Exhibit 10.II
E MPLOYMENT A GREEMENT
This E MPLOYMENT A GREEMENT (this “ Agreement ”)
is entered into effective as of this 31st day of December, 2008, by
and among Oak Ridge Financial Services, Inc., a North Carolina
corporation (the “ Corporation ”), Bank
of Oak Ridge, a North Carolina-chartered bank and wholly owned
subsidiary of the Corporation (the “ Bank
”), and L. William Vasaly III, Senior Vice President and
Chief Credit Officer of the Bank (the “
Executive ”). The Corporation and the Bank are
referred to in this Agreement individually and together as the
“ Employer .”
W HEREAS , the Executive possesses unique skills,
knowledge, and experience relating to the Employer’s business
and the Executive has made and is expected to continue to make
major contributions to the profitability, growth, and financial
strength of the Employer and affiliates,
W HEREAS , the Employer and the Executive desire to set
forth in this Agreement the terms and conditions of the
Executive’s employment,
W HEREAS , the Executive and the Bank are parties to an
Employment Agreement dated as of April 10, 2000, as amended,
but the Executive, the Corporation, and the Bank intend that this
Agreement shall supersede and replace in its entirety the
April 10, 2000 Employment Agreement, as amended,
and
W HEREAS , none of the conditions or events included in
the definition of the term “golden parachute payment”
that is set forth in Section 18(k)(4)(A)(ii) of the Federal
Deposit Insurance Act [12 U.S.C. 1828(k)(4)(A)(ii)] and in Federal
Deposit Insurance Corporation Rule 359.1(f)(1)(ii) [12 CFR
359.1(f)(1)(ii)] exists or, to the best knowledge of the Employer,
is contemplated insofar as the Employer or any affiliates are
concerned.
N OW T HEREFORE , in consideration of these premises, the mutual
covenants contained herein, and other good and valuable
consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows.
A RTICLE 1
E MPLOYMENT
1.1 Employment
. Effective on the date and for the
term specified in section 1.3, the Employer hereby employs the
Executive to serve as Senior Vice President and Chief Credit
Officer according to the terms and conditions of this Agreement.
The Executive hereby accepts employment according to the terms and
conditions of this Agreement.
1.2 Duties
. As Senior Vice President and Chief
Credit Officer, the Executive shall serve in accordance with the
Employer’s Articles of Incorporation and Bylaws, as each may
be amended or restated from time to time. The Executive shall serve
the Employer faithfully, diligently, competently, and to the best
of the Executive’s ability. The Executive shall exclusively
devote full working time, energy, and attention to the business of
the Employer and to the promotion of the Employer’s interests
throughout the term of this Agreement. Without the written consent
of the Corporation and the Bank, the Executive shall not render
services to or for any
person, firm, corporation, or other entity or
organization in exchange for compensation, regardless of the form
in which the compensation is paid and regardless of whether it is
paid directly or indirectly to the Executive. Nothing in this
section 1.2 shall prevent the Executive from managing personal
investments and affairs, provided that doing so does not interfere
with the proper performance of the Executive’s duties and
responsibilities under this Agreement.
1.3 Term of Employment
. The initial term of employment
under this Agreement shall be a three-year period commencing on the
effective date first written above. On the first anniversary of the
effective date and on each anniversary thereafter this Agreement
shall be automatically extended for one additional year, unless the
Employer’s board of directors determines that the term shall
not be extended. If the board of directors determines not to extend
the term, it shall promptly notify the Executive in writing. If the
board decides not to extend the term of this Agreement, this
Agreement shall nevertheless remain in force until its term
expires. The board’s decision not to extend the term of this
Agreement shall not – by itself – give the Executive
any rights under this Agreement to claim an adverse change in
position, compensation, or circumstances or otherwise to claim
entitlement to severance or other benefits under Articles 4 or 5 of
this Agreement. References herein to the term of this Agreement
mean the initial term, as the same may be extended. Unless sooner
terminated, the Executive’s employment and the term of this
Agreement shall terminate when the Executive attains age
65.
