Document:

Exhibit 10.2

 

UNITED STATES OF AMERICA

BEFORE THE

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

WASHINGTON, D.C.

 

	
Written Agreement by and between 

 

HCSB FINANCIALCORPORATION

Loris, South Carolina

 

and

 
    	
 
    	
 

Docket No. 11-034 -WA/RB-HC
    
	
FEDERAL RESERVE BANK OF RICHMOND

Richmond, Virginia
    	
 
    	
 
    

 

WHEREAS, HCSB Financial Corporation, Loris, South Carolina (“HCSB”), a registered bank holding company, owns and controls Horry County State Bank, Loris, South Carolina (the “Bank”), a state-chartered nonmember bank, and a nonbank subsidiary;

 

WHEREAS, it is the common goal of HCSB and the Federal Reserve Bank of Richmond (the “Reserve Bank”) to maintain the financial soundness of HCSB so that HCSB may serve as a source of strength to the Bank;

 

WHEREAS, HCSB and the Reserve Bank have mutually agreed to enter into this Written Agreement (the “Agreement”); and

 

WHEREAS, on April 21, 2011, the board of directors of HCSB, at a duly constituted meeting, adopted a resolution authorizing and directing James R. Clarkson to enter into this Agreement on behalf of HCSB, and consenting to compliance with each and every provision of this Agreement by HCSB and its institution-affiliated parties, as defined in

 

 

sections 3(u) and 8(b)(3) of the Federal Deposit Insurance Act, as amended (the “FDI Act”) (12 U.S.C. §§ 1813(u) and 1818(b)(3)).

 

NOW, THEREFORE, HCSB and the Reserve Bank agree as follows:

 

Source of Strength

 

1.                                       The board of directors of HCSB shall take appropriate steps to fully utilize HCSB’s financial and managerial resources, pursuant to section 225.4(a) of Regulation Y of the Board of Governors of the Federal Reserve System (the “Board of Governors”) (12 C.F.R. § 225.4(a)), to serve as a source of strength to the Bank, including, but not limited to, taking steps to ensure that the Bank complies with the Consent Order entered into with the Federal Deposit Insurance Corporation and the South Carolina Board of Financial Institutions dated February 10, 2011, and any other supervisory action taken by the Bank’s federal or state regulator.

 

Dividends and Distributions

 

2.                                       (a)                                  HCSB shall not declare or pay any dividends without the prior written approval of the Reserve Bank and the Director of the Division of Banking Supervision and Regulation (the “Director”) of the Board of Governors.

 

(b)                                 HCSB shall not directly or indirectly take dividends or any other form of payment representing a reduction in capital from the Bank without the prior written approval of the Reserve Bank.

 

(c)                                  HCSB and its nonbank subsidiary shall not make any distributions of interest, principal, or other sums on subordinated debentures or trust preferred securities without the prior written approval of the Reserve Bank and the Director.

 

(d)                                 All requests for prior approval shall be received by the Reserve Bank at least 30 days prior to the proposed dividend declaration date, proposed distribution on

 

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subordinated debentures, and required notice of deferral on trust preferred securities. All requests shall contain, at a minimum, current and projected information on HCSB’s capital, earnings, and cash flow; the Bank’s capital, asset quality, earnings, and allowance for loan and lease losses; and identification of the sources of funds for the proposed payment or distribution. For requests to declare or pay dividends, HCSB must also demonstrate that the requested declaration or payment of dividends is consistent with the Board of Governors’ Policy Statement on the Payment of Cash Dividends by State Member Banks and Bank Holding Companies, dated November 14, 1985 (Federal Reserve Regulatory Service, 4-877 at page 4-323).

 

Debt and Stock Redemption

 

3.                                       (a)                                  HCSB and its nonbank subsidiary shall not, directly or indirectly, incur, increase, or guarantee any debt without the prior written approval of the Reserve Bank. All requests for prior written approval shall contain, but not be limited to, a statement regarding the purpose of the debt, the terms of the debt, and the planned source(s) for debt repayment, and an analysis of the cash flow resources available to meet such debt repayment.

 

(b)                                 HCSB shall not, directly or indirectly, purchase or redeem any shares of its stock without the prior written approval of the Reserve Bank.

