AMENDED AND RESTATED CHANGE-IN-CONTROL PROTECTIVE AGREEMENT
EXHIBIT
10.12
AMENDED
AND RESTATED
THIS
AMENDED AND RESTATED AGREEMENT (the
“Agreement”) entered
into this 24th day of April 2008 (the “Effective Date”), by and between
FIRST
SOUTH BANK
(the
“Bank”), FIRST
SOUTH BANCORP, INC.
(the
“Company”), and XXXXXXX
X. XXXX
(the
“Employee”).
WHEREAS,
the
Employee has heretofore been employed by the Bank as an executive officer;
and
WHEREAS,
the
Board of Directors of each of the Company, the Bank and the Employee have
determined that it is necessary and appropriate to enter into this Amended
and
Restated Agreement to ensure the Employee’s continued service on terms
consistent with his role and his importance to the success of the Company and
the Bank;
NOW,
THEREFORE,
the
undersigned parties AGREE as follows:
1. Defined
Terms
When
used
anywhere in the Agreement, the following terms shall have the meanings set
forth
herein.
(a) “Change
in Control”
shall
mean any one of the following events: (i) the acquisition by any person (or
persons acting as a group) of ownership, holding or power to vote more than
25%
of the voting stock of the Company or the Bank, (ii) the acquisition by any
person (or persons acting as a group) of the ability to control the election
of
a majority of the Company’s or the Bank’s directors, (iii) the acquisition of a
controlling influence over the management or policies of the Company or of
the
Bank, or (iv) during any period of two consecutive years, individuals (the
“Continuing Directors”) who at the beginning of such period constitute the Board
of Directors of the Company or of the Bank (the “Existing Board”) cease for any
reason to constitute at least two-thirds thereof, provided that any individual
whose election or nomination for election as a member of the Existing Board
was
approved by a vote of at least two-thirds of the Continuing Directors then
in
office shall be considered a Continuing Director. For purposes of this
paragraph, the terms “person” or “persons acting as a group” shall be construed
within the meaning of Section 13(d) of the Securities Exchange Act of 1934
and
shall refer to an individual or a corporation, partnership, trust, association,
joint venture, pool, syndicate, sole proprietorship, unincorporated organization
or any other form of entity not specifically listed herein.
(b) “Code”
shall
mean the Internal Revenue Code of 1986, as amended from time to time, and as
interpreted through applicable rulings and regulations in effect from time
to
time.
(c) “Good
Reason”
shall
mean any of the following events, which has not been consented to in advance
by
the Employee in writing: (i) the requirement that the Employee move his personal
residence, or perform his principal executive functions, more than thirty (30)
miles from his primary office as of the date of the Change in Control; (ii)
a
material reduction in the Employee’s base compensation as in effect on the date
of the Change in Control or as the same may be increased from time to time;
(iii) the failure by the Bank or the Company to continue to provide the Employee
with compensation and benefits provided for on the date of the Change in
Control, as the same may be increased from time to time, or with benefits
substantially similar to those provided to him under any of the employee benefit
plans in which the Employee now or hereafter becomes a participant, or the
taking of any action by the Bank or the Company which would directly or
indirectly reduce any of such benefits or deprive the Employee of any material
fringe benefit enjoyed by him at the time of the Change in Control; (iv) the
assignment to the Employee of duties and responsibilities materially different
from those normally associated with his position; (v) a failure to elect or
reelect the Employee to the Board of Directors of the Bank or the Company,
if
the Employee is serving on such Board on the date of the Change in Control;
(vi)
a material diminution or reduction in the Employee’s responsibilities or
authority (including reporting responsibilities) in connection with his
employment with the Bank or the Company; or (vii) a material reduction in the
secretarial or other administrative support of the Employee.
(d) “Just
Cause” shall mean, in the good faith determination of the Bank’s Board
of Directors, the Employee’s personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule or
regulation (other than traffic violations or similar offenses) or final
cease-and-desist order, or material breach of any provision of this Agreement.
