Document:

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                                                                   EXHIBIT 10.10

                              EMPLOYMENT AGREEMENT

      This EMPLOYMENT AGREEMENT ("Agreement") is entered into as of February 8,
2005 (and effective as of the First Closing Date (as hereinafter defined))
between Sunair Electronics, Inc. a Florida corporation (the "Company"), and
Henry A. Budde, an individual resident of the State of Florida (the "Employee").

      WHEREAS, the Employee currently is the Vice President of Operations of the
Company;

      WHEREAS, the Company is a party to the Purchase Agreement, dated as of
November 17, 2004, with Coconut Palm Capital Investors, II, Ltd. (as the same
shall be amended, restated, modified and supplemented from time to time, the
"Purchase Agreement"); and

      WHEREAS, the parties desire that this Agreement only be effective from and
after the First Closing Date (as that term is defined in the Purchase
Agreement).

      NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements contained in this Agreement, the parties
hereto agree as follows:

      1.    Employment.

            (a) Retention. From and after the First Closing Date, the Company
agrees to employ the Employee and the Employee agrees to accept such employment,
subject to the terms and conditions of this Agreement.

            (b) Employment Period. The period during which the Employee shall
serve as an employee of the Company shall commence on the First Closing Date
and, unless earlier terminated pursuant to this Agreement, shall expire on the
second (2nd) anniversary of the First Closing Date (the "Employment Period").

            (c) Duties and Responsibilities. During the Employment Period, the
Employee shall have the title of Vice President of Operations of the
communications division of the Company (the "Communications Division") reporting
to the President of the Communications Division and the Employee shall have such
authority and responsibility and perform such duties as may be assigned to him
from time to time at the direction of the President of the Communications
Division, and in the absence of such assignment, such duties customarily carried
out by Employee immediately prior to this Agreement as are necessary to the
business and operations of the Company. During the Employment Period, the
Employee's employment shall be full time and the Employee shall perform his
duties honestly, diligently, competently, in good faith and in the best
interests of the Company and shall use his best efforts to promote the interests
of the Company.

<PAGE>

            (d) Compensation. In consideration for the Employee's services
hereunder and the restrictive covenants contained herein, during the Employment
Period, the Employee shall be paid on the basis of an annual salary of One
Hundred Twenty-Five Thousand and 00/100 Dollars ($125,000.00) (the "Salary"),
payable in accordance with the Company's customary payroll practices.

            (e) Benefits. During the Employment Period, the Employee shall be
entitled to participate in any insurance programs, sales compensation plans or
other Company bonus plans, vacation policies, pension plans and other fringe
benefit plans and programs as are from time to time established and maintained
for the benefit of the Company's employees with responsibilities comparable to
those of the Employee, subject to the provisions of such plans and programs.
Subject to shareholder approval of the Company's 2004 Stock Incentive Plan (the
"Plan"), and pursuant to the terms and conditions of the Plan, as of the first
day of the Employment Period the Employee shall be granted options to purchase
40,000 shares of the Company's common stock at an exercise price equal to the
Fair Market Value (as defined in the Plan) of the shares on the date of grant.
Such options shall vest at a rate of 1,666 per full month of employment, except
that at the end of month twenty-four of the Employment Period, all remaining
options shall vest.

            (f) Expenses. In addition to the salary and benefits described
above, during the Employment Period, the Employee shall be reimbursed for all
out-of-pocket expenses reasonably incurred by him on behalf of or in connection
with the business of the Company, pursuant to the normal standards and
guidelines followed from time to time by the Company.

      2.    Termination.

            (a) Death, Disability and Cause. At any time during the Employment
Period, the Company shall have the right to terminate the Employment Period and
to discharge the Employee for Cause (as defined below) effective upon delivery
of written notice to the Employee. If the Employee dies during the Employment
Period, this Agreement and the Employment Period shall automatically terminate.
Upon any such termination by the Company for Cause or automatic termination upon
death, the Employee or his legal representatives shall be entitled to (A) that
portion of the Salary prorated through the date of termination, (B)
reimbursement of expenses properly incurred by the Employee prior to the date of
termination and not previously reimbursed, (C) to the extent applicable, any
death or disability benefits specified in any of the Company's employee benefit
plans in which the Employee participates as in effect at such time, and (D) any
benefits which are required by law, and, except as provided above, the Company
shall have no further obligations hereunder from and after the date of such
termination. Termination for Cause shall mean termination because of (i) the
Employee's material breach of this Agreement, (ii) the Employee's failure or
refusal to perform the duties and responsibilities required to be performed by
the Employee under the terms of this Agreement, which failure or refusal
continues for a period of fifteen (15) days after written notice thereof is
given to the Employee by the Company, (iii) the Employee's gross negligence or
willful misconduct in the performance of his duties hereunder, (iv) the
Employee's commission of an act of dishonesty affecting the Company, or the
commission of an act constituting common law fraud or a felony, (v) the
Employee's commission of an act (other than the good faith exercise of his
business judgment in the exercise of his responsibilities) resulting in damages
to the

