Document:

EX-10.1 AMENDED AND RESTATED EMPLOYMENT AGREEMENT

 

EXHIBIT 10.1

Form of Amended and Restated Employment Agreement between

SouthFirst Bank and Sandra H. Stephens

 

 

EXHIBIT 10.1

SOUTHFIRST BANK

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

(Effective as of January 1, 2006)

(Sandra H. Stephens)

     THIS AGREEMENT is entered into as of the 1st day of January, 2006 (the “Effective
Date”), by and between SouthFirst Bank, a federal savings bank (the “Bank”) and Sandra H. Stephens
(the “Employee”).

     WHEREAS, the Employee has heretofore been employed by the Bank as Chief Executive Officer and
is experienced in all phases of the business of the Bank; and

     WHEREAS, the parties desire by this writing to establish and to set forth the employment
relationship between the Bank and the Employee.

     NOW, THEREFORE, it is AGREED as follows:

     1. Employment. The Employee is hereby employed as the Chief Executive Officer of the
Bank. The Employee shall render such administrative and management services for the Bank as are
currently rendered and as are customarily performed by persons situated in a similar executive
capacity. The Employee shall also promote, by entertainment or otherwise, as and to the extent
permitted by law, the business of the Bank. The Employee’s other duties shall be such as the Board
of Directors of the Bank (“Board”) may from time to time reasonably direct, including normal duties
as an officer of the Bank.

     2. Base Compensation. The Bank agrees to pay the Employee during the term of this
Agreement a salary at the rate of $125,000 per annum, payable in cash not less frequently than
monthly. The Board shall review, not less often than annually, the rate of the Employee’s salary,
and in its sole discretion may decide to increase her salary.

     3. Performance Bonus. Beginning on the Effective Date, and in addition to Employee’s
base salary, Employee shall be eligible to receive such performance bonuses as may be determined in
the sole discretion of the Board.

     4. (a) Participation in Retirement, Medical and Other Plans. The Employee shall
participate in any plan that the Bank maintains for the benefit of its employees if the plan
relates to (i) pension, profit-sharing, or other retirement benefits, (ii) medical insurance or the
reimbursement of medical or dependent care expenses, or (iii) other group benefits, including
disability and life insurance plans.

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          (b) Employee Benefits; Expenses. The Employee shall participate in any fringe
benefits which are or may become available to the Bank’s senior management employees, including for
example: any stock option or incentive compensation plans, $500 auto allowance, club memberships,
and any other benefits which are commensurate with the responsibilities and functions to be
performed by the Employee under this Agreement. The Employee shall be reimbursed for all
reasonable out-of-pocket business expenses which she shall incur in connection with her services
under this Agreement upon substantiation of such expenses in accordance with the policies of the
Bank.

     5. Term. The Bank hereby employs the Employee, and the Employee hereby accepts such
employment under this Agreement, for the period commencing on the Effective Date and ending 24
months thereafter (or such earlier date as is determined in accordance with Section 9).
Additionally, on each annual anniversary date from the Effective Date, this Agreement and the
Employee’s term of employment shall be extended for an additional one-year period beyond the then
effective expiration date, provided the Board determines in a duly adopted resolution that the
performance of the Employee has met the Board’s requirements and standards, and that this Agreement
shall be extended.

     6. Loyalty; Full Time and Attention.

          (a) During the period of her employment hereunder and except for illnesses, reasonable
vacation periods, and reasonable leaves of absence, the Employee shall devote all her full business
time, attention, skill, and efforts to the faithful performance of her duties hereunder; provided,
however, from time to time, Employee may serve on the boards of directors of, and hold any other
offices or positions in, companies or organizations, which will not present any conflict of
interest with the Bank or any of its subsidiaries or affiliates, or unfavorably affect the
performance of Employee’s duties pursuant to this Agreement, or will not violate any applicable
statute or regulation. “Full business time” is hereby defined as that amount of time usually
devoted to like companies by similarly situated executive officers. During the term of her
employment under this Agreement, the Employee shall not engage in any business or activity contrary
to the business affairs or interests of the Bank, or be gainfully employed in any other position or
job other than as provided above.

          (b) Nothing contained in this Paragraph 6 shall be deemed to prevent or limit the Employee’s
right to invest in the capital stock or other securities of any business dissimilar from that of
the Bank, or, solely as a passive or minority investor, in any business.

     7. Standards. The Employee shall perform her duties under this Agreement in
accordance with such reasonable standards as the Board may establish from time to time. The Bank
will provide Employee with the working facilities and staff customary for similar executives and
necessary for her to perform her duties.

     8. Vacation and Sick Leave. The Employee shall be entitled, without loss of pay, to
absent herself voluntarily from the performance of her duties under this Agreement in accordance
with the terms set forth below, all such voluntary absences to count as vacation time; provided
that:

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          (a) The Employee shall be entitled to an annual vacation in accordance with the policies that
the Board periodically establishes for senior management employees of the Bank.

          (b) The Employee shall not receive any additional compensation from the Bank on account of her
failure to take a vacation, and the Employee shall not accumulate unused vacation from one fiscal
year to the next, except in either case to the extent authorized by the Board.

          (c) In addition to the aforesaid paid vacations, the Employee shall be entitled without loss
of pay, to absent herself voluntarily from the performance of her employment obligations with the
Bank for such additional periods of time and for such valid and legitimate reasons as the Board may
in its discretion approve. Further, the Board may grant to the Employee a leave or leaves of
absence, with or without pay, at such time or times and upon such terms and conditions as the Board
in its discretion may determine.

          (d) In addition, the Employee shall be entitled to an annual sick leave benefit as established
by the Board.

     9. Termination and Termination Pay. Subject to the provisions of Section 11 hereof,
the Employee’s employment hereunder may be terminated under the following circumstances:

          (a) Death. The Employee’s employment under this Agreement shall terminate upon her
death during the term of this Agreement, in which event the Employee’s estate shall be entitled to
receive the compensation due the Employee through the last day of the calendar month in which her
death occurred.

          (b) Disability. The Bank may terminate the Employee’s employment after having
established, through a determination by the Board, the Employee’s Disability. For purposes of this
Agreement, “Disability” means a physical or mental infirmity which impairs the Employee’s ability
to substantially perform her duties under this Agreement and which results in the Employee becoming
eligible for long-term disability benefits under the Bank’s long-term disability plan (or, if the
Bank has no such plan in effect, which impairs the Employee’s ability to substantially perform her
duties under this Agreement for a period of one hundred eighty (180) consecutive days). The
Employee shall be entitled to the compensation and benefits provided for under this Agreement for
(i) any period during the term of this Agreement and prior to the establishment of the Employee’s
Disability during which the Employee is unable to work due to the physical or mental infirmity, or
(ii) any period of Disability which is prior to the Executive’s termination of employment pursuant
to this Section 9(b).

