Document:

Filed by Bowne Pure Compliance

 

Exhibit 10.3

Wake Forest Federal Savings & Loan Association

Amended and Restated Employment Agreement

This Amended and Restated Employment Agreement (“Agreement”) is made and entered into as of
September 17, 2007 by and between Wake Forest Federal Savings & Loan Association, a savings and
loan association organized and operating under federal laws of the United States and having an
office at 302 South Brooks Street, Wake Forest, North Carolina 27588-0707 (“Association”) and Billy
B. Faulkner, an individual residing at 64 Norwood Faulkner Road, Louisburg, North Carolina 27549
(“Executive”).

Whereas, the Executive currently serves the Association in the capacity of Secretary/Treasurer
and Vice President; and

Whereas, the Association desires to assure for itself the continued availability of the
Executive’s services and the ability of the Executive to perform such services with a minimum of
personal distraction in the event of a pending or threatened Change in Control (as hereinafter
defined); and

Whereas, the Executive is willing to continue to serve the Association on the terms and
conditions set forth;

Now, Therefore, in consideration of the premises and the mutual covenants and conditions
hereinafter set forth, the Association and the Executive hereby agree as follows:

Section 1. Employment.

The Association agrees to continue to employ the Executive, and the Executive hereby agrees to
such continued employment, during the period and upon the terms and conditions set forth in this
Agreement.

Section 2. Employment Period.

(a) The terms and conditions of this Agreement shall be and remain in effect during the period
of employment established under this section 2 (“Employment Period”). The Employment Period shall
be for an initial term of three (3) years beginning on the effective date of this Agreement. Prior
to the first anniversary of the effective date of this Agreement and each anniversary date
thereafter (each, an “Anniversary Date”), the Board of Directors of the Association (“Board”) shall
review the terms of this Agreement and the Executive’s performance of services hereunder and may,
in the absence of objection from the Executive, approve an extension of the Employment Period. In
such event, the Employment Period shall be extended to the third anniversary of the relevant
Anniversary Date.

(b) Nothing in this Agreement shall be deemed to prohibit the Association from terminating the
Executive’s employment at any time during the Employment Period with or
without notice for any reason; provided, however, that the relative rights and obligations of the
Association and the Executive in the event of any such termination shall be determined under this
Agreement.

 

 

 

Section 3. Duties.

The Executive shall serve as Secretary/Treasurer and Vice President of the Association, having
such power, authority and responsibility and performing such duties as are prescribed by or under
the By-laws of the Association and as are customarily associated with such position or as assigned
by the Board acting in good faith. The Executive shall devote his full business time and attention
(other than during weekends, holidays, approved vacation periods, and periods of illness or
approved leaves of absence) to the business and affairs of the Association and shall use his best
efforts to advance the interests of the Association.

Section 4. Cash Compensation .

In consideration for the services to be rendered by the Executive hereunder, the Association
shall pay to him a salary at an initial annual rate of $88,000, payable in approximately equal
installments in accordance with the Association’s customary payroll practices for senior officers.
Prior to each Anniversary Date occurring during the Employment Period, the Board shall review the
Executive’s annual rate of salary and may, in its discretion, approve an increase therein. In
addition to salary, the Executive may receive other cash compensation, including bonuses, from the
Association for services hereunder at such times, in such amounts and on such terms and conditions
as the Board may determine from time to time.

Section 5. Employment Benefit Plans and Programs.

During the Employment Period, the Executive shall be treated as an employee of the Association
shall be eligible to participate in and receive benefits under any and all qualified or
non-qualified retirement, pension, savings, profit-sharing or stock bonus plans, any and all group
life, health (including hospitalization, medical and major medical), dental, accident and long term
disability insurance plans, and any other employee benefit and compensation plans (including, but
not limited to, any incentive compensation plans or programs, stock option and appreciation rights
plans and restricted stock plans) as may from time to time be maintained by, or cover executive
employees of, the Association, in accordance with the terms and conditions of such employee benefit
plans and programs and consistent with the Association’s customary practices.

Section 6. Indemnification and Insurance.

(a) During the Employment Period and for a period of six (6) years thereafter, the Association
shall cause the Executive to covered by and named as an insured under any policy or contract of
insurance obtained by it to insure its directors and officers against personal liability for acts
or omissions in connection with service as an officer or director of the Association or service in
other capacities at the request of the Association. The coverage provided to the
Executive pursuant to this section 6 shall be of the same scope and on the same terms and
conditions as the coverage (if any) provided to other officers or directors of the Association.

 

 

 

(b) To the maximum extent permitted under applicable law (including 12 C.F.R. 545.121 to the
extent applicable), during the Employment Period and for a period six (6) years thereafter, the
Association shall indemnify, and shall cause its subsidiaries and affiliates to indemnify the
Executive against and hold him harmless from any costs, damages, losses and exposures arising out
of a bona fide action, suit or proceeding in which he may be involved by reason of his having been
a director or officer of the Association, the Mutual Holding Company, or the Stock Holding Company
to the fullest extent and on the most favorable terms and conditions that similar indemnification
is offered to any director or officer of the Association or any subsidiary of affiliate thereof.
This section 6(b) shall not be applicable where section 18 is applicable.

