Exhibit 10.10
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement") is entered into effective
as of this 20th day of February, 2008, by and among First South Bancorp, Inc., a
South Carolina corporation (the "Corporation"), First South Bank, a bank
chartered under South Carolina law and a wholly owned subsidiary of the
Corporation (the "Bank"), and Xxxxx X. Slider, President and Chief Executive
Officer of the Corporation and the Bank (the "Executive"). The Corporation and
the Bank are referred to in this Agreement individually and together as the
"Employer."
WHEREAS, the Executive is the President and Chief Executive Officer of
the Corporation and the Bank, possessing unique skills, knowledge, and
experience relating to their business, and the Executive has made and is
expected to continue to make major contributions to the profitability, growth,
and financial strength of the Corporation and affiliates,
WHEREAS, the Employer desires to provide additional inducement for the
Executive to continue serving as President and Chief Executive Officer and to
set forth in this Agreement the terms and conditions of the Executive's
employment,
WHEREAS, the Employer desires to assure itself of the continuity of
management, the Employer desires to establish minimum severance benefits for
certain of its officers and other key employees, including the Executive, if a
change in control occurs, and the Employer wishes to ensure that officers and
other key employees are not practically disabled from discharging their duties
if a proposed or actual transaction involving a change in control arises, 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 Employer 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. The Employer hereby employs the Executive to serve as
President and Chief Executive Officer according to the terms and conditions of
this Agreement and for the period stated in section 1.3. The Executive hereby
accepts employment according to the terms and conditions of this Agreement and
for the period stated in section 1.3.
1.2 Duties. As President and Chief Executive Officer, the Executive
shall serve under the direction of the Employer's board of directors and in
accordance with the Employer's Articles of Incorporation and Bylaws, as each may
be amended or restated from time to time. The Executive shall report directly to
the board of directors. The Executive shall serve the Employer faithfully,
diligently, competently, and to the best of the Executive's ability. The
Executive shall exclusively devote 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 Agreement. Without the written consent of the board
of directors of each of the Corporation and the Bank, during the term of this
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
section 1.2 shall prevent the Executive from managing personal investments and
affairs, provided that doing so does not interfere with the proper performance
of the Executive's duties and responsibilities under this Agreement.
1.3 Term. The initial term of employment under this Agreement shall be
three years, commencing on the effective date first written above. The term of
this Agreement shall automatically be extended at the end of each month for one
additional month unless the Bank's board of directors determines that the term
shall not be extended. If the board of directors decides not to extend the term,
the board shall promptly notify the Executive in writing, but this Agreement
shall nevertheless remain in force until its current term expires. The board's
decision not to extend the term shall not - by itself - give the Executive any
rights under this Agreement to claim an adverse change in position,
compensation, or circumstances or otherwise to claim entitlement to severance
benefits under Articles 4 or 5. References herein to the term of this Agreement
mean the initial term, as the same may be extended. Unless sooner terminated,
the Executive's employment and the term of this Agreement shall terminate when
the Executive attains age 65.
1.4 Service on the Board of Directors. The Executive is currently
serving as a director of each of the Corporation and the Bank. The Corporation
shall nominate the Executive for election as a director at such times as
necessary so that the Executive will, if elected by stockholders, remain a
director of the Corporation throughout the term of this Agreement. The Executive
hereby consents to serving as a director and to being named as a director of the
Corporation in documents filed with the Securities and Exchange Commission. The
board of directors of each of the Corporation and the Bank shall undertake every
lawful effort to ensure that the Executive continues throughout the term of this
Agreement to be elected or reelected as a director of the Bank. The Executive
shall be deemed to have resigned as a director of each of the Corporation and
the Bank effective immediately after termination of the Executive's employment
under Article 3 of this Agreement, regardless of whether the Executive submits a
formal, written resignation as director.
ARTICLE 2
COMPENSATION AND BENEFITS
2.1 Base Salary. In consideration of the Executive's performance of the
obligations under this Agreement, the Employer shall pay or cause to be paid to
the Executive a salary at the annual rate of not less than $242,700, payable in
bi-weekly installments or otherwise according to the Employer's regular pay
practices. The Executive's salary shall be reviewed annually by the Employer's
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board of directors or the board committee having jurisdiction over executive
compensation. The Executive's salary shall be increased no more frequently than
annually to account for cost of living increases. At the discretion of the board
of directors or the board committee with jurisdiction over executive
compensation, the Executive's salary also may be increased beyond the amount
necessary to account for cost of living increases. However, the Executive's
salary shall not be reduced. All compensation under this Agreement shall be
subject to customary withholding taxes and such other employment taxes as are
imposed by law. The Executive's salary, as the same may be increased from time
to time, is referred to in this Agreement as the "Base Salary."
