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Exhibit 10.4
NOTICE: THIS AGREEMENT IS SUBJECT TO ARBITRATION PURSUANT
TO THE SOUTH CAROLINA UNIFORM ARBITRATION ACT
AMENDED NONCOMPETITION, SEVERANCE AND EMPLOYMENT AGREEMENT
THIS AMENDED NONCOMPETITION, SEVERANCE AND EMPLOYMENT AGREEMENT
(the
"Agreement") is made and entered into as of this 17th day of
October, 2007, by
and among Ronald K. Earnest, an individual (the "Executive"),
GrandSouth
Bancorporation, a South Carolina corporation (the "Company"),
and the Company's
wholly-owned subsidiary, GrandSouth Bank, a South Carolina
corporation (the
"Bank").
WHEREAS, the Company, the Bank and the Executive entered into
a
Noncompetition, Severance and Employment Agreement dated as of
January 18, 2006
(the "Original Agreement"); and
WHEREAS, the Company, the Bank and the Executive desire to amend
the
Original Agreement in compliance with the recently enacted
Internal Revenue Code
Section 409A and associated federal regulations; and
WHEREAS, the Boards of Directors of the Company and the Bank
continue
to believe that the Executive has been instrumental in the
success of the
Company and the Bank since his employment in 1998; and
WHEREAS, the Company desires to continue to employ the Executive
as
President and Chief Operating Officer of the Company, and the
Bank desires to
continue to employ the Executive as President and Chief
Executive Officer of the
Bank; and
WHEREAS, the Executive is willing to continue to accept the
employment
contemplated herein under the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the premises and the
mutual
covenants and agreements contained herein and other good and
valuable
consideration, the receipt of which is hereby acknowledged, the
parties hereto
agree to amend and restate the Original Agreement as
follows:
1. Employment. Subject to the terms and conditions hereof, the
Company
hereby employs the Executive and the Executive hereby accepts
such employment as
the President and Chief Operating Officer of the Company, and
the Bank hereby
employs the Executive and the Executive hereby accepts such
employment as the
President and Chief Executive Officer of the Bank, having such
duties and
responsibilities as are set forth in Section 3 below.
2. Definitions. For purposes of this Agreement, the following
terms
shall have the meanings specified below.
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2.1 "Change of Control" shall mean the occurrence during the
Term of any of the following events:
(a) An acquisition (other than directly from the Company) of
any voting securities of the Company (the "Voting Securities")
by any
one Person, or more than one Person acting as a group,
immediately
after which such Person or group has ownership of more than 50%
of the
combined voting power of the Company's then outstanding
Voting
Securities; provided, however, that in determining whether a
Change of
Control has occurred, Voting Securities which are acquired in
a
"Non-Control Acquisition" (as hereinafter defined) shall not
constitute
an acquisition which would cause a Change of Control. A
"Non-Control
Acquisition" shall mean an acquisition by (i) an employee
benefit plan
(or a trust forming a part thereof) maintained by (x) the
Company or
(y) any corporation or other Person or group of which a majority
of its
voting power or its equity securities or equity interest is
owned
directly or indirectly by the Company (a "Subsidiary"), (ii)
the
Company or any Subsidiary, or (iii) any Person or group in
connection
with a "Non-Control Transaction" (as hereinafter defined);
or
(b) The date a majority of the individuals who, as of the
date
of this Agreement, are members of the Board of Directors of the
Company
(the "Incumbent Board") are replaced for any reason during any
twelve
month period; provided, however, that if the election, or
nomination
for election by the Company's stockholders, of any new director
was
approved by a vote of at least a majority of the Incumbent
Board, such
new director shall, for purposes of this Agreement, be
considered as a
member of the Incumbent Board; or
(c) A merger, consolidation or reorganization involving the
Company, unless
(i) the stockholders of the Company, immediately before such
merger, consolidation or reorganization, own, directly or
indirectly, immediately following such merger, consolidation
or reorganization, at least a majority of the combined
voting
power of the outstanding voting securities of the
corporation
resulting from such merger or consolidation or
reorganization
(the "Surviving Corporation"), and
(ii) the individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement
providing
for such merger, consolidation or reorganization constitute
at
least a majority of the members of the board of directors of
the Surviving Corporation.
