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CHANGE-IN-CONTROL PROTECTIVE AGREEMENT
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THIS AGREEMENT entered into this 4th day of April, 2005 (the
"Effective
Date"), by and between First South Bank (the "Bank"), First South
Bancorp, Inc.
(the "Company"), and Larry W. Mallard (the "Employee").
WHEREAS, the Employee has commenced employment with the Bank
effective
this date, and the Bank deems it to be in its best interest to
enter into this
Agreement as an additional incentive to the Employee to continue as
an employee
of the Bank; and
WHEREAS, the parties desire by this writing to set forth their
understanding as to their respective rights and obligations in the
event a
change of control occurs with respect to the Bank or the
Company.
NOW, THEREFORE, the undersigned parties agree as follows:
1. Defined
Terms
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When used anywhere in the Agreement, the following terms shall have
the
meaning set forth herein.
(a) "CHANGE IN CONTROL" shall mean any one of the following
events: (i) the acquisition of ownership, holding or power to vote
more than 25%
of the voting stock of the Bank or the Company, (ii) the
acquisition of the
ability to control the election of a majority of the Bank's or the
Company's
directors, (iii) the acquisition of a controlling influence over
the management
or policies of the Bank or of the Company by any person or by
persons acting as
a "group" (within the meaning of Section 13(d) of the Securities
Exchange Act of
1934), or (iv) during any period of two consecutive years,
individuals (the
"Continuing Directors") who at the beginning of such period
constitute the Board
of Directors of the Bank or of the Company (the "Existing Board")
cease for any
reason to constitute at least two-thirds thereof, provided that any
individual
whose election or nomination for election as a member of the
Existing Board was
approved by a vote of at least two-thirds of the Continuing
Directors then in
office shall be considered a Continuing Director. Notwithstanding
the foregoing,
the Company's ownership of the Bank shall not of itself constitute
a Change in
Control for purposes of the Agreement. For purposes of this
paragraph only, the
term "person" refers to an individual or a corporation,
partnership, trust,
association, joint venture, pool, syndicate, sole proprietorship,
unincorporated
organization or any other form of entity not specifically listed
herein.
(b) "CODE" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and as interpreted through applicable
rulings and
regulations in effect from time to time.
(c) "CODE SS.280G MAXIMUM" shall mean the product of 2.99 and
the
Employee's "base amount" as defined in Code ss.280G(b)(3).
(d) "GOOD REASON" shall mean any of the following events, which
has not been consented to in advance by the Employee in writing:
(i) the
requirement that the Employee move his personal residence, or
perform his
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principal executive functions, more than thirty (30) miles from his
primary
office as of the date of the Change in Control; (ii) a material
reduction in the
Employee's base compensation as in effect on the date of the Change
in Control
or as the same may be increased from time to time; (iii) the
failure by the Bank
or the Company to continue to provide the Employee with
compensation and
benefits provided for on the date of the Change in Control, as the
same may be
increased from time to time, or with benefits substantially similar
to those
provided to him under any of the employee benefit plans in which
the Employee
now or hereafter becomes a participant, or the taking of any action
by the Bank
or the Company which would directly or indirectly reduce any of
such benefits or
deprive the Employee of any material fringe benefit enjoyed by him
at the time
of the Change in Control; (iv) the assignment to the Employee of
duties and
responsibilities materially different from those normally
associated with his
position; (v) a failure to elect or reelect the Employee to the
Board of
Directors of the Bank or the Company, if the Employee is serving on
such Board
on the date of the Change in Control; (vi) a material diminution or
reduction in
the Employee's responsibilities or authority (including
reporting
responsibilities) in connection with his employment with the Bank
or the
Company; or (vii) a material reduction in the secretarial or
other
administrative support of the Employee.
(e) "JUST CAUSE" shall mean, in the good faith determination of
the Bank's Board of Directors, the Employee's personal dishonesty,
incompetence,
willful misconduct, breach of fiduciary duty involving personal
profit,
intentional failure to perform stated duties, willful violation of
any law, rule
or regulation (other than traffic violations or similar offenses)
or final
cease-and-desist order, or material breach of any provision of this
Agreement.
The Employee shall have no right to receive compensation or other
benefits for
any period after termination for Just Cause. No act, or failure to
act, on the
Employee's part shall be considered "willful" unless he has acted,
or failed to
act, with an absence of good faith and without a reasonable belief
that his
action or failure to act was in the best interest of the Bank and
the Company.
(f) "PROTECTED PERIOD" shall mean the period that begins on the
date six months before a Change in Control and ends on the later of
the second
annual anniversary of the Change in Control or the expiration date
of this
Agreement.
(g) "Trust" shall mean a grantor trust designed in accordance
with
Revenue Procedure 92-64 and having a trustee independent of the
Bank and the
Company.
2.
Trigger
Events
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The Employee shall be entitled to collect the severance benefits
set
forth in Section 3 of this Agreement in the event that (i) the
Employee
voluntarily terminates employment within 90 days of an event that
both occurs
during the Protected Period and constitutes Good Reason, or (ii)
the Bank, the
Company, or their successor(s) in interest terminate the Employee's
employment
for any reason other than Just Cause during the Protected
Period.
2
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3. Amount of
Severance Benefit
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If the Employee becomes entitled to collect severance benefits
pursuant
to Section 2 hereof, the Bank shall pay the Employee a severance
benefit equal
to one times the Employee's base annual salary in effect when the
Protected
Period begins. In no event, however, will this amount exceed the
difference
between (i) the Code ss.280G Maximum and (ii) the sum of any other
"parachute
payments" (as defined under Code ss.280G(b)(2)) that the Employee
receives on
account of the Change in Control. Said sum shall be paid in one
lump sum within
ten (10) days of the later of the date of the Change in Control
and
