EMPLOYMENT AGREEMENT
EXHIBIT 10.4
THIS AGREEMENT is made effective as of April 11, 2002, by and between SouthEast Bank & Trust
(the “Bank”), Athens, Tennessee, and F. Xxxxxxx Xxxxxx (the “Executive”).
WHEREAS, the Bank wishes to assure itself of the services of Executive for the period provided
in this Agreement; and
WHEREAS, the Executive is willing to serve in the employment of the Bank on a full-time basis
for said period.
NOW, THEREFORE, in consideration of the mutual covenants herein contained, and upon the other
terms and conditions hereinafter provided, the parties hereby agree as follows:
1. POSITION AND RESPONSIBILITIES.
During the period of his employment hereunder, Executive agrees to serve as Chairman and Chief
Executive Officer of the Bank.
2. TERMS AND DUTIES.
(a) The term of this Agreement shall be deemed to have commenced as of the date first above
written and shall continue for a period of thirty-six (36) full calendar months thereafter.
Commencing on the first anniversary date, which is defined as the last day of the 36-month term,
the Agreement will renew automatically for an additional thirty-six (36) months unless the
Agreement is otherwise terminated or amended by mutual agreement upon delivery of notice to the
other party of intent not to renew within one hundred eighty (180) days of the renewal date.
Unless amended by the parties hereto in writing, the term of this Agreement shall continue in this
fashion in thirty-six-month intervals. Upon the expiration of this Agreement for a period of twelve
(12) months, the Executive agrees that he will not compete with the Bank in any city or town in
which the Bank operates a branch or main office. For purposes of this paragraph, the term
“compete” shall have the same meaning as that more fully described in Xxxxxxxxx 00,
Xxx-Xxxxxxxxxxx. The provisions of Paragraph 2(a) do not apply to a termination of this Agreement
by reason of Change in Control, as defined in Paragraph 5(a) hereof; disability as defined in
Paragraph 6(a) hereof; death; retirement, as defi xxx in Paragraph 7 hereof; for cause, as defined
in Paragraph 8 hereof; or Executive’s resignation pursuant to the conditions set forth in Paragraph
4(a) hereof.
(b) During the period of his employment hereunder, except for periods of absence occasioned by
illness, vacation periods, and leaves of absence, Executive shall devote substantially all his
business time, attention, skill, and efforts to the faithful performance of his
Exhibit 10.4 - 1
duties hereunder including activities and services related to the organization, operation and
management of the Bank; provided, however, that, from time to time, Executive may serve, or
continue to serve, on the boards of directors of, and hold any other offices or positions in,
companies or organizations, which will not materially affect the performance of Executive’s duties
pursuant to this Agreement.
3. COMPENSATION AND REIMBURSEMENT.
(a) The compensation specified under this Agreement shall constitute the salary and benefits
paid for the duties described in Sections 1 and 2. The Bank shall pay Executive as compensation a
salary of one hundred twenty-five thousand ($125,000.00) per year (“Base Salary”). Such Base Salary
shall be payable in accordance with the customary payroll practices of the Bank. During the period
of this Agreement, Executive’s Base Salary shall be reviewed at least annually; the first such
review will be made no later than one (1) year from the date of this Agreement. Such review shall
be conducted by a Committee designated by the Board, and the Board may increase Executive’s Base
Salary. In addition to the Base Salary provided in this Section 3(a), the Bank shall provide to
Executive at no additional cost to Executive all such other benefits as are provided to regular
full-time employees of the Bank.
(b) Executive will be entitled to participate in or receive benefits under any employee
benefit plans including, but not limited to, stock options, retirement plans, supplemental
retirement plans, pension plans, profit-sharing plans, health-and-accident plans, medical coverage
or any other employee benefit plan or arrangement made available by the Bank in the future to its
senior executives and key management employees, subject to, and on a basis consistent with, the
terms, conditions and overall administration of such plans and arrangements. Executive will be
entitled to incentive compensation and bonuses as provided in any plan, or pursuant to any
arrangement of the Bank, in which Executive is eligible to participate. Nothing paid to the
Executive under any such plan or arrangement will be deemed to be in lieu of other compensation to
which the Executive is entitled under this Agreement, except as provided under Section 5(e).
