Exhibit 10.3


 


EXECUTION COPY


 


EMPLOYMENT AGREEMENT


 


THIS EMPLOYMENT AGREEMENT (this “Agreement”)
dated as of December 31, 2008, is made by and between CommunitySouth
Financial Corporation, a South Carolina corporation (the “Company”),
CommunitySouth Bank and Trust (the “Bank”), a South Carolina state bank and
wholly owned subsidiary of the Company (the Company and the Bank collectively
referred to herein as the “Employer”), and John W. Hobbs, an individual
resident of South Carolina (the “Executive”).


 


The Employer presently employs the
Executive as its Chief Financial Officer of the Bank and the Company.   The Employer recognizes that the Executive’s
contribution to the growth and success of the Bank and the Company is
substantial.  The Employer desires to provide
for the continued employment of the Executive and to make certain changes in
the Executive’s employment arrangements which the Employer has determined will
reinforce and encourage the continued dedication of the Executive to the
Employer and will promote the best interests of the Employer and the Company’s
shareholders.  The Executive is willing
to terminate his interests and rights under the existing employment agreement
with the Employer and to continue to serve the Employer on the terms and conditions
herein provided.  Certain terms used in
this Agreement are defined in Section 17 hereof.


 


In consideration of the foregoing,
the mutual covenants contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto, intending to be legally bound, hereby agree as follows:


 


1.                                       Employment.  The Employer
shall continue to employ the Executive, and the Executive shall continue to
serve the Employer, as Chief Financial Officer of the Company and the Bank upon
the terms and conditions set forth herein. 
The Executive shall have such authority and responsibilities consistent
with his position as are set forth in the Company’s or the Bank’s Bylaws or
assigned by the Company’s or the Bank’s Chief Executive Officer or Board of
Directors (collectively, the “Board”) from time to time.  The Executive shall devote his full business
time, attention, skill and efforts to the performance of his duties hereunder,
except during periods of illness or periods of vacation and leaves of absence
consistent with Bank policy.  The
Executive may devote reasonable periods to service as a director or advisor to
other organizations, to charitable and community activities, and to managing
his personal investments; provided that, such activities do not
materially interfere with the performance of his duties hereunder and are not
in conflict or competitive with, or adverse to, the interests of the Company or
the Bank.


 


The Executive is currently serving as a director of
each of the Company and the Bank.  The
Company shall nominate the Executive for election as a director at such times
as necessary so that the Executive will, if elected by shareholders, remain a
director of the Company throughout the term of this Agreement.  The Executive hereby consents to serving as a
director and to being named as a director of the Company in documents filed
with the Securities and Exchange Commission. 
The Board shall undertake every lawful effort to ensure that the
Executive continues throughout the term of employment to be elected or
reelected as a director of the Bank.


 


2.                                       Term.  Unless
earlier terminated as provided herein, the Executive’s employment under this
Agreement shall commence on the date hereof and be for a term (the “Term”) of
two years.  At the end of each day of the
Term, the Term shall be extended for an additional day so that the remaining
term shall continue to be two years; provided that, the Executive or the
Employer may at any time, by written notice, fix the Term to a finite term of
two years commencing with the date of the notice.  Notwithstanding the foregoing, the Term of
employment hereunder will end on the date that the Executive attains the
retirement age, if any, specified in the Bylaws of the Bank for directors of
the Bank.


 

















 


3.               Compensation and Benefits.


 


(a)   The
Employer shall pay the Executive an initial annual base salary of $148,000,
which shall be paid in accordance with the Employer’s standard payroll
procedures.  The Board or the
Compensation Committee shall review the Executive’s performance and salary at
least annually and the Board may increase the Executive’s base salary if it
determines in its sole discretion that an increase is appropriate.


 


(b)   The
Executive shall participate in the Employer’s long-term equity incentive
program and be eligible for the grant of stock options, restricted stock, and
other awards thereunder or under any similar plan adopted by the Company.  Any options or similar awards shall be issued
to Executive at an exercise price of not less than the stock’s current fair
market value as of the date of grant, and the number of shares subject to such
grant shall be fixed on the date of grant.


 


(c)   The
Executive shall participate in all retirement, medical, welfare and other benefit
plans or programs of the Employer now or hereafter applicable generally to
employees of the Employer or to a class of employees that includes senior
executives of the Employer.  Employer
will cover the cost of premium payments for medical, dental, vision and
disability insurance for the Executive and medical, dental, and vision
insurance for his dependents.  The
Executive shall also be eligible to receive directors’ fees in the same amount
as outside directors as determined by the Board in its sole discretion from
time to time.  The Employer shall pay
such fees in accordance with the Employer’s standard payroll procedures.


 


(d)   The
Employer shall reimburse the Executive for reasonable travel and other
expenses, including cell phone expenses related to the Executive’s duties,
which are incurred and accounted for in accordance with the normal practices of
the Employer.  The Employer shall
reimburse the Executive for such expenses within 60 days of Executive’s
incurring such expense.


 


(e)   The
Employer shall provide the Executive with four weeks’ annual paid time off,
which includes sick leave, in accordance with any banking rules or
regulations governing paid time off leave. 
Any payments made by the Employer to the Executive as compensation for
paid time off days shall be paid in accordance with the Employer’s standard
payroll procedures.


 


(f)    The
Executive shall be eligible to receive cash bonuses based on the Executive’s
achievement of specified goals and criteria. 
These goals and criteria may include both annual and long-term goals,
may provide for vesting over a specified time period, and shall be established
annually by the Board (or an appropriate committee of the Board).  Any bonus payment made pursuant to this Section 3(f) shall
be determined by the Board and made by the earlier of (i) 70 days after
the previous year end for which the bonus was earned by the Executive or (ii) the
first pay period following the Employer’s press release announcing its previous
year’s financial performance.


 


4.               Termination.


 


(a)   The
Executive’s employment under this Agreement may be terminated prior to the end
of the Term only as provided in this Section 4.


 


(b)   The
Agreement will be terminated upon the death of the Executive.  In this event, the Employer shall pay Executive’s
estate any sums due him as base salary and/or reimbursement of expenses through
the end of the month during which death occurred in accordance with the
Employer’s standard payroll procedures. 
The Employer shall also pay the Executive’s estate any bonus earned
through the date of death.  Any bonus for
previous years which was not yet paid will be paid pursuant to the terms as set
forth in Section 3(f) above. 
Any bonus that is earned in the year of death will be paid on the
earlier of (i) 70 days after the year end in which the Executive died or (ii) the
first pay period following the Employer’s press release announcing its
financial performance for the year in which the Executive died.  To the extent that the bonus is
performance-based, the amount of the bonus will be calculated by taking into
account the performance of the Company and the Bank for the entire year and
prorated through the date of Executive’s death.


