Exhibit 10.52

 

Employment Agreement

 

This Employment Agreement is entered into effective as of this 28th day of
April, 2006, by and among Southern Community Financial Corporation, a North
Carolina corporation, Southern Community Bank and Trust, a North
Carolina-chartered bank and wholly owned subsidiary of Southern Community
Financial Corporation (the “Bank”), and Merle B. Andrews, Executive Vice
President of the Bank (the “Executive”). For convenience, Southern Community
Financial Corporation and the Bank are referred to in this Employment Agreement
individually and together as the “Employer.”

 

Whereas, the Executive is the Executive Vice President of the Bank, possessing
unique skills, knowledge, and experience relating to the Employer’s business,
and the Executive has made and is expected to continue to make major
contributions to the profitability, growth, and financial strength of the
Employer and affiliates,

 

Whereas, the Employer and the Executive desire to set forth in this Employment
Agreement the terms and conditions of the Executive’s employment,

 

Whereas, the Executive and the Bank are parties to an Employment Agreement dated
as of January 12, 2004, but the Executive and the Bank intend that this
Employment Agreement supersede and replace the previous employment agreement in
its entirety, and

 

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 [12 U.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 Employer, is contemplated insofar as the
Bank or any affiliates are concerned.

 

Now Therefore, in consideration of these premises, the mutual covenants
contained herein, and other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows.

 

Article 1

Employment

 

1.1 Employment. Effective on the date and for the term specified in section 1.3,
the Employer hereby employs the Executive to serve as Executive Vice President
of the Bank according to the terms and conditions of this Employment Agreement.
The Executive hereby accepts employment according to the terms and conditions of
this Employment Agreement.

 

1.2 Duties. As Executive Vice President, the Executive shall serve in accordance
with the Employer’s Articles of Incorporation and Bylaws, as each may be amended
or restated from time to time. She shall serve the Employer faithfully,
diligently, competently, and to the best of her ability, and she shall
exclusively devote her full working time, energy, and attention to the business
of the Employer and to the promotion of the Employer’s interests throughout the
term of the Employment Agreement. Without the written consent of the board of
directors of each of Southern Community Financial Corporation and the Bank,
during the term of this Employment Agreement the Executive shall not render
services to or for any person, firm, corporation, or other entity or
organization in exchange for compensation, regardless of the form in which the
compensation is paid and regardless of whether it is paid directly or indirectly
to the Executive. Nothing in this Article 2 shall prevent the Executive from
managing his personal investments and affairs, provided that doing so does not
interfere with the proper performance of his duties and responsibilities as
Executive Vice President.

 

1.3 Term of Employment. The initial term of employment under this Employment
Agreement shall be for the period commencing upon the April 28, 2006 effective
date of this Employment Agreement and ending three calendar years from the
effective date of this Employment Agreement. On each anniversary of the
effective date of this Employment Agreement, the term of this Employment
Agreement shall automatically be extended for one additional year period beyond
the then-effective expiration date unless written notice from the Employer or
the Executive is received 90 days prior to an anniversary date advising the
other that this Employment Agreement shall not be further extended. If the board
decides not to extend the term of this Employment Agreement, this Employment
Agreement shall nevertheless remain in force until its then-current three-year
term expires. The board’s decision not to extend the term of this Employment
Agreement shall not – by itself – give the Executive any rights under this
Employment Agreement to claim an adverse change in his position, compensation,
or circumstances or otherwise to claim entitlement to severance benefits under
Articles 4 or 5 of this Employment Agreement, absent some other reason that
entitles Executive to such benefits pursuant to either or both of such Articles.
References herein to the term of this Employment Agreement shall refer to the
initial term, as the same may be extended. Unless sooner terminated, the
Executive’s employment and the term of this Employment Agreement shall terminate
when the Executive attains age 65.

 

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Article 2

Compensation and Other Benefits

 

2.1 Base Salary. In consideration of the Executive’s performance of her
obligations under this Employment Agreement, the Bank shall pay or cause to be
paid to the Executive a salary at the annual rate of not less than $170,000,
payable in equal or approximately equal monthly installments. The Executive’s
salary shall be reviewed annually by the Employer’s board of directors or by the
board committee having jurisdiction over executive compensation. The Executive’s
salary shall be increased no less frequently than annually to account for cost
of living increases. The Executive’s salary also may be increased beyond the
amount necessary to account for cost of living increases at the discretion of
the committee having jurisdiction over executive compensation. However, the
Executive’s salary shall not be reduced. The Executive’s salary, as the same may
be increased from time to time, is referred to in this Employment Agreement as
the “Base Salary.”

 

2.2 Benefit Plans and Perquisites. The Executive shall be entitled throughout
the term of this Employment Agreement to participate in any and all officer or
employee compensation, bonus, incentive, and benefit plans in effect from time
to time, including without limitation plans providing pension, retirement,
medical, dental, disability, and group life benefits, and to receive any and all
other fringe benefits provided from time to time, provided that the Executive
satisfies the eligibility requirements for the plans or benefits. Without
limiting the generality of the foregoing –

 

(a) Participation in Stock Plans. The Executive shall be eligible to participate
in any stock-based compensation, incentive, bonus, or purchase plans existing on
the date of this Employment Agreement or adopted during the term of this
Employment Agreement.

