Document:

ex10-1.htm

    
      

    

    Exhibit
10.1

    

     

     

    OTELCO
INC. EXECUTIVE LONG TERM INCENTIVE PLAN

    (effective
January 1, 2009)

     

    
 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    OTELCO
INC. EXECUTIVE LONG TERM INCENTIVE PLAN

    (effective
January 1, 2009)

    

    TABLE
OF CONTENTS

     

    Page

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            	
                                    SECTION
      1.

                                  	
                                    INTRODUCTION
      AND DEFINITIONS

                                  	
                                    1

                                  
	 	 	 
	 
      	
                                    1.1.

                                  	
                                    Preamble

                                  	 
      
	 
      	
                                    1.2.

                                  	
                                    Definitions

                                  	 
      
	 
      	 
      	
                                    1.2.1.

                                  	
                                    Administrator

                                  	 
      
	 
      	 
      	
                                    1.2.2.

                                  	
                                    Affiliate

                                  	 
      
	 
      	 
      	
                                    1.2.3.

                                  	
                                    Award

                                  	 
      
	 
      	 
      	
                                    1.2.4.

                                  	
                                    Beneficiary

                                  	 
      
	 
      	 
      	
                                    1.2.5.

                                  	
                                    Board
      of Directors

                                  	 
      
	 
      	 
      	
                                    1.2.6.

                                  	
                                    Cause

                                  	 
      
	 
      	 
      	
                                    1.2.7.

                                  	
                                    Change
      in Control

                                  	 
      
	 
      	 
      	
                                    1.2.8.

                                  	
                                    Code

                                  	 
      
	 
      	 
      	
                                    1.2.9.

                                  	
                                    Committee

                                  	 
      
	 
      	 
      	
                                    1.2.10.

                                  	
                                    Disability
      or Disabled

                                  	 
      
	 
      	 
      	
                                    1.2.11.

                                  	
                                    Effective
      Date

                                  	 
      
	 
      	 
      	
                                    1.2.12.

                                  	
                                    Employer

                                  	 
      
	 
      	 
      	
                                    1.2.13.

                                  	
                                    ERISA

                                  	 
      
	 
      	 
      	
                                    1.2.14.

                                  	
                                    Participant

                                  	 
      
	 
      	 
      	
                                    1.2.15.

                                  	
                                    Plan

                                  	 
      
	 
      	 
      	
                                    1.2.16.

                                  	
                                    Plan
      Statement

                                  	 
      
	 
      	 
      	
                                    1.2.17.

                                  	
                                    Plan
      Year

                                  	 
      
	 
      	 
      	
                                    1.2.18.

                                  	
                                    Retires
      and Retirement

                                  	 
      
	 
      	 
      	
                                    1.2.19.

                                  	
                                    Separation
      from Service

                                  	 
      
	 
      	 
      	
                                    1.2.20.

                                  	
                                    Vest
      and Vested

                                  	 
      
	 
      	
                                    1.3.

                                  	
                                    Rules
      of Interpretation

                                  	 
      
	 	 	 
	
                                    SECTION
      2.

                                  	
                                    ELIGIBILITY
      AND PARTICIPATION

                                  	
                                    3

                                  
	 	 	 
	
                                    SECTION
      3.

                                  	
                                    AWARDS

                                  	
                                    4

                                  
	 	 	 
	 
      	
                                    3.1.

                                  	
                                    Amount
      of Award

                                  	 
      
	 	 	 
	
                                    SECTION
      4.

                                  	
                                    PERFORMANCE
      MEASUREMENT

                                  	
                                    4

                                  
	 	 	 
	
                                    SECTION
      5.

                                  	
                                    VESTING

                                  	
                                    4

                                  
	 	 	 
	 
      	
                                    5.1.

                                  	
                                    Vesting
      Events

                                  	 
      
	 
      	 
      	
                                    5.1.1.

                                  	
                                    Disability

                                  	 
      
	 
      	 
      	
                                    5.1.2.

                                  	
                                    Death

                                  	 
      
	 
      	 
      	
                                    5.1.3.

                                  	
                                    Retirement

                                  	 
      
	 
      	 
      	
                                    5.1.4.

                                  	
                                    Change
      in Control

                                  	 
      
	 
      	 
      	
                                    5.1.5.

                                  	
                                    Involuntarily
      Separation from Service Other Than for Cause

                                  	 
      
	 
      	 
      	
                                    5.1.6.

                                  	
                                    Termination
      of the Plan

                                  	 
      

                          

                        

                      

                       

                      
                        
                          
                          

                        

                        
                          i

                          
                            

                          

                        

                        
                          
                          

                        

                      

                       

                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  
                                                    	 
      	
                                                            5.2.

                                                          	
                                                            Forfeiture

                                                          	 
      
	 	 	 
	
                                                            SECTION
      6.

                                                          	
                                                            UNFUNDED
      PLAN

                                                          	
                                                            5

                                                          
	 	 	 
	
                                                            SECTION
      7.

                                                          	
                                                            DISTRIBUTIONS

                                                          	
                                                            5

                                                          
	 	 	 
	 
      	
                                                            7.1.

                                                          	
                                                            Distribution

                                                          	 
      
	 
      	 
      	
                                                            7.1.1.

                                                          	
                                                            Distribution
      in Cash

                                                          	 
      
	 
      	 
      	
                                                            7.1.2.

                                                          	
                                                            Time
      of Distribution

                                                          	 
      
	 
      	 
      	
                                                            7.1.3.

                                                          	
                                                            Death
      Prior to Distribution

                                                          	 
      
	 
      	 
      	
                                                            7.1.4.

                                                          	
                                                            Cooperation
      with Committee

                                                          	 
      
	 
      	
                                                            7.2.

                                                          	
                                                            Designation
      of Beneficiaries

                                                          	 
      
	 
      	 
      	
                                                            7.2.1.

                                                          	
                                                            Right
      to Designate

                                                          	 
      
	 
      	 
      	
                                                            7.2.2.

                                                          	
                                                            Failure
      of Designation

                                                          	 
      
	 	 	 
	
                                                            SECTION
      8.

                                                          	
                                                            SPENDTHRIFT
      PROVISION

                                                          	
                                                            6

                                                          
	 	 	 
	
                                                            SECTION
      9.

                                                          	
                                                            AMENDMENT
      AND TERMINATION

                                                          	
                                                            7

                                                          
	 	 	 
	 
      	
                                                            9.1.

                                                          	
                                                            Amendment

                                                          	 
      
	 
      	
                                                            9.2.

                                                          	
                                                            Plan
      Termination

                                                          	 
      
	 	 	 	 
	
                                                            SECTION
      10.

                                                          	
                                                            INDEMNIFICATION

                                                          	
                                                            7

                                                          
	 	 	 
	
                                                            SECTION
      11.

                                                          	
                                                            DETERMINATIONS
      — CLAIM PROCEDURES

                                                          	
                                                            8

                                                          
	 	 	 
	 
      	
                                                            11.1.

                                                          	
                                                            Determinations

                                                          	 
      
	 
      	
                                                            11.2.

                                                          	
                                                            Claim
      and Review Procedures

                                                          	 
      
	 
      	 
      	
                                                            11.2.1.

                                                          	
                                                            Initial
      Claim

                                                          	 
      
	 
      	 
      	
                                                            11.2.2.

                                                          	
                                                            Notice
      of Initial Adverse Determination

                                                          	 
      
	 
      	 
      	
                                                            11.2.3.

                                                          	
                                                            Request
      for Review

                                                          	 
      
	 
      	 
      	
                                                            11.2.4.

                                                          	
                                                            Claim
      on Review

                                                          	 
      
	 
      	 
      	
                                                            11.2.5.

                                                          	
                                                            Notice
      of Adverse Determination for Claim on Review

                                                          	 
      
	 
      	
                                                            11.3.

                                                          	
                                                            Deadline
      to File Claim

                                                          	 
      
	 
      	
                                                            11.4.

                                                          	
                                                            Exhaustion
      of Administrative Remedies

                                                          	 
      
	 
      	
                                                            11.5.

                                                          	
                                                            Deadline
      to File Legal Action

                                                          	 
      
	 
      	
                                                            11.6.