 


(c)   The
Employer may terminate the Executive’s Employment upon the Disability of the
Executive for a period of 180 days. 
During the period of any Disability leading up to the Executive’s
Termination of 


 


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Employment under this provision, the Employer shall
continue to pay the Executive his full base salary at the rate then in effect
and all perquisites and other benefits (other than any bonus) in accordance
with the Employer’s standard payroll procedures until the Executive becomes
eligible for benefits under any long-term disability plan or insurance program
maintained by the Employer; provided that, the amount of any such payments to
the Executive shall be reduced by the sum of the amounts, if any, payable to
the Executive for the same period under any other disability benefit or pension
plan covering the Executive. 
Furthermore, the Employer shall pay the Executive any bonus earned
through the date of Disability.  Any
bonus for previous years which was not yet paid will be paid pursuant to the
terms as set forth in Section 3(f) above.  Any bonus that is earned in the year of
Disability will be paid on the earlier of (i) 70 days after the year end
in which Executive became Disabled or (ii) the first pay period following
the Employer’s press release announcing its financial performance for the year
in which the Executive became Disabled. 
To the extent that the bonus is performance based, the amount of the
bonus will be calculated by taking into account the performance of the Company
and the Bank for the entire year and prorated based on the number of days the
Executive worked during the year of the Executive’s Disability.  Nothing herein shall prohibit the Employer
from hiring an acting chief financial officer prior to the expiration of this
180-day period.


 


(d)   The
Employer may terminate the Executive’s Employment for Cause upon delivery of a
Notice of Termination to the Executive. 
If the Executive’s employment is terminated for Cause under this
provision, the Executive shall receive only any sums due him as base salary
and/or reimbursement of expenses through the date of termination, which shall
be paid in accordance with the Employer’s standard payroll procedures.


 


(e)   The
Employer may terminate the Executive’s employment without Cause upon delivery
of a Notice of Termination to the Executive. 
If the Executive’s employment is terminated without Cause under this
provision, subject to the possibility of a six-month delay described below in
this Section 4(e), beginning on the first day of the month following date
of the Executive’s termination, and continuing on the first day of the month
for the next 12 months, the Employer shall pay to the Executive severance
compensation in an amount equal to 100% of his then current monthly base
salary.  Employer shall also pay the
Executive any bonus earned through the date of termination (including any
amounts awarded for previous years but which were not yet paid).  Any bonus for previous years which was not
yet paid will be paid pursuant to the terms as set forth in Section 3(f) above.  Any bonus that is earned in the year of the
Executive’s termination will be paid on the earlier of (i) 70 days after
the year end in which the Executive was terminated or (ii) the first pay
period following the Employer’s press release announcing its previous year’s
financial performance.  To the extent
that the bonus is performance based, the amount of the bonus will be calculated
by taking into account the performance of the Company and the Bank for the
entire year and prorated through the date of Executive’s termination of
employment.


 


If when Executive’s employment terminates he is a
specified employee within the meaning of Section 409A of the Code, and if
the benefits under this Section 4(e) would be considered deferred
compensation under Section 409A, and finally if an exemption from the
six-month delay requirement of Section 409A(a)(2)(B)(i) is not
available, the following benefits under this Section 4(e) shall be
paid to the Executive as follows: severance compensation in an amount equal to
7 times his then current monthly base salary, any bonus for previous years
which was not yet paid, will be paid in a single lump sum on the date that is
six months and one day following date of Executive’s termination; thereafter on
the first day of the month for the next 5 months, the Employer shall pay to the
Executive severance compensation in an amount equal to 100% of his then current
monthly base salary.  Any bonus that is
earned in the year of the Executive’s termination will be paid pursuant to the
terms as set forth in Section 3(f) above.


 


In addition, for the next 12 months following date of
the Executive’s termination, the Employer shall reimburse the Executive for the
cost of COBRA medical, dental, vision and disability insurance coverage for
himself and his dependents for the duration of the Executive’s COBRA period,
provided the Executive timely elects COBRA coverage; provided, however, (A) if
the Executive’s COBRA period ends within 12 months of Executive’s termination,
the Employer shall reimburse the Executive for the monthly cost of medical,
dental, vision and disability insurance coverage obtained for himself and his
dependents, provided such reimbursements shall not exceed the monthly cost of
coverage under COBRA during the Executive’s COBRA period; (B) if the Executive
becomes eligible for coverage under another group health or dental insurance
plan at any time within 12 months of Executive’s termination, the Employer
shall only be required to reimburse the Executive for any out-of-pocket and
deductible expenses the Executive incurs with respect to such coverages for
himself and his dependents; and, in the case of both 


 


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clause (A) and (B) above, such reimbursements shall be paid
as soon as administratively practicable, but in no event shall any
reimbursement be paid after the last day of the calendar year following the
calendar year in which the expense was incurred.


 


At the time of Termination of Employment, and as a
condition to the Employer’s obligation to provide any severance benefits as
stated in this Section 4(e), the Employer and the Executive shall enter
into the release attached hereto as Exhibit A acknowledging such remaining
obligations and discharging both parties, as well as the Employer’s officers,
directors and employees with respect to their actions for or on behalf of the
Employer, from any other claims or obligations arising out of or in connection
with the Executive’s employment by the Employer, including the circumstances of
such termination.


 


(f)    The
Executive may terminate his employment at any time by delivering a Notice of
Termination at least 14 days prior to such termination, and such termination
shall not in and of itself be, nor shall it be deemed to be, a breach of this
Agreement.  If the Executive terminates
his employment under this provision, the Executive shall receive any sums due
him as base salary and/or reimbursement of expenses through the date of such
termination, which shall be paid in accordance with the Employer’s standard payroll
procedures.


