Exhibit 10.6
FOUR OAKS BANK & TRUST COMPANY
SUPPLEMENTAL EXECUTIVE
RETIREMENT PLAN
AYDEN R. LEE, JR.
Originally Effective as of January 1, 1998
Amended and Restated as of December 12, 2008
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FOUR OAKS BANK & TRUST COMPANY
SUPPLEMENTAL
EXECUTIVE RETIREMENT PLAN
AYDEN R. LEE, JR.
ARTICLE I
INTRODUCTION
1.1
In General. This Plan is an optional deferred compensation plan
that is
intended to provide supplemental retirement benefits to Ayden R.
Lee, Jr.,
President of Four Oaks Bank & Trust Company (the
"Participant"), to encourage
the Participant to remain as an employee of Four Oaks Bank &
Trust Company and
any successor thereto (the "Bank") and to reward him for
contributing materially
to the success of the Bank. The Plan shall be construed and
interpreted for
purposes of the Code and ERISA as an unfunded plan maintained
primarily for the
purpose of providing deferred compensation for a select group of
management or
highly compensated employees within the meaning of ERISA Section
201(2).
1.2
Name. This instrument and any amendments hereto shall be known as
the
Four Oaks Bank & Trust Company Supplemental Executive
Retirement Plan (herein
referred to as the "Plan").
1.3
Effective Date. The Plan was originally effective as of January 1,
1998
(the "Effective Date"). It was amended and restated effective as of
December 12,
2008 to comply with the requirements of Section 409A of the
Code.
ARTICLE II
DEFINITIONS
2.1
"Account Balance" means the estimated account balance in the
Participant's 401(k) plan sponsored by the Bank. The estimation
assumes that the
Participant will contribute to the Bank's 401(k) plan the minimum
amount
necessary at the last day of each year to receive the maximum
matching
contribution from the Bank for that year. This account balance is
accumulated
each year using the interest rate prescribed for employee
contributions under
Section 411(c)(2)(C)(iii) of the Internal Revenue Code, as of the
first day of
the plan year. For purposes of this Plan, Participant's Account
Balance as of
January 1, 1998, was $228,372, to which contributions and earnings
have and will
be added. It is understood and agreed to by the parties that on any
given date
after the Effective Date, the Account Balance likely will not be
the same amount
as the actual dollar amount of the Participant's account balance in
the 401(k)
plan sponsored by the Bank.
2.2
"Actuarial Equivalence" means present values calculated using
the
interest rate on 30-year treasury securities for the month prior to
the first
day of the plan year, as prescribed by the Retirement Protection
Act of 1994,
and the 1983 Group Annuity Mortality Tables used for lump sum
purposes under the
Retirement Protection Act of 1994.
2
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2.3
"Average Annual Compensation" means the annual average of the
Compensation received by Participant during his three (3)
consecutive years of
Service with respect to which the Participant receives the highest
Compensation
that occurs within his five (5) years of Service immediately
preceding his
Retirement or earlier termination of employment, or if less, the
number of
complete calendar years during his period of participation.
2.4
"Beneficiary" means such person designated by the Participant in
a
written instrument filed with the Board to receive any death
benefit that is
payable under this Plan. In the event no valid Beneficiary
designation exists at
the time of the Participant's death, the death benefit shall be
payable to his
spouse or, if there is no surviving spouse, to his estate.
2.5
"Board" means the Board of Directors of the Bank.
2.6
"Change in Control" means, for purposes of this Plan, that a
change
shall have occurred upon any purchase, assignment, merger,
consolidation, pledge
or transfer of any kind (e.g., voluntary, involuntary or by
operation of law) of
the voting securities of the Bank or FOFN, or an increase in
percentage of
ownership of the Bank or FOFN resulting from a redemption of voting
securities
(any of the foregoing transactions hereinafter referred to as an
"Acquisition")
if, after the Acquisition, (i) the acquiring party (or parties
acting in
concert) owns, controls, or holds the power to vote more than fifty
percent
(50%) of the total voting power of the securities of the Bank or
FOFN, as
applicable, (ii) the Bank or FOFN, as applicable, is not the
surviving entity
and immediately after the Acquisition, the acquiring party (or
parties acting in
concert) owns, controls, or holds the power to vote more than fifty
percent
(50%) of the total voting power of the securities of the surviving
entity, or
(iii) the directors of the Bank or FOFN, as applicable, immediately
prior to the
Acquisition constitute less than a majority of the board of
directors of the
surviving entity.
2.7
"Code" means the Internal Revenue Code of 1986, as amended, and
any
successor statue thereof, as interpreted by the rules and
regulations issued
thereunder, in each case as in effect from time to time.
