SOUTHERN COMMUNITY BANK AND TRUST Salary Continuation Agreement of James Hastings
Exhibit
10.2:
SOUTHERN
COMMUNITY BANK AND TRUST
Xxxxx
Xxxxxxxx
This
Salary
Continuation Agreement
(this
“Agreement”) is entered into as of this 4th
day
of
June,
2008,
by and between Southern
Community Bank and Trust,
a North
Carolina-chartered bank (the “Bank”), and Xxxxx
Xxxxxxxx
its
Executive
Vice President/Chief Financial Officer (the
“Executive”).
WHEREAS,
the
Executive has contributed substantially to the success of the Bank and the
Bank
desires that the Executive continue in its employ;
WHEREAS,
to
encourage the Executive to remain in the employment of the Bank, the Bank is
willing to provide salary continuation benefits to the Executive under this
Agreement, payable from the Bank’s general assets;
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 [12U.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 Bank, are contemplated insofar as the Bank is
concerned;
WHEREAS,
the
parties hereto intend that this Agreement shall be considered an unfunded
arrangement maintained primarily to provide supplemental retirement benefits
for
the Executive, and to be considered a non-qualified benefit plan for purposes
of
the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). The
Executive is fully advised of the Bank’s financial status and understands that
he is a general creditor of the Bank;
NOW
THEREFORE,
in
consideration of these premises and other good and valuable consideration,
the
receipt and sufficiency of which are hereby acknowledged, the Executive and
the
Bank hereby agree as follows.
ARTICLE
1
DEFINITIONS
The
following words and phrases used in this Agreement have the meanings specified.
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1.1
|
“Accrual
Balance”
means the liability that should be accrued by the Bank under generally
accepted accounting principles (“GAAP”) for the Bank’s obligation to the
Executive under this Agreement, applying Accounting Principles Board
Opinion No. 12 as amended by Statement of Financial Accounting Standards
No. 106. The Accrual Balance shall be calculated using a Discount
Rate
determined by the Plan Administrator, resulting in an Accrual Balance
at
the Executive’s Normal Retirement Age that is equal to the present value
of the normal retirement benefits assuming commencement at Normal
Retirement Date of August 1,
2017.
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1
The
“Discount
Rate”
means
the rate used by the Plan Administrator for determining the Accrual Balance.
If
required by its outside auditors, the Plan Administrator may adjust the Discount
Rate to maintain the rate within reasonable standards according to GAAP. Unless
otherwise changed by the Plan Administrator the Discount Rate shall be seven
percent (7%). Any change in the Discount Rate shall not cause the Executive’s
Account Balance to be reduced, but would only affect the future accounting
accrual.
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1.2
|
“Actuarial
(Actuarially) Equivalent”
means a benefit of equivalent value differing in timing, payment
period,
or manner of payment to the Normal Annuity Form determined by generally
accepted actuarial principles. The actuarial equivalent is calculated
for
different purposes, as follows:
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(a)
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For
Benefits Not Paid as a Lump Sum:
All alternate forms of distributions shall be Actuarially Equivalent
to
the Normal Annuity Form of distribution at a Participant’s Normal
Retirement Date. The alternative form of payment shall be based on
the
1983
Group Annuity Male Mortality Table,
with an interest assumption of
7.0%.
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(b)
|
For
Benefits Paid in a Lump Sum:
Any lump sum payment (a form of benefit differing in time, period,
or
manner of payment from a specific benefit provided under this Agreement)
shall be computed using the “1983 Group Annuity Male Mortality Table” and
the “Applicable Interest Rate” where the “Applicable Interest Rate” shall
mean the greater of either (i) seven percent (7%), or (ii) the 30
Year US
Treasury Bond Rate in effect as of the first of the month preceding
the
month of payment.
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1.3
|
“Beneficiary”
means each designated person, or the estate of the deceased Executive,
entitled to benefits, if any, upon the death of the Executive, determined
according to Article 4.
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1.4
|
“Change
in Control”
shall mean 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 –
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| (a) |
Change
in ownership:
A
change in ownership of Southern Community Financial Corporation occurs
on
the date any one person or group of persons accumulates ownership
of
Southern Community Financial Corporation’s stock constituting more than
50% of the total fair market value or total voting power of Southern
Community Financial Corporation’s stock,
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| (b) |
Change
in effective control: A
change in effective control occurs when either (i)
any one person or more than one person acting as a group acquires
within a
12-month period ownership of stock of Southern Community Financial
Corporation possessing 35% or more of the total voting power of Southern
Community Financial Corporation’s stock, or (ii)
a
majority of Southern Community Financial Corporation’s Board of Directors
is replaced during any 12-month period by Directors whose appointment
or
election is not endorsed in advance by a majority of Southern Community
Financial Corporation’s Board of Directors, or
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2
| (c) |
Change
in ownership of a substantial portion of assets:
A
change in the ownership of a substantial portion of Southern Community
Financial Corporation’s assets occurs if in a 12 -month period any one
person or more than one person acting as a group acquires assets
from
Southern Community Financial Corporation having a total gross fair
market
value equal to or exceeding 40% of the total gross fair market value
of
all of the assets of Southern Community Financial Corporation immediately
before the acquisition or acquisitions. For this purpose, “gross fair
market value” means the value of Southern Community Financial
Corporation’s assets, or the value of the assets being disposed of,
determined without regard to any liabilities associated with the
assets.