(c) The Executive and the Association agree that the termination benefits described in this
Section 6 are intended to be exempt from Section 409A of the Internal Revenue Code (“Section 409A”)
pursuant to Treasury Regulation Section 1.409A-1(b)(10) as certain indemnification and liability
insurance plans. 

Section 7. Outside Activities.

The Executive may serve as a member of the boards of directors of such business, community and
charitable organizations as he may disclose to and as may be approved by the Board (which approval
shall not be unreasonably withheld); provided, however, that such service shall not materially
interfere with the performance of his duties under this Agreement. The Executive may also engage
in personal business and investment activities which do not materially interfere with the
performance of his duties hereunder; provided, however, that such activities are not prohibited
under any code of conduct or investment or securities trading policy established by the Association
and generally applicable to all similarly situated executives (including, without limitation, any
applicable conflict of interest policy adopted by the Board of Directors as contemplated by 12
C.F.R. 571.7) The Executive may also serve as an officer or director of the Mutual Holding Company
and the Stock Holding Company on such terms and conditions as the Association and the Mutual
Holding Company or the Stock Holding Company may mutually agree upon, and such service shall not be
deemed to materially interfere with the Executive’s performance of his duties hereunder or
otherwise to result in a material breach of this Agreement.

Section 8. Working Facilities and Expenses.

The Executive’s principal place of employment shall be at the Association’s executive offices
at the address first above written, or at such other location within Wake County at which the
Association and the Executive may mutually agree upon. The Association shall provide the Executive
at his principal place of employment with a private office, secretarial services and other support
services and facilities suitable to his position with the Association and necessary or appropriate
in connection with the performance of his assigned duties under this Agreement. The Association
shall reimburse the Executive for his ordinary and necessary business expenses,
including, without limitation, fees for membership in such clubs and organizations as the Executive
and the Association shall mutually agree are necessary and appropriate for business purposes, and
his travel and entertainment expenses incurred in connection with the performance of his duties
under this Agreement, in each case upon presentation to the Association of an itemized account of
such expenses in such form as the Association may reasonably require.

 

 

 

Section 9. Termination of Employment with Severance Benefits.

(a) The Executive shall be entitled to the severance benefits described herein in the event
that his employment with the Association terminates during the Employment Period under any of the
following circumstances:

(i) The Executive’s voluntary resignation from employment with the Association within ninety
(90) days following:

(A) the failure of the Board to appoint or re-appoint or elect or reelect the
Executive to the office of Secretary/Treasuer and Vice President (or a more senior
office) of the Association;

(B) the expiration of a thirty (30) day period following the date on which the
Executive gives written notice to the Association of its material failure, whether
by amendment of the Association’s Organization Certificate or By-laws, action of the
Board or the Association’s stockholders or otherwise, to vest in the Executive the
functions, duties, or responsibilities prescribed in section 3 of this Agreement as
of the date hereof, unless, during such thirty (30) day period, the Association
fully cures such failure;

(C) the expiration of a thirty (30) day period following the date on which the
Executive gives written notice to the Association of its material breach of any
term, condition or covenant contained in this Agreement (including, without
limitation any reduction of the Executive’s rate of base salary in effect from time
to time and any change in the terms and conditions of any compensation or benefit
program in which the Executive participates which, either individually or together
with other changes, has a material adverse effect on the aggregate value of his
total compensation package), unless, during such thirty (30) day period, the
Association fully cures such failure; or

(ii) the termination of the Executive’s employment with the Association for any other reason
not described in section 10(a)- (Termination for “Cause”).

In such event, subject to section 25, the Association shall provide the benefits and pay to the

Executive in the amounts described in section 9(b).

(b) upon the termination of the Executive’s employment with the Association under
circumstances described in section 9(a) of this Agreement, the Association shall pay and provide to
the Executive (or, in the event of his death, to his estate):

 

 

 

(i) his earned but unpaid compensation as of the date of the termination of his employment
with the Association, such payment to be made at the time and in the manner prescribed by
law applicable to the payment of wages but in no event later than thirty (30) days after
termination of employment as defined in Treasury Regulation Section 1.409A-1(h)(1)(ii);

(ii) the benefits, if any, to which he is entitled as a former employee under the employee
benefit plans and programs and compensation plans and programs maintained for the benefit of
the Association’s officers and employees;

(iii) continued group life, health (including hospitalization, medical and major medical),
dental, accident and long term disability insurance benefits, in addition to that provided
pursuant to section 9(b)(ii), and after taking into account the coverage provided by any
subsequent employer, if and to the extent necessary to provide for the Executive, for a
period of three (3) years, coverage equivalent to the coverage to which he would have been
entitled under such plans (as in effect on the date of his termination of employment, or, if
his termination of employment occurs after a Change in Control, on the date of such Change
in Control, whichever benefits are greater) if he had continued working for the Association.
The Executive and the Association agree that the termination benefits described in this
Section 9(b)(iii) are intended to be exempt from Section 409A pursuant to Treasury
Regulation Section 1.409A-1(b)(1) as non-taxable benefits.

