Document:

Exhibit 10.3

 

EMPLOYMENT AGREEMENT

 

This
Employment Agreement (Agreement) dated as February 8, 2008, is made by and
between Atlantic Bancshares, Inc., (Company) a South Carolina corporation
which is the holding company for Atlantic Community Bank (Bank), a South
Carolina state bank, (collectively referred to as Employer) and Todd D. Hoke (Executive).

 

In
consideration of the mutual covenants herein contained, the parties agree as
follows:

 

Section 1 – Duties

 

Employer
shall employ Executive and the Executive shall serve the Employer as Chief
Credit Officer and Executive Vice President of the Bank and of the Company upon
the terms can conditions set forth herein. 
Executive shall have such authority and responsibilities consistent with
his position as set forth in the Company’s or Bank’s bylaws or as assigned by
the Company’s and the Bank’s Boards of Directors (collectively referred to as
Board of Directors) or the Company’s Chief Executive Officer.  Executive shall devote his full business
time, attention, skill and efforts to the performance of his duties
hereunder.  Executive may devote
reasonable period to service as a director or advisor to other organizations,
to charitable and community activities, provided that, in the Board’s sole
opinion, such activities do not materially interfere with and are not in
conflictive with or adverse to, the interests of the Company or the Bank. Executive
shall be subject to all Bank policies and benefits as are other employees,
except as may otherwise be stated herein.

 

Section 2 – Term

 

A.            Unless earlier
terminated as provided herein, Executive’s employment under this Agreement
shall commence on February 8, 2008, and be for a term of three years.  Executive agrees to remain in the exclusive
employ of Employer until February 8, 2011, and neither to accept other
employment nor to become employed by any other employer until such termination
date, unless the termination date is affected as hereinafter provided.

 

B.            In the event written
notice is not given by either party to this Agreement 60 days prior to the
termination date, this Agreement shall be extended on the same terms and
conditions as herein provided, all for an additional period of three (3) years.
Agreement shall continue thereafter for three-year periods unless either party
hereto gives 60 days written notice to the other party that the party does not
wish to extend this Agreement.

 

C.            Nothing in this
Agreement shall prevent, limit or otherwise interfere with the right of Company
and Bank to terminate the services of Executive at any time, subject only to
the provisions set forth in Section 4 of this Agreement.

 

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D.            Nothing in this
Agreement shall prevent, limit or otherwise interfere with the right of the Executive
to resign at any time from his position with Employer, subject only to the
provision set forth in Section 4 of this Agreement.

 

Section 3 – Compensation & Benefits

 

A.            Starting February 8,
2008, Employer shall pay Executive an annual base salary of $105,000.00 (One Hundred Five Thousand and no/100
Dollars) in accordance with the Employer’s normal payroll
practices, which shall mean no less frequently than monthly.  The Chief Executive Officer shall review Executive’s
performance and salary periodically and may increase Executive’s base salary if
he determines in his sole discretion that an increase is appropriate.

 

B.            Executive shall
participate in Employer’s long-term equity incentive program and be eligible to
purchase stock options in accordance with the stock incentive plan approved by
the Company’s shareholders.  Any options
or similar awards shall be issued to Executive at an exercise price of not less
than the stock’s current fair market value as of the date of grant.

 

C.            Executive shall
participate in all retirement, health, welfare, and other benefit plans or
programs of Employer now or as may be adopted for all employees or adopted for
a class of employees that includes Executive.  Employer shall pay the Executive’s coverage
for medical and dental benefits excluding the minimal required co-pay payment.

 

D.            Employer shall
provide Executive with an automobile allowance of $350.00 per month.

 

E.             Employer may pay
for membership dues for Executive’s membership in various civic
organizations.  In addition, Employer
shall pay membership fees and annual dues, subject to approval by the Chief
Executive Officer.

 

F.             Employer shall
reimburse Executive for reasonable travel and other expenses, including cell
phone, related to Executive’s duties which are incurred and accounted for in
accordance with Bank policies.  Executive
shall be issued a corporate credit card to be used for business related
expenses in accordance with Bank policies.  The Employer shall reimburse the Executive for
such expenses within 60 days of Executive’s notice to Employer of such expense.

 

G.            Employer shall
provide Executive with four weeks paid vacation per year which shall be taken
in accordance with Bank policies and in accordance with any banking rules or
regulations governing vacation leave. 
Paid time off days may not be carried forward into following calendar
years, and any payments made by the Employer to the Executive as compensation
for paid time off days shall be paid in accordance with 

 

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the Employer’s normal payroll practices, which shall mean no less
frequently than monthly.

 

H.            The Executive shall
be eligible to receive cash bonuses based on the Executive’s achievement of
specified goals and criteria.  These
goals and criteria may include both annual and long-term goals, may provide for
vesting over a specified time period, and shall be established annually by the
Compensation Committee of the Board of Directors.  For purposes of this Agreement, a bonus shall
not be deemed to be earned prior to the date it is actually paid to the
Executive except to the extent that the Employer specifically provides
otherwise in a writing delivered to the Executive.  Any bonus payment made pursuant to this Section 3(H) shall
be made the earlier of (i) 70 days after the previous year end for which
the bonus was earned by the Executive and became a payable of the Employer or (ii) the
first pay period following the Employer’s press release announcing its previous
year’s financial performance.

 

Section 4 – Termination

 

A.            Executive’s
employment under the Agreement may be terminated prior to the end of the term
only as provided in this Section 4.

 

B.            Death.  The Agreement will terminate upon the death
of Executive.   In this event, the Employer shall pay Executive’s
estate any sums due him as base salary and/or reimbursement of expenses through
the end of the month during which death occurred in accordance with the
Employer’s normal payroll practices, which shall mean no less frequently than
monthly.  The Employer shall also pay the
Executive’s estate any bonus earned or accrued through the date of death
including any amounts awarded for previous years but which were not yet vested.  Any bonus for previous years which was not
yet paid will be paid pursuant to the terms as set forth in Section 3(H).  Any bonus that is earned in the year of death
will be paid on the earlier of (i) 70 days after the year end in which the
Executive died or (ii) the first pay period following the Employer’s press
release announcing its financial performance for the year in which the
Executive died.  To the extent that the
bonus is performance-based, the amount of the bonus will be calculated by
taking into account the performance of the Company for the entire year and
prorated through the date of Executive’s death.

 

C.            Disability.  Employer may terminate this Agreement upon
the Disability of Executive for a period of ninety (90) days.  In this event, the Employer shall pay
Executive any sums due him as base salary and/or reimbursement of expenses
through the date of termination in accordance with the Employer’s normal
payroll practices, which shall mean no less frequently than monthly.

 

D.            For Cause.  Employer may terminate this Agreement for
cause upon delivery of a Notice of Termination to Executive.  If Executive is terminated for cause under
this provision Executive shall receive only any sums due him as base salary and
reimbursement of expenses through the date of termination in accordance with
the 

 

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Employer’s normal payroll practices, which shall mean no less
frequently than monthly.  For purposes of
this paragraph, cause is defined as:

 

(i)  The commission or omission by Executive of any act,
which in Employer’s sole opinion, is intended to cause, causes, or is
reasonably likely to cause harm to Employer, including harm to its business
reputation;

 

(ii)  The indictment of Executive for the commission or
perpetration by Executive of any crime involving dishonesty, moral turpitude,
or fraud;

 

(iii)  The material breach by Executive of this Agreement;

 

(iv)  Violation of Employer policies by Executive;

 

(v)  Receipt of any form of notice, written or otherwise,
that any regulatory agency having jurisdiction over Employer intends to institute
any formal or informal regulatory action against Executive or Employer;

 

(vi)  Exhibition by Executive of a standard of behavior that
is disruptive to the orderly conduct of the Employer’s Business to a level which,
in the Board of Director’s sole opinion, is detrimental to Employer’s best
interest; or

 

(vii)  Failure of Executive to devote his full business time
and attention to his employment.

 

E.           Without Cause.  Employer may terminate this Agreement without
cause upon delivery of a Notice of Termination to Executive.

 

If Executive is terminated without cause under this provision, Employer
shall pay to Executive severance compensation a lump sum amount equal to his then
current monthly base salary for twelve (12) months, plus any bonus earned or accrued
through the date of termination, including any amounts awarded for previous
years but which were not yet vested.  If
when Executive’s employment terminates he is a specified employee within the
meaning of Section 409A of the Internal Revenue Code, and if the benefits
under this Section 4(E) would be considered deferred compensation
under Section 409A, and finally if an exemption from the six-month delay
requirement of Section 409A(a)(2)(B)(i) is not available, the lump
sum amount due under this Section 4(E) shall be paid to the Executive
on the date that is six months and one day following date of Executive’s
termination.