A RTICLE 2
C OMPENSATION AND B ENEFITS
2.1 Base Salary
. In consideration of the
Executive’s performance of the obligations under this
Agreement, the Employer shall pay or cause to be paid to the
Executive a salary at the annual rate of not less than $130,000,
payable in accordance with the Employer’s pay practices. The
Executive’s salary shall be reviewed annually by the
Employer’s board of directors or by the board committee
having jurisdiction over executive compensation. In the discretion
of the board or the committee having jurisdiction over executive
compensation ( x ) the Executive’s salary may be
increased to account for increases in the cost of living, but
cost-of-living increases, if any, shall not occur more frequently
than annually, and ( y ) the Executive’s salary
also may be increased beyond the amount necessary to account for
cost of living increases. However, the Executive’s salary
shall not be reduced. The Executive’s salary, as the same may
be changed from time to time, is referred to in this Agreement as
the “ Base Salary .”
2.2 Benefit Plans and
Perquisites . The
Executive shall be entitled throughout the term of this Agreement
to participate in any and all officer or employee compensation,
bonus, incentive, and benefit plans in effect from time to time,
including without limitation any stock-based compensation, option,
incentive, bonus, or purchase plans existing on the date of this
Agreement or adopted during the term of this Agreement and plans
providing pension, retirement, welfare, medical, dental,
disability, and group life benefits, and to receive any and all
other fringe benefits provided from time to time, provided that the
Executive satisfies the eligibility requirements for the plans or
benefits. Without limiting the generality of the foregoing
–
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(a) Use of automobile . The
Executive shall have the use of an automobile leased or titled in
the Employer’s name for use by the Executive to carry out the
Executive’s duties for the Employer, the insurance and
maintenance expenses of which shall be paid by the Employer. As
additional compensation, the Executive may use such automobile for
personal purposes, provided that the Executive renders an
accounting of business and personal use to the Employer in
accordance with regulations under the Internal Revenue Code of
1986, as amended.
(b) Club dues . During the
term of this Agreement, the Employer shall pay or cause to be paid
the Executive’s membership dues in civic clubs. Without
limiting the generality of the foregoing, the Executive shall be
reimbursed for dues and expenses associated with membership in and
use of the private country club of the Executive’s choice in
Guilford County.
(c) Reimbursement of business
expenses . Upon submission of appropriate documentation by the
Executive, the Employer agrees to reimburse the Executive for all
out-of-pocket expenses incurred performing the Executive’s
obligations under this Agreement, including but not limited to all
reasonable business travel and entertainment expenses incurred
while acting at the request of or in the service of the Employer
and reasonable expenses for attendance at annual and other periodic
meetings of trade associations.
2.3 Vacation
. The Executive shall be entitled to
paid annual vacation and sick leave in accordance with the policies
established from time to time by the Employer. The Executive shall
not be entitled to any additional compensation for failure to use
allotted vacation or sick leave, nor shall the Executive be
entitled to accumulate unused sick leave from one year to the next
unless authorized by the Employer’s board of directors to do
so. Vacation days not used in a given year may not be carried over
from one calendar year to the next.
2.4 Taxes . All compensation of the Executive shall be
subject to withholding and other employment taxes imposed by
Federal, state, and local law.
2.5 Indemnification and
Insurance . (a)
Indemnification . The Employer shall indemnify the Executive
or cause the Executive to be indemnified for the Executive’s
activities as a director, officer, employee, or agent of the
Employer or as a person who is serving or has served at the request
of the Employer (a “ representative ”) as
a director, officer, employee, agent, or trustee of an affiliated
corporation, joint venture, trust or other enterprise, domestic or
foreign, in which the Employer has a direct or indirect ownership
interest against expenses (including without limitation
attorneys’ fees, judgments, fines, and amounts paid in
settlement) actually and reasonably incurred (“
Expenses ”) in connection with any claim
against the Executive that is the subject of any threatened,
pending, or completed action, suit, or other type of proceeding,
whether civil, criminal, administrative, investigative, or
otherwise and whether formal or informal (a “
Proceeding ”), to which the Executive was, is,
or is threatened to be made a party by reason of the Executive
being or having been such a director, officer, employee, agent, or
representative.