(iv) with thirty (30) days following his termination of employment with the Association, a
lump sum payment, in an amount equal to three (3) times the Executive’s highest rate of
annual salary, including bonuses and stock awards included as W-2 wages, achieved during the
Employment Period.

(v) within thirty (30) days following his termination of employment with the Association, a
lump sum payment in an amount equal to:

(A) the present value of the aggregate benefits to which he would be entitled
under any and all qualified and non-qualified retirement plans, maintained by, or
covering employees of the Association as if he were 100% vested at date of
termination. Present value is to be determined in accordance with IRC Section 280G.
In the case of the Association’s leveraged Employee Stock Ownership Plan, the
additional assets allocable to him will be computed based upon: (1) the fair market
value of such assets at termination of employment, assuming he were 100% vested in
the Plan, and (2) the Association made the maximum amount of employee contributions
required under the Plan during the remaining debt service period, and (3) the
Executive had continued working for the Association at the highest rate of pay
during the Employment Period.

(vi) at the election of the Association’s Board of Directors made within thirty (30) days
following his termination of employment with the Association, upon surrender of stock
options or appreciation rights granted such Executive under any stock option or
appreciation rights plan covering employees of the Association, a lump sum payment equal to
the product of:

 

 

 

(A) the excess of (1) the fair market value of a share of stock of the same
class as the stock subject to the option or appreciation right, determined as of the
date of termination of employment, over (2) the exercise price per share for such
option or appreciation right, as specified in or under the relevant plan or program;
multiplied by

(B) the number of shares with respect to which options or appreciation rights
are being surrendered.

For purposes of this section 9(b)(vi), the Executive shall be deemed fully vested in all options
and appreciation rights under any stock option or appreciation rights plan or program maintained
by, or covering employees of the Association, even if he is not vested under such plan or program.

(vii) at the election of the Association’s Board of Directors made with thirty (30) days
following the Executive’s termination of employment with the Association, upon surrender of
any shares awarded to the Executive under any restricted stock plan maintained by, or
covering employees of the Association, a lump sum payment in an amount equal to the product
of:

(A) the fair market value of a share of stock of the same class of stock
granted under such plan, determined as of the date of the Executive’s
termination of employment; multiplied by

(B) the number of shares which are being surrendered.

For purposes of this section 9(b)(vii), the Executive shall be deemed fully vested in all shares
awarded under any restricted stock plan maintained by, or covering employees of, the Association,
even if he is not vested under such plan or program.

(c) The Executive and the Association acknowledge that each of the payments and benefits
promised to the Executive under this Agreement must either comply with the requirements of Section
409A and the regulations thereunder or qualify for an exception from compliance. To that end, the
Executive and the Association agree that the termination benefits described in Sections 9(b)(i),
(iv), (v), (vi) and (vii) are intended to be exempt from Section 409A pursuant to Treasury
Regulation Section 1.409A-1(b)(4) as short-term deferrals.

The Association and the Executive hereby stipulate that the damages which may be incurred by
the Executive following any such termination of employment are not capable of accurate measurement
as of the date first above written and that the payments and benefits contemplated by this section
9(b) constitute reasonable damages under the circumstances and shall be payable without any
requirement of proof of actual damage and without regard to the
Executive’s efforts, if any, to mitigate damages. The Association and the Executive further
agree that the Association may condition the payments described under section 9(b) on the receipt
of the Executive’s resignation from any and all positions which he holds as an officer or employee
of the Association, the Mutual Holding Company, or the Stock Holding Company.

 

 

 

Section 10. Termination without Additional Association Liability.

In the event that the Executive’s employment with the Association shall terminate during the
Employment Period on account of:

(a) the discharge of the Executive for “cause,” which, for purposes of this Agreement shall
mean 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 any material breach of this Agreement, in each case as measured against standards generally
prevailing at the relevant time in the savings and community banking industry; provided, however,
that the Executive shall not be deemed to have been discharged for cause unless and until he shall
have received a written notice of termination from the Board, which notice shall be given to the
Executive not later than five (5) business days after the Board adopts, and shall be accompanied
by, a resolution duly approved by affirmative vote a a majority of the entire Board at a meeting
called and held for such purpose (which meeting shall be held not more than fifteen (15) days nor
more than thirty (30) days after notice to the Executive), at which meeting there shall be a
reasonable opportunity for the Executive to make oral and written presentations to the members of
the Board, on his own behalf, or through a representative, who may be legal counsel, to refute the
grounds for the proposed determination finding that in the good faith opinion of the Board grounds
exist for discharging the Executive for cause; or