(c) Executive will be reimbursed for reasonable travel and entertainment expenses.
(d) The Bank will reimburse the Executive for the monthly dues, the capital improvement fund
fee and applicable taxes as well as the per month standard meal allowance charge and
business-related entertainment at the Springbrook Golf and Country Club (“Country Club”), Niota,
Tennessee. Executive will pay for any personal expenditures at the Country Club not related to the
business of the Bank. Executive will maintain accurate records segregating business and personal
expenditures at the Country Club.
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.
(a) Upon the occurrence of an Event of Termination (as herein defined) during the Executive’s
term of employment under this Agreement, the provisions of this Section shall apply. As used in
this Agreement, an “Event of Termination” shall mean and include any one or more of the following:
(i) the termination of Executive’s full-time employment hereunder due to
Exhibit 10.4 - 2
expiration of this Agreement pursuant to Paragraph 2(a); (ii) the termination by the Bank of
Executive’s full-time employment hereunder for any reason other than a Change in Control as defined
in Paragraph 5(a) hereof or for Cause as defined in Paragraph 8 hereof; disability, as defined in
Paragraph 6(a) hereof; death; retirement, as defined in Paragraph 7 hereof; (iii) Executive’s
resignation from the Bank’s employment, upon (A), unless consented to by the Executive, a material
change in Executive’s function, duties, or responsibilities, which change would cause Executive’s
position to become one of lesser responsibility, importance, or scope from the position and
attributes thereof described in Paragraphs 1 and 2, above, (any such material change shall be
deemed a continuing breach of this Agreement); (B) a relocation of Executive’s principal place of
employment by more than fifty(50) miles from its location at the effective date of this Agreement,
or a material reduction in the benefits and perquisites to Executive from those being provided as
of the effective date of this Agreement; (C) the liquidation or dissolution of the Bank; or (D) any
breach of this Agreement by the Bank. Upon the occurrence of any event described in clauses (A),
(B), (C), or (D), above, Executive shall have the right to elect to terminate his employment under
this Agreement by resignation upon not less than sixty (60) days prior written notice to the Bank
given within a reasonable period of time not to exceed, except in case of a continuing breach,
four (4)calendar months after the event giving rise to said right to elect.
(b) Upon the occurrence of an Event of Termination, the Bank shall pay Executive, or, in the
event of his subsequent death, his beneficiary or beneficiaries, or his estate, as the case may be,
as severance pay or liquidated damages, or both, a lump sum payment equal to twelve (12) months’
Base Salary.
(c) Upon the occurrence of an Event of Termination, the Bank will cause to be continued life,
medical, dental and disability coverage substantially identical to the coverage maintained by the
Bank for Executive prior to his termination for a period of twelve (12) months at the Bank’s
expense. A COBRA notice will issue upon the date of termination. Any COBRA-mandated coverage
extensions beyond the first twelve (12) months will be at the option of the Executive and paid for
by him as provided by law unless he has secured other coverage from another source extinguishing
his coverage rights.
5. CHANGE IN CONTROL.
(a) No benefit shall be paid under this Paragraph 5 unless there shall have occurred a Change
in Control of the Bank. For purposes of this Agreement, a “Change in Control” of the Bank shall be
deemed to occur if and when:
(i) there occurs an acquisition in one or more transactions of at least 15 percent but
less than 25 percent of the Common Stock by any Person, or by two or more Persons acting as
a group (excluding officers and directors of the Bank), and the adoption by the Board of
Directors of a resolution declaring that a change in control of the Bank has occurred; or
(ii) there occurs a merger, consolidation, reorganization, recapitalization or similar
transaction involving the securities of the Bank upon the consummation of which
Exhibit 10.4 - 3
more than 50 percent in voting power of the voting securities of the surviving
corporation(s) is held by Persons other than former shareholders of the Bank; or
(iii) 25 percent or more of the directors elected by shareholders of the Bank to the
Board of Directors are persons who were not listed as nominees in the Bank’s then most
recent proxy statement (the “New Directors”).