 

(b) Club Dues. During the term of this Employment Agreement, the Employer shall
pay or cause to be paid the Executive’s membership assessments and dues in civic
clubs. Without limiting the generality of the foregoing, the Executive shall be
reimbursed for assessments, dues, and expenses associated with his membership in
and use of the private country club of his choice in Forsyth County or Surry
County.

 

(c) Disability Insurance. The Employer shall reimburse the Executive for the
Executive’s cost to purchase and maintain disability insurance coverage on
himself during the term of this Employment Agreement. The amount reimbursed by
the Employer shall be grossed up to compensate the Executive for federal and
state income taxes imposed as a result of the Employer’s reimbursement of the
Executive’s cost. The disability insurance policy shall be owned by the
Executive exclusively.

 

(d) Reimbursement of Business Expenses. Upon submission of appropriate
documentation by the Executive and approval by the board of directors or by a
board committee appointed for such purpose, the Employer agrees to reimburse the
Executive for all out-of-pocket expenses incurred performing his obligations
under this Employment Agreement, including but not limited to all reasonable
business travel and entertainment expenses incurred while acting at the request
of or in the service of the Employer and reasonable expenses for attendance at
annual and other periodic meetings of trade associations. Except for club dues
under section 2.2(b), to be reimbursable each expense must be of a nature
qualifying it as a proper deduction on the Employer’s income tax returns as a
business expense rather than deductible compensation to the Executive. The
records and other documentary evidence submitted by the Executive to the
Employer with each request for reimbursement shall be in the form required by
applicable statutes and regulations issued by appropriate taxing authorities for
the substantiation of expenditures as deductible business expenses of the
Employer rather than deductible compensation to the Executive.

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2.3 Vacation. The Executive shall be entitled to paid annual vacation and sick
leave in accordance with the policies established from time to time by the
Employer. The Executive shall not be entitled to any additional compensation for
failure to allotted vacation or sick leave, nor shall the Executive be allowed
to carry over unused vacation allowance from one calendar year to the next. The
Executive shall be entitled to accumulate unused sick leave from one year to the
next for use solely in the case of actual illness.

 

2.4 Taxes. All compensation of the Executive shall be subject to withholding and
other employment taxes imposed by federal, state, and local law.

 

2.5 Indemnification and Insurance. (a) Indemnification. The Employer shall
indemnify the Executive or cause the Executive to be indemnified with respect to
his activities as a director, officer, employee, or agent of the Employer or as
a person who is serving or has served at the request of the Employer (a
“representative”) as a director, officer, employee, agent, or trustee of an
affiliated corporation, joint venture trust or other enterprise, domestic or
foreign, in which the Employer has a direct or indirect ownership interest
against expenses (including without limitation attorneys’ fees, judgments,
fines, and amounts paid in settlement) actually and reasonably incurred by her
(“Expenses”) in connection with any claim against the Executive that is the
subject of any threatened, pending, or completed action, suit, or other type of
proceeding, whether civil, criminal, administrative, investigative, or otherwise
and whether formal or informal (a “Proceeding”), to which the Executive was, is,
or is threatened to be made a party by reason of the Executive being or having
been such a director, officer, employee, agent, or representative.

 

The indemnification provided herein shall not be exclusive of any other
indemnification or right to which the Executive may be entitled and shall
continue after the Executive has ceased to occupy a position as an officer,
director, employee, agent or representative with respect to Proceedings relating
to or arising out of the Executive’s acts or omissions during her service in
such position. The indemnification provided to the Executive under this
Employment Agreement for the Executive’s service as a representative shall be
payable if and only if and only to the extent that reimbursement to the
Executive by the affiliated entity with which the Executive has served as a
representative, whether pursuant to agreement, applicable law, articles of
incorporation or association, by-laws or regulations of the entity, or insurance
maintained by such affiliated entity, is insufficient to compensate the
Executive for Expenses actually incurred and otherwise payable by the Employer
under this Employment Agreement. Any payments for such Expenses in fact made to
or on behalf of the Executive directly or indirectly by the affiliated entity
with which the Executive served as a representative shall reduce the obligation
of the Employer hereunder.