          (c) For Cause. The Board may, by written notice to the Employee, immediately
terminate her employment at any time, for Cause. The Employee shall have no right to receive
compensation or other benefits for any period after termination for Cause. Termination for “Cause”
shall mean termination because of, in the good faith determination of

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the Board, the Employee’s personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform stated duties, willful
violation of any law, rule or regulation (other than traffic violations or similar offenses) or
final cease-and-desist order, or material breach of any provision of this Agreement.
Notwithstanding the foregoing, the Employee shall not be deemed to have been terminated for Cause
unless there shall have been delivered to the Employee a copy of a resolution duly adopted by the
affirmative vote of not less than a majority of the entire membership of the Board (excluding the
Employee if a member of the Board) at a meeting of the Board called and held for the purpose (after
reasonable notice to the Employee and an opportunity for the Employee to be heard before the
Board), finding that in the good faith opinion of the Board the Employee was guilty of conduct set
forth above in the second sentence of this Subsection (c) and specifying the particulars thereof in
detail.

          (d) Without Cause. Subject to the provisions of Section 11 hereof, the Board may, by
written notice to the Employee, immediately terminate her employment at any time for any reason;
provided that if such termination is for any reason other than pursuant to Sections 9 (a) (b) or
(c) above, the Employee shall be entitled to receive the following compensation and benefits: (i)
the base compensation provided pursuant to Section 2 hereof for a 12-month period, and (ii) the
average annual compensation less the base compensation for the 12-month period, based upon the
benefit levels substantially equal to those that the Bank provided for the Employee at the date of
termination of employment. Said sum shall be paid, at the option of the Employee, either (I) in
periodic payments over the remaining term of this Agreement, as if the Employee’s employment had
not been terminated, or (II) in one lump sum within ten (10) days of such termination. The
Employee’s “average annual compensation” shall be the average of the total annual “compensation”
acquired by the Employee during each of the five (5) fiscal years (or the number of full fiscal
years of employment, if the Employee’s employment is less than five (5) years at the termination
thereof) immediately preceding the date of termination. The term “compensation” shall mean any
payment of money or provision of any other thing of value in consideration of employment,
including, without limitation, base compensation, health, life and disability benefits, bonuses,
pension and profit sharing plan, director fees or committee fees, fringe benefits and deferred
compensation accruals.

          (e) Voluntary Termination by Employee. Subject to the provisions of Section 11
hereof, the Employee may voluntarily terminate employment with the Bank during the term of this
Agreement, upon at least 60 days’ prior written notice to the Board of Directors, in which case the
Employee shall receive only her compensation, vested rights and employee benefits accrued up to the
date of her termination.

     10. No Mitigation. The Employee shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise, and no such
payment shall be offset or reduced by the amount of any compensation or benefits provided to the
Employee in any subsequent employment.

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     11. Change in Control.

          (a) Notwithstanding any provision herein to the contrary, if the Employee’s employment under
this Agreement is terminated by the Bank, without the Employee’s prior written consent and for a
reason other than for Cause, death or disability in connection with or within the period that is
twelve (12) months before to twenty-four (24) months after any change in control of the Bank or
SouthFirst Bancshares, Inc. (the “Corporation”), the Employee shall be paid an amount equal to the
difference between (i) the product of 2.99 times her “base amount” as defined in Section 28OG(b)(3)
of the Internal Revenue Code of 1986, as amended (the “Code”) and regulations promulgated
thereunder, and (ii) the sum of any other “parachute payments” (as defined under Section 28OG(b)(2)
of the Code) that the Employee receives on account of the change in control and payments received
under paragraph 9(d) if any. Said sum shall be paid in one lump sum within ten (10) days of such
termination. The term “change in control” shall mean (1) an increase in the ownership of, or the
holding of, or the power to vote, by any person, or by any persons acting as a “group” (within the
meaning of Section 13(d) of the Securities Exchange Act of 1934), the Bank’s or Corporation’s
voting stock, to an amount which is more than 25% of the issued and outstanding shares thereof, (2)
a change in the ownership of, or possession of, the ability to control the election of a majority
of the Bank’s or Corporation’s directors, (3) a change in the ownership of, or possession of, the
ability to exercise a controlling influence over the management or policies of the Bank or the
Corporation, by any person, or by any persons acting as a “group” (within the meaning of Section
13(d) of the Securities Exchange Act of 1934) (except in the case of (1), (2) and (3) hereof,
ownership or control of the Bank, or its board of directors, by the Corporation itself shall not
constitute a “change in control”), or (4) during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board of Directors of the Corporation or the
Bank (the “Company Board”) (the “Continuing Directors”) cease for any reason to constitute at least
two-thirds thereof, provided that any individual whose election or nomination for election as a
member of the Company Board was approved by a vote of at least two-thirds of the Continuing
Directors then in office shall be considered a Continuing Director. For the purposes of defining
“change in control”, the signing of a letter of intent that would result in any of the foregoing
items (1) through (4), shall constitute a change in control. The term “person” means an individual
(other than the Employee), individuals acting in concert or as a “group”, or a corporation,
partnership, trust, association, joint venture, pool, syndicate, sole proprietorship,
unincorporated organization or any other form of entity not specifically listed herein.

          (b) Notwithstanding any other provision of this Agreement to the contrary, the Employee may
voluntarily terminate her employment under this Agreement within twelve (12) months following a
change in control of the Bank or the Corporation, and the Employee shall thereupon be entitled to
receive the payment described in Section 11(a) of this Agreement, upon the occurrence of any of the
following events, or within ninety (90) days thereafter, which have not been consented to in
advance by the Employee in writing: (i) the requirement that the Employee move her personal
residence, or perform her principal executive functions, more than thirty-five (35) miles from her
primary office as of the date of the change in control; (ii) a material reduction in the Employee’s
base compensation as in effect on the date of

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the change in control, as the same may be increased from time to time; (iii) the failure by
the Bank to continue to provide the Employee with compensation and benefits provided for under this
Agreement, as the same may be increased from time to time, or with benefits substantially similar
to those provided to her under any of the employee benefit plans in which the Employee now or
hereafter becomes a participant, or the taking of any action by the Bank which would directly or
indirectly reduce any of such benefits or deprive the Employee of any material fringe benefit
enjoyed by her at the time of the change in control; (iv) the assignment to the Employee of duties
and responsibilities materially different from those normally associated with her position as
referenced at Section 1; (v) a failure to elect or reelect the Employee to the Board of Directors
of the Bank if the Employee is serving on such Board on the date of the change in control; or (vi)
a material diminution or reduction in the Employee’s responsibilities or authority (including
reporting responsibilities) in connection with her employment with the Bank.