2.2 Benefit Plans and Perquisites. The Executive shall be entitled
throughout the term of this Agreement (x) 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 including stock-based
compensation, incentive, bonus, or purchase plans existing on the date of this
Agreement or adopted after the date of this Agreement, provided that the
Executive satisfies the eligibility requirements for any such plans or benefits,
and (y) to receive any and all other fringe benefits provided from time to time,
including the following fringe benefits -
(a) Club dues. The Employer shall pay or cause to be paid the
Executive's initiation and membership assessments and dues in civic and social
clubs of the Executive's choice. The Executive shall be solely responsible for
personal expenses for use of the civic and clubs.
(b) Reimbursement of business expenses. The Executive shall be entitled
to reimbursement for all reasonable business expenses incurred performing the
obligations under this 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.
(c) Use of automobile. The Executive shall have the use of an
automobile titled in the Employer's name for use by the Executive to carry out
the Executive's duties, the insurance and maintenance expenses of which shall be
paid by the Employer. As additional compensation, the Executive may use such
automobile for personal purposes, provided that the Executive renders an
accounting of business and personal use to the Employer in accordance with
regulations under the Internal Revenue Code of 1986, as amended.
(d) Long-term care insurance. The Employer shall purchase and maintain
long-term care insurance for the benefit of the Executive, which policy shall be
fully paid no later than the date on which the Executive attains age 65,
provided the Executive remains employed by the Employer to age 65. The long-term
care insurance policy shall be owned by the Executive exclusively. If before
attaining age 65 the Executive's employment terminates involuntarily but without
Cause, voluntarily but with Good Reason, or because of disability, the
Executive's right to the long-term care insurance benefit under this section
2.2(d) shall be determined under section 4.2.
(e) Disability insurance. The Employer shall reimburse the Executive
for the Executive's cost to purchase and maintain disability insurance coverage.
The amount reimbursed by the Employer shall be grossed up to compensate the
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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.
2.3 Vacation. The Executive shall be entitled to sick leave and paid
annual vacation in accordance with policies established from time to time by the
Employer.
ARTICLE 3
EMPLOYMENT TERMINATION
3.1 Termination Because of Death or Disability. (a) Death. 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, the
Executive's estate shall receive any sums due to the Executive as Base Salary
and reimbursement of expenses through the end of the month in which death
occurred, any bonus earned or accrued through the date of death, including any
unvested amounts awarded for previous years, and for twelve months after the
Executive's death the Employer shall provide without cost to the Executive's
family continuing health care coverage under COBRA substantially identical to
that provided for the Executive before death.
(b) Disability. 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 Agreement the Executive shall be
considered "disabled" if an independent physician selected by the Employer and
reasonably acceptable to the Executive or the Executive's legal representative
determines that, because of illness or accident, the Executive is unable to
perform the Executive's duties and will be unable to perform those duties for 90
consecutive days. The Executive shall not be considered disabled, however, if
the Executive returns to work on a full-time basis within 30 days after the
Employer gives notice of termination due to disability. If the Executive is
terminated by either of the Corporation or the Bank because of disability, the
Executive's employment with the other shall also terminate at the same time. If
the Executive's employment terminates because of disability, the Executive shall
receive the Base Salary earned through the date on which termination becomes
effective, any bonus earned or accrued through the date of incapacity, including
any unvested amounts awarded for previous years, any payments the Executive is
eligible to receive under any disability insurance program in which the
Executive participates, and such other benefits to which the Executive may be
entitled under the Employer's benefit plans, policies, and agreements.