 

F.           Resignation.  Executive may terminate this Agreement at any
time by delivery of a Notice of Resignation to Employer with a minimum of 30
days notice.  If Executive resigns under
this provision, Employer shall pay Executive any sums due him as base salary
and reimbursement of expenses through the effective date of 

 

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resignation, and any other amounts due to Executive pursuant to the
Employer’s policies; provided however, that if Executive fails to give at least
30 days notice, Executive may forfeit right to payment of accrued and unpaid
vacation time.  Any such amounts payable
under this Section 4(F) will be paid in accordance with the Employer’s
normal payroll practices, which shall mean no less frequently than monthly.

 

G.           Change of Control.  Upon the occurrence of a Change in Control,
and regardless of whether the Executive remains employed by the Employer or its
successor following a Change in Control, the Executive shall be entitled to the
following:

 

(i)  within fifteen (15) days, Employer shall pay Executive
in cash in an amount equal to his then current monthly base salary multiplied
by 36 plus any bonus earned or accrued through the date of Change in Control
(including any amounts awarded for previous years but which were not yet
vested);

 

(ii)  For a period of 36 months, payment of premiums for
medical and dental insurance, disability insurance, and life insurance being provided
to Executive prior to the change in control or to other similarly situated
executives who continue in the employ of Employer. Employer’s obligation
hereunder with respect to the benefits stated in this Section 4G(ii) shall
be limited to the extent that Executive’s employment terminates and he becomes
eligible for any such benefits pursuant to a subsequent employer’s benefit
plans, in which case Employer may reduce the coverage of any benefits it is
required to provide Executive so long as the aggregate coverage and benefits of
the combined benefit plans is no less favorable to Executive than the coverages
and benefits required to be provided hereunder; and

 

(iii)  The restrictions on any outstanding incentive awards
(including restricted stock) granted to Executive under Company’s or Bank’s
long-term equity incentive program or other incentive plan or arrangement shall
lapse and such awards shall become 100% vested, all stock options and stock
appreciation rights granted to Executive shall become immediately exercisable
and shall become 100% vested, all performance units granted to Executive shall
become 100% vested.

 

For the purpose of this Section 4(G), all amounts paid to Executive
will be grossed up so as to account for any additional federal and state income
taxes that may be owed as a result of this lump sum payment rather than
periodic payments over 36 months.

 

H.          With the exceptions of
the provisions of this Section 4 and the express terms of any benefit plan
under which Executive is a participant, it is agreed that, upon termination of Executive’s
employment for any reason, Employer shall have no obligation to Executive for,
and Executive waives and relinquishes any further 

 

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compensation or benefits, except for COBRA benefits.  Unless otherwise stated in this Section 4,
the effect of termination on any outstanding incentive awards, stock options,
stock appreciations rights, performance units or other incentives shall be
governed by the terms of the applicable plan. 
At the time of Termination of Employment, and as a condition to the
Employer’s obligation to pay any severance hereunder, the Employer and the
Executive shall enter into a release substantially in the form attached hereto
as Exhibit A acknowledging such remaining obligations and
discharging both parties, as well as the Employer’s officers, directors and
employees with respect to their actions for or on behalf of the Employer, from
any other claims or obligations arising out of or in connection with the
Executive’s employment by the Employer, including the circumstances of such
termination.

 

I.              The parties intend
that the severance payments and other compensation provided for herein are reasonable
compensation for Executive’s service to Employer and shall not constitute “excess
parachute payments” within the meaning of Section 280G of the Internal
Revenue Code and any regulations thereunder. 
In the event that Employer’s independent accountants acting as auditors
for Employer on the date of a Change in Control determine that the payments
provided for herein constitute “excess parachute payments,” then the
compensation payable hereunder shall be increased, on a tax gross-up basis, so
as to reimburse Executive for the tax payable by Executive, pursuant to Section 4999
of the Internal Revenue Code, on such “excess parachute payments,” taking into
account all taxes payable by Executive with respect to such tax gross-up
payments hereunder, so that Executive shall be, after payment of all taxes, in
the same financial position as if no taxes under Section 4999 of the
Internal Revenue Code had been imposed upon him.

 

Section 5 - Ownership of Work Product

 

Employer shall own all work product arising during the course of Executive’s
employment (prior, present, or future).  For
purposes hereof, “work product” shall mean all intellectual property rights,
including all trade secrets, U.S. and international copyrights, patentable
inventions, and other intellectual property rights in any programming,
documentation, technology, or other work product that relates to Employer, its
Business or its customers and that the Executive conceives, develops or
delivers to Employer at any time during his employment, during or outside
normal working hours, in or away from the facilities of Employer, and whether
or not requested by Employer. If the Work Product contains any materials,
programming, or intellectual property rights that the Executive conceived or
developed prior to and independent of the Executive’s work for Employer, Executive
agrees to point out the pre-existing items to Employer and Executive grants
Employer a worldwide, unrestricted, royalty-free right, including the right to
sublicense such items.

 

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Section 6 - Protection of Trade Secrets

 

Executive agrees to maintain in strict confidence, and except as
necessary to perform his duties for Employer, the Executive agrees not to use
or disclose any trade secrets of Employer during or after his employment. “Trade
secret” means information, including a formula, pattern, compilation, program,
device, method, technique, process, drawing, cost data, or customer list, that:
(i) derives economic value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper means by, other persons
who can obtain economic value from its disclosure or use; and (ii) is the
subject of efforts that are reasonable under the circumstances to maintain its
secrecy.

 

Section 7 - Protection of Other Confidential
Information

 

Executive agrees to maintain in strict confidence and, except as
necessary to perform his duties for Employer, not to use or disclose any
confidential business information of Employer during his employment and for a
period of 24 months following termination of Executive’s employment.  “Confidential business information” shall
mean any internal, non-public information concerning Employer’s financial
position and results of operations (including revenues, assets, net income,
etc.); annual and long-range business plans; product or service plans;
marketing plans and methods; training, educational and administrative manuals;
customer and supplier information and purchase histories; and employee lists.
The provisions of Sections 6 and 7 shall also apply to protect trade secrets
and confidential business information of third parties provided to Employer
under an obligation of confidentiality or secrecy.

 

Section 8 - Return of Materials

 

Executive shall surrender to Employer, promptly upon its request or
upon termination of Executive’s employment, all media, documents, notebooks,
computer programs, handbooks, data files, models, samples, price lists,
drawings, customer lists, prospect data, or other material of any nature
whatsoever (in tangible or electronic form) in Executive’s possession or
control, including all copies thereof, relating to Employer, its Business or
its customers. Upon the request of Employer, Executive shall certify in writing
compliance with the foregoing requirement.

 

Section 9 - Restrictive Covenants

 

A.            No Solicitation
of Customers.  During Executive’s
employment with Employer and for a period of 12 months thereafter, Executive
shall not (except of behalf of or with the prior written consent of Employer)
either directly or indirectly, on Executive’s own behalf or in the service or
on behalf of others (i) solicit, divert, or appropriate to or for a Competing
Business, or (ii) attempt to solicit, divert, or appropriate to or for a Competing
Business, any person or entity that is or was a customer of Employer or any of
its affiliates at any time during the 12 months prior to the date of
termination and with whom the Executive has had material contact. The 

 

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parties agree that solicitation of such a customer to acquire stock in
a Competing Business during this time period would be a violation of this Section 9(A).  This restriction does not apply following a
Change in Control.

 

B.            No Recruitment of
Personnel. During Executive’s employment with Employer and for a period of
12 months thereafter, Executive shall not, either directly or indirectly, on Executive’s
own behalf or in the service or on behalf of others (i) solicit, divert or
hire away or (ii) attempt to solicit, divert or hire away, to any Competing
Business located in the territory, any employee of or consultant to Employer or
any of its affiliates, regardless of whether Executive or consultant is
full-time or temporary, the employment or engagement is pursuant to written
agreement, or the employment is for a determined period or is at-will.  For purposes of this Agreement, “territory”
means within a radius of 15 miles from the main office of the Employer or any
branch office of Employer.  This
restriction does not apply following a Change in Control.

 

C.            Non-Competition
Agreement.  During Executive’s
employment with Employer and for a period of 12 months thereafter, Executive
shall not (except of behalf of or with the prior written consent of Employer)
compete with Employer or any of its affiliates by directly or indirectly
forming, serving as organizer, employee, director or officer of, or consultant
to, or acquiring or maintaining more than a 1% passive investment in a depository
financial institution or holding company therefore if such depository
institution or holding company has one or more offices or branches located in
the territory.  This restriction does not
apply following a Change in Control.

