Employment Agreement
Exhibit
10.1:
This
Employment
Agreement
is
entered into effective as of this 4th
day of
June,
2008,
by and among Southern Community Financial Corporation, a North Carolina
corporation, Southern Community Bank and Trust, a North Carolina-chartered
bank
and wholly owned subsidiary of Southern Community Financial Corporation (the
“Bank”),
and
Xxxxx
Xxxxxxxx,
Executive Vice President of the Bank (the “Executive”).
For
convenience, Southern Community Financial Corporation and the Bank are referred
to in this Employment Agreement individually or together as the “Employer.”
Whereas,
the
Executive is the Executive Vice President of the Bank, possessing unique skills,
knowledge, and experience relating to the Employer’s business, and the Executive
has made and is expected to continue to make major contributions to the
profitability, growth, and financial strength of the Employer and
affiliates,
Whereas,
the
Employer and the Executive desire to set forth in this Employment Agreement
the
terms and conditions of the Executive’s employment, and
Whereas,
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 Employer, is contemplated insofar as the Bank
or
any affiliates are concerned.
Now
Therefore,
in
consideration of these premises, the mutual covenants contained herein, and
other good and valuable consideration the receipt and sufficiency of which
are
hereby acknowledged, the parties hereto agree as follows.
Article
1
Employment
1.1
Employment.
Effective on the date and for the term specified in section 1.3, the Employer
hereby employs the Executive to serve as Executive Vice President of the Bank
according to the terms and conditions of this Employment Agreement. The
Executive hereby accepts employment according to the terms and conditions of
this Employment Agreement.
2
1.2
Duties.
As
Executive Vice President, the Executive shall serve in accordance with the
Employer’s Articles of Incorporation and Bylaws, as each may be amended or
restated from time to time. He shall serve the Employer faithfully, diligently,
competently, and to the best of his ability, and he shall exclusively devote
his
full working time, energy, and attention to the business of the Employer and
to
the promotion of the Employer’s interests throughout the term of this Employment
Agreement. Without the written consent of the board of directors of each of
Southern Community Financial Corporation and the Bank, during the term of this
Employment Agreement the Executive shall not render services to or for any
person, firm, corporation, or other entity or organization in exchange for
compensation, regardless of the form in which the compensation is paid and
regardless of whether it is paid directly or indirectly to the Executive.
Nothing in this Article 2 shall prevent the Executive from managing his personal
investments and affairs, provided that doing so does not interfere with the
proper performance of his duties and responsibilities as Executive Vice
President.
1.3
Term
of Employment.
The
initial term of employment under this Employment Agreement shall be for the
period commencing upon the 4th
day
of
June,
2008
effective date of this Employment Agreement and ending three calendar years
from
the effective date of this Employment Agreement. On each anniversary of the
effective date of this Employment Agreement, the term of this Employment
Agreement shall automatically be extended for one additional year period beyond
the then-effective expiration date unless written notice from the Employer
or
the Executive is received 90 days prior to an anniversary date advising the
other that this Employment Agreement shall not be further extended. If the
board
decides not to extend the term of this Employment Agreement, this Employment
Agreement shall nevertheless remain in force until its then-current three-year
term expires. The board’s decision not to extend the term of this Employment
Agreement shall not - by itself - give the Executive any rights under this
Employment Agreement to claim an adverse change in his position, compensation,
or circumstances or otherwise to claim entitlement to severance benefits under
Articles 4 or 5 of this Employment Agreement, absent some other reason that
entitles Executive to such benefits pursuant to either or both of such Articles.
References herein to the term of this Employment Agreement shall refer to the
initial term, as the same may be extended. Unless sooner terminated, the
Executive’s employment and the term of this Employment Agreement shall terminate
when the Executive attains age 65.
Article
2
Compensation
and Other Benefits
2.1
Base
Salary.
In
consideration of the Executive’s performance of his obligations under this
Employment Agreement, the Bank shall pay or cause to be paid to the Executive
a
salary at the annual rate of not less than $225,000.00,
payable
in equal or approximately equal monthly installments. The Executive’s salary
shall be reviewed annually by the Employer’s board of directors or by the board
committee having jurisdiction over executive compensation. The Executive’s
salary shall be increased no less frequently than annually to account for cost
of living increases. The Executive’s salary also may be increased beyond the
amount necessary to account for cost of living increases at the discretion
of
the committee having jurisdiction over executive compensation. However, the
Executive’s salary shall not be reduced. The Executive’s salary, as the same may
be increased from time to time, is referred to in this Employment Agreement
as
the “Base
Salary.”
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2.2
Benefit
Plans and Perquisites.
The
Executive shall be entitled throughout the term of this Employment Agreement
to
participate in any and all officer or employee compensation, bonus, incentive,
and benefit plans in effect from time to time, including without limitation
plans providing pension, retirement, medical, dental, disability, and group
life
benefits, and to receive any and all other fringe benefits provided from time
to
time, provided that the Executive satisfies the eligibility requirements for
the
plans or benefits. Without limiting the generality of the foregoing
-
(a)
Participation
in Stock Plans.
The
Executive shall be eligible to participate in any stock-based compensation,
incentive, bonus, or purchase plans existing on the date of this Employment
Agreement or adopted during the term of this Employment Agreement.