3.2 Involuntary Termination with Cause. The Employer may terminate the
Executive's employment with Cause. If the Executive's employment terminates with
Cause, the Executive shall receive the Base Salary through the date on which
termination becomes effective and reimbursement of expenses to which the
Executive is entitled when termination becomes effective. If the Executive is
terminated with Cause by either of the Corporation or the Bank, the Executive
shall be deemed also to have been terminated with Cause by the other. The
Executive shall not be deemed to have been terminated with Cause under this
Agreement unless and until there is delivered to the Executive a copy of a
resolution duly adopted at a meeting of the board of directors called and held
for such purpose, which resolution shall (x) contain findings that, in the good
faith opinion of the board, the Executive has committed an act constituting
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Cause, and (y) specify the particulars thereof. The resolution of the board of
directors shall be deemed to have been duly adopted if and only if it is adopted
by the affirmative vote of a majority of the directors of the Corporation then
in office or a majority of the directors of the Bank then in office, in either
case excluding the Executive, at a meeting duly called and held for that
purpose. Notice of the meeting and the proposed termination with Cause shall be
given to the Executive a reasonable time before the board's meeting. The
Executive and the Executive's counsel (if the Executive chooses to have counsel
present) shall have a reasonable opportunity to be heard by the board at the
meeting. Nothing in this Agreement limits the Executive's or beneficiaries'
right to contest the validity or propriety of the board's determination of
Cause. For purposes of this Agreement "Cause" means any of the following -
1) an intentional act of fraud, embezzlement, or theft by the
Executive in the course of employment. For purposes of this 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 Employer's best interests, or
2) intentional violation of any law or significant policy of
the Employer that, in the Employer's sole judgment, has an adverse
effect on the Employer, or
3) the Executive's gross negligence or gross neglect of duties
in the performance of duties, or
4) intentional wrongful damage by the Executive to the
business or property of the Employer, including without limitation the
Employer's reputation, which in the Employer's sole judgment causes
material harm to the Employer, or
5) a breach by the Executive of fiduciary duties or misconduct
involving dishonesty, in either case whether in the Executive's
capacity as an officer or as a director, or
6) a breach by the Executive of this Agreement that, in the
Employer's sole judgment, is a material breach, which breach is not
corrected by the Executive within ten days after receiving written
notice of the breach, 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
8) 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 seven consecutive days or more, or
9) the occurrence of any event that results in the Executive
being excluded from coverage, or having coverage limited for the
Executive as compared to other executives of the Employer, under the
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Employer's blanket bond or other fidelity or insurance policy covering
its directors, officers, or employees.
3.3 Voluntary Termination by the Executive Without Good Reason. If the
Executive terminates employment without Good Reason, the Executive shall receive
the Base Salary and expense reimbursement to which the Executive is entitled
through the date on which termination becomes effective.
3.4 Involuntary Termination Without Cause and Voluntary Termination
with Good Reason. With written notice to the Executive 90 days in advance, the
Employer may terminate the Executive's employment without Cause. Termination
shall take effect at the end of the 90-day period. With advance written notice
to the Employer as provided in paragraph (b), the Executive may terminate
employment with Good Reason. If the Executive's employment terminates
involuntarily without Cause or voluntarily but with Good Reason, the Executive
shall be entitled to the benefits specified in Article 4 of this Agreement. For
purposes of this Agreement a voluntary termination by the Executive will be
considered a voluntary termination with Good Reason if the conditions stated in
both paragraphs (a) and (b) are satisfied -
(a) a voluntary termination by the Executive will be considered a
voluntary termination with Good Reason if any of the following occur without the
Executive's advance written consent, and the term Good Reason shall mean the
occurrence of any of the following without the Executive's advance written
consent -
1) a material diminution of the Executive's Base Salary, or
2) a material diminution of the Executive's authority, duties,
or responsibilities, or
3) a material diminution in the authority, duties, or
responsibilities of the supervisor to whom the Executive is required to
report, including a requirement that the Executive report to a
corporate officer or employee instead of reporting directly to the
board of directors, or
4) a material diminution in the budget over which the
Executive retains authority, or
5) a material change in the geographic location at which the
Executive must perform services for the Employer, or
6) any other action or inaction that constitutes a material
breach by the Employer of this Agreement.
(b) the Executive must give notice to the Employer of the existence of
one or more of the conditions described in paragraph (a) within 90 days after
the initial existence of the condition, and the Employer shall have 30 days
thereafter to remedy the condition. In addition, the Executive's voluntary
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termination because of the existence of one or more of the conditions described
in paragraph (a) must occur within 24 months after the initial existence of the
condition.
