SUPPLEMENTAL INCOME PLAN AGREEMENT
THIS AGREEMENT made and entered into as of the 21st day of September, 2004
(the "Effective Date") by and between First South Bank, a commercial bank
organized and existing under the laws of the State of North Carolina (the
"Bank"), and Xxxxxx X. Xxxxxx (the "Employee").
WITNESSETH:
WHEREAS, the Employee is employed by the Bank;
WHEREAS, the Bank recognizes the valuable services heretofore performed
for it by the Employee and wishes to encourage his continued employment;
WHEREAS, the Employee wishes to be assured that he will be entitled to a
certain amount of additional compensation for some definite period of time from
and after the termination of his employment with the Bank and that his
beneficiary will be entitled to a death benefit from and after the Employee's
death;
WHEREAS, the parties hereto wish to provide the terms and conditions upon
which the Bank shall pay such additional compensation to the Employee after the
termination of his employment with the Bank or such death benefit to his
beneficiary after the Employee's death.
NOW, THEREFORE, in consideration of the premises and of the mutual
promises herein contained, the parties hereto agree as follows:
Section 1. Retirement Benefits. Except as otherwise specifically provided
herein, if the Employee shall remain in the employment of the Bank until he
attains the age of 65 (the "Retirement Date"), the Bank shall pay the Employee
the sum of ten thousand dollars ($10,000.00) per annum for a period of five (5)
years, payable in equal monthly installments, commencing on a date to be
determined by the Bank, but in no event later than the first day of the sixth
calendar month following the calendar month in which the Retirement Date occurs.
Section 2. Post-Retirement Death Benefits. In the event that the Employee
should die after becoming entitled to receive payments under Section I but
before all such payments have been made, the Bank will make all remaining
payments to such beneficiary or beneficiaries as the Employee has designated to
the Bank in writing (the "Beneficiaries'). In the event of death of the last
living Beneficiary before all unpaid payments have been made, the balance of any
payments which remain unpaid at the time of the death of such Beneficiary shall
be commuted on the basis of six percent (6%) per annum compounded interest and
shall be paid in a single sum to the estate of the last Beneficiary to die. In
the absence of such beneficiary designation, any amount remaining unpaid at the
Employee's death shall be commuted on the basis of six percent (6%) per annum
compounded interest and shall be paid in a single sum to the Employee's estate.
Section 3. Pre-RetirementDeathBenefits. In the event of the death of the
Employee while employed by the Bank and before the Retirement Date, the Bank
shall make the payments described in Section I above to the Beneficiaries, and
the amount of such payments shall be determined as if the date of death of the
Employee was his Retirement Date. The first monthly payment shall be made on a
date to be determined by the Bank, but in no event later than the first day of
the sixth calendar month following the month in which the Employee died. In the
event of death of the last living Beneficiary before all the payments have been
made, the balance of any payments which remain unpaid at the time of such
Beneficiary's death shall be commuted on the basis of six percent (6%) per annum
compounded interest and shall be paid in a single sum to the estate of the last
Beneficiary to die. In the absence of any beneficiary designation made by the
Employee pursuant to Section 2, above, or if no Beneficiary survives the
Employee, the payments to be made hereunder shall be commuted on the basis of
six percent (6%) per annum compounded interest and shall be paid in a single sum
to the Employee's estate. Notwithstanding the foregoing, if the Employee dies as
result of suicide on or before the two-year anniversary of the Effective Date,
no benefits of whatever nature shall be payable to the Beneficiaries under this
Agreement.
Section 4. Termination Benefits. Except as otherwise provided in Section 6
with respect to termination of employment in certain circumstances, in the event
that the employment of the Employee terminates prior to the time he is first
entitled to receive payments under this Agreement for any reason other than his
death, the Employee or his Beneficiaries, as applicable, shall be entitled, upon
the occurrence of the Employee's 65th birthday or prior death, to receive the
percentage of the applicable annual payment described in Section I above
determined by Exhibit A attached hereto an incorporated herein by reference.
