NON-COMPETITION AGREEMENT
Exhibit
10.3
THIS NON-COMPETITION AGREEMENT (this “Agreement”), made and entered into this 28th day
of February, 2007, between CapitalSouth Bancorp, a Delaware corporation and a registered bank
holding company (“CapitalSouth”), and Xxxx Xxxxx, a resident of Xxxxx County, Florida (“Xx.
Xxxxx”).
W I T N E S S E T H:
WHEREAS, on even date hereof, CapitalSouth Bancorp, a Delaware corporation and a registered
bank holding company (“CapitalSouth”), and Monticello Bancshares, Inc., a Florida
corporation (“Monticello”), have executed an Agreement and Plan of Merger (the “Merger
Agreement”), joined in by Xx. Xxxxx, pursuant to which Monticello will be merged with and into
CapitalSouth (the “Merger”), and it is contemplated, but not required, that, in the sole
discretion of CapitalSouth and in connection with the consummation of the Merger Agreement and
pursuant to the terms of a certain Bank Merger Agreement (the “Bank Merger Agreement”),
Monticello Bank, a federal savings bank (“Monticello Bank”), will be merged with and into
CapitalSouth Bank, an Alabama banking corporation (“CapitalSouth Bank”); and
WHEREAS, it is a condition precedent to the Merger that Xx. Xxxxx execute this Agreement.
NOW, THEREFORE, in consideration of the promises, mutual covenants set forth in this
Agreement, and other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, do hereby agree as follows:
SECTION 1: NON-COMPETITION, NON-SOLICITATION AND CONFIDENTIALITY
1.1 Non-Competition and Non-Solicitation. As an inducement for CapitalSouth to enter
into the Merger Agreement and in consideration for CapitalSouth’s consummation of the transactions
contemplated thereby, Xx. Xxxxx agrees that:
(a) For purposes of this Agreement, the phrase “Non-Competition Period” shall mean the
period commencing on the Closing Date and continuing to the second (2nd) anniversary of
the Closing Date, except as such period may be extended by Section 1.1(c) hereof. During the
Non-Competition Period, Xx. Xxxxx will not, without the prior written approval of the Board of
Directors of CapitalSouth, directly or indirectly (i) whether through his own account or as a
partner, member, manager, employee, advisor, consultant, owner, trustee, shareholder, officer,
director or agent of or to any person, corporation, proprietorship, partnership, limited liability
company, joint venture, trust or other entity or association (any of the foregoing being referred
to as a “Person”), (A) within Xxxxx County, Florida or any county contiguous thereto (the
“Non-Competition Territory”), perform services, own, advise, participate in, support, have
an interest in, give financial assistance to, permit Xx. Xxxxx’x name to be used in connection with
or serve as a member of management, supervisor, consultant or employee of any financial service
institution, including without limitation any “insured depository institution”
(as such term is defined in 12 U.S.C. § 1813(c)(2)) or any “regulated lending institution” (as
such term is defined in 42 U.S.C. § 4003(a)(10)) or any other business, or any affiliate, parent,
or subsidiary thereof, which would be competitive with the business of CapitalSouth or any
affiliate or subsidiary thereof, or (B) within the States of Florida, Georgia, Alabama or South
Carolina perform services for, own, advise, participate in, support, have an interest in, give
financial assistance to, permit Xx. Xxxxx’x name to be used in connection with or serve as a member
of management, supervisor, consultant or employee of any broker, originator, packager or seller of
residential mortgage loans, including any mortgage banking operation; (ii) solicit or induce, or
attempt to solicit or induce, any employee of CapitalSouth or any affiliate or subsidiary thereof
to terminate such employment or to become employees of any other person or entity; (iii) solicit or
induce, or attempt to solicit or induce, any Person who during the term of this Agreement was or is
a customer, supplier, contractual party of CapitalSouth or any affiliate or subsidiary thereof or
any other Person with whom any of them has or had business relations to refrain from or cease doing
business with, seek advice and/or services and products from, or otherwise discontinue all or any
portion of their relationship with CapitalSouth or any affiliate or subsidiary thereof; or (iv)
disparage or cast in a poor light CapitalSouth or any affiliate or subsidiary thereof, or any of
their respective shareholders, directors, officers, or employees. The preceding provisions of
Section 1.1(a)(i) shall not preclude Xx. Xxxxx from holding any publicly-traded stock, provided
that Xx. Xxxxx does not at any time hold any stock interest in any one company in excess of one
percent (1%) of the outstanding voting stock of that company.