 


(g)   Upon the
occurrence of a Change in Control, and regardless of whether the Executive
remains employed by the Employer or its successor following a Change in
Control, the Executive shall be entitled to the following:


 


(i)            within
15 days, the Employer shall pay the Executive cash compensation in an amount
equal to two times his base amount (as defined under Section 280G of the
Code) as well as any bonus earned through the date of Change in Control, (equal
to a pro rata portion of the Executive’s previous year’s bonus based on the
number of days the Executive was employed during the year of the Change in
Control) and any bonus awarded for a previous year but which was not yet paid,
subject to the provisions of Section 4(k) and (l) below;


 


(ii)           for
a period of two years, the Employer shall at its expense continue on behalf of
the Executive and his dependents and beneficiaries the life insurance,
disability, medical, dental, and hospitalization benefits provided (x) to
the Executive at any time during the 90-day period prior to the Change in
Control or at any time thereafter or (y) to other similarly situated
executives who continue in the employ of the Employer.  Such coverage and benefits (including
deductibles and costs) shall be no less favorable to the Executive and his
dependents and beneficiaries than the most favorable of such coverages and
benefits referred to above.  The Employer’s
obligation hereunder with respect to the foregoing benefits shall be limited to
the extent that the Executive obtains any such benefits pursuant to a
subsequent employer’s benefit plans, in which case the Employer may reduce the
coverage of any benefits it is required to provide the Executive hereunder as
long as the aggregate coverages and benefits of the combined benefit plans are
no less favorable to the Executive than the coverages and benefits required to
be provided hereunder.  This subsection (ii) shall
not be interpreted so as to limit any benefits to which the Executive or his
dependents or beneficiaries may be entitled under any of the Employer’s
employee benefit plans, programs, or practices following the Executive’s
Termination of Employment, including, without limitation, retiree medical and
life insurance benefits; and


 


(iii)          the
restrictions on any outstanding incentive awards (including restricted stock)
granted to the Executive under the Company’s or the Bank’s long-term equity
incentive program or any other incentive plan or arrangement shall lapse and
such awards shall become 100% vested, all stock options and stock appreciation
rights granted to the Executive shall become immediately exercisable and shall
become 100% vested, all performance units granted to the Executive shall become
100% vested (except to the extent such acceleration of vesting of any such
award would make compensation payable to the Executive non-deductible under Section 162(m) of
the Code), and the restrictive covenants contained in Section 9 shall not
apply to the Executive.


 


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(h)   With the
exceptions of the provisions of this Section 4, and the express terms of
any benefit plan under which the Executive is a participant, it is agreed that,
upon Executive’s Termination of Employment, the Employer shall have no
obligation to the Executive for, and the Executive waives and relinquishes, any
further compensation or benefits (exclusive of COBRA benefits).  Unless otherwise stated in this Section 4,
the effect of termination on any outstanding incentive awards, stock options,
stock appreciation rights, performance units, or other incentives shall be
governed by the terms of the applicable benefit or incentive plan and/or the
agreements governing such incentives.


 


(i)    In the
event that the Executive’s employment is terminated for any reason, as a
condition to the Employer’s obligation to pay any severance hereunder, the
Executive shall resign as a director of the Company and the Bank effective upon
his termination of employment.


 


(j)    The
Company is aware that upon the occurrence of a Change in Control, the Board or
a shareholder of the Company may then cause or attempt to cause the Company to
refuse to comply with its obligations under this Agreement, or may cause or
attempt to cause the Company to institute, or may institute, litigation seeking
to have this Agreement declared unenforceable, or may take, or attempt to take,
other action to deny the Executive the benefits intended under this Agreement.
In these circumstances, the purpose of this Agreement could be frustrated. It
is the intent of the parties that the Executive not be required to incur the
legal fees and expenses associated with the protection or enforcement of the
Executive’s rights under this Agreement by litigation or other legal action
because such costs would substantially detract from the benefits intended to be
extended to the Executive hereunder, nor be bound to negotiate any settlement
of the Executive’s rights hereunder under threat of incurring such costs.
Accordingly, if at any time after a Change in Control, it should appear to the
Executive that the Company is acting or has acted contrary to or is failing or
has failed to comply with any of its obligations under this Agreement for the
reason that it regards this Agreement to be void or unenforceable or for any other
reason, or that the Company has purported to terminate the Executive’s
employment for Cause or is in the course of doing so in either case contrary to
this Agreement, or in the event that the Company or any other person takes any
action to declare this Agreement void or unenforceable, or institutes any
litigation or other legal action designed to deny, diminish or recover (other
than as required by law) from the Executive the benefits provided or intended
to be provided to the Executive hereunder, and the Executive has acted in good
faith to perform the Executive’s obligations under this Agreement, the Company
irrevocably authorizes the Executive from time to time to retain counsel of the
Executive’s choice at the expense of the Company to represent the Executive in
connection with the protection and enforcement of the Executive’s rights
hereunder, including without limitation representation in connection with
termination of the Executive’s employment contrary to this Agreement or with
the initiation or defense of any litigation or other legal action, whether by
or against the Executive or the Company or any director, officer, shareholder
or other person affiliated with the Company, in any jurisdiction. The
reasonable fees and expenses of counsel selected from time to time by the
Executive as hereinabove provided shall be paid or reimbursed to the Executive
by the Company on a regular, periodic basis upon presentation by the Executive
of a statement or statements prepared by such counsel.  If other officers or key executives of the
Company have retained counsel in connection with the protection and enforcement
of their rights under similar agreements between them and the Company, and,
unless in the Executive’s sole judgment use of common counsel could be prejudicial
to the Executive or would not be likely to reduce the fees and expenses
chargeable hereunder to the Company, the Executive agrees to use the Executive’s
best efforts to agree with such other officers or executives to retain common
counsel.


 


(k)   The parties
intend that the severance payments and other compensation provided for herein
are reasonable compensation for the Executive’s services to the Employer and
shall not constitute “excess parachute payments” within the meaning of Section 280G
of the Code.  In the event that the
Employer’s independent accountants acting as auditors for the Employer on the
date of a Change in Control determine that the payments provided for herein
constitute “excess parachute payments,” then the compensation payable hereunder
shall be reduced to an amount the value of which is $1.00 less than the maximum
amount that could be paid to the Executive without the compensation being
treated as “excess parachute payments” under Section 280G.  The allocations of the reduction required
hereby among the termination benefits payable to the Executive shall be
determined by the Executive.


 


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(l)    Notwithstanding
any other provision in this Agreement, if the Executive is determined by the
Board, as of the date of termination of employment with the Bank, to be a “specified
employee,” as such term is defined in Treasury Regulation §1.409A-1(i), and if
any benefits paid to the Executive hereunder would be considered deferred
compensation under Section 409A, and finally if an exemption from the six
month delay requirement of Section 409A(a)(2)(B)(i) is not available,
then all severance payments and other payment, except for other payments of
base salary at the normal payroll schedule, reimbursement of expenses, and
other than as a result of death, that would normally be paid within six months
and one day from the date of termination of employment shall be paid on the
first day of the seventh month following termination of employment.


