EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (“Agreement”), made and entered into as of
February 10, 2005 (the “Effective Date”) by and between Douglas J. Hertha, a
resident of the State of Georgia (“Employee”), and SouthCrest Financial Group,
Inc., a Georgia corporation (“Employer”).

W I T N E S S E T H:

     WHEREAS, Employer desires to employ Employee as its Senior Vice President
and Chief Financial Officer and Employee desires to accept such employment;

     NOW, THEREFORE, in consideration of the employment of Employee by Employer,
of the premises and the mutual promises and covenants contained herein, and of
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, agree as
follows:

          1. Employment and Duties.

          1.1 Position. Employer hereby employs Employee to serve as its Senior
Vice President and Chief Financial Officer and to perform such duties and
responsibilities as are customarily performed by persons acting in such
capacity. During the term of this Agreement (as defined in Section 2 herein),
Employee will devote substantially all of his full time and effort to his duties
hereunder.

          1.2 Other Business Activities. The parties agree that the Employee
shall be free to engage in other non-competitive business activities and
ventures during the term of this Agreement, so long as any such other business
activities and ventures do not conflict or compete with the business of Employer
or prevent the Employee from the faithful performance of his duties hereunder.

     2. Term.

     Subject to the provisions of Section 12 of this Agreement, the period of
Employee’s employment under this Agreement shall be deemed to have commenced as
of the Effective Date, and shall continue for a period of three (3) years,
unless the Employee dies before the end of such three (3) years, in which case
the period of employment shall continue until the end of the month of such
death. The Agreement shall automatically renew on each anniversary of the
Effective Date such that upon each such anniversary, the term of the Agreement
shall continue for three (3) years, unless any party shall deliver to the other
party such party’s written notice of non-renewal no later than ninety (90) days
prior to any such anniversary.

          3. Compensation.

     For all services to be rendered by Employee during the term of this
Agreement,

          3.1 Base Salary. Employer shall pay Employee an annual base salary
equal to $110,000 (the “Base Salary”), less normal withholdings, payable in
equal monthly or more frequent installments as are customary under Employer’s
payroll practices from time to time. Employer’s Board of Directors shall review
Employee’s Base Salary annually and may increase Employee’s Base Salary from
year to year during the term of this Agreement. Any Base Salary increase
(regardless of form), will be determined by the Employer’s Board of Directors
after taking into account, among other things, changes in the cost of living,
Employee’s performance and the performance of Employer. Any action or review by
the Board of Directors may be delegated to an appropriate committee thereof.
Employee shall be entitled to annual incentive compensation in such amount and
subject to such criteria as the parties mutually agree as set forth on Exhibit A
attached hereto.

     4. Expenses.

     So long as Employee is employed hereunder, Employee is entitled to receive
reimbursement for, or seek payment directly by Employer of, all reasonable
expenses which are consistent with the normal policy of Employer in the
performance of Employee’s duties hereunder, provided that Employee accounts for
such expenses in writing in accordance with Employer’s reimbursement policies as
may be adopted from time to time.

          5. Employee Benefits.

          So long as Employee is actively employed hereunder, Employee will be
entitled to participate in the employee benefit, option, bonus and any other
compensation programs as may be available from time to time to executives of the
Employer similarly situated to Employee, as well as the items set forth on
Exhibit A attached hereto.

          6. Vacation.

     Employee shall be entitled to three (3) weeks annual vacation.

          7. Confidentiality.

 

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     In Employee’s position as an employee of Employer, Employee has had and
will have access to confidential information, trade secrets and other
proprietary information of vital importance to Employer and has and will also
develop relationships with customers, employees and others who deal with
Employer which are of value to Employer. Employer requires as a condition to
Employee’s employment with Employer that Employee agree to certain restrictions
on Employee’s use of the proprietary information and valuable relationships
developed during Employee’s employment with Employer. In consideration of the
terms and conditions contained herein, the parties hereby agree as follows:

          7.1 The parties mutually agree and acknowledge that Employer may
entrust Employee with highly sensitive, confidential, restricted and proprietary
information concerning various Business Opportunities (as hereinafter defined),
customer lists, and personnel matters. Employee acknowledges that he shall bear
a fiduciary responsibility to Employer to protect such information from use or
disclosure that is not necessary for the performance of Employee’s duties
hereunder, as an essential incident of Employee’s employment with Employer.