                                                          	
                                                            Knowledge
      of Fact by Participant Imputed to Beneficiary and Others

                                                          	 
      
	 	 	 
	
                                                            SECTION
      12.

                                                          	
                                                            PLAN
      ADMINISTRATION

                                                          	
                                                            10

                                                          
	 	 	 
	 
      	
                                                            12.1.

                                                          	
                                                            Service
      of Process

                                                          	 
      
	 
      	
                                                            12.2.

                                                          	
                                                            Receipt
      of Documents

                                                          	 
      

                                                  

                                                   

                                                  
                                                    
                                                      
                                                      

                                                    

                                                    
                                                      ii

                                                      
                                                        

                                                      

                                                    

                                                    
                                                      
                                                      

                                                    

                                                  

                                                   

                                                  
                                                    
                                                      	
                                                              SECTION
      13.

                                                            	
                                                              IN
      GENERAL

                                                            	
                                                              11

                                                            
	 	 	 
	 
      	
                                                              13.1.

                                                            	
                                                              Disclaimers

                                                            	 
      
	 
      	 
      	
                                                              13.1.1.

                                                            	
                                                              Effect
      on Employment

                                                            	 
      
	 
      	 
      	
                                                              13.1.2.

                                                            	
                                                              Sole
      Source of Benefits

                                                            	 
      
	 
      	
                                                              13.2.

                                                            	
                                                              Applicable
      Laws

                                                            	 
      
	 
      	 
      	
                                                              13.2.1.

                                                            	
                                                              ERISA
      Status

                                                            	 
      
	 
      	 
      	
                                                              13.2.2.

                                                            	
                                                              Internal
      Revenue Code Status

                                                            	 
      
	 
      	
                                                              13.3.

                                                            	
                                                              Choice
      of Law

                                                            	 
      
	 
      	
                                                              13.4.

                                                            	
                                                              Plan
      Statement Controls

                                                            	 
      

                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    

    
      
        
        

      

      
        iii

        
          

        

      

      
        
        

      

    

    

    OTELCO
INC. EXECUTIVE LONG TERM INCENTIVE PLAN

    (effective
January 1, 2009)

    

    SECTION
1

     

    INTRODUCTION
AND DEFINITIONS

     

    1.1.          Preamble.  The
purposes of the Plan (as defined below in Section 1.2.15) are to provide
competitive
incentive opportunities within the context of Otelco Inc.’s overall compensation
program and to facilitate Otelco Inc.’s success.

     

    1.2.          Definitions.  When
the following terms are used herein with initial capital letters, they shall
have the following meanings:

     

    1.2.1.      
Administrator — the
Chief Executive Officer of the Employer, except that with respect to decisions
involving the Chief Executive Officer, the Administrator shall be the
Committee.

     

    1.2.2.       Affiliate — a business entity
which is not the Employer but which is part of a “controlled group” or under
“common control” with the Employer, as those terms are defined in
section 414(b) and (c) of the Code as required to be aggregated with the
Employer under section 409A based on eighty percent (80%) or greater
control.

     

    1.2.3.       Award — a grant of a potential
incentive payment to a Participant based on the Employer’s
performance.

     

    1.2.4.       Beneficiary — a person
designated by a Participant (or automatically by operation of this Plan
Statement) to receive all or a part of a Participant’s Award in the event of the
Participant’s death prior to full distribution thereof.  A person so
designated shall not be considered a Beneficiary until the death of the
Participant.

     

    1.2.5.       Board of Directors — the Board
of Directors of the Employer.  Functions generally assigned to the
Board of Directors may be delegated to and discharged by the Compensation
Committee of the Employer or other delegate, which shall report its actions to
the Board of Directors.

     

    1.2.6.       Cause — a Participant’s
Separation from Service shall be for cause for purposes of this Plan if it is
due to any of the following:

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          	 
      	(a)	Failure to
      Perform.  The Participant breaches or violates the terms
      of the Participants’s employment agreement, if any, or fails to
      substantially perform the duties of the Participant’s position (including
      gross negligence, but excluding ordinary negligence), as determined by the
      Administrator.
	 	 	 
	 
      	
                                  (b)

                                	
                                  Misconduct.  The
      Participant engages in (i) substantial misconduct, including but not
      limited to a material violation of the personnel policies of the Employer
      and its Affiliates, (ii) a material violation of the Otelco Inc. Code
      of Ethics, or (iii) gross malfeasance that harms the Employer and its
      Affiliates, as determined by the Administrator.

                                
	 	 	 
	 
      	
                                  (c)

                                	
                                  Felony.  The
      Participant is convicted of or pleads guilty to a
  felony.

                                

                        

                      

                       

                      
                        
                          
                          

                        

                        
                          1

                          
                            

                          

                        

                        
                          
                          

                        

                      

                       

                    

                  

                

              

            

          

        

      

    

    1.2.7.       Change in Control — a change
in control shall have the meaning of the definition of "Change of Control" set
forth in Otelco Inc.'s Second Amended and Restated Credit Agreement, dated as of
October 20, 2008, as the same may be amended, restated, supplemented, waived,
replaced, restructured, repaid, increased, refunded, refinanced or otherwise
modified from time to time; provided that if such agreement is not in effect,
Change in Control shall be a change in control for the purposes of section 409A
of the Code.

     

    1.2.8.       Code — the Internal Revenue
Code of 1986, including applicable regulations for the specified section of the
Code.  Any reference in this Plan Statement to a section of the Code,
including the applicable regulation, shall be considered also to mean and refer
to any subsequent amendment or replacement of that section or
regulation.

     

    1.2.9.       Committee — the Compensation
Committee of the Employer’s Board of Directors.  Functions generally
assigned to the Committee may be delegated to and discharged by the officers and
employees of the Employer.

     

    1.2.10.     Disability or Disabled — a
determination the Participant is disabled under the Employer’s long term
disability plan or a determination by the Social Security Administration that
the Participant is disabled.

     

    1.2.11.     Effective Date —
January 1, 2009.

     

    1.2.12.     Employer — Otelco Inc., a
Delaware corporation.

     

    1.2.13.     ERISA — the Employee
Retirement Income Security Act of 1974, including applicable regulations for the
specified section of ERISA.  Any reference in this Plan Statement to a
section of ERISA, including the applicable regulation, shall be considered also
to mean and refer to any subsequent amendment or replacement of that section or
regulation.

     

    1.2.14.     Participant — the Chief
Executive Officer of Otelco Inc. and additional employees in the management of
Otelco Inc. (consisting of any employee who is selected by the
Committee).  An employee who has become a Participant shall continue
as a Participant in the Plan until the date the Participant no longer has an
unpaid Award under the Plan.

     

    1.2.15.     Plan — the executive long term
incentive plan established for the benefit of employees eligible to participate
therein, as set forth in this Plan Statement.

     

    1.2.16.     Plan Statement — this document
entitled “Otelco Inc. Executive Long Term Incentive Plan.”

     

    1.2.17.     Plan Year — each calendar year
beginning on January 1 and ending on December 31.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    1.2.18.     Retires and Retirement — a
Participant’s voluntary Separation from Service on or after attaining age
fifty-five (55) and completing ten (10) years of service provided the
Administrator determines the Participant’s Separation from Service is not due to
Cause (and provided the Administrator determines the Participant would not have
had a Separation from Service for Cause if the Participant had not voluntarily
terminated employment). Years of service with respect to employees of acquired
entities shall be determined by the Administrator.  The Chief
Financial Officer of the Company on the effective date of this Plan shall be
deemed to have satisfied the above age and service requirements.

     

    1.2.19.     Separation from Service — a
Participant’s termination of employment.

     

    1.2.20.     Vest and Vested — means
nonforfeitable.

     

    1.3.          Rules of
Interpretation.  Whenever appropriate, words used herein in the
singular may be read in the plural, or words used herein in the plural may be
read in the singular; the masculine may include the feminine and the feminine
may include the masculine; and the words “hereof,” “herein” or “hereunder” or
other similar compounds of the word “here” shall mean and refer to this entire
Plan Statement and not to any particular paragraph or Section of this Plan
Statement unless the context clearly indicates to the contrary.  The
titles given to the various Sections of this Plan Statement are inserted for
convenience of reference only and are not part of this Plan Statement, and they
shall not be considered in determining the purpose, meaning or intent of any
provision hereof.  Any reference in this Plan Statement to a statute
or regulation shall be considered also to mean and refer to any subsequent
amendment or replacement of that statute or regulation.