 

(b) Exclusions. Anything herein to the contrary notwithstanding, however,
nothing in this Section 2.5 requires indemnification, reimbursement, or payment
by the Employer, and the Executive shall not be entitled to demand
indemnification, reimbursement, or payment –

 

(1) if and to the extent indemnification, reimbursement, or payment constitutes
a “prohibited indemnification payment” within the meaning of Federal Deposit
Insurance Corporation Rule 359.1(l)(1) [12 CFR 359.1(l)(1)], or

 

(2) for any claim or any part thereof as to which the Executive shall have been
determined by a court of competent jurisdiction, from which no appeal is or can
be taken, by clear and convincing evidence, to have acted with deliberate intent
to cause injury to the Employer or with reckless disregard for the best
interests of the Employer, or

 

(3) for any claim or any part thereof arising under Section 16(b) of the
Securities Exchange Act of 1934 as a result of which the Executive is required
to pay any penalty, fine, settlement, or judgment, or

 

(4) for any obligation of the Executive based upon or attributable to the
Executive gaining in fact any personal gain, profit, or advantage to which he
was not entitled, or 

 

(5) any proceeding initiated by the Executive without the consent or
authorization of the Employer’s board of directors, but this exclusion shall not
apply with respect to any claims brought by the Executive (a) to enforce his
rights under this Employment Agreement, or (b) in any Proceeding initiated by
another person or entity whether or not such claims were brought by the
Executive against a person or entity who was otherwise a party to such
proceeding.

 

 

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(c) Insurance. The Employer shall maintain or cause to be maintained fidelity
and Directors & Officers’ liability insurance covering the Executive throughout
the term of this Employment Agreement.

 

Article 3

Termination of Employment

 

3.1 Termination by the Employer. (a) Death or Disability. The Executive’s
employment shall terminate automatically on the date of the Executive’s death.
If the Executive dies in active service to the Employer, for twelve months after
the Executive’s death the Employer shall provide the Executive’s family with and
pay the premiums for continuing health care coverage under COBRA substantially
identical to that provided for the Executive before her death.

 

By delivery of written notice 30 days in advance to the Executive, the Employer
may terminate the Executive’s employment if the Executive is disabled. For
purposes of this Employment Agreement, the Executive shall be considered
“disabled” if for health or medical-related reasons she is unable to and does
not perform her duties hereunder for a period of 90 consecutive days. The
Executive shall not be considered disabled, however, if he returns to work on a
full-time basis within 30 days after the Employer gives him notice of
termination due to disability.

 

(b) Termination Without Cause. With written notice to the Executive 60 days in
advance, the Employer may terminate the Executive’s employment without Cause.
Upon such event, the compensation and benefits after termination provisions of
Sections 4.4 and 4.5 shall apply, in addition to any other applicable
post-termination payments or benefits provided for in this Employment Agreement.

 

(c) Termination with Cause. The Employer may terminate the Executive’s
employment with Cause. Upon such event, the Executive shall not be entitled to
any further compensation or other benefits beyond his effective termination date
in accordance with Section 4.1, except such benefits which by the terms of their
plan document continue after such termination or except as may be otherwise
provided for in this Employment Agreement. The term “Cause” means any of the
following –

 

(1) an intentional act of fraud, embezzlement, or theft by the Executive in the
course of his employment. For purposes of this Employment 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 Employer, or

 

(2) intentional violation of any law or significant policy of the Employer
committed in connection with the Executive’s employment, which in the Employer’s
judgment has a material adverse effect on the Employer, or

 

(3) the Executive’s gross negligence or gross neglect of duties in the
performance of his duties to the Employer, or

 

(4) intentional wrongful damage by the Executive to the business or property of
the Employer, including without limitation the reputation of the Employer, which
in the Employer’s sole judgment causes material harm to the Employer, or

 

(5) a breach by the Executive of his fiduciary duties as an officer or director
of the Employer or misconduct involving dishonesty, in either case whether in
his capacity as an officer or as a director of the Bank or Southern Community
Financial Corporation, or

 

(6) a breach by the Executive of this Employment Agreement that, in the sole
judgment of the Employer, is a material breach, which breach is not corrected by
the Executive within 30 days after receiving written notice of the breach which
the Employer shall provide, or

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(7) removal of the Executive from office or permanent prohibition of the
Executive 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), or

 

(8) conviction of the Executive for or plea of nolo contendere to a felony or
conviction of or plea of nolo contendere to a misdemeanor involving moral
turpitude, or the actual incarceration of the Executive.

 

3.2 Termination by the Executive. The Executive may terminate her employment
with written notice to the Employer 60 days in advance, whether with or without
Good Reason. If the Executive terminates with Good Reason, the termination will
take effect at the conclusion of the 60-day period unless the event or
circumstance constituting Good Reason is cured by the Employer or unless the
notice of termination for Good Reason is revoked by the Executive within the
60-day period. Upon such event, the compensation and benefits after termination
provisions of Sections 4.4 and 4.5 shall apply, in addition to any other
applicable post-termination payments or benefits provided for in this Employment
Agreement. For purposes of this Employment Agreement, “Good Reason” means any of
the following events occur without the Executive’s written consent –

 

(a) Reduced Base Salary: reduction of the Executive’s Base Salary, or

 

(b) Participation in Benefit Plans Reduced or Terminated: reduction of the
Executive’s bonus, incentive, or other compensation award opportunities under
the Employer’s benefit plans, unless a company-wide reduction of all officers’
award opportunities occurs simultaneously, or termination of the Executive’s
participation in any officer or employee benefit plan maintained by the
Employer, unless the plan is terminated because of changes in law or loss of tax
deductibility to the Employer for contributions to the plan, or unless the plan
is terminated as a matter of policy applied equally to all participants in the
plan, or