          (c) Notwithstanding any other provision of this Agreement or the employment agreement between
the Employee and the Corporation (the “SouthFirst Contract”) to the contrary, the Employee may
voluntarily terminate her employment under this Agreement within twelve (12) months following a
change in control of the Corporation or the Bank, and the Employee shall thereupon be entitled to
receive the payment described in Section 11(a) of this Agreement.

          (d) Any payments made to the Employee 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.

          (e) In the event that any dispute arises between the Employee and the Bank as to the terms or
interpretation of this Agreement, including this Section 11, the parties shall follow the dispute
resolution procedure specified in Section 14. The Employee shall be reimbursed for all costs and
expenses, including reasonable attorneys’ fees, arising from such dispute, proceedings or actions,
provided that the Employee shall have obtained a final judgment by the arbitrator in favor of the
Employee. Such reimbursement shall be paid within ten (10) days of Employee’s furnishing to the
Bank written evidence, which may be in the form, among other things, of a canceled check or
receipt, of any costs or expenses incurred by the Employee.

          (f) Any and all amounts paid to Employee under Section 9 and/or Section 11 of the SouthFirst
Contract shall be deemed to be paid in satisfaction of, and shall therefore offset, any amounts to
be paid to Employee pursuant to Section 9 hereunder or pursuant to this Section 11, to the extent
that any amounts paid under Section 9 and/or 11 of the SouthFirst Contract are attributable to, or
related to, the base salary, or other compensation and amounts, paid to Employee under this
Agreement.

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     12. Requirements of Applicable Regulations of OTS

     (a) The Bank’s board of directors may terminate the Employee’s employment at any time, but any
termination by the Bank’s board of directors, other than termination for cause, shall not prejudice
the Employee’s right to compensation or other benefits under this Agreement. The Employee shall
have no right to receive compensation or other benefits for any period after termination for cause
(as defined in Section 9(c) hereof).

     (b) If the Employee is suspended and/or temporarily prohibited from participating in the
conduct of the Bank’s affairs by a notice served under section 8(e)(3) or (g)(1) of Federal Deposit
Insurance Act (12 U.S.C. 1818 (e)(3) and (g)(1)), the Bank’s obligations under this Agreement shall
be suspended as of the date of service unless stayed by appropriate proceedings. If the charges in
the notice are dismissed, the Bank may in its discretion (i) pay the Employee all or part of the
compensation withheld while its obligations were suspended, and (ii) reinstate (in whole or in
part) any of its obligations which were suspended.

     (c) If the Employee is removed and/or permanently prohibited from participating in the conduct
of the Bank’s affairs by an order issued under section 8(e)(4) or (g)(1) of the Federal Deposit
Insurance Act (12 U.S.C. 1818 (e)(4) or (g)(1)), all obligations of the Bank under this Agreement
shall terminate as of the effective date of the order, but vested rights of the contracting parties
shall not be affected.

     (d) If the Bank is in default (as defined in section 3(x)(1) of the Federal Deposit Insurance
Act), all obligations under this Agreement shall terminate as of the date of default, but this
Section 12(d) shall not affect any vested rights of the parties.

     (e) All obligations under this Agreement shall be terminated, except to the extent determined
that the continuation of this Agreement is necessary of the continued operation of the Bank:

          (i) By the Director of the Office of Thrift Supervision (the “Director”) or his or her
designee, at the time the Federal Deposit Insurance Corporation or Resolution Trust Corporation
enters into an agreement to provide assistance to or on behalf of the Bank under the authority
contained in 13(c) of the Federal Deposit Insurance Act; or

          (ii) By the Director or his or her designee, at the time the Director or his or her designee
approves a supervisory merger to resolve problems related to operation of the Bank or when the Bank
is determined by the Director to be in an unsafe or unsound condition.

          Any rights of the Employee that have already vested, however, shall not be affected by such
action.

     (f) Should any provision of this Agreement give rise to a discrepancy or conflict with respect
to any applicable law or regulation, then the applicable law or regulation shall control the
relevant construction and operation of this Agreement.

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     13. Successors and Assigns.

          (a) This Agreement shall inure to the benefit of and be binding upon any corporate or other
successor of the Bank which shall acquire, directly or indirectly, by merger, consolidation,
purchase or otherwise, all or substantially all of the assets or stock of the Bank.

          (b) since the Bank is contracting for the unique and personal skills of the Employee, the
Employee shall be precluded from assigning or delegating her rights or duties hereunder without
first obtaining the written consent of the Bank.

     14. Alternative Dispute Resolution. THE PARTIES TO THIS AGREEMENT HEREBY EXPRESS THAT
ALL DISPUTES, CONTROVERSIES OR CLAIMS OF ANY KIND AND NATURE BETWEEN THE PARTIES HERETO, ARISING
OUT OF OR IN ANY WAY RELATED TO THE WITHIN AGREEMENT, ITS INTERPRETATION, PERFORMANCE OR BREACH,
SHALL BE RESOLVED EXCLUSIVELY BY THE FOLLOWING ALTERNATIVE DISPUTE RESOLUTION MECHANISMS:

          (a) Negotiation — The parties hereto shall first engage in a good faith effort to negotiate
any such controversy or claim by communications between them. Said Negotiations may be oral or
written. To the extent that they are oral, they should be confirmed in writing.

          (b) Should the above-stated negotiations be unsuccessful, the parties shall engage in
mediation pursuant to the American Arbitration Association Commercial Mediation Rules, or such
other mediation rule as the parties may otherwise agree to choose.

          (c) Should the above-stated mediation be unsuccessful, the parties shall agree to arbitrate
any such controversy or claim with the express understanding that this Agreement is affected by
interstate commerce in that the goods and services which are the subject matter of this Agreement,
pass through interstate commerce. Said arbitration shall be conducted pursuant to the American
Arbitration Association Commercial Arbitration Rules (the “Arbitration Rules”) or such other
arbitration rule as the parties may otherwise agree to choose.

          (d) The cost of the above-stated mediation shall be borne equally between the parties. The
cost of the above-stated arbitration shall be borne by the party against whom an award is issued
and in favor of the prevailing party. In either event, each party shall bear the cost of its own
attorney’s fees and costs.