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1.5
|
“Code”
means the Internal Revenue Code of 1986, as amended, and rules,
regulations, and guidance of general application issued thereunder
by the
Department of the Treasury.
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| 1.6 |
“Disability”
means that a Participant is either:
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|
(a)
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Unable
to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected
to result
in death or can be expected to last for a continuous period of not
less
than 12 months, or
|
| (b) |
By
reason of any medically determinable physical or mental impairment
(which
can be expected to result in death or can be expected to last for
a
continuous period of not less than 12 months) receiving income replacement
benefits for a period of three (3) or more months under an accident
and
health plan covering employees of the
Employer.
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1.7
|
“Early
Termination”
means Separation from Service before Normal Retirement Age for reasons
other than death, Disability, Termination for Cause, or after a Change
in
Control.
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| 1.8 |
“Effective
Date”
means July 1, 2008.
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1.9
|
“Intentional,”
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 best interests of the Bank.
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| 1.10 |
“Normal
Retirement Age”
means August 1, 2017.
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| The Participant’s date of birth is July 21, 1952. |
| 1.11 |
“Plan
Administrator”
or “Administrator”
means the plan administrator described in Article
8.
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1.12
|
“Plan
Year”
means a twelve-month period commencing on January 1 and ending on
December
31 of each year. The initial Plan Year shall commence on July 1,
2008 and
end December 31, 2008.
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3
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1.13
|
“Separation
from Service”
means the Executive’s service (as an executive and/or independent
contractor to the Bank and any member of a controlled group, as defined
in
Code Section 414), terminates for any reason, other than because
of a
leave of absence approved by the Bank or the Executive’s death. For
purposes of this Agreement, if there is a dispute about the employment
status of the Executive or the date of the Executive’s Separation from
Service, the Bank shall have the sole and absolute right to decide
the
dispute unless a Change in Control shall have occurred.
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1.14
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“Termination
for Cause”
and “Cause”
shall have the same meaning specified in any effective Severance
or
Employment Agreement existing on the date hereof or hereafter entered
into
between the Executive and the Bank. If the Executive is not a party
to a
severance or employment agreement containing a definition of “termination
for cause”, then Termination
for Cause
shall mean the Bank terminated the Executive’s employment because of any
of the following reasons:
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(a)
|
the
Executive’s gross negligence or gross neglect of duties or intentional and
material failure to perform stated duties after written notice thereof,
or
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(b)
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disloyalty
or dishonesty by the Executive in the performance of the Executive’s
duties, or a breach of the Executive’s fiduciary duties for personal
profit, in any case whether in the Executive’s capacity as a director or
officer, or
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(c)
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intentional
wrongful damage by the Executive to the business or property of the
Bank
or its affiliates, including without limitation the reputation of
the
Bank, which in the judgment of the Bank causes material harm to the
Bank
or affiliates, or
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(d)
|
a
willful violation by the Executive of any applicable law or significant
policy of the Bank or an affiliate that, in the Bank’s judgment, results
in an adverse effect on the Bank or any affiliate, regardless of
whether
the violation leads to criminal prosecution or conviction. For purposes
of
this Agreement, applicable laws include any statute, rule, regulatory
order, statement of policy, or final cease-and-desist order of any
governmental agency or body having regulatory authority over the
Bank, or
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(e)
|
the
Executive is removed from office or permanently prohibited from
participating in the Bank’s affairs by an order issued under Section
8(e)(4) or Section 8(g)(1) of the Federal Deposit Insurance Act,
12 U.S.C.
1818(e)(4) or (g)(1), or
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(f)
|
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.
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1.15
|
Year
of Vesting Service.
Shall mean each calendar year in which the Executive completes 1,000
or
more hours of service in the employ of the Bank.
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ARTICLE
2 LIFETIME
BENEFITS
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2.1
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Normal
Retirement Benefit.
Unless a Separation
from Service
or
a Change
in Control
occurs before Normal Retirement Age, when the Executive attains his
Normal
Retirement Age the Bank shall pay to the Executive the benefit described
in this Section 2.1(a) instead of any other benefit under this
Agreement
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4
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(a)
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Amount
of Normal Form of benefit.
The annual Normal Retirement benefit under this Section 2.1 is $40,000,
which shall be paid in monthly installments in the monthly amount
of
$3,333.33 for the Life of the Executive (Normal Form is a Life Annuity).