 

(c) Reduced Responsibilities or Status: assignment to the Executive of duties
that are materially inconsistent with the Executive’s position as the Bank’s
Executive Vice President or that represent a reduction of his authority, or

 

(d) Failure to Obtain Assumption Agreement: failure to obtain an assumption of
the Employer’s obligations under this Employment Agreement by any successor to
the Employer, regardless of whether the entity becomes a successor to the
Employer as a result of a merger, consolidation, sale of assets, or other form
of purchase, sale or reorganization, or

 

(e) Material Breach: a material breach of this Employment Agreement by the
Employer that is not corrected within 30 days after receiving written notice of
the breach from the Executive, or

 

(f) Relocation of the Executive: relocation of the Bank’s principal executive
offices, or requiring the Executive to change his principal work location, to
any location that is more than 15 miles from the location of the Bank’s
principal executive offices on the date of this Employment Agreement.

 

3.3 Notice. Any purported termination by the Employer or by the Executive shall
be communicated by written notice of termination to the other. The notice must
state the specific termination provision of this Employment Agreement relied
upon. The notice must also state the date on which termination shall become
effective, which shall be a date not earlier than the date of the termination
notice. If termination is for Cause or with Good Reason, the notice must state
in reasonable detail the facts and circumstances forming the basis for
termination of the Executive’s employment.

 

Article 4

Compensation and Benefits After Termination

 

4.1 Cause. If the Executive’s employment terminates for Cause, the Executive
shall receive the salary to which she is entitled through the date on which
termination becomes effective and any other benefits to which she may be
entitled under the Employer’s benefit plans and policies in effect on the date
of termination.

 

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4.2 Termination by the Executive Other than for Good Reason. If the Executive
terminates employment other than for Good Reason, the Executive shall receive
the salary to which she is entitled through the date on which his termination
becomes effective and any other benefits to which she may be entitled under the
Employer’s benefit plans and policies.

 

4.3 Continued Salary in the Case of Termination Because of Disability. If the
Executive’s employment terminates because of disability, the Executive shall
receive the salary earned through the date on which termination becomes
effective, any unpaid bonus or incentive compensation due to the Executive for
the calendar year preceding the calendar year in which the termination becomes
effective, any payments the Executive is eligible to receive under any
disability insurance program in which the Executive participates, and such other
benefits to which he may be entitled under the Employer’s benefit plans,
policies, and agreements.

 

4.4 Termination Without Cause and Termination for Good Reason. If the Employer
terminates the Executive’s employment without Cause or if the Executive
terminates employment for Good Reason, the Executive shall continue to receive
her most recent Base Salary level for the unexpired term of this Employment
Agreement, but she shall not be entitled to continued participation in the
Employer’s or a subsidiary’s retirement plans or any stock-based plans unless
the terms of any applicable plan document allow such participation. The Employer
and the Executive acknowledge and agree that the compensation and benefits under
this Section 4.4 shall not be payable if compensation and benefits are payable
or shall have been paid previously to the Executive under Article 5 of this
Employment Agreement.

 

4.5 Post-Termination Insurance and Medical Coverage. If the Executive’s
employment terminates involuntarily but without Cause or voluntarily but with
Good Reason, or if the Executive’s employment terminates because of disability,
the Employer shall continue or cause to be continued at the Employer’s expense
life, health, and disability insurance benefits in effect during the two years
preceding the date of the Executive’s termination. The life, health, and
disability insurance benefits shall continue until the first to occur of (a) the
Executive’s return to employment with the Employer or another employer, (b) the
Executive’s attainment of age 65, (c) the Executive’s death, or (d) the end of
the term remaining under this Employment Agreement at the time of the
Executive’s termination.

 

4.6 Salary Continuation Agreement. The Bank and the Executive shall use their
best efforts to finalize and enter into a Salary Continuation Agreement and
Endorsement Split Dollar Agreement. The Salary Continuation Agreement shall
provide for an annual benefit payable to the Executive in equal monthly
installments for his lifetime, beginning after her termination of service with
the Bank on or after attaining age 65. Unless the Salary Continuation Agreement
or Endorsement Split Dollar Agreement explicitly provides otherwise, whether
benefits are properly payable to the Executive under the Salary Continuation
Agreement or the Endorsement Split Dollar Agreement shall be determined solely
by reference to those agreements, except that the Executive shall forfeit all
benefits under the Salary Continuation Agreement and Endorsement Split Dollar
Agreement for violation of the covenant against competition in Section 7.3 of
this Employment Agreement.

