SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
Form
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
Date
of
Report (Date of earliest event reported) October 24, 2007
CRESCENT
FINANCIAL CORPORATION
(Exact
name of Registrant as specified in its charter)
| |
North
Carolina
|
000-32951
|
56-2259050
|
|
| |
(State
or other jurisdiction
|
(Commission
File No.)
|
(IRS
Employer Identification
|
|
| |
of
incorporation)
|
|
number)
|
|
1005
HIGH HOUSE ROAD, CARY, NC 27513
(Address
of principal executive offices)
Registrant’s
telephone number, including area code (919)
460-7770
(Former
address of principal executive offices)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
|
|
o |
Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
|
|
|
o |
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
|
|
o |
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR
240.14d-2(b))
|
|
|
o |
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR
240.13e-4(c))
|
| Item
5.02 |
Departure
of Directors or Certain Officers; Election of Directors; Appointment
of
Certain Officers; Compensatory Arrangements of Certain
Officers
|
| (e) |
Compensatory
Arrangements of Certain Officers.
|
On
October 24, 2007, Crescent Financial Corporation (the “Registrant”) entered into
various compensatory agreements with several of its executive officers.
Capitalized terms used in the ensuing discussion of the compensatory agreements
have the same meanings as those ascribed to them in the particular compensatory
agreement. Several of the changes in the compensatory agreements have been
made
solely to comply with Section 409A of the Internal Revenue Code and are not
detailed in the discussion below.
Employment
Agreements. The
Registrant entered into new employment agreements that replace prior employment
agreements with each of Michael G. Carlton, President and Chief Executive
Officer of the Registrant and its wholly owned subsidiary, Crescent State
Bank
(the “Bank”), Bruce W. Elder, Vice President and Principal Accounting Officer of
the Registrant and Senior Vice President and Chief Financial Officer of the
Bank, Ray D. Vaughn, Senior Vice President of the Bank and Thomas E. Holder,
Jr., Senior Credit Officer of the Bank. The Registrant entered into a new
employment agreement with W. Keith Betts, Executive Vice President of the
Bank,
that restates and amends a previous employment agreement with Mr. Betts entered
into with Port City Capital Bank, which has merged into the Bank. The following
describes the material terms of the employment agreements for each
officer.
Michael
G. Carlton.
Mr.
Carlton’s employment agreement provides for a three-year term, which renews
automatically for an additional year on each anniversary of the agreement,
except that his employment and the agreement terminate upon his attainment
of
age 65. The agreement provides that Mr. Carlton is to be appointed to the
Board
of the Registrant and the Bank. It provides for a Base Salary of $280,000,
the
payment of country club dues and a new car for his business and personal
use
every three years. The agreement provides indemnification to Mr. Carlton
for his
services as an officer and director and agrees to maintain liability insurance
covering him. In the event he is Involuntarily Terminated without Cause or
he
Voluntarily Terminates with Good Reason, Mr. Carlton is entitled to certain
post-termination benefits. In these instances, he will receive (i) his then
current Base Salary for 24 months following termination, (ii) post-termination
life and medical insurance coverage until (w) he obtains a new job with
coverage, (x) attains age 65, (y) dies or (z) the end of the remaining term
of
the employment agreement as of the date of the termination, whichever occurs
first, (iii) the cash out value of his unvested stock options, and (iv)
reimbursement for outplacement expenses and support. Mr. Carlton is entitled
to
a Change in Control benefit equal to three times his then current Base Salary
plus cash bonuses and incentives awarded as of the end of the year before
the
Change in Control. Mr. Carlton will receive a tax gross-up of this Change
in
Control benefit to compensate him for excise taxes owing under Section 280G
of
the Internal Revenue Code. In the event benefits under Mr. Carlton’s employment
agreement are contested following a Change in Control, Mr. Carlton is entitled
to receive legal fee reimbursements up to $250,000. Mr. Carlton is subject
to a
non-disclosure provision regarding the confidential information of the
Registrant and Bank that survives termination of the employment agreement.
Bruce
W. Elder.
Mr.