ARTICLE 4
SEVERANCE COMPENSATION
4.1 Cash Severance after Termination Without Cause or Termination with
Good Reason. (a) Subject to the possibility that cash severance after employment
termination might be delayed under section 4.1(b), if the Executive's employment
terminates involuntarily but without Cause or if the Executive voluntarily
terminates employment with Good Reason, 30 days after employment termination the
Employer shall pay to the Executive in a single lump sum cash in an amount equal
to (x) three times the Executive's Base Salary on the date notice of employment
termination is given, without discount for the time value of money, plus (y) any
bonus earned by the Executive or accrued by the Employer on behalf of the
Executive through the date employment termination becomes effective. The
Employer and the Executive acknowledge and agree that the compensation and
benefits under this section 4.1 shall not be payable if compensation and
benefits are payable or shall have been paid to the Executive under Article 5 of
this Agreement.
(b) If when employment termination occurs the Executive is a specified
employee within the meaning of section 409A of the Internal Revenue Code of
1986, and if the cash severance payment under section 4.1(a) would be considered
deferred compensation under section 409A, and finally if an exemption from the
six-month delay requirement of section 409A(a)(2)(B)(i) is not available, the
Executive's cash severance payment under section 4.1(a) shall be paid to the
Executive in a single lump sum on the first day of the seventh month after the
month in which the Executive's employment terminates. References in this
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.
4.2 Post-Termination Insurance Coverage. (a) Subject to section 4.2(b),
if the Executive's employment terminates involuntarily but without Cause,
voluntarily but with Good Reason, or because of disability, the Employer shall
continue or cause to be continued at the Employer's expense and on behalf of the
Executive and the Executive's dependents medical insurance coverage, the
long-term care insurance benefit under section 2.2(d), and the disability
reimbursement and gross-up benefit under section 2.2(e), in each case as in
effect during and in accordance with the same schedule prevailing in the two
years preceding the date of the Executive's termination. The medical and
disability (including income tax gross up) insurance benefits provided by this
section 4.2(a) shall continue until the first to occur of (w) the Executive's
return to employment with the Employer or another employer providing equivalent
or superior insurance benefits, (x) the Executive's attainment of age 65, (y)
the Executive's death, or (z) the end of the term remaining under this Agreement
when the Executive's employment terminates. The long-term care insurance benefit
under section 2.2(d) shall continue until the policy is fully paid. If continued
long-term care insurance benefits under section 2.2(d) constitute taxable income
to the Executive, the Employer shall reimburse the Executive for federal and
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state income taxes imposed on the Executive that are attributable to continued
maintenance of the long-term care insurance coverage, and 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.
(b) If (w) under the terms of the applicable policy or policies for the
insurance benefits specified in section 4.2(a) it is not possible to continue
the Executive's coverage or (x) when employment termination occurs the Executive
is a specified employee within the meaning of section 409A of the Internal
Revenue Code of 1986, if any of the continued insurance benefits specified in
section 4.2(a) would be considered deferred compensation under section 409A, and
finally if an exemption from the six-month delay requirement of section
409A(a)(2)(B)(i) is not available for that particular insurance benefit, instead
of providing continued medical and disability (including income tax gross up)
insurance benefits for the Executive under section 4.2(a) the Employer shall pay
to the Executive in a single lump sum an amount in cash equal to the present
value of the Employer's projected cost to maintain that particular insurance
benefit had the Executive's employment not terminated, assuming continued
coverage for the lesser of 36 months or the number of months until the Executive
attains age 65. The lump-sum payment shall be made 30 days after employment
termination or, if section 4.1(b) applies and a six-month delay is required
under Internal Revenue Code section 409A, on the first day of the seventh month
after the month in which the Executive's employment terminates.
If (y) under the terms of the long-term care insurance policy it is not
possible to continue the Executive's coverage or (z) when employment termination
occurs the Executive is a specified employee within the meaning of section 409A
of the Internal Revenue Code of 1986, if continuation of the long-term care
insurance benefit would be considered deferred compensation under section 409A,
and finally if an exemption from the six-month delay requirement of section
409A(a)(2)(B)(i) is not available for that particular insurance benefit, instead
of providing the continued long-term care insurance benefit under section 4.2(a)
(including income tax gross up), the Employer shall pay to the Executive in a
single lump sum an amount in cash equal to the present value of the Employer's
projected cost to maintain the long-term care insurance policy (including income
tax gross up) until the Executive attains age 65. The lump-sum payment shall be
made 30 days after employment termination or, if section 4.1(b) applies and a
six-month delay is required under Internal Revenue Code section 409A, on the
first day of the seventh month after the month in which the Executive's
employment terminates.