The Employee shall have no right to receive compensation or other benefits
for
any period after termination for Just Cause. No act, or failure to act, on
the
Employee’s part shall be considered “willful” unless he has acted, or failed to
act, with an absence of good faith and without a reasonable belief that his
action or failure to act was in the best interest of the Bank and the Company.
Notwithstanding the foregoing, the Employee shall not be deemed to have been
terminated for Just Cause unless there shall have been delivered to the Employee
a copy of a resolution duly adopted by the affirmative vote of not less than
a
majority of the membership of the Bank’s Board at a meeting called and held for
that purpose (after reasonable notice to the Employee and an opportunity for
the
Employee to be heard before the Board), finding that in the good faith opinion
of the Boards the Employee was guilty of conduct and specifying the particulars
thereof in detail.
(e) “Protected
Period”
shall
mean the period that begins on the date that is six (6) months before a Change
in Control and ends on later of the second anniversary of the effective date
of
a Change in Control or the expiration of this Agreement.
2. Trigger
Events
The
Employee shall be entitled to the severance benefits set forth in Section 3
of
this Agreement in the event that (i) the Employee voluntarily terminates
employment for any reason within the 30-day period beginning on the effective
date of a Change in Control, (ii) the Employee voluntarily terminates employment
within 90 days of an event that both occurs during the Protected Period and
constitutes Good Reason, or (iii) the Bank, the Company, or their successor(s)
in interest terminate the Employee’s employment for any reason other than Just
Cause during the Protected Period.
3.
Severance
Benefit
If
the
Employee becomes entitled to collect severance benefits pursuant to Section
2
hereof, the Bank shall pay the Employee a severance benefit equal to two (2)
times the Employee’s base annual salary at the rate in effect when the Protected
Period begins. Said sum shall be paid in one lump sum within ten (10) days
of
the later of the date of the Change in Control and the Employee’s last day of
employment with the Bank or the Company. In addition, upon the Employee’s
termination of employment during the Protected Period for any reason other
than
Just Cause, the Employee and his spouse shall continue to participate in the
Bank’s group health insurance program for the remainder of their respective
lives on the terms set forth herein. The Bank shall fund the cost of such
continuation coverage on the same terms as the Bank funded the cost of coverage
for the Employee and his spouse immediately prior to the Employee’s termination
of employment (i.e., the Employee will pay the same dollar amount toward the
premium costs as he paid immediately prior to his termination of employment),
and the Bank shall fund the balance of such costs. If, for any reason, the
Employee or his spouse cannot be continued under the Bank’s group health
insurance program for the period contemplated by this subparagraph, the Bank
shall reimburse the Employee or his spouse for the cost of any substitute
coverage obtained by the Employee or his spouse that provides substantially
similar benefits. Such reimbursement shall be in an amount determined by
reference to the dollar amount paid by the Employee immediately prior to his
termination of employment, with the remaining amount paid by the
Bank.
2
4. Excise
Tax Indemnification
(a) For
purposes of this Agreement, “Covered Benefits” shall mean any payment or benefit
paid or provided to the Employee by the Company, the Bank or any affiliate
or
any successor in interest to the Company or the Bank (whether pursuant to this
Agreement or otherwise) that will be (or in the opinion of Tax Counsel (as
defined below) might reasonably be expected to be) subject to any excise tax
(the “Excise Tax”) imposed under Section 4999 of the Internal Revenue Code of
1986, as amended (the “Code”). In the event that at any time during or after the
Term of Employment the Employee shall receive any Covered Benefits, the Company
shall pay to the Employee an additional amount (the “Gross-Up Payment”) such
that the net amount retained by the Employee from the Gross-Up Payment, after
deduction of any federal, state and local income taxes, Excise Tax, and FICA
and
Medicare withholding taxes on the Gross-Up Payment, shall be equal to the Excise
Tax on the Covered Benefits. For purposes of determining the amount of such
Excise Tax on the Covered Benefits, the amount of the Covered Benefits that
shall be taken into account in calculating the Excise Tax shall be equal to
(i)
the Covered Benefits, less (ii) the amount of such Covered Benefits that, in
the
opinion of tax counsel selected by the Company and reasonably acceptable to
the
Employee (“Tax Counsel”), are not parachute payments (within the meaning of
Section 280G(b)(1) of the Code).