          7.2 For the purposes of this Section, the following definitions shall
apply:

               7.2.1 “Trade Secret” shall mean the identity and addresses of
customers of Employer, the whole or any portion or phase of any scientific or
technical information, design, process, procedure, formula or improvement that
is valuable and secret (in the sense that it is not generally known to
competitors of Employer) and which is defined as a “trade secret” under Georgia
law pursuant to the Georgia Trade Secrets Act.

               7.2.2 “Confidential Information” shall mean any data or
information, other than Trade Secrets, which is material to Employer and not
generally known by the public. Confidential Information shall include, but not
be limited to, Business Opportunities of Employer (as hereinafter defined), the
details of this Agreement, Employer’s business plans and financial statements
and projections, information as to the capabilities of Employer’s employees,
their respective salaries and benefits and any other terms of their employment
and the costs of the services Employer may offer or provide to the customers it
serves, to the extent such information is material to Employer and not generally
known by the public.

               7.2.3 “Business Opportunities” shall mean any specialized
information or plans of Employer concerning the provision of financial services
to the public, together with all related information concerning the specifics of
any contemplated financial services regardless of whether Employer has contacted
or communicated with such target person or business.

               7.2.4 Notwithstanding the definitions of Trade Secrets,
Confidential Information, and Business Opportunities set forth above, Trade
Secrets, Confidential Information, and Business Opportunities shall not include
any information:

                    (i) that is or becomes generally known to the public;

                    (ii) that is already known by Employee or is developed by
Employee after termination of employment through entirely independent efforts;

                    (iii) that Employee obtains from an independent source
having a bona fide right to use and disclose such information;

                    (iv) that is required to be disclosed by law, except to the
extent eligible for special treatment under an appropriate protective order; or

                    (v) that Employer’s Board of Directors approves for release.

          7.3 Employee shall not, without the prior approval of Employer’s Board
of Directors, during his employment with Employer and for so long thereafter as
the information or data remain Trade Secrets, use or disclose, or negligently
permit any unauthorized person who is not an employee of Employer to use,
disclose, or gain access to, any Trade Secrets of Employer, its affiliates, or
of any other person or entity making Trade Secrets available for Employer’s use.

          7.4 Employee shall not, without the prior written consent of Employer,
during his employment with Employer and for a period of twenty-four (24) months
thereafter as long as the information or data remains competitively sensitive,
use or disclose, or negligently permit any unauthorized person who is not
employed by Employer to use, disclose, or gain access to, any Confidential
Information to which the Employee obtained access by virtue of his employment
with Employer, except as provided in Section 7.2 of this Agreement.

          8. Observance of Security Measures.

     During Employee’s employment with Employer, Employee is required to observe
all security measures adopted to protect Trade Secrets, Confidential
Information, and Business Opportunities of Employer.

          9. Return of Materials.

     Upon the request of Employer and, in any event, upon the termination of his
employment with Employer, Employee shall deliver to Employer all memoranda,
notes, records, manuals or other documents, including all copies of such
materials containing Trade Secrets or Confidential Information, whether made or
compiled by Employee or furnished to him from any source by virtue of his
employment with Employer.

          10. Severability.

     Employee acknowledges and agrees that the covenants contained in
Sections 7, 8, 9 and 14 of this Agreement shall be construed as covenants
independent of one another and distinct from the remaining terms and conditions
of this Agreement,

 

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and severable from every other contract and course of business between Employer
and Employee, and that the existence of any claim, suit or action by Employee
against Employer, whether predicated upon this or any other agreement, shall not
constitute a defense to Employer’s enforcement of any covenant contained in
Sections 7, 8, 9 and 14 of this Agreement.

     11. Specific Performance.

     Employee acknowledges and agrees that the covenants contained in
Sections 7, 8, 9 and 14 of this Agreement shall survive any termination of
employment, as applicable, with or without Cause (as defined in Section 12
hereof), at the instigation or upon the initiative of either party. Employee
further acknowledges and agrees that the ascertainment of damages in the event
of Employee’s breach of any covenant contained in Sections 7, 8, 9 and 14 of
this Agreement would be difficult, if at all possible. Employee therefore
acknowledges and agrees that Employer shall be entitled in addition to and not
in limitation of any other rights, remedies, or damages available to Employer in
arbitration, at law or in equity, upon submitting whatever affidavit the law may
require, and posting any necessary bond, to have a court of competent
jurisdiction enjoin Employee from committing any such breach.