(b) If any of the events described in Paragraph 5(a) hereof constituting a Change in Control
have occurred or the Board of the Bank has determined that a Change in Control has occurred,
Executive shall be entitled to the benefits provided in Paragraphs (c ), (d) and (e) of this
Paragraph 5 upon his subsequent involuntary termination of employment at any time during the term
of this Agreement (or voluntary termination following a Change of Control following any demotion,
loss of title, office or significant authority, reduction in his annual compensation or benefits,
or relocation of his principal place of employment by more than 50 miles from its location
immediately prior to the Change in Control), unless such termination is because of his death,
retirement as provided in Paragraph 7, termination for Cause, or termination for Disability.
(c) Upon the occurrence of a Change in Control followed by the Executive’s termination of
employment, the Bank shall pay Executive, or in the event of his subsequent death, his beneficiary
or beneficiaries, or his estate, as the case may be, as severance pay or liquidated damages, or
both, a sum equal to one (1) time the Executive’s “base amount,” currently in effect, within the
meaning of §280G(b)(3) of th e Internal Revenue Code of 1986 (“Code”), as amended. Such payment
shall be made in a lump sum paid within ten (10) days of the Executive’s Date of Termination.
(d) Upon the occurrence of a Change in Control followed by the Executive’s termination of
employment, the Bank will cause to be continued life, medical, dental and disability coverage
substantially identical to the coverage maintained by the Bank for Executive prior to his
severance. In addition, Executive shall be entitled to receive the value of employer contributions
that would have been made on the Executive’s behalf over the remaining term of the agreement to any
tax-qualified retirement plan sponsored by the Bank as of the Date of Termination. Such coverage
and payments shall cease upon the expiration of twelve (12) months.
(e) Upon the occurrence of a Change in Control the Executive shall be entitled to receive
benefits due him under, or contributed by the Bank on his behalf, pursuant to any retirement,
incentive, profit sharing, bonus, performance, disability or other employee benefit plan maintained
by the Bank on the Executive’s behalf to the extent that such benefits are not otherwise paid to
the Executive upon a Change in Control.
(f) Notwithstanding the preceding paragraphs of this Paragraph 5, in the event that the
aggregate payments or benefits to be made or afforded to the Executive under this Paragraph would
be deemed to include an “excess parachute payment” under §280G of the Code, such payments or
benefits shall be payable or provided to Executive in equal monthly installments over the minimum
period necessary to reduce the present value of such payments or benefits to
Exhibit 10.4 - 4
an amount which is one dollar ($1.00) less than three (3) times the Executive’s “base
amount,” currently in effect, under §280G(b)(3) of the Code.
(g) Upon the occurrence of a Change in Control followed by the Executive’s termination of
employment, the Executive agrees that he will not compete with the Bank or the surviving financial
institution for a period of twelve (12) months in any city or town in which the Bank operates a
branch or main office. For purposes of this paragraph, the term “compete” shall have the same
meaning as more fully defined in Paragraph 10, Non-Competition.
6. TERMINATION FOR DISABILITY.
(a) If the Executive shall become disabled as defined in the Bank’s then current disability
plan (or, if no such plan is then in effect, if the Executive is permanently and totally disabled
within the meaning of Section 22(e)(3) of the Code as determined by a physician designated by the
Board), the Bank may terminate Executive’s employment for “Disability.”
(b) Upon the Executive’s termination of employment for Disability, the Bank will pay
Executive, as disability pay, a bi-weekly payment equal to two-thirds (2/3) of Executive’s
bi-weekly rate of Base Salary on the effective date of such termination. These disability payments
shall commence on the effective date of Executive’s termination and will end on the earlier of (i)
the date Executive returns to the full-time employment of the Bank in the same capacity as he was
employed prior to his termination for Disability and pursuant to an employment agreement between
Executive and the Bank; (ii) Executive’s full-time employment by another employer; (iii) Executive
attaining the normal expected retirement age or age 70 if the Executive so elects; or (iv)
Executive’s death. The disability pay shall be reduced by the amount, if any, paid to the Executive
under any plan of the Bank providing disability benefits to the Executive.