(A transaction described in clauses (c)(i) and (ii) shall
herein be referred to as a "Non-Control Transaction"); or
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(d) The sale or other disposition of all or substantially
all
of the assets of the Company to any Person (other than a
transfer to a
related person as set forth in 26 C.F.R. 1.409A-3(i)(5)(vii)(B))
over a
consecutive 12-month period.
2.2 "Cause" shall mean:
(a) any act that (i) constitutes, on the part of the
Executive, fraud, dishonesty, willful failure to follow the
directives
or implement the policies of the Board of Directors of the
Company or
the Bank, willful violation of any state or federal law or
regulation
applicable to the Company or the Bank, gross malfeasance of
duty,
conduct grossly inappropriate to the Executive's office, or a
material
willful violation of this Agreement, and (ii) is demonstrably
likely to
lead to material injury to the Company or the Bank or resulted
or was
intended to result in direct or indirect gain to or personal
enrichment
of the Executive at the expense, direct or indirect, of the
Company or
the Bank; or
(b) the conviction (from which no appeal may be or is timely
taken) of the Executive of a felony; or
(c) the suspension or removal of the Executive by federal or
state banking regulatory authorities acting under lawful
authority
pursuant to provisions of federal or state law or regulation
which may
be in effect from time to time;
provided, however, that in the case of clause (a) above, such
conduct
shall not constitute Cause:
(i) unless (x) there shall have been delivered to the
Executive a written notice setting forth with specificity
the
reasons that the Board of the Company or the Bank believes
the
Executive's conduct meets the criteria set forth in clause
(a); (y) the Executive shall have been provided the
opportunity to be heard in person by the Board of the
Company
or the Bank, as applicable (with assistance of the
Executive's
counsel if the Executive so desires); and (z) after such
opportunity to be heard, the termination is evidenced by a
resolution adopted in good faith by two-thirds of the
members
of the Board of the Company or the Bank, as applicable
(other
than the Executive); or
(ii) if such conduct (x) was believed by the Executive in
good
faith to have been in, or not opposed to, the interests of
the
Company and the Bank, and (y) was not intended to, and did
not, result in the direct or indirect gain to or personal
enrichment of the Executive.
2.3 "Confidential Information" shall mean all business and
other information relating to the business of the Company or the
Bank, including
without limitation, technical or non-technical data, programs,
methods,
techniques, processes, financial data, financial plans, product
plans, and lists
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of actual or potential customers, which (a) derives economic
value, actual or
potential, from not being generally known to, and not being
readily
ascertainable by proper means by, other Persons, and (b) is the
subject of
efforts that are reasonable under the circumstances to maintain
its secrecy or
confidentiality. Such information and compilations of
information shall be
contractually subject to protection under this Agreement whether
or not such
information constitutes a trade secret and is separately
protectable at law or
in equity as a trade secret.
2.4 "Disability" or "Disabled" shall mean (a) the Executive
is
unable to engage in any substantial gainful activity by reason
of any medically
determinable physical or mental impairment that can be expected
to result in
death or can be expected to last for a continuous period of not
less than 12
months; or (b) the Executive is, by reason of any medically
determinable
physical or mental impairment that can be expected to result in
death or can be
expected to last for a continuous period of not less than 12
months, receiving
income replacement benefits for a period of not less than three
months under an
accident and health plan covering employees of the Company or
the Bank; or (c)
the Executive has been determined to be totally disabled by the
Social Security
Administration or Railroad Retirement Board; or (d) the
Executive has been
determined to be disabled in accordance with a disability
insurance program
provided by the Company or the Bank and in which Executive
participates,
provided that the definition of disability applied under such
disability
insurance program complies with the requirements of (a) or (b)
listed above.