 

D.            Independent
Provisions.  The provisions in each
of the above Sections 9(A), 9(B), and 9(C) are independent, and the
unenforceability of any one provision shall not affect the enforceability of
any other provision.

 

Section 10 - Successors: Binding Agreement

 

The rights and obligations of this Agreement shall bind and inure to
the benefit of the surviving corporation in any merger or consolidation in
which Employer is a party, or to any assignee of all or substantially all of
Employer’s Business and properties. Executive’s rights and obligations under
this Agreement may not be assigned by him, except under his right to receive
accrued but unpaid compensation, unreimbursed expenses and other rights, if
any, provided under this Agreement which survive termination of this Agreement
shall pass after death to the personal representative of his estate.

 

Section 11 - Notice

 

For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered or sent by certified
mail, return receipt requested, postage prepaid, addressed to the respective
addresses last given by each party to the other; provided, however, that all
notices to Employer shall be directed to the attention 

 

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of the Chief Executive Officer with a copy to the Secretary of
Employer. All notices and communications shall be deemed to have been received
on the date of delivery thereof.

 

Section 12 - Governing Law

 

This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of South Carolina without giving effect
to the conflict of laws principles thereof. 
Any action brought by any party to this Agreement shall be brought and
maintained in a court of competent jurisdiction in State of South Carolina.

 

Section 13 - Non Waiver

 

Failure of Employer to enforce any of the provisions of this Agreement
or any rights with respect thereto shall in no way be considered to be a waiver
of such provisions or rights or in any way affect the validity of this
Agreement.

 

Section 14 - Enforcement

 

Executive aggress that in the event of any breach or threatened breach
by Executive of any covenant contained in Section 9(A), 9(B), or 9(C) hereof,
the resulting injuries to Employer would be difficult or impossible to estimate
accurately, even though irreparable injury or damages would certainly result.
Accordingly, an award of legal damages, if without other relief, would be
inadequate to protect Employer.  Executive,
therefore, agrees that in the event of any such breach, Employer shall be
entitled to obtain from a court of competent jurisdiction an injunction to
restrain the breach or anticipated breach of any such covenant, and to obtain
any other available legal, equitable, statutory or contractual relief. Should
Employer have cause to seek such relief, no bond shall be required from
Employer and Executive shall pay all attorney’s fees and court costs which
Employer may incur to the extent Employer prevails in its enforcement action.

 

Section 15 - Saving Clause

 

The provisions of this Agreement shall be deemed severable and the
invalidity or unenforceability of any provision shall not affect the validity
or enforceability of the other provisions thereof. If any provision or clause
of this Agreement, or portion thereof, shall be held by any court or other
tribunal of competent jurisdiction to be illegal, void, or unenforceable in
such jurisdiction, the remainder of such provision shall not be thereby
affected and shall be given full effect, without regard to the invalid portion.
It is the intention of the parties that, if any court construes any provision
or clause of this Agreement, or any portion thereof, to be illegal, void, or
unenforceable because of the duration of such provision or the area or matter
covered thereby, such court shall reduce the duration, area, or matter or such
provision, and, in its reduced form, such provision shall then be enforceable
and shall be enforced. Executive and Employer hereby agree that this Agreement
may be amended from time to time to modify the terms of Section 9(A),
9(B), or 9(C) the definition of the term “territory” and the definition 

 

9

 

of the term “business” to reflect changes in Employer’s Business and
affairs so that the scope of the limitations placed on Executive’s activities
by Section 9 accomplishes the parties’ intent in relation to the current
facts and circumstances.

 

Section 16 - Certain Definitions

 

A.            “Affiliate” shall
mean any business entity controlled by, controlling or under common control
with Employer.

 

B.            “Business” shall
mean the operation of a depository financial institution, including, without
limitation, the solicitation and acceptance of deposits of money and commercial
paper, the solicitation and funding of loans and the provision of other banking
services, and any other related business engaged in by Employer or any of its
Affiliates as of the date of termination.

 

C.            “Change in Control”
shall mean as defined by Treasury Regulation § 1.409A-3(i)(5).

 

D.            “Competing Business”
shall mean any business that, in whole or in part, is the same or substantially
the same as the Business.

 

E.             “Disability” shall
mean as defined by Treasury Regulation § 1.409A-3(i)(4).

 

F.             “Notice of
Termination” shall mean a written notice of termination from Employer or Executive
which specifies an effective date of termination, indicates the specific
termination provision(s) in this Agreement relied upon, and, in the case
of a termination for Good Reason or for Cause, sets forth in reasonable detail
the facts and circumstances claimed to provide the basis for termination of Executive’s
employment under the provision so indicated.

 

G.            “Terminate,” “terminated,”
“termination,” or “Termination” of Employment” shall mean separation from
service as defined by Regulation 1.409A-1(h).

 

Section 17 – Entire Agreement

 

This Agreement constitutes the entire agreement between the parties
hereto and supersedes all prior agreements, if any, understanding and
arrangements, oral or written, between the parties hereto with respect to the
subject matter hereof.

 

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IN WITNESS WHEREOF, Employer has caused this Agreement to be executed
by its Chairman of the Board of Directors and Executive has signed this
Agreement, effective of the date first above written.

 

 

	
  ATTEST:

  	
   

  	
  ATLANTIC
  BANCSHARES, INC.

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   /s/
  Brian J. Smith

  
	
  Name:

  	
   

  	
   

  	
  Name:
  Brian J. Smith

  
	
   

  	
   

  	
  Title:
  Chairman of the Board

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  EXECUTIVE:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   /s/
  Todd D. Hoke

  
	
   

  	
   

  	
  Todd
  D. Hoke

  
						

 

11

 

Exhibit A

 

Form of Release of Claims

 

SEVERANCE AGREEMENT AND RELEASE

 

This
Severance Agreement and Release (the “Agreement”) is made between Todd D. Hoke, an individual resident
of South Carolina (“Employee”), and Atlantic Community Bank (the “Bank”).

 

As
used in this Agreement, the term “Employee” shall include the employee’s heirs,
executors, administrators, and assigns, and the term “Bank” shall include the
Bank, its holding company, any other related or affiliated entities, and the
current and former officers, directors, shareholders, employees, and agents of
them.

 

On
February 8, 2008, the Bank and Employee entered into an Employment
Agreement governing the relationship between the parties.  Section 4(H) of the Employment
Agreement also provides that Employee shall be entitled to severance pay if the
Employment Agreement is terminated, on the condition that Employee enter into
this release or a substantially similar release.

 

Employee
desires to receive severance pay and the Bank is willing to provide severance
pay on the condition the Employee enter into this Agreement.

 

Now,
in consideration for the mutual promises and covenants set forth herein, and in
full and complete settlement of all matters between Employee and the Bank, the
parties agree as follows:

 

1.           Termination Date:  The Employee agrees that his employment with
the Bank terminates as of                                 
(the “Termination Date”).

 

2.           Severance Payments:  Subsequent to his
Termination Date, the Bank shall pay Employee severance pay as noted in
Paragraph 4 of the Employment Agreement, dated                 ,
(the “Severance Payment”), less applicable deductions and withholdings.

 

3.           Legal Obligations

 

The
parties acknowledge that pursuant to Section 4(H) of the Employment
Agreement, they agreed that at the time of termination and as a condition of
payment of severance, they would enter into this release acknowledging any
remaining obligations and discharging each other from any other claims or
obligations arising out of or in connection with Employee’s employment by the
Bank, including the circumstances of such termination.  Employee acknowledges that the Bank has no
prior legal obligations to make the payments described in Section 2 above
which are exchanged for the promises of Employee set forth in this Agreement. It
is specifically agreed that the payments described in Section 2 are
valuable and sufficient consideration for each of the promises of Employee set
forth in this Agreement and are payments in addition to anything of value to
which Employee is otherwise entitled.

 

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4.           Waiver and Release:

 

a)                                      Employee
unconditionally releases and discharges the Bank from any and all causes of
action, suits, damages, claims, proceedings, and demands that the Employee has
ever had, or may now have, against the Bank, whether asserted or unasserted,
whether known or unknown, concerning any matter occurring up to and including
the date of the signing of this Agreement.