(b)
Club
Dues.
During
the term of this Employment Agreement, the Employer shall pay or cause to be
paid the Executive’s membership assessments and dues in civic clubs. Without
limiting the generality of the foregoing, the Executive shall be reimbursed
for
assessments, dues, and expenses associated with his membership in and use of
the
private country club of his choice in Forsyth or Davie County.
(c)
Disability
Insurance.
The
Employer shall reimburse the Executive for the Executive’s cost to purchase and
maintain disability insurance coverage on himself during the term of this
Employment Agreement. The amount reimbursed by the Employer shall be grossed
up
to compensate the Executive for federal and state income taxes imposed as a
result of the Employer’s reimbursement of the Executive’s cost. The disability
insurance policy shall be owned by the Executive exclusively.
(d)
Reimbursement
of Business Expenses.
Upon
submission of appropriate documentation by the Executive and approval by the
board of directors or by a board committee appointed for such purpose, the
Employer agrees to reimburse the Executive for all out-of-pocket expenses
incurred performing his obligations under this Employment Agreement, including
but not limited to all reasonable business travel and entertainment expenses
incurred while acting at the request of or in the service of the Employer and
reasonable expenses for attendance at annual and other periodic meetings of
trade associations. Except for club dues under section 2.2(b), to be
reimbursable each expense must be of a nature qualifying it as a proper
deduction on the Employer’s income tax returns as a business expense rather than
deductible compensation to the Executive. The records and other documentary
evidence submitted by the Executive to the Employer with each request for
reimbursement shall be in the form required by applicable statutes and
regulations issued by appropriate taxing authorities for the substantiation
of
expenditures as deductible business expenses of the Employer rather than
deductible compensation to the Executive.
2.3
Vacation.
The
Executive shall be entitled to paid annual vacation and sick leave in accordance
with the policies established from time to time by the Employer. The Executive
shall not be entitled to any additional compensation for failure to use allotted
vacation or sick leave, nor shall the Executive be allowed to carry over unused
vacation allowance from one calendar year to the next. The Executive shall
be
entitled to accumulate unused sick leave from one year to the next for use
solely in the case of actual illness.
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2.4
Taxes.
All
compensation of the Executive shall be subject to withholding and other
employment taxes imposed by federal, state, and local law.
2.5
Indemnification
and Insurance.
(a)
Indemnification.
The
Employer shall indemnify the Executive or cause the Executive to be indemnified
with respect to his activities as a director, officer, employee, or agent of
the
Employer or as a person who is serving or has served at the request of the
Employer (a “representative”)
as a
director, officer, employee, agent, or trustee of an affiliated corporation,
joint venture trust or other enterprise, domestic or foreign, in which the
Employer has a direct or indirect ownership interest against expenses (including
without limitation attorneys’ fees, judgments, fines, and amounts paid in
settlement) actually and reasonably incurred by him (“Expenses”)
in
connection with any claim against the Executive that is the subject of any
threatened, pending, or completed action, suit, or other type of proceeding,
whether civil, criminal, administrative, investigative, or otherwise and whether
formal or informal (a “Proceeding”),
to
which the Executive was, is, or is threatened to be made a party by reason
of
the Executive being or having been such a director, officer, employee, agent,
or
representative.
The
indemnification provided herein shall not be exclusive of any other
indemnification or right to which the Executive may be entitled and shall
continue after the Executive has ceased to occupy a position as an officer,
director, employee, agent or representative with respect to Proceedings relating
to or arising out of the Executive’s acts or omissions during his service in
such position. The indemnification provided to the Executive under this
Employment Agreement for the Executive’s service as a representative shall be
payable if and only if and only to the extent that reimbursement to the
Executive by the affiliated entity with which the Executive has served as a
representative, whether pursuant to agreement, applicable law, articles of
incorporation or association, by-laws or regulations of the entity, or insurance
maintained by such affiliated entity, is insufficient to compensate the
Executive for Expenses actually incurred and otherwise payable by the Employer
under this Employment Agreement. Any payments for such Expenses in fact made
to
or on behalf of the Executive directly or indirectly by the affiliated entity
with which the Executive served as a representative shall reduce the obligation
of the Employer hereunder.
(b)
Exclusions.
Anything herein to the contrary notwithstanding, however, nothing in this
Section 2.5 requires indemnification, reimbursement, or payment by the Employer,
and the Executive shall not be entitled to demand indemnification,
reimbursement, or payment -
(1)
if
and to the extent indemnification, reimbursement, or payment constitutes a
“prohibited indemnification payment” within the meaning of Federal Deposit
Insurance Corporation Rule 359.1(l)(1) [12 CFR 359.1(l)(1)], or
(2)
for
any claim or any part thereof as to which the Executive shall have been
determined by a court of competent jurisdiction, from which no appeal is or
can
be taken, by clear and convincing evidence, to have acted with deliberate intent
to cause injury to the Employer or with reckless disregard for the best
interests of the Employer, or
5
(3)
for
any claim or any part thereof arising under Section 16(b) of the Securities
Exchange Act of 1934 as a result of which the Executive is required to pay
any
penalty, fine, settlement, or judgment, or
(4)
for
any obligation of the Executive based upon or attributable to the Executive
gaining in fact any personal gain, profit, or advantage to which he was not
entitled, or
(5)
any
proceeding initiated by the Executive without the consent or authorization
of
the Employer’s board of directors, but this exclusion shall not apply with
respect to any claims brought by the Executive (a) to enforce his rights under
this Employment Agreement, or (b) in any Proceeding initiated by another person
or entity whether or not such claims were brought by the Executive against
a
person or entity who was otherwise a party to such proceeding.