(c) The Bank will cause to be continued life, medical, dental and disability coverage
substantially identical to the coverage maintained by the Bank for Executive prior to his
termination for Disability. This coverage and payments shall cease upon the earlier of (i) the date
Executive returns to the full-time employment of the Bank, in the same capacity as he was employed
prior to his termination for Disability and pursuant to an employment agreement between Executive
and the Bank; (ii) Executive’s full-time employment by another employer; (iii) Executive’s
attaining normal retirement age or age 65 if the Executive so elects; or (iv) the Executive’s
death.
(d) Notwithstanding the foregoing, there will be no reduction in the compensation otherwise
payable to Executive during any period during which Executive is incapable of performing his duties
hereunder by reason of temporary disability.
(e) Executive agrees that he will not compete with the Bank in any city or town in which the
Bank operates a branch or main office for a period of twelve (12) months following his retirement
from his employment by the Bank. For purposes of this paragraph, the term “compete” shall have the
same meaning as more fully defined in Xxxxxxxxx 00, Xxx-
Exhibit 10.4 - 5
Competition.
7. TERMINATION UPON RETIREMENT; DEATH OF EXECUTIVE.
Termination by the Bank of Executive based on “Retirement” shall mean retirement at age 70 or
in accordance with any retirement arrangement established with Executive’s consent with respect to
him. Upon termination of Executive upon Retirement, Executive shall be entitled to all benefits
under any retirement plan of the Bank and other plans to which Executive is a party. Upon the death
of the Executive during the term of this Agreement, the Bank shall pay to Executive’s estate the
compensation due to the Executive through the last day of the calendar month in which his death
occurred.
8. TERMINATION FOR CAUSE.
For purposes of this Agreement, “Termination for Cause” shall include termination because of
the Executive’s personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties, willful violation of any
law, rule, or regulation which negatively impacts the Bank (other than traffic violations or
similar offenses) or final cease-and-desist order, or material breach of any provision of this
Agreement. For purposes of this Paragraph, the term “willful” is defined to include any act or
omission which demonstrates an intentional or reckless disregard for the duties and
responsibilities owed to the business of the employer by Executive. Notwithstanding the
foregoing, Executive shall not be deemed to have been terminated for Cause unless and until there
shall have been delivered to him a copy of a resolution duly adopted by the affirmative vote of not
less than three-fourths (3/4) of the members of the Board at a meeting of the Board called and held
for that purpose, finding that in the good faith opinion of the Board, Executive was guilty of
conduct justifying termination for Cause and specifying the reasons thereof. The Executive shall
not have the right to receive compensation or other benefits for any period after termination for
Cause. Any stock options granted to Executive under any stock option plan or any unvested awards
granted under any other stock benefit plan of the Bank, or any subsidiary or affiliate thereof,
shall become null and void effective upon Executive’s receipt of Notice of Termination for Cause
pursuant to Paragraph 9 hereof, and shall not be exercisable by Executive at any time subsequent
to such Termination for Cause. If he is terminated for Cause, Executive shall not compete with the
Bank in any city or town in which the Bank operates a branch or main office for twelve (12) months
from the Date of the Termination for Cause. For purposes of this paragraph, the term “compete”
shall have the same meaning as more fully defined in Paragraph 10, Non-Competition.
Exhibit 10.4 - 6
9. NOTICE.
(a) Any purported termination by the Bank or by Executive shall be communicated by Notice of
Termination to the other party hereto. For purposes of this Agreement, a “Notice of Termination”
shall mean a written notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of Executive’s employment under the provision so indicated.
(b) “Date of Termination” shall mean (A) if Executive’s employment is terminated for
Disability, thirty (30) days after a Notice of Termination is given (provided that he shall not
have returned to the performance of his duties on a full-time basis during such thirty (30) day
period); and (B) if his employment is terminated for any other reason, the date specified in the
Notice of Termination (which, in the case of a Termination for Cause, shall not be less than thirty
(30) days from the date such Notice of Termination is given).
