EXHIBIT
10.12
THIS AGREEMENT
CONTAINS A BINDING, IRREVOCABLE AGREEMENT TO ARBITRATE AND IS
SUBJECT TO ARBITRATION PURSUANT TO TITLE 15, CHAPTER 48 (UNIFORM
ARBITRATION ACT) OF THE CODE OF LAWS OF SOUTH
CAROLINA
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 10th day
of September, 2007, by and between COASTAL BANKING COMPANY, INC., a
bank holding company organized under the laws of the State of South
Carolina (the “Employer”), and PAUL R. GARRIGUES, a
resident of the State of Florida (the
“Executive”).
RECITALS:
The Employer desires to employ the
Executive as the Chief Financial Officer of the Employer and its
designated affiliates and the Executive desires to accept such
employment on the terms and conditions set forth herein.
In consideration of the above premises
and the mutual agreements hereinafter set forth, the parties hereby
agree as follows:
.
Definitions
. Whenever used in this Agreement,
the following terms and their variant forms shall have the meaning
set forth below:
.
“ Affiliate
” shall mean any entity
which controls another entity, is controlled by another entity, or
is under common control with another entity. For this
purpose, “control” means ownership of more than fifty
percent (50%) of the ordinary voting power of the outstanding
equity securities of an entity.
1.2
“ Agreement
” shall mean this
Agreement and any exhibits incorporated herein together with any
amendments hereto made in the manner described in this
Agreement.
1.3
“ Area ”
shall mean the geographic areas within a
thirty-five (35) mile radius from the Employer’s principal
locations in, respectively, Fernandina Beach, Florida and Beaufort,
South Carolina. It is the express intent of the parties that
the Area as defined herein is the area where the Executive performs
services on behalf of the Employer under this Agreement as of the
Effective Date.
1.4
“ Business of the
Employer ” shall
mean the business conducted by the Employer, which is the business
of commercial banking.
1.5
“ Cause
” shall mean:
(a)
A material breach of the terms of this
Agreement by the Executive, including, without limitation, failure
by the Executive to perform his duties and responsibilities in the
manner and to the extent required under this Agreement,
which
remains uncured after the expiration of
fifteen (15) days following the delivery of written notice of such
breach to the Executive by the Employer. Such notice shall
(i) specifically identify the duties that the Chief Executive
Officer of the Employer believes the Executive has failed to
perform, and (ii) state the facts upon which the Chief Executive
Officer made such determination;
(b)
Conduct by the Executive that amounts to
fraud, dishonesty, disloyalty or willful misconduct in the
performance of his duties and responsibilities
hereunder;
(c)
Arrest for, charged in relation to (by
criminal information, indictment or otherwise), or conviction of
the Executive during the Term of a crime involving breach of trust
or moral turpitude or any felony;
(d)
Conduct by the Executive that amounts to
gross and willful insubordination or inattention to his duties and
responsibilities hereunder;
(e)
Receipt of any form of notice, written or
otherwise, that any regulatory agency having jurisdiction over the
Employer intends to institute any form of formal or informal
regulatory action against (i) the Executive or (ii) the Employer,
provided that the Chief Executive Officer of the Employer
determines in good faith that such action involves acts or
omissions by or under the supervision of the Executive or that
termination of the Executive could materially advance the
Employer’s compliance with the purpose of the action or would
materially assist the Employer in avoiding or reducing the
restrictions or adverse effect to the Employer related to the
regulatory action;
(f)
The Executive purchasing securities in
any corporation that results in the Executive collectively owning
beneficially at any time five percent (5%) or more of the equity
securities of any Competing Business; or
(g)
Executive’s removal and/or
permanent prohibition from participating in the conduct of the
Employer’s affairs by an order issued under Section 8(e)(4)
or 8(g)(1) of the Federal Deposit Insurance Act
(“FDIA”) (12 U.S.C. 1818(e)(4) and (g)(1)).
1.6
“ Change of Control
” means any one of the
following events which may occur after the Effective
Date:
(a)
the acquisition by any one person, or
more than one person acting as a group (other than any person or
more than one person acting as a group who is considered to own
more than fifty percent (50%) of the total fair market of the stock
of the Employer prior to such acquisition), of stock of the
Employer that, together with stock held by such person or group,
constitutes more than fifty percent (50%) of the total fair market
value or total voting power of the stock of the
Employer;
(b)
within any twelve-month period (beginning
on or after the Effective Date) the date a majority of members of
the Employer’s Board of Directors is replaced by
directors whose appointment or election
is not endorsed by a majority of the members of the
Employer’s Board of Directors before the date of the
appointment or election; or
(c)
within any twelve-month period (beginning
on or after the Effective Date) the acquisition by any one person,
or more than one person acting as a group, of the assets of the
Employer that have a total gross fair market value of eighty-five
percent (85%) or more of the total gross fair market value of all
of the assets of the Employer immediately before such acquisition
or acquisitions; provided, however, that transfers to the following
entities or person(s) shall not be deemed to result in a Change of
Control under this Subsection (c):
(i)
an entity that is controlled by the
shareholders of the Employer immediately after the
transfer;
(ii)
a shareholder (determined immediately
before the asset transfer) of the Employer in exchange for or with
respect to its stock;
(iii)
an entity, fifty percent (50%) or more of
the total value or voting power of which is owned, directly or
indirectly, by the Employer;
(iv)
a person, or more than one person acting
as a group, that owns, directly or indirectly, fifty percent (50%)
or more of the total value or voting power of all the outstanding
stock of the Employer; or
(v)
an entity, at least fifty percent (50%)
of the total value or voting power of which is owned, directly or
indirectly, by a person described in the above Subsection
(c)(iv).