(b) For
purposes of this Section 4, the Employee shall be deemed to pay federal income
taxes at the highest marginal rate of federal income taxation in the calendar
year in which the Excise Tax is payable and state and local income taxes at
the
highest marginal rate of taxation in the state and locality of the Employee’s
residence on the effective date of the Employee’s termination, net of the
reduction in federal income taxes which could be obtained from deduction of
such
state and local taxes. Except as otherwise provided herein, all determinations
required to be made under this Section 13 shall be made by Tax Counsel, which
determinations shall be conclusive and binding on the Employee and Company,
absent manifest error.
(c) The
Company shall indemnify and hold the Employee harmless from any and all losses,
costs and expenses (including without limitation, reasonable attorney’s fees,
reasonable accountant’s fees, interest, fines and penalties of any kind) which
the Employee incurs as a result of any administrative or judicial review of
the
Employee’s liability under Section 4999 of the Code by the Internal Revenue
Service or any comparable state agency through and including a final judicial
determination or final administrative settlement of any dispute arising out
of
the Employee’s liability for the Excise Tax or otherwise relating to the
classification for purposes of Section 280G of the Code of any of the Covered
Benefits or other payment or benefit in the nature of compensation made or
provided to the Employee by the Company. The Employee shall promptly notify
the
Company in writing whenever the Employee receives notice of the commencement
of
any judicial or administrative proceeding, formal or informal, in which the
federal tax treatment under Section 4999 of the Code of any amount paid or
payable under this Agreement or otherwise is being reviewed or is in dispute
(including a notice of audit or other inquiry concerning the reporting of the
Employee’s liability under Section 4999). The Company may assume control at its
expense over all legal and accounting matters pertaining to such federal or
state tax treatment (except to the extent necessary or appropriate for the
Employee to resolve any such proceeding with respect to any matter unrelated
to
the Covered Benefits or other payment or benefit in the nature of compensation
made or provided to the Employee by the Company) and the Employee shall
cooperate fully with the Company in any such proceeding. The Employee shall
not
enter into any compromise or settlement or otherwise prejudice any rights the
Company may have in connection therewith without prior consent of the Company.
In the event that the Company elects not to assume control over such matters,
the Company shall promptly reimburse the Employee for all expenses related
thereto as and when incurred upon presentation of appropriate documentation
relating thereto.
3
5. Term
of the Agreement
This
Agreement shall remain in effect for the period commencing on the Effective
Date
and ending on the earlier of (i) the date 12 months after the Effective Date,
and (ii) the date on which the Employee terminates employment with the Bank;
provided that the Employee’s rights hereunder shall continue following the
termination of this employment with the Bank under any of the circumstances
described in Section 2 hereof. Additionally, on each annual anniversary date
from the Effective Date, the term of this Agreement shall be extended for an
additional one-year period beyond the then effective expiration date provided
the Board of Directors of the Bank determines in a duly adopted resolutions
that
the performance of the Employee has met the requirements and standards of the
Board, and that this Agreement shall be extended.
6. Termination
or Suspension Under Federal Law
(a) Any
payments made to the Employee pursuant to this Agreement, or otherwise, are
subject to and conditioned upon their compliance with 12 U.S.C. Section 1828(k)
and any regulations promulgated thereunder.
(b) If
the
Employee is removed and/or permanently prohibited from participating in the
conduct of the Bank’s affairs by an order issued under Sections 8(e)(4) or
8(g)(1) of the Federal Deposit Insurance Act (“FDIA”) (12 U.S.C. 1818(e)(4) or
(g)(1)), all obligations of the Bank under this Agreement shall terminate,
as of
the effective date of the order, but the vested rights of the parties shall
not
be affected.