ARTICLE 5
CHANGE IN CONTROL BENEFITS
5.1 Change in Control Benefits. If a Change in Control occurs during
the term of this Agreement, 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 (x)
the Executive's Base Salary when the Change in Control occurs plus (y) any bonus
or incentive compensation earned for the calendar year ended immediately before
the year in which the Change in Control occurs, 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
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compensation shall not include interest or other earnings credited to the
Executive under qualified or nonqualified plans and annual compensation shall
not include any compensation earned in the Executive's capacity as a director.
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 section 5.1 is payable no later than five business days after the
Change in Control. If the Executive receives payment under this section 5.1 the
Executive shall not be entitled to any cash severance benefits under section 4.1
of this Agreement. The Executive shall be entitled to benefits under this
section 5.1 on no more than one occasion.
5.2 Change in Control Defined. For purposes of this Agreement "Change
in Control" means a change in control as defined in Internal Revenue Code
section 409A and rules, regulations, and guidance of general application
thereunder issued by the Department of the Treasury, including -
(a) Change in ownership: a change in ownership of the Corporation
occurs on the date any one person or group accumulates ownership of Corporation
stock constituting more than 50% of the total fair market value or total voting
power of Corporation stock,
(b) Change in effective control: (x) any one person or more than one
person acting as a group acquires within a 12-month period ownership of
Corporation stock possessing 30% or more of the total voting power of
Corporation stock, or (y) a majority of the 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 the Corporation's board of
directors, or
(c) Change in ownership of a substantial portion of assets: a change in
ownership of a substantial portion of the Corporation's assets occurs if in a
12-month period any one person or more than one person acting as a group
acquires from the Corporation assets having a total gross fair market value
equal to or exceeding 40% of the total gross fair market value of all of the
Corporation's assets immediately before the acquisition or acquisitions. For
this purpose, gross fair market value means the value of the Corporation's
assets, or the value of the assets being disposed of, determined without regard
to any liabilities associated with the assets.
5.3 Gross-Up for Taxes. (a) Additional payment to account for Excise
Taxes. If the Executive receives the lump sum payment under section 5.1 of this
Agreement and acceleration of benefits under any other benefit, compensation, or
incentive plan or arrangement with the Employer (collectively, the "Total
Benefits"), and if any part of the Total Benefits is subject to the Excise Tax
under section 280G and section 4999 of the Internal Revenue Code (the "Excise
Tax"), the Employer shall pay or cause to be paid to the Executive the following
additional amounts, consisting of (x) a payment equal to the Excise Tax payable
by the Executive under section 4999 on the Total Benefits (the "Excise Tax
Payment") and (y) a payment equal to the amount necessary to provide the Excise
Tax Payment net of all income, payroll, and excise taxes. Together, the
additional amounts described in clauses (x) and (y) are referred to in this
Agreement as the "Gross-Up Payment Amount." Payment of the Gross-Up Payment
Amount shall be made in addition to the amount set forth in section 5.1.
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Calculating the Excise Tax. For purposes of determining whether any of
the Total Benefits will be subject to the Excise Tax and for purposes of
determining the amount of the Excise Tax,
1) Determination of "parachute payments" subject to the Excise
Tax: any other payments or benefits received or to be received by the
Executive as a result of the Change in Control or the Executive's
employment termination (whether under the terms of this Agreement or
any other agreement or any other benefit plan or arrangement with the
Employer, any person whose actions result in a Change in Control, or
any person affiliated with the Employer or such person) shall be
treated as "parachute payments" within the meaning of section
280G(b)(2) of the Internal Revenue Code, and all "excess parachute
payments" within the meaning of section 280G(b)(1) shall be treated as
subject to the Excise Tax, unless in the opinion of the certified
public accounting firm that is retained by the Employer as of the date
immediately before the Change in Control (the "Accounting Firm") such
other payments or benefits do not constitute (in whole or in part)
parachute payments, or such excess parachute payments represent (in
whole or in part) reasonable compensation for services actually
rendered within the meaning of section 280G(b)(4) of the Internal
Revenue Code in excess of the "base amount" (as defined in section
280G(b)(3) of the Internal Revenue Code), or are otherwise not subject
to the Excise Tax,
2) Calculation of benefits subject to the Excise Tax: the
amount of the Total Benefits that shall be treated as subject to the
Excise Tax shall be equal to the lesser of (x) the total amount of the
Total Benefits reduced by the amount of such Total Benefits that in the
opinion of the Accounting Firm are not parachute payments, or (y) the
amount of excess parachute payments within the meaning of section
280G(b)(1) (after applying clause (1), above), and
3) Value of noncash benefits and deferred payments: the value
of any noncash benefits or any deferred payment or benefit shall be
determined by the Accounting Firm in accordance with the principles of
sections 280G(d)(3) and (4) of the Internal Revenue Code.