     THE PARTIES UNDERSTAND AND AGREE (i) THAT EACH OF THEM IS WAIVING RIGHTS TO SEEK REMEDIES IN
COURT, INCLUDING THE RIGHT TO A JURY TRIAL; (ii) THAT PRE-ARBITRATION DISCOVERY IN ARBITRATION
PROCEEDINGS IS GENERALLY MORE LIMITED THAN AND DIFFERENT FROM COURT PROCEEDINGS; AND (iii) THAT THE
ARBITRATORS’ AWARD IS NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR LEGAL REASONING, AND (iv)

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EITHER PARTY’S RIGHT TO APPEAL OR TO SEEK MODIFICATION OF RULINGS BY THE ARBITRATORS, IS
STRICTLY LIMITED.

     The venue for mediation and/or arbitration under this paragraph shall be in the City of
Birmingham, State of Alabama.

     15. Amendments. No amendments or additions to this Agreement shall be binding unless
made in writing and signed by all of the parties, except as herein otherwise specifically provided.

     16. Applicable Law. Except to the extent preempted by Federal law, the laws of the
State of Delaware shall govern this Agreement in all respects, whether as to its validity,
construction, capacity, performance or otherwise.

     17. Severability. 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.

     18. Entire Agreement. This Agreement, together with any understanding or
modifications thereof as agreed to in writing by the parties, shall constitute the entire agreement
between the parties hereto.

[Remainder of Page Intentionally Left Blank.]

[Signatures Begin on the Following Page.]

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     IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first
hereinabove written.

	 	 	 	 	 	 	 	 	 
	ATTEST:	 	 	 	SOUTHFIRST BANK	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	BY:	 	 	 	 
	 

Secretary

	 	 	 	 	 	 

Allen G. McMillan III	 	 
	 

	 	 	 	 	 	Chairman of the Board of Directors	 	 
	 
	 	 	 	 	 	 	 	 
	WITNESS:
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 

Sandra H. Stephens (“Employee”)	 	 

10EX-10.2 AMENDED AND RESTATED EMPLOYMENT AGREEMENT

 

EXHIBIT 10.2

Form of Amended and Restated Employment Agreement between

Pension and Benefit Financial Services, Inc. and J. Malcomb Massey

 

 

EXHIBIT 10.2

PENSION & BENEFIT FINANCIAL SERVICES, INC.

EMPLOYMENT AGREEMENT

(Amended and Restated as of January 1, 2006)

(J. Malcomb Massey)

     THIS EMPLOYMENT AGREEMENT (the “Agreement”) is entered into as of this first day of January,
2006 (the “Effective Date”), by and between Pension & Benefit Financial Services, Inc. (D/B/A
“Pension & Benefit Trust Company”), an Alabama corporation (the “Company”) and the wholly-owned
operating subsidiary of SouthFirst Bank, a federal savings association (the “Bank”), and J. Malcomb
Massey (the “Employee”).

     WHEREAS, the Employee has heretofore been employed by the Company and is experienced in all
phases of the planning, designing, implementation, administration and duties required of a trustee,
of employee benefit plans; and

     WHEREAS, the parties desire by this writing to establish and to set forth the employment
relationship between the Company and the Employee.

     NOW, THEREFORE, it is AGREED as follows:

     1. Employment. The Employee is hereby employed as the President and Chief Executive
Officer of the Company. The Employee shall render such administrative and management services for
the Company as are currently rendered and as are customarily performed by persons situated in a
similar executive capacity. The Employee shall also promote, by entertainment or otherwise, as and
to the extent permitted by law, the business of the Company. Further, the Employee may, from time
to time, with the approval of the Board of Directors of the Company (the “Board”), in his
individual capacity as a licensed insurance broker or insurance agent, enter into agreements with
insurance companies and insurance agencies (each an “Insurance Agreement”) and, thereby and
thereunder, provide insurance brokerage or insurance agency services and, further, may undertake to
perform his obligations under any such Insurance Agreement during Company business hours or
otherwise; provided that, during the term of this Agreement and thereafter, all
compensation to which Employee is, or becomes, entitled to receive under any such Insurance
Agreement, for services rendered or insurance products sold during the term of his employment with
the Company, shall be for the benefit of the Company and shall be either assigned to the Company
(if permissible), paid over to the Company by the Employee upon receipt, or, with explicit and
particular approval of the Board, offset against the Employee’s salary (as set forth in Section 2
of this Agreement). The Employee shall report on a monthly basis, for so long as any Insurance
Agreement is in effect, all such compensation earned by Employee during the previous month. The
Employee’s other duties shall be such as the Board may from time to time reasonably direct,
including normal duties as

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an officer of the Company. The Employee’s obligations under this Section 1 shall survive
termination of this Agreement.

     2. Compensation.

          (a) The Company agrees to pay the Employee during the term of this Agreement, a salary at the
rate of One Hundred Fifty Thousand Dollars ($150,000) per annum, payable in cash not less
frequently than monthly (the “Base Salary”); provided, however, that the Company shall be
entitled to offset against the Employee’s salary, by up to $150,000 per annum, that amount of
compensation which the Employee receives under any Insurance Agreements, and which is neither
assigned to the Company nor paid over to the Company by the Employee upon receipt (the “Salary
Offset”). If the Salary Offset shall equal $150,000 for any one year, the Employee shall be
obligated to assign or pay over to the Company the excess of $150,000 of compensation received
which otherwise would have been offset against the Employee’s salary as a Salary Offset. For
purposes of Sections 10 and 11 of this Agreement, regardless of whether the Company offsets any
amount against the Employee’s salary as a Salary Offset, the Employee’s Base Salary shall equal
$150,000. The Board shall review, not less often than annually, the rate of the Employee’s salary,
and, in its sole discretion, may decide to increase his salary;

          (b) In further consideration of Employee’s services, Employee has, on April 11, 1997, received
Fifteen Thousand Five Hundred Twelve (15,512) shares (the “Compensatory Shares”) of $.01 par value
common stock (the “Common Stock”) of SouthFirst Bancshares, Inc., the parent and holding company of
the Bank (the “Corporation”), which shares vest in the Employee at a rate of one-fifteenth (1/15)
per year, beginning on the first anniversary of April 11, 1997, and upon each anniversary of that
date, until April 11, 2012, at which time the Compensatory Shares shall be fully vested; and

          (c) The Company further agrees to furnish the Employee a mutually acceptable automobile. The
cost of maintenance, fuel, insurance and upkeep to be borne by the Company.

     3. Earnings and Distribution of Compensatory Shares; Voting Rights.

          (a) Compensatory Shares; Forfeitures.

