Employment Agreement
This Employment Agreement (this
“ Agreement ”) is entered into as of
this 1st day of May, 2008, by and among Tidelands Bancshares,
Inc., a South Carolina corporation (the “
Corporation ”), Tidelands Bank, a South
Carolina-chartered bank and wholly owned subsidiary of Tidelands
Bancshares, Inc. (the “ Bank ”), and
Thomas H. Lyles, Executive Vice President and Chief
Administrative Officer of the Bank (the “
Executive ”). The Corporation and the Bank
are referred to in this Agreement individually and together as
the “ Employer .”
Whereas , 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,
Whereas , the Employer and
the Executive desire to set forth in this Agreement the terms and
conditions of the Executive’s employment, and
Whereas , 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.
Now Therefore , 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.
Article
1
Employment
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 the Bank’s
Executive Vice President and Chief Administrative 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 the Bank’s
Executive Vice President and Chief Administrative 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 May 1, 2008. At the end of each day
the term of this Agreement shall automatically extend for one
additional day so that the entire term remains a term of three
years. However, at any time the Employer or the Executive may
provide written notice to the other that the term of this Agreement
shall be fixed to a finite term ending three years after the date
of the notice, without extension. If the Employer or the Executive
gives written notice that the term shall be fixed at three years,
this Agreement shall nevertheless remain in force until the end of
the fixed term. The Employer’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. Unless sooner terminated, the
Executive’s employment and the term of this Agreement shall
terminate when the Executive attains age 65.
Article
2
Compensation and
Benefits
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 $182,000, 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. The Executive’s salary shall be
increased no less frequently than annually to account for cost
of living increases. The Executive’s salary also may be
increased beyond the amount necessary to account for cost of
living increases at the discretion of the committee having
jurisdiction over executive compensation. However, the
Executive’s salary shall not be reduced. The
Executive’s salary, as the same may be increased 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 –
(a)
Automobile allowance . The Executive shall receive an
automobile allowance consistent with past practices of the
Employer, as the same may change from time to time.
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(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 Charleston
County.
(c)
Reimbursement of business expenses . Upon submission of
appropriate documentation by the Executive, the Executive shall be
entitled to reimbursement for all reasonable business 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. Except for club dues under section 2.2(b), to
be reimbursable each expense must be of a nature qualifying it as a
proper deduction on the Employer’s income tax returns as a
business expense rather than deductible compensation to the
Executive. The records and other documentary evidence submitted by
the Executive to the Employer with each request for reimbursement
shall be in the form required by applicable statutes and
regulations issued by appropriate taxing authorities for the
substantiation of expenditures as deductible business expenses of
the Employer rather than deductible compensation to the
Executive.
(d) Insurance
premiums . At no expense to the Executive, the Employer will
pay the Executive’s family yearly medical, dental, vision,
and disability insurance premiums.
2.3
Vacation . The Executive
shall be entitled to paid annual vacation and sick leave in
accordance with policies established from time to time by the
Employer.
2.4
Taxes . All compensation of
the Executive shall be subject to withholding and other employment
taxes imposed by federal, state, and local law.
Article
3
Employment Termination
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 without cost to the Executive’s family 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
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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 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
(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, 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
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(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 paragraph
(b), 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 paragraphs (a) and (b) are
satisfied –
(a) 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, or
2) a
material diminution of the Executive’s authority, duties, or
responsibilities, or
3) a
material diminution in the authority, duties, or responsibilities
of the supervisor to whom the Executive is required to report,
or
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4) a
material diminution in the budget over which the Executive retains
authority, or
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.
(b) the
Executive must give notice to the Employer of the existence of
one or more of the conditions described in paragraph (a) 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
paragraph (a) must occur within 24 months after the initial
existence of the condition.
Article
4
Severance Compensation
4.1
Cash Severance after
Termination Without Cause or Termination for 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) and a pro rata share of any bonus for
the year in which termination becomes effective. The Employer
and the Executive acknowledge and agree that the compensation
and benefits under this section 4.1(a) shall not be payable if
compensation and benefits are payable or shall have been paid to
the Executive under Article 5 of this Agreement.
(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.
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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
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