 

Article 5

Change in Control Benefits

 

5.1 Change in Control Benefits. (a) If a Change in Control occurs during the
term of this Employment Agreement and if within 24 months thereafter the
Executive’s employment terminates involuntarily but without Cause or voluntarily
but with Good Reason, the Employer shall make or cause to be made a lump-sum
payment to the Executive in an amount in cash equal to three times the
Executive’s annual compensation. For this purpose, annual compensation means (1)
the Executive’s Base Salary when the Change in Control occurs plus (2) any bonus
or incentive compensation earned for the calendar year ended immediately before
the year in which the Change in Control occurred, regardless of when the bonus
or incentive compensation earned for the preceding calendar year is paid and
regardless of whether all or part of the bonus or incentive compensation is
subject to elective deferral. Annual compensation shall be calculated without
regard to any deferrals under qualified or nonqualified plans, but annual
compensation shall not include interest or other earnings credited to the
Executive under qualified or nonqualified plans. The amount payable to the
Executive hereunder shall not be reduced to account for the time value of money
or discounted to present value. The payment required under this paragraph (a) is
payable no later than five business days after termination of employment. If the
Executive is removed from office or if her employment terminates before a Change
in Control occurs but after discussions with a third party regarding a Change in
Control commence, and if those discussions ultimately conclude with a Change in
Control, then for purposes of this Employment Agreement the removal of the
Executive or termination of her employment shall be deemed to have occurred
after the Change in Control.

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(b) Benefit Plans: In addition to insurance and medical benefits under Section
4.5 of this Employment Agreement and any benefits to which the Executive may be
entitled under the Salary Continuation Agreement and Endorsement Split Dollar
Agreement referred to in Section 4.6 of this Employment Agreement, if a Change
in Control occurs during the term of this Employment Agreement and if within 24
months thereafter the Executive’s employment terminates involuntarily but
without Cause or voluntarily but with Good Reason the Employer shall (1) cause
the Executive to become fully vested in any qualified and non-qualified plans,
programs, or arrangements in which the Executive participated if the plan,
program, or arrangement does not address the effect of a change in control, and
(2) contribute or cause to be contributed to the Executive’s 401(k) plan
account, if any, the matching and profit-sharing contributions, if any, that the
Executive is entitled to based upon all W-2 income earned by the Executive for
the plan year.

 

5.2 Definition of Change in Control. For purposes of this Employment Agreement,
“Change in Control” means any one or more of the following events occurs –

 

(a) Merger. Southern Community Financial Corporation merges into or consolidates
with another corporation, or merges another corporation into Southern Community
Financial Corporation, and as a result less than a majority of the combined
voting power of the resulting corporation immediately after the merger or
consolidation is held by persons who were holders of Southern Community
Financial Corporation’s voting securities immediately before the merger or
consolidation. For purposes of this Employment Agreement, the term “person”
means an individual, corporation, partnership, trust, association, joint
venture, pool, syndicate, sole proprietorship, unincorporated organization, or
other entity,

 

(b) Acquisition of Significant Share Ownership. after the date of this
Employment Agreement a report on Schedule 13D, Schedule TO, or another form or
schedule (other than Schedule 13G) is filed or is required to be filed under
Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if the schedule
discloses that the filing person or persons acting in concert has or have become
the beneficial owner of 25% or more of the combined voting power of Southern
Community Financial Corporation’s voting securities outstanding (but this
paragraph (b) shall not apply to beneficial ownership of voting shares held by
the Employer in a fiduciary capacity or beneficial ownership of voting shares
held by an employee benefit plan of the Employer),

 

(c) Change in Board Composition. during any period of two consecutive years,
individuals who constitute Southern Community Financial Corporation’s board of
directors at the beginning of the two-year period cease for any reason to
constitute at least a majority thereof; provided, however, that – for purposes
of this paragraph (c) – each director who is first elected by the board (or
first nominated by the board for election by stockholders) by a vote of at least
two-thirds (2/3) of the directors who were directors at the beginning of the
period shall be deemed to have been a director at the beginning of the two-year
period, or

 

(d) Sale of Assets. Southern Community Financial Corporation sells to a third
party all or substantially all of Southern Community Financial Corporation’s
assets. For this purpose, sale of all or substantially all of Southern Community
Financial Corporation’s assets includes, but is not limited to, sale of the Bank
alone.

 

5.3 No Multiple Severance Payments. If the Executive receives payment under
Section 5.1 she shall not be entitled to any benefits under Section 4.4 of this
Employment Agreement.

 

Article 6

Confidentiality and Creative Work

 

6.1 Non-disclosure. The Executive covenants and agrees that she will not reveal
to any person, firm, or corporation any confidential information of any nature
concerning the Employer or its business, or anything connected therewith. As
used in this Article 6, the term “confidential information” means all of the
Employer’s and its affiliates’ confidential and proprietary information and
trade secrets in existence on the date hereof or existing at any time during the
term of this Employment Agreement, including but not limited to –

 

(a) the whole or any portion or phase of any business plans, financial
information, purchasing data, supplier data, accounting data, or other financial
information,

 

 

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(b) the whole or any portion or phase of any research and development
information, design procedures, algorithms or processes, or other technical
information,

 

(c) the whole or any portion or phase of any marketing or sales information,
sales records, customer lists, prices, sales projections, or other sales
information, and

 

(d) trade secrets, as defined from time to time by the laws of the State of
North Carolina.