(b) the Executive’s voluntary resignation from employment with the Association for reasons
other than those specified in section 9(a)(i);

(c) the Executive’s death;

(d) a determination that the Executive is eligible for long-term disability benefits under the
Association’s long-term disability insurance program or, if there is not such program, under the
federal Social Security Act; or

(e) the Executive’s termination of employment for any reason at or after attainment of
mandatory retirement age under the Association’s mandatory retirement policy for executive officers
in effect as of the date of this Agreement;

then the Association shall have no further obligations under this Agreement, other than the payment
to the Executive ( or, in the event of his death, to his estate) of his earned but unpaid
compensation as of the date of the termination of his employment, and the provision of such other
benefits, if any, to which he is entitled as a former employee under the employee benefit plans and
programs and compensation plans and programs maintained by, or covering employees of, the
Association.

 

 

 

Section 11. Termination Upon or Following a Change in Control.

(a) A Change in Control of the Association (“Change in Control”) shall be deemed to have
occurred upon the happening of any of the following events:

(i) approval by the stockholders of the Association of a transaction that would result in
the reorganization, merger or consolidation of the Association, respectively, with one (1)
or more other persons, other than a transaction following which:

(A) at least 51% of the equity ownership interest of the entity resulting from
such transaction are beneficially owned (within the meaning of Rule 13d-3
promulgated under the Securities Exchange Act of 1934 (“Exchange Act”)) in
substantially the same relative proportions by persons who, immediately prior to
such transaction, beneficially owned (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) at least 51% of the outstanding equity ownership interests
in the Association; and

(B) at least 51% of the securities entitled to vote generally in the election
of directors of the entity resulting from such transaction are beneficially owned
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) in
substantially the same relative proportions by persons who, immediately prior to
such transaction, beneficially owned (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) at least 51% of the securities entitled to vote generally in
the election of directors of the Association;

(ii) the acquisition of all or substantially all of the assets of the Association or
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
or 25% or more of the outstanding securities of the Association entitled to vote generally
in the election of directors by any person or by any persons acting in concert, or approval
by the stockholders of the Association of any transaction which would result in such an
acquisition; or

(iii) a complete liquidation or dissolution of the Association, or approval by the
stockholders of the Association of a plan for such liquidation or dissolution; or

(iv) the occurrence of any event if, immediately following such event, at least 50% of the
members of the board of directors of the Association do not belong to any of the following
groups:

(A) individuals who were members of the Board of the Association on the date of
this Agreement; or

(B) individuals who first became members of the Board of the Association after
the date of this Agreement either:

 

 

 

(1) upon election to serve as a member of the Board to serve as a
member of the board of directors of the Board, but only if nominated for
election by affirmative vote of three-quarters of the members of the board
of directors of the Board, or of a nominating committee thereof , in office
at the time of such first nomination;

provided, however, that such individual’s election or nomination did not result
from an actual or threatened election contest (within the meaning of Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents (within the meaning of Rule 14a-11 of Regulation
14a-11 of Regulation 14A promulgated under the Exchange Act) other than by or on
behalf of the Board of the Association;

In no event, however, shall a Change in Control be deemed to have occurred as a result of any
acquisition of securities or assets of the Association by any employee benefit plan maintained by
the Association. For purposes of this section 11, the term “person” shall have the meaning
assigned to it under sections 13(d)(3) or 14(d)(2) of the Exchange Act.

(b) In the event of Change in Control, the Executive shall be entitled to the payments and
benefits contemplated by section 9(b) in the event of his termination of employment with the
Association under any of the circumstances described in section 9(a) of this Agreement or under any
of the following circumstances:

(i) resignation, voluntary or otherwise, by the Executive at any time during
the Employment Period and within ninety (90) days following his demotion, loss of
title, office or significant authority or responsibility, or following any reduction
in any element of his package of compensation and benefits;

(ii) resignation, voluntary or otherwise, by the Executive at anytime during
the Employment Period and within ninety (90) days following relocation of his
principal place of employment (Wake Forest, North Carolina) or any change in working
conditions at such principal place of employment which is embarrassing, derogatory
or otherwise materially adverse to the Executive;

(iii) resignation, voluntary or otherwise, by the Executive at any time during the
Employment Period following the failure of any successor to the Association in the
Change in Control to include the Executive in any compensation or benefit program
maintained by it or covering any of its executive officers, unless the Executive is
already covered by a substantially similar plan of the Association which is at least
as favorable to him; or

(iv) resignation, voluntary or otherwise, for any reason whatsoever following
the expiration of a transition period of thirty days beginning on the effective date
of the Change in Control (or such longer period, not to exceed
ninety (90) days beginning on the effective date of the Change in Control, as the
Association or its successor may reasonably request) to facilitate a transfer of
management responsibilities.

 

 

 

Section 12. Covenant Not to Compete.