(c)
Insurance.
The
Employer shall maintain or cause to be maintained fidelity and Directors &
Officers’ liability insurance covering the Executive throughout the term of this
Employment Agreement.
Article
3
Termination
of Employment
3.1
Termination
by the Employer.
(a)
Death
or Disability.
The
Executive’s employment shall terminate automatically on the date of the
Executive’s death. If the Executive dies in active service to the Employer, for
twelve months after the Executive’s death the Employer shall provide the
Executive’s family with and pay the premiums for continuing health care coverage
under COBRA substantially identical to that provided for the Executive before
his death.
By
delivery of written notice 30 days in advance to the Executive, the Employer
may
terminate the Executive’s employment if the Executive is disabled. For purposes
of this Employment Agreement, the Executive shall be considered “disabled”
if
for
health or medical-related reasons he is unable to and does not perform his
duties hereunder for a period of 90 consecutive days. The Executive shall not
be
considered disabled, however, if he returns to work on a full-time basis within
30 days after the Employer gives him notice of termination due to
disability.
(b)
Termination
Without Cause.
With
written notice to the Executive 60 days in advance, the Employer may terminate
the Executive’s employment without Cause. Upon such event, the compensation and
benefits after termination provisions of Sections 4.4 and 4.5 shall apply,
in
addition to any other applicable post-termination payments or benefits provided
for in this Employment Agreement.
6
(c)
Termination
with Cause.
The
Employer may terminate the Executive’s employment with Cause. Upon such event,
the Executive shall not be entitled to any further compensation or other
benefits beyond his effective termination date in accordance with Section 4.1,
except such benefits which by the terms of their plan document continue after
such termination or except as may be otherwise provided for in this Employment
Agreement. The term “Cause”
means
any of the following -
(1)
an
intentional act of fraud, embezzlement, or theft by the Executive in the course
of his employment. For purposes of this Employment Agreement, no act or failure
to act on the part of the Executive shall be deemed to have been intentional
if
it was due primarily to an error in judgment or negligence. An act or failure
to
act on the Executive’s part shall be considered intentional if it is not in good
faith and if it is without a reasonable belief that the action or failure to
act
is in the best interests of the Employer, or
(2)
intentional violation of any law or significant policy of the Employer committed
in connection with the Executive’s employment, which in the Employer’s judgment
has a material adverse effect on the Employer, or
(3)
the
Executive’s gross negligence or gross neglect of duties in the performance of
his duties to the Employer, or
(4)
intentional wrongful damage by the Executive to the business or property of
the
Employer, including without limitation the reputation of the Employer, which
in
the Employer’s sole judgment causes material harm to the Employer,
or
(5)
a
breach by the Executive of his fiduciary duties as an officer or director of
the
Employer or misconduct involving dishonesty, in either case whether in his
capacity as an officer or as a director of the Bank or Southern Community
Financial Corporation, or
(6)
a
breach by the Executive of this Employment Agreement that, in the sole judgment
of the Employer, is a material breach, which breach is not corrected by the
Executive within 30 days after receiving written notice of the breach which
the
Employer shall provide, or
(7)
removal of the Executive from office or permanent prohibition of the Executive
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), or
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(8)
conviction of the Executive for or plea of nolo
contendere
to a
felony or conviction of or plea of nolo
contendere
to a
misdemeanor involving moral turpitude, or the actual incarceration of the
Executive.
3.2
Termination
by the Executive.
The
Executive may terminate his employment with written notice to the Employer
60
days in advance, whether with or without Good Reason. If the Executive
terminates with Good Reason, the termination will take effect at the conclusion
of the 60-day period unless the event or circumstance constituting Good Reason
is cured by the Employer or unless the notice of termination for Good Reason
is
revoked by the Executive within the 60-day period. Upon such event, the
compensation and benefits after termination provisions of Sections 4.4 and
4.5
shall apply, in addition to any other applicable post-termination payments
or
benefits provided for in this Employment Agreement. For purposes of this
Employment Agreement, “Good
Reason”
means
any of the following events occur without the Executive’s written consent
-
(a)
Reduced
Base Salary:
reduction of the Executive’s Base Salary, or
(b)
Participation
in Benefit Plans Reduced or Terminated:
reduction of the Executive’s bonus, incentive, or other compensation award
opportunities under the Employer’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 the Employer, unless the plan is terminated because of
changes in law or loss of tax deductibility to the Employer for contributions
to
the plan, or unless the plan is terminated as a matter of policy applied equally
to all participants in the plan, or
(c)
Reduced
Responsibilities or Status:
assignment to the Executive of duties that are materially inconsistent with
the
Executive’s position as the Bank’s Executive Vice President or that represent a
reduction of his authority, or
(d)
Failure
to Obtain Assumption Agreement:
failure
to obtain an assumption of the Employer’s obligations under this Employment
Agreement by any successor to the Employer, regardless of whether the entity
becomes a successor to the Employer as a result of a merger, consolidation,
sale
of assets, or other form of purchase, sale or reorganization, or
(e)
Material
Breach:
a
material breach of this Employment Agreement by the Employer that is not
corrected within 30 days after receiving written notice of the breach from
the
Executive, or
(f)
Relocation
of the Executive:
relocation of the Bank’s principal executive offices, or requiring the Executive
to change his principal work location, to any location that is more than 30
miles from the location of the Bank’s principal executive offices on the date of
this Employment Agreement.