 

b)                                     Employee
acknowledges that he is waiving and releasing, to the full extent permitted by
law, all claims against the Bank, including (but not limited to) all claims
arising out of, or related in any way to, his employment with the Bank or the
termination of that employment, including (but not limited to) any and all
breach of contract claims, tort claims, claims of wrongful discharge, claims
for breach of an express or implied employment contract, defamation claims,
claims under Title VII of the Civil Rights Act of 1964 as amended, which
prohibits discrimination in employment based on race, color, national origin,
religion or sex, the Family and Medical Leave Act, which provides for unpaid
leave for family or medical reasons, the Equal Pay Act, which prohibits paying
men and women unequal pay for equal work, the Age Discrimination in Employment
Act of 1967, which prohibits age discrimination in employment, the Americans
with Disabilities Act, which prohibits discrimination based on disability, the
Rehabilitation Act of 1973, the South Carolina Human Affairs Law, any and all
other applicable local, state and federal non-discrimination statutes, the
Employee Retirement Income Security Act, the Fair Labor Standards Act, the
South Carolina Payment of Wages Law and all other statutes relating to
employment, the common law of the State of South Carolina, or any other state,
and any and all claims for attorneys’ fees.

 

c)                                      This Waiver and
Release provision ((a) through (c) of this paragraph) shall be
construed to release all claims to the full extent allowed by law.  If any term of this paragraph shall be
declared unenforceable by a court or other tribunal of competent jurisdiction,
it shall not adversely affect the enforceability of the remainder of this
paragraph.

 

d)                                     The Bank
unconditionally releases and discharges Employee from any and all causes of
action, suits, damages, claims, proceedings, and demands that the Bank has ever
had, or may now have, against Employee, whether asserted or unasserted, whether
known or unknown, concerning any matter occurring up to and including the date
of the signing of this Agreement with the exception of any claims for breach of
trust, or any act which constitutes a felony or crime involving dishonesty,
theft, or fraud.

 

5.           Restrictive
Covenants and Other Obligations

 

The
parties agree that Section 5 – “Ownership of Work Product,” Section 6
– “Protection of Trade Secret,” Section 7 – “Protection of Confidential
Information,” Section 8 – “Return of Materials,” Section 9 – “Restrictive
Covenants,” Section 14 – “Enforcement,” and Section 15 – “Saving
Clause,” of the Employment Agreement shall remain in full force and effect and
that Employee will perform his obligations under those sections and those
sections of the Employment Agreement are incorporated by reference as if set
forth fully herein.  In the event
Employee breaches any obligation under this Section 5, the Bank’s
obligation to make severance payments to Employee shall terminate immediately
and the Bank shall have no further obligations to Employee.

 

13

 

6.           Duty
of Loyalty/Nondisparagement

 

The
parties shall not (except as required by law) communicate to anyone, whether by
word or deed, whether directly or through any intermediary, and whether
expressly or by suggestion or innuendo, any statement, whether characterized as
one of fact or of opinion, that is intended to cause or that reasonably would
be expected to cause any person to whom it is communicated to have a lowered
opinion of the other party.

 

7.           Confidentiality
Of The Terms Of This Agreement

 

Employee
agrees not to publicize or disclose the contents of this Agreement, including
the amount of the monetary payments, except (i) to his immediate family; (ii) to
his attorney(s), accountant(s), and/or tax preparer(s); (iii) as may be
required by law; or (iv) as necessary to enforce the terms of this
Agreement.  Employee further agrees that
he will inform anyone to whom the terms of this Agreement are disclosed of the
confidentiality requirements contained herein. 
Notwithstanding the foregoing, the parties agree that where business
needs dictate, Employee may disclose to a third party that he has entered into
an agreement with the Bank, which agreement contains restrictive covenants
including noncompetition and nondisclosure provisions, one or more of which
prohibit him from performing the requested service.

 

Employee
recognizes that the disclosure of any information regarding this Agreement by
him, his family, his attorneys, his accountants or financial advisors, could
cause the Bank irreparable injury and damage, the amount of which would be
difficult to determine.  In the event the
Bank establishes a violation of this paragraph of the Agreement by Employee,
his attorneys, immediate family, accountants, or financial advisors, or others
to whom Employee disclosed information in violation of the terms of this
Agreement.  The Bank shall be entitled to
injunctive relief without the need for posting a bond and shall also be
entitled to recover from Employee the amount of attorneys’ fees and costs
incurred by the Bank in enforcing the provisions of this paragraph.

 

8.           Continued
Cooperation

 

Employee
agrees that he will cooperate fully with the Bank in the future regarding any
matters in which he was involved during the course of his employment, and in
the defense or prosecution of any claims or actions now in existence or which
may be brought or threatened in the future against or on behalf of the
Bank.  Employee’s cooperation in
connection with such matters, actions and claims shall include, without
limitation, being available to meet with the Bank’s officials regarding
personnel or commercial matters in which he was involved; to prepare for any
proceeding (including, without limitation, depositions, consultation, discovery
or trial); to provide affidavits; to assist with any audit, inspection,
proceeding or other inquiry; and to act as a witness in connection with any
litigation or other legal proceeding affecting the Bank.  Employee further agrees that should he be
contacted (directly or indirectly) by any person or entity adverse to the Bank,
he shall within 48 hours notify the then-current Chairman of the Board of the
Bank.  Employee shall be reimbursed for
any reasonable costs and expenses incurred in connection with providing such
cooperation.

 

9.           Entire
Agreement; Modification of Agreement

 

Except
as otherwise expressly noted herein, this Agreement constitutes the entire
understanding of the parties and supersedes all prior discussions,
understandings, and 

 

14

 

agreements
of every nature between them relating to the matters addressed herein.  Accordingly, no representation, promise, or
inducement not included or incorporated by reference in this Agreement shall be
binding upon the parties.  Employee
affirms that the only consideration for the signing of this Agreement are the
terms set forth above and that no other promises or assurances of any kind have
been made to him by the Bank or any other entity or person as an inducement for
him to sign this Agreement.  This
Agreement may not be changed orally, but only by an agreement in writing signed
by the parties or their respective heirs, legal representatives, successors,
and assigns.

 

10.         Partial Invalidity

 

The
parties agree that the provisions of this Agreement and any paragraphs,
subsections, sentences, or provisions thereof shall be deemed severable and
that the invalidity or unenforceability of any paragraph, subsection, sentence,
or provision shall not affect the validity or enforceability of the remainder
of the Agreement.

 

11.         Waiver

 

The
waiver of the breach of any term or provision of this Agreement shall not
operate as or be construed to be a waiver of any other subsequent breach of
this Agreement.

 

12.         Successors and
Assigns

 

This
Agreement shall inure to and be binding upon the Bank and Employee, their
respective heirs, legal representatives, successors, and assigns.

 

13.         Governing Law

 

This
Agreement shall be construed in accordance with the laws of the state of South
Carolina and any applicable federal laws.

 

14.         Headings

 

The
headings or titles of sections and subsections of this Agreement are for
convenience and reference only and do not constitute a part of this Agreement.

 

15.         Notice

 

Any
notice or communication required or permitted under this Agreement shall be
made in writing and sent by certified mail, return receipt requested, addressed
as follows:

 

	
   

  	
  If
  to Employee:

  
	
   

  	
  66
  Point Comfort Road, Hilton Head Island, SC 29928

  
	
   

  	
   

  
	
   

  	
  If
  to the Bank:

  
	
   

  	
  PO
  Box 3077, Bluffton, SC 29910

  

 

16.         Representations:  Employee acknowledges that:

 

a)           He has read this Agreement and
understands its meaning and effect.

 

15

 

b)           He has knowingly and voluntarily
entered into this Agreement of his own free will.

 

c)           By signing this
Agreement, Employee has waived, to the full extent permitted by law, all claims
against the Bank based on any actions taken by the Bank up to the date of the
signing of this Agreement, and the Bank may plead this Agreement as a complete
defense to any claim the Employee may assert.

 

d)           He would not
otherwise be entitled to the consideration described in this Agreement, and
that the Bank is providing such consideration in return for Employee’s
agreement to be bound by the terms of this Agreement.

 

e)           He has been advised to consult with
an attorney before signing this Agreement.

 

f)            He has been given up to 21 days to
consider the terms of this Agreement.

 

g)           He has seven
days, after Employee has signed the Agreement and it has been received by the
Bank, to revoke it by notifying the Chairman of the Board of his intent to
revoke acceptance.  For such revocation
to be effective, the notice of revocation must be received no later than 5:00 p.m.
on the seventh day after the signed Agreement is received by the Bank.  This Agreement shall not become effective or
enforceable until the revocation period has expired.

 

h)           He is not
waiving or releasing any rights or claims that may arise after the date the
Employee signs this Agreement.

 

As
to Employee:

 

 

	
   

  	
   

  	
   

  
	
  Date

  	
   

  	
  Todd
  D. Hoke

  
	
   

  	
   

  
	
   

  	
   

  
	
  As
  to the Bank:

  	
   

  
	
   

  	
   

  
	
   

   

  	
   

  	
   

  
	
  Date

  	
  Brian
  J. Smith, Chairman of the Board

  

 

16Exhibit 10.4

 

EMPLOYMENT AGREEMENT

 

This
Employment Agreement (Agreement) dated as February 8, 2008, is made by and
between Atlantic Bancshares, Inc., (Company) a South Carolina corporation
which is the holding company for Atlantic Community Bank (Bank), a South
Carolina state bank, (collectively referred to as Employer) and Michelle M.
Pennell (Executive).