 


(m)  If the
Executive is suspended or temporarily prohibited from participating, in any way
or to any degree, in the conduct of the Employer’s affairs by (1) a notice
served under section 8(e) or (g) of Federal Deposit Insurance Act (12
U.S.C. 1818 (e) or (g)) or (2) as a result of any other regulatory or
legal action directed at the Executive by any regulatory or law enforcement
agency having jurisdiction over the Executive (each of the foregoing referred
to herein as a “Suspension Action”), and if this Agreement is not terminated,
the Employer’s obligations under this Agreement shall be suspended as of the
earlier of the effective date of such Suspension Action or the date on which
the Executive was provided notice of the Suspension Action, unless stayed by
appropriate proceedings.  If the charges
underlying the Suspension Action are dismissed, the Bank shall:


 


(i)                                     pay on the first day of the first month
following such dismissal of charges (or as provided elsewhere in this
Agreement) the Executive all of the compensation withheld while the obligations
under this Agreement were suspended; and


 


(ii)                                  reinstate any such obligations which were
suspended.


 


Notwithstanding anything to the contrary herein, if
the Executive is removed or permanently prohibited from participating, in any
way or to any degree, in the conduct of the Employer’s affairs by (1) an
order issued under section 8(e)(4) or (g)(1) of the Federal Deposit
Insurance Act (12 U.S.C. Section 1818 (e)(4) or (g)(1)) or (2) any
other legal or law enforcement action (each of the foregoing referred to herein
as a “Removal Action”), all obligations of the Executive under this Agreement
shall terminate as of the effective date of the Removal Action, but any vested
rights of the parties hereto shall not be affected.


 


Notwithstanding anything to the contrary herein, if
the Employer is in default (as defined in section 3(x)(1) of the Federal
Deposit Insurance Act, 12 U.S.C. Section 1813(x)(1)), all obligations
under this Agreement shall terminate as of the date of default, but this
paragraph (4)(m) shall not affect any vested rights of the parties hereto.


 


Any payments made to the Executive pursuant to this
Agreement, or otherwise, are subject to and conditioned upon their compliance
with 12 U.S.C. Section 1828(k) and any regulations promulgated
thereunder.


 


5.                                       Ownership of Work Product. 
The Employer shall own all Work Product arising during the course of the
Executive’s employment (prior, present or future).  For purposes hereof, “Work Product” shall
mean all intellectual property rights, including all Trade Secrets, U.S. and
international copyrights, patentable inventions, and other intellectual
property rights in any programming, documentation, technology or other work
product that relates to the Employer, its business or its customers and that
the Executive conceives, develops, or delivers to the Employer at any time
during his employment, during or outside normal working hours, in or away from
the facilities of the Employer, and whether or not requested by the Employer.  If the Work Product contains any materials,
programming or intellectual property rights that the Executive conceived or
developed prior to, and independent of, the Executive’s work for the Employer,
the Executive agrees to point out the pre-existing items to the Employer and
the Executive grants the Employer a worldwide, unrestricted, royalty-free
right, including the right to sublicense such items.  The Executive agrees to take such actions and
execute such further acknowledgments and assignments as the Employer may
reasonably request to give effect to this provision.


 


6.                                       Protection of Trade Secrets. 
The Executive agrees to maintain in strict confidence and, except as
necessary to perform his duties for the Employer, the Executive agrees not to
use or disclose any Trade Secrets of the Employer during or after his
employment.  “Trade Secret” means
information, including a 


 


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formula, pattern, compilation, program, device,
method, technique, process, drawing, cost data or customer list, that: (i) derives
economic value, actual or potential, from not being generally known to, and not
being readily ascertainable by proper means by, other persons who can obtain
economic value from its disclosure or use; and (ii) is the subject of
efforts that are reasonable under the circumstances to maintain its secrecy.


 


7.                                       Protection of Other Confidential
Information.  In addition, the Executive agrees to maintain
in strict confidence and, except as necessary to perform his duties for the
Employer, not to use or disclose any Confidential Business Information of the
Employer during his employment and for a period of 12 months following
termination of the Executive’s employment. 
“Confidential Business Information” shall mean any internal, non-public
information (other than Trade Secrets already addressed above) concerning the
Employer’s financial position and results of operations (including revenues,
assets, net income, etc.); annual and long-range business plans; product or
service plans; marketing plans and methods; training, educational and
administrative manuals; customer and supplier information and purchase
histories; and employee lists.  The
provisions of Sections 6 and 7 shall also apply to protect Trade Secrets and
Confidential Business Information of third parties provided to the Employer
under an obligation of secrecy.


 


8.                                       Return of Materials. 
The Executive shall surrender to the Employer, promptly upon its request
and in any event upon termination of the Executive’s employment, all media,
documents, notebooks, computer programs, handbooks, data files, models,
samples, price lists, drawings, customer lists, prospect data, or other
material of any nature whatsoever (in tangible or electronic form) in the
Executive’s possession or control, including all copies thereof, relating to
the Employer, its business, or its customers. 
Upon the request of the Employer, the Executive shall certify in writing
compliance with the foregoing requirement.


 


9.                                       Restrictive Covenants.


 


(a)           No
Solicitation of Customers.  During
the Executive’s employment with the Employer and for a period of 12 months
thereafter, the Executive shall not (except on behalf of or with the prior
written consent of the Chairman of the Board), either directly or indirectly,
on the Executive’s own behalf or in the service or on behalf of others, (A) solicit,
divert, or appropriate to or for a Competing Business, or (B) attempt to
solicit, divert, or appropriate to or for a Competing Business, any person or
entity that is or was a customer of the Employer or any of its Affiliates at
any time during the 12 months prior to the date of termination and with whom
the Executive has had material contact.


 


(b)           No Recruitment of
Personnel.  During the Executive’s
employment with the Employer and for a period of 12 months thereafter, the
Executive shall not, either directly or indirectly, on the Executive’s own
behalf or in the service or on behalf of others, (A) solicit, divert, or
hire away, or (B) attempt to solicit, divert, or hire away, to any
Competing Business located in the Territory, any employee of or consultant to
the Employer or any of its Affiliates, regardless of whether the employee or
consultant is full-time or temporary, the employment or engagement is pursuant
to written agreement, or the employment is for a determined period or is at
will.


 


(c)           Non-Competition
Agreement. During the Executive’s employment with the Employer and for a
period of 12 months following any termination (as opposed to expiration) of
this Agreement, the Executive shall not (without the prior written consent of
the Chairman of the Board) compete with the Employer or any of its Affiliates
by, directly or indirectly, forming, serving as an organizer, director or
officer of, or consultant to, or acquiring or maintaining more than a 1%
passive investment in, a depository financial institution or holding company
therefor if such depository institution or holding company has, or upon
formation will have, one or more offices or branches located in the Territory.