     12. Termination.

     During the term of this Agreement, Employee’s employment, including without
limitation, except as otherwise provided in Section 12 of this Agreement, all
compensation, salary, expenses reimbursement, and employee benefits may be
terminated as follows:

          12.1 At the election of Employer for Cause;

          12.2 At Employee’s election upon Employer’s breach of any material
provision of this Agreement;

          12.3 “Cause” shall mean (i) material dishonesty, gross negligence or
willful misconduct by Employee in the performance of his duties hereunder which
conduct results in material financial or reputational harm to Employer or its
affiliates; (ii) conviction (from which no appeal may be, or is, timely taken)
of Employee of a felony; (iii) initiation of suspension or removal proceedings
against Employee by federal or state regulatory authorities acting under lawful
authority pursuant to provisions of federal or state law or regulation which may
be in effect from time to time; (iv) knowing violation by Employee of federal or
state banking laws or regulations; or (v) refusal by Employee to perform a duly
authorized and lawful written directive of Employer’s President and Chief
Executive Officer and/or Board of Directors.

          12.4 Upon Employee’s death, or, at the election of either party, upon
Employee’s disability as determined in accordance with the standards and
procedures under Employer’s then-current long-term disability insurance coverage
provided by Employer, or, if such disability insurance coverage provided by
Employer is not then in place, upon Employee’s disability resulting in his
inability to perform the duties described in Section 1.1 of this Agreement for a
period of one hundred eighty (180) consecutive days.

          12.5 If this Agreement is terminated either (i) by Employer at any
time for any reason other than for Cause or (ii) upon Employer’s breach of this
Agreement, then Employer shall pay to Employee as Employer’s sole remaining
obligation to Employee under this Agreement the sum of the following:
(i) Employee’s Base Salary for the remaining months of the term of this
Agreement at the Base Salary rate then in effect; (ii) the cost of COBRA health
continuation coverage for Employee for the lesser of (a) the remaining months of
the term of this Agreement, or (b) the period during which Employee is entitled
to COBRA health continuation coverage from the Employer; and (iii) the cost for
term life insurance coverage for Employee for the remaining months of the term
of this Agreement in an amount not to exceed the monthly cost of premiums for
such coverage in effect on the effective date of termination.

          12.6 If the Agreement is terminated either for Cause or by Employee
pursuant to Section 12.4 of this Agreement, Employee shall receive no further
compensation or benefits, other than Employee’s Base Salary and other
compensation as accrued through the effective date of such termination.

     13. Notice.

     All notice provided for herein shall be in writing and shall be deemed to
be given when delivered in person or deposited in the United States Mail,
registered or certified, return receipt requested, with proper postage prepaid
and addressed as follows:

     
Employer:
  SouthCrest Financial Group, Inc.
600 North Glynn Street
Suite B
Fayetteville, Georgia 30214

Employee:
  Douglas J. Hertha
123 Chadwick Drive
Peachtree City, Georgia 30269

 

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with a copy to:
  Powell Goldstein LLP
One Atlantic Center
Fourteenth Floor
1201 West Peachtree Street NW
Atlanta, Georgia 30309-3488
Attn: Walter G. Moeling, IV, Esquire

     14. Covenant Not to Compete and Not to Solicit.

          14.1 For purposes of this Section 14, Employer and Employee conduct
the following business in the following geographic areas:

               14.1.1 Employer is engaged in the business of commercial banking
(“Business of Employer”).

               14.1.2 As of the Effective Date, Employer conducts the Business
of Employer from its main office located at 600 North Glynn Street, Suite B,
Fayetteville, Georgia 30214 (the “Holding Company Office”).

               14.1.3 Employee has established business relationships and
performs the duties described in Section 1.1 of this Agreement in the geographic
area covered by Fayette, Meriwether, Polk and Upson Counties, Georgia (the
“Restricted Area”), and will work primarily in the Restricted Area while in the
employ of Employer.