 

Notwithstanding the foregoing, confidential information excludes information
that – as of the date hereof or at any time after the date hereof – is published
or disseminated without obligation of confidence or that becomes a part of the
public domain (1) by or through action of the Employer, or (2) otherwise than by
or at the direction of the Executive. This Section 6.1 does not prohibit
disclosure required by an order of a court having jurisdiction or a subpoena
from an appropriate governmental agency or disclosure made by the Executive in
the ordinary course of business and within the scope of his authority.

 

6.2 Return of Materials. The Executive agrees to deliver or return to the
Employer upon termination, upon expiration of this Employment Agreement, or as
soon thereafter as possible, all written information and any other similar items
furnished by the Employer or prepared by the Executive in connection with her
services hereunder. The Executive will retain no copies thereof after
termination of this Employment Agreement or termination of the Executive’s
employment.

 

6.3 Creative Work. The Executive agrees that all creative work and work product,
including but not limited to all technology, business management tools,
processes, software, patents, trademarks, and copyrights developed by the
Executive during the term of this Employment Agreement and in the course and
scope of her duties hereunder, regardless of when or where such work or work
product was produced, constitutes work made for hire, all rights of which are
owned by the Employer. The Executive hereby assigns to the Employer all rights,
title, and interest, whether by way of copyrights, trade secret, trademark,
patent, or otherwise, in all such work or work product, regardless of whether
the same is subject to protection by patent, trademark, or copyright laws.

 

6.4 Injunctive Relief. The Executive acknowledges that it is impossible to
measure in money the damages that will be suffered by the Employer if the
Executive fails to observe the obligations imposed on him by this Article 6.
Accordingly, if the Bank institutes an action to enforce the provisions hereof,
the Executive hereby waives the claim or defense that an adequate remedy at law
is available to the Employer and the Executive agrees not to urge in any such
action the claim or defense that an adequate remedy at law exists.

 

6.5 Affiliates’ Confidential Information is Covered; Confidentiality Obligation
Survives Termination. For purposes of this Employment Agreement, the term
“affiliate” includes Southern Community Financial Corporation, the Bank, and any
entity that directly or indirectly through one or more intermediaries controls,
is controlled by, or is under common control with Southern Community Financial
Corporation or the Bank. The rights and obligations set forth in this Article 6
shall survive termination of this Employment Agreement.

 

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Article 7

Competition After Employment Termination

 

7.1 Covenant Not to Solicit Employees. The Executive agrees not to solicit the
services of any officer or employee of the Employer for one year after the
Executive’s employment termination.

 

7.2 Covenant Not to Compete. (a) The Executive covenants and agrees that she
will not, without advance written consent of the Employer, compete directly or
indirectly with the Employer for two years after termination of her employment,
plus any period during which the Executive is in violation of this covenant not
to compete and any period during which the Employer seeks by litigation to
enforce this covenant not to compete. For purposes of this section –

 

(1)the term “compete” means

 

(a)providing financial products or services on behalf of any financial
institution for any person residing in the territory,

 

(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
Employer at the date of the Executive’s termination of employment to seek
financial products or services from another financial institution.

 

(2)the words “directly or indirectly” means –

 

(a)acting as a consultant, officer, director, independent contractor, or
employee of any financial institution in competition with the Employer 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 Employer
at the Executive’s termination of employment.

 

(3)the term “customer” means any person to whom the Employer is providing
financial products or services on the date of the Executive’s termination of
employment.

 

(4)the term “financial institution” means any bank, savings association, or bank
or savings association holding 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 Employer or one of its affiliated
corporations.

 

(5)“financial product or service” means 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 financial activity
under section 4(k) of the Bank Holding Company Act of 1956 and that is offered
by the Employer or an affiliate on the date of the Executive’s employment
termination, including but not limited to banking activities and activities that
are closely related and a proper incident to banking.

 

(6)the term “person” means any individual or individuals, corporation,
partnership, fiduciary or association.

 

(7)the term “territory” means all of Forsyth, Guilford, Iredell, Rockingham,
Stokes, Surry, 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 the
Executive’s termination of employment.

 

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(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.

 

7.3 Remedies. Because of the unique character of the services to be rendered by
the Executive hereunder, the Executive understands that the Employer 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 7. Accordingly, the Executive agrees that the Employer’s remedies for a
material breach or threatened breach of this Article 7 include but are not
limited to (a) forfeiture of any money representing accrued salary, contingent
payments, or other fringe benefits due and payable to the Executive, (b)
forfeiture of any severance benefits under Sections 4.4 and 4.5 of this
Employment Agreement, (c) forfeiture of benefits under the Salary Continuation
Agreement and Endorsement Split Dollar Agreement referred to in Section 4.6 of
this Agreement, and (d) a suit in equity by the Employer 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
Employer 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 Employer from pursuing any other remedies for the breach or
threatened breach.

 

7.4 Article 7 Survives Termination But Is Void After a Change in Control. The
rights and obligations set forth in this Article 7 shall survive termination of
this Employment Agreement. However, Article 7 shall become null and void
effective immediately upon a Change in Control.