               (1) General Rules. The Compensatory Shares awarded hereunder shall be earned and
non-forfeitable by the Employee at the rate of one-fifteenth per year until April 11, 2012.

               (2) Exception for Terminations Due to Death or Disability. Notwithstanding the
general rule contained in Section 3(a)(1) above, all Compensatory Shares held by the Employee at
the date of the termination of Employee’s service with the Company due to death, disability (as
determined by the Board), or the termination of his employment “without cause” under the provisions
of Section 10(d) of this Agreement, shall be deemed earned and fully vested as of such date and
shall be distributed as soon as practicable thereafter.

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               (3) Exception for a Change in Control. Notwithstanding the general rule contained in
Section 3(a)(1) above, all Compensatory Shares held by the Employee shall be deemed to be
immediately 100% earned, fully vested and non-forfeitable in the event of a “change in control” of
the Company, the Bank or the Corporation (collectively and/or separately, as the context shall
require, the “Relevant Corp” ) and shall be distributed as soon as practicable thereafter. For
purposes of this paragraph, “change in control” shall mean the occurrence of any one of the
following events: (1) an increase in the ownership of, the holding of, or the power to vote, by
any person, or by any persons acting as a “group” (within the meaning of Section 13(d) of the
Securities Exchange Act of 1934), the Relevant Corp’s voting stock, to an amount which is more than
25% of the issued and outstanding shares thereof, (2) a change in the ownership of, or possession
of, the ability to control the election of a majority of the Relevant Corp’s directors, (3) a
change in the ownership of, or the possession of, the ability to exercise a controlling influence
over the management or policies of the Relevant Corp by any person, or by any persons acting as a
“group” within the meaning of Section 13(d) of the Securities Exchange Act of 1934 (except in the
case of (1), (2) and (3) hereof, ownership or control of the Relevant Corp (or its board of
directors) by the Bank or by the Corporation, as the case may be, shall not constitute a “change in
control”), or (4) during any period of two consecutive years, individuals who at the beginning of
such period constitute the board of directors of the Relevant Corp. (the “Continuing Directors”)
cease for any reason to constitute at least two-thirds thereof, provided that any individual whose
election or nomination for election as a member of such board of directors was approved by a vote
of at least two-thirds of the Continuing Directors then in office shall be considered a Continuing
Director. For purposes of this subparagraph only, the term “person” refers to an individual (other
than the Employee), individuals acting in concert or as a “group,” a corporation, partnership,
trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated
organization or any other form of entity not specifically listed herein.

               (4) Discretionary Acceleration of Vesting. In its sole and absolute discretion, the
Board may, at any time, with respect to the Employee, accelerate the vesting schedule according to
which the Employee’s Compensatory Shares become earned and become non-forfeitable by the Employee,
if the Board concludes that it is in the best interests of the Company to do so.

          (b) Accrual of Dividends. Whenever Compensatory Shares are distributed to the
Employee under Section 3(c) below, the Employee shall also be entitled to receive, with respect to
each Compensatory Share distributed, an amount equal to any cash dividends and a number of shares
of Common Stock equal to any stock dividends declared and paid with respect to a share of Common
Stock after the date the relevant Compensatory Shares were awarded.

          (c) Distribution of Compensatory Shares.

                (1) Timing of Distributions. Except as provided in Section 3(c)(2) below, the
Corporation shall distribute Compensatory Shares and accumulated cash from dividends and interest,
if any, to the Employee or his Beneficiary, as the case may be, as soon as practicable after they
have been earned. No fractional shares shall be distributed.

3

 

                (2) Form of Distribution. The Employee may file a written request with the
Corporation to have the Compensatory Shares distributed, as soon as practicable, in the form of a
transfer to the Employee of Common Stock subject to forfeiture of any portion thereof which does
not become vested under the applicable vesting provisions hereunder. In such event, the
Corporation may, in its sole and absolute discretion, transfer to the Employee Common Stock
certificate(s) in the name of the Employee, whereupon the Employee shall become a stockholder of
the Corporation with respect to such Common Stock and shall have all the rights of a stockholder,
including but not limited to the right to receive all dividends paid on such shares and the right
to vote such shares. All shares of said Common Stock, which, pursuant to the provisions of this
Agreement, have not become vested on or before the Employee’s termination of services with the
Company, shall be forfeited by the Employee and returned to the Company or the Corporation. The
certificate(s) for the shares of the Common Stock distributed to the Employee hereunder shall bear
the following legend reflecting that the shares represented thereby are subject to restrictions
against transfer and to forfeiture, in accordance with this Agreement:

“The transferability of this certificate and the shares of stock
represented thereby are subject to the terms and conditions
(including forfeiture) contained in the Employee’s Employment
Agreement between Pension & Benefit Financial Services, Inc. and J.
Malcomb Massey. Copies of such Employment Agreement are on file in
the offices of the Secretary of Pension & Benefit Financial
Services, Inc., 260 Commerce Street, Montgomery, Alabama 36104.”

     As the Employee earns the Common Stock, the Employee (or, in the event of the Employee’s
death, the legal representative of his estate, or if the personal representative of the Employee’s
estate shall have assigned the estate’s interest in the Common Stock, the person or persons to whom
his rights under such Common Stock shall have passed by assignment pursuant to his will or to the
laws of descent and distribution) may surrender the Common Stock certificates bearing the foregoing
legend, whereupon the Corporation shall cause such certificate(s) to be reissued without the
legend. If the Employee forfeits any or all of such Common Stock, the Employee shall, within
thirty (30) days after terminating employment, return to the Company or to the Corporation all
shares of the Common Stock which were forfeited and, further, pay to the Company or the Corporation
an amount equal to the dividends paid by the Corporation with respect to the shares of the
forfeited Common Stock.

                (3) Acquisition for Investment. Employee understands and acknowledges that the shares
of Common Stock which he may acquire pursuant to the terms of this Agreement are being acquired by
him solely for his own account, for investment and not with a view to, or for resale in connection
with, any distribution or public offering thereof within the meaning of the Securities Act of 1933
(the “Securities Act”).

               (4) Unregistered Securities. Employee further understands and acknowledges that the
shares of Common Stock which he may acquire under this Agreement have not been registered under the
Securities Act or the securities laws of any state, and will not at the time of issuance and
delivery of such shares as contemplated by the terms of this

4

 

Agreement have been so registered, in reliance upon certain exemptions from the registration
and prospectus delivery requirements of the Securities Act and such laws. Employee understands
that the shares of Common Stock so acquired by him must be held indefinitely, and that he must
therefore bear the economic risk of such investment indefinitely, unless a subsequent disposition
thereof is registered under the Securities Act and any applicable state securities laws, or is
exempt from such registration to the satisfaction of counsel for the Corporation. Employee further
acknowledges that the availability of the exemptions described in the first sentence of this
Section depend upon, among other things, the bona fide nature of his investment intent expressed
herein, upon which the Company hereby expressly relies.