The Executive hereby covenants and agrees that, in the event of his termination of employment
with the Association prior to the expiration of the Employment Period, for a period of one (1) year
following the date of his termination of employment with the Association (or, if less, the
remaining unexpired Employment Period), he shall not, without the written consent of the
Association, become an officer, employee, consultant, director or trustee with executory,
managerial, supervisory or strategic authority or influence at any savings bank, savings and loan
association, savings and loan holding company, bank or bank holding company, or any direct or
indirect subsidiary of affiliate of any such entity, that entails working within fifty (50) miles
of the headquarters of the Association on the date of the Executive’s termination of employment;
provided, however, that this section 12 shall not apply if the Executive’s employment is terminated
for the reasons set forth in section 9(a) or section 11; and provided, further, that if the
Executive’s employment shall be terminated on account of disability as provided in section 10(d) of
this Agreement, this section 12 shall not prevent the Executive from accepting any position or
performing any services if (a) he first offers, by written notice, to accept a similar position
with, or perform similar services for, the Association on substantially the same terms and
conditions and (b) the Association declines to accept such offer within ten (10) days after such
notice is given.

Section 13. Confidentiality.

Unless he obtains the prior written consent of the Association, the Executive shall keep
confidential and shall refrain from using for the benefit of himself, or any person or entity other
than the Association or any entity which is an affiliate of the Association, any material document
or information obtained from the Association, or from its parent or subsidiaries, in the course of
his employment with any of them concerning their properties, operations, or business (unless such
document or information is readily ascertainable from public or published information or trade
sources or has otherwise been made available to the public through no fault of his own) until the
same ceases to be material (or becomes so ascertainable or available); provided, however, that
nothing in this section 13 shall prevent the Executive, with or without the Association’s consent,
from participating in or disclosing documents or information in connection with any judicial or
administrative investigation, inquiry or proceeding to the extent that such participation or
disclosure is required under applicable law.

Section 14. Solicitation.

The Executive hereby covenants and agrees that, for a period of one (1) year following his
termination of employment with the Association, he shall not without the written consent of the
Association, either directly or indirectly:

 

 

 

(a) solicit, offer employment to, or take any other action intended, or that a reasonable
person acting in like circumstances would expect, to have the effect of causing any officer or
employee of the Association or any affiliate, as of the date of this Agreement, of either of them
to terminate her or his employment and accept employment or become affiliated with, or provide
services for compensation in any capacity whatsoever to, any savings bank, savings and loan
association, bank, bank holding company, savings and loan holding company, or other institution
engaged in the business of accepting deposits and making loans, doing business with fifty (50)
miles of the headquarters of the Association or any affiliate, as of the date of this Agreement, of
either of them;

(b) provide any information, advice or recommendation with respect to any such officer or
employee of any savings bank, savings and loan association, bank, bank holding company, savings and
loan holding company, or other institution engaged in the business of accepting deposits and making
loans, doing business within fifty (50) miles of the headquarters of the Association or any
affiliate, as of the date of this Agreement, of either of them that is intended, or that a
reasonable person acting in like circumstances would expect, to have the effect of causing any
officer or employee of the Association or any affiliate, as of the date of this Agreement, of
either of them to terminate her or his employment and accept employment or become affiliated with,
or provide services for compensation in any capacity whatsoever to, any savings bank, savings and
loan association, bank, bank holding company, savings and loan holding company, or other
institution engaged in the business of accepting deposits and making loans, doing business within
fifty (50) miles of the headquarters of the Association or any affiliate, as of the date of this
Agreement, of either of them;

(c) solicit, provide any information, advice or recommendation or take any other action
intended, or that a reasonable person acting in like circumstances would expect to have the effect
of causing any customer of the Association to terminate an existing business or commercial
relationship with the Association.

Section 15. No Effect on Employee Benefit Plans or Programs.

The termination of the Executive’s employment during the term of this Agreement or thereafter,
whether by the Association or by the Executive, shall have no effect on the rights and obligations
of the parties hereto under the Association’s qualified or non-qualified retirement, pension,
savings, thrift, profit-sharing or stock bonus plans, group life, health (including
hospitalization, medical and major medical), dental, accident and long term disability insurance
plans or such other employee benefit plans or programs, or compensation plans or programs, as may
be maintained by, or cover employees of the Association from time to time.

Section 16. Successors and Assigns.

This Agreement will inure to the benefit of and be binding upon the Executive, his legal
representatives and testate or intestate distributees, and the Association and its successors and
assigns, including any successor by merger or consolidation or any other person or firm or
corporation to which all or substantially all of the assets and business of the Association may be
sold or otherwise transferred. Failure of the Association to obtain from any successor its express
written assumption of the Association’s obligations hereunder at least sixty (60) days in advance
of the scheduled effective date of any such succession shall be deemed a material breach of this
Agreement unless cured within ten (10) days after notice thereof by the Executive to the
Association.

 

 

 

Section 17. Notices.