 

Capital Plan

 

4.                                       Within 60 days of this Agreement, HCSB shall submit to the Reserve Bank an acceptable written plan to maintain sufficient capital at HCSB on a consolidated basis. The plan shall, at a minimum, address, consider, and include:

 

(a)                                  The consolidated organization’s and the Bank’s current and future capital requirements, including compliance with the Capital Adequacy Guidelines for Bank Holding Companies: Risk-Based Measure and Tier 1 Leverage Measure, Appendices A and D of

 

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Regulation Y of the Board of Governors (12 C.F.R. Part 225, App. A and D) and the applicable capital adequacy guidelines for the Bank issued by the Bank’s federal regulator;

 

(b)                                 the adequacy of the Bank’s capital, taking into account the volume of classified credits, risk profile, the adequacy of the allowance for loan and lease losses, current and projected asset growth, and projected earnings;

 

(c)                                  the source and timing of additional funds necessary to fulfill the consolidated organization’s and the Bank’s future capital requirements;

 

(d)                                 supervisory requests for additional capital at the Bank or the requirements of any supervisory action imposed on the Bank by its federal or state regulator; and

 

(e)                                  the requirements of section 225.4(a) of Regulation Y of the Board of Governors that HCSB serve as a source of strength to the Bank.

 

5.                                       HCSB shall notify the Reserve Bank, in writing, no more than 30 days after the end of any quarter in which HCSB’s capital ratios fall below the approved plan’s minimum ratios. Together with the notification, HCSB shall submit an acceptable written plan that details the steps that HCSB will take to increase its capital ratios to or above the approved plan’s minimums.

 

Cash Flow Projections

 

6.                                       Within 60 days of this Agreement, HCSB shall submit to the Reserve Bank a written statement of its planned sources and uses of cash for debt service, operating expenses, and other purposes (“Cash Flow Projection”) for 2011. HCSB shall submit to the Reserve Bank a Cash Flow Projection for each calendar year subsequent to 2011 at least one month prior to the beginning of that calendar year.

 

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Compliance with Laws and Regulations

 

7.                                       (a)                                  In appointing any new director or senior executive officer, or changing the responsibilities of any senior executive officer so that the officer would assume a different senior executive officer position, HCSB shall comply with the notice provisions of section 32 of the FDI Act (12 U.S.C. § 1831i) and Subpart H of Regulation Y of the Board of Governors (12 C.F.R. §§ 225.71 et seq.).

 

(b)                                 HCSB shall comply with the restrictions on indemnification and severance payments of section 18(k) of the FDI Act (12 U.S.C. § 1828(k)) and Part 359 of the Federal Deposit Insurance Corporation’s regulations (12 C.F.R. Part 359).

 

Progress Reports

 

8.                                       Within 30 days after the end of each calendar quarter following the date of this Agreement, the board of directors shall submit to the Reserve Bank written progress reports detailing the form and manner of all actions taken to secure compliance with the provisions of this Agreement and the results thereof, and a parent company only balance sheet, income statement, and, as applicable, report of changes in stockholders’ equity.

 

Approval and Implementation of Plan

 

9.                                       (a)                                  HCSB shall submit written capital plans that are acceptable to the Reserve Bank within the applicable time period set forth in paragraphs 4 and 5 of this Agreement.

 

(b)                                 Within 10 days of approval by the Reserve Bank, HCSB shall adopt the approved capital plans. Upon adoption, HCSB shall promptly implement the approved plans, and thereafter fully comply with it.

 

(c)                                  During the term of this Agreement, the approved capital plans shall not be amended or rescinded without the prior written approval of the Reserve Bank.

 

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Communications

 

10.                                 All communications regarding this Agreement shall be sent to:

 

	
(a)
    	
Ms. Joan T. Garton
    
	
 
    	
Vice President
    
	
 
    	
Federal Reserve Bank of Richmond
    
	
 
    	
P. O. Box 27622
    
	
 
    	
Richmond, Virginia 23261-7622
    
	
 
    	
 
    
	
(b)
    	
Mr. James R. Clarkson
    
	
 
    	
President and Chief Executive Officer 
    
	
 
    	
HCSB Financial Corporation
    
	
 
    	
P.O. Box 218
    
	
 
    	
Loris, South Carolina 29569
    

 

Miscellaneous

 

11.                                 Notwithstanding any provision of this Agreement, the Reserve Bank may, in its sole discretion, grant written extensions of time to HCSB to comply with any provision of this Agreement.