 


(d)           Notwithstanding
the foregoing, the Executive may serve as an officer of or consultant to a
depository institution or holding company therefor even though such institution
operates one or more offices or branches in the Territory, if the Executive’s
employment does not directly involve, in whole or in part, the depository
financial institution’s or holding company’s operations in the Territory.


 


(e)           The
parties hereby agree that the provisions set forth in this Section 9 shall
not apply following a Change in Control.


 


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10.                                 Independent
Provisions.  The provisions in each
of the above Sections 9(a), 9(b), and 9(c) are independent, and the
unenforceability of any one provision shall not affect the enforceability of
any other provision.


 


11.                                 Successors;
Binding Agreement. The rights and obligations of this Agreement shall bind
and inure to the benefit of the surviving corporation in any merger or
consolidation in which the Employer is a party, or any assignee of all or
substantially all of the Employer’s business and properties.  The Executive’s rights and obligations under
this Agreement may not be assigned by him, except that his right to receive
earned but unpaid compensation, unreimbursed expenses and other rights, if any,
provided under this Agreement which survive termination of this Agreement shall
pass after death to the personal representatives of his estate.


 


12.                                 Notice.  For the purposes of this Agreement, notices
and all other communications provided for in the Agreement shall be in writing
and shall be deemed to have been duly given when personally delivered or sent
by certified mail, return receipt requested, postage prepaid, addressed to the
respective addresses last given by each party to the other; provided, however,
that all notices to the Employer shall be directed to the attention of the
Chairman of the Board with a copy to the Secretary.  All notices and communications shall be
deemed to have been received on the date of delivery thereof.


 


13.                                 Governing
Law.  This Agreement shall be
governed by and construed and enforced in accordance with the laws of the State
of South Carolina without giving effect to the conflict of laws principles
thereof.  Any action brought by any party
to this Agreement shall be brought and maintained in a court of competent
jurisdiction in State of South Carolina.


 


14.                                 Non-Waiver.  Failure of the Employer to enforce any of the
provisions of this Agreement or any rights with respect thereto shall in no way
be considered to be a waiver of such provisions or rights, or in any way affect
the validity of this Agreement.


 


15.                                 Enforcement.  The Executive agrees that in the event of any
breach or threatened breach by the Executive of any covenant contained in Section 9(a),
9(b), or 9(c) hereof, the resulting injuries to the Employer would be difficult
or impossible to estimate accurately, even though irreparable injury or damages
would certainly result.  Accordingly, an
award of legal damages, if without other relief, would be inadequate to protect
the Employer.  The Executive, therefore,
agrees that in the event of any such breach, the Employer shall be entitled to
obtain from a court of competent jurisdiction an injunction to restrain the
breach or anticipated breach of any such covenant, and to obtain any other
available legal, equitable, statutory, or contractual relief.  Should the Employer have cause to seek such
relief, no bond shall be required from the Employer, and the Executive shall
pay all attorney’s fees and court costs which the Employer may incur to the
extent the Employer prevails in its enforcement action.


 


16.                                 Saving
Clause.  The provisions of this
Agreement shall be deemed severable and the invalidity or unenforceability of
any provision shall not affect the validity or enforceability of the other
provisions hereof.  If any provision or
clause of this Agreement, or portion thereof, shall be held by any court or
other tribunal of competent jurisdiction to be illegal, void, or unenforceable
in such jurisdiction, the remainder of such provision shall not be thereby
affected and shall be given full effect, without regard to the invalid
portion.  It is the intention of the
parties that, if any court construes any provision or clause of this Agreement,
or any portion thereof, to be illegal, void, or unenforceable because of the
duration of such provision or the area or matter covered thereby, such court
shall reduce the duration, area, or matter of such provision, and, in its
reduced form, such provision shall then be enforceable and shall be enforced.
The Executive and the Employer hereby agree that they will negotiate in good
faith to amend this Agreement from time to time to modify the terms of Sections
9(a), 9(b), and 9(c), the definition of the term “Territory,” and the
definition of the term “Business,” to reflect changes in the Employer’s
business and affairs so that the scope of the limitations placed on the
Executive’s activities by Section 9 accomplishes the parties’ intent in
relation to the then current facts and circumstances.  Any such amendment shall be effective only
when completed in writing and signed by the Executive and the Employer.


 


8

















 


17.                                 Certain
Definitions.


 


(a)                                  “Affiliate”
shall mean any business entity controlled by, controlling or under common
control with the Employer.


 


(b)                                 “Business”
shall mean the operation of a depository financial institution, including,
without limitation, the solicitation and acceptance of deposits of money and
commercial paper, the solicitation and funding of loans and the provision of
other banking services, and any other related business engaged in by the
Employer or any of its Affiliates as of the date of termination.


 


(c)                                  “Cause”
shall consist of any of (A) the commission by the Executive of a willful
act (including, without limitation, a dishonest or fraudulent act) or a grossly
negligent act, or the willful or grossly negligent omission to act by the
Executive, which is intended to cause, causes or is reasonably likely to cause
material harm to the Employer (including harm to its business reputation); (B) the
indictment of the Executive for the commission or perpetration by the Executive
of any felony or any crime involving dishonesty, moral turpitude or fraud; (C) the
material breach by the Executive of this Agreement that, if susceptible of
cure, remains uncured ten days following written notice to the Executive of
such breach; (D) the receipt of any form of notice, written or otherwise,
that any regulatory agency having jurisdiction over the Employer intends to
institute any form of formal or informal (e.g., a memorandum of
understanding which relates to the Executive’s performance) regulatory action
against the Executive or the Employer (provided, that the Board of
Directors determines in good faith, with the Executive abstaining from
participating in the consideration of and vote on the matter, that the subject
matter of such action involves acts or omissions by or under the supervision of
the Executive or that termination of the Executive would materially advance the
Employer’s compliance with the purpose of the action or would materially assist
the Employer in avoiding or reducing the restrictions or adverse effects to the
Employer related to the regulatory action); (E) the exhibition by the
Executive of a standard of behavior within the scope of his employment that is
materially disruptive to the orderly conduct of the Employer’s business
operations (including, without limitation, substance abuse or sexual
misconduct) to a level which, in the Board of Directors’ good faith and reasonable
judgment, with the Executive abstaining from participating in the consideration
of and vote on the matter, is materially detrimental to the Employer’s best
interest, that, if susceptible of cure remains uncured ten days following
written notice to the Executive of such specific inappropriate behavior; or (F) the
failure of the Executive to devote his full business time and attention to his
employment as provided under this Agreement that, if susceptible of cure,
remains uncured 30 days following written notice to the Executive of such
failure.  The Executive shall not be
deemed to have been terminated for Cause unless and until there is delivered to
the Executive a copy of a resolution duly adopted by the affirmative vote of
75% of the non-management directors of the Employer then in office, excluding
the Executive, at a meeting of the Board of Directors, which resolution shall (x) contain
findings that, in the good faith opinion of the Board of Directors, the
Executive has committed an act constituting Cause, and (y) specify the
particulars thereof. Notice of the meeting of the Board of Directors and the
proposed termination for Cause shall be given to the Executive at least seven
calendar days before such meeting.  The
Executive and the Executive’s counsel (if the Executive chooses to have counsel
present) shall have a reasonable opportunity to be heard by the Board of
Directors at the meeting.  Nothing in
this Agreement limits the Executive’s or the Executive’s beneficiaries’ right
to challenge the validity or propriety of the board’s determination of Cause.