Assumed Marginal Income Tax Rate. For purposes of determining the
Gross-Up Payment Amount, the Executive shall be deemed to pay federal income
taxes at the highest marginal rate of federal income taxation in the calendar
years in which the Gross-Up Payment Amount is to be made and state and local
income taxes at the highest marginal rate of taxation in the state and locality
of the Executive's residence on the date of the Change in Control or termination
of employment, net of the reduction in federal income taxes that can be obtained
from deduction of such state and local taxes (calculated by assuming that any
reduction under section 68 of the Internal Revenue Code in the amount of
itemized deductions allowable to the Executive applies first to reduce the
amount of such state and local income taxes that would otherwise be deductible
by the Executive, and applicable federal FICA and Medicare withholding taxes).
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Return of Reduced Excise Tax Payment or Payment of Additional Excise
Tax. If the Excise Tax is later determined to be less than the amount taken into
account hereunder when the Change in Control occurred or when the Executive's
employment terminated, the Executive shall repay to the Employer - when the
amount of the reduction in Excise Tax is finally determined - the portion of the
Gross-Up Payment Amount attributable to the reduction (plus that portion of the
Gross-Up Payment Amount attributable to the Excise Tax, federal, state and local
income taxes and FICA and Medicare withholding taxes imposed on the Gross-Up
Payment Amount being repaid by the Executive to the extent that the repayment
results in a reduction in Excise Tax, FICA and Medicare withholding taxes and/or
a federal, state or local income tax deduction).
If the Excise Tax is later determined to be more than the amount taken
into account hereunder when the Change in Control occurred or when the
Executive's employment terminated (due, for example, to a payment whose
existence or amount cannot be determined at the time of the Gross-Up Payment
Amount), the Employer shall make an additional payment to the Executive for that
excess (plus any interest, penalties or additions payable by the Executive for
the excess) when the amount of the excess is finally determined.
(b) Responsibilities of the Accounting Firm and the Bank.
Determinations Shall Be Made by the Accounting Firm. Subject to the provisions
of section 5.3(a), all determinations required to be made under this section
5.3(b) - including whether and when a Gross-Up Payment Amount is required, the
amount of the Gross-Up Payment Amount and the assumptions to be used to arrive
at the determination (collectively, the "Determination") - shall be made by the
Accounting Firm, which shall provide detailed supporting calculations both to
the Employer and the Executive within 15 business days after receipt of notice
from the Employer or the Executive that there has been a Gross-Up Payment
Amount, or such earlier time as is requested by the Employer.
Fees and Expenses of the Accounting Firm and Agreement with the
Accounting Firm. All fees and expenses of the Accounting Firm shall be borne
solely by the Employer. The Employer shall enter into any agreement requested by
the Accounting Firm in connection with the performance of its services
hereunder.
Accounting Firm's Opinion. If the Accounting Firm determines that no
Excise Tax is payable by the Executive, the Accounting Firm shall furnish the
Executive with a written opinion to that effect, and to the effect that failure
to report Excise Tax, if any, on the Executive's applicable federal income tax
return will not result in the imposition of a negligence or similar penalty.