(c) If, within thirty (30) days after any Notice of Termination is given, the party receiving
such Notice of Termination notifies the other party that a dispute exists concerning the
termination, except upon the occurrence of a Change in Control and voluntary termination by
Executive in which case the Date of Termination shall be the date specified in the Notice, the Date
of Termination shall be the date on which the dispute is finally determined, either by mutual
written agreement of the parties by a binding arbitration award, or by a final judgment, order or
decree of a court of competent jurisdiction (the time for appeal therefrom having expired and no
appeal having been perfected) and provided further that the Date of Termination shall be extended
by a notice of dispute only if such notice is given in good faith and the party giving such notice
pursues the resolution of such dispute with reasonable diligence. Notwithstanding the pendency of
any such dispute, the Bank will continue to pay Executive his full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to, Base Salary) and
continue him as a participant in all compensation, benefit and insurance plans in which he was
participating when the notice of dispute was given, until the dispute is finally resolved in
accordance with this Agreement. Amounts paid under this Paragraph are in addition to all other
amounts due under this Agreement and shall not be offset against or reduce any other amounts due
under this Agreement. Provided, however, in no event shall the Executive be entitled to
compensation or benefits after the Date of Termination if the Executive is terminated for Cause as
provided in Paragraph 8 hereof.
10. NON-COMPETITION.
(a) Upon any termination of Executive’s employment hereunder for any reason, including but not
limited to expiration of this Agreement, Executive agrees not to compete with the Bank for a period
of twelve (12) months following such termination in any city or town in which the Bank operates a
branch or main office, determined as of the effective date of such termination. Executive agrees
that, during such period, Executive shall not work for or advise, consult or otherwise serve with,
directly or indirectly, any entity whose business materially competes with the depository, lending
or other business activities of the Bank. Executive specifically further agrees that he will not,
for the twelve (12) month non-competition period
Exhibit 10.4 - 7
work in either a paid or unpaid capacity with any individual or group proposing to establish a
new bank or other financial institution in Bank’s market area. The parties hereto, recognizing that
irreparable injury will result to the Bank, its business and property in the event of Executive’s
breach of this Subparagraph 10(a) agree that in the event of any such breach by Executive, the Bank
will be entitled, in addition to any other remedies and damages available, to an injunction to
restrain the violation hereof by Executive, Executive’s partners, agents, servants, employers,
employees and all persons acting for or with Executive. Executive represents and admits that in the
event of the termination of his employment pursuant to Paragraph 8 hereof, Executive’s experience
and capabilities are such that Executive can obtain employment in a business, engaged in other
lines and/or of a different nature than the Bank, and that the enforcement of a remedy by way of
injunction will not prevent Executive from earning a livelihood. Nothing herein will be construed
as prohibiting the Bank from pursuing any other remedies available to the Bank for such breach or
threatened breach, including the recovery of damages from Executive.
(b) Executive recognizes and acknowledges that the knowledge of the business activities and
plans for business activities of the Bank and affiliates thereof, as it may exist from time to
time, is a valuable, special and unique asset of the business of the Bank. Executive will not,
during or after the term of his employment, disclose any knowledge of the past, present, planned or
considered business activities of the Bank or affiliates thereof to any person, firm, corporation
or other entity for any reason or purpose whatsoever. Notwithstanding the foregoing, Executive may
disclose any knowledge of banking, financial and/or economic principles, concepts or ideas which
are not solely and exclusively derived from the business plans and activities of the Bank. In the
event of a breach or threatened breach by the Executive of the provisions of this Paragraph, the
Bank will be entitled to an injunction restraining Executive from disclosing, in whole or in part,
the knowledge of the past, present, planned or considered business activities of the Bank or
affiliates thereof, or from rendering any services to any person, firm corporation, other entity
to whom such knowledge, in whole or in part, has been disclosed or is threatened to be disclosed.