 

In
consideration of the mutual covenants herein contained, the parties agree as
follows:

 

Section 1 – Duties

 

Employer
shall employ Executive and the Executive shall serve the Employer as Chief
Financial Officer and Executive Vice President of the Bank and of the Company
upon the terms can conditions set forth herein. 
Executive shall have such authority and responsibilities consistent with
her position as set forth in the Company’s or Bank’s bylaws or as assigned by
the Company’s and the Bank’s Boards of Directors (collectively referred to as
Board of Directors) or the Company’s Chief Executive Officer.  Executive shall devote her full business
time, attention, skill and efforts to the performance of her duties
hereunder.  Executive may devote
reasonable period to service as a director or advisor to other organizations,
to charitable and community activities, provided that, in the Board’s sole
opinion, such activities do not materially interfere with and are not in
conflictive with or adverse to, the interests of the Company or the Bank. Executive
shall be subject to all Bank policies and benefits as are other employees,
except as may otherwise be stated herein.

 

Section 2 – Term

 

A.                                   Unless earlier
terminated as provided herein, Executive’s employment under this Agreement
shall commence on February 8, 2008, and be for a term of three years.  Executive agrees to remain in the exclusive
employ of Employer until February 8, 2011, and neither to accept other
employment nor to become employed by any other employer until such termination
date, unless the termination date is affected as hereinafter provided.

 

B.                                     In the event
written notice is not given by either party to this Agreement 60 days prior to
the termination date, this Agreement shall be extended on the same terms and
conditions as herein provided, all for an additional period of three (3) years.
Agreement shall continue thereafter for three-year periods unless either party
hereto gives 60 days written notice to the other party that the party does not
wish to extend this Agreement.

 

1

 

C.                                     Nothing in this
Agreement shall prevent, limit or otherwise interfere with the right of Company
and Bank to terminate the services of Executive at any time, subject only to
the provisions set forth in Section 4 of this Agreement.

 

D.                                    Nothing in this
Agreement shall prevent, limit or otherwise interfere with the right of the Executive
to resign at any time from her position with Employer, subject only to the
provision set forth in Section 4 of this Agreement.

 

Section 3 – Compensation & Benefits

 

A.                                   Starting February 8,
2008, Employer shall pay Executive an annual base salary of $110,000.00 (One Hundred Ten Thousand and no/100
Dollars) in accordance with the Employer’s normal payroll
practices, which shall mean no less frequently than monthly.  The Chief Executive Officer shall review Executive’s
performance and salary periodically and may increase Executive’s base salary if
he determines in his sole discretion that an increase is appropriate.

 

B.                                     Executive shall
participate in Employer’s long-term equity incentive program and be eligible to
purchase stock options in accordance with the stock incentive plan approved by
the Company’s shareholders.  Any options
or similar awards shall be issued to Executive at an exercise price of not less
than the stock’s current fair market value as of the date of grant.

 

C.                                     Executive shall
participate in all retirement, health, welfare, and other benefit plans or
programs of Employer now or as may be adopted for all employees or adopted for
a class of employees that includes Executive.  Employer shall pay the Executive’s coverage
for medical and dental benefits excluding the minimal required co-pay payment.

 

D.                                    Employer shall
provide Executive with an automobile allowance of $350.00 per month.

 

E.                                      Employer may
pay for membership dues for Executive’s membership in various civic
organizations.  In addition, Employer
shall pay membership fees and annual dues, subject to approval by the Chief
Executive Officer.

 

F.                                      Employer shall
reimburse Executive for reasonable travel and other expenses, including cell
phone, related to Executive’s duties which are incurred and accounted for in
accordance with Bank policies.  Executive
shall be issued a corporate credit card to be used for business related
expenses in accordance with Bank policies.  The Employer shall reimburse the Executive for
such expenses within 60 days of Executive’s notice to Employer of such expense.

 

G.                                     Employer shall
provide Executive with four weeks paid vacation per year which shall be taken
in accordance with Bank policies and in accordance with any banking rules or
regulations governing vacation leave. 
Paid time off days may not be 

 

2

 

carried forward into following calendar years, and any payments made by
the Employer to the Executive as compensation for paid time off days shall be
paid in accordance with the Employer’s normal payroll practices, which shall
mean no less frequently than monthly.

 

H.                                    The Executive
shall be eligible to receive cash bonuses based on the Executive’s achievement
of specified goals and criteria.  These
goals and criteria may include both annual and long-term goals, may provide for
vesting over a specified time period, and shall be established annually by the
Compensation Committee of the Board of Directors.  For purposes of this Agreement, a bonus shall
not be deemed to be earned prior to the date it is actually paid to the
Executive except to the extent that the Employer specifically provides
otherwise in a writing delivered to the Executive.  Any bonus payment made pursuant to this Section 3(H) shall
be made the earlier of (i) 70 days after the previous year end for which
the bonus was earned by the Executive and became a payable of the Employer or (ii) the
first pay period following the Employer’s press release announcing its previous
year’s financial performance.

 

Section 4 – Termination

 

A.                                   Executive’s
employment under the Agreement may be terminated prior to the end of the term
only as provided in this Section 4.

 

B.                                     Death.  The Agreement will terminate upon the death
of Executive.   In this event, the Employer shall pay
Executive’s estate any sums due her as base salary and/or reimbursement of
expenses through the end of the month during which death occurred in accordance
with the Employer’s normal payroll practices, which shall mean no less
frequently than monthly.  The Employer
shall also pay the Executive’s estate any bonus earned or accrued through the
date of death including any amounts awarded for previous years but which were
not yet vested. Any bonus for previous years which was not yet paid will be
paid pursuant to the terms as set forth in Section 3(H).  Any bonus that is earned in the year of death
will be paid on the earlier of (i) 70 days after the year end in which the
Executive died or (ii) the first pay period following the Employer’s press
release announcing its financial performance for the year in which the
Executive died.  To the extent that the
bonus is performance-based, the amount of the bonus will be calculated by
taking into account the performance of the Company for the entire year and prorated
through the date of Executive’s death.

 

C.                                     Disability.  Employer may terminate this Agreement upon
the Disability of Executive for a period of ninety (90) days.  In this event, the Employer shall pay
Executive any sums due her as base salary and/or reimbursement of expenses
through the date of termination in accordance with the Employer’s normal
payroll practices, which shall mean no less frequently than monthly.

 

D.                                    For Cause.  Employer may terminate this Agreement for
cause upon delivery of a Notice of Termination to Executive.  If Executive is terminated for cause under
this provision Executive shall receive only any sums due her as base salary and

 

3

 

reimbursement of expenses through the date of termination in accordance
with the Employer’s normal payroll practices, which shall mean no less
frequently than monthly.  For purposes of
this paragraph, cause is defined as:

 

(i) The commission or omission by Executive of any act, which in
Employer’s sole opinion, is intended to cause, causes, or is reasonably likely
to cause harm to Employer, including harm to its business reputation;

 

(ii) The indictment of Executive for the commission or
perpetration by Executive of any crime involving dishonesty, moral turpitude,
or fraud;

 

(iii) The material breach by Executive of this Agreement;

 

(iv) Violation of Employer policies by Executive;

 

(v) Receipt of any form of notice, written or otherwise, that any
regulatory agency having jurisdiction over Employer intends to institute any
formal or informal regulatory action against Executive or Employer;

 

(vi) Exhibition by Executive of a standard of behavior that is
disruptive to the orderly conduct of the Employer’s Business to a level which,
in the Board of Director’s sole opinion, is detrimental to Employer’s best
interest; or

 

(vii) Failure of Executive to devote her full business time and
attention to her employment.

 

E.                                      Without Cause.  Employer may terminate this Agreement without
cause upon delivery of a Notice of Termination to Executive.  If Executive is terminated without cause
under this provision, Employer shall pay to Executive severance compensation a
lump sum amount equal to her then current monthly base salary for twelve (12)
months, plus any bonus earned or accrued through the date of termination,
including any amounts awarded for previous years but which were not yet vested.  If when Executive’s employment terminates she
is a specified employee within the meaning of Section 409A of the Internal
Revenue Code, and if the benefits under this Section 4(E) would be
considered deferred compensation under Section 409A, and finally if an
exemption from the six-month delay requirement of Section 409A(a)(2)(B)(i) is
not available, the lump sum amount due under this Section 4(E) shall
be paid to the Executive on the date that is six months and one day following
date of Executive’s termination.