(c) If
the
Bank is in default (as defined in Section 3(x)(1) of FDIA), all obligations
under this Agreement shall terminate as of the date of default; however, this
Paragraph shall not affect the vested rights of the parties.
(d) If
a
notice served under Section 8(e)(3) or (g)(1) of the FDIA (12 U.S.C. 1818(e)(3)
and (g)(1)) suspends and/or temporarily prohibits the Employee from
participating in the conduct of the Bank’s affairs, the Bank’s obligations under
this Agreement shall be suspended as of the date of such service, unless stayed
by appropriate proceedings. If the charges in the notice are dismissed, the
Bank
may in its discretion (i) pay the Employee all or part of the compensation
withheld while its contract obligations were suspended, and (ii) reinstate
(in
whole or in part) any of its obligations which were suspended.
7. Expense
Reimbursement
In
the
event that any dispute arises between the Employee and the Bank as to the terms
or interpretation of this Agreement, whether instituted by formal legal
proceedings or otherwise, including any action that the Employee takes to
enforce the terms of this Agreement or to defend against any action taken by
the
Bank or the Company, the Employee shall be reimbursed for all costs and
expenses, including reasonable attorneys’ fees, arising from such dispute,
proceedings or actions, provided that the Employee shall obtain a final judgment
in favor of the Employee in a court of competent jurisdiction or in binding
arbitration under the rules of the American Arbitration Association. Such
reimbursement shall be paid within ten (10) days of Employee’s furnishing to the
Bank or the Company written evidence, which may be in the form, among other
things, of a cancelled check or receipt, of any costs or expenses incurred
by
the Employee.
4
8. Successors
and Assigns; Source of Payments
(a) This
Agreement shall inure to the benefit of and be binding upon any corporate or
other successor of the Bank or Company which shall acquire, directly or
indirectly, by merger, consolidation, purchase or otherwise, all or
substantially all of the assets or stock of the Bank or Company.
(b) Since
the
Bank is contracting for the unique and personal skills of the Employee, the
Employee shall be precluded from assigning or delegating his rights or duties
hereunder without first obtaining the written consent of the Bank.
(c) The
payments and benefits due the Employee under this Agreement, if any, shall
be
paid or provided by the Bank; provided, however, that the Company
agrees that it shall be jointly and severally liable with the Bank for the
payment of all amounts and the provision of all benefits due the Employee under
any provision of this Agreement.
9. Amendments
No
amendments or additions to this Agreement shall be binding unless made in
writing and signed by all of the parties, except as herein otherwise
specifically provided.
10. Applicable
Law
Except
to
the extent preempted by federal law, the laws of the State of North Carolina
shall govern this Agreement in all respects, whether as to its validity,
construction, capacity, performance or otherwise.
11. Severability
The
provisions of this Agreement shall be deemed severable and the invalidity or
unenforceability of any provision shall not affect the validity or
enforceability of the other provisions hereof.
12. Entire
Agreement
This
Agreement, together with any understanding or modifications thereof as agreed
to
in writing by the parties, shall constitute the entire agreement between the
parties hereto.
5
IN
WITNESS WHEREOF,
the
parties have executed this Amended and Restated Agreement on the day and year
first hereinabove written.
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ATTEST:
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FIRST
SOUTH BANK
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/s/
Xxxxxxx X. Xxxxxxx
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By:
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/s/
Xxxxxx X. Xxxx
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Assistant
Secretary
|
Its
President
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ATTEST:
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FIRST
SOUTH BANCORP, INC.
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/s/
Xxxxxxx X. Xxxxxxx
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By:
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/s/
Xxxxxx X. Xxxx
|
|
|
Assistant
Secretary
|
Its
President
|
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WITNESS:
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|||
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/s/
Xxxxxxx X. Xxxxxxx
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/s/
Xxxxxxx X. Xxxx
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Xxxxxxx
X. Xxxx
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