Nothing herein will be construed as prohibiting the Bank from pursuing any other remedies available
to the Bank for such breach or threatened breach, including the recovery of damages from Executive.
11. SOURCE OF PAYMENTS.
All payments provided in this Agreement shall be timely paid in cash or check from the general
funds of the Bank.
12. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.
This Agreement contains the entire understanding between the parties hereto and supersedes any
prior employment agreement between the Bank or any predecessor of the Bank and Executive, except
that this Agreement shall not affect or operate to reduce any benefit or compensation inuring to
the Executive of a kind elsewhere provided. No provision of this Agreement shall be interpreted to
mean that Executive is subject to receiving fewer benefits than those available to him without
reference to this Agreement.
Exhibit 10.4 - 8
13. NO ATTACHMENT; SUCCESSORS AND ASSIGNS.
(a) Except as required by law, no right to receive payments under this Agreement shall be
subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or
hypothecation, or to execution, attachment, levy, or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary, to affect any such action shall be null, void, and
of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of, Executive and the Bank
and their respective successors and assigns.
14. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an instrument in writing signed by
the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been waived, nor shall
there by any estoppel against the enforcement of any provision of this Agreement, except by written
instrument of the party charged with such waiver or estoppel. No such written waiver shall be
deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate
only as to the specific term or condition waived and shall not constitute a waiver of such term or
condition for the future as to any act other than that specifically waived.
15. SEVERABILITY.
If, for any reason, any provision of this Agreement, or any part of any provision, is held
invalid, such invalidity shall not affect any other provision of this Agreement or any part of such
provision not held so invalid, and each such other provision and part thereof shall to the full
extent consistent with law continue in full force and effect.
16. HEADINGS FOR REFERENCE ONLY.
The headings of sections and paragraphs herein are included solely for convenience of
reference and shall not control the meaning or interpretation of any of the provisions of this
Agreement.
17. GOVERNING LAW.
This Agreement shall be governed by the substantive laws and procedural provisions of the
State of Tennessee, unless otherwise specified herein; provided, however, that in the event of a
conflict between the terms of this Agreement and any applicable federal or state law or regulation,
the provisions of such law or regulation shall prevail.
18. PAYMENT OF LEGAL FEES.
Exhibit 10.4 - 9
All reasonable legal fees paid or incurred by the Bank or the Executive pursuant to any
dispute or question of interpretation relating to this Agreement shall be paid or reimbursed by
the prevailing party in such judgment, arbitration or settlement.
19. INDEMNIFICATION.
The Bank shall provide Executive with coverage under a standard directors’ and officers’
liability insurance policy at its expense, or in lieu thereof, shall indemnify Executive to the
fullest extent permitted under applicable Tennessee and federal law and the Bank’s Charter and
Bylaws against all expenses and liabilities reasonably incurred by him in connection with or
arising out of any action, suit or proceeding in which he may be involved by reason of his having
been a director or officer of the Bank (whether or not he continues to be a director or officer at
the time of incurring such expenses or liabilities), such expenses and liabilities to include, but
not be limited to, judgment, court costs and attorneys’ fees and the cost of reasonable
settlements.
20. SUCCESSOR TO THE BANK.
The Bank shall require any successor or assignee, whether direct or indirect, by purchase,
merger, consolidation or otherwise, to all or substantially all the business or assets of the Bank,
expressly and unconditionally to assume and agree to perform the Bank’s obligations under this
Agreement, in the same manner and to the same extent that the Bank would be required to perform if
no such succession or assignment had taken place.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by a duly
authorized officer or director, and Executive has signed this Agreement, effective on the date
first written above.
| SOUTHEAST BANK & TRUST | ||||
| BY: | /s/ Xxx X. Xxxxxx, III, President | |||
| Xxx X. Xxxxxx, III, President | ||||
| BY: | /s/ F. Xxxxxxx Xxxxxx, Executive | |||
| F. Xxxxxxx Xxxxxx, Executive | ||||
Exhibit 10.4 - 10