8
3.3
Notice.
Any
purported termination by the Employer or by the Executive shall be communicated
by written notice of termination to the other. The notice must state the
specific termination provision of this Employment Agreement relied upon. The
notice must also state the date on which termination shall become effective,
which shall be a date not earlier than the date of the termination notice.
If
termination is for Cause or with Good Reason, the notice must state in
reasonable detail the facts and circumstances forming the basis for termination
of the Executive’s employment.
Article
4
Compensation
and Benefits After Termination
4.1
Cause.
If the
Executive’s employment terminates for Cause, the Executive shall receive the
salary to which he is entitled through the date on which termination becomes
effective and any other benefits to which he may be entitled under the
Employer’s benefit plans and policies in effect on the date of
termination.
4.2
Termination
by the Executive Other than for Good Reason.
If the
Executive terminates employment other than for Good Reason, the Executive shall
receive the salary to which he is entitled through the date on which his
termination becomes effective and any other benefits to which he may be entitled
under the Employer’s benefit plans and policies.
4.3
Continued
Salary in the Case of Termination Because of Disability.
If the
Executive’s employment terminates because of disability, the Executive shall
receive the salary earned through the date on which termination becomes
effective, any unpaid bonus or incentive compensation due to the Executive
for
the calendar year preceding the calendar year in which the termination becomes
effective, any payments the Executive is eligible to receive under any
disability insurance program in which the Executive participates, and such
other
benefits to which he may be entitled under the Employer’s benefit plans,
policies, and agreements.
4.4
Termination
Without Cause and Termination for Good Reason.
If the
Employer terminates the Executive’s employment without Cause or if the Executive
terminates employment for Good Reason, the Executive shall continue to receive
his most recent Base Salary level for the unexpired term of this Employment
Agreement, but he shall not be entitled to continued participation in the
Employer’s or a subsidiary’s retirement plans or any stock-based plans unless
the terms of any applicable plan document allow such participation. The Employer
and the Executive acknowledge and agree that the compensation and benefits
under
this Section 4.4 shall not be payable if compensation and benefits are payable
or shall have been paid previously to the Executive under Article 5 of this
Employment Agreement.
4.5
Post-Termination
Insurance and Medical Coverage.
If the
Executive’s employment terminates involuntarily but without Cause or voluntarily
but with Good Reason, or if the Executive’s employment terminates because of
disability, the Employer shall continue or cause to be continued at the
Employer’s expense life, health, and disability insurance benefits in effect
during the two years preceding the date of the Executive’s termination. The
life, health, and disability insurance benefits shall continue until the first
to occur of (a) the Executive’s return to employment with the Employer or
another employer, (b) the Executive’s attainment of age 65, (c) the Executive’s
death, or (d) the end of the term remaining under this Employment Agreement
at
the time of the Executive’s termination.
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4.6
Salary
Continuation Agreement.
The
Bank and the Executive shall use their best efforts to finalize and enter into
a
Salary Continuation Agreement and Endorsement Split Dollar Agreement. The Salary
Continuation Agreement shall provide for an annual benefit payable to the
Executive in equal monthly installments for his lifetime, beginning after his
termination of service with the Bank on or after attaining age 65. Unless the
Salary Continuation Agreement or Endorsement Split Dollar Agreement explicitly
provides otherwise, whether benefits are properly payable to the Executive
under
the Salary Continuation Agreement or the Endorsement Split Dollar Agreement
shall be determined solely by reference to those agreements, except that the
Executive shall forfeit all benefits under the Salary Continuation Agreement
and
Endorsement Split Dollar Agreement for violation of the covenant against
competition in Section 7.3 of this Employment Agreement.
Article
5
Change
in Control Benefits
5.1
Change
in Control Benefits.
(a) If
a Change in Control occurs during the term of this Employment Agreement and
if
within 24 months thereafter the Executive’s employment terminates involuntarily
but without Cause or voluntarily but with Good Reason, the Employer shall make
or cause to be made a lump-sum payment to the Executive in an amount in cash
equal to three times the Executive’s annual compensation. For this purpose,
annual compensation means (1) the Executive’s Base Salary when the Change in
Control occurs plus (2) any bonus or incentive compensation earned for the
calendar year ended immediately before the year in which the Change in Control
occurred, regardless of when the bonus or incentive compensation earned for
the
preceding calendar year is paid and regardless of whether all or part of the
bonus or incentive compensation is subject to elective deferral. Annual
compensation shall be calculated without regard to any deferrals under qualified
or nonqualified plans, but annual compensation shall not include interest or
other earnings credited to the Executive under qualified or nonqualified plans.