The indemnification provided herein
shall not be exclusive of any other indemnification or right to
which the Executive may be entitled and shall continue after the
Executive has ceased to occupy a position as an officer, director,
employee, agent or representative with respect to Proceedings
relating to or arising out of the Executive’s acts or
omissions during the Executive’s
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service in such position. The indemnification
provided to the Executive under this Agreement for the
Executive’s service as a representative shall be payable if
and only if and only to the extent that reimbursement to the
Executive by the affiliated entity with which the Executive has
served as a representative, whether pursuant to agreement,
applicable law, articles of incorporation or association, by-laws
or regulations of the entity, or insurance maintained by such
affiliated entity, is insufficient to compensate the Executive for
Expenses actually incurred and otherwise payable by the Employer
under this Agreement. Any payments in fact made to or on behalf of
the Executive directly or indirectly by the affiliated entity with
which the Executive served as a representative shall reduce the
obligation of the Employer hereunder.
(b) Exclusions . Despite
anything herein to the contrary however, nothing in this section
2.5 requires indemnification, reimbursement, or payment by the
Employer, and the Executive shall not be entitled to demand
indemnification, reimbursement or payment –
1) if and to the extent
indemnification, reimbursement, or payment constitutes a
“prohibited indemnification payment” within the meaning
of Federal Deposit Insurance Corporation Rule 359.1(l)(1) [12 CFR
359.1(l)(1)], or
2) for any claim or any part thereof
for which the Executive shall have been determined by a court of
competent jurisdiction, from which no appeal is or can be taken, by
clear and convincing evidence, to have acted with deliberate intent
to cause injury to the Employer or with reckless disregard for the
best interests of the Employer, or
3) for any claim or any part thereof
arising under section 16(b) of the Securities Exchange Act of 1934
as a result of which the Executive is required to pay any penalty,
fine, settlement, or judgment, or
4) for any obligation of the
Executive based upon or attributable to the Executive gaining in
fact any personal gain, profit, or advantage to which the Executive
was not entitled, or
5) any proceeding initiated by the
Executive without the consent or authorization of the
Employer’s board of directors, but this exclusion shall not
apply with respect to any claims brought by the Executive (
x ) to enforce the Executive’s rights under this
Agreement, or ( y ) in any Proceeding initiated by
another person or entity whether or not such claims were brought by
the Executive against a person or entity who was otherwise a party
to such proceeding.
(c) Insurance . The Employer
shall maintain or cause to be maintained liability insurance
covering the Executive throughout the term of this
Agreement.
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A RTICLE 3
E MPLOYMENT T ERMINATION
3.1 Termination Because of Death
or Disability .
(a) Death . The Executive’s employment shall
terminate automatically on the date of the Executive’s death.
If the Executive dies in active service to the Employer, the
Executive’s estate shall receive any sums due to the
Executive as Base Salary and reimbursement of expenses through the
end of the month in which death occurred, any bonus earned or
accrued through the date of death, including any unvested amounts
awarded for previous years, and for twelve months after the
Executive’s death the Employer shall provide to the
Executive’s family at no cost continuing health care coverage
under COBRA substantially identical to that provided for the
Executive before death.