Any communication required or permitted to be given under this Agreement, including any
notice, direction, designation, consent, instruction, objection or waiver, shall be in writing and
shall be deemed to have been given at such time as it is delivered personally, or five (5) days
after mailing if mailed, postage prepaid, by registered or certified mail, return receipt
requested, addressed to such party at the address listed below or at such other address as one (1)
such party may by written notice specify to the other party:

If to the Executive:

Billy B. Faulkner

64 Norwood Faulkner Road

Louisburg, North Carolina 27549

If to the Association:

Wake Forest Federal Savings and Loan Association

302 S. Brooks Street, P.O. Box 1167

Wake Forest, North Carolina, 27588

Attention: Chairman of the Board

Section 18. Indemnification for Attorneys’ Fees.

The Association shall indemnify, hold harmless and defend the Executive against reasonable
costs, including legal fees, incurred by him in connection with or arising out of any action, suit
or proceeding in which he may be involved, as a result of his efforts, in good faith, to defend or
enforce the terms of this Agreement; provided, however, that the Executive shall have substantially
prevailed on the merits pursuant to a judgment, decree or order of a court of competent
jurisdiction or of an arbitrator in an arbitration proceeding, or in a settlement. For purposes of
this Agreement, any settlement agreement which provides for payment of any amounts in settlement of
the Association’s obligations hereunder shall be conclusive evidence of the Executive’s entitlement
to indemnification hereunder, and any such indemnification payments shall be in addition to amounts
payable pursuant to such settlement agreement, unless such settlement agreement expressly provides
otherwise.

 

 

 

Section 19. Severability.

A determination that any provision of this Agreement is invalid or unenforceable shall not
affect the validity or enforceability of any other provision hereof.

Section 20. Waiver.

Failure to insist upon strict compliance with any of the terms, covenants or conditions hereof
shall not be deemed a waiver of such term, covenant, or condition. A waiver of any provision of
this Agreement must be made in writing, designated as a waiver, and signed by the party against
whom its enforcement is sought. Any waiver or relinquishment of any right or power hereunder at
any one (1) or more times shall not be deemed a waiver or relinquishment of such right or power at
any other time or times.

Section 21. Counterparts.

This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed
an original, and all of which shall constitute one and the same Agreement.

Section 22. Governing Law.

This Agreement shall be governed by and construed and enforced in accordance with the federal
laws of the United States and, to the extent that federal law is inapplicable, in accordance with
the laws of the State of North Carolina applicable to contracts entered into and to be performed
entirely within the State of North Carolina.

Section 23. Headings and Construction.

The headings of sections in this Agreement are for convenience of reference only and are not
intended to qualify the meaning of any section. Any reference to a section number shall refer to a
section of this Agreement, unless otherwise stated.

Section 24. Entire Agreement; Modifications.

This instrument contains the entire agreement of the parties relating to the subject matter
hereof, and supersedes in its entirety any and all prior agreements, understandings or
representations relating to the subject matter hereof. No modifications of this Agreement shall be
valid unless made in writing and signed by the parties hereto. Notwithstanding the preceding
sentence, this Agreement shall be construed and administered in such manner as shall be necessary
to effect compliance with Section 409A and shall be subject to amendment in the future, in such
manner as the Association may deem necessary or appropriate to effect such compliance; provided
that any such amendment shall preserve for the Executive the benefit originally afforded pursuant
to this Agreement.

 

 

 

Section 25. Required Regulatory Provisions.

The following provisions are included for the purposes of complying with various laws, rules,
and regulations applicable to the Association:

(a) Notwithstanding anything herein contained to the contrary, in no event shall the aggregate
amount of compensation payable to the Executive under section 9(b) hereof (exclusive of amounts
described in Section 9(b)(i), (vi) and (vii)) exceed three times the Executive’s average annual
compensation for the last five (5) consecutive calendar years to end prior to his termination of
employment with the Association (or for his entire period of employment with the Association if
less than five (5) calendar years). The compensation payable to the Executive hereunder shall be
further reduced (but not below zero) if such reduction would avoid the assessment of excise taxes
on excess parachute payments (within the meaning of section 280G of the Code). “Annual
compensation” is defined to include any cash bonuses and the value of stock awards vested during a
calendar year under any restricted stock plan maintained by, or covering employees of the
Association, which are reportable as taxable wages.

(b) Notwithstanding anything herein contained to the contrary, any payments to the Executive
by the Association, whether pursuant to this Agreement or otherwise, are subject to and conditioned
upon their compliance with section 18(k) of the Federal Deposit Insurance Act (“FDI Act”), 12
U.S.C. 1828(k), and any regulations promulgated thereunder.

(c) Notwithstanding anything herein contained to the contrary, if the Executive is suspended
from office and/or temporarily prohibited from participating in the conduct of the affairs of the
Association pursuant to a notice served under section 8(e)(3) or 8(g)(1) of the FDI Act, 12 U.S.C.
1818(e)(3) or 1818(g)(1), the Association’s obligations under this Agreement shall be suspended as
of the date of service of such notice, unless stayed by appropriate proceedings. If the charges in
such notice are dismissed, the Association, in its discretion may (i) pay to the Executive all or
part of the compensation withheld while the Association’s obligations hereunder were suspended and
(ii) reinstate, in whole or in part, any of the obligations which were suspended.