 


(f)                                    “Change
in Control” shall mean as defined by Treasury Regulation § 1.409A-3(i)(5).


 


(g)                                 “Code”
shall mean the Internal Revenue Code of 1986 and any regulations thereunder.


 


(e)                                  “Competing
Business” shall mean any business that, in whole or in part, is the same or
substantially the same as the Business.


 


(f)                                    “Disability”
or “Disabled” shall mean as defined by Treasury Regulation §
1.409A-3(i)(4).


 


(g)                                 “Notice
of Termination” shall mean a written notice of termination from the
Employer or the Executive which specifies an effective date of termination,
indicates the specific termination provision in this Agreement relied upon,
and, in the case of a termination for Cause, sets forth in reasonable detail
the facts


 


9

















 


and circumstances
claimed to provide a basis for termination of the Executive’s employment for
Cause.


 


(h)                                 “Standard
Payroll Procedures” shall mean no less frequently than monthly.


 


(i)                                     “Terminate,”
“terminated,” “termination,” or “Termination of Employment”
shall mean separation from service as defined by Regulation 1.409A-1(h).


 


(j)                                     “Territory”
shall mean a radius of 25 miles from (i) the main office of the Employer
or (ii) any branch office of the Employer.


 


18.                                 Entire
Agreement.  This Agreement
constitutes the entire agreement between the parties hereto and supersedes all
prior agreements, if any, understandings and arrangements, oral or written,
between the parties hereto with respect to the subject matter hereof.


 


19.                                 Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.


 


20.                                 Compliance
with Capital Purchase Program. 
Notwithstanding anything to the contrary herein, any payments to the
Executive shall be limited to the extent required under the United States
Treasury Capital Purchase Program and related regulations in the event that the
Company participates in such Program. 
The Executive agrees to such amendments, agreements, or waivers that are
required by the United States Treasury or requested by the Company to comply
with the terms of such program.


 


10

















 


 IN WITNESS
WHEREOF, the Employer has caused this Agreement to be executed and its seal to
be affixed hereunto by its officers thereunto duly authorized, and the
Executive has signed and sealed this Agreement, effective as of the date first
above written.


 


	
   

  	
   

  	
  COMMUNITYSOUTH FINANCIAL CORPORATION

  
	
   

  	
   

  	
   

  	
   

  
	
  ATTEST:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
       /s/ Barbara J. Marcy

  	
   

  	
  By:

  	
  /s/   C. Allan Ducker, III

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
    Barbara J. Marcy

  	
   

  	
  Name:

  	
    C. Allan Ducker, III

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
      Chief
  Executive Officer

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  COMMUNITYSOUTH
  BANK AND TRUST

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ATTEST:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
          /s/
  Barbara J. Marcy

  	
   

  	
  By:

  	
        C. Allan
  Ducker, III

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
    Barbara
  J. Marcy

  	
   

  	
  Name:

  	
    C.
  Allan Ducker, III

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
    Chief
  Executive Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  EXECUTIVE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   /s/
  John W. Hobbs

  
	
   

  	
   

  	
  John W. Hobbs

  
													



 


11

















 


Exhibit A


 


Form of Release of Claims


 


SEVERANCE AGREEMENT AND RELEASE


 


This Severance Agreement
and Release (the “Agreement”) is made between John W. Hobbs, an
individual resident of South Carolina (“Employee”), and CommunitySouth Bank
and Trust (the “Bank”).


 


As used in this
Agreement, the term “Employee” shall include the employee’s heirs, executors,
administrators, and assigns, and the term “Bank” shall include the Bank, its
holding company, any other related or affiliated entities, and the current and
former officers, directors, shareholders, employees, and agents of them.


 


On
                                    
, 2008, the Bank and Employee entered into an Employment Agreement governing
the relationship between the parties.  Section 4(e) provides
that the Bank may terminate the Employment Agreement without cause.  Section 4 of the Employment Agreement
also provides that Employee shall be entitled to severance benefits if the Employment
Agreement is terminated without cause, on the condition that Employee enter
into this release or a substantially similar release.


 


Employee desires to
receive severance benefits and the Bank is willing to provide severance
benefits on the condition the Employee enter into this Agreement.


 


Now, in consideration for
the mutual promises and covenants set forth herein, and in full and complete
settlement of all matters between Employee and the Bank, the parties agree as
follows:


 


1.                                      Termination
Date:  The Employee agrees that
his employment with the Bank terminates as of
                                
(the “Termination Date”).


 


2.                                      Severance
Payments:  Subsequent to his
Termination Date, the Bank shall pay Employee severance benefits as noted in
Paragraph 4(e) of the Employment Agreement, dated
                ,
20    , (the “Severance Payment”), less applicable
deductions and withholdings.


 


3.                                      Legal
Obligations


 


The parties acknowledge
that pursuant to Section 4(e) of the Employment Agreement, they agreed
that at the time of termination and as a condition of payment of severance,
they would enter into this release acknowledging any remaining obligations and
discharging each other from any other claims or obligations arising out of or
in connection with Employee’s employment by the Bank, including the
circumstances of such termination.


 


With the exceptions of
the provisions of Section 2, and the express terms of any benefit plan
under which the Employee is a participant, it is agreed that the Bank shall have
no obligation to the Employee for, and the Employee waives and relinquishes,
any further compensation or benefits (exclusive of COBRA benefits).  Unless otherwise stated in this Section 3,
the effect of termination on any outstanding incentive awards, stock options,
stock appreciation rights, performance units, or other incentives shall be
governed by the terms of the applicable benefit or incentive plan and/or the
agreements governing such incentives.


 


Employee acknowledges that the Bank has no prior legal obligations to
make the payments described in Section 2 above which are exchanged for the
promises of Employee set forth in this Agreement.  It is specifically agreed that the payments
described in Section 2 are valuable and sufficient consideration for each
of the promises of Employee set forth in this Agreement and are payments in
addition to anything of value to which Employee is otherwise entitled.