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(b)
|
Payment
of benefit.
Subject to the six month delay provision in Section 2.7 herein, the
Bank
shall pay the annual benefit to the Executive in 12 equal monthly
installments payable on the first day of each month, beginning with
the
month immediately after the month in which the Executive attains
the
Normal Retirement Age. The Normal Retirement monthly benefit as provided
in Section 2.1(a) above, shall be paid to the Executive for the
Executive’s lifetime with the last payment ceasing as of the first day of
the month preceding the Executive’s death.
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.
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(c)
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Alternative
Forms of Payment. Executive
may elect to receive his Normal Retirement Benefit payable under
this
Agreement payable in a Form other than a Life Annuity (as provided
above
in Section 2.1(a) above), provided he elects to do so either on his
initial Election Form or a Change of Election Form. Any Change of
Election
Form must be in accordance with IRC 409A and such Change of Election
Form
must be received by the Plan Administrator at least 12 months prior
to the
date payment of benefits are to other commence under this Agreement.
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Accordingly,
a Participant may elect, in lieu of a Life Annuity, to receive his Normal
Retirement Benefit in one of the following Alternative Forms of
Payment:
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(i)
|
Life
Annuity with either a 120 or 180 guaranteed monthly
payments;
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(ii)
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Joint
and 50% (or 100%) Survivor Annuity.
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Any
Alternative Form of Payment provide herein shall be the Actuarial Equivalent
of
the Normal Form (Life Annuity) of payment.
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|
If
the Executive’s Separation
from Service
thereafter is a Termination
for Cause
or
if this Agreement terminates under Article 5, no further benefits
shall be
paid.
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2.2
|
Early
Termination Benefit.
Upon Early Termination as defined in Section 1.7, the Bank shall
pay to
the Executive the benefit described in this Section 2.2(a) instead
of any
other benefit under this Agreement.
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(a)
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Amount
of benefit.
The Executive’s vested Accrual Balance as of the end of the month
preceding his Early Termination shall be converted (without discounting
for the time value of money) as of his Normal Retirement Date into
a Life
Annuity (or other Alternative Form of Payment as provided in Section
2.1(c) above), based on the Actuarial Equivalent of his vested Accrual
Balance as of such date.
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5
| (b) |
Payment
of benefit.
The Bank shall commence payment of the monthly retirement benefit
as
computed in Section 2.2 above beginning with the later
of
(i)
the seventh month after the Executive’s Separation from Service, or
(ii)
the month immediately after the month in which the Executive attains
his
Normal Retirement Age. The monthly benefit shall be paid to the Executive
for the Executive’s lifetime, subject to any Alternative Form of Payment
the Executive may have elected in accordance with Section 2.1(c)
herein.
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(c)
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Vesting
of Accrued Balance.
The Vested amount of a Executive’s Accrued Balance shall be determined on
the basis of the Executive’s number of Years of Vesting Service according
to the following schedule:
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Vesting Schedule
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||||
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Years of Vesting Service
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Percent Vested
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Less
than 3
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0
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%
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3
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33
1/3
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%
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4
|
66
2/3
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%
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5
or more years
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100
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%
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||
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2.3
|
Disability
Benefit.
Upon Separation from Service because of Disability before Normal
Retirement Age, the Bank shall pay to the Executive the benefit described
in this Section 2.3(a) instead of any other benefit under this
Agreement.
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(a)
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Amount
of benefit.
The Executive’s vested Accrual Balance as of the end of the month
preceding the date of his Disability shall be converted (without
discounting for the time value of money) as of his Normal Retirement
Date
into a Life Annuity (or other Alternative Form of Payment as provided
in
Section 2.1(c) above), based on the Actuarial Equivalent of his vested
Accrual Balance as of such date.
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(b)
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Payment
of benefit.
The Bank shall pay the Disability benefit to the Executive in 12
equal
monthly installments on the first day of each month beginning with
the
later
of
(i)
the seventh month after the Executive’s Separation from Service, or (ii)
the month immediately after the month in which the Executive attains
his
Normal Retirement Age.
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2.4
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Change-in-Control
Benefit.
If a Change
in Control
occurs after the Effective Date of this Agreement but before the
Executive’s Normal Retirement Age and before his Separation from Service,
the Bank shall pay to the Executive the benefit described in this
Section
2.4(a) instead of any other benefit under this
Agreement.
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(a)
|
Amount
of benefit:
The benefit under this Section 2.4 is the Accrual Balance existing
when
the Change of Control occurs.
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(b)
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Payment
of benefit:
The Bank shall pay the Change-in-Control benefit under Section 2.4
of this
Agreement to the Executive in a single lump sum within ten (10) days
after
the Change in Control. If the Executive receives the benefit under
this
Section 2.4 because of the occurrence of a Change in Control, the
Executive shall not be entitled to claim additional benefits under
Section
2.4 if an additional Change in Control occurs thereafter.