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Company, or (vi) the Employee's inability to perform his duties and
responsibilities as provided herein due to his physical or mental disability or
sickness extending for greater than one hundred fifty (150) days. If the
Employee shall resign or otherwise terminate his employment with the Company,
the Employee shall be deemed for purposes of this Agreement to have been
terminated for Cause.

            (b) Without Cause. At any time during the Employment Period, the
Company shall have the right to terminate the Employment Period and to discharge
the Employee without Cause effective upon delivery of written notice to the
Employee.

      Upon any such termination by the Company without Cause, the Employee shall
be entitled to (A) continue to receive his Salary payable in accordance with
Section 1(d) for six (6) months following the date of such notice, (B)
reimbursement of expenses properly incurred by the Employee prior to the date of
termination and not previously reimbursed, (C) any benefits which are required
by law, (D) reimbursement of expenses incurred by Employee to continue the
health insurance benefit provided by the Company for the six (6) month period
following the date of such notice, (E) the immediate vesting of any unvested
options issued to Employee pursuant to Section 1(e) hereof, and otherwise the
Company shall have no further obligations hereunder from and after the date of
such termination; provided, however that the Employee shall only be entitled to
such payments as long as (i) he is in compliance with the provisions of Sections
3 and 4 below; and (ii) the Employee executes a release reasonably acceptable to
the Company, releasing the Company from any and all claims arising out of the
Employee's employment with the Company other than a claim for benefits required
pursuant to the terms of this Section of this Agreement.

      3.    Restrictive Covenants. In consideration of the foregoing, the
Employee agrees that the Employee shall not directly or indirectly:

            (a) for the Employment Period and for a period of one (1) year
following the date of termination of Employee's employment by the Company,
except in the case of a termination without cause in which such case for a
period of six (6) months (the "Noncompete Period"), directly or indirectly,
alone or as a partner, joint venturer, officer, director, manager, employee,
consultant, agent, independent contractor, or security holder, of any company or
business, engage in, be involved with, or finance, or provide financial
assistance with respect to, any business engaged in the design, development,
marketing, manufacture, production, distribution or sale of any products or the
provisions of any services which are the same as or competitive with the HF
Radio products or services which the Communications Division was designing,
developing, marketing, manufacturing, producing, distributing, selling or
providing at the time of, or for the six month period prior to, termination of
Employee's employment with the Company (the "Business") in the United States and
any other country or territory in which the Communications Division was doing
business at the time of, or for the six month period prior to, termination of
Employee's employment with the Company (the "Territory"); provided, however,
that the beneficial ownership of less than five percent (5%) of any class of
securities of any entity having a class of equity securities actively traded on
a national securities exchange or over-the-counter market shall not be deemed,
in and of itself, to violate the prohibitions of this Section;

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            (b) during the Noncompete Period, directly or indirectly, (i) induce
any customer of the Communications Division to patronize any business which is
directly or indirectly in competition with the Business conducted by the
Communications Division; (ii) canvass, solicit or accept from any Person which
is a customer of the Business conducted by the Communications Division any such
competitive business; or (iii) request or advise any customer or other business
relationship of the Business conducted by the Communications Division to
withdraw, curtail, decrease or cancel any such person's business with the
Communications Division or its successors; and

            (c) during the Noncompete Period, directly or indirectly, employ any
person who was employed by the Communications Division or in any manner seek to
induce any employee of the Communications Division to leave his or her
employment.