 

Article 8

Miscellaneous

 

8.1 Successors and Assigns. (a) This Employment Agreement Is Binding on The
Employer’s Successors. This Employment Agreement shall be binding upon the
Employer and any successor to the Employer, including any persons acquiring
directly or indirectly all or substantially all of the business or assets of the
Employer by purchase, merger, consolidation, reorganization, or otherwise. But
this Employment Agreement and the Employer’s obligations under this Employment
Agreement are not otherwise assignable, transferable, or delegable by the
Employer. By agreement in form and substance satisfactory to the Executive, the
Employer shall require any successor to all or substantially all of the business
or assets of the Employer to expressly assume and agree to perform this
Employment Agreement in the same manner and to the same extent the Employer
would be required to perform if no such succession had occurred.

 

(b) This Employment Agreement Is Enforceable by the Executive and Her Heirs.
This Employment Agreement will inure to the benefit of and be enforceable by the
Executive’s personal or legal representatives, executors, administrators,
successors, heirs, distributees, and legatees.

 

(c) This Employment Agreement Is Personal in Nature and Is Not Assignable. This
Employment Agreement is personal in nature. Without written consent of the other
parties, no party shall assign, transfer, or delegate this Employment Agreement
or any rights or obligations under this Employment Agreement except as expressly
provided herein. Without limiting the generality or effect of the foregoing, the
Executive’s right to receive payments hereunder is not assignable or
transferable, whether by pledge, creation of a security interest, or otherwise,
except for a transfer by the Executive’s will or by the laws of descent and
distribution. If the Executive attempts an assignment or transfer that is
contrary to this Section 8.1, the Employer shall have no liability to pay any
amount to the assignee or transferee.

 

8.2 Governing Law, Jurisdiction, and Forum. This Employment Agreement shall be
construed under and governed by the internal laws of the State of North
Carolina, without giving effect to any conflict of laws provision or rule
(whether of the State of North Carolina or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
North Carolina. By entering into this Employment Agreement, the Executive
acknowledges that she is subject to the jurisdiction of both the federal and
state courts in the State of North Carolina. Any actions or proceedings
instituted under this Employment Agreement shall be brought and tried solely in
courts located in Forsyth County, North Carolina or in the federal court having
jurisdiction in Winston-Salem, North Carolina. The Executive expressly waives
his rights to have any such actions or proceedings brought or tried elsewhere.

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8.3 Entire Agreement. This Employment Agreement sets forth the entire agreement
of the parties concerning the employment of the Executive. Any oral or written
statements, representations, agreements, or understandings made or entered into
prior to or contemporaneously with the execution of this Employment Agreement
are hereby rescinded, revoked, and rendered null and void by the parties.
Without limiting the generality of the foregoing, the parties hereto acknowledge
and agree that this Employment Agreement supersedes in its entirety the
Employment Agreement dated as of January 12, 2004, entered into by the Executive
and the Bank, as amended or supplemented. The January 12, 2004 Employment
Agreement shall hereafter be void and of no force or effect.

 

8.4 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. Unless otherwise changed by notice, notice shall be properly
addressed to the Executive if addressed to the address of the Executive on the
books and records of the Employer at the time of the delivery of notice, and
properly addressed to the Employer if addressed to the Board of Directors,
Southern Community Financial Corporation, 4605 Country Club Road, Winston-Salem,
North Carolina 27104.

 

8.5 Severability. In the case of conflict between any provision of this
Employment Agreement and any statute, regulation, or judicial precedent, the
latter shall prevail, but the affected provisions of this Employment Agreement
shall be curtailed and limited solely to the extent necessary to bring them
within the requirements of law. If any provision of this Employment Agreement is
held by a court of competent jurisdiction to be indefinite, invalid, void or
voidable, or otherwise unenforceable, the remainder of this Employment Agreement
shall continue in full force and effect unless that would clearly be contrary to
the intentions of the parties or would result in an injustice.

 

8.6 Captions and Counterparts. The captions in this Employment Agreement are
solely for convenience. The captions in no way define, limit, or describe the
scope or intent of this Employment Agreement. This Employment Agreement may be
executed in several counterparts, each of which shall be deemed to be an
original but all of which together shall constitute one and the same instrument.

 

8.7 No Duty to Mitigate. The Employer hereby acknowledges that it will be
difficult and could be impossible (a) for the Executive to find reasonably
comparable employment after his employment terminates, and (b) to measure the
amount of damages the Executive may suffer as a result of termination.
Additionally, the Employer acknowledges that its general severance pay plans do
not provide for mitigation, offset, or reduction of any severance payment
received thereunder. Accordingly, the Employer further acknowledges that the
payment of severance benefits under this Employment Agreement is reasonable and
shall be liquidated damages. The Executive shall not be required to mitigate the
amount of any payment provided for in this Employment Agreement by seeking other
employment. Moreover, the amount of any payment provided for in this Employment
Agreement shall not be reduced by any compensation earned or benefits provided
as the result of employment of the Executive or as a result of the Executive
being self-employed after termination of her employment.