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6
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2.5
|
Occurrence
of a Change in Control: Lump-sum Payment of Normal Retirement Benefit,
Early Termination Benefit, or Disability Benefit Being Paid.
If
a Change in Control occurs at any time during the salary continuation
benefit payment period and if when the Change in Control occurs the
Executive is receiving or is entitled to receive at his Normal Retirement
Age the benefit provided by Sections 2.1(b), 2.2(b), or 2.3(c), the
Bank
shall pay in a lump sum the present value of the Actuarial Equivalent
of
any remaining salary continuation benefits to the Executive in a
single
lump sum within ten (10) days after the Change in Control.
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2.6
|
Contradiction
Between this Agreement and Schedule A.
If there is a contradiction between this Agreement and Schedule
A
attached hereto concerning the amount of a particular benefit due
the
Executive under Sections 2.2, 2.3, or 2.4 hereof, then the amount
of the
benefit determined under this Agreement shall control. If the Plan
Administrator changes the Discount Rate employed for purposes of
calculating the Accrual Balance, the Plan Administrator shall prepare
or
cause to be prepared a revised Schedule A, which shall supersede
and
replace any and all Schedules A previously prepared under or attached
to
this Agreement. However, any
change in the Discount Rate shall not cause the Executive’s Account
Balance to be reduced, but would only affect the future accounting
accrual.
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2.7
|
Savings
Clause Relating to Compliance with Code Section 409A.
Despite any contrary provision of this Agreement, if when the Executive’s
employment terminates the Executive is a Specified
Employee,
as defined in Code Section 409A, and if any payments under Article
2 of
this Agreement will result in additional tax or interest to the Executive
because of Section 409A, the Executive will not be entitled to the
payments under Article 2 until the earliest
of:
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|
(i)
|
the
date that is at least six (6) months after termination of the Executive’s
employment for reasons other than the Executive’s death,
or
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| (ii) |
the
date of the Executive’s death, or
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| (iii) |
any
earlier date that does not result in additional tax or interest to
the
Executive under Section 409A.
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If
any
provision of this Agreement would subject the Executive to additional tax or
interest under Section 409A of the Code or result in a violation of Section
409A
of Code, the Bank shall reform such provision. However, the Bank 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 Bank shall not be required to incur any additional compensation expense
as a
result of the reformed provision. References in this Agreement to Section 409A
of the Code include rules, regulations, and guidance of general application
issued by the Department of the Treasury under Code Section 409A.
7
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2.8
|
One
Benefit Only.
Despite anything to the contrary in this Agreement, the Executive
and
Beneficiary are entitled to one benefit only under this Agreement,
which
shall be determined by the first event to occur that is dealt with
by this
Agreement. Except as provided in Section 2.5 or Article 3, subsequent
occurrence of events dealt with by this Agreement shall not entitle
the
Executive or Beneficiary to other or additional benefits under this
Agreement.
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ARTICLE
3 DEATH BENEFITS
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3.1
|
Death
During Active Service.
If the Executive dies before a Separation
from Service,
at the death of the Executive, the Executive’s Beneficiary shall be
entitled to an amount payable in a lump sum amount equal to the Accrual
Balance existing at the time of the Executive’s death, unless the
Change-in-Control benefit shall have previously been paid to the
Executive.
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No
benefit shall be paid to the Beneficiary under the above paragraph, if the
Change-in-Control benefit shall have previously been paid to the Executive.
If a
benefit is payable to the Executive’s Beneficiary under the paragraph above, the
benefit shall be paid in a single lump sum 90 days after the Executive’s death.
However, no benefits under this Agreement shall be paid or payable to the
Executive or the Executive’s Beneficiary if this Agreement is terminated under
Article 5.
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3.2
|
Death
after Separation from Service.
If the Executive dies after a Separation
from Service
and
if such Separation from Service was not as a result of a Termination
for
Cause, at the Executive’s death the Executive’s Beneficiary shall be
entitled to a monthly payment based on the Alternative Form of Payment
the
Executive elected in accordance with Section 2.1(c), provided he
elected a
Alternative Form of Payment in lieu of the Normal Annuity Form which
is a
Life Annuity. However, no payment shall be made to a Beneficiary
under
this Section 3.2 if a lump sum payment has previously been made under
the
Change-in-Control benefit payable under Section 2.5 above. However,
no
benefits under this Agreement shall be paid or payable to the Executive
or
the Executive’s Beneficiary if this Agreement is terminated under Article
5.
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ARTICLE
4 BENEFICIARIES
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4.1
|
Beneficiary
Designations.
The Executive shall have the right to designate at any time a Beneficiary
to receive any benefits payable under this Agreement upon the death
of the
Executive. The Beneficiary designated under this Agreement may be
the same
as, or different from, the beneficiary designation under any other
benefit
plan of the Bank in which the Executive participates.