 


12

















 


4.                                      Waiver
and Release:


 


a)                                      Employee
unconditionally releases and discharges the Bank and its predecessors,
successors and assigns, its and their current and former parents, affiliates,
subsidiaries, divisions, and joint ventures (individually and collectively, for
purposes of this paragraph, “Bank”)  from
any and all causes of action, suits, damages, claims, proceedings,
controversies, promises, grievances, complaints, charges, liabilities, debts,
taxes, allowances, demands, and remedies of any type that the Employee has ever
had, or may now have, against the Bank, whether asserted or unasserted, whether
known or unknown, concerning any matter occurring up to and including the date
of the signing of this Agreement.


 


b)                                     Employee
acknowledges that he is waiving and releasing, to the full extent permitted by law,
all claims against the Bank, including (but not limited to) all claims arising
out of, or related in any way to, his employment with the Bank or the
termination of that employment, including (but not limited to) any and all
breach of contract claims, tort claims, claims of wrongful discharge, claims
for breach of an express or implied employment contract, defamation claims,
claims under the Civil Rights Act of 1866, which prohibits discrimination on
the basis of race or color, Title VII of the Civil Rights Act of 1964 as
amended, which prohibits discrimination in employment based on race, color,
national origin, religion or sex, the Civil Right Act of 1991, which modifies
the 1964 Act by providing for the right to trial by jury on discrimination
claims, the Family and Medical Leave Act of 1993, which provides for unpaid
leave for family or medical reasons, the Equal Pay Act of 1963, which prohibits
paying men and women unequal pay for equal work, the Age Discrimination in
Employment Act of 1967, which prohibits age discrimination in employment, the
Americans with Disabilities Act of 1990, which prohibits discrimination based
on disability, the Rehabilitation Act of 1973, which prohibits discrimination
on the basis of disability, the Employee Retirement Income Security Act of
1974, which regulates employee benefit plans, the Fair Labor Standards Act of
1938, which establishes a national minimum wage, regulates overtime
compensation, and prohibits employment of a minor, the Older Workers Benefit
Protection Act of 1990, which prohibits
age discrimination related to employee benefits, the Occupational Safety
and Health Act of 1970, which governs occupational health and safety in the
workplace, the Sarbanes-Oxley Act of 2002, which establishes standards of conduct
for all U.S. public company boards, management, and public accounting
firms, the South Carolina Human Affairs Law, any and all other applicable
local, state and federal non-discrimination statutes, the South Carolina
Payment of Wages Law and all other statutes or regulations relating to
employment, the common law of the State of South Carolina, or any other state,
and any and all claims for attorneys’ fees.


 


This General Release
includes a release of all claims based on the treatment of any payments hereunder
under Section 409A of the Internal Revenue Code (the “Code”) including
specifically any penalties thereunder.


 


This General Release also
includes a release of all compensation and benefit claims, including, without
limitation, claims concerning salary, bonus, and any award(s), grant(s), or
purchase(s) under any equity and incentive compensation plan or program,
and separation pay under any Bank severance plan.


 


c)                                      This
Waiver and Release provision ((a) through (c) of this paragraph)
shall be construed to release all claims to the full extent allowed by
law.  If any term of this paragraph shall
be declared unenforceable by a court or other tribunal of competent
jurisdiction, it shall not adversely affect the enforceability of the remainder
of this paragraph.


 


d)                                     The
Bank unconditionally releases and discharges Employee from any and all causes
of action, suits, damages, claims, proceedings, and demands that the Bank has
ever had, or may now have, against Employee, whether asserted or unasserted,
whether known or unknown, concerning any matter occurring up to and including
the date of the signing of this Agreement with the exception of any claims for
breach of trust, or any act which constitutes a felony or crime involving
dishonesty, theft, or fraud.


 


5.                                      Restrictive
Covenants and Other Obligations


 


The parties agree that Section 5
– “Ownership of Work Product,” Section 6 – “Protection of Trade Secret,” Section 7
– “Protection of Confidential Information,” Section 8 – “Return of
Materials,” Section 9 – “Restrictive Covenants,” Section 10 – “Independent
Provisions,” Section 15 – “Enforcement,” and Section 16 –


 


13

















 


“Savings Clause,” of the
Employment Agreement shall remain in full force and effect and that Employee
will perform his obligations under those sections and those sections of the
Employment Agreement are incorporated by reference as if set forth fully
herein.  In the event Employee breaches
any obligation under this Section 5, the Bank’s obligation to make
severance payments to Employee shall terminate immediately and the Bank shall
have no further obligations to Employee.


 


6.                                      Duty
of Loyalty/Nondisparagement


 


The parties shall not
(except as required by law) communicate to anyone, whether by word or deed,
whether directly or through any intermediary, and whether expressly or by
suggestion or innuendo, any statement, whether characterized as one of fact or
of opinion, that is intended to cause or that reasonably would be expected to
cause any person to whom it is communicated to have a lowered opinion of the
other party.


 


7.                                      Confidentiality
Of The Terms Of This Agreement


 


Except to the extent that
this Agreement has been disclosed in the Bank’s SEC filings, Employee agrees
not to publicize or disclose the contents of this Agreement, including the
amount of the monetary payments, except (i) to his immediate family; (ii) to
his attorney(s), accountant(s), and/or tax preparer(s); (iii) as may be
required by law; or (iv) as necessary to enforce the terms of this
Agreement.  Employee further agrees that
he will inform anyone to whom the terms of this Agreement are disclosed of the
confidentiality requirements contained herein. 
Notwithstanding the foregoing, the parties agree that where business
needs dictate, Employee may disclose to a third party that he has entered into
an agreement with the Bank, which agreement contains restrictive covenants
including noncompetition and nondisclosure provisions, one or more of which
prohibit him from performing the requested service.


 


Employee recognizes that
the disclosure of any information regarding this Agreement by him, his family,
his attorneys, his accountants or financial advisors, could cause the Bank
irreparable injury and damage, the amount of which would be difficult to
determine.  In the event the Bank
establishes a violation of this paragraph of the Agreement by Employee, his
attorneys, immediate family, accountants, or financial advisors, or others to
whom Employee disclosed information in violation of the terms of this
Agreement, the Bank shall be entitled to injunctive relief without the need for
posting a bond and shall also be entitled to recover from Employee the amount
of attorneys’ fees and costs incurred by the Bank in enforcing the provisions
of this paragraph.