Such payments shall be made in equal monthly installments, with the first
monthly installment commencing on a date to be determined by the Bank, but in no
event later than the first day of the sixth calendar month following the
calendar month of the Employee's 65th birthday or death, as applicable, occurs.
Section 5. Benefits Not Transferable. Neither the Employee, any
Beneficiary nor any other person claiming any right or interest under this
Agreement through the Employee or any other Beneficiary shall have any right to
commute, assign, transfer or otherwise convey the right to receive any benefits
hereunder.
Section 6. Binding Upon Successors. This Agreement and the Bank's
obligations hereunder shall be binding upon the Bank's successors and permitted
assigns. The Bank may not assign its right or obligations under this Agreement
without the Employee's prior written consent. In addition, the Bank shall not
enter into any agreement proving for the merger of the Bank with and into
another business entity or the sale of more than a majority of the Bank's assets
to another business entity, person or group of persons that does not
specifically provide that such successor by merger or purchaser(s) of assets
shall assume and satisfy each and every obligation of the Bank to the Employee
under this Agreement. In the case of an asset sale, such assumption shall not
relieve the Bank of its liability to fulfill such obligations.
Except as otherwise provided in Sections 1, 2 or 3, above, as applicable,
in the event that, on or before the occurrence of the Employee's Retirement
Date, a "Termination of Protected Employment" occurs following a "Change in
Control" (as these terms are defined below), the Employee shall be deemed to
have retired as of his Retirement Date and the provisions of Section I shall be
deemed applicable, except that the Retirement Date shall be deemed to be the
date that such Change in Control shall occur.
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For purposes of this Agreement, "Change in Control" shall mean any one of
the following events: (i) the acquisition of ownership, holding, or power to
vote more than 25% of the voting stock of the Bank or First South Bancorp, Inc.
(the "Company"), (ii) the acquisition of the ability to control the election of
a majority of the Bank's or the Company's directors, (iii) the acquisition of a
controlling influence over the management or policies of the Bank or of the
Company by any person or by persons acting as a "group" (within the meaning of
Section 13(d) of the Securities Exchange Act of 1934), 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 Bank or of the
Company (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. Notwithstanding the foregoing, the Company's ownership of
the Bank shall not of itself constitute a Change in Control for purposes of the
Agreement. For purposes of this paragraph only, the term "person" refers 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.
For purposes of this Agreement, a "Termination of Protected Employment"
shall occur if: (i) the Employee is terminated without Just Cause, with "Just
Cause" meaning, 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, or rule or regulation
(other than traffic violations or similar offenses) or final cease-and-desist
order; provided that 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 interests of the Bank or of the Company; or (ii) the Employee
voluntarily terminates employment for an event that constitutes "Good Reason,"
which shall mean any of the following events, that has not been consented to in
advance by the Employee in writing: (a) the requirement that the Employee move
his personal residence, or perform his principal executive functions, more than
30 miles from his primary office as of the later of the Effective Date and the
most recent voluntary relocation by the Employee; (b) a material reduction in
the Employee's base compensation in effect on the date of the Change in Control;
(c) the failure by the Bank to continue to provide the Employee with
compensation and benefits in effect on the date of the Change in Control, 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 which would directly or
indirectly reduce any of such benefits or deprive the Employee of any material
fringe benefit enjoyed by him; (d) the assignment to the Employee of duties and
responsibilities materially different from those normally associated with his
position; (e) a failure to reelect the Employee to the Board of Directors of the
Bank, if the Employee has served on such Board at any time during the term of
the Agreement; (f) a material diminution or reduction in the Employee's
responsibilities or authority (including reporting responsibilities) in
connection with his employment with the Bank; or (g) a material reduction in the
secretarial or other administrative support of the Employee.
Section 7. Benefits Payable Only from General Corporate Assets; Unsecured
General Creditor Status of Employee.