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|
4.2
|
Beneficiary
Designation: Change.
The Executive shall designate a Beneficiary by completing and signing
the
Beneficiary Designation Form and delivering it to the Plan Administrator
or its designated agent. The Executive’s Beneficiary designation shall be
deemed automatically revoked if the Beneficiary predeceases the Executive
or if the Executive names a spouse as Beneficiary and the marriage
is
subsequently dissolved. The Executive shall have the right to change
a
Beneficiary by completing, signing, and otherwise complying with
the terms
of the Beneficiary Designation Form and the Plan Administrator’s rules and
procedures, as in effect from time to time. Upon the acceptance by
the
Plan Administrator of a new Beneficiary Designation Form, all Beneficiary
designations previously filed shall be cancelled. The Plan Administrator
shall be entitled to rely on the last Beneficiary Designation Form
filed
by the Executive and accepted by the Plan Administrator before the
Executive’s death.
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8
|
4.3
|
Acknowledgment.
No designation or change in designation of a Beneficiary shall be
effective until received, accepted, and acknowledged in writing by
the
Plan Administrator or its designated agent.
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|
4.4
|
No
Beneficiary Designation.
If the Executive dies without a valid beneficiary designation, or
if all
designated Beneficiaries predecease the Executive, then the Executive’s
spouse shall be the designated Beneficiary. If the Executive has
no
surviving spouse, the benefits shall be made to the personal
representative of the Executive’s estate.
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4.5
|
Facility
of Payment.
If a benefit is payable to a minor, to a person declared incapacitated,
or
to a person incapable of handling the disposition of his or her property,
the Bank may pay such benefit to the guardian, legal representative,
or
person having the care or custody of the minor, incapacitated person,
or
incapable person. The Bank may require proof of incapacity, minority,
or
guardianship as it may deem appropriate before distribution of the
benefit. Distribution shall completely discharge the Bank from all
liability for the benefit.
|
ARTICLE
5 GENERAL LIMITATIONS
|
5.1
|
Termination
for Cause.
Despite any contrary provision of this Agreement, the Bank shall
not pay
any benefit under this Agreement and this Agreement shall terminate
if a
Separation
from Service
is
the result of Termination
for Cause
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|
5.2
|
Suicide
or Misstatement. The
Bank shall not pay any benefit under this Agreement and the Beneficiary
shall be entitled to no benefits if the Executive commits suicide
within
two years after the date of this Agreement or if the Executive makes
any
material misstatement of fact on any application or resume provided
to the
Bank or on any life insurance application for benefits which death
benefits would be payable to the Bank.
|
|
5.3
|
Removal.
If the Executive is removed from office or permanently prohibited
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), all obligations of the Bank under this Agreement
shall terminate as of the effective date of the order.
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|
5.4
|
Default.
Notwithstanding any provision of this Agreement to the contrary,
if the
Bank is in “default” or “in danger of default,” as those terms are defined
in Section 3(x) of the Federal Deposit Insurance Act, 12 U.S.C. 1813(x),
all obligations under this Agreement shall
terminate.
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|
5.5
|
FDIC
Open-Bank Assistance.
All obligations under this Agreement shall terminate, except to the
extent
determined that continuation of the contract is necessary for the
continued operation of the Bank, when the Federal Deposit Insurance
Corporation enters into an agreement to provide assistance to or
on behalf
of the Bank under the authority contained in Federal Deposit Insurance
Act
Section 13(c). 12 U.S.C.
1823(c).
|
9
However,
rights of the parties that have already vested in accordance with Section 2.2(c)
shall not be affected by such action.
ARTICLE
6 CLAIMS
AND REVIEW PROCEDURES
|
6.1
|
Claims
Procedure.
A
person or beneficiary (“claimant”) who has not received benefits under
this Agreement that he or she believes should be paid may make a
claim for
such benefits as follows –
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|
(a)
|
Initiation
– written claim.
The claimant initiates a claim by submitting to the Administrator
a
written claim for the benefits. If the claim relates to the contents
of a
notice received by the claimant, the claim must be made within 60
days
after the notice was received by the claimant. All other claims must
be
made within 180 days after the date of the event that caused the
claim to
arise. The claim must state with particularity the determination
desired
by the claimant.
|
|
(b)
|
Timing
of Bank response.
The Bank shall respond to the claimant within 90 days after receiving
the
claim. If the Bank determines that special circumstances require
additional time for processing the claim, the Bank may extend the
response
period by an additional 90 days by notifying the claimant in writing
before the end of the initial 90-day period that an additional period
is
required. The notice of extension must state the special circumstances
and
the date by which the Bank expects to render its
decision.
|
|
(c)
|
Notice
of decision.