Elder’s employment agreement provides for a three-year term, which renews
automatically for an additional year on each anniversary of the agreement,
except that his employment and the agreement terminate upon his attainment
of
age 65. Mr. Elder’s employment agreement provides for a Base Salary of $160,000
and perquisites customary for his position and title. The agreement provides
indemnification to Mr. Elder for his services as an officer and agrees to
maintain liability insurance covering him. In the event he is Involuntarily
Terminated without Cause, Mr. Elder is entitled to certain post-termination
benefits. Mr. Elder will receive his then current Base Salary for 12 months
following his termination. This benefit will not be paid if Mr. Elder is
terminated within 24 months following a Change in Control and will be reduced
if
he becomes employed during the 12-month period following termination. Mr.
Elder
is subject to a non-disclosure provision regarding the confidential information
of the Registrant and Bank that survives termination of the employment
agreement.
W.
Keith Betts.
Mr.
Betts’ employment agreement provides for a three-year term, which renews
automatically for an additional year on each anniversary of the agreement,
except that his employment and the agreement terminate upon his attainment
of
age 65. Mr. Betts’ employment agreement provides for a Base Salary of $175,000
and perquisites customary for his position and title, including club dues
of up
to $750 per month. In the event he is Involuntarily Terminated without Cause
or
Voluntarily Terminates with Good Reason, Mr. Betts is entitled to certain
post-termination benefits. In these instances, he will receive (i) 2.5 times
his
then current Base Salary (this cash severance is not available if he is
terminated following a Change in Control), (ii) the cash out value of his
unvested stock options and (iii) reimbursement for outplacement expenses
and
support. Mr. Betts is subject to a non-disclosure provision regarding the
confidential information of the Registrant and Bank that survives termination
of
the employment agreement. If Mr. Betts is no longer employed with the Registrant
or Bank, he is prohibited from soliciting any employees of the Registrant
or
Bank for a period of one year following termination. Mr. Betts is also
prohibited from competing directly or indirectly with the Registrant or Bank
in
New Hanover County, North Carolina and any contiguous counties for a period
of
two years if his employment terminates before September 1, 2011 and for one
year
if his employment terminates after September 1, 2011 but before September
1,
2013. After September 1, 2013, Mr. Betts is no longer subject to the non-compete
provisions of his employment agreement. In consideration for this non-compete
provision, Mr. Betts has received payments of $78,333 on each of September
1,
2006 and 2007 and is scheduled to receive an additional $78,333 on September
1,
2008.
Ray
D.
Vaughn.
Mr.
Vaughn’s employment agreement provides for a three-year term, which renews
automatically for an additional year on each anniversary of the agreement,
except that his employment and the agreement terminate upon his attainment
of
age 65. Mr. Vaughn’s employment agreement provides for a Base Salary of $160,000
and perquisites customary for his position and title. The agreement provides
indemnification to Mr. Vaughn for his services as an officer and agrees to
maintain liability insurance covering him. In the event he is Involuntarily
Terminated without Cause, Mr. Vaughn is entitled to certain post-termination
benefits. Mr. Vaughn will receive his then current Base Salary for 12 months
following his termination. This benefit will not be paid if Mr. Vaughn is
terminated within 24 months following a Change in Control and will be reduced
if
he becomes employed during the 12-month period following termination. Mr.
Vaughn
is subject to a non-disclosure provision regarding the confidential information
of the Registrant and Bank that survives termination of the employment
agreement. If Mr. Vaughn is no longer employed with the Registrant or Bank,
he
is prohibited from soliciting any employees of the Registrant or Bank for
a
period of one year following termination. Mr. Vaughn is also prohibited from
competing directly or indirectly with the Registrant or Bank in Wake County,
North Carolina and any contiguous counties and in any county in which the
Bank
has a branch or loan production office as of the date the agreement was signed
or in any county in which the Bank establishes a branch or loan production
office during the term of the agreement. This non-compete provision lasts
for a
period of two years following Mr. Vaughn’s termination.
Thomas
E. Holder, Jr.
Mr.