The payments to the Employee or his Beneficiaries hereunder shall be made
from assets, which shall continue for all purposes, to be a part of the general
unrestricted assets of the Bank; no person shall have nor acquire any interest
in any such assets by virtue of the provisions of this Agreement. The Bank's
obligations hereunder shall be an unfunded and unsecured promise to pay money in
the future. To the extent that the Employee or any person acquires a right to
receive payments from the Bank under the provisions hereof, such right shall be
no greater than the right of any unsecured general creditor of the Bank; no such
person shall have nor require any legal or equitable right, interest or claim in
or to any property or assets of the Bank.
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In the event that, in its discretion, the Bank purchases an insurance
policy or policies insuring the life of the Employee (or any other property) in
order to allow the Bank to recover the cost of providing the benefits, in whole,
or in part, hereunder, neither the Employee nor any beneficiary shall have the
rights whatsoever therein or in the proceeds therefrom. The Bank shall be the
sole owner and beneficiary of any such policy or policies and, as such, shall
possess and, may exercise all incidents of ownership therein.
Notwithstanding any other provision of this Agreement that may be contrary
or inconsistent herewith, not later than ten business days after a Change in
Control, the Bank shall (i) deposit in a grantor trust (the "Trust") that is
designed in accordance with Revenue Procedure 92-64 and has a trustee
independent of the Bank, the Company and any successor to their interest, an
amount equal to the present value of all benefits that may become payable under
this Agreement, unless the Employee has previously provided a written release of
any claims under this Agreement, and (ii) provide the trustee of the Trust with
a written direction to hold said amount and any investment return thereon in a
segregated account for the benefit of the Employee, and to follow the procedures
set forth in the next paragraph as to the payment of such amounts from the
Trust.
At any time or from time to time following a Change in Control, the
Employee may provide the trustee of the Trust with a written schedule directing
that the trustee pay to the Employee the amounts designated in the schedule as
being payable pursuant to this Agreement. Within three business days after
receiving said notice, the trustee of the Trust shall send a copy of the notice
to the Bank via overnight and registered mail (return receipt requested). On the
fifth business day after mailing said notice to the Bank, the trustee of the
Trust shall pay the Employee the amount designated therein in immediately
available funds, unless prior thereto the Bank provides the trustee with a
written notice directing the trustee to withhold such payment. In the latter
event, the trustee shall submit the dispute to non-appealable binding
arbitration for a determination of the amount payable to the Employee pursuant
to this Agreement, and the costs of such arbitration (including any attorneys'
fees incurred by the Employee) shall be paid by the Bank. The trustee shall
choose the arbitrator to settle the dispute, and such arbitrator shall be bound
by the rules of the American Arbitration Association in making his
determination. The parties and the trustee shall be bound by the results of the
arbitration and, within three days of the determination by the arbitrator, the
trustee shall pay from the Trust the amounts required to be paid to the Employee
and/or the Bank, and in no event shall the trustee be liable to either party for
making the payments as determined by the arbitrator.
Upon the receipt of the Employee's written release of all claims under
this Agreement, the trustee of the Trust shall pay to the Bank the entire
balance remaining in the segregated account maintained for the benefit of the
Employee. The Employee shall thereafter have no further interest in the Trust
pursuant to this Agreement.
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Section 8. Additional Benefits. The benefits and rights provided under
this Agreement are in addition to, and independent of, those rights and benefits
of the Employee provided under other agreements with the Bank, and shall not
affect, reduce or diminish the right of Employee to participate in any current
or future retirement plan or in any supplemental compensation arrangement.
Section 9. No Contract of Employment. Nothing contained herein shall be
construed to be a contract of employment or as conferring upon the Employee the
right to continue to be employed by the Bank. It is expressly understood by the
parties hereto that this Agreement relates exclusively to additional
compensation for the Employee's services, payable after termination of his
employment with the Bank, and is not intended to be an employment agreement.
