITION OF C HANGE
IN C ONTROL . For purposes of this Severance
Agreement, the term Change in Control means any of the following
events occur –
(a) Merger : Cape Fear Bank Corporation merges into or
consolidates with another corporation, or merges another
corporation into Cape Fear Bank Corporation, and as a result
less
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than a majority of the combined voting power of
the resulting corporation immediately after the merger or
consolidation is held by persons who were stockholders of Cape Fear
Bank Corporation immediately before the merger or consolidation.
For purposes of this Severance Agreement, the term person means an
individual, corporation, partnership, trust, association, joint
venture, pool, syndicate, sole proprietorship, unincorporated
organization, or other entity,
(b) Acquisition of Significant Share Ownership : a report
on Schedule 13D, Schedule TO, or another form or schedule (other
than Schedule 13G), is filed or is required to be filed under
sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if
the schedule discloses that the filing person or persons acting in
concert has or have become the beneficial owner of 25% or more of
the combined voting power of Cape Fear Bank Corporation’s
voting securities (but this paragraph (b) shall not apply to
beneficial ownership of voting shares held by a subsidiary in a
fiduciary capacity or beneficial ownership of voting shares held by
an employee benefit plan of Cape Fear Bank Corporation or a
subsidiary),
(c) Change in Board Composition : during any period of
two consecutive years, individuals who constitute Cape Fear Bank
Corporation’s board of directors at the beginning of the
two-year period cease for any reason to constitute at least a
majority thereof; provided, however , that – for
purposes of this paragraph (c) – each director who is
first elected by the board (or first nominated by the board for
election by stockholders) by a vote of at least two-thirds
(b) of the directors who were directors at the beginning of
the period shall be deemed to have been a director at the beginning
of the two-year period, or
(d) Sale of Assets : Cape Fear Bank Corporation sells to
a third party substantially all of Cape Fear Bank
Corporation’s assets. For purposes of this Severance
Agreement, sale of substantially all of Cape Fear Bank
Corporation’s assets includes sale of the shares or assets of
Cape Fear Bank alone.
3 . G OOD R EASON . For
purposes of this Severance Agreement, the term Good Reason means
the occurrence of any of the following without the
Executive’s written consent –
(a) reduction of the Executive’s base salary, or
(b) reduction of the Executive’s bonus, incentive, and
other compensation award opportunities under Cape Fear Bank
Corporation’s or subsidiary’s benefit plans, unless a
company-wide reduction of all officers’ award opportunities
occurs simultaneously, or termination of the Executive’s
participation in any officer or employee benefit plan maintained by
Cape Fear Bank Corporation or a subsidiary, unless the plan is
terminated because of changes in law or loss of tax deductibility
to Cape Fear Bank Corporation for contributions to the plan, or
unless the plan is terminated as a matter of policy applied equally
to all participants, or
(c) assignment to the Executive of duties or responsibilities
that are materially inconsistent with the Executive’s duties
and responsibilities immediately before the Change in Control, or
any other action by Cape Fear Bank Corporation or its successor
that results in a material reduction or material adverse change in
the Executive’s position, authority, duties, or
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responsibilities, or failure to nominate the
Executive as a director of Cape Fear Bank Corporation if the
Executive shall have been a director immediately before the Change
in Control, or
(d) failure to obtain an assumption of Cape Fear Bank
Corporation’s obligations under this Severance Agreement by a
successor to Cape Fear Bank Corporation, regardless of whether the
entity becomes a successor as a result of a merger, consolidation,
sale of assets, or other form of reorganization, or
(e) relocation of Cape Fear Bank’s principal executive
offices or requiring the Executive to change the Executive’s
principal work location to any location that is more than 50 miles
from the location of Cape Fear Bank’s principal executive
offices on the date of this Severance Agreement.
4. T ERMINATION FOR W HICH
N O S EVERANCE B
ENEFITS A RE P AYABLE
. (a) No Severance after Termination for
Cause . Despite any provision of this Severance Agreement to
the contrary, under no circumstance shall the Executive be entitled
to severance benefits if the Executive’s employment
terminates for Cause. For purposes of this Severance Agreement the
term Cause means the Executive shall have committed any of the
following acts –
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1) Fraud, Embezzlement, Theft or Other Crime : an act of
fraud, embezzlement, or theft while employed by Cape Fear Bank
Corporation or a subsidiary, 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 45 consecutive days or more,
or
2) Negligence and Other Actions : gross negligence,
insubordination, disloyalty, or dishonesty in the performance of
the Executive’s duties as an officer of Cape Fear Bank
Corporation or a subsidiary; wilful or reckless failure by the
Executive to adhere to Cape Fear Bank Corporation’s or
subsidiary’s written policies; intentional wrongful damage by
the Executive to the business or property of Cape Fear Bank
Corporation, including without limitation its reputation, which in
Cape Fear Bank Corporation’s sole judgment causes material
harm to Cape Fear Bank Corporation; breach by the Executive of
fiduciary duties to Cape Fear Bank Corporation and its
stockholders, whether in the Executive’s capacity as an
officer or a director of Cape Fear Bank Corporation or a
subsidiary,
3) Removal : removal of the Executive from office or
permanent prohibition o
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