     

    SECTION
2

     

    ELIGIBILITY
AND PARTICIPATION

     

    The
Committee shall determine each year the employees who are eligible to
participate in this Plan. The Chief Executive Officer of the Employer shall
notify each employee selected of the employee’s eligibility for an Award under
the Plan.

     

    SECTION
3

     

    AWARDS

     

    3.1.          Amount of Award. Before the
start of each Plan Year during the term of this Plan, the Committee shall
establish a target level of EBITDA (“Target EBITDA”) for such Plan
Year.  At the close of a Plan Year, the Company’s audited financial
statements shall be used to calculate the Company’s actual level of EBITDA
(“Actual EBITDA”) for such Plan Year.  An “Incentive Pool Amount”
shall be established for each Plan Year based on the amount, if any, by which
Actual EBITDA exceeds Target EBITDA (“Excess EBITDA”) for such Plan
Year.  The Committee shall determine the percentage of Excess EBITDA
to be distributed under the Plan. If Actual EBITDA does not exceed Target EBITDA
for a Plan Year, no Incentive Pool Amount shall be established for such Plan
Year.  The Incentive Pool Amount shall be allocated among
Participants, in the sole discretion of the Committee, based on the
Participant’s contribution to the overall financial results of the Company or
such other factors as the Committee deems relevant, on or as soon as
administratively practicable following the close of such Plan Year (the
“Crediting Date”).

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    

    SECTION
4

     

    PERFORMANCE
MEASUREMENT

     

    The
Committee shall have sole discretion to interpret and determine the measurements
of the Employer’s performance for the Plan Year and the allocation of Awards to
Participants.

     

    SECTION
5

     

    VESTING

     

    5.1.          Vesting
Events.  Amounts awarded to a Participant shall vest ratably
over a three year period commencing with the Plan Year in which the Award
relates. On the last day of the Plan Year to which an Award relates a
participant shall become vested in one third of the amount Awarded for that Plan
Year provided the Participant is employed on the last day of that Plan Year. A
Participant shall become vested in the second third of an Award for a Plan Year
on the last day of the year following the Plan Year in which an Award relates
provided the Participant is employed on the last day of year following the Plan
Year to which the Award relates. A Participant shall become vested in the final
third of an Award for a Plan Year on the last day of the second year following
the Plan Year in which an Award relates provided the Participant is employed on
the last day of second year following the Plan Year to which the Award relates.
Prior to that date, the Participant shall have no interest in or right to any
amount under the Plan.  Vested amounts will be distributed to the
Participant in accordance with Section 7.  Notwithstanding the
foregoing, the Participant shall become Vested upon the occurrence of any of the
following events while employed by the Employer:

     

    5.1.1.       Disability.  If a
Participant becomes Disabled, the Participant’s Award shall become Vested as of
the date the Administrator determines that the Participant is
Disabled.

     

    5.1.2.       Death.  If a
Participant dies, the Participant’s Award shall become Vested as of the date of
the Participant’s death.

     

    5.1.3.       Retirement.  If a
Participant Retires, the Participant’s Award shall become Vested as of the date
of the Participant’s Retirement.

     

    5.1.4.       Change in
Control.  If there is a Change in Control, the Participant’s
Award shall become Vested as of the date a day before the Change in
Control.

     

    5.1.5.       Involuntary Separation from Service
Other Than for Cause.  If a Participant has an involuntary
Separation from Service for reasons other than Cause, the Administrator may
decide in its sole discretion to fully or partially Vest the
Participant.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    5.1.6.       Termination of the
Plan.  If the Board of Directors terminates the Plan, all
Awards shall become Vested prior to the Plan’s termination.

     

    5.2.          Forfeiture.  The
Participant’s Award shall not Vest and shall be forfeited if the Participant has
a Separation from Service before the end of the Performance Period unless one of
the exceptions listed in Section 5.1 applies.

     

    SECTION
6

     

    UNFUNDED
PLAN

     

    The
obligations to make payments under the Plan constitute only the unsecured (but
legally enforceable) promises of the Employer.  No Participant shall
have any lien, prior claim or other security interest in any property of the
Employer or the Affiliates.  The Employer shall have no obligation to
establish or maintain any fund, trust or account for funding or paying the
Plan’s benefits.  If such a fund, trust or account is established, the
property therein shall remain the property of the Employer.

     

    SECTION
7

     

    DISTRIBUTIONS

     

    7.1.          Distribution.

     

    7.1.1.       Distribution in
Cash.  All distributions under the Plan shall be made in cash
in a single lump sum.

     

    7.1.2.       Time of Distribution. If a
Participant becomes Vested in the Participant’s Award, the Participant’s Award
shall be paid no later than March 14th of the
year following the year such amounts vest, provided however, that the
Participant’s death, Disability, Retirement, Involuntary Separation from Service
for reasons other than Cause, or a Change in Control shall not accelerate the
payment date.

     

    7.1.3.       Death Prior to
Distribution.  If the Participant dies before distribution of
the Participant’s Award, the Award shall be distributed to the Participant’s
Beneficiary.

     

    7.1.4.       Cooperation with
Committee.  Each individual who claims to be or is entitled to
benefits shall cooperate with the Committee (including, but not limited to
signing documents).  Each individual who claims to be or is entitled
to benefits shall furnish the Committee with such documents, evidence, data or
information as the Committee considers necessary or desirable for the purpose of
administering the Plan.

     

    7.2.          Designation of
Beneficiaries.

     

    7.2.1.       Right to
Designate.  Each Participant may designate a Beneficiary on a
form prepared by and filed with the Employer.  The Participant may
change or revoke such designation from time to time without notice to or consent
from any Beneficiary or spouse.  No such designation, change or
revocation shall be effective unless signed by the Participant and received by
the division or person at the Employer designated by the Committee during the
Participant’s lifetime.  The Committee may establish rules for the use
of electronic signatures.  Until such rules are established,
electronic signatures shall not be effective.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    7.2.2.       Failure of
Designation.  If a Participant (i) fails to designate a
Beneficiary, (ii) designates a Beneficiary and thereafter revokes such
designation without naming another Beneficiary, or (iii) designates one or
more Beneficiaries and all such Beneficiaries so designated fail to survive the
Participant, such Participant’s said death benefit, or the part thereof as to
which such Participant’s designation fails, as the case may be, shall be payable
to the first class of the following classes of automatic Beneficiaries with a
member surviving the Participant and (except in the case of his surviving issue)
in equal shares if there is more than one member in such class surviving the
Participant:

     

    Participant’s
surviving spouse

    Participant’s
surviving issue per stirpes and not per capita

    Participant’s
surviving parents

    Representative
of Participant’s estate.

     

    SECTION
8

     

    SPENDTHRIFT
PROVISION

     

    No
Participant or Beneficiary shall have any transmissible interest in any Award
nor shall any Participant or Beneficiary have any power to anticipate, alienate,
dispose of, pledge or encumber the same while it is in the possession or control
of the Employer, nor shall the Employer recognize any assignment thereof, either
in whole or in part, nor shall the Award be subject to attachment, garnishment,
execution following judgment or other legal process (including without
limitation any domestic relations order, whether or not a “qualified domestic
relations order” under section 414(p) of the Code).

     

    SECTION
9

     

    AMENDMENT
AND TERMINATION

     

    9.1.          Amendment.  The
Board of Directors reserves the power to amend this Plan Statement either
prospectively or retroactively or both in any respect. In addition, the
Administrator may amend the Plan in any respect (i) to comply with changes
in the law provided the amendment does not materially increase the cost of the
Plan, and (ii) to revise the Plan in a manner that does not materially
alter the Plan or materially increase the cost of the Plan.  The
Administrator shall report all amendments to the Committee and the Board of
Directors. Notwithstanding the
foregoing, if there is a material adverse change in the Employer’s financial
condition (as determined by the Committee), the Committee may reduce or
eliminate the amount of the Participants’ Awards under this Plan, provided
however, that the Committee can not reduce or eliminate any Award that is
already vested.