Accounting Firm's Determination Is Binding; Underpayment and
Overpayment. The Determination by the Accounting Firm shall be binding on the
Employer and the Executive. Because of the uncertainty in determining whether
any of the Total Benefits will be subject to the Excise Tax at the time of the
Determination, it is possible that a Gross-Up Payment Amount that should have
been made will not have been made by the Employer ("Underpayment"), or that a
Gross-Up Payment Amount will be made that should not have been made by the
Employer ("Overpayment"). If, after a Determination by the Accounting Firm, the
Executive is required to make a payment of additional Excise Tax, the Accounting
Firm shall determine the amount of the Underpayment. The Underpayment (together
11
with interest at the rate provided in section 1274(d)(2)(B) of the Internal
Revenue Code) shall be paid promptly by the Employer to or for the benefit of
the Executive. If the Gross-Up Payment Amount exceeds the amount necessary to
reimburse the Executive for the Excise Tax according to section 5.3(a), the
Accounting Firm shall determine the amount of the Overpayment. The Overpayment
(together with interest at the rate provided in section 1274(d)(2)(B) of the
Internal Revenue Code) shall be paid promptly by the Executive to or for the
benefit of the Employer. Provided that the Executive's expenses are reimbursed
by the Employer, the Executive shall cooperate with any reasonable requests by
the Employer in any contests or disputes with the Internal Revenue Service
relating to the Excise Tax.
Accounting Firm Conflict of Interest. If the Accounting Firm is serving
as accountant or auditor for the individual, entity, or group effecting the
Change in Control, the Executive may appoint another nationally recognized
public accounting firm to make the Determinations required hereunder (in which
case the term "Accounting Firm" as used in this Agreement shall be deemed to
refer to the accounting firm appointed by the Executive under this paragraph).
ARTICLE 6
CONFIDENTIALITY AND CREATIVE WORK
6.1 Non-disclosure. The Executive covenants and agrees not to 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 the Employer's affiliates' confidential and proprietary
information and trade secrets in existence on the date hereof or existing at any
time during the term of this 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 South 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 (x) by or through action of the Employer, or (y) 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
12
from an appropriate governmental agency or disclosure made by the Executive in
the ordinary course of business and within the scope of the Executive's
authority.
6.2 Return of Materials. The Executive agrees to deliver or return to
the Employer upon termination, upon expiration of this 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 the
Executive's services hereunder. The Executive will retain no copies thereof
after termination of this 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 Agreement, 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.
6.4 Affiliates' Confidential Information is Covered; Confidentiality
Obligation Survives Termination. For purposes of this Agreement, the term
"affiliate" of the Employer includes any entity that directly, or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with the Corporation or the Bank. The rights and obligations set
forth in this Article 6 shall survive termination of this Agreement.
6.5 Injunctive Relief. The Executive acknowledges that it is impossible
to measure in money the damages that will accrue to the Employer if the
Executive fails to observe the obligations imposed by this Article 6.
Accordingly, if the Employer 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. The
confidentiality and remedies provisions of this Article 6 shall be in addition
to and shall not be deemed to supersede or restrict, limit, or impair the
Employer's rights under applicable state or federal statute or regulation
dealing with or providing a remedy for the wrongful disclosure, misuse, or
misappropriation of trade secrets or proprietary or confidential information.
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 Bank for one year after
the Executive's employment termination.
7.2 Covenant Not to Compete. (a) The Executive covenants and agrees not
to compete directly or indirectly with the Employer for one year after
employment termination. For purposes of this section -
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1) the term "compete" means
(a) providing financial products or services on behalf of
any financial institution for any person residing in
the territory,
(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
(c) inducing or attempting to induce any person who was a
customer of the Employer at the date of the
Executive's employment termination to seek financial
products or services from another financial
institution.
2) the words "directly or indirectly" means -
(a) acting as a consultant, officer, director,
independent contractor, or employee of any financial
institution in competition with the Employer in the
territory, or
(b) communicating to such financial institution the names
or addresses or any financial information concerning
any person who was a customer of the Employer when
the Executive's employment terminated.
3) the term "customer" means any person to whom the Employer is
providing financial products or services on the date of the
Executive's employment termination.
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 any of
its affiliated corporations.
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.
6) the term "person" means any individual or individuals,
corporation, partnership, fiduciary or association.
7) the term "territory" means the area within a 15-mile radius of
any office of the Employer at the date of the Executive's
employment termination.
14
(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.
7.3 Injunctive and Other Relief. 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 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 (x) forfeiture of any money
representing accrued salary, contingent payments, or other fringe benefits due
and payable to the Executive, (y) forfeiture of any severance benefits under
sections 4.1 and 4.2 of this Employment Agreement, and (z) 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 Bank 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 or additional 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 Agreement. However, Article 7 shall become null and void if
a Change in Control occurs before employment termination.
ARTICLE 8
MISCELLANEOUS
8.1 Successors and Assigns. (a) This Agreement is binding on
successors. This Agreement shall be binding upon the Employer and any successor,
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 Agreement and the Employer's obligations
under this 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 expressly to assume and agree to perform this
Agreement in the same manner and to the same extent the Employer would be
required to perform had no succession occurred.