 

8.8 Amendment and Waiver. This Employment Agreement may not be amended,
released, discharged, abandoned, changed, or modified in any manner, except by
an instrument in writing signed by each of the parties hereto. The failure of
any party hereto to enforce at any time any of the provisions of this Employment
Agreement shall not be construed to be a waiver of any such provision, nor
affect the validity of this Employment Agreement or any part thereof or the
right of any party thereafter to enforce each and every such provision. No
waiver or any breach of this Employment Agreement shall be held to be a waiver
of any other or subsequent breach.

 

8.9 Payment of Legal Fees. The Employer is aware that after a Change in Control
management could cause or attempt to cause the Employer to refuse to comply with
its obligations under this Employment Agreement, or could institute or cause or
attempt to cause the Employer to institute litigation seeking to have this
Employment Agreement declared unenforceable, or could take or attempt to take
other action to deny Executive the benefits intended under this Employment
Agreement. In these circumstances, the purpose of this Employment Agreement
would be frustrated. It is the Employer’s intention that the Executive not be
required to incur the expenses associated with the enforcement of his rights
under this Employment 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 Employer’s
intention that the Executive not be forced to negotiate settlement of his rights
under this Employment Agreement under threat of incurring expenses. Accordingly,
if after a Change in Control occurs it appears to the Executive that (a) the
Employer has failed to comply with any of its obligations under this Employment
Agreement, or (b) the Employer or any other person has taken any action to
declare this Employment 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,
the Employer irrevocably authorizes the Executive from time to time to retain
counsel of her choice, at the Employer’s expense as provided in this Section
8.9, to represent the Executive in connection with the initiation or defense of
any litigation or other legal action, whether by or against the Employer or any
director, officer, stockholder, or other person affiliated with the Employer, in
any jurisdiction. Notwithstanding any existing or previous attorney-client
relationship between the Employer and any counsel chosen by the Executive under
this Section 8.9, the Employer irrevocably consents to the Executive entering
into an attorney-client relationship with that counsel, and the Employer 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 Employer 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 $200,000, whether suit be brought or not, and whether or not incurred
in trial, bankruptcy, or appellate proceedings. The Employer’s obligation to pay
the Executive’s legal fees provided by this Section 8.9 operates separately from
and in addition to any legal fee reimbursement obligation the Employer may have
with the Executive under any separate severance or other agreement. Anything in
this Section 8.9 to the contrary notwithstanding however, the Employer shall not
be required to pay or reimburse 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 Corporation [12 CFR 359.3].

 

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8.10 Consultation with Counsel and Interpretation of this Employment Agreement.
The Executive acknowledges and agrees that she has had the assistance of counsel
of her choosing in the negotiation of this Employment Agreement, or she has
chosen not to have the assistance of her own counsel. Both the Employer and the
Executive have participated in the negotiation and drafting of this Employment
Agreement, and they hereby agree that there shall not be strict interpretation
against either party in connection with any review of this Employment Agreement
in which interpretation thereof is an issue.

 

8.11 Compliance with Internal Revenue Code Section 409A. The Employer and the
Executive intend that their exercise of authority or discretion under this
Employment Agreement shall comply with section 409A of the Internal Revenue Code
of 1986. If when the Executive’s employment terminates the Executive is a
specified employee, as defined in section 409A of the Internal Revenue Code of
1986, and if any payments under this Employment Agreement, including Articles 4
or 5, will result in additional tax or interest to the Executive because of
section 409A, then despite any provision of this Employment Agreement to the
contrary the Executive will not be entitled to the payments until the earliest
of (a) the date that is at least six months after termination of the Executive’s
employment for reasons other than the Executive’s death, (b) the date of the
Executive’s death, or (c) any earlier date that does not result in additional
tax or interest to the Executive under section 409A. As promptly as possible
after the end of the period during which payments are delayed under this
provision, the entire amount of the delayed payments shall be paid to the
Executive in a single lump sum. If any provision of this Employment Agreement
does not satisfy the requirements of section 409A, such provision shall
nevertheless be applied in a manner consistent with those requirements. If any
provision of this Employment Agreement would subject the Executive to additional
tax or interest under section 409A, the Employer shall reform the provision.
However, the Employer 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 Employer shall not be required to incur any
additional compensation expense as a result of the reformed provision.
References in this Employment Agreement to section 409A of the Internal Revenue
Code of 1986 include rules, regulations, and guidance of general application
issued by the Department of the Treasury under Internal Revenue Code section
409A.

 

[The remainder of this page is left blank intentionally]

 

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In Witness Whereof, the parties have executed this Employment Agreement as of
the date first written above.

 

EXECUTIVE SOUTHERN COMMUNITY BANK AND TRUST         /s/ Merle B. Andrews By: /s/
F. Scott Bauer Merle B. Andrews   F. Scott Bauer   Its: Chief Executive Officer
              SOUTHERN COMMUNITY FINANCIAL CORPORATION       By: /s/ F. Scott
Bauer     F. Scott Bauer   Its: Chief Executive Officer

 

 

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