 

F.                                      Resignation.  Executive may terminate this Agreement at any
time by delivery of a Notice of Resignation to Employer with a minimum of 30
days notice.  If Executive resigns under
this provision, Employer shall pay Executive any sums due her as base salary
and reimbursement of expenses through the effective date of resignation, and
any other amounts due to Executive pursuant to the Employer’s 

 

4

 

policies; provided however, that if Executive fails to give at least 30
days notice, Executive may forfeit right to payment of accrued and unpaid
vacation time.  Any such amounts payable under
this Section 4(F) will be paid in accordance with the Employer’s
normal payroll practices, which shall mean no less frequently than monthly.

 

G.                                     Change of
Control.  Upon the occurrence of a
Change in Control, and regardless of whether the Executive remains employed by
the Employer or its successor following a Change in Control, the Executive
shall be entitled to the following:

 

(i) within fifteen (15) days, Employer shall pay Executive in cash
in an amount equal to her then current monthly base salary multiplied by 36 plus
any bonus earned or accrued through the date of Change in Control (including
any amounts awarded for previous years but which were not yet vested);

 

(ii) For a period of 36 months, payment of premiums for medical
and dental insurance, disability insurance, and life insurance being provided
to Executive prior to the change in control or to other similarly situated
executives who continue in the employ of Employer.

 

Employer’s obligation hereunder with respect to the benefits stated in this
Section 4G(ii) shall be limited to the extent that Executive’s
employment terminates and she becomes eligible for any such benefits pursuant
to a subsequent employer’s benefit plans, in which case Employer may reduce the
coverage of any benefits it is required to provide Executive so long as the
aggregate coverage and benefits of the combined benefit plans is no less
favorable to Executive than the coverages and benefits required to be provided
hereunder; and

 

(iii) The restrictions on any outstanding incentive awards
(including restricted stock) granted to Executive under Company’s or Bank’s
long-term equity incentive program or other incentive plan or arrangement shall
lapse and such awards shall become 100% vested, all stock options and stock
appreciation rights granted to Executive shall become immediately exercisable
and shall become 100% vested, all performance units granted to Executive shall
become 100% vested.

 

For the purpose of this Section 4(G), all amounts paid to Executive
will be grossed up so as to account for any additional federal and state income
taxes that may be owed as a result of this lump sum payment rather than
periodic payments over 36 months.

 

H.                                    With the
exceptions of the provisions of this Section 4 and the express terms of any
benefit plan under which Executive is a participant, it is agreed that, upon
termination of Executive’s employment for any reason, Employer shall have no
obligation to Executive for, and Executive waives and relinquishes any further 

 

5

 

compensation or benefits, except for COBRA benefits.  Unless otherwise stated in this Section 4,
the effect of termination on any outstanding incentive awards, stock options,
stock appreciations rights, performance units or other incentives shall be
governed by the terms of the applicable plan. 
At the time of Termination of Employment, and as a condition to the
Employer’s obligation to pay any severance hereunder, the Employer and the
Executive shall enter into a release substantially in the form attached hereto
as Exhibit A acknowledging such remaining obligations and
discharging both parties, as well as the Employer’s officers, directors and
employees with respect to their actions for or on behalf of the Employer, from
any other claims or obligations arising out of or in connection with the
Executive’s employment by the Employer, including the circumstances of such
termination.

 

I.                                         The parties
intend that the severance payments and other compensation provided for herein
are reasonable compensation for Executive’s service to Employer and shall not
constitute “excess parachute payments” within the meaning of Section 280G
of the Internal Revenue Code and any regulations thereunder.  In the event that Employer’s independent
accountants acting as auditors for Employer on the date of a Change in Control
determine that the payments provided for herein constitute “excess parachute
payments,” then the compensation payable hereunder shall be increased, on a tax
gross-up basis, so as to reimburse Executive for the tax payable by Executive,
pursuant to Section 4999 of the Internal Revenue Code, on such “excess
parachute payments,” taking into account all taxes payable by Executive with
respect to such tax gross-up payments hereunder, so that Executive shall be,
after payment of all taxes, in the same financial position as if no taxes under
Section 4999 of the Internal Revenue Code had been imposed upon him.

 

Section 5 - Ownership of Work Product

 

Employer shall own all work product arising during the course of Executive’s
employment (prior, present, or future).  For
purposes hereof, “work product” shall mean all intellectual property rights,
including all trade secrets, U.S. and international copyrights, patentable
inventions, and other intellectual property rights in any programming,
documentation, technology, or other work product that relates to Employer, its
Business or its customers and that the Executive conceives, develops or
delivers to Employer at any time during her employment, during or outside
normal working hours, in or away from the facilities of Employer, and whether
or not requested by Employer. If the Work Product contains any materials,
programming, or intellectual property rights that the Executive conceived or
developed prior to and independent of the Executive’s work for Employer, Executive
agrees to point out the pre-existing items to Employer and Executive grants
Employer a worldwide, unrestricted, royalty-free right, including the right to
sublicense such items.

 

6

 

Section 6 - Protection of Trade Secrets

 

Executive agrees to maintain in strict confidence, and except as
necessary to perform her duties for Employer, the Executive agrees not to use
or disclose any trade secrets of Employer during or after her employment. “Trade
secret” means information, including a formula, pattern, compilation, program,
device, method, technique, process, drawing, cost data, or customer list, that:
(i) derives economic value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper means by, other persons
who can obtain economic value from its disclosure or use; and (ii) is the
subject of efforts that are reasonable under the circumstances to maintain its
secrecy.

 

Section 7 - Protection of Other Confidential
Information

 

Executive agrees to maintain in strict confidence and, except as
necessary to perform her duties for Employer, not to use or disclose any
confidential business information of Employer during her employment and for a
period of 24 months following termination of Executive’s employment.  “Confidential business information” shall
mean any internal, non-public information concerning Employer’s financial
position and results of operations (including revenues, assets, net income,
etc.); annual and long-range business plans; product or service plans;
marketing plans and methods; training, educational and administrative manuals;
customer and supplier information and purchase histories; and employee lists.
The provisions of Sections 6 and 7 shall also apply to protect trade secrets
and confidential business information of third parties provided to Employer
under an obligation of confidentiality or secrecy.

 

Section 8 - Return of Materials

 

Executive shall surrender to Employer, promptly upon its request or
upon termination of Executive’s employment, all media, documents, notebooks,
computer programs, handbooks, data files, models, samples, price lists,
drawings, customer lists, prospect data, or other material of any nature
whatsoever (in tangible or electronic form) in Executive’s possession or
control, including all copies thereof, relating to Employer, its Business or
its customers. Upon the request of Employer, Executive shall certify in writing
compliance with the foregoing requirement.

 

Section 9 - Restrictive Covenants

 

A.                                   No Solicitation
of Customers.  During Executive’s
employment with Employer and for a period of 12 months thereafter, Executive
shall not (except of behalf of or with the prior written consent of Employer)
either directly or indirectly, on Executive’s own behalf or in the service or
on behalf of others (i) solicit, divert, or appropriate to or for a Competing
Business, or (ii) attempt to solicit, divert, or appropriate to or for a Competing
Business, any person or entity that is or was a customer of Employer or any of
its affiliates at any time during the 12 months prior to the date of
termination and with whom the Executive has had material contact. The 

 

7

 

parties agree that solicitation of such a customer to acquire stock in
a Competing Business during this time period would be a violation of this Section 9(A).  This restriction does not apply following a
Change in Control.

 

B.                                     No Recruitment
of Personnel. During Executive’s employment with Employer and
for a period of 12 months thereafter, Executive shall not, either directly or
indirectly, on Executive’s own behalf or in the service or on behalf of others (i) solicit,
divert or hire away or (ii) attempt to solicit, divert or hire away, to
any Competing Business located in the territory, any employee of or consultant
to Employer or any of its affiliates, regardless of whether Executive or
consultant is full-time or temporary, the employment or engagement is pursuant
to written agreement, or the employment is for a determined period or is
at-will.  For purposes of this Agreement,
“territory” means within a radius of 15 miles from the main office of the
Employer or any branch office of Employer. 
This restriction does not apply following a Change in Control.

 

C.                                     Non-Competition
Agreement.  During Executive’s
employment with Employer and for a period of 12 months thereafter, Executive
shall not (except of behalf of or with the prior written consent of Employer)
compete with Employer or any of its affiliates by directly or indirectly
forming, serving as organizer, employee, director or officer of, or consultant
to, or acquiring or maintaining more than a 1% passive investment in a depository
financial institution or holding company therefore if such depository
institution or holding company has one or more offices or branches located in
the territory.  This restriction does not
apply following a Change in Control.