      4.    Confidentiality; Non-Disparagement.

            (a) The Employee agrees that at all times during and after the
Employment Period, the Employee shall (i) hold in confidence and refrain from
disclosing to any other party all information, whether written or oral, of a
private, secret, proprietary or confidential nature, of or concerning the
Communications Division and their business and operations, and all files,
letters, memoranda, reports, records, computer disks or other computer storage
medium, data, models or any photographic or other tangible materials containing
such information ("Confidential Information"), including without limitation, any
sales, promotional or marketing plans, programs, techniques, practices or
strategies, any expansion plans (including existing, and entry into new,
geographic and/or product markets), and any customer lists, (ii) use the
Confidential Information solely in connection with his employment with the
Communications Division and for no other purpose, (iii) take all precautions
necessary to ensure that the Confidential Information shall not be, or be
permitted to be, shown, copied or disclosed to third parties, without the prior
written consent of the Board of Directors of the Company, and (iv) observe all
security policies implemented by the Company from time to time with respect to
the Confidential Information. Confidential Information shall not include any
information which becomes generally available to the public or lawfully
obtainable from other sources (except by reason of any unauthorized disclosure
by the Employee). In the event that the Employee is ordered to disclose any
Confidential Information, whether in a legal or regulatory proceeding or
otherwise, the Employee shall provide the Board of Directors of the Company with
prompt notice of such request or order so that the Company may seek to prevent
disclosure. In the case of any disclosure, the Employee shall disclose only that
portion of the Confidential Information that he is ordered to disclose.

            (b) The Employee agrees that at all times during and for the one (1)
year period after the Employment Period, the Employee will not engage in any
conduct that is injurious to the Company's reputation and interests, including,
but not limited to, making disparaging comments (or inducing or encouraging
others to make disparaging comments) about the Company or any of the Company's
directors, officers, employees, managers, members or agents or the Company's
operations, financial condition, prospects, products or services.

      5.    Acknowledgments of the Parties. The parties agree and acknowledge
that the restrictions contained in Sections 3 and 4 hereof are reasonable in
scope and duration and are

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necessary to protect the Company. If any provision of Section 3 or 4 as applied
to any party or to any circumstance is adjudged by a court to be invalid or
unenforceable, the same shall in no way affect any other circumstance or the
validity or enforceability of any other provision of this Agreement. If any such
provision, or any part thereof, is held to be unenforceable because of the
duration of such provision or the area covered thereby, the parties agree that
the court making such determination shall have the power to reduce the duration
and/or area of such provision, and/or to delete specific words or phrases, and
in its reduced form, such provision shall then be enforceable and shall be
enforced. It is expressly acknowledged and agreed that the restrictions
contained in Sections 3 and 4 shall survive and continue to be in effect, in
accordance with the terms hereof, following the expiration or termination for
any reason of the Employee's relationship with the Company. The provisions of
Sections 3 and 4 shall be construed as an agreement on the part of Employee
independent of any other part of this Agreement or any other agreement, and the
existence of any claim or cause of action of Employee against the Company
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by the Company of the provisions of Sections 3 or 4.

      6.    Notices. All notices, requests, demands, claims and other
communications hereunder shall be in writing and shall be deemed given if
delivered by certified or registered mail (first class postage pre-paid),
guaranteed overnight delivery or facsimile transmission if such transmission is
confirmed by delivery by certified or registered mail (first class postage
pre-paid) or guaranteed overnight delivery to, the following addresses and
telecopy numbers (or to such other addresses or telecopy numbers which such
party shall designate in writing to the other parties): (a) if to the Company,
to Sunair Electronics, Inc., 3005 S.W. 3rd Avenue, Fort Lauderdale, Florida
33315 Attention: President, Fax: (954) 765-1322; and (b) if to the Employee, at
the address and facsimile number listed on the signature page hereto.

      7.    Amendment; Waiver. This Agreement may not be modified, amended,
supplemented, canceled or discharged, except by a written instrument executed by
all parties. No failure to exercise, and no delay in exercising, any right,
power or privilege under this Agreement shall operate as a waiver, nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
the exercise of any other right, power or privilege. No waiver of any breach of
any provision shall be deemed to be a waiver of any preceding or succeeding
breach of the same or any other provision, nor shall any waiver be implied from
any course of dealing between the parties. No extension of time for performance
of any obligations or other acts hereunder or under any other agreement shall be
deemed to be an extension of the time for performance of any other obligations
or any other acts. The rights and remedies of the parties under this Agreement
are in addition to all other rights and remedies, at law or equity, that they
may have against each other.