     

    9.2.          Plan
Termination.  The Board of Directors shall have the right at
any time to terminate the Plan.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    SECTION
10

     

    INDEMNIFICATION

     

    Except as
prohibited by applicable law, the Employer shall defend, indemnify and hold
harmless from any and all liabilities, costs and expenses (including legal
fees), to the extent not covered by insurance, each director, officer, and
employee of the Employer  and its Affiliates, who is a party to or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding with respect to the Plan, wherever brought, whether civil,
criminal, administrative or investigative by reason of the fact that the
individual is or was a fiduciary or administrator of the Plan, or by reason of
acting in any other capacity in connection with the Plan.

    

    Notwithstanding
the foregoing, no such indemnification shall be required or provided if such
liability arises (i) from the individual’s claim for the individual’s own
benefit, (ii) from the willful misconduct, fraud or bad faith of the
individual, or (iii) from the criminal misconduct of such individual if the
individual had reason to believe the conduct was unlawful.

    

    The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent, shall not,
of itself, create a presumption that the person did not act in good faith, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that the individual’s conduct was unlawful.  This
indemnification shall continue as to an individual who has ceased to be a
director, officer, and employee of the Employer and its Affiliates and shall
inure to the benefit of the heirs, executors and administrators of such an
individual.

    

    SECTION
11

     

    DETERMINATIONS
— CLAIM PROCEDURES

     

    11.1.        Determinations.  The
Administrator and the Committee have discretionary authority to grant or deny
benefits under the Plan.  The Administrator and the Committee shall
have the discretion, authority and responsibility to interpret and construe this
Plan Statement and all relevant documents and information, and to determine all
factual and legal questions under the Plan, including but not limited to the
entitlement of all persons to benefits and the amounts of their
benefits.  The Administrator and the
Committee shall make such
determinations as may be required from time to time in the administration of the
Plan.  This discretionary authority shall include all matters arising
under the Plan.  The Administrator and the Committee may retain
advisors to assist them in making their determinations under the
Plan.

     

    11.2.        Claim and Review Procedures.
Until modified by the Committee, the claim and review procedures set forth in
this Section shall be the mandatory claim and review procedures for the
resolution of disputes and disposition of claims filed under the Plan to be
reviewed by the Administrator.

     

    11.2.1.     Initial Claim.  If
there is a dispute, an individual may, subject to any applicable deadline, file
with the Administrator a written claim for benefits under the Plan in a form and
manner prescribed by the Administrator.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    
      
        
          	 
      	
                  (a)

                	
                  If
      the Administrator denies the claim in whole or in part, the Administrator
      shall notify the claimant of the adverse benefit determination within
      ninety (90) days after receipt of the claim.

                
	 	 	 
	 
      	
                  (b)

                	
                  The
      ninety (90) day period for making the claim determination may be extended
      for ninety (90) days if the Administrator determines that special
      circumstances require an extension of time for determination of the claim,
      provided that the Administrator notifies the claimant, prior to the
      expiration of the initial ninety (90) day period, of the special
      circumstances requiring an extension and the date by which a claim
      determination is expected to be
made.

                

        

         

      

    

    11.2.2.     Notice of Initial Adverse
Determination. A notice of an adverse
determination shall set forth in a manner calculated to be understood by the
claimant:

     

    
      
        
          
            	 
      	
                    (a)

                  	
                    the
      specific reasons for the adverse determination;

                  
	 	 	 
	 
      	
                    (b)

                  	
                    references
      to the specific provisions of this Plan Statement (or other applicable
      Plan document) on which the adverse determination is based;
      and

                  
	 	 	 
	 
      	
                    (c)

                  	
                    a
      description of any additional material or information necessary to perfect
      the claim and an explanation of why such material or information is
      necessary.

                  

          

           

        

      

    

    11.2.3.     Request for
Review.  Within sixty (60) days after receipt of an initial
adverse benefit determination notice, the claimant may file with the
Administrator a written request for a review of the adverse determination and
may, in connection therewith submit written comments, documents, records and
other information relating to the claim for benefits.  The
Administrator will forward the request for review to the
Committee.  Any request for review of the initial adverse
determination not filed within sixty (60) days after receipt of the initial
adverse determination notice shall be untimely.

     

    11.2.4.     Claim on Review.  If
the Committee denies the claim upon review, in whole or in part, the Committee
shall notify the claimant of the adverse benefit determination within sixty (60)
days after receipt of such a request for review.

     

    
      
        
          
            	 
      	
                    (a)

                  	
                    The
      sixty (60) day period for deciding the claim on review may be extended for
      sixty (60) days if the Committee determines that special circumstances
      require an extension of time for determination of the claim, provided that
      the Committee notifies the claimant, prior to the expiration of the
      initial sixty (60) day period, of the special circumstances requiring an
      extension and the date by which a claim determination is expected to be
      made.

                  
	 	 	 
	 
      	
                    (b)

                  	
                    In
      the event that the time period is extended due to a claimant’s failure to
      submit information necessary to decide a claim on review, the claimant
      shall have sixty (60) days within which to provide the necessary
      information and the period for making the claim determination on review
      shall be tolled from the date on which the notification of the extension
      is sent to the claimant until the date on which the claimant responds to
      the request for additional information or, if earlier, the expiration of
      sixty (60) days.

                  
	 	 	 
	 
      	
                    (c)

                  	
                    The Committee’s
      review of a denied claim shall take into account all comments, documents,
      records, and other information submitted by the claimant relating to the
      claim, without regard to whether such information was submitted or
      considered in the initial benefit
determination.

                  

          

           

          
            
              
              

            

            
              8

              
                

              

            

            
              
              

            

          

           

        

      

    

    11.2.5.     Notice of Adverse Determination for
Claim on Review. A notice of an adverse
determination for a claim on review shall set forth in a manner calculated to be
understood by the claimant:

     

    
      
        
          	 
      	
                  (a)

                	
                  the
      specific reasons for the denial; and

                
	 	 	 
	 
      	
                  (b)

                	
                  references
      to the specific provisions of this Plan Statement (or other applicable
      Plan document) on which the adverse determination is
  based.

                

        

      

    

     

    11.3.        Deadline to File
Claim.  To be considered timely under the Plan’s claim and
review procedure, a claim must be filed with the Administrator within one (1)
year after the claimant knew or reasonably should have known of the principal
facts upon which the claim is based.

     

    11.4.        Exhaustion of Administrative
Remedies.  Notwithstanding any provision in this Plan
Statement, the exhaustion of the claim and review procedure is mandatory for
resolving every claim and dispute arising under the Plan.  As to such
claims and disputes:

     

    
      
        
          	 
      	
                  (a)

                	
                  no
      legal action to recover Plan benefits or to enforce or clarify rights
      under the Plan under any provision of law, whether or not statutory, may
      be commenced until the claim and review procedure set forth herein has
      been exhausted in the entirety; and

                
	 	 	 
	 
      	
                  (b)

                	
                  in
      any such legal action all explicit and all implicit determinations by the
      Administrator and the Committee (including, but not limited to,
      determinations as to whether the initial request for benefits or request
      for review was timely filed) shall be afforded the maximum deference
      permitted by law.

                

        

      

    

     

    11.5.        Deadline to File Legal
Action.  No legal action to recover Plan benefits or to enforce
or clarify rights under the Plan under any provision of law, whether or not
statutory, may be brought by any claimant on any matter pertaining to the Plan
unless the legal action is commenced in the proper forum before the earlier
of:

     

    
      
        
          	 
      	
                  (a)

                	
                  thirty
      (30) months after the date the claimant knew or reasonably should have
      known of the principal facts on which the claim is based,
    or

                
	 	 	 
	 
      	
                  (b)

                	
                  six
      (6) months after the date the claimant has exhausted the claim and review
      procedure.