2.8
"Compensation" means the total compensation paid by the Bank to
the
employee during any plan year for services performed that would
otherwise be
includible in gross income. Compensation taken into account for
this purpose
shall be the compensation paid to the employee prior to any
reduction under (i)
a salary reduction agreement entered into by the Participant
pursuant to a plan
maintained by the Bank that qualifies under Section 401(k) of the
Code, or (ii)
a salary reduction agreement entered into by the Participant
pursuant to a plan
maintained by the Bank that qualifies under Section 125 of the
Code.
2.9
"Disability" or "Disabled" means the Participant is, by reason of
any
medically determinable physical or mental impairment which can be
expected to
result in death or can be expected to last for a continuous period
of not less
than twelve (12) months, receiving income replacement benefits for
a period of
not less than three (3) months under an accident and health plan
covering
employees of the Bank. Notwithstanding the foregoing, the
Participant shall be
deemed Disabled if he is determined to be totally disabled by the
Social
Security Administration.
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2.10
"Early Retirement Date" means the first day of the month (prior to
the
Normal Retirement Date) coinciding or next following the date on
which the
Participant or former Participant attains his 55th birthday (Early
Retirement
Age).
2.11
"Employer" means the Bank, and any entity required to be
aggregated
with the Bank by Sections 414(b), (c), (m), or (o) of the Code.
2.12
"ERISA" means the Employee Retirement Income Security Act of 1974
as
it may be amended from time to time.
2.13
"401(k) Offset Benefit" means the Account Balance as of the date
of
retirement or other termination of employment, divided by the
present value of
one dollar paid at the beginning of each year for the Participant's
lifetime,
determined as of the date of retirement or termination, as the case
may be,
using the definition of Actuarial Equivalence, as set forth in
Section 2.2 of
this Plan.
2.14 "FOFN" means Four Oaks
Fincorp, Inc., a North Carolina corporation, or
any successor thereto.
2.15
"Normal Form of Payment" means a monthly annuity payable for
the
Participant's lifetime, to be paid to the Participant, or, in the
case of the
Participant's death, his named beneficiary or estate.
2.16
"Normal Retirement Date" means the first day of the month
coinciding
or next following the Participant's Normal Retirement Age (65th
birthday).
2.17
"Service" means the Participant's period of employment with the
Employer, measured in years and completed months, beginning not
earlier than the
Effective Date of this Plan.
2.18
"Social Security Benefit" means the annual Primary Insurance
Amount
estimated to be payable to the Participant at age 65 under the
Federal Social
Security Act assuming continued Compensation to age 65 after
retirement or
termination and projected prior Compensation based on a estimated
wage history
projected backwards utilizing changes in average wages from year to
year as
determined by the Social Security Administration. It is understood
and agreed to
by the parties that in certain circumstances, the Social Security
Benefit may
result in an offset in benefits payable to the Participant under
the terms of
this Plan, even though the Participant may not yet have reached the
age to
receive an actual social security benefit payment from the Social
Security
Administration.
2.19
"Vested" means that the benefit payable under this Plan with
respect
to the Participant is nonforfeitable.
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ARTICLE III
DEFERRED COMPENSATION
3.1
Normal Retirement. Upon retirement on or after his Normal
Retirement
Age, the Employer shall pay the Participant an annual supplemental
retirement
benefit (which benefit is herein called his Normal Retirement
Benefit), subject
to Section 3.7, equal to the sum of seventy-five percent (75%) of
the
Participant's Average Final Compensation reduced by the
Participant's (i) 401(k)
Offset Benefit and (ii) Social Security Benefit. The Participant
shall become
fully Vested in his Normal Retirement Benefit upon attaining Normal
Retirement
Age. The Normal Retirement Benefit shall be payable, according to
the Normal
Form of Payment, in monthly installments commencing on the first
day of the
month following the Participant's retirement on or after his Normal
Retirement
Date and continuing on the first of each month thereafter for the
Participant's
lifetime.
3.2
Early Retirement. Upon retirement on or after his Early Retirement
Age
but prior to his Normal Retirement Date, the Employer shall pay, in
lieu of a
Normal Retirement Benefit, the Participant an annual supplemental
retirement
benefit (which benefit is herein called his Early Retirement
Benefit), subject
to Section 3.7, of a certain percentage of the Normal Retirement
Benefit, to be
determined as follows:
Early Retirement Benefit as a
Age at Retirement
Percentage of Normal Retirement
-----------------
-------------------------------
55
58%
56
64%
57
70%
58
76%
59
82%
60
88%
61
94%
62
100%
63
100%
64 or older
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