The amount payable to the Executive hereunder shall not be reduced to account
for the time value of money or discounted to present value. The payment required
under this paragraph (a) is payable no later than five business days after
termination of employment. If the Executive is removed from office or if his
employment terminates before a 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 Employment Agreement the removal of the Executive or termination of his
employment shall be deemed to have occurred after the Change in
Control.
10
(b)
Benefit
Plans:
In
addition to insurance and medical benefits under Section 4.5 of this Employment
Agreement and any benefits to which the Executive may be entitled under the
Salary Continuation Agreement and Endorsement Split Dollar Agreement referred
to
in Section 4.6 of this Employment Agreement, if a Change in Control occurs
during the term of this Employment Agreement and if within 24 months thereafter
the Executive’s employment terminates involuntarily but without Cause or
voluntarily but with Good Reason the Employer shall (1) 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 (2)
contribute or cause to be contributed to the Executive’s 401(k) plan account, if
any, 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.
5.2
Definition
of Change in Control.
For
purposes of this Employment Agreement, “Change
in Control”
means
any one or more of the following events occurs with regard to Southern Community
Financial Corporation:
(a)
Change
in ownership
- A
change in ownership of Southern Community Financial Corporation occurs on the
date any one person or group of persons accumulates ownership of Southern
Community Financial Corporation’s stock constituting more than 50% of the total
fair market value or total voting power of Southern Community Financial
Corporation’s stock,
(b)
Change
in effective control - A
change
in effective control occurs when either (i) any one person or more than one
person acting as a group acquires within a 12-month period ownership of stock
of
Southern Community Financial Corporation possessing 35% or more of the total
voting power of Southern Community Financial Corporation’s stock, or (ii) a
majority of Southern Community Financial Corporation’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 Southern Community Financial
Corporation’s Board of Directors before the date of appointment or election,
or
(c)
Change
in ownership of a substantial portion of assets -
A
change in the ownership of a substantial portion of Southern Community Financial
Corporation’s assets occurs if in a 12-month period any one person or more than
one person acting as a group acquires assets from Southern Community Financial
Corporation having a total gross fair market value equal to or exceeding 40%
of
the total gross fair market value of all of the assets of Southern Community
Financial Corporation immediately before the acquisition or acquisitions. For
this purpose, “gross fair market value” means the value of Southern Community
Financial Corporation’s assets, or the value of the assets being disposed of,
determined without regard to any liabilities associated with the
assets.
5.3
No
Multiple Severance Payments.
If the
Executive receives payment under Section 5.1 he shall not be entitled to any
benefits under Section 4.4 of this Employment Agreement.
11
Article
6
Confidentiality
and Creative Work
6.1
Non-disclosure.
The
Executive covenants and agrees that he will not reveal to any person, firm,
or
corporation any confidential information of any nature concerning the Employer
or its business, or anything connected therewith. As used in this Article 6,
the
term “confidential
information”
means
all of the Employer’s and its affiliates’ confidential and proprietary
information and trade secrets in existence on the date hereof or existing at
any
time during the term of this Employment Agreement, including but not limited
to
-
(a)
the
whole or any portion or phase of any business plans, financial information,
purchasing data, supplier data, accounting data, or other financial
information,
(b)
the
whole or any portion or phase of any research and development information,
design procedures, algorithms or processes, or other technical
information,
(c)
the
whole or any portion or phase of any marketing or sales information, sales
records, customer lists, prices, sales projections, or other sales information,
and
(d)
trade
secrets, as defined from time to time by the laws of the State of North
Carolina.
Notwithstanding
the foregoing, confidential information excludes information that - as of the
date hereof or at any time after the date hereof - is published or disseminated
without obligation of confidence or that becomes a part of the public domain
(1)
by or through action of the Employer, or (2) otherwise than by or at the
direction of the Executive. This Section 6.1 does not prohibit disclosure
required by an order of a court having jurisdiction or a subpoena from an
appropriate governmental agency or disclosure made by the Executive in the
ordinary course of business and within the scope of his authority.
6.2
Return
of Materials.
The
Executive agrees to deliver or return to the Employer upon termination, upon
expiration of this Employment Agreement, or as soon thereafter as possible,
all
written information and any other similar items furnished by the Employer or
prepared by the Executive in connection with his services hereunder. The
Executive will retain no copies thereof after termination of this Employment
Agreement or termination of the Executive’s employment.
6.3
Creative
Work.
The
Executive agrees that all creative work and work product, including but not
limited to all technology, business management tools, processes, software,
patents, trademarks, and copyrights developed by the Executive during the term
of this Employment Agreement and in the course and scope of his duties
hereunder, regardless of when or where such work or work product was produced,
constitutes work made for hire, all rights of which are owned by the Employer.
The Executive hereby assigns to the Employer all rights, title, and interest,
whether by way of copyrights, trade secret, trademark, patent, or otherwise,
in
all such work or work product, regardless of whether the same is subject to
protection by patent, trademark, or copyright laws.
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6.4
Injunctive
Relief.
The
Executive acknowledges that it is impossible to measure in money the damages
that will be suffered by the Employer if the Executive fails to observe the
obligations imposed on him by this Article 6. Accordingly, if the Bank
institutes an action to enforce the provisions hereof, the Executive hereby
waives the claim or defense that an adequate remedy at law is available to
the
Employer and the Executive agrees not to urge in any such action the claim
or
defense that an adequate remedy at law exists.