If the Bank denies part or all of the claim, the Bank shall notify
the
claimant in writing of the denial. The Bank shall write the notification
in a manner calculated to be understood by the claimant. The notification
shall set forth –
|
| (i) |
the
specific reasons for the denial,
|
| (ii) |
a
reference to the specific provisions of the Agreement on which the
denial
is based,
|
| (iii) |
a
description of any additional information or material necessary
for the
claimant
to perfect the claim and an explanation of why it is needed,
|
|
(iv)
|
an
explanation of the Agreement’s review procedures and the time limits
applicable to such procedures, and
|
|
(v)
|
a
statement of the claimant’s right to bring a civil action under ERISA
Section 502(a) following an adverse benefit determination on review.
|
|
6.2
|
Review
Procedure.
If the Bank denies part or all of the claim, the claimant shall have
the
opportunity for a full and fair review by the Bank of the denial,
as
follows –
|
10
| (a) |
Initiation
– written request.
To initiate the review, the claimant, within 60 days after
receiving the Bank’s notice of denial, must file with the Bank a written
request
for review.
|
|
(b)
|
Additional
submissions – information access.
The claimant shall then have the opportunity to submit written comments,
documents, records, and other information relating to the claim.
The Bank
shall also provide the claimant, upon request and free of charge,
reasonable access to and copies of all documents, records, and other
information relevant (as defined in applicable ERISA regulations)
to the
claimant’s claim for benefits.
|
|
(c)
|
Considerations
on review.
In considering the review, the Bank shall take into account all materials
and information the claimant submits relating to the claim, without
regard
to whether the information was submitted or considered in the initial
benefit determination.
|
|
(d)
|
Timing
of Bank response.
The Bank shall respond in writing to the claimant within 60 days
after
receiving the request for review. If the Bank determines that special
circumstances require additional time for processing the claim, the
Bank
may extend the response period by an additional 60 days by notifying
the
claimant in writing before the end of the initial 60-day period that
an
additional period is required. The notice of extension must state
the
special circumstances and the date by which the Bank expects to render
its
decision.
|
|
(e)
|
Notice
of decision.
The Bank shall notify the claimant in writing of its decision on
review.
The Bank shall write the notification in a manner calculated to be
understood by the claimant. The notification shall set forth -
|
| (i) |
the
specific reason for the denial,
|
|
(ii)
|
a
reference to the specific provisions of the Agreement on which the
denial
is based,
|
|
(iii)
|
a
statement that the claimant is entitled to receive, upon request
and free
of charge, reasonable access to and copies of all documents, records,
and
other information relevant (as defined in applicable ERISA regulations)
to
the claimant’s claim for benefits, and
|
|
(iv)
|
a
statement of the claimant’s right to bring a civil action under ERISA
Section 502(a).
|
|
6.3
|
Reimbursement
of Expenses.
If the claimant prevails at the conclusion of the claims and review
procedure outlined in this Article 6, including any civil action
brought
by the claimant under ERISA Section 502(a), the Bank shall reimburse
the
claimant for all legal expenses incurred by the claimant in the claims
and
review procedure.
|
11
ARTICLE
7 MISCELLANEOUS
|
7.1
|
Amendments
and Termination.
Subject to Section 7.15 of this Agreement, this Agreement may be
amended
solely by a written agreement signed by the Bank and by the Executive;
and
except for termination occurring under Article 5, this Agreement
may be
terminated solely by a written agreement signed by the Bank and by
the
Executive.
|
|
7.2
|
Binding
Effect.
This Agreement shall bind the Executive, the Bank, and their
Beneficiaries, survivors, executors, successors, administrators,
and
transferees.
|
|
7.3
|
No
Guarantee of Employment.
This Agreement is not an employment policy or contract. It does not
give
the Executive the right to remain an employee of the Bank nor does
it
interfere with the Bank’s right to discharge the Executive. It also does
not require the Executive to remain an employee or interfere with
the
Executive’s right to terminate employment at any
time.
|
|
7.4
|
Non-Transferability.
Benefits under this Agreement cannot be sold, transferred, assigned,
pledged, attached, or encumbered in any
manner.
|
|
7.5
|
Successors;
Binding Agreement.
By an assumption agreement in form and substance satisfactory to
the
Executive, the Bank shall require any successor (whether direct or
indirect, by purchase, merger, consolidation, or otherwise) to all
or
substantially all of the business or assets of the Bank to expressly
assume and agree to perform this Agreement in the same manner and
to the
same extent that the Bank would be required to perform this Agreement
if
no such succession had occurred.
|
|
7.6
|
Tax
Withholding.
The Bank shall withhold any taxes that are required to be withheld
from
the benefits provided under this
Agreement.
|
|
7.7
|
Applicable
Law.
This Agreement and all rights hereunder shall be governed by the
laws of
the State of North Carolina, except to the extent preempted by the
laws of
the United States of America.
|
|
7.8
|
Unfunded
Arrangement.