                

        

      

    

     

    11.6.        Knowledge of Fact by Participant
Imputed to Beneficiary and Others.  Knowledge of all facts that
a Participant knew or reasonably should have known shall be imputed to every
claimant who is or claims to be a Beneficiary of the Participant or otherwise
claims to derive an entitlement by reference to the Participant for the purpose
of applying the previously specified periods.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    SECTION
12

     

    PLAN
ADMINISTRATION

     

    12.1.        Service of
Process.  The Chief Financial Officer (or the Chief Executive
Officer with respect to claims made by the Chief Financial Officer) of the
Employer is designated as the appropriate and exclusive agent for the receipt of
service of process directed to the Plan in any legal proceeding, including
arbitration, involving the Plan.

     

    12.2.        Receipt of
Documents.  If a form or document must be filed with or
received by the Employer, the Committee, the Administrator, and the Human
Resources Department (the “appropriate entity”), it must be actually received by
the appropriate entity to be effective.  The determination of whether
or when a form or document has been received by the appropriate entity shall be
made by the Administrator without regard to the “mailbox rule” or similar rule
of evidence.  The absence of a beneficiary designation in the
appropriate entity’s records and files shall be conclusive and binding proof
that the beneficiary designation was not received by the appropriate
entity.  Unless otherwise specified, forms and documents must be
mailed to and received at the following address:

     

    Otelco
Inc.

    Attn:  Chief
Financial Officer

    505 Third
Avenue East

    Oneonta,
Alabama 35121

     

    SECTION
13

     

    IN
GENERAL

     

    13.1.        Disclaimers.

     

    13.1.1.     Effect on
Employment.  Neither the terms of this Plan Statement nor the
benefits hereunder nor the continuance thereof shall be a term of the employment
of any employee, and the Employer  shall not be obligated to continue
the Plan.  The terms of this Plan Statement shall not give any
employee the right to be retained in the employment of the
Employer  and its Affiliates.

     

    13.1.2.     Sole Source of
Benefits.  Neither the Board of Directors, the Committee, the
Administrator, the officers or employees in any way guarantee the payment of any
benefit or amount which may become due and payable hereunder to any Participant,
Beneficiary, or other person.  Each Participant, Beneficiary, or other
person entitled at any time to payments hereunder shall look solely to the
assets of the Employer  for such payments.  If an Award
shall have been distributed to a former Participant, Beneficiary, or any other
person entitled to the receipt thereof, such former Participant, Beneficiary, or
other person, as the case may be, shall have no further right or interest in the
Employer’s assets.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    13.2.        Applicable Laws.

     

    13.2.1.     ERISA Status.  The
Plan is not intended to provide for retirement income or the deferral of income
until after Separation from Service.  The Plan is not an employee
benefit pension plan, a pension plan, an employee benefit plan, or plan for
purposes of ERISA.

     

    13.2.2.     Internal Revenue Code
Status.  The Plan is maintained as a long term incentive plan
that is designed to be exempt from the requirements of Internal Revenue Code
Section 409A under the “short term deferral rule” in that all payments under the
Plan shall be paid by March 15 of the year following the year in which amounts
payable under the Plan are no longer subject to a substantial risk of
forfeiture.  Each provision shall be interpreted and administered
accordingly.  Notwithstanding the foregoing, neither the
Employer  nor any of its officers, directors, agents or affiliates
shall be obligated, directly or indirectly, to any Participant or any other
person for any taxes, penalties, interest or like amounts that may be imposed on
the Participant or other person on account of any amounts under this Plan or on
account of any failure to comply with the Code.

     

    13.3.        Choice of
Law.  Except to the extent that federal law is controlling, the
Plan shall be construed and enforced in accordance with the laws of the State of
Delaware, without regard to any choice of law provisions.

     

    13.4.        Plan Statement
Controls.  If there is a discrepancy between this Plan
Statement and other documents prepared with respect to the Plan, including any
plan overview or summary, the terms of this Plan Statement shall control and
govern over the other document.

     

     

    11ex10-1.htm

    
      

    

    Exhibit
10.1

     

    

     

    EMPLOYMENT
AGREEMENT

     

    This
Employment Agreement (the “Agreement”) is made effective as of May 8, 2009 (the
“Effective Date”), by and between Atlantic Coast Bank (the “Bank”) and Thomas B.
Wagers, Sr. (the “Executive”).  References herein to the “Company”
mean Atlantic Coast Federal Corporation, which owns 100% of the common stock of
the Bank.  The Company is a signatory to this Agreement for the sole
purpose of guaranteeing the Bank’s performance hereunder.  Any
reference to the “Employer” shall mean both the Company and the
Bank.

     

    WHEREAS, the Executive is
currently employed as Chief Operating Officer of the Employer; and

     

    WHEREAS, Executive is willing
to serve the Employer on the terms and conditions hereinafter set forth;
and

     

    NOW, THEREFORE, in
consideration of the mutual covenants herein contained, and upon the other terms
and conditions hereinafter provided, the parties hereby agree as
follows:

     

    1.           
POSITION
AND RESPONSIBILITIES.

     

    During
the term of this Agreement, Executive agrees to serve as Chief Operating Officer
of the Bank (the “Executive Position”), and will perform all duties and will
have all powers associated with such position as set forth in the job
description for such Executive Position as established by the
Employer.  During the term of the Agreement, Executive also agrees to
serve, if elected, as an officer and/or director of any subsidiary or affiliate
of Employer and in such capacity carry out such duties and responsibilities
reasonably appropriate to that office.

     

    2.           
TERM
AND DUTIES.

     

    (a)           Three Year Contract; Annual
Renewal. The term of Executive’s employment under this Agreement shall
commence as of the Effective Date and shall continue thereafter for a period of
three (3) years.  Commencing on the first anniversary date of this
Agreement (the “Anniversary Date”) and continuing on each Anniversary Date
thereafter, the term of this Agreement shall renew for an additional year such
that the remaining term of this Agreement is always three (3) years provided,
however, that in order for the Agreement to renew, the disinterested members of
the Board of Directors of the Bank (the “Board”) must take the following actions
prior to each non-renewal notice period (as described in the next sentence): (i)
at least sixty (60) days prior to the Anniversary Date, conduct a comprehensive
performance evaluation and review of Executive for purposes of determining
whether to extend the Agreement; and (ii) affirmatively approve the renewal or
non-renewal of the Agreement, which decision shall be included in the minutes of
the Board’s meeting.  If the decision of such disinterested members of
the Board is not to renew the Agreement, then the Board shall provide the
Executive with a written notice of non-renewal (“Non-Renewal Notice”) at least
thirty (30) days and not more than sixty (60) days prior to any Anniversary
Date, such that this Agreement shall terminate at the end of twenty-four (24)
months following such Anniversary Date.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (b)           Termination of
Agreement.  Notwithstanding anything contained in this
Agreement to the contrary, either Executive or the Employer may terminate
Executive’s employment with the Employer at any time during the term of this
Agreement, subject to the terms and conditions of this Agreement.

     

    (c)           Continued Employment
Following Termination of Employment Period.  Nothing in this
Agreement shall mandate or prohibit a continuation of Executive’s employment
following the expiration of the term of this Agreement, upon such terms and
conditions as the Employer and Executive may mutually agree.

    

    (d)           Duties; Membership on Other
Boards.  During the Employment Period, except for periods of
absence occasioned by illness, reasonable vacation periods, and reasonable
leaves of absence approved by the Chief Executive Officer, Executive shall
devote substantially all his business time, attention, skill, and efforts to the
faithful performance of his duties hereunder including activities and services
related to the organization, operation and management of the Employer; provided,
however, that, with the approval of the Chief Executive Officer, Executive may
serve, or continue to serve, on the boards of directors of, and hold any other
offices or positions in, business companies or business organizations, which, in
the Chief Executive Officer’s judgment, will not present any conflict of
interest with the Employer, or materially affect the performance of Executive’s
duties pursuant to this Agreement it being understood that membership in and
service on boards or committees of social, religious, charitable or similar
organizations does not require Chief Executive Officer approval pursuant to this
Section. For purposes of this Section, Chief Executive Officer approval shall be
deemed to have been granted as to service with any such business company or
organization that Executive was serving as of the date of this Agreement and
disclosed to the Chief Executive Officer.