6.5
Affiliates’
Confidential Information is Covered; Confidentiality Obligation Survives
Termination.
For
purposes of this Employment Agreement, the term “affiliate”
includes Southern Community Financial Corporation, the Bank, and any entity
that
directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with Southern Community Financial
Corporation or the Bank. The rights and obligations set forth in this Article
6
shall survive termination of this Employment Agreement.
Article
7
Competition
After Employment Termination
7.1
Covenant
Not to Solicit Employees.
The
Executive agrees not to solicit the services of any officer or employee of
the
Employer for one year after the Executive’s employment termination.
7.2
Covenant
Not to Compete.
(a) In
consideration for the agreement by Southern Community Financial Corpration
to
grant the Executive 10,000 options to purchase shares of its common stock,” the
Executive covenants and agrees that he will not, without advance written consent
of the Employer, compete directly or indirectly with the Employer for two years
after termination of his employment, plus any period during which the Executive
is in violation of this covenant not to compete and any period during which
the
Employer seeks by litigation to enforce this covenant not to compete. For
purposes of this section -
(1) the
term
“compete” means
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(a)
providing financial products or services on behalf of any financial
institution for any person residing in the
territory,
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(b)
assisting (other than through the performance of ministerial or
clerical
duties) any financial institution in providing financial products
or
services to any person residing in the territory,
or
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(c)
inducing or attempting to induce any person who was a customer
of the
Employer at the date of the Executive’s termination of employment to seek
financial products or services from another financial
institution.
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(2) the
words
“directly or indirectly” means -
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(a)
acting as a consultant, officer, director, independent contractor,
or
employee of any financial institution in competition with the Employer
in
the territory, or
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(b)
communicating to such financial institution the names or addresses
or any
financial information concerning any person who was a customer
of the
Employer at the Executive’s termination of
employment.
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(3) the
term “customer” means any person to whom the Employer is providing
financial products or services on the date of the Executive’s termination
of employment.
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(4)
the term “financial institution” means any bank, savings association, or
bank or savings association holding company, or any other institution,
the
business of which is engaging in activities that are financial in
nature
or incidental to such financial activities as described in section
4(k) of
the Bank Holding Company Act of 1956, other than the Employer or
one of
its affiliated corporations.
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(5)
“financial product or service” means any product or service that a
financial institution or a financial holding company could offer
by
engaging in any activity that is financial in nature or incidental
to such
a financial activity under section 4(k) of the Bank Holding Company
Act of
1956 and that is offered by the Employer or an affiliate on the date
of
the Executive’s employment termination, including but not limited to
banking activities and activities that are closely related and a
proper
incident to banking.
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(6)
the term “person” means any individual or individuals, corporation,
partnership, fiduciary or
association.
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(7)
the term “territory” means all of Forsyth, Guilford, Iredell, Rockingham,
Stokes, Surry, and Yadkin Counties in North Carolina and the area
within a
15-mile radius of any full-service banking office of the Bank at
the date
of the Executive’s termination of
employment.
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(b) If
any
provision of this section or any word, phrase, clause, sentence or other portion
thereof (including, without limitation, the geographical and temporal
restrictions contained therein) is held to be unenforceable or invalid for
any
reason, the unenforceable or invalid provision or portion shall be modified
or
deleted so that the provisions hereof, as modified, are legal and enforceable
to
the fullest extent permitted under applicable law.
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7.3
Remedies.
Because
of the unique character of the services to be rendered by the Executive
hereunder, the Executive understands that the Employer would not have an
adequate remedy at law for the material breach or threatened breach by the
Executive of any one or more of the Executive’s covenants set forth in this
Article 7. Accordingly, the Executive agrees that the Employer’s remedies for a
material breach or threatened breach of this Article 7 include but are not
limited to (a) forfeiture of any money representing accrued salary, contingent
payments, or other fringe benefits due and payable to the Executive, (b)
forfeiture of any severance benefits under Sections 4.4 and 4.5 of this
Employment Agreement, (c) forfeiture of benefits under the Salary Continuation
Agreement and Endorsement Split Dollar Agreement referred to in Section 4.6
of
this Agreement, and (d) a suit in equity by the Employer to enjoin the Executive
from the breach or threatened breach of such covenants. The Executive hereby
waives the claim or defense that an adequate remedy at law is available to
the
Employer and the Executive agrees not to urge in any such action the claim
or
defense that an adequate remedy at law exists. Nothing herein shall be construed
to prohibit the Employer from pursuing any other remedies for the breach or
threatened breach.
7.4 Article
7 Survives Termination But Is Void After a Change in
Control.
The
rights and obligations set forth in this Article 7 shall survive termination
of
this Employment Agreement. However, Article 7 shall become null and void
effective immediately upon a Change in Control.
Article
8
Miscellaneous
8.1
Successors
and Assigns.
(a)
This
Employment Agreement Is Binding on The Employer’s Successors.