2.5 A voluntary termination by the Executive shall be
considered an involuntary termination with "Good Reason" if any
of the following
occurs, following a Change of Control, without the Executive's
advance written
consent, and the term "Good Reason" shall mean the occurrence,
following a
Change of Control, of any of the following without the
Executive's advance
written consent: (a) a material diminution of the Executive's
base compensation;
(b) a material diminution of the Executive's authority, duties,
or
responsibilities; (c) a material diminution in the authority,
duties, or
responsibilities of the supervisor to whom the Executive is
required to report;
(d) a material diminution in the budget over which the Executive
retains
authority; (e) a material change in the geographic location at
which the
Executive must perform services for the Company or the Bank; or
(f) any other
action or inaction that constitutes a material breach by the
Company or the Bank
of this Agreement. In order to qualify as a voluntary
termination for Good
Reason, (x) the Executive must give notice to the Company or the
Bank, as
applicable, of the existence of one or more of the conditions
described in (a) -
(f) above within 90 days after the initial existence of the
condition, and the
Company or the Bank, as applicable, shall have 30 days
thereafter to remedy the
condition, and (y) the termination of employment must occur
within 24 months
following a Change of Control.
2.6 "Person" shall mean any individual, corporation, bank,
partnership, joint venture, association, joint-stock company,
trust,
unincorporated organization or other entity.
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3. Duties. During the Term hereof, the Executive shall have such
duties
and authority as are typical of a President and Chief Operating
Officer of
companies such as the Company and the Bank, including, without
limitation, those
specified in the Company's and the Bank's Bylaws. Executive
agrees that during
the Term hereof, he will devote his full time, attention and
energies to the
diligent performance of his duties. Executive shall not, without
prior written
consent of the Company and the Bank, at any time during the Term
hereof (a)
accept employment with, or render services of a business,
professional or
commercial nature to, any Person other than the Company and the
Bank, (b) engage
in any venture or activity which the Company or the Bank may in
good faith
consider to be competitive with or adverse to the business of
the Company, the
Bank or of any other affiliate of the Company, whether alone, as
a partner, or
as an officer, director, employee or shareholder or otherwise,
except that the
ownership of not more than 5% of the stock or other equity
interest of any
publicly traded corporation or other entity shall not be deemed
a violation of
this Section, or (c) engage in any venture or activity which the
Board of
Directors of the Company or the Bank may in good faith consider
to interfere
with Executive's performance of his duties hereunder.
4. Term. Unless earlier terminated as provided herein, the
Executive's
employment hereunder shall be for a rolling term of three years
(the "Term"),
which commenced on the date of the Original Agreement, with
compensation to be
effective as of the date of this Agreement. This Agreement shall
be deemed to
extend each day for an additional day automatically and without
any action on
behalf of any party hereto; provided, however, that any party
may, by notice to
the others, cause this Agreement to cease to extend
automatically and, upon such
notice, the "Term" of this Agreement shall be the three years
following the date
of such notice, and this Agreement shall terminate upon the
expiration of such
Term. If no such notice is given and this Agreement is
terminated pursuant to
Section 5 hereof, for the purposes of calculating any amounts
payable to the
Executive as a result of such termination, the remaining Term of
this Agreement
shall be deemed to be three years from the date of such
termination.
5. Termination. This Agreement may be terminated as follows:
5.1 By the Company or the Bank. The Company or the Bank shall
have
the right to terminate the Executive's employment hereunder at
any time during
the Term hereof for any reason or for no reason, including,
without limitation,
(a) for Cause, (b) if the Executive becomes Disabled, or (c)
upon the
Executive's death.
5.1.1 If the Company or the Bank terminates Executive's
employment under this Agreement for Cause or as a result of
Executive's
Disability or death, the Company's and the Bank's obligations
hereunder shall
cease as of the date of termination without prejudice to any
vested rights to
benefits provided hereunder.
5.1.2 If the Company or the Bank terminates Executive's
employment other than for Cause and other than as a result
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