          (d) Voting of Compensatory Shares. All of the Compensatory Shares not otherwise
distributed to Employee hereunder shall be voted by the Company as directed by the Employee.

     4. Discretionary Bonuses. The Employee shall participate in an equitable manner with
all other senior management employees of the Company in discretionary bonuses that the Board may
award from time to time to the Company’s senior management employees. No other compensation
provided for in this Agreement shall be deemed a substitute for the Employee’s right to participate
in such discretionary bonuses.

     5. Participation in Retirement, Medical and Other Plans.

          (a) The Employee shall participate in any plan that the Company maintains for the benefit of
its employees if the plan relates to (i) pension, profit-sharing, or other retirement benefits,
(ii) medical insurance or the reimbursement of medical or dependent care expenses, or (iii) other
group benefits, including disability and life insurance plans.

          (b) The Employee shall participate in any fringe benefits which are or may become available to
the Company’s senior management employees, including for example: any stock option or incentive
compensation plans, club memberships, and any other benefits which are commensurate with the
responsibilities and functions to be performed by the Employee under this Agreement. The Employee
shall be reimbursed for all reasonable out-of-pocket business expenses which he shall incur in
connection with his services under this Agreement upon substantiation of such expenses in
accordance with the policies of the Company.

     6. Term. The Company hereby employs the Employee, and the Employee hereby accepts
such employment under this Agreement, for the period commencing on the Effective Date and ending 24
months thereafter (or such earlier date as is determined in accordance with Section 10).
Additionally, on each annual anniversary date from the Effective Date, this Agreement and the
Employee’s term of employment shall be extended for an additional one-year period beyond the then
effective expiration date, provided the Board determines in a duly adopted resolution that the
performance of the Employee has met the Board’s requirements and standards, and that this Agreement
shall be extended.

     7. Loyalty; Full Time and Attention.

5

 

          (a) During the period of his employment hereunder and except for illnesses, reasonable
vacation periods, and reasonable leaves of absence, the Employee shall devote all his full business
time, attention, skill, and efforts to the faithful performance of his duties hereunder; provided,
however, from time to time, Employee may serve on the boards of directors of, and hold any other
offices or positions in, companies or organizations, which will not present any conflict of
interest with the Company, the Bank or the Corporation or any of their respective subsidiaries or
affiliates, or unfavorably affect the performance of Employee’s duties pursuant to this Agreement,
or will not violate any applicable statute or regulation. “Full business time” is hereby defined
as that amount of time usually devoted to like companies by similarly situated executive officers.
During the term of his employment under this Agreement, the Employee shall not engage in any
business or activity contrary to the business affairs or interests of the Company, the Bank or the
Corporation, or be gainfully employed in any other position or job other than as provided above.

          (b) Nothing contained in this Paragraph 7 shall be deemed to prevent or limit the Employee’s
right to invest in the capital stock or other securities of any business dissimilar from that of
the Company, the Bank or the Corporation or, solely as a passive or minority investor, in any
business.

     8. Standards. The Employee shall perform his duties under this Agreement in
accordance with such reasonable standards as the Board may establish from time to time. The
Company will provide Employee with the working facilities and staff customary for similar
executives and necessary for him to perform his duties.

     9. Vacation and Sick Leave. The Employee shall be entitled, without loss of pay, to
absent himself voluntarily from the performance of his duties under this Agreement in accordance
with the terms set forth below, all such voluntary absences to count as vacation time; provided
that:

          (a) The Employee shall be entitled to an annual vacation in accordance with the policies that
the Board periodically establishes for senior management employees of the Company.

          (b) The Employee shall not receive any additional compensation from the Company on account of
his failure to take a vacation, and the Employee shall not accumulate unused vacation from one
fiscal year to the next, except in either case to the extent authorized by the Board.

          (c) In addition to the aforesaid paid vacations, the Employee shall be entitled without loss
of pay, to absent himself voluntarily from the performance of his employment obligations with the
Company for such additional periods of time and for such valid and legitimate reasons as the Board
may in its discretion approve. Further, the Board may grant to the Employee a leave or leaves of
absence, with or without pay, at such time or times and upon such terms and conditions as the Board
in its discretion may determine.

6

 

          (d) In addition, the Employee shall be entitled to an annual sick leave benefit as established
by the Board.

     10. Termination and Termination Pay. Subject to the provisions of Section 11 hereof,
the Employee’s employment hereunder may be terminated under the following circumstances:

          (a) Death. The Employee’s employment under this Agreement shall terminate upon his
death during the term of this Agreement, in which event the Employee’s estate shall be entitled to
receive the compensation due the Employee through the last day of the calendar month in which his
death occurred.

          (b) Disability. The Company may terminate the Employee’s employment after having
established, through a determination by the Board, the Employee’s Disability. For purposes of this
Agreement, “Disability” means a physical or mental infirmity which impairs the Employee’s ability
to substantially perform his duties under this Agreement and which results in the Employee becoming
eligible for long-term disability benefits under the Company’s long-term disability plan (or, if
the Company has no such plan in effect, which impairs the Employee’s ability to substantially
perform his duties under this Agreement for a period of one hundred eighty (180) consecutive days).
The Employee shall be entitled to the compensation and benefits provided for under this Agreement
for (i) any period during the term of this Agreement and prior to the establishment of the
Employee’s Disability during which the Employee is unable to work due to the physical or mental
infirmity, or (ii) any period of Disability which is prior to the Executive’s termination of
employment pursuant to this Section 10(b).

          (c) For Cause. The Board may, by written notice to the Employee, immediately
terminate his employment at any time, for Cause. The Employee shall have no right to receive
compensation or other benefits for any period after termination for Cause. Termination for “Cause”
shall mean termination because of, in the good faith determination of the Board, the Employee’s
personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties, willful violation of any law, rule or
regulation (other than traffic violations or similar offenses) or final cease-and-desist order, or
material breach of any provision of this Agreement. Notwithstanding the foregoing, the Employee
shall not be deemed to have been terminated for Cause unless there shall have been delivered to the
Employee a copy of a resolution duly adopted by the affirmative vote of not less than a majority of
the entire membership of the Board (excluding the Employee if a member of the Board) at a meeting
of the Board called and held for the purpose (after reasonable notice to the Employee and an
opportunity for the Employee to be heard before the Board), finding that in the good faith opinion
of the Board the Employee was guilty of conduct set forth above in the second sentence of this
Subsection (c) and specifying the particulars thereof in detail.