(d) Notwithstanding anything herein contained to the contrary, if the Executive is removed
and/or permanently prohibited from participating in the conduct of the Association’s affairs by an
order issued under section 8(e)(4) or 8(g)(1) of the FDI Act, 12 U.S.C. 1818(e)(4) or (g)(1), all
prospective obligations of the Association under this Agreement shall terminate as of the effective
date of the order, but vested rights and obligations of the Association and the Executive shall not
be affected.

(e) Notwithstanding anything herein contained to the contrary, if the Association is in
default (within the meaning of section 3(x)(1) of the DI Act, 12 U.S.C. 1813(x)(1), all prospective
obligations of the Association under this Agreement shall terminate as of the date of default, but
vested rights and obligations of the Association and the Executive shall not be affected.

 

 

 

(f) Notwithstanding anything herein contained to the contrary, all prospective obligations of
the Association hereunder shall be terminated, except to the extent that a continuation of this
Agreement is necessary for the continued operation of the Association: (i) by the Director of the
Office of Thrift Supervision (“OTS”) or his designee or the Federal Deposit Insurance Corporation
(“FDIC”), at the time the FDIC enters into an agreement to provide assistance to or on behalf of
the Association under the authority contained in section 13(c) of the FDI Act, 12 U.S.C. 1823(c);
(ii) by the Director of the OTS or his designee at the time such Director or designee approves a
supervisory merger to resolve problems related to the operation of the Association or when the
Association is determined by such Director to be in an unsafe or unsound condition. The vested
rights and obligations of the parties shall not be affected.

If and to the extent that any of the foregoing provisions shall cease to be required or by
applicable law, rule or regulation, the same shall become inoperative as though eliminated by
formal amendment of this Agreement.

Section 26. Effective Date.

This Agreement shall take effect September 17, 2007.

Section 27. Payments to Key Employees.

Notwithstanding anything in this Agreement to the contrary, to the extent required under
Section 409A, no payment to be made to a key employee (within the meaning of Section 409A) shall be
made sooner than six (6) months after such termination of employment; provided, however, that to
the extent such six (6)-month delay is imposed by Section 409A as a result of a Change of Control
as defined in Section 11(a) the payment shall be paid into a rabbi trust for the benefit of the
Executive as if the six (6)-month delay was not imposed with such amounts then being distributed to
the Executive as soon as permissible under Section 409A.

Section 28. Involuntary Termination Payments to Employees (Safe Harbor).

In the event a payment is made to an employee upon an involuntary termination of employment,
as deemed pursuant to this Agreement, such payment will not be subject to Section 409A provided
that such payment does not exceed two (2) times the lesser of (i) the sum of the Executive’s
annualized compensation based on the taxable year immediately preceding the year in which
termination of employment occurs or (ii) the maximum amount that may be taken into account under a
qualified plan pursuant to Section 401(a)(17) of the Code for the year in which the Executive
terminates service (the “Safe Harbor Amount”). However, if such payment exceeds the Safe Harbor
Amount, only the amount in excess of the Safe Harbor Amount will be subject to Section 409A. In
addition, if such Executive is considered a key employee, such payment in excess of the Safe Harbor
Amount will have its timing delayed and will be subject to the six (6)-month wait-period imposed by
Section 409A as provided in Section 27 of this Agreement. The Executive and the Association agree
that the termination benefits described in this Section 28 are intended to be exempt from Section
409A pursuant to Treasury Regulation Section 1.409A-1(b)(9)(iii) as the safe harbor for separation
pay due to involuntary separation from service.

 

 

 

In Witness Whereof, the Association has caused this Agreement to be executed and the Executive
has hereunto set his hand, all as of the day and year first above written.

	 	 	 
	 

	 	s/s Billy B. Faulkner
	 

	 	   Billy B. Faulkner
	 
	 	 
	ATTEST:

	 	Wake Forest Federal
	 

	 	 Savings and Loan Association
	 
	 	 
	By s/s Robert C. White

	 	By s/s Howard R. Brown
	   President

	 	   Name: Howard R. Brown
	 

	 	   Title: Chairman of the Board
	 
	 	 
	[Seal]
	 	 

 

 

 

			
	 	 	 
	STATE OF NORTH CAROLINA
	 	)
	 
	 	: ss.:
	COUNTY OF WAKE
	 	)

On this 17 day of September, 2007, before me personally came Billy B. Faulkner, to me known,
and known to me to be the individual described in the foregoing instrument, who, being by me duly
sworn, did depose and say that he resides at the address set forth is said instrument and that he
signed his name to the foregoing instrument.

s/s Millie W. Hale

   Notary Public

			
	 	 	 
	STATE OF NORTH CAROLINA
	 	)
	 