The Executive and Beneficiary are general unsecured creditors of
the Bank
for the payment of benefits under this Agreement. The benefits represent
the mere promise by the Bank to pay the benefits. Rights to benefits
are
not subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, attachment, or garnishment by creditors.
Any insurance on the Executive’s life is a general asset of the Bank to
which the Executive and Beneficiary have no preferred or secured
claim.
|
|
7.9
|
Entire
Agreement.
This Agreement constitutes the entire agreement between the Bank
and the
Executive concerning the subject matter. No rights are granted to
the
Executive under this Agreement other than those specifically set
forth.
|
12
|
7.10
|
Severability.
If any provision of this Agreement is held invalid, such invalidity
shall
not affect any other provision of this Agreement not held invalid,
and
each such other provision shall continue in full force and effect
to the
full extent consistent with law. If any provision of this Agreement
is
held invalid in part, such invalidity shall not affect the remainder
of
the provision not held invalid, and the remainder of such provision
together with all other provisions of this Agreement shall continue
in
full force and effect to the full extent consistent with law.
|
|
7.11
|
Headings.
Caption headings and subheadings herein are included solely for
convenience of reference and shall not affect the meaning or
interpretation of any provision of this Agreement.
|
|
7.12
|
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, to the following addresses or to such other
address
as either party may designate by like notice. If to the Bank, notice
shall
be given to:
|
Board
of
Directors
Southern
Community Bank and Trust
0000
Xxxxxxx Xxxx Xxxx
Xxxxxxx-Xxxxx,
Xxxxx Xxxxxxxx 00000
or
to
such other or additional person or persons as the Bank shall have designated
to
the Executive in writing. If to the Executive, notice shall be given to the
Executive at the Executive’s address appearing on the Bank’s records, or to such
other or additional person or persons as the Executive shall have designated
to
the Bank in writing.
|
7.13
|
Payment
of Legal Fees.
The Bank is aware that after a Change
in Control
management of the Bank could cause or attempt to cause the Bank to
refuse
to comply with its obligations under this Agreement, or could institute
or
cause or attempt to cause the Bank 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.
|
It
is the
intention of the Bank 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. It is the intention of the Bank 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:
|
(i)
|
the
Bank has failed to comply with any of its obligations under this
Agreement, or
|
|
(ii)
|
the
Bank 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,
|
13
the
Bank
irrevocably authorizes the Executive from time to time to retain counsel of
the
Executive’s choice (at the Bank’s expense as provided in this Section 7.13) to
represent the Executive in the initiation or defense of any litigation or other
legal action, whether by or against the Bank or any director, officer,
stockholder, or other person affiliated with the Bank, in any jurisdiction.
Despite
any existing or previous attorney-client relationship between the Bank and
any
counsel chosen by the Executive under this Section 7.13, the Bank irrevocably
consents to the Executive entering into an attorney-client relationship with
that counsel, and the Bank and the Executive agree that a confidential
relationship shall exist between the Executive and that counsel. The fees and
expenses of counsel selected from time to time by the Executive as provided
in
this Section shall be paid or reimbursed to the Executive by the Bank on a
regular, periodic basis upon presentation by the Executive of a statement or
statements prepared by such counsel in accordance with such counsel’s customary
practices, up to a maximum
aggregate amount of $250,000, whether suit be brought or not, and whether or
not
incurred in trial, bankruptcy, or appellate proceedings.
The
Bank’s obligation to pay the Executive’s legal fees provided by this Section
7.13 operates separately from and in addition to any legal fee reimbursement
obligation the Bank may have with the Executive under any separate employment,
severance, or other agreement between the Executive and the Bank. Despite any
contrary provision in this Section 7.13 however, the Bank shall not be required
to pay or reimburse the 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].
|
7.14
|
Termination
or Modification of Agreement Because of Changes in Law, Rules or
Regulations.
The Bank is entering into this Agreement on the assumption that certain
existing tax laws, rules, and regulations will continue in effect
in their
current form. If that assumption materially changes and the change
has a
material detrimental effect on this Agreement, then the Bank reserves
the
right to terminate or modify this Agreement accordingly, subject
to the
written consent of the Executive, which shall not be unreasonably
withheld. This Section 7.14 shall become null and void effective
immediately upon an event that is considered a Change in Control.
|
ARTICLE
8 ADMINISTRATION OF AGREEMENT
|
8.1
|
Plan
Administrator Duties.
This Agreement shall be administered by a Plan Administrator consisting
of
the Bank’s Board of Directors or such Committee or person(s) as the Board
shall appoint. The Executive may be a member of the Plan Administrator.
The Plan Administrator shall also have the discretion and authority
to
(i)
make, amend, interpret, and enforce all appropriate rules and regulations
for the administration of this Agreement and (ii)
decide or resolve any and all questions, including interpretations
of this
Agreement, as may arise in connection with the Agreement.
|
14
|
8.2
|
Agents.