 

D.                                    Independent
Provisions.  The
provisions in each of the above Sections 9(A), 9(B), and 9(C) are
independent, and the unenforceability of any one provision shall not affect the
enforceability of any other provision.

 

Section 10 - Successors: Binding Agreement

 

The rights and obligations of this Agreement shall bind and inure to
the benefit of the surviving corporation in any merger or consolidation in
which Employer is a party, or to any assignee of all or substantially all of
Employer’s Business and properties. Executive’s rights and obligations under
this Agreement may not be assigned by him, except under her right to receive
accrued but unpaid compensation, unreimbursed expenses and other rights, if
any, provided under this Agreement which survive termination of this Agreement
shall pass after death to the personal representative of her estate.

 

Section 11 - Notice

 

For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered or sent by certified
mail, return receipt requested, postage prepaid, addressed to the respective
addresses last given by each party to the other; provided, however, that all
notices to Employer shall be directed to the attention 

 

8

 

of the Chief Executive Officer with a copy to the Secretary of
Employer. All notices and communications shall be deemed to have been received
on the date of delivery thereof.

 

Section 12 - Governing Law

 

This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of South Carolina without giving effect
to the conflict of laws principles thereof. 
Any action brought by any party to this Agreement shall be brought and
maintained in a court of competent jurisdiction in State of South Carolina.

 

Section 13 - Non Waiver

 

Failure of Employer to enforce any of the provisions of this Agreement
or any rights with respect thereto shall in no way be considered to be a waiver
of such provisions or rights or in any way affect the validity of this
Agreement.

 

Section 14 - Enforcement

 

Executive aggress that in the event of any breach or threatened breach
by Executive of any covenant contained in Section 9(A), 9(B), or 9(C) hereof,
the resulting injuries to Employer would be difficult or impossible to estimate
accurately, even though irreparable injury or damages would certainly result.
Accordingly, an award of legal damages, if without other relief, would be
inadequate to protect Employer.  Executive,
therefore, agrees that in the event of any such breach, Employer shall be
entitled to obtain from a court of competent jurisdiction an injunction to
restrain the breach or anticipated breach of any such covenant, and to obtain
any other available legal, equitable, statutory or contractual relief. Should
Employer have cause to seek such relief, no bond shall be required from
Employer and Executive shall pay all attorney’s fees and court costs which
Employer may incur to the extent Employer prevails in its enforcement action.

 

Section 15 - Saving Clause

 

The provisions of this Agreement shall be deemed severable and the
invalidity or unenforceability of any provision shall not affect the validity
or enforceability of the other provisions thereof. If any provision or clause
of this Agreement, or portion thereof, shall be held by any court or other
tribunal of competent jurisdiction to be illegal, void, or unenforceable in
such jurisdiction, the remainder of such provision shall not be thereby
affected and shall be given full effect, without regard to the invalid portion.
It is the intention of the parties that, if any court construes any provision
or clause of this Agreement, or any portion thereof, to be illegal, void, or
unenforceable because of the duration of such provision or the area or matter
covered thereby, such court shall reduce the duration, area, or matter or such
provision, and, in its reduced form, such provision shall then be enforceable
and shall be enforced. Executive and Employer hereby agree that this Agreement
may be amended from time to time to modify the terms of Section 9(A),
9(B), or 9(C) the definition of the term “territory” and the definition 

 

9

 

of the term “business” to reflect changes in Employer’s Business and
affairs so that the scope of the limitations placed on Executive’s activities
by Section 9 accomplishes the parties’ intent in relation to the current
facts and circumstances.

 

Section 16 - Certain Definitions

 

A.                                   “Affiliate”
shall mean any business entity controlled by, controlling or under common
control with Employer.

 

B.                                     “Business”
shall mean the operation of a depository financial institution, including,
without limitation, the solicitation and acceptance of deposits of money and
commercial paper, the solicitation and funding of loans and the provision of
other banking services, and any other related business engaged in by Employer
or any of its Affiliates as of the date of termination.

 

C.                                     “Change in
Control” shall mean as defined by Treasury Regulation § 1.409A-3(i)(5).

 

D.                                    “Competing
Business” shall mean any business that, in whole or in part, is the same or
substantially the same as the Business.

 

E.                                      “Disability”
shall mean as defined by Treasury Regulation § 1.409A-3(i)(4).

 

F.                                      “Notice of
Termination” shall mean a written notice of termination from Employer or Executive
which specifies an effective date of termination, indicates the specific
termination provision(s) in this Agreement relied upon, and, in the case
of a termination for Good Reason or for Cause, sets forth in reasonable detail
the facts and circumstances claimed to provide the basis for termination of Executive’s
employment under the provision so indicated.

 

G.                                     “Terminate,” “terminated,”
“termination,” or “Termination” of Employment” shall mean separation from
service as defined by Regulation 1.409A-1(h).

 

Section 17 – Entire Agreement

 

This Agreement constitutes the entire agreement between the parties
hereto and supersedes all prior agreements, if any, understanding and
arrangements, oral or written, between the parties hereto with respect to the
subject matter hereof.

 

10

 

IN WITNESS WHEREOF, Employer has caused this Agreement to be executed
by its Chairman of the Board of Directors and Executive has signed this
Agreement, effective of the date first above written.

 

 

	
  ATTEST:

  	
   

  	
   

  	
  ATLANTIC
  BANCSHARES, INC.

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:
  

  	
  /s/
  Brian J. Smith

  
	
  Name:

  	
   

  	
   

  	
  Name:
  Brian J. Smith

  
	
   

  	
   

  	
   

  	
  Title:
  Chairman of the Board

  
	
   

  	
   

  	
   

  	
   

  
							

 

	
   

  	
   

  	
  EXECUTIVE:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/
  Michelle M. Pennell

  
	
   

  	
   

  	
  Michelle
  M. Pennell

  

 

11

 

Exhibit A

 

Form of Release of Claims

 

SEVERANCE AGREEMENT AND RELEASE

 

This
Severance Agreement and Release (the “Agreement”) is made between Michelle M. Pennell, an individual
resident of South Carolina (“Employee”), and Atlantic Community Bank
(the “Bank”).

 

As
used in this Agreement, the term “Employee” shall include the employee’s heirs,
executors, administrators, and assigns, and the term “Bank” shall include the
Bank, its holding company, any other related or affiliated entities, and the
current and former officers, directors, shareholders, employees, and agents of
them.

 

On
February 8, 2008, the Bank and Employee entered into an Employment
Agreement governing the relationship between the parties.  Section 4(H) of the Employment
Agreement also provides that Employee shall be entitled to severance pay if the
Employment Agreement is terminated, on the condition that Employee enter into
this release or a substantially similar release.

 

Employee
desires to receive severance pay and the Bank is willing to provide severance
pay on the condition the Employee enter into this Agreement.

 

Now,
in consideration for the mutual promises and covenants set forth herein, and in
full and complete settlement of all matters between Employee and the Bank, the
parties agree as follows:

 

1.                                      Termination
Date:  The Employee
agrees that her employment with the Bank terminates as of                                 
(the “Termination Date”).

 

2.                                      Severance
Payments:  Subsequent to
her Termination Date, the Bank shall pay Employee severance pay as noted in
Paragraph 4 of the Employment Agreement, dated                 ,
(the “Severance Payment”), less applicable deductions and withholdings.

 

3.                                      Legal
Obligations

 

The
parties acknowledge that pursuant to Section 4(H) of the Employment
Agreement, they agreed that at the time of termination and as a condition of
payment of severance, they would enter into this release acknowledging any
remaining obligations and discharging each other from any other claims or
obligations arising out of or in connection with Employee’s employment by the
Bank, including the circumstances of such termination.  Employee acknowledges that the Bank has no
prior legal obligations to make the payments described in Section 2 above
which are exchanged for the promises of Employee set forth in this Agreement.

 

It
is specifically agreed that the payments described in Section 2 are
valuable and sufficient consideration for each of the promises of Employee set
forth in this Agreement and are payments in addition to anything of value to
which Employee is otherwise entitled.

 

12

 

4.                                   Waiver
and Release:

 

a)                                      Employee
unconditionally releases and discharges the Bank from any and all causes of
action, suits, damages, claims, proceedings, and demands that the Employee has
ever had, or may now have, against the Bank, whether asserted or unasserted,
whether known or unknown, concerning any matter occurring up to and including
the date of the signing of this Agreement.