(b) Xx. Xxxxx agrees that each of the covenants set forth above in Section 1.1(a) of this
Agreement are reasonable with respect to its duration, geographical area and scope.
(c) In the event of a breach by Xx. Xxxxx of any covenant set forth in Section 1.1(a) of this
Agreement, the Non-Competition Period shall be extended by the period of the duration of such
breach.
1.2 Confidentiality.
(a) Xx. Xxxxx hereby acknowledges that he has occupied a position of trust and confidence with
Monticello and Monticello Bank prior to the date hereof, has contacts with and has developed and
served the customers of Monticello and Monticello Bank, and that in all of his activities,
including negotiation of the Merger Agreement and the transactions contemplated thereby, he has
become familiar with and has had access to confidential information relating to the business,
assets, operations, customers, suppliers, contractual parties and other persons with whom
Monticello, Monticello Bank, CapitalSouth and its respective affiliates and subsidiaries do
business. Xx. Xxxxx hereby acknowledges and confirms that such information constitutes the
exclusive property of CapitalSouth or any affiliate or subsidiary thereof, as the case may be, and
that such information is proprietary in nature. Such information does not include information
already in the public realm or information received by Xx. Xxxxx from third parties.
(b) Xx. Xxxxx agrees in perpetuity that he shall not at any time disclose to others (except as
permitted and as directed by CapitalSouth or any affiliate or subsidiary thereof or only as to the
extent required pursuant to a subpoena or order of a court of competent jurisdiction) any such
information referred to in Section 1.2(a) of this Agreement.
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1.3 Remedies.
(a) If Xx. Xxxxx breaches, or threatens to commit a breach, of any of the provisions of
Section 1 hereof, CapitalSouth shall have the following rights and remedies, each of which rights
and remedies shall be independent of the others and severally enforceable, and each of which is in
addition to, and not in lieu of, any other rights and remedies available to CapitalSouth at law or
in equity (including the right to recover damages):
(i) the right and remedy to have Section 1 hereof specifically enforced by any court of
competent jurisdiction, it being agreed that any breach or threatened breach of Section 1 would
cause irreparable harm to CapitalSouth and that money damages would not provide an adequate remedy
to CapitalSouth;
(ii) the right and remedy to require Xx. Xxxxx to account for and pay over to CapitalSouth all
compensation, profits or other benefits derived or received by Xx. Xxxxx as the result of any
actions constituting a breach of Section 1 hereof; and
(iii) the right to recover all costs, fees and expenses incurred in connection with enforcing
the terms of this agreement, including, but not limited to, all court arbitration fees, costs,
attorneys’ fees, court reporter fees and expert witness costs.
1.4 Blue Penciling. If for any reason any court of competent jurisdiction shall find
that the provisions of Sections 1.1 or 1.2 hereof are unreasonable in duration or in geographic
scope, the prohibitions contained herein shall be restricted to such time and/or geographic areas
as such court determines to be reasonable.
SECTION 2: GENERAL PROVISIONS
2.1 Defined Terms. Unless defined herein, capitalized terms used herein shall have
the meanings ascribed to them in the Merger Agreement unless the context clearly requires
otherwise.
2.2 Intention of the Parties. The parties acknowledge and agree that the terms and
provisions of this Agreement, including, but not limited to, Section 1 hereof, have been agreed to
by the parties in contemplation of the consummation of the Merger and that the execution of this
Agreement is a condition precedent to the consummation of the Merger.
2.3 Nonassignability; Persons Bound. Neither this Agreement nor any of the rights,
obligations or interests arising hereunder may be assigned by Xx. Xxxxx without the prior written
consent of CapitalSouth. Neither this Agreement nor any of the rights, obligations or interests
arising hereunder may be assigned by CapitalSouth without the prior written consent of Xx. Xxxxx to
a person other than (i) an affiliate or subsidiary of CapitalSouth, or (ii) any party with whom
CapitalSouth merges or consolidates, or to whomever CapitalSouth may sell all or substantially all
of its assets; provided, however that any such affiliate, subsidiary or successor
shall expressly assume all of CapitalSouth’s obligations and liabilities to Xx. Xxxxx under this
Agreement. This Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns. Notwithstanding anything to
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contrary herein, there shall be no third-party beneficiaries of this Agreement except as
provided in Section 2.7 hereof.