 

12.                                 The provisions of this Agreement shall be binding upon HCSB and its institution-affiliated parties, in their capacities as such, and their successors and assigns.

 

13.                                 Each provision of this Agreement shall remain effective and enforceable until stayed, modified, terminated, or suspended in writing by the Reserve Bank.

 

14.                                 The provisions of this Agreement shall not bar, estop, or otherwise prevent the Board of Governors, the Reserve Bank, or any other federal or state agency from taking any other action affecting HCSB, the Bank, any nonbank subsidiary of HCSB, or any of their current or former institution-affiliated parties and their successors and assigns.

 

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15.                                 Pursuant to section 50 of the FDI Act (12 U.S.C. § 1831aa), this Agreement is enforceable by the Board of Governors under section 8 of the FDI Act (12 U.S.C. § 1818).

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the 9th day of May, 2011.

 

 

	
HCSB FINANCIAL CORPORATION
    	
 
    	
FEDERAL RESERVE BANK OF RICHMOND
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ James R. Clarkson
    	
 
    	
By:
    	
/s/ Joan T. Garton
    
	
 
    	
James R. Clarkson
    	
 
    	
 
    	
Joan T. Garton
    
	
 
    	
President and Chief Executive Officer
    	
 
    	
 
    	
Vice President
    

 

7Exhibit 10.47

 

EMPLOYMENT AGREEMENT

 

THIS AGREEMENT made this May 02, 2011 is by and between Kips Bay Medical, Inc., a Delaware  Corporation (the “Company”), and Michael Reinhardt a resident of the State of Minnesota (the “Employee”).

 

WHEREAS, the parties wish to provide for the employment of the Employee by the Company; and

 

WHEREAS, the Company desires reasonable protection of its confidential business and technical information, which has been and will be acquired, and is being developed by the Company, at substantial expense.

 

NOW, THEREFORE, in consideration of mutual promises contained herein, the Company and the Employee, each intending to be legally bound, agree as follows:

 

1.                                       Employment.  Subject to all of the terms and conditions of this Agreement, the Company agrees to employ the employee as Vice President of Sales & Marketing and the Employee accepts this employment.

 

2.                                       Duties.  The Employee will make the best use of his/her energy, knowledge and training in advancing the Company’s interest.  He/she will diligently and conscientiously perform the duties of Vice President of Sales & Marketing for the Company, as such duties may be defined by the Company’s Board of Directors and such other tasks as may from time to time be reasonably required to further the growth of the Company.  The Employee will make every effort to avoid using any trade secrets or confidential information that he/she may have in his/her possessions from any previous employer.  Employee’s work will be confined to new developments created at the Company or in the public domain.  This will help to avoid any conflict with Employee’s previous employers.

 

3.                                       Term.  The Employee shall be employed on an “at will” basis.  Either party may terminate the employment relationship created by this agreement for any reason by giving ten (10) working days prior written notice to the other party.  Because the employment relationship is “at will,” the Employee shall have no right to continued employment, and the Company may terminate the Employee for any reason (other than because of Employee’s race, sex, age or other legally protected category) at any time.  If this Agreement is terminated by the Company, Employee shall not be entitled to any severance benefits.  The Company may, in its sole discretion, provide severance benefits in certain circumstances to a terminated employee.  The provision of severance benefits to a terminated employee, however, shall not imply a policy, practice of obligation of providing severance benefits to any other terminated employee.

 

No document or statement (oral or written) by the Company or its officers will create a right to continued employment or a right to severance benefits for a terminated employee.

 

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4.                                       Compensation.

 

(a)                                  Salary.  The Company shall pay the Employee a salary of $8,076.93  bi-weekly ($210,000 annually).

 

(b)                                 Benefits.  The Employee will be entitled to participate in benefit plans which may be established by the Board of Directors of the Company.

 

(c)                                  Expenses.  The Company, shall reimburse the Employee for all ordinary and necessary business expenses the Employee incurs while performing his/her duties under this Agreement, provided that the Employee accounts properly for such expenses to the Company in accordance with the general corporate policy of the Company as determined by the Company’s Board of Directors and in accordance with the requirements of Internal Revenue Service regulations relating to substantiation of expenses.