 

b)                                     Employee
acknowledges that she is waiving and releasing, to the full extent permitted by
law, all claims against the Bank, including (but not limited to) all claims
arising out of, or related in any way to, her employment with the Bank or the
termination of that employment, including (but not limited to) any and all
breach of contract claims, tort claims, claims of wrongful discharge, claims
for breach of an express or implied employment contract, defamation claims,
claims under Title VII of the Civil Rights Act of 1964 as amended, which
prohibits discrimination in employment based on race, color, national origin,
religion or sex, the Family and Medical Leave Act, which provides for unpaid
leave for family or medical reasons, the Equal Pay Act, which prohibits paying
men and women unequal pay for equal work, the Age Discrimination in Employment
Act of 1967, which prohibits age discrimination in employment, the Americans
with Disabilities Act, which prohibits discrimination based on disability, the
Rehabilitation Act of 1973, the South Carolina Human Affairs Law, any and all
other applicable local, state and federal non-discrimination statutes, the
Employee Retirement Income Security Act, the Fair Labor Standards Act, the
South Carolina Payment of Wages Law and all other statutes relating to
employment, the common law of the State of South Carolina, or any other state,
and any and all claims for attorneys’ fees.

 

c)                                      This Waiver and
Release provision ((a) through (c) of this paragraph) shall be
construed to release all claims to the full extent allowed by law.  If any term of this paragraph shall be
declared unenforceable by a court or other tribunal of competent jurisdiction,
it shall not adversely affect the enforceability of the remainder of this
paragraph.

 

d)                                     The Bank
unconditionally releases and discharges Employee from any and all causes of
action, suits, damages, claims, proceedings, and demands that the Bank has ever
had, or may now have, against Employee, whether asserted or unasserted, whether
known or unknown, concerning any matter occurring up to and including the date
of the signing of this Agreement with the exception of any claims for breach of
trust, or any act which constitutes a felony or crime involving dishonesty,
theft, or fraud.

 

5.                                  Restrictive
Covenants and Other Obligations

 

The
parties agree that Section 5 – “Ownership of Work Product,” Section 6
– “Protection of Trade Secret,” Section 7 – “Protection of Confidential
Information,” Section 8 – “Return of Materials,” Section 9 – “Restrictive
Covenants,” Section 14 – “Enforcement,” and Section 15 – “Saving
Clause,” of the Employment Agreement shall remain in full force and effect and
that Employee will perform her obligations under those sections and those
sections of the Employment Agreement are incorporated by reference as if set
forth fully herein.  In the event
Employee breaches any obligation under this Section 5, the Bank’s
obligation to make severance payments to Employee shall terminate immediately
and the Bank shall have no further obligations to Employee.

 

13

 

6.                                  Duty
of Loyalty/Nondisparagement

 

The
parties shall not (except as required by law) communicate to anyone, whether by
word or deed, whether directly or through any intermediary, and whether
expressly or by suggestion or innuendo, any statement, whether characterized as
one of fact or of opinion, that is intended to cause or that reasonably would
be expected to cause any person to whom it is communicated to have a lowered
opinion of the other party.

 

7.                                Confidentiality
Of The Terms Of This Agreement

 

Employee
agrees not to publicize or disclose the contents of this Agreement, including
the amount of the monetary payments, except (i) to her immediate family; (ii) to
her attorney(s), accountant(s), and/or tax preparer(s); (iii) as may be
required by law; or (iv) as necessary to enforce the terms of this Agreement.  Employee further agrees that she will inform
anyone to whom the terms of this Agreement are disclosed of the confidentiality
requirements contained herein. 
Notwithstanding the foregoing, the parties agree that where business
needs dictate, Employee may disclose to a third party that she has entered into
an agreement with the Bank, which agreement contains restrictive covenants
including noncompetition and nondisclosure provisions, one or more of which
prohibit her from performing the requested service.

 

Employee
recognizes that the disclosure of any information regarding this Agreement by
him, her family, her attorneys, her accountants or financial advisors, could
cause the Bank irreparable injury and damage, the amount of which would be
difficult to determine.  In the event the
Bank establishes a violation of this paragraph of the Agreement by Employee,
her attorneys, immediate family, accountants, or financial advisors, or others
to whom Employee disclosed information in violation of the terms of this
Agreement.  The Bank shall be entitled to
injunctive relief without the need for posting a bond and shall also be
entitled to recover from Employee the amount of attorneys’ fees and costs
incurred by the Bank in enforcing the provisions of this paragraph.

 

8.                                Continued
Cooperation

 

Employee
agrees that she will cooperate fully with the Bank in the future regarding any
matters in which she was involved during the course of her employment, and in
the defense or prosecution of any claims or actions now in existence or which
may be brought or threatened in the future against or on behalf of the
Bank.  Employee’s cooperation in
connection with such matters, actions and claims shall include, without
limitation, being available to meet with the Bank’s officials regarding
personnel or commercial matters in which she was involved; to prepare for any
proceeding (including, without limitation, depositions, consultation, discovery
or trial); to provide affidavits; to assist with any audit, inspection,
proceeding or other inquiry; and to act as a witness in connection with any
litigation or other legal proceeding affecting the Bank.  Employee further agrees that should she be
contacted (directly or indirectly) by any person or entity adverse to the Bank,
she shall within 48 hours notify the then-current Chairman of the Board of the
Bank.  Employee shall be reimbursed for
any reasonable costs and expenses incurred in connection with providing such
cooperation.

 

14

 

9.                                      Entire
Agreement; Modification of Agreement

 

Except
as otherwise expressly noted herein, this Agreement constitutes the entire
understanding of the parties and supersedes all prior discussions,
understandings, and agreements of every nature between them relating to the
matters addressed herein.  Accordingly,
no representation, promise, or inducement not included or incorporated by
reference in this Agreement shall be binding upon the parties.  Employee affirms that the only consideration
for the signing of this Agreement are the terms set forth above and that no
other promises or assurances of any kind have been made to her by the Bank or
any other entity or person as an inducement for her to sign this
Agreement.  This Agreement may not be
changed orally, but only by an agreement in writing signed by the parties or
their respective heirs, legal representatives, successors, and assigns.

 

10.                               Partial
Invalidity

 

The
parties agree that the provisions of this Agreement and any paragraphs,
subsections, sentences, or provisions thereof shall be deemed severable and
that the invalidity or unenforceability of any paragraph, subsection, sentence,
or provision shall not affect the validity or enforceability of the remainder
of the Agreement.

 

11.                               Waiver

 

The
waiver of the breach of any term or provision of this Agreement shall not
operate as or be construed to be a waiver of any other subsequent breach of
this Agreement.

 

12.                               Successors
and Assigns

 

This
Agreement shall inure to and be binding upon the Bank and Employee, their
respective heirs, legal representatives, successors, and assigns.

 

13.                               Governing
Law

 

This
Agreement shall be construed in accordance with the laws of the state of South
Carolina and any applicable federal laws.

 

14.                               Headings

 

The
headings or titles of sections and subsections of this Agreement are for
convenience and reference only and do not constitute a part of this Agreement.

 

15.                               Notice

 

Any
notice or communication required or permitted under this Agreement shall be
made in writing and sent by certified mail, return receipt requested, addressed
as follows:

 

If
to Employee:

4 Minuteman Drive, Bluffton, SC 29910

 

If
to the Bank:

PO Box 3077, Bluffton, SC 29910

 

16.                               Representations:  Employee acknowledges that:

 

15

 

a)                                      She has read
this Agreement and understands its meaning and effect.

 

b)                                     She has
knowingly and voluntarily entered into this Agreement of her own free will.

 

c)                                      By signing this
Agreement, Employee has waived, to the full extent permitted by law, all claims
against the Bank based on any actions taken by the Bank up to the date of the
signing of this Agreement, and the Bank may plead this Agreement as a complete
defense to any claim the Employee may assert.

 

d)                                     She would not
otherwise be entitled to the consideration described in this Agreement, and
that the Bank is providing such consideration in return for Employee’s
agreement to be bound by the terms of this Agreement.

 

e)                                      She has been
advised to consult with an attorney before signing this Agreement.

 

f)                                        She has been
given up to 21 days to consider the terms of this Agreement.

 

g)                                     She has seven
days, after Employee has signed the Agreement and it has been received by the
Bank, to revoke it by notifying the Chairman of the Board of her intent to
revoke acceptance.  For such revocation
to be effective, the notice of revocation must be received no later than 5:00 p.m.
on the seventh day after the signed Agreement is received by the Bank.  This Agreement shall not become effective or
enforceable until the revocation period has expired.

 

h)                                     She is not
waiving or releasing any rights or claims that may arise after the date the
Employee signs this Agreement.

 

 

As
to Employee:

 

 

	
   

  	
   

  	
   

  
	
  Date

  	
   

  	
  Michelle M. Pennell

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  As
  to the Bank:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date

  	
   

  	
  Brian
  J. Smith, Chairman of the Board

  

 

16

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