(b) Disability . By delivery
of written notice 30 days in advance to the Executive, the Employer
may terminate the Executive’s employment if the Executive is
disabled. For purposes of this Agreement the Executive shall be
considered “ disabled ” if an independent
physician selected by the Employer and reasonably acceptable to the
Executive or the Executive’s legal representative determines
that, because of illness or accident, the Executive is unable to
perform the Executive’s duties and will be unable to perform
those duties for 90 consecutive days. The Executive shall not be
considered disabled, however, if the Executive returns to work on a
full-time basis within 30 days after the Employer gives notice of
termination due to disability. If the Executive is terminated by
either of the Corporation or the Bank because of disability, the
Executive’s employment with the other shall also terminate at
the same time. During the period of incapacity leading up to the
termination of the Executive’s employment under this
provision, the Employer shall continue to pay the full Base Salary
at the rate then in effect and all perquisites and other benefits
(other than bonus) until the Executive becomes eligible for
benefits under any disability plan or insurance program maintained
by the Employer, provided that the amount of the Employer’s
payments to the Executive under this section 3.1(b) shall be
reduced by the sum of the amounts, if any, payable to the Executive
for the same period under any disability benefit or pension plan
covering the Executive. Furthermore, the Executive shall receive
any bonus earned or accrued through the date of incapacity,
including any unvested amounts awarded for previous
years.
3.2 Involuntary Termination with
Cause . The Employer may
terminate the Executive’s employment with Cause. If the
Executive’s employment terminates with Cause, the Executive
shall receive the Base Salary through the date on which termination
becomes effective and reimbursement of expenses to which the
Executive is entitled when termination becomes effective. If the
Executive is terminated with Cause by either of the Corporation or
the Bank, the Executive shall be deemed also to have been
terminated with Cause by the other. For purposes of this Agreement
“ Cause ” means any of the following
–
(a) an intentional act of fraud,
embezzlement, or theft by the Executive in the course of
employment. For purposes of this Agreement no act or failure to act
on the part of the Executive shall be deemed to have been
intentional if it was due primarily to an error in judgment or
negligence. An act or failure to act on the Executive’s part
shall be considered intentional if it is not in good faith and if
it is without a reasonable belief that the action or failure to act
is in the Employer’s best interests, or
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(b) intentional violation of any law
or significant policy of the Employer that, in the Employer’s
sole judgment, has an adverse effect on the Employer. For purposes
of this Agreement applicable laws include any statute, rule,
regulatory order, statement of policy, or final cease-and-desist
order of any governmental agency or body having regulatory
authority over the Employer, or
(c) the Executive’s gross
negligence or gross neglect of duties in the performance of duties,
or
(d) intentional wrongful damage by
the Executive to the business or property of the Employer,
including without limitation the Employer’s reputation, which
in the Employer’s sole judgment causes material harm to the
Employer, or
(e) a breach by the Executive of
fiduciary duties or misconduct involving dishonesty, in either case
whether in the Executive’s capacity as an officer or as a
director, or
(f) a breach by the Executive of
this Agreement that, in the Employer’s sole judgment, is a
material breach, which breach is not corrected by the Executive
within ten days after receiving written notice of the breach,
or
(g) removal of the Executive from
office or permanent prohibition of the Executive from participating
in the Bank’s affairs by an order issued under section
8(e)(4) or (g)(1) of the Federal Deposit Insurance Act, 12 U.S.C.
1818(e)(4) or (g)(1), or
(h) conviction of the Executive for
or plea of no contest to a felony or conviction of or plea of no
contest to a misdemeanor involving moral turpitude, or the actual
incarceration of the Executive for seven consecutive days or more,
or
(i) the occurrence of any event that
results in the Executive being excluded from coverage, or having
coverage limited for the Executive as compared to other executives
of the Employer, under the Employer’s blanket bond or other
fidelity or insurance policy covering its directors, officers, or
employees.
3.3 Voluntary Termination by the
Executive Without Good Reason . If the Executive terminates employment without
Good Reason, the Executive shall receive the Base Salary and
expense reimbursement to which the Executive is entitled through
the date on which termination becomes effective.