     

    3.    COMPENSATION,
BENEFITS AND REIMBURSEMENT.

     

    (a)    Base
Salary.  The Employer shall pay Executive a salary of not less
than $178,000 per year (“Base Salary”).  Such Base Salary shall be
payable biweekly, or with such other frequency as officers and employees are
generally paid. During the period of this Agreement, Executive’s Base Salary
shall be reviewed at least annually. Such review shall be conducted by the Chief
Executive Officer, and the Employer may increase, but not decrease, Executive’s
Base Salary (with any increase in Base Salary to become “Base Salary” for
purposes of this Agreement).

     

    (b)    Bonus and Incentive
Compensation.  Executive shall be entitled to incentive
compensation and bonuses as provided in any plan or arrangement of the Employer
in which Executive is eligible to participate or as agreed to by the Bank and
the Executive.  Nothing paid to Executive under any such plan or
arrangement will be deemed to be in lieu of other compensation to which
Executive is entitled under this Agreement.  Subject to the terms of
the relevant plan documents, payments of bonuses and incentive compensation are
dependent on the Board’s review of Executive’s performance for the relevant
period and shall be paid at the Board’s discretion.

     

    (c)    Employee
Benefits.  Executive shall be entitled to participate in all
employee benefit plans, programs and arrangements as generally provided by the
Employer to senior executive officers and for which Executive shall
qualify.  Executive is also entitled to receive reimbursement for a
country club membership of the Executive’s choosing, not to exceed $5,000 (net
after taxes) annually.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    (d)    Paid Time
Off.  Executive shall be entitled to paid vacation time each
year during the term of this Agreement (measured on a fiscal or calendar year
basis, in accordance with the Employer’s usual practices), as well as sick
leave, holidays and other paid absences in accordance with the Employer’s
policies and procedures for senior executives.  Any unused paid time
off during an annual period shall be treated in accordance with the Employer’s
personnel policies as in effect from time to time.

     

    (e)    Expense
Reimbursements.  During the Employment Period, the Employer
shall pay or reimburse Executive for all reasonable travel, entertainment and
other reasonable expenses incurred by Executive during the course of performing
his obligations under this Agreement, upon presentation to the Employer of an
itemized account of such expenses in such form as the Employer may reasonably
require.  All reimbursements under this Section 3(e) shall be paid as
soon as practicable by the Employer; provided, however, that no payment shall be
made later than March 15 of the year immediately following the year in which the
expense was incurred.

     

    4.    PAYMENTS
TO EXECUTIVE UPON AN EVENT OF TERMINATION.

     

    (a)    Upon the
occurrence of an Event of Termination (as herein defined) during the term of
this Agreement, the provisions of this Section 4 shall apply.  As used
in this Agreement, an “Event of Termination’’ shall mean and include any one or
more of the following:

     

    (i)            
the involuntary termination by the Bank of Executive’s full-time employment
hereunder for any reason other than a termination due to “Disability” or death,
as set forth in Section 6; or a termination upon “Retirement,” as defined in
Section 7 or a termination for “Cause,” as defined in Section 8;
and

     

    (ii)            Executive’s
voluntary resignation within two years after any of the following, unless
consented to by Executive (where any vote by Executive in performance of his
duties as a member of the Board in favor of such action shall constitute express
consent of Executive to such action):

     

    (A)           a
relocation of Executive’s principal place of employment to a location that is
more than 50 miles from Jacksonville, Florida;

     

    (B)           a
material reduction in the benefits and perquisites, including Base Salary, to
Executive from those being provided as of the Effective Date (except for any
reduction that is part of a reduction in pay or benefits that is generally
applicable to officers or employees of the Bank) or;

     

    (C)           a
material breach of this Agreement by the Employer; provided, however, that a
change in the Executive’s title or duties will not be considered a material
breach of this Agreement.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    Upon the occurrence of any event
described in clause (ii) above (“Good Reason”), Executive shall have the right
to elect to terminate his employment under this Agreement by resignation within
two years after the initial occurrence of such condition upon not less than
thirty (30) days prior written notice given within a reasonable period of time
(not to exceed ninety (90) days) after the initial event giving rise to the
right to elect; provided, however, that the Bank shall be given at least thirty
(30) days to remedy the condition before the Executive terminates
employment.  Such voluntary termination for Good Reason by Executive
shall be an Event of Termination.

     

    (b)    Upon the
occurrence of an Event of Termination, the Employer shall pay Executive, or, in
the event of his subsequent death, his beneficiary or beneficiaries, or his
estate, as the case may be, as severance pay or liquidated damages, or both, a
lump sum in cash equal to three (3) times (i) the highest annual rate of Base
Salary paid to Executive at any time under this Agreement and (ii) the highest
annual bonus and non-equity incentive compensation paid to the Executive over
the most recent three (3) calendar years prior to the Event of Termination;
provided however, that, to the extent required by regulations or interpretations
of the Office of Thrift Supervision, all severance payments under the Agreement
shall be reduced not to exceed three (3) times Executive’s average annual
compensation (as defined in such regulations or interpretations) over the most
recent five (5) taxable years.  Such payment shall not be reduced in
the event Executive obtains other employment following the Event of Termination.
Notwithstanding the foregoing, in the event Executive is a “Specified Employee”
(as defined in the Internal Revenue Code (the “Code”) Section 409A and the
regulations thereunder) to the extent required under Code Section 409A, no
payment shall be made to Executive prior to the first day of the seventh month
following the Event of Termination.

     

    (c)    Upon the
occurrence of an Event of Termination, the Bank shall provide at the Bank’s
expense, life and disability insurance coverage and non-taxable medical and
dental insurance coverage substantially comparable to the coverage maintained by
the Bank for Executive and his family prior to the Event of Termination, except
to the extent such coverage may be changed in its application to all Bank
employees.  Such coverage shall cease upon the earlier of (i)
thirty-six (36) months following the Event of Termination or (ii) Executive’s
obtaining substantially similar coverage from a new employer.

     

    5.    CHANGE IN
CONTROL.

     

    (a)    In the
event that the aggregate payments or benefits to be made or afforded to
Executive in the event of a change in control as defined in Code Section 280G
and that would be deemed to include an “excess parachute payment” under Code
Section 280G or any successor thereto, then at the election of Executive, (i)
such payments or benefits shall be payable or provided to Executive over the
minimum period necessary to reduce the present value of such payments or
benefits to an amount that is one dollar ($1.00) less than three times
Executive’s “base amount” under such Code Section 280G, or (ii) the payments or
benefits to be provided under this Agreement shall be reduced to the extent
necessary to avoid treatment as an excess parachute payment, with the allocation
of the reduction among such payments and benefits to be determined by
Executive.  Notwithstanding anything in this subsection to the
contrary, a change in control shall not be deemed to have occurred upon the
conversion of the Company’s mutual holding company parent to stock form, or in
connection with any reorganization used to effect such a
conversion.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    

    6.    TERMINATION
FOR DISABILITY OR DEATH.

     

    (a)    Termination
of Executive’s employment based on “Disability” shall be construed to comply
with Section 409A of the Internal Revenue Code and shall be deemed to have
occurred if: (i) Executive is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
that can be expected to result in death, or last for a continuous period of not
less than twelve (12) months; (ii) by reason of any medically determinable
physical or mental impairment that can be expected to result in death, or last
for a continuous period of not less than twelve (12) months, Executive is
receiving income replacement benefits for a period of not less than three months
under an accident and health plan covering employees of the Bank or the Company;
or (iii) Executive is determined to be totally disabled by the Social Security
Administration. The provisions of Sections 6(b) and (c) shall apply upon the
termination of the Executive’s employment based on Disability.

     

    (b)    Executive
shall be entitled to receive Base Salary earned until the date of Executive’s
termination of employment due to Disability, plus payment for unused vacation,
personal leave, sick leave and other vested benefits, as well as payment under
any short- or long-term disability plan maintained by the Bank.

     

    (c)    The Bank
shall cause to be continued life, disability, and non-taxable medical and dental
insurance coverage substantially comparable to the coverage maintained by the
Bank for the Executive prior to the termination of his employment based on
Disability, except to the extent such coverage may be changed in its application
to all Bank employees or not available on an individual basis to an employee
terminated based on Disability.  This coverage shall cease upon the
earlier of (i) the date Executive returns to the full-time employment of the
Bank; (ii) Executive’s full-time employment by another employer; or (iii)
Executive’s death.