          (d) Without Cause. Subject to the provisions of Section 11 hereof, the Board may, by
written notice to the Employee, immediately terminate his employment at any time for any reason;
provided that if such termination is for any reason other than pursuant to Sections 10 (a) (b) or
(c) above, the Employee shall be entitled to receive the following compensation and

7

 

benefits: (i) the base compensation provided pursuant to Section 2 hereof for a 12-month
period, and (ii) the average annual compensation less the base compensation for the 12-month
period, based upon the benefit levels substantially equal to those that the Company provided for
the Employee at the date of termination of employment. Said sum shall be paid, at the option of
the Employee, either (I) in periodic payments over the remaining term of this Agreement, as if the
Employee’s employment had not been terminated, or (II) in one lump sum within ten (10) days of such
termination. The Employee’s “average annual compensation” shall be the average of the total annual
“compensation” acquired by the Employee during each of the five (5) fiscal years (or the number of
full fiscal years of employment, if the Employee’s employment is less than five (5) years at the
termination thereof) immediately preceding the date of termination. The term “compensation” shall
mean any payment of money or provision of any other thing of value in consideration of employment,
including, without limitation, base compensation, health, life and disability benefits, bonuses,
pension and profit sharing plan, director fees or committee fees, fringe benefits and deferred
compensation accruals.

          (e) Voluntary Termination by Employee. Subject to the provisions of Section 11
hereof, the Employee may voluntarily terminate employment with the Company during the term of this
Agreement, upon at least 60 days’ prior written notice to the Board of Directors, in which case the
Employee shall receive only his compensation, vested rights and employee benefits accrued up to the
date of his termination.

     11. Change in Control.

          (a) Notwithstanding any provision herein to the contrary, if the Employee’s employment under
this Agreement is terminated by the Company, without the Employee’s prior written consent and for a
reason other than for Cause, death or disability in connection with or within the period that is
twelve (12) months before to twenty-four (24) months after any change in control of the Company,
the Bank or the Corporation (collectively and/or separately, as the context shall require, the
“Relevant Corp”), the Employee shall be paid an amount equal to the difference between (i) the
product of 2.99 times his “base amount” as defined in Section 280G(b)(3) of the Internal Revenue
Code of 1986, as amended (the “Code”), whereby, for purposes of this Section 11, the Employee’s
gross income for taxable years in the “base period” (as defined in Section 280G(d)(2) of the Code)
shall include compensation received under any Insurance Agreements against which the Employee’s
Base Salary was offset by a Salary Offset, and (ii) the sum of any other “parachute payments” (as
defined under Section 280G(b)(2) of the Code) that the Employee receives based on the change in
control and payments under paragraph 10(d) if any. Said sum shall be paid in one lump sum within
ten (10) days of such termination. The term “change in control” shall have the same meaning as
contained in Section 3(a)(3) of this Agreement.

          (b) Notwithstanding any other provision of this Agreement to the contrary, the Employee may
voluntarily terminate his employment under this Agreement within twelve (12) months following a
change in control of the Relevant Corp, and the Employee shall thereupon be entitled to receive the
payment described in Section 11(a) of this Agreement, upon the occurrence of any of the following
events, or within ninety (90) days thereafter, which have not been consented to in advance by the
Employee in writing: (i) the requirement that the Employee

8

 

move his personal residence, or perform his principal executive functions, more than
thirty-five (35) miles from his primary office as of the date of the change in control; (ii) a
material reduction in the Employee’s base compensation as in effect on the date of the change in
control, as the same may be increased from time to time; (iii) the failure by the Company to
continue to provide the Employee with compensation and benefits provided for under this Agreement,
as the same may be increased from time to time, or with benefits substantially similar to those
provided to him under any of the employee benefit plans in which the Employee now or hereafter
becomes a participant, or the taking of any action by the Company which would directly or
indirectly reduce any of such benefits or deprive the Employee of any material fringe benefit
enjoyed by him at the time of the change in control; (iv) the assignment to the Employee of duties
and responsibilities materially different from those normally associated with his position as
referenced at Section 1; (v) a failure to elect or reelect the Employee to the board of directors
of the Company, the Bank or the Corporation, as the case may be, if the Employee is serving on such
board of directors on the date of the change in control; or (vi) a material diminution or reduction
in the Employee’s responsibilities or authority (including reporting responsibilities) in
connection with his employment with the Company.

          (c) Notwithstanding any other provision of this Agreement to the contrary, the Employee may
voluntarily terminate his employment under this Agreement within twelve (12) months following a
change in control of the Company, the Bank or the Corporation, and the Employee shall thereupon be
entitled to receive the payment described in Section 11(a) of this Agreement.

          (d) Any payments made to the Employee 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.

          (e) In the event that any dispute arises between the Employee and the Company as to the terms
or interpretation of this Agreement, including this Section 11, the parties shall follow the
dispute resolution procedure specified in Section 16. The Employee shall be reimbursed for all
costs and expenses, including reasonable attorneys’ fees, arising from such dispute, proceedings or
actions, provided that the Employee shall have obtained a final judgment by the arbitrator in favor
of the Employee. Such reimbursement shall be paid within ten (10) days of Employee’s furnishing to
the Company written evidence, which may be in the form, among other things, of a canceled check or
receipt, of any costs or expenses incurred by the Employee.

          (f) Any and all amounts paid to Employee under Section 11 shall be deemed to be paid in
satisfaction of, and shall therefore offset, any amounts to be paid to Employee pursuant to Section
10 hereunder, to the extent that any amounts paid under Section 11 are attributable to, or related
to, the base salary, or other compensation and amounts, paid to Employee under this Agreement.

     12. Requirements of Applicable Regulations of OTS.

9

 

          (a) The Company’s board of directors may terminate the Employee’s employment at any time, but
any termination by the Company’s board of directors, other than termination for cause, shall not
prejudice the Employee’s right to compensation or other benefits under this Agreement. The
Employee shall have no right to receive compensation or other benefits for any period after
termination for cause (as defined in Section 10(c) hereof).