Holder’s employment agreement provides for a three-year term, which renews
automatically for an additional year on each anniversary of the agreement,
except that his employment and the agreement terminate upon his attainment
of
age 65. Mr. Holder’s employment agreement provides for a Base Salary of $145,000
and perquisites customary for his position and title. The agreement provides
indemnification to Mr. Holder for his services as an officer and agrees to
maintain liability insurance covering him. In the event he is Involuntarily
Terminated without Cause, Mr. Holder is entitled to certain post-termination
benefits. Mr. Holder will receive his then current Base Salary for 12 months
following his termination. This benefit will not be paid if Mr. Holder is
terminated within 24 months following a Change in Control and will be reduced
if
he becomes employed during the 12-month period following termination. Mr.
Holder
is subject to a non-disclosure provision regarding the confidential information
of the Registrant and Bank that survives termination of the employment
agreement.
Salary
Continuation Agreements.
The
Registrant entered into salary continuation agreements with Messrs. Betts
and
Vaughn and entered into amended salary continuation agreements with Messrs.
Carlton, Elder and Holder.
In
the
event Mr. Betts or Mr. Vaughn reaches their Normal Retirement Age, 65, while
still employed with the Bank, upon a Separation from Service each shall be
entitled to receive $50,000 per year for life. If either Mr. Betts or Mr.
Vaughn
Separates from Service after age 55 or age 58, respectively, or is disabled,
he
will be entitled to the Accrual Balance, the liability accrued on the Bank’s
balance sheet for this benefit, fully amortized. These payments will commence
on
the later of (a) the first day of the seventh month after the executive’s
Separation from Service or (b) the executive’s attainment of Normal Retirement
Age. If a Change in Control occurs, Messrs. Betts and Vaughn will be entitled
to
their respective Accrual Balances as of the date of such Change in Control
in a
lump sum payment. If Messrs. Betts or Vaughn are receiving either their Normal
Retirement Age benefit, Early Termination benefit or Disability benefit and
a
Change in Control occurs, the executives shall be entitled to receive their
remaining Accrual Balance in a lump sum payment. In general, if either executive
dies before or after his Separation from Service, he will be entitled to
receive
his Accrual Balance at that time plus his benefit under the endorsement split
dollar agreement, discussed below.
The
Registrant’s existing salary continuation agreements with Messrs. Carlton, Elder
and Holder were amended so as to comply with Section 409A of the Internal
Revenue Code. In addition, Mr. Carlton’s Normal Retirement Age was reduced from
age 65 to age 60, and the Normal Retirement Ages for Messrs. Elder and Holder
were reduced from age 65 to age 62.
Endorsement
Split Dollar Agreements.
The
Registrant entered into endorsement split dollar agreements with Messrs.
Betts
and Vaughn. The endorsement split dollar agreements provide that upon the
death
of the executive prior to his Separation from Service the executive’s
beneficiary shall be entitled to receive the lesser of (a) 100% of the Net
Death
Proceeds, which is equal to the death proceeds of a life insurance policy
carried on the life of the executive and the cash surrender value of such
policy, or (b) $500,000. If the executive dies after his Separation from
Service, his beneficiary is not entitled to any benefits under the endorsement
split dollar agreement. Each executive has an option to purchase the life
insurance policy within 60 days of his Separation from Service. The purchase
price is equal to the cash surrender value of the policy at that time. This
option to purchase lapses after 60 days.
The
Current Report on Form 8-K (including information included or incorporated
by
reference herein) may contain, among other things, certain forward-looking
statements within the meaning of the Private Securities Litigation Reform
Act of
1995, including, without limitation, (i) statements regarding certain of
the
Registrant's goals and expectations with respect to earnings, income per
share,
revenue, expenses and the growth rate in such items, as well as other measures
of economic performance, including statements relating to estimates of credit
quality trends, and (ii) statements preceded by, followed by or that include
the
words “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,”
“expect,” “intend,” “plan,” “projects,” “outlook” or similar expressions. These
statements are based upon the current belief and expectations of the
Registrant’s management and are subject to significant risks and uncertainties
that are subject to change based on various factors (many of which are beyond
the Registrant’s control).
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
| |
|
|
| |
CRESCENT
FINANCIAL CORPORATION |
|
|
|
| |
By: |
/s/
Michael G. Carlton |
| |
Michael
G. Carlton |
| |
President
and
Chief Executive Officer |
Dated:
October 30, 2007