     

    (d)           In
the event of Executive’s death during the term of this Agreement, his estate,
legal representatives or named beneficiaries (as directed by Executive in
writing) shall be paid Executive’s earned but unpaid Base Salary through
Executive’s date of death, and the Employer shall pay all premiums for six (6)
months following Executive’s date of death for medical, dental and other
insurance benefits normally provided for Executive’s family.  Such
payments are in addition to any other benefits that Executive’s beneficiaries
may be entitled to receive under any employee benefit plan maintained by the
Bank for the benefit of Executive, including, but not limited to, the Bank’s
life insurance and tax-qualified and non-qualified retirement
plans.

     

    7.    TERMINATION
UPON RETIREMENT.

     

    Termination
of Executive’s employment based on “Retirement” shall mean termination of
Executive’s employment at age sixty-five (65) or in accordance with any
retirement policy established by the Board with Executive’s consent with respect
to him.  Upon termination of Executive based on Retirement, no amounts
or benefits shall be due Executive under this Agreement, and Executive shall be
entitled to all benefits under any retirement plan of the Employer and other
plans to which Executive is a party.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    8.    TERMINATION
FOR CAUSE.

     

    (a)           The
Employer may terminate the Executive’s employment at any time, but any
termination other than Termination for Cause, as defined herein, shall not
prejudice the Executive’s right to compensation or other benefits under the
Agreement.  The Executive shall have no right to receive compensation
or other benefits for any period after Termination for
“Cause.”  Termination for “Cause” shall include termination because of
the Executive’s personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, material breach of the Code of Ethics
of either the Bank or the Company, material violation of the Sarbanes-Oxley
requirements for officers of public companies that in the reasonable opinion of
the Chief Executive Officer or the Board will likely cause substantial financial
harm or substantial injury to the reputation of the Company or the Bank,
willfully engaging in actions that in the reasonable opinion of the Chief
Executive Officer or the Board will likely cause substantial financial harm or
substantial injury to the business reputation of the Company or the Bank,
failure to perform stated duties after receiving written notice of Executive’s
failure to perform assigned duties, willful violation of any law, rule or
regulation (other than routine traffic violations or similar offenses) or final
cease-and-desist order, or material breach of any provision of the
Agreement.

    

    (b)           For
purposes of this Section 8, no act or failure to act, on the part of the
Executive, shall be considered “willful” unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive’s action or omission was in the best interests of the
Employer.  Any act, or failure to act, based upon the direction of the
Chief Executive Officer or based upon the advice of counsel for the Employer
shall be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Employer.

    

    9.    NOTICE.

     

    (a)    Any
purported termination by the Bank for Cause shall be communicated by Notice of
Termination to Executive.  If, within thirty (30) days after any
Notice of Termination for Cause is given, Executive notifies the Bank that a
dispute exists concerning the termination, the parties shall promptly proceed to
arbitration, as provided in Section 19.  Notwithstanding the pendency
of any such dispute, the Employer shall discontinue paying Executive’s
compensation until the dispute is finally resolved in accordance with this
Agreement.  If it is determined that Executive is entitled to
compensation and benefits under Section 4, the payment of such compensation and
benefits by the Employer shall commence immediately following the date of
resolution by arbitration, with interest due Executive on the cash amount that
would have been paid pending arbitration (at the prime rate as published in
The Wall Street Journal
from time to time).

     

    (b)    Any other
purported termination by the Bank or by Executive shall be communicated by a
“Notice of Termination” (as defined in Section 9(c)) to the other
party.  If, within thirty (30) days after any Notice of Termination is
given, the party receiving such Notice of Termination notifies the other party
that a dispute exists concerning the termination, the parties shall promptly
proceed to arbitration as provided in Section 19.  Notwithstanding the
pendency of any such dispute, the Employer shall continue to pay Executive his
Base Salary, and other compensation and benefits in effect when the notice
giving rise to the dispute was given (except as to termination of Executive for
Cause); provided, however, that such payments and benefits shall not continue
beyond the date that is twenty-four (24) months from the date the Notice of
Termination is given.  In the event the voluntary termination by
Executive of his employment is disputed by the Bank, and if it is determined in
arbitration that Executive is not entitled to termination benefits pursuant to
this Agreement, he shall return all cash payments made to him pending resolution
by arbitration, with interest thereon at the prime rate as published in The Wall Street Journal from
time to time, if it is determined in arbitration that Executive’s voluntary
termination of employment was not taken in good faith and not in the reasonable
belief that grounds existed for his voluntary termination.  If it is
determined that Executive is entitled to receive severance benefits under this
Agreement, then any continuation of Base Salary and other compensation and
benefits made to Executive under this Section 9 shall offset the amount of any
severance benefits that are due to Executive under this Agreement.

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    (c)    For
purposes of this Agreement, a “Notice of Termination” shall mean a written
notice that shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Executive’s employment under the
provision so indicated.

     

    10.         
POST-TERMINATION
OBLIGATIONS AND CONFIDENTIALITY.

     

    (a)           Executive
hereby covenants and agrees that (except following a change in control as
defined in the Company’s 2005 Stock Option Plan), for a period of one year
following his termination of employment with the Bank, he shall not, without the
written consent of the Bank, either directly or indirectly:

    

    (i)           
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 Bank or the Company, or any of their
respective subsidiaries or affiliates, to terminate his or her employment and
accept employment or become affiliated with, or provide services for
compensation in any capacity whatsoever to, any business whatsoever that
competes with the business of the Bank or the Company, or any of their direct or
indirect subsidiaries or affiliates or has headquarters or offices within 50
miles of the locations in which the Bank or the Company has business operations
or has filed an application for regulatory approval to establish an
office;

    

    (ii)           become
an officer, employee, consultant, director, independent contractor, agent, sole
proprietor, joint venturer, greater than five percent (5%) equity owner or
stockholder, partner or trustee of
any savings bank, savings and loan association, savings and loan holding
company, credit union, bank or bank holding company, insurance company or
agency, any mortgage or loan broker or any other entity competing with the Bank
or its affiliates in the same geographic locations where the Bank or its
affiliates has material business interests; or

    

    (iii)           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 Bank to terminate an existing
business or commercial relationship with the Bank.

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    (b)           Executive
shall, upon reasonable notice, furnish such information and assistance to the
Bank as may reasonably be required by the Bank, in connection with any
litigation in which it or any of its subsidiaries or affiliates is, or may
become, a party; provided, however, that Executive shall not be required to
provide information or assistance with respect to any litigation between the
Executive and the Bank or any of its subsidiaries or affiliates.

     

    (c)           All
payments and benefits to Executive under this Agreement shall be subject to
Executive’s compliance with this Section 10.  The parties hereto,
recognizing that irreparable injury will result to the Bank, its business and
property in the event of Executive’s breach of this Section 10, agree that, in
the event of any such breach by Executive, the Bank will be entitled, in
addition to any other remedies and damages available, to an injunction to
restrain the violation hereof by Executive and all persons acting for or with
Executive. Executive represents and admits that Executive’s experience and
capabilities are such that Executive can obtain employment in a business engaged
in other lines and/or of a different nature than the Bank, and that the
enforcement of a remedy by way of injunction will not prevent Executive from
earning a livelihood.  Nothing herein will be construed as prohibiting
the Bank or the Company from pursuing any other remedies available to them for
such breach or threatened breach, including the recovery of damages from
Executive.

    

    11.          
SOURCE
OF PAYMENTS.

     

    All
payments provided in this Agreement shall be timely paid in cash or check from
the general funds of the Bank.  The Company, however, guarantees
payment and provision of all amounts and benefits due hereunder to Executive,
and if such amounts and benefits due from the Bank are not timely paid or
provided by the Bank, such amounts and benefits shall be paid or provided by the
Company.