2.4 Severability. This Agreement shall be deemed severable and any part hereof which
may be held invalid by a court or other entity of competent jurisdiction shall be deemed
automatically excluded from this Agreement and the remaining parts shall remain in full force and
effect.
2.5 Entire Understanding. This Agreement contains the entire understanding of the
parties hereto and constitutes the only agreement between CapitalSouth and Xx. Xxxxx regarding
subject matter contained herein. This Agreement supersedes all prior agreements, either express or
implied, between the parties hereto regarding the subject matter contained herein.
2.6 Amendment. None of the terms and conditions of this Agreement shall be amended or
modified unless expressly consented to in writing and signed by each of the parties hereto. The
parties hereto agree to amend this Agreement from time to time in such a manner that: (a) is
agreeable to CapitalSouth; and (b) prevents the payment of any excise tax resulting from Section
409A of the Code.
2.7 Arbitration. Other than as set forth in Section 1.3 hereof, the parties hereto,
by executing this Agreement, WAIVE THEIR RIGHT TO TRIAL BY JURY of disputes, claims or
controversies between themselves or any of their respective officers, directors, partners,
employees, shareholders, affiliates or agents (such non-signatories being the intended third party
beneficiaries of this Agreement with respect solely to this Section 2.7) and instead agree that ANY
AND ALL CONTROVERSIES AND CLAIMS ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE BREACH
THEREOF, SHALL BE SETTLED BY FINAL AND BINDING ARBITRATION IN ACCORDANCE WITH THE COMMERCIAL
ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION THEN IN EFFECT. Any such arbitration
proceedings shall be and remain confidential. The panel of arbitrators for any such arbitration
shall consist of three members of the American Arbitration Association, one of whom shall be
selected by CapitalSouth, one of whom shall be selected by Xx. Xxxxx, and the third who will be
selected by the other two. Judgment upon the decision rendered by the arbitrators may be entered
in any court having jurisdiction thereof. The parties specifically acknowledge that this Agreement
evidences a transaction involving, affecting, affected by, and a part of, interstate commerce and
that this Agreement to arbitrate is governed by and enforceable under 9 U.S.C. §§ 1 et seq.
The place of arbitration shall be Birmingham, Alabama.
2.8 Notices. All notices or other communications to be given by the parties among
themselves pursuant to this Agreement shall be in writing and shall be deemed to have been duly
made to the party to whom it is directed at Monticello Bancshares, Inc., 00000 Xx. Xxxxxxxxx Xxxx,
Xxxxxxxxxxxx, Xxxxxxx 00000, Attn: Xxxx Xxxxx, for Xx. Xxxxx and at 0000 Xxxxxxxxx Xxxxx, Xxxxx
000, Xxxxxxxxxx, Xxxxxxx 00000, Attention: Chairman, if to CapitalSouth, (a) upon the earlier of
five (5) days after mailing or the date of actual delivery, if mailed by first class or certified
mail with postage prepaid; or (b) upon delivery, if either by hand delivery or by
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reputable overnight courier. Any of the parties hereto may change their respective addresses
upon written notice to the other given in the manner provided in this section.
2.9 Waiver. No waiver by any of the parties to this Agreement of any condition, term
or provision of this Agreement shall be deemed to be a waiver of any preceding or subsequent breach
of the same or any other condition, term or provision hereof.
2.10 Effective Date. This Agreement shall be effective as of the Effective Time. In
the event the Merger is not consummated by the parties, this Agreement shall be void and of no
further effect.
2.11 Governing Law. This Agreement shall be governed by and construed under the laws
of the State of Alabama without regard to provisions thereof governing conflicts of law.
2.12 Construction. This Agreement was prepared by the parties jointly. The language
used in this Agreement shall be deemed to be the language chosen by the parties to express their
mutual intent, and no rule of strict construction shall be applied against either party. Whenever
used in this Agreement, the singular number shall include the plural and the plural the singular.