In the administration of this Agreement, the Plan Administrator may
employ
agents and delegate to them such administrative duties as it sees
fit
(including acting through a duly appointed representative) and may
from
time to time consult with counsel, who may be counsel to the Bank.
|
|
8.3
|
Binding
Effect of Decisions.
The decision or action of the Plan Administrator with respect to
any
question arising out of or in connection with the administration,
interpretation, and application of the Agreement and the rules and
regulations promulgated hereunder shall be final and conclusive and
binding upon all persons having any interest in the Agreement. No
Executive or Beneficiary shall be deemed to have any right, vested
or
non-vested, regarding the continued use of any previously adopted
assumptions, including but not limited to the Discount Rate and
calculation method described in Section 1.1.
|
|
8.4
|
Indemnity
of Plan Administrator.
The Bank shall indemnify and hold harmless the members of the Plan
Administrator against any and all claims, losses, damages, expenses,
or
liabilities arising from any action or failure to act with respect
to this
Agreement, except in the case of willful misconduct by the Plan
Administrator or any of its members.
|
|
8.5
|
Bank
Information.
To enable the Plan Administrator to perform its functions, the Bank
shall
supply full and timely information to the Plan Administrator on all
matters relating to the date and circumstances of the retirement,
Disability, death, or Separation from Service of the Executive and
such
other pertinent information as the Plan Administrator may reasonably
require.
|
ARTICLE
9 AGREEMENT NOT TO COMPETE
|
9.1
|
Covenant
Not to Compete.
|
|
(a)
|
Without
advance written consent of the Bank, the Executive shall not compete
directly or indirectly with the Bank for two years after Separation
from
Service, plus any period during which the Executive is in violation
of
this covenant not to compete and any period during which the Bank
seeks by
litigation to enforce this covenant not to
compete.
|
|
(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.
|
|
(c)
|
Definitions:
For purposes of this Section the following definitions shall
apply:
|
(1) “compete”
shall
mean:
| (a) |
providing
financial products or services on behalf of any financial institution
for
any person residing in the
territory,
|
15
|
(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 Bank
at the
date of the Executive’s termination of employment to seek financial
products or services from another financial
institution.
|
|
(2)
|
“directly
or indirectly”
shall mean:
|
|
(a)
|
acting
as a consultant, officer, director, independent contractor, or employee
of
any financial institution in competition with the Bank 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 Bank
at the
date of the Executive’s Separation from
Service.
|
|
(3)
|
“customer”
shall mean any person to whom the Bank is providing financial products
or
services at the date of the Executive’s Separation from
Service.
|
|
(4)
|
“financial
institution”
shall mean any bank, savings association, or bank or savings association
hold 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 Bank or one of its affiliated
corporations.
|
| (5) |
“financial
product or service” shall
mean 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 firm’s activity under Section 4(k) of
the Bank Holding Company Act of 1956 and that is offered by the Bank
or
any affiliate on the date of the Executive’s Separation from Service,
including but not limited to banking activities that are closely
related
and a proper incident to banking.
|
|
(6)
|
“person”
shall mean any individual or individuals, corporation, partnership,
fiduciary or association.
|
|
(7)
|
“territory”
shall mean all of Forsyth, Guilford, Iredell, Rockingham, Surry,
Stokes,
and Yadkin Counties in North Carolina and the area within a 15-mile
radius
of any full-service banking office of the Bank at the date of Executive’s
Separation from Service.
|
|
9.2
|
Remedies.
Because of the unique character of the services to be rendered by
the
Executive hereunder, the Executive understands that the Bank would
not
have an adequate remedy at law for the material breach or threatened
breach by the Executive of any one or more of the Executive’s covenants
set forth in this Article 9. Accordingly, the Executive agrees that
the
Bank’s remedies for a material breach or threatened breach of this Article
9 include but are not limited to forfeiture of benefits under this
Agreement and a suit in equity by the Bank 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 Bank from pursuing any other remedies for
the
breach or threatened breach.
|
16
|
9.3
|
Article
9 Survives Termination But Is Void After a Change in
Control.
The rights and obligations set forth in this Article 9 shall survive
termination of this Agreement. However, Article 9 shall become null
and
void effective immediately upon a Change in Control.
|
IN
WITNESS WHEREOF,
the
Executive and a duly authorized officer of the Bank have executed this Salary
Continuation Agreement as of this 17
day
of
June,
2008.
|
EXECUTIVE:
|
Southern
Community Bank and Trust:
|
|||
|
x
|
/s/
Xxxxx
Xxxxxxxx
|
By:
|
/s/
Xxxx X. Xxxxx
|
|
|
Xxxxx Xxxxxxxx
|
||||
|
Corporate Title:
|
President
|
17