(b) This Agreement is enforceable by the Executive's heirs. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, and legatees.
(c) This Agreement is personal and is not assignable. This Agreement is
personal in nature. Without written consent of the other parties, no party shall
assign, transfer, or delegate this Agreement or any rights or obligations under
this Agreement except as expressly provided herein. Without limiting the
15
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 Agreement shall be
construed under and governed by the internal laws of the State of South
Carolina, without giving effect to any conflict of laws provision or rule
(whether of the State of South Carolina or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
South Carolina. By entering into this Agreement, the Executive acknowledges that
the Executive is subject to the jurisdiction of both the federal and state
courts in the State of South Carolina. Any actions or proceedings instituted
under this Agreement shall be brought and tried solely in courts located in
Spartanburg County, South Carolina or in the federal court having jurisdiction
in Spartanburg, South Carolina. The Executive expressly waives the right to have
any such actions or proceedings brought or tried elsewhere.
8.3 Entire Agreement. This Agreement sets forth the entire agreement of
the parties concerning the employment of the Executive by the Employer. Any oral
or written statements, representations, agreements, or understandings made or
entered into before or contemporaneously with the execution of this 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 such notice, and properly addressed to the Employer if addressed to the Board
of Directors, First South Bancorp, Inc., 0000 Xxxx X. Xxxxx Xx. Xxxxxxxxx,
Xxxxxxxxxxx, Xxxxx Xxxxxxxx 00000.
8.5 Severability. If there is a conflict between any provision of this
Agreement and any statute, regulation, or judicial precedent, the latter shall
prevail, but the affected provisions of this Agreement shall be curtailed and
limited solely to the extent necessary to bring them within the requirements of
law. If any provision of this Agreement is held by a court of competent
jurisdiction to be indefinite, invalid, void or voidable, or otherwise
unenforceable, the remainder of this 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.
8.6 Captions and Counterparts. The captions in this Agreement are
solely for convenience and do not define, limit, or describe the scope or intent
of this Agreement. This 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 (x) for the Executive to find reasonably
16
comparable employment after employment termination, and (y) 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. The Employer further acknowledges that the payment of
severance benefits under this 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 Agreement by seeking other employment. Moreover,
the amount of any payment provided for in this 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 employment
termination.
8.8 Amendment and Waiver. This 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 Agreement
shall not be construed to be a waiver of any such provision, nor affect the
validity of this 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 Agreement shall be held to be a waiver of any other or subsequent breach.
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 Agreement, or could institute or cause or
attempt to cause the Employer to institute litigation seeking to have this
Agreement declared unenforceable, or could take or attempt to take other action
to deny Executive the benefits intended under this Agreement. In these
circumstances the purpose of this Agreement would be frustrated. The Employer
desires that the Executive not be required to incur the expenses associated with
the enforcement of rights under this 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. The
Employer desires that the Executive not be forced to negotiate settlement of
rights under this Agreement under threat of incurring expenses. Accordingly, if
after a Change in Control occurs it appears to the Executive that (x) the
Employer has failed to comply with any of its obligations under this Agreement,
or (y) the Employer or any other person has taken any action to declare this
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 the Executive's
choice, at the Employer's expense as provided in this section 8.9, to represent
the Executive in 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.
Despite 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
17
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 counsel in accordance with counsel's
customary practices, up to a maximum aggregate amount of $500,000, 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. Despite anything in this
Agreement to the contrary, 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 Compliance with Internal Revenue Code Section 409A. The Employer
and the Executive intend that their exercise of authority or discretion under
this 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 Agreement, including Articles 4 or 5, will result in
additional tax or interest to the Executive because of section 409A, then
despite any contrary provision of this Agreement the Executive shall not be
entitled to the payments until the earliest of (x) the date that is at least six
months after termination of the Executive's employment for reasons other than
the Executive's death, (y) the date of the Executive's death, or (z) 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 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 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.
IN WITNESS WHEREOF, the parties have executed this Employment Agreement
as of the date first written above.
EXECUTIVE FIRST SOUTH BANK
------------------------ By: ---------------------------
Xxxxx X. Slider
Its: ---------------------------
FIRST SOUTH BANCORP, INC.
By: ---------------------------
Its: ---------------------------