This
Employment Agreement shall be binding upon the Employer and any successor to
the
Employer, including any persons acquiring directly or indirectly all or
substantially all of the business or assets of the Employer by purchase, merger,
consolidation, reorganization, or otherwise. But this Employment Agreement
and
the Employer’s obligations under this Employment Agreement are not otherwise
assignable, transferable, or delegable by the Employer. By agreement in form
and
substance satisfactory to the Executive, the Employer shall require any
successor to all or substantially all of the business or assets of the Employer
to expressly assume and agree to perform this Employment Agreement in the same
manner and to the same extent the Employer would be required to perform if
no
such succession had occurred.
(b)
This
Employment Agreement Is Enforceable by the Executive and His
Heirs.
This
Employment Agreement will inure to the benefit of and be enforceable by the
Executive’s personal or legal representatives, executors, administrators,
successors, heirs, distributees, and legatees.
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(c)
This
Employment Agreement Is Personal in Nature and Is Not
Assignable.
This
Employment Agreement is personal in nature. Without written consent of the
other
parties, no party shall assign, transfer, or delegate this Employment Agreement
or any rights or obligations under this Employment Agreement except as expressly
provided herein. Without limiting the generality or effect of the foregoing,
the
Executive’s right to receive payments hereunder is not assignable or
transferable, whether by pledge, creation of a security interest, or otherwise,
except for a transfer by the Executive’s will or by the laws of descent and
distribution. If the Executive attempts an assignment or transfer that is
contrary to this Section 8.1, the Employer shall have no liability to pay any
amount to the assignee or transferee.
8.2
Governing
Law, Jurisdiction, and Forum.
This
Employment Agreement shall be construed under and governed by the internal
laws
of the State of North Carolina, without giving effect to any conflict of laws
provision or rule (whether of the State of North Carolina or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of North Carolina. By entering into this Employment
Agreement, the Executive acknowledges that he is subject to the jurisdiction
of
both the federal and state courts in the State of North Carolina. Any actions
or
proceedings instituted under this Employment Agreement shall be brought and
tried solely in courts located in Forsyth County, North Carolina or in the
federal court having jurisdiction in Winston-Salem, North Carolina. The
Executive expressly waives his rights to have any such actions or proceedings
brought or tried elsewhere.
8.3
Entire
Agreement.
This
Employment Agreement sets forth the entire agreement of the parties concerning
the employment of the Executive. Any oral or written statements,
representations, agreements, or understandings made or entered into prior to
or
contemporaneously with the execution of this Employment Agreement are hereby
rescinded, revoked, and rendered null and void by the parties.
8.4
Notices.
All
notices, requests, demands, and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered by hand or
mailed, certified or registered mail, return receipt requested, with postage
prepaid. Unless otherwise changed by notice, notice shall be properly addressed
to the Executive if addressed to the address of the Executive on the books
and
records of the Employer at the time of the delivery of notice, and properly
addressed to the Employer if addressed to the Board of Directors, Southern
Community Financial Corporation, 0000 Xxxxxxx Xxxx Xxxx, Xxxxxxx-Xxxxx, Xxxxx
Xxxxxxxx 00000.
8.5
Severability.
In the
case of conflict between any provision of this Employment Agreement and any
statute, regulation, or judicial precedent, the latter shall prevail, but the
affected provisions of this Employment Agreement shall be curtailed and limited
solely to the extent necessary to bring them within the requirements of law.
If
any provision of this Employment Agreement is held by a court of competent
jurisdiction to be indefinite, invalid, void or voidable, or otherwise
unenforceable, the remainder of this Employment Agreement shall continue in
full
force and effect unless that would clearly be contrary to the intentions of
the
parties or would result in an injustice.
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8.6
Captions
and Counterparts.
The
captions in this Employment Agreement are solely for convenience. The captions
in no way define, limit, or describe the scope or intent of this Employment
Agreement. This Employment Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
8.7
No
Duty to Mitigate.
The
Employer hereby acknowledges that it will be difficult and could be impossible
(a) for the Executive to find reasonably comparable employment after his
employment terminates, and (b) to measure the amount of damages the Executive
may suffer as a result of termination. Additionally, the Employer acknowledges
that its general severance pay plans do not provide for mitigation, offset,
or
reduction of any severance payment received thereunder. Accordingly, the
Employer further acknowledges that the payment of severance benefits under
this
Employment Agreement is reasonable and shall be liquidated damages. The
Executive shall not be required to mitigate the amount of any payment provided
for in this Employment Agreement by seeking other employment. Moreover, the
amount of any payment provided for in this Employment Agreement shall not be
reduced by any compensation earned or benefits provided as the result of
employment of the Executive or as a result of the Executive being self-employed
after termination of his employment.
8.8
Amendment
and Waiver.
This
Employment Agreement may not be amended, released, discharged, abandoned,
changed, or modified in any manner, except by an instrument in writing signed
by
each of the parties hereto. The failure of any party hereto to enforce at any
time any of the provisions of this Employment Agreement shall not be construed
to be a waiver of any such provision, nor affect the validity of this Employment
Agreement or any part thereof or the right of any party thereafter to enforce
each and every such provision. No waiver or any breach of this Employment
Agreement shall be held to be a waiver of any other or subsequent
breach.
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8.9
Payment
of Legal Fees.