	 	:ss.:
	COUNTY OF WAKE
	 	)

On this 17 day of September, 2007, before me personally came Howard L. Brown, to me known,
who, being by me duly sworn, did depose and say that he resides at 900 Averette Road, Wake Forest,
North Carolina, 27587, that he is Chairman of the Board of Directors of Wake Forest Federal Savings
& Loan Association, the savings institution described in and which executed the foregoing
instrument; that he knows the seal of said savings institution; that the seal affixed to said
instrument is such seal; that it was so affixed by order of the Board of Directors of said savings
institution, and that he signed his name thereto by like order.

s/s Millie W. Hale

   Notary Publicexv10w1

 

Exhibit 10.1

NEOWARE SENIOR OFFICER BONUS PLAN, AS AMENDED

Purpose of the Plan

The Senior Officer Bonus Plan (the “Plan”) of Neoware, Inc. (“Neoware,” or the “Company”) is
designed to motivate and reward the senior officers of the Company for their contribution to the
achievement of key business objectives by Neoware and to support Neoware’s efforts in attracting,
retaining and rewarding senior officers, while aligning the interests of the senior officers with
shareholder expectations.

Eligibility; Partial Bonus Period Payment

The Chief Executive Officer and the Senior Officers (as defined below) of Neoware (“Participants”)
are eligible to participate in the Plan. Employees who are hired by Neoware or are promoted or
reclassified as a Senior Officer during a Plan bonus period (as defined below) will be eligible for
a pro-rated bonus. In order to be eligible to receive a bonus, the individual must be employed by
Neoware at the time of payment. For purposes of the Plan, a Senior Officer is defined as any
employee who is deemed by the Board of Directors to be an “executive officer” under Item 401(b) of
Regulation S-K of the Securities Exchange Act of 1934, as well as other senior officers determined
by the Chief Executive Officer and approved by the Compensation and Stock Option Committee of the
Board of Directors (the “Compensation Committee”).

Bonus Period

The Plan will be effective from July 1, 2005 to June 30, 2006 and will automatically renew upon the
anniversary date of the Plan unless terminated by the Compensation Committee or the Board of
Directors of Neoware. Bonuses are based upon Neoware’s financial performance and employee
individual performance, as set forth herein, during the applicable bonus period, which shall be the
fiscal year or a fiscal quarter or quarters, or may be based upon a pro rata portion of a fiscal
quarter, as shall be determined by the Compensation Committee (the “Bonus Period”).

Executive bonus Plan Payment

Although every effort will be made to process payments on a timely basis, there is no guaranteed
payment date associated with this Plan. Payments will be made only after financial results have
been reported and recommendations have been submitted to and approved by the Compensation
Committee.

Performance and Individual Targets

Participants will be eligible for a cash incentive bonus based on the achievement of predetermined
goals and also based upon individual performance, as set forth below. For the achievement of
predetermined goals, participants will have an assigned target equal to a specific percentage of
salary earned during the Bonus Period. The target is based on the Participant’s position in the
Company. The target percentages can be increased or decreased at the discretion of the Compensation
Committee based upon the individual Participant’s performance, as set forth
herein. The achievement of individual Participant achievement goals can result in the individual’s
target percentage being increased or decreased, as discussed below.

 

 

Page 2

Financial Performance

All bonuses will be measured upon the achievement of specific performance targets based on one or
more of the following criteria:

	 	•	 	Revenues
	 
	 	•	 	Earnings per share
	 
	 	•	 	Operating income
	 
	 	•	 	Earnings before interest, taxes, depreciation and amortization
	 
	 	•	 	Net income
	 
	 	•	 	Working capital
	 
	 	•	 	Gross profit

Financial results higher or lower than the performance targets will result in an adjustment up or
down of the performance target based on evaluation by the Compensation Committee. The performance
target is then multiplied by the Participant’s assigned target percentage to determine the eligible
bonus percentage.

Individual Participant Achievement

Once the target percentage has been assigned to a Participant, the Compensation Committee will have
discretion to adjust the bonus for individual Participants up or down based upon job performance
and achievement of individual, functional area and departmental objectives.

Approvals

The actual bonus payment for all participants will be reviewed and approved by the Compensation
Committee.

Administration of the Plan

Notwithstanding the above, the Compensation Committee may modify or change this Plan or its
implementation at any time, including, but not limited to, revising performance targets, bonus
multipliers, strategic goals and objectives and actual bonus payments. The Compensation Committee
shall have the sole discretion to determine (i) whether performance targets have been achieved,
(ii) whether individual goals and objectives have been achieved, and (iii) the amount of any
adjustments to a Participant’s assigned target percentage based on items (i) and (ii) above and
such other criteria deemed appropriate by the Compensation Committee. As a condition to
participation, each Participant will acknowledge that he or she has reviewed and understood this
Plan, that the bonuses under the Plan are discretionary and that no bonus will be payable unless
and until the actual amount of the bonus payment is approved by the Compensation Committee.

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