     

    12.         
EFFECT
ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.

     

    This
Agreement contains the entire understanding between the parties hereto and
supersedes any prior employment agreement between the Employer or any
predecessor of the Employer and Executive, except that this Agreement shall not
affect or operate to reduce any benefit or compensation inuring to Executive of
a kind elsewhere provided.  No provision of this Agreement shall be
interpreted to mean that Executive is subject to receiving fewer benefits than
those available to him without reference to this Agreement.

     

    13.         
NO
ATTACHMENT; BINDING ON SUCCESSORS.

     

    (a)    Except as
required by law, no right to receive payments under this Agreement shall be
subject to anticipation, commutation, alienation, sale, assignment, encumbrance,
charge, pledge, or hypothecation, or to execution, attachment, levy, or similar
process or assignment by operation of law, and any attempt, voluntary or
involuntary, to effect any such action shall be null, void, and of no
effect.

     

    (b)    This
Agreement shall be binding upon, and inure to the benefit of, Executive and the
Employer and their respective successors and assigns.

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    14.         
MODIFICATION
AND WAIVER.

     

    (a)    This
Agreement may not be modified or amended except by an instrument in writing
signed by the parties hereto.

     

    (b)    No term
or condition of this Agreement shall be deemed to have been waived, nor shall
there be any estoppel against the enforcement of any provision of this
Agreement, except by written instrument of the party charged with such waiver or
estoppel.  No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future as to any act other than that specifically
waived.

     

    15.         
REQUIRED
PROVISIONS.

     

    (a)           The
Bank may terminate Executive’s employment at any time, but any termination by
the Board other than termination for Cause shall not prejudice Executive’s right
to compensation or other benefits under this Agreement.  Executive
shall have no right to receive compensation or other benefits for any period
after termination for Cause.

     

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

     

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

     

    (d)           If
the Bank is in default as defined in Section 3(x)(1) [12 U.S.C. §1813(x)(1)] of
the Federal Deposit Insurance Act, all obligations of the Bank under this
Agreement shall terminate as of the date of default, but this paragraph shall
not affect any vested rights of the contracting parties.

     

    (e)           All
obligations under this Agreement shall be terminated, except to the extent
determined that continuation of the contract is necessary for the continued
operation of the Bank, (i) by the Director of the Office of Thrift Supervision
(“OTS”) or his or her designee, at the time the FDIC enters into an agreement to
provide assistance to or on behalf of the Bank under the authority contained in
Section 13(c) [12 U.S.C. §1823(c)] of the Federal Deposit Insurance Act; or
(ii) by the Director or his or her designee at the time the Director or his
or her designee approves a supervisory merger to resolve problems related to
operation of the Bank or when the Bank is determined by the Director to be in an
unsafe or unsound condition.  Any rights of the parties that have
already vested, however, shall not be affected by such action.

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    (f)           Notwithstanding
anything herein contained to the contrary, any payments to Executive by the Bank
or the Company, 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, 12 U.S.C. § 1828(k), and the regulations promulgated
thereunder in 12 C.F.R. Part 359.

     

    16.         
SEVERABILITY.

     

    If, for
any reason, any provision of this Agreement, or any part of any provision, is
held invalid, such invalidity shall not affect any other provision of this
Agreement or any part of such provision not held so invalid, and each such other
provision and part thereof shall to the full extent consistent with law continue
in full force and effect.

     

    17.         
HEADINGS
FOR REFERENCE ONLY.

     

    The
headings of sections and paragraphs herein are included solely for convenience
of reference and shall not control the meaning or interpretation of any of the
provisions of this Agreement.

     

    18.         
GOVERNING
LAW.

     

    This
Agreement shall be governed by the laws of the State of Georgia but only to the
extent not superseded by federal law.

     

    19.         
ARBITRATION.

     

    Any
dispute or controversy arising under or in connection with this Agreement shall
be settled exclusively by binding arbitration, as an alternative to civil
litigation and without any trial by jury to resolve such claims, conducted by a
panel of three arbitrators sitting in a location selected by Executive within
fifty (50) miles from the main office of the Bank, in accordance with the rules
of the American Arbitration Association’s National Rules for the Resolution of
Employment Disputes (“National Rules”) then in effect.  One arbitrator
shall be selected by Executive, one arbitrator shall be selected by the Bank and
the third arbitrator shall be selected by the arbitrators selected by the
parties.  If the arbitrators are unable to agree within fifteen (15)
days upon a third arbitrator, the arbitrator shall be appointed for them from a
panel of arbitrators selected in accordance with the National
Rules.  Judgment may be entered on the arbitrator’s award in any court
having jurisdiction.

     

    20.         
INDEMNIFICATION.

     

    Executive
shall be provided with coverage under a standard directors’ and officers’
liability insurance policy, and shall be indemnified for the term of this
Agreement and for a period of six years thereafter to the fullest extent
permitted under applicable law against all expenses and liabilities reasonably
incurred by him in connection with or arising out of any action, suit or
proceeding in which he may be involved by reason of his having been a director
or officer of the Bank or any affiliate (whether or not he continues to be a
director or officer at the time of incurring such expenses or liabilities), such
expenses and liabilities to include, but not be limited to, judgments, court
costs and attorneys’ fees and the cost of reasonable settlements (such
settlements must be approved by the Board), provided, however, Executive shall
not be indemnified or reimbursed for legal expenses or liabilities incurred in
connection with an action, suit or proceeding arising from any illegal or
fraudulent act committed by Executive.  Any such indemnification shall
be made consistent with Section 545.121 of the OTS Regulations and Section 18(k)
of the Federal Deposit Insurance Act, 12 U.S.C. §1828(k), and the regulations
issued thereunder in 12 C.F.R. Part 359.

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

    21.          
NOTICE.

     

    For the
purposes of this Agreement, notices and all other communications provided for in
this Agreement shall be in writing and shall be deemed to have been duly given
when delivered or mailed by certified or registered mail, return receipt
requested, postage prepaid, addressed to the respective addresses set forth
below:

     

    
      
        
          
            
              
                
                  	 	
                          To
      the Company:

                        	
                          Atlantic
      Coast Federal Corporation

                          Attn:
      Robert J. Larison, Jr., President

                          505
      Haines Avenue

                          Waycross,
      Georgia 31501

                        	 
	 	 	 	 
	 	
                          To
      the Bank:

                        	
                          Atlantic
      Coast Bank

                          Attn:  Robert
      J. Larison, Jr., President

                          505
      Haines Avenue

                          Waycross,
      Georgia 31501

                        	 
	 	 	 	 
	 	
                          To
      Executive:

                           

                        	
                          Thomas
      B. Wagers, Sr.

                          505
      Haines Avenue

                          Waycross,
      Georgia 31501

                        	 

                

              

            

          

        

      

    

    

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

    SIGNATURES

     

    IN WITNESS WHEREOF, the
Company and the Bank have each caused this Agreement to be executed by its duly
authorized representative, and Executive has signed this Agreement, effective as
of the date first above written.

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  
                                                    	 
      	 	ATLANTIC
      COAST FEDERAL CORPORATION  
	 
      	 	 	 
      	 
	 
      	 	 	 
      	 
	
                                                            May 8, 2009

                                                          	 	By:	
                                                            /s/ Robert J. Larison, Jr.

                                                          	 
	      
                                                            Date

                                                          	 	 	Robert
      J. Larison, Jr. President and	 
	 	 	 	Chief
      Executive Officer	 
	 	 	 	 	 
	 
      	 	 	 
      	 
	 
      	 	ATLANTIC
      COAST BANK	 
	 
      	 	 	 
      	 
	 
      	 	 	 
      	 
	
                                                            May 8, 2009

                                                          	 	By:	
                                                            /s/ Robert J. Larison, Jr.

                                                          	 
	      
                                                            Date

                                                          	 	 	Robert
      J. Larison, Jr. President and	 
	 	 	 	Chief
      Executive Officer	 
	 	 	 	 	 
	 
      	 	 	 
      	 
	 
      	 	EXECUTIVE	 
	 
      	 	 	 
      	 
	 
      	 	 	 
      	 
	
                                                            May 8, 2009

                                                          	 	/s/ Thomas B. Wagers, Sr.	 
	      
                                                            Date

                                                          	 	 	 
      	 

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

     

     

    12

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