Pronouns of one gender shall include all genders. Accounting terms used and not otherwise defined
in this Agreement have the meanings determined by, and all calculations with respect to accounting
or financial matters unless otherwise provided for herein, shall be computed in accordance with
generally accepted accounting principles, consistently applied. References herein to articles,
sections, paragraphs, subparagraphs or the like shall refer to the corresponding articles,
sections, paragraphs, subparagraphs or the like of this Agreement. The words “hereof”, “herein”,
and terms of similar import shall refer to this entire Agreement. Unless the context clearly
requires otherwise, the use of the terms “including”, “included”, “such as”, or terms of similar
meaning, shall not be construed to imply the exclusion of any other particular elements.
2.13 Captions. The captions as to contents of particular articles, sections or
paragraphs contained in this Agreement and the table of contents hereto are inserted only for
convenience and are in no way to be construed as part of this Agreement or as a limitation on the
scope of the particular articles, sections or paragraphs to which they refer.
2.14 Counterparts. This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original, but all of which together shall constitute one and the same
document with the same force and effect as though all parties had executed the same document. This
Agreement may be executed and delivered by facsimile transmission.
2.15 Regulatory Provisions. Notwithstanding anything to the contrary contained in
this Agreement, any payments to be made to Xx. Xxxxx pursuant to this Agreement or otherwise, are
subject to and conditioned upon their compliance with 12 U.S.C. Section 1828(k) and FDIC Regulation
12 CFR Part 359, Golden Parachute and Indemnification Payments. CapitalSouth’s obligations under
this Agreement shall be suspended commencing on the date Xx. Xxxxx is suspended and/or temporarily
prohibited from participating in the conduct of CapitalSouth’s affairs by notice served under
Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C. Section 1818(e)(3) and
(g)(1)); provided that if the charges in the notice are dismissed, CapitalSouth shall (i) pay Xx.
Xxxxx all of the compensation withheld
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while CapitalSouth’s obligations under this Agreement were suspended, and (ii) reinstate all
of its obligations under this Agreement; provided further that the foregoing provisions shall not
effect or impair any other rights of CapitalSouth to terminate Xx. Xxxxx for “just cause”. All
obligations of CapitalSouth hereunder shall be terminated, except to the extent it is determined
that the continuation of this Agreement is necessary for the continued operation of CapitalSouth by
the appropriate regulatory authorities, (i) at the time the Federal Deposit Insurance Corporation
enters into an agreement to provide assistance to or on behalf of CapitalSouth or any of its
subsidiaries under the authority contained in Section 13(c) of the Federal Deposit Insurance Act;
or (ii) at the time appropriate regulatory authorities approve a supervisory merger to resolve
problems related to the operation of CapitalSouth or any of its subsidiaries or when CapitalSouth
or any of its subsidiaries is determined by appropriate regulatory authorities to be in an unsafe
or unsound condition. If CapitalSouth reasonably determines that any provision of this Agreement
fails to comply with the rules, regulations or orders of any governmental authority possessing
regulatory authority over CapitalSouth and its operations, CapitalSouth and Xx. Xxxxx, jointly and
severally, agree to amend, modify and/or appeal any such provision or provisions in order to make
such provision or provisions comply with such rules, regulations or orders.
[The remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have duly, or caused to be executed this Agreement as
at the date and year first above written.
| CAPITALSOUTH: | ||||||
| By: | ||||||
| Name: | ||||||
| Its: | ||||||
| XX. XXXXX: | ||||||
| Name: | ||||||
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STATE OF ALABAMA
|
) | |||||
| : | ||||||
JEFFERSON COUNTY
|
) |
I, the undersigned, a notary public in and for said county in said state, hereby certify that
,
whose name as
of CapitalSouth Bancorp, a Delaware
corporation and registered bank holding company, is signed to the foregoing instrument, and who is
known to me, acknowledged before me on this day that, being informed of the contents of said
instrument, he, as such officer and with full authority, executed the same voluntarily for and as
the act of said corporation.
Given under my hand and official seal this day of , 2007.
| Notary Public | ||||
[NOTARIAL SEAL]
|
My commission expires: |
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STATE OF ALABAMA
|
) | |||||
| : | ||||||
JEFFERSON COUNTY
|
) |
I, the undersigned, a notary public in and for said county in said state, hereby certify that
Xxxx Xxxxx, whose name is signed to the foregoing instrument, and who is known to me, acknowledged
before me on this day that, being informed of the contents of said instrument, he executed the same
voluntarily on the day the same bears date.
Given under my hand and official seal this day of , 2007.
| Notary Public | ||||
[NOTARIAL SEAL]
|
My commission expires: |