          14.2 Employee covenants and agrees that both during the term of this
Agreement and for a period of one (1) year after the termination of his
employment with Employer for any reason other than a resignation pursuant to
Section 15.3 of this Agreement, Employee shall not, directly or indirectly, as
principal, agent, trustee, consultant or through the agency of any corporation,
partnership, association, trust or other entity or person, on Employee’s own
behalf or for others, provide the duties described in Section 1.1 of this
Agreement for any entity or person conducting the Business of Employer within
the Restricted Area.

          14.3 Employee covenants and agrees that both during the term of this
Agreement and for a period of one (1) year after the termination of his
employment with Employer for any reason, Employee will not enter into, and will
not participate in, any plan or arrangement to cause any employee of the
Employer to terminate his or her employment with Employer, and, Employee further
agrees that for a period of at least one (1) year after the termination of
employment by any employee of Employer, Employee will not hire such employee in
connection with any business initiated by Employee or any other person, firm or
corporation. Employee further agrees that information as to the capabilities of
Employer’s employees, their salaries and benefits, and any other terms of their
employment is Confidential Information and proprietary to the Employer.

          14.4 Employee and Employer shall periodically amend this Agreement by
updating the address referenced in Section 14.1.2 of this Agreement so that it
at all times lists the then current geographic area served by Employer for which
Employee performs the duties described in Section 1.1 of this Agreement.

          14.5 The covenants contained in this Section 14 shall be construed as
agreements severable from and independent of each other and of any other
provision of this or any other contract or agreement between the parties hereto.
The existence of any claim or cause of action by Employee against Employer,
whether predicated upon this or any other contract or agreement, shall not
constitute a defense to the enforcement by Employer of said covenants.

     15. Change in Control.

     None of the benefits provided in Section 15 of this Agreement shall be
payable to Employee unless (i) there shall have been a Change in Control of
Employer, as set forth in this Section 15, and (ii) Employee is employed by
Employer when the Change in Control occurs.

          15.1 “Change in Control” shall be deemed to have occurred if:

               15.1.1 During the term of this Agreement, the individuals
constituting Employer’s Board of Directors immediately following the Effective
Date (the “Beginning Board”) cease for any reason to constitute at least a
majority of said Board, provided that in making such determination, a director
elected by or on the recommendation of the Beginning Board shall be deemed to be
a member of such Beginning Board, excluding, for this purpose, any director
whose assumption of office occurs as a result of an actual or threatened
election contest or proxy contest with respect to the election or removal of
directors; or

               15.1.2 If (i) a notice or an application is filed with the
Federal Reserve Board (“FRB”) pursuant to Regulation “Y” of the FRB under the
Change in Bank Control Act or the Bank Holding Company Act or with the Georgia
Department of Banking and Finance (the “Department”) pursuant to the Financial
Institutions Code of Georgia for permission to acquire control of Employer or
any of its banking affiliates, or (ii) more than twenty-five percent (25%) of
Employer’s outstanding common stock or equivalent in voting power of any class
or classes of outstanding securities of Employer entitled to vote in elections
of directors shall be acquired by any corporation or other person, or group.
“Group” shall mean persons who act in concert as described in Section 13(d)(3)
or 14(d)(2) of the Securities Exchange Act of 1934, as amended; or

               15.1.3 Employer shall become a subsidiary of another corporation
or shall be merged or consolidated into another corporation and (i) less than a
majority of the outstanding voting shares of the parent or surviving corporation
after such acquisition, merger or consolidation are owned immediately after such
acquisition, merger or consolidation by the

 

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owners of the voting shares of Employer immediately before such acquisition,
merger or consolidation, or (ii) a person or entity (excluding any corporation
resulting from such business combination or any employee benefit plan or related
trust of Employer or such resulting corporation) beneficially owns or controls
twenty-five percent (25%) or more of the combined voting power of the then
outstanding securities of such corporation, except to the extent that such
ownership existed prior to the business combination, or (iii) less than a
majority of the members of the board of directors of the corporation resulting
from such business combination were members of the Employer’s Board of Directors
at the time of the execution of the initial agreement for such merger or
consolidation; or

               15.1.4 Substantially all of the assets of Employer shall be sold
to another entity other than a sale to a wholly-owned subsidiary of Employer; or

               15.1.5 The sale or transfer of any of the stock or substantially
all of the assets of Employer regardless of the form of the transaction, other
than a sale or transfer to a wholly-owned subsidiary of Employer.