          (b) If the Employee is suspended and/or temporarily prohibited from participating in the
conduct of the Company’s affairs by a notice served under section 8(e)(3) or (g)(1) of Federal
Deposit Insurance Act (12 U.S.C. 1818 (e)(3) and (g)(1)), the Company’s obligations under this
Agreement shall be suspended as of the date of service unless stayed by appropriate proceedings.
If the charges in the notice are dismissed, the Company may in its discretion (i) pay the Employee
all or part of the compensation withheld while its obligations were suspended, and (ii) reinstate
(in whole or in part) any of its obligations which were suspended.

          (c) If the Employee is removed and/or permanently prohibited from participating in the conduct
of the Company’s affairs by an order issued under section 8(e)(4) or (g)(1) of the Federal Deposit
Insurance Act (12 U.S.C. 1818 (e)(4) or (g)(1)), all obligations of the Company under this
Agreement shall terminate as of the effective date of the order, but vested rights of the
contracting parties shall not be affected.

          (d) If the Company is in default (as defined in section 3(x)(1) of the Federal Deposit
Insurance Act), all obligations under this Agreement shall terminate as of the date of default, but
this Section 12(d) shall not affect any vested rights of the parties.

          (e) All obligations under this Agreement shall be terminated, except to the extent determined
that the continuation of this Agreement is necessary of the continued operation of the Company:

               (i) By the Director of the Office of Thrift Supervision (the “Director”) or his or her
designee, at the time the Federal Deposit Insurance Corporation or Resolution Trust Corporation
enters into an agreement to provide assistance to or on behalf of the Bank under the authority
contained in 13(c) of the Federal Deposit Insurance Act; or

               (ii) By the Director or his or her designee, at the time the Director or his or her designee
approves a supervisory merger to resolve problems related to operation of the Bank or when the Bank
is determined by the Director to be in an unsafe or unsound condition.

     Any rights of the Employee that have already vested, however, shall not be affected by such
action.

          (f) Should any provision of this Agreement give rise to a discrepancy or conflict with respect
to any applicable law or regulation, then the applicable law or regulation shall control the
relevant construction and operation of this Agreement.

10

 

     13. Non-Solicitation of Employees. Employee agrees that he will, for so long as he is
engaged hereunder, and for a period of three (3) years after termination of his employment, refrain
from recruiting or hiring, or attempting to recruit or hire, directly or by assisting others, any
other employee of the Company who is employed by the Company or any successor or affiliate of the
Company; provided, however, that the provisions of this Section 13 shall not apply, and shall
terminate, upon a termination of the Employee’s employment without cause, pursuant to Section 10(d)
hereof, or upon a “change in control” of the Company, the Bank and/or the Corporation, as defined
in, and contemplated by, Section 3(a)(3) hereof.

     14. No Mitigation. The Employee shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise, and no such
payment shall be offset or reduced by the amount of any compensation or benefits provided to the
Employee in any subsequent employment.

     15. Successors and Assigns.

          (a) This Agreement shall inure to the benefit of and be binding upon any corporate or other
successor of the Company which shall acquire, directly or indirectly, by merger, consolidation,
purchase or otherwise, all or substantially all of the assets or stock of the Company.

          (b) Since the Company is contracting for the unique and personal skills of the Employee, the
Employee shall be precluded from assigning or delegating his rights or duties hereunder without
first obtaining the written consent of the Company.

     16. Alternative Dispute Resolution. THE PARTIES TO THIS AGREEMENT HEREBY EXPRESS THAT
ALL DISPUTES, CONTROVERSIES OR CLAIMS OF ANY KIND AND NATURE BETWEEN THE PARTIES HERETO, ARISING
OUT OF OR IN ANY WAY RELATED TO THE WITHIN AGREEMENT, ITS INTERPRETATION, PERFORMANCE OR BREACH,
SHALL BE RESOLVED EXCLUSIVELY BY THE FOLLOWING ALTERNATIVE DISPUTE RESOLUTION MECHANISMS:

          (a) Negotiation — The parties hereto shall first engage in a good faith effort to negotiate
any such controversy or claim by communications between them. Said Negotiations may be oral or
written. To the extent that they are oral, they should be confirmed in writing.

          (b) Should the above-stated negotiations be unsuccessful, the parties shall engage in
mediation using one mediator pursuant to the American Arbitration Association Commercial Mediation
Rules, or such other mediation rule as the parties may otherwise agree to choose.

          (c) Should the above-stated mediation be unsuccessful, the parties shall agree to arbitrate
any such controversy or claim with the express understanding that this Agreement is affected by
interstate commerce in that the goods and services which are the subject matter of this Agreement,
pass through interstate commerce. Said arbitration shall be conducted pursuant to the American
Arbitration Association Commercial Arbitration Rules (the “Arbitration Rules”) or such other
arbitration rule as the parties may otherwise agree to choose.

11

 

          (d) The cost of the above-stated mediation shall be borne equally between the parties. The
cost of the above-stated arbitration shall be borne by the party against whom an award is issued
and in favor of the prevailing party. In either event, each party shall bear the cost of its own
attorney’s fees and costs.

     THE PARTIES UNDERSTAND AND AGREE (i) THAT EACH OF THEM IS WAIVING RIGHTS TO SEEK REMEDIES IN
COURT, INCLUDING THE RIGHT TO A JURY TRIAL; (ii) THAT PRE-ARBITRATION DISCOVERY IN ARBITRATION
PROCEEDINGS IS GENERALLY MORE LIMITED THAN AND DIFFERENT FROM COURT PROCEEDINGS; AND (iii) THAT THE
ARBITRATORS’ AWARD IS NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR LEGAL REASONING, AND (iv) EITHER
PARTY’S RIGHT TO APPEAL OR TO SEEK MODIFICATION OF RULINGS BY THE ARBITRATORS, IS STRICTLY LIMITED.

     The venue for mediation and/or arbitration under this paragraph shall be in the City of
Montgomery, State of Alabama.

     17. Amendments. No amendments or additions to this Agreement shall be binding unless
made in writing and signed by all of the parties, except as herein otherwise specifically provided.

     18. Applicable Law. Except to the extent preempted by Federal law, the laws of the
State of Alabama shall govern this Agreement in all respects, whether as to its validity,
construction, capacity, performance or otherwise.

     19. Severability. 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.

     20. Entire Agreement. This Agreement, together with any understanding or
modifications thereof as agreed to in writing by the parties, shall constitute the entire agreement
between the parties hereto.

12

 

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

	 	 	 	 	 	 	 
	ATTEST:	 	PENSION & BENEFIT FINANCIAL

SERVICES, INC.
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	Secretary

	 	 	 	Ruth M. Roper, Executive Vice-President	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	Witness:

	 	 	 	J. Malcomb Massey (“Employee”)	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 

13

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