      8.    Remedies Upon Breach. Employee acknowledges that his services
hereunder are of a special and unique character and places him in a position of
trust and confidence with confidential and proprietary documents and information
and employees, customers and suppliers of the Company, and that such information
and documents are of a special and unique character that give them a peculiar
value, and, as a result, any breach of Employee's obligations under this
Agreement will cause the Company irreparable injury that cannot be adequately
compensated by the payment of damages in an action at law. Accordingly, the
parties agree that the Company shall be entitled to the remedies of injunction,
specific performance and other equitable relief to

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redress any breach, or to prevent any threatened breach and the Company shall
be required to prove special damages and provided the Company is successful on
the merits, Employee shall pay any and all costs and expenses (including
reasonable attorneys' fees and expenses) incurred by the Company in enforcing
its rights hereunder. Nothing contained in this Agreement shall, however, be
construed as a waiver by the Company of any right, including, without
limitation, the Company's right to damages.

      9.    Assignment. This Agreement, and the Employee's rights and
obligations hereunder, may not be assigned or delegated by Employee. The Company
may assign its rights, and delegate its obligations, hereunder without the
consent of the Employee. The rights and obligations of the Company under this
Agreement shall inure to the benefit of and be binding upon their respective
successors and assigns.

      10.   Severability; Survival. Subject to Section 5 hereof, in the event
that any provision of this Agreement is found to be void and unenforceable by a
court of competent jurisdiction, then such unenforceable provision shall be
deemed modified so as to be enforceable (or if not subject to modification then
eliminated herefrom) for the purpose of those proceedings to the extent
necessary to permit the remaining provisions to be enforced. The provisions of
Sections 3, 4 and 8 will survive the termination for any reason of the
Employee's relationship with the Company.

      11.   Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument.

      12.   Governing Law. This Agreement shall be construed in accordance with
and governed for all purposes by the laws of the State of Florida applicable to
contracts executed and to be wholly performed within such State.

      13.   Entire Agreement. This Agreement contains the entire understanding
of the parties in respect of its subject matter and supersedes all prior
agreements and understandings (oral or written) between or among the parties
with respect to such subject matter. Notwithstanding the foregoing, Employee
acknowledges the execution and continued applicability of certain agreements
entered into with the Company including that certain Release and Waiver
Agreement dated May 12, 1986, and that certain Nondisclosure Agreement dated May
12, 1986.

      14.   Headings. The headings herein are for convenience of reference and
are not part of this Agreement and shall not affect the interpretation of any of
its terms.

      15.   Construction. This Agreement shall be construed as a whole according
to its fair meaning and not strictly for or against any party. The parties
acknowledge that each of them has reviewed this Agreement and has had the
opportunity to have it reviewed by their respective attorneys and that any rule
of construction to the effect that ambiguities are to be resolved against the
drafting party shall not apply in the interpretation of this Agreement.

      16.   Effective Date. This Agreement shall only be effective from and
after the First Closing Date. Prior to the First Closing Date, this Agreement
shall be of no force and effect.

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This Agreement shall also be of no force and effect if the Employee's employment
with the Company terminates for any reason prior to the First Closing Date.

                         [SIGNATURES ON FOLLOWING PAGE]

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

                                             SUNAIR ELECTRONICS, INC., a
                                             Florida corporation

                                             By: /s/ James E. Laurent
                                                 -------------------------------
                                             Name: James E. Laurent
                                             Title: President

                                             EMPLOYEE:

                                                 /s/ Henry A. Budde
                                             -----------------------------------
                                             Name: Henry A. Budde

                                             Address for Notices:

                                                 813 SW 18 Court
                                                 Fort Lauderdale, FL 33315-2043
                                             Facsimile: 954 467-2252

                                       8<PAGE>

                                                                    Exhibit 10.1

              RESIGNATION, SEVERANCE AND GENERAL RELEASE AGREEMENT

      THIS AGREEMENT ("Agreement") is made and entered into as of March 31,
2005, by and between JOE K. MCARTHUR ("McArthur") and FIRST FEDERAL OF THE
SOUTH, a federal savings bank and SOUTHFIRST BANCSHARES, INC. (singularly and
collectively referred to as "Employer"), as follows:

                              W I T N E S S E T H:

      WHEREAS, McArthur has been employed as an officer and director of Employer
for many years, most recently pursuant to employment agreement with First
Federal of the South dated as of January 1, 2005, and employment agreement with
SouthFirst Banchares, Inc. dated as of October 1, 2003; and

      WHEREAS, McArthur has tendered his resignation to the Boards of Directors
of Employer conditioned upon the mutual execution of this Agreement; and

      WHEREAS, the parties have mutually agreed to the terms of this Agreement;

      NOW, THEREFORE, the parties hereto agree as follows:

      1. Resignation. McArthur does resign as an officer, director and committee
member of Employer effective 12 o'clock noon on March 31, 2005. Employer hereby
accepts McArthur's resignation.

      2. Severance Benefits. McArthur shall be paid a severance benefit in one
lump sum of $228,361.00. Such payment, less $2854.00 for the purchase of
McArthur's company car, shall be made contemporaneously with the execution of
this Agreement, and is based on Schedule "1" attached hereto and made a part
hereof. In addition to the Severance Benefits described above, the Employer
agrees to pay McArthur $10,000 for the surrender of all stock options in the
shares of either or both Employer, that McArthur possess.

      3. Change in Control. The parties agree that in the event of a change in
control of either Employer, the change in control benefit heretofore available
to McArthur under paragraph 11(a) of the First Federal of the South Amended and
Restated Employment Agreement and the SouthFirst Bancshares, Inc. Amended and
Restated Employment Agreement shall be in full force and effect as though
McArthur's employment had been terminated by the Employer without McArthur's
prior written consent and for a reason other than for Cause, death or
disability. The parties intend by this paragraph to enable McArthur to enjoy the
benefits that would have accrued to him under the change in control provision of
paragraph 11 of the referenced agreements had McArthur remained in employment
for 24 months following the effective date of his resignation. Provided,
however, the parties do by execution of this Agreement, acknowledge that in the
event of McArthur's death prior to an event described under paragraphs 11(a) of
the

<PAGE>

above referenced employment agreements, McArthur shall not be entitled to any
benefit set forth in such paragraphs.

      4. Indemnity. For a period of two years from the date of this Agreement,
Employer agrees not to delete former officers and directors from coverage under
any Employer maintained errors and omissions policy of insurance.

      5. Deferred Compensation Agreement. Employer and McArthur agree that
McArthur has vested rights under the Deferred Compensation Agreement dated
November 16, 1994; that the vested benefit is 11.25 years; that the benefit to
be provided thereby is $1834.69 per month for 180 months, commencing on the
earlier of McArthur's attaining age 65, or his death; and, that should McArthur
die before full payout of such benefit, then the payment will be due and payable
to McArthur's designated beneficiary.

      6. General Release. In consideration of the promises set forth herein, the
sufficiency of which consideration is hereby acknowledged, McArthur hereby
releases and forever discharges Employer and any of its directors, officers,
agents and employees, from any and all causes of action or claims of any type
that McArthur might have from the beginning of time through the date of
McArthur's execution of this Agreement, arising or which could have arisen out
of McArthur's employment relationship with Employer, including but not limited
to causes of action or claims of any type arising under the Civil Rights Acts of
1866, 1871, 1964 and 1991(as amended), the National Labor Relations Act, the
Fair Labor Standards Act, the Equal Pay Act, the Occupational Safety and Health
Act, the Family Medical and Leave Act, the Americans With Disabilities Act, the
Employee Retirement Income Security Act of 1974 (except with respect to vested
retirement benefits), and any other federal, state or local statute, law,
ordinance, regulation or order that may give rise to any cause of action.
McArthur further agrees and covenants never to institute directly or indirectly
or to participate in any action or proceeding of any kind against Employer, its
directors, officers, agents and employees.

      7. No Admission. Neither this Agreement nor any act taken by Employer
pursuant to this Agreement shall, in any way, be construed as an admission by
Employer of any liability, wrongdoing or violation of law, regulation, contract
or policy.

      8. Confidentiality. This Agreement and all of its terms and provisions are
strictly confidential and shall not be divulged by the parties or disclosed in
any way to any person other than the Employer, its officers and directors, its
legal and tax advisors, and its regulators, or to McArthur, his spouse or legal
and tax advisor(s), and McArthur will protect the confidentiality of this
Agreement in all regards. McArthur agrees and understands that a breach of this
confidentiality provision will be grounds entitling Employer to the return of
the severance benefits recited hereinabove and for damages resulting from any
harm to Employer including, but not limited to, Employer's reasonable attorneys'
fees in connection therewith.