The
Employer is aware that after a Change in Control management could cause or
attempt to cause the Employer to refuse to comply with its obligations under
this Employment Agreement, or could institute or cause or attempt to cause
the
Employer to institute litigation seeking to have this Employment Agreement
declared unenforceable, or could take or attempt to take other action to deny
Executive the benefits intended under this Employment Agreement. In these
circumstances, the purpose of this Employment Agreement would be frustrated.
It
is the Employer’s intention that the Executive not be required to incur the
expenses associated with the enforcement of his rights under this Employment
Agreement, whether by litigation or other legal action, because the cost and
expense thereof would substantially detract from the benefits intended to be
granted to the Executive hereunder. It is the Employer’s intention that the
Executive not be forced to negotiate settlement of his rights under this
Employment Agreement under threat of incurring expenses. Accordingly, if after
a
Change in Control occurs it appears to the Executive that (a) the Employer
has
failed to comply with any of its obligations under this Employment Agreement,
or
(b) the Employer or any other person has taken any action to declare this
Employment Agreement void or unenforceable, or instituted any litigation or
other legal action designed to deny, diminish, or to recover from the Executive
the benefits intended to be provided to the Executive hereunder, the Employer
irrevocably authorizes the Executive from time to time to retain counsel of
his
choice, at the Employer’s expense as provided in this Section 8.9, to represent
the Executive in connection with the initiation or defense of any litigation
or
other legal action, whether by or against the Employer or any director, officer,
stockholder, or other person affiliated with the Employer, in any jurisdiction.
Notwithstanding any existing or previous attorney-client relationship between
the Employer and any counsel chosen by the Executive under this Section 8.9,
the
Employer irrevocably consents to the Executive entering into an attorney-client
relationship with that counsel, and the Employer and the Executive agree that
a
confidential relationship shall exist between the Executive and that counsel.
The fees and expenses of counsel selected from time to time by the Executive
as
provided in this section shall be paid or reimbursed to the Executive by the
Employer on a regular, periodic basis upon presentation by the Executive of
a
statement or statements prepared by such counsel in accordance with such
counsel’s customary practices, up to a maximum aggregate amount of $200,000,
whether suit be brought or not, and whether or not incurred in trial,
bankruptcy, or appellate proceedings. The Employer’s obligation to pay the
Executive’s legal fees provided by this Section 8.9 operates separately from and
in addition to any legal fee reimbursement obligation the Employer may have
with
the Executive under any separate severance or other agreement. Anything in
this
Section 8.9 to the contrary notwithstanding however, the Employer shall not
be
required to pay or reimburse Executive’s legal expenses if doing so would
violate section 18(k) of the Federal Deposit Insurance Act [12 U.S.C. 1828(k)]
and Rule 359.3 of the Federal Deposit Insurance Xxxxxxxxxxx [00 XXX
359.3].
8.10
Consultation
with Counsel and Interpretation of this Employment
Agreement.
The
Executive acknowledges and agrees that he has had the assistance of counsel
of
his choosing in the negotiation of this Employment Agreement, or he has chosen
not to have the assistance of his own counsel. Both the Employer and the
Executive have participated in the negotiation and drafting of this Employment
Agreement, and they hereby agree that there shall not be strict interpretation
against either party in connection with any review of this Employment Agreement
in which interpretation thereof is an issue.
8.11
Compliance
with Internal Revenue Code Section 409A.
The
Employer and the Executive intend that their exercise of authority or discretion
under this Employment Agreement shall comply with section 409A of the Internal
Revenue Code of 1986. If when the Executive’s employment terminates the
Executive is a specified employee, as defined in section 409A of the Internal
Revenue Code of 1986, and if any payments under this Employment Agreement,
including Articles 4 or 5, will result in additional tax or interest to the
Executive because of section 409A, then despite any provision of this Employment
Agreement to the contrary the Executive will not be entitled to the payments
until the earliest of (a) the date that is at least six months after termination
of the Executive’s employment for reasons other than the Executive’s death, (b)
the date of the Executive’s death, or (c) any earlier date that does not result
in additional tax or interest to the Executive under section 409A. As promptly
as possible after the end of the period during which payments are delayed under
this provision, the entire amount of the delayed payments shall be paid to
the
Executive in a single lump sum. If any provision of this Employment Agreement
does not satisfy the requirements of section 409A, such provision shall
nevertheless be applied in a manner consistent with those requirements. If
any
provision of this Employment Agreement would subject the Executive to additional
tax or interest under section 409A, the Employer shall reform the provision.
However, the Employer shall maintain to the maximum extent practicable the
original intent of the applicable provision without subjecting the Executive
to
additional tax or interest, and the Employer shall not be required to incur
any
additional compensation expense as a result of the reformed provision.
References in this Employment Agreement to section 409A of the Internal Revenue
Code of 1986 include rules, regulations, and guidance of general application
issued by the Department of the Treasury under Internal Revenue Code section
409A.
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In
Witness Whereof,
the
parties have executed this Employment Agreement as of the date first written
above.
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Executive
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Southern
Community Bank and Trust
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/s/
Xxxxx Xxxxxxxx
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By:
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/s/
Xxxx X. Xxxxx
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June
17, 2008
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Its:
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President
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Date
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Southern
Community Financial Corporation
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By:
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/s/
F. Xxxxx Xxxxx
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Its:
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CEO
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