          15.2 In the event of a Change in Control of Employer, if Employer
terminates Employee without Cause, or if Employer takes any action specified in
Section 15.3 of this Agreement during the term of this Agreement following the
date of occurrence of a Change in Control of Employer (“Termination of
Employment”), Employer shall pay Employee a lump sum cash payment in an amount
equal to the product of one (1) multiplied by Employee’s annual compensation
from Employer, including salary, bonuses, all perquisites, and all other forms
of compensation paid to Employee for his benefit or the benefit of his family,
however characterized, for the fiscal year during the term of this Agreement for
which such compensation was highest (“Employee’s Annual Salary”). The payment
provided for in this Section 15.2 shall be due and payable to Employee within
thirty (30) days after the date of the Termination of Employment. In no event
shall payment(s) described in this Section exceed the amount permitted by
Section 280G of the Internal Revenue Code, as amended (the “Code”). Therefore,
if the aggregate present value (determined as of the date of the Change in
Control in accordance with the provisions of Section 280G of the Code) of both
the severance payment and all other payments to the Employee in the nature of
compensation which are contingent on a change in ownership or effective control
of Employer or in the ownership of a substantial portion of the assets of
Employer (the “Aggregate Severance”) would result in a “parachute payment,” as
defined under Section 280G of the Code, then the Aggregate Severance shall not
be greater than an amount equal to 2.99 multiplied by Employee’s “base amount”
for the “base period,” as those terms are defined under Section 280G of the
Code. In the event the Aggregate Severance is required to be reduced pursuant to
this Section, the Employee shall be entitled to determine which portions of the
Aggregate Severance are to be reduced so that the Aggregate Severance satisfies
the limit set forth in the preceding sentence.

          15.3 During the remaining term of this Agreement following the
effective date of a Change in Control, if Employer takes any of the following
actions, such action shall be deemed to be a termination by Employer without
Cause. Those actions are: (i) a material reduction in Employee’s Base Salary,
bonus provisions or other perquisites as were in effect immediately prior to a
Change in Control of Employer, (ii) a material change in Employee’s status,
offices, titles or reporting requirements, duties or responsibilities with
Employer as in effect immediately prior to the effective date of the Change in
Control, (iii) a failure by Employer to increase Employee’s Base Salary annually
in accordance with an established procedure, or (iv) due to Employer’s
requirement that Employee relocate his principal place of business by more than
twenty five (25) miles from the Holding Company Office. In any such event,
Employee shall be entitled to all payments provided for in Section 15.2 of this
Agreement.

     16. Miscellaneous.

          16.1 This Agreement constitutes and expresses the whole agreement of
the parties in reference to the employment of Employee by Employer, and there
are no representations, inducements, promises, agreements, arrangements, or
undertakings oral or written, between the parties other than those set forth
herein.

          16.2 This Agreement shall be governed by the laws of the State of
Georgia. The parties agree that the Superior Court of Upson County, Georgia,
shall have jurisdiction of any case or controversy arising under or in
connection with this Agreement and shall be a proper forum in which to
adjudicate such case or controversy. The parties consent to the jurisdiction of
such court.

          16.3 Should any clause or any other provision of this Agreement be
determined to be void or unenforceable for any reason, such determination shall
not affect the validity or enforceability of any clause or provision of this
Agreement, all of which shall remain in full force and effect.

          16.4 Time is of the essence in this Agreement.

          16.5 This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their successors and assigns. This Agreement shall not be
assignable by any other parties hereto without the prior written consent of the
other parties.

          16.6 This Agreement may be executed in multiple counterparts, each of
which shall be deemed an original and all of which taken together shall
constitute but a single instrument.

 

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     IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.

      /s/Ann Hindman

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Witness   “Employee”

/s/ Douglas J. Hertha (SEAL)

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Douglas J. Hertha

    “Employer”

ATTEST   SouthCrest Financial Group, Inc.

/s/Ann Hindman

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  By: /s/ Larry T. Kuglar

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Its: President, CEO

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(CORPORATE SEAL)    

 

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EXHIBIT A

Annual Incentive Compensation

[To be mutually agreed upon]

Perquisites

[Customary perquisites to be added]