3.4 Involuntary Termination
Without Cause and Voluntary Termination with Good Reason
. With written notice to the
Executive 90 days in advance, the Employer may terminate the
Executive’s employment without Cause. Termination shall take
effect at the end of the 90-day period. With advance written notice
to the Employer as provided in clause ( y ), the Executive
may terminate employment with Good Reason. If the Executive’s
employment terminates involuntarily without Cause or voluntarily
but with Good Reason, the Executive shall be entitled to the
benefits specified in Article 4 of this Agreement. For purposes of
this Agreement a voluntary termination by the Executive will be
considered a voluntary termination with Good Reason if the
conditions stated in both clauses ( x ) and ( y
) are satisfied –
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( x ) a voluntary termination
by the Executive will be considered a voluntary termination with
Good Reason if any of the following occur without the
Executive’s advance written consent, and the term Good Reason
shall mean the occurrence of any of the following without the
Executive’s advance written consent –
1) a material diminution of the
Executive’s Base Salary,
2) a material diminution of the
Executive’s authority, duties, or
responsibilities,
3) a material diminution in the
authority, duties, or responsibilities of the supervisor to whom
the Executive is required to report,
4) a material diminution in the
budget over which the Executive retains authority,
5) a material change in the
geographic location at which the Executive must perform services
for the Employer, or
6) any other action or inaction that
constitutes a material breach by the Employer of this
Agreement.
( y ) the Executive must give
notice to the Employer of the existence of one or more of the
conditions described in clause ( x ) within 90 days
after the initial existence of the condition, and the Employer
shall have 30 days thereafter to remedy the condition. In addition,
the Executive’s voluntary termination because of the
existence of one or more of the conditions described in clause (
x ) must occur within 24 months after the initial
existence of the condition.
A RTICLE 4
S EVERANCE C OMPENSATION
4.1 Cash Severance after
Termination Without Cause or Termination with Good
Reason . (a) Subject
to the possibility that cash severance after employment termination
might be delayed under section 4.1(b), if the Executive’s
employment terminates involuntarily but without Cause or if the
Executive voluntarily terminates employment with Good Reason, 30
days after employment termination the Employer shall pay to the
Executive in a single lump sum cash in an amount equal to (
x ) three times the Executive’s Base Salary on
the date notice of employment termination is given, without
discount for the time value of money, plus ( y ) any
bonus earned by the Executive or accrued by the Employer on behalf
of the Executive through the date employment termination becomes
effective (including any amounts awarded but that have not vested
when termination becomes effective). The Employer and the Executive
acknowledge and agree that the benefits under this section 4.1(a)
shall not be payable if benefits are payable or shall have been
paid to the Executive under section 5.1(a) of this
Agreement.
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(b) If when employment termination
occurs the Executive is a specified employee within the meaning of
section 409A of the Internal Revenue Code of 1986, and if the cash
severance payment under section 4.1(a) 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 Executive’s cash severance payment under
section 4.1(a) shall be paid to the Executive in a single lump sum
on the first day of the seventh month after the month in which the
Executive’s employment terminates. References in this
Agreement to section 409A of the Internal Revenue Code of 1986
include rules, regulations, and guidance of general application
issued by the Department of the Treasury under Internal Revenue
Code section 409A.
4.2 Post-Termination Insurance
Coverage .
(a) Subject to section 4.2(b), if the Executive’s
employment terminates involuntarily but without Cause, voluntarily
but with Good Reason, or because of disability, the Employer shall
continue or cause to be continued at the Employer’s expense
and on behalf of the Executive and the Executive’s dependents
and beneficiaries medical, dental, and hospitalization insurance
coverage as in effect during and in accordance with the same
schedule prevailing in the 12 months preceding the date of the
Executive’s termination. The insurance benefits provided by
this section 4.2(a) shall be reduced if the Executive obtains
disability, medical, dental, and hospitalization insurance benefits
through another employer, or eliminated entirely if the other
employer’s insurance benefits are equivalent or superior to
the benefits provided under this section 4.2(a). If the insurance
benefits are reduced, they shall be reduced by an amount such that
the Executive’s aggregate insurance benefits for the period
specified in this section 4.2(a) are equivalent to the benefits to
which the Executive would have been entitled had the Executive not
obtained disability, medical, dent