 


8.                                      Continued
Cooperation


 


Employee agrees that he
will cooperate fully with the Bank in the future regarding any matters in which
he was involved during the course of his employment, and in the defense or
prosecution of any claims or actions now in existence or which may be brought
or threatened in the future against or on behalf of the Bank.  Employee’s cooperation in connection with
such matters, actions and claims shall include, without limitation, being
available to meet with the Bank’s officials regarding personnel or commercial
matters in which he was involved; to prepare for any proceeding (including,
without limitation, depositions, consultation, discovery or trial); to provide
affidavits; to assist with any audit, inspection, proceeding or other inquiry;
and to act as a witness in connection with any litigation or other legal
proceeding affecting the Bank.  Employee
further agrees that should he be contacted (directly or indirectly) by any
person or entity adverse to the Bank, he shall within 48 hours notify the
then-current Chairman of the Board of the Bank. 
Employee shall be reimbursed for any reasonable costs and expenses
incurred in connection with providing such cooperation.


 


9.                                      Entire Agreement; Modification of Agreement


 


Except as otherwise
expressly noted herein, this Agreement constitutes the entire understanding of
the parties and supersedes all prior discussions, understandings, and
agreements of every nature between them relating to the matters addressed
herein.  Accordingly, no representation,
promise, or inducement not included or


 


14

















 


incorporated by reference
in this Agreement shall be binding upon the parties.  Employee affirms that the only consideration
for the signing of this Agreement are the terms set forth above and that no
other promises or assurances of any kind have been made to him by the Bank or
any other entity or person as an inducement for him to sign this
Agreement.  This Agreement may not be
changed orally, but only by an agreement in writing signed by the parties or
their respective heirs, legal representatives, successors, and assigns.


 


10.                               Partial
Invalidity


 


The parties agree that
the provisions of this Agreement and any paragraphs, subsections, sentences, or
provisions thereof shall be deemed severable and that the invalidity or
unenforceability of any paragraph, subsection, sentence, or provision shall not
affect the validity or enforceability of the remainder of the Agreement.


 


11.                               Waiver


 


The waiver of the breach
of any term or provision of this Agreement shall not operate as or be construed
to be a waiver of any other subsequent breach of this Agreement.


 


12.                               Successors
and Assigns


 


This Agreement shall
inure to and be binding upon the Bank and Employee, their respective heirs,
legal representatives, successors, and assigns.


 


13.                               Governing
Law


 


This Agreement shall be
construed in accordance with the laws of the state of South Carolina and any
applicable federal laws.


 


14.                               Headings


 


The headings or titles of
sections and subsections of this Agreement are for convenience and reference
only and do not constitute a part of this Agreement.


 


15.                               Notice


 


Any notice or
communication required or permitted under this Agreement shall be made in
writing and sent by overnight courier (confirmation of receipt required) or
certified mail (postage prepaid and return receipt requested) addressed as
follows:


 


If to Employee:


 


[INSERT]


 


If to the Bank:


 


[INSERT]


 


16.                               Tax
Matters


 


The payment of any amount
pursuant to this Agreement shall be subject to all applicable withholding and
payroll taxes and other applicable deductions. Notwithstanding any provision to
the contrary in this Agreement or


 


15

















 


in any of the Bank’s
equity plans (each, a “Plan”), any payment otherwise required to be made to
Employee under any Bank plan on account of Employee’s “separation from service,”
within the meaning of the Section 409A Rules (as defined below), to
the extent such payment (after taking into account all exclusions applicable to
such payment under the Section 409A Rules) is properly treated as deferred
compensation subject to the Section 409A Rules, shall not be made until
the first business day after (i) the expiration of six (6) months
from the date of Employee’s separation from service, or (ii) if earlier,
the date of Employee’s death (the “Delayed Payment Date”). On the Delayed
Payment Date, there shall be paid to Employee or, if Employee has died,
Employee’s estate, in a single cash lump sum, an amount equal to aggregate
amount of the payments delayed pursuant to the preceding sentence. In the case
of each Plan under which Employee is entitled to receive amounts treated as
deferred compensation subject to the Section 409A Rules and which
provides for payment of such amounts in the form of “a series of installment
payments”, as defined in Treas. Reg. §1.409A-2(b)(iii), (A) Employee’s
right to receive such payments shall be treated as a right to receive a series
of separate payments under Treas. Reg. §1.409A-2(b)(iii), and (B) to the
extent such Plan does not already so provide, it is hereby amended to so
provide, with respect to amounts payable to Employee thereunder. For purposes
of this subparagraph, the “Section 409A Rules” shall mean Section 409A
of the Code, the regulations issued thereunder, and all notices, rulings, and
other guidance issued by the Internal Revenue Service interpreting same.
Notwithstanding the foregoing, Employee shall be solely responsible, and the
Bank shall have no liability, for any taxes, acceleration of taxes, interest,
or penalties arising under the Section 409A Rules.


 


17.                               Construction


 


Employee and the Bank
have participated jointly in the negotiation and drafting of this Agreement. In
the event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by Employee and the Bank,
and no presumption or burden of proof shall arise favoring or disfavoring
either of them by virtue of the authorship of any of the provisions of this
Agreement.


 


18.                               Representations:  Employee acknowledges that:


 


a)                                      He
has read this Agreement and understands its meaning and effect.


 


b)                                     He
has knowingly and voluntarily entered into this Agreement of his own free will.


 


c)                                      By
signing this Agreement, Employee has waived, to the full extent permitted by
law, all claims against the Bank based on any actions taken by the Bank up to
the date of the signing of this Agreement, and the Bank may plead this
Agreement as a complete defense to any claim the Employee may assert.


 


d)                                     He
would not otherwise be entitled to the consideration described in this
Agreement, and that the Bank is providing such consideration in return for
Employee’s agreement to be bound by the terms of this Agreement.


 


e)                                      He
has been given up to 21 days to consider the terms of this Agreement.


 


f)                                        He
has seven (7) days, after Employee has signed the Agreement and it has
been received by the Bank, to revoke it by notifying the Chairman of the Board
of his intent to revoke acceptance.  For
such revocation to be effective, the notice of revocation must be received no
later than 5:00 p.m. on the seventh day after the signed Agreement is
received by the Bank.  This Agreement
shall not become effective or enforceable until the revocation period has
expired.


 


g)                                     He
is not waiving or releasing any rights or claims that may arise after the date
the Employee signs this Agreement.


 


h)                                     HE
HAS BEEN ADVISED TO CONSULT WITH AN ATTORNEY BEFORE SIGNING THIS AGREEMENT.


 


16

















 


	
  As to Employee:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date

  	
   

  	
  John W. Hobbs

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  As to the Bank:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date

  	
   

  	
  Chairman of the Board

  



 


17