 

5.                                       Inventions.

 

(a)                                  “Inventions,” as used in this Section 5, means any discoveries, designs, improvements or software (whether or not they are in writing or reduced to practice) or works of authorship (whether or not they can be patented or copyrighted) that the Employee makes, authors or conceives (ether alone or with others) and that:

 

(i)                                     concern directly the Company’s products, research or development;

 

(ii)                                  result from any work the Employee performs for the Company; or

 

(iii)                               use the Company’s equipment, facilities, or trade secret information.

 

(b)                                 The Employee agrees that all Inventions he/she makes during the term of this Agreement will be the sole and exclusive property of the Company.  The Employee will, with respect to any such Invention:

 

(i)                                     keep current, accurate, and complete records, which will belong to the Company and be kept and stored on the Company’s premises while the Employee is employed by the Company;

 

(ii)                                  promptly and fully disclose the existence and describe the nature of the Invention to the Company and in writing (and without request);

 

(iii)                               assign (and the Employee does hereby assign) to the Company all of his/her rights to the Invention, and applications he/she makes for patents or copyrights in any country, and any patents or copyrights granted to him/her in any country; and

 

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(iv)                              acknowledge and deliver promptly to the Company any written instruments, and perform any other reasonable acts necessary in the Company’s opinion and at its expense to preserve property rights in the Invention against forfeiture, abandonment, or loss and to obtain and maintain letters, patents and/or copyrights on the Invention and to vest the entire right and title to the Invention in the Company, provided that the Employee makes no warranty or representation to the Company as to rights against third parties hereunder.

 

(c)                                  The requirements of this subsection 5(b) do not apply to an Invention for which no equipment, facility, or trade secret information of the Company was used and which was developed entirely on the Employee’s own time, and which:

 

(i)                                     does not relate directly to the Company’s business or to the Company’s actual research or development; and

 

(ii)                                  does not result from any work the Employee performed for the Company.  Except as previously disclosed to the Company in writing, the Employee does not have and will not assert any claims to or rights under any Inventions as having been made, conceived, authored, or acquired by the Employee prior to his/her employment hereunder.

 

6.                                       Confidential Information.

 

(a)                                  “Confidential Information,” as used in this Section 6, means information that is not generally known and that is proprietary to the Company or that the Company is obligated to treat as proprietary.  This information includes, without limitation:

 

(i)                                     trade secret information about the Company and its products or services;

 

(ii)                                  “Inventions,” as defined in subsection 5(a) above;

 

(iii)                               information concerning the Company’s business, as the Company has conducted it or as it may conduct it in the future; and

 

(iv)                              information concerning any of the Company’s past, current, or possible future products, including (without limitation) information about the Company’s research, development, engineering, purchasing, manufacturing, servicing, finances, marketing or selling.

 

Any information that reasonably can be expected to be treated as Confidential Information will be presumed to be Confidential Information (whether the Employee or other originated it and regardless of how he/she obtained it).

 

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(b)                                 Except as required in his/her duties to the Company, the Employee will not, during his/her employment and for all times after termination of his/her employment with the Company, use or disclose Confidential Information to any person not authorized by the Company to receive it, excluding Confidential Information:

 

(i)                                     which becomes publicly available by a source other than the Employee;

 

(ii)                                  which is received by the Employee after termination of his/her employment hereunder from a source who did not obtain the information directly or indirectly from employees or agents of the Company; or

 

(iii)                               for which disclosure thereof the Company has consented in writing.  When the Employee’s employment with the Company ends, he/she will promptly turn over to the Company all records and any compositions, articles, devices, apparatus and other items that disclose, describe, or embody Confidential Information including all copies, reproductions, and specimens of Confidential Information in his/her possession regardless of who prepared them.

 

7.                                       Competitive Activities.  The Employee agrees that during his/her employment with the Company and for a period of one (1) year after his/her employment with the Company ends:

 

(a)                                  He/she will not alone, or in any capacity with another firm:

 

(i)                                     directly or indirectly engage in any commercial activity that is competitive with any of the Company’s business in which the Employee participated while he/she was employed by the Company or any affiliate thereof nor will he/she participate in the management or operation of, or become a significant investor in, any venture or enterprise of whatever kind as a principal officer, director, employee, representative, agent or shareholder of any entity whose business is the design, development, production, marketing or servicing of any product or service competitive with the business of the Company as it exists at the time his/her employment with the Company or any affiliate thereof is terminated;

 

(ii)                                  solicit or in any way interfere or attempt to interfere with the Company’s relationships with any of its current or potential customers; or