      9. Non-Disparagement and Neutral Reference. Employer and McArthur agree
that they will not disparage one another to any other person or entity. If
McArthur seeks an employment reference from Employer, he should direct any such
request to Allen G. McMillan, III. Employer agrees that it will provide a
neutral reference consisting only of McArthur's dates of employment and
positions held.

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<PAGE>

      10. Entire Agreement. The document constitutes the complete and entire
agreement between the parties. This Agreement shall supercede and replace any
and all prior written or oral agreements previously entered into between the
parties with respect to the subject matter hereof and any such prior agreements
shall be null and void and of no consequence.

      11. Severability. If any provision of this Agreement is held invalid or
unenforceable by a court of competent jurisdiction, the other provisions of this
Agreement shall remain in full force and effect. Any provision of this Agreement
held invalid or unenforceable only in part or degree shall remain in full force
and effect to the extent not held invalid or unenforceable.

      12. Governing Law. To the extent state law is not preempted by applicable
federal law, this Agreement shall be governed by, construed and enforced in
accordance with the laws of the State of Alabama.

      13. Consultation with Legal Counsel. McArthur has reviewed and considered
this Agreement prior to signing it with legal counsel. McArthur represents and
acknowledges that he has been fully informed and fully understands all the
provisions of this Agreement. McArthur also represents and acknowledges that he
has executed this Agreement voluntarily, with full knowledge of its
significance.

      14. Non-Modification. Nothing contained in this Agreement is intended to
alter or modify any rights, obligations or duties that either party may have
under deferred compensation agreements or option agreements that may have
heretofore been established for the benefit of McArthur or entered into by and
between McArthur and Employer.

      15. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the heirs, successors and assigns of the parties.

      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 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

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<PAGE>

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

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<PAGE>

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

                              __________________________________________________
                              JOE K. MCARTHUR

                                                   (McArthur)

                              FIRST FEDERAL OF THE SOUTH, a federal savings bank

                              By: ________________________________
                                  Allen G. McMillan, III
                                  Its: Chairman of the Board of Directors

                              SOUTHFIRST BANCSHARES, INC.

                              By: ________________________________
                                  Allen G. McMillan, III
                                  Its: Chairman of the Board of Directors

                                                  (Employer)

                                        5
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                                  SCHEDULE "1"

                              [SEVERANCE  BENEFITS]

                                        6
<PAGE>

                                 Joe K. McArthur
                             Compensation & Benefits

<TABLE>
<CAPTION>
                                     2000         2001        2002        2003        2004      Total       5 yr. Avg
                                    -------     -------     -------     -------     -------   ---------     ---------
<S>                                 <C>         <C>         <C>         <C>         <C>       <C>           <C>
Base Salary                         105,000     107,916     142,917     150,000     150,000     655,833      150,000
Bonus                                17,065       8,875      10,000       8,650       5,769      48,359        9,672
Dividend Incentive Plan              12,425      15,439      15,439      18,019      18,019      79,341       15,868
Profit Sharing Plan - 401K Match      1,017       2,877       4,275       1,125           -       9,294        1,859
ESOP Company Contribution             3,260       3,550       2,547       5,621           -      15,078        3,016
Directors Fees                       13,155      19,725      22,995      24,000      21,000     100,875       20,175
Committee Fees                            -           -           -           -           -           -            -
Health Insurance                      3,660       3,348       3,752       4,525       4,857      20,142        4,028
Life & Disability Insurance             660         450         968         966         966       4,008          502
Country Club Dues                     1,680       1,680       1,680       1,680       1,680       8,400        1,680
Automobile                              964         964       1,465       1,485       1,485       8,383        1,277
Deferred Comp Premium                17,835      17,835      17,835      17,835      17,835      89,175       17,635
Cell Phone                                -           -       2,150       2,150       2,150       6,450        2,150
                                    -------     -------     -------     -------     -------   ---------      -------
Total Severance                     176,721     180,659     226,141     236,056     223,761   1,043,338      228,361
                                    =======     =======     =======     =======     =======   =========      =======
</TABLE>

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