Section 10. Claims and Review Procedures.
A. General. For the purposes of implementing a claims procedure under
this Agreement as required by the Employee Retirement Income
Security Act of 1974 ("ERISA") (but not for any other purpose), the
Bank is hereby designated as the named fiduciary and Plan
Administrator of this unfunded, nonqualified deferred compensation
plan. If any person believes he is being denied any rights or
benefits under the Agreement, such person may file a claim in
writing with the Plan Administrator for resolution in accordance
with the provisions of Paragraph B of this Section 10.
B. Claims Procedure. If any claim filed hereunder is wholly or
partially denied, the Plan Administrator will notify the claimant of
its decision in writing. Such notification will be written in a
manner calculated to be understood by the claimant and will contain:
(i) specific reasons for the denial,
(ii) specific reference to pertinent provisions of the Agreement on
which the Plan Administrator based its denial,
(iii) a description of any additional material or information
necessary for the claimant to perfect such claim and an
explanation of why such material or information is necessary,
and
(iv) information as to the steps to be taken if the claimant wishes
to submit a request for review.
Such notification will be given within ninety (90) days after the
claim is received by the Plan Administrator (or within 180 days, if
special circumstances require an extension of time for processing
the claim, and if written notice of such extension and circumstances
is given to the claimant within the initial ninety (90) day period).
If such notification is not given within such period, the claim will
be considered denied as of the last day of such period and the
claimant may request a review of his claim in accordance with
Section 10.C. hereof.
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C. Review Procedure. Within sixty (60) days after the date on which a
claimant received a written notice of a denied claim (or, if
applicable, within sixty (60) days after the date on which such
denial is considered to have occurred) the claimant (or his duly
authorized representative) may:
(i) file a written request with the Plan Administrator for a
review of his denied claim and of pertinent documents; and
(ii) submit written issues and comments to the Plan Administrator.
The plan Administrator will notify the claimant of its decision in
writing. Such notification will be written in a manner calculated to
be understood by the claimant and will contain specific reasons for
the decision as well as specific references to pertinent provisions
of the Agreement. The decision on review will be made within sixty
(60) days after the request for review is received by the Plan
Administrator (or within one hundred twenty (120) days, if special
circumstances require an extension of time for processing the
request (such as an election by the Plan Administrator to hold a
hearing), and if written notice of such extension and circumstances
is given to the claimant within the initial sixty (60) day period.
Section 11. Amendment. This Agreement may not be amended, altered or
modified, except by a written instrument signed by the parties hereto or their
respective successors, and may not be otherwise terminated except as provided
herein.
Section 12. Governing Law. This Agreement, and the rights of the parties
hereunder, shall be governed by and construed in accordance with the laws of the
State of North Carolina.
IN WITNESS WHEREOF, the parties have executed this Supplemental Plan
Agreement as of the day and year first written above.
FIRST SOUTH BANK
Attest: By: /s/ Xxxxxx X. Van
-----------------
Xxxxxx X. Xxxx
President and
/s/ Xxxxxxx X. Xxxx Chief Executive Officer
-------------------
Xxxxxxx X. Xxxx
Secretary
{Corporate Seal}
EMPLOYEE:
/s/ Xxxxxx X. Xxxxxx
--------------------
Xxxxxx X. Xxxxxx
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EXHIBIT A
TO
SUPPLEMENTAL INCOME PLAN AGREEMEENT
FOR
XXXXXX X. XXXXXX
FULL YEARS OF EMPLOYMENT
AFTER EFFECTIVE DATE
--------------------
1
2
3
4
5
6
7
8
9
10
PERCENTAGE OF THE ANNUAL
INSTALLMENT PAYMENTS
STATED IN SECTION 1 OF THIS
AGREEMENT TO WHICH THE
EMPLOYEE IS ENTITLED
--------------------
10
20
30
40
50
60
70
80
90
100
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