 

(iii)                               employ or attempt to employ any of the Company’s employees on behalf of any other entity competing with the Company, provided that, nothing in this Section 7 shall restrict the Employee’s employment by or association with any entity, venture, or enterprise which engages in a business with a product or service competitive with any product or service of the Company so long as the following conditions are complied with:  (a) the Employee’s employment or association with such entity, venture or enterprise is limited to work which does

 

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not involve or relate to the design, development, production, marketing or servicing of a product or service which is directly competitive with any product or service of the company; and (b) the Employee’s employer takes reasonable measures to insure that the Employee is not involved with or consulted in any aspect of the design, development, production, marketing, or servicing of such competitive product or service.

 

(b)                                 Employee will, prior to accepting employment with any new employer, inform that employer of this Agreement and provide that employer with a copy of Section 7 of this Agreement, provided that he/she reasonably believed his/her new position is or may be contrary to this Agreement.

 

8.                                       Conflicting Business.  Unless prior written approval is obtained from the Company’s Board of Directors or an appropriate committee of the Board, the Employee agrees that he/she will not transact business with the Company personally, or as agent, owner, partner, or shareholder of any other entity.  The Employee further agrees that he/she will not engage in any business activity or outside employment that may be in conflict with the Company’s proprietary or business interests.

 

9.                                       No Adequate Remedy.  The Employee understands that if he/she fails to fulfill his/her obligations under Sections 5, 6, 7 or 8 of this Agreement, the damages to the Company would be very difficult to determine.  Therefore, in addition to any other rights or remedies available to the Company at law, in equity or by statute, the Employee hereby consents to the specific enforcement of Sections 5, 6, 7 or 8 of this Agreement by the Company through an injunction or restraining order issued by any appropriate court.

 

10.                                 Miscellaneous.

 

(a)                                  Successors and Assigns.  This Agreement may not be assigned by the Employee, except as provided in the next sentence.  This Agreement may not be assigned by the Company without the Employee’s consent, which consent shall not be unreasonably withheld.  In any event, the Company may assign this Agreement without the consent of the Employee in connection with a merger, consolidation, assignment, sale or other disposition of substantially all of its assets or business or the assets or business of a division of the Company.

 

(b)                                 Modification.  This Agreement may be modified or amended only by a writing signed by each of the parties hereto.

 

(c)                                  Governing Law.  The laws of the State of Minnesota shall govern the validity, construction, and performance of this Agreement.

 

(d)                                 Construction.  Wherever possible, each provision of this Agreement shall be interpreted so that it is valid under applicable law.  If any provision of this Agreement is to any extent invalid under applicable law in any jurisdiction, that provision shall still be effective to the extent it remains valid.  The remainder of this Agreement also shall

 

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continue to be valid, and the entire Agreement shall continue to be valid in other jurisdictions.

 

(e)                                  Non-Waiver.  No failure or delay by any of the parties hereto in exercising any right or remedy under this Agreement shall waive any provision of this Agreement.  Any single or partial exercise by either of the parties hereto of any right or remedy under this Agreement shall not preclude the party from otherwise or further exercising its rights or remedies, or any other rights or remedies granted by any law or any related document.

 

(f)                                    Captions.  The headings in this Agreement are for convenience only and shall not affect the interpretation of this Agreement.

 

(g)                                 Notices.  All notices and other communications required or permitted under this Agreement shall be in writing and hand delivered or sent by registered first-class mail, postage prepaid.  Such notices and other communication shall be effective upon receipt if hand delivered and shall be effective five (5) business days after mailing if sent by mail to the following addresses, or such other addresses as either party shall have notified the other party:

 

If to the Company:

 

Kips Bay Medical, Inc.

3405 Annapolis Lane Suite 200

Minneapolis, MN  55447

 

If to the Employee:

 

Michael Reinhardt

12910 44th Ave. N.

Plymouth, MN  55442

 

IN WITNESS WHEREOF, The Company and the Employee have executed this Agreement as of the date first above written.

 

	
By:
    	
/s/ Manny Villafaña
    	
 
    
	
 
    	
 
    	
 
    
	
Title:
    	
Chairman/CEO
    	
 
    
	
 
    	
 
    	
 
    
	
Employee:
    	
/s/   Michael Reinhardt
    	
 
    
					

 

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