For purposes of this Section 1.6, persons
will be considered to be acting as a group if they are owners of a
corporation that enters into a merger, consolidation, purchase or
acquisition of stock, or similar business transaction with the
Employer. Notwithstanding the foregoing, no Change of Control
shall be deemed to have occurred for purposes of this Agreement by
reason of any actions or events in which the Executive participates
in a capacity other than in the Executive capacity as an
employee.
1.7
“ Competing Business
” shall mean any entity
(other than the Employer and its Affiliates) that is conducting
business that is the same or substantially the same as the Business
of the Employer.
1.8
“ Confidential
Information ” means
data and information relating to the business of the Employer and
its Affiliates (which does not rise to the status of a Trade
Secret) which is or has been disclosed to the Executive or of which
the Executive became aware as a consequence of or through the
Executive’s relationship to the Employer and its Affiliates
and which has value to the Employer and its Affiliates and is not
generally known to its competitors. Confidential Information
shall not include any data or information that has been voluntarily
disclosed to the public by the Employer or its Affiliates (except
where such public disclosure has been made by the
Executive without authorization) or that
has been independently developed and disclosed by others, or that
otherwise enters the public domain through lawful means.
1.9
“ Disability
” shall mean that the
Executive suffers from a physical or mental disability or infirmity
which would constitute a disability under an accident and health
plan maintained by the Employer that provides income replacement
benefits or, if the Employer does not maintain such a plan, the
Executive’s inability to perform the essential functions of
the Executive’s job with or without reasonable accommodation
as a result of a physical or mental disability or infirmity which
can be expected to last for a continuous period of not less than
twelve (12) months.
1.10
“ Disability Period
” means the period
beginning on the date the Chief Executive Officer of the Employer
determines that the Executive is subject to a condition that
constitutes a Disability and ending on either the date that is
three (3) months after such determination or the date the Executive
begins receiving income replacement benefits under any accident or
health plan maintained by the Employer, whichever occurs
first.
1.11
“ Effective Date
” shall be September 10,
2007.
1.12
“ Employer Information
” means Confidential
Information and Trade Secrets.
1.13
“ Good Reason
” means with respect to
a termination of employment by the Executive:
(a)
a material diminution in the
Executive’s Base Salary (as defined in Section
4.1);
(b)
a material diminution in the
Executive’s or his superior’s authority,
responsibilities or duties;
(c)
a material diminution in the budget over
which the Executive retains authority;
(d)
the relocation of the Executive’s
principal place of work to a location more than thirty-five (35)
miles from its current location ; or
(e)
a material breach of the terms of this
Agreement by the Employer;
provided, however, that for a termination
of employment by the Executive to be for Good Reason , the
Executive must notify the Employer in writing of the event giving
rise to Good Reason within thirty (30) days following the
occurrence of the event (or if later the Executive’s
knowledge of occurrence of the event), the event must remain
uncured after the expiration of thirty (30) days following the
delivery of written notice of such event to the Employer by the
Executive, and the Executive must resign effective no later than
sixty (60) days following the Employer’s failure to cure the
event and must give at least thirty (30) days advance written
notice prior to his effective date of resignation.
1.14
“ Term ”
shall mean the period the Agreement is in
effect pursuant to Section 3.1.
1.15
“ Trade Secrets
” means Employer or
Affiliate information including, but not limited to, technical or
nontechnical data, formulas, patterns, compilations, programs,
devices, methods, techniques, drawings, processes, financial data,
financial plans, product plans or lists of actual or potential
customers or suppliers 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 who can obtain
economic value from its disclosure or use; and
(b)
is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy.
2
Duties .
2.1
Position . The
Executive is employed as a Senior Vice President and the Chief
Financial Officer of the Employer, subject to the direction of the
Chief Executive Officer of the Employer or his designee(s), shall
perform and discharge well and faithfully the duties and
responsibilities commensurate with such position as may be assigned
to him from time to time by the Employer in connection with the
conduct of its business. During the Term, at the discretion
of the Chief Executive Officer of the Employer, the Executive shall
also serve as the Chief Financial Officer of Lowcountry National
Bank and of First National Bank of Nassau County on an at-will
basis and without any additional compensation.
2.2
Full-Time Status
. In addition to the duties and responsibilities
specifically assigned to the Executive pursuant to Section 2.1
hereof, the Executive shall:
(a)
subject to Section 2.3, devote
substantially all of his time, energy and skill during regular
business hours to the performance of the duties of his employment
(reasonable vacations and reasonable absences due to illness
excepted) and faithfully and industriously perform such
duties;
(b)
diligently follow and implement all
reasonable and lawful management policies and decisions
communicated to him by the Chief Executive Officer of the Employer;
and
(c)
timely prepare and forward to the Chief
Executive Officer of the Employer all reports and accountings as
may be requested of the Executive.
2.3
Permitted Activities
. The Executive shall devote his business
time, attention and energies to the Business of the Employer and
shall not during the Term be engaged (whether or not during normal
business hours) in any other business or professional activity,
whether or not such activity is pursued for gain, profit or other
pecuniary advantage, but this shall not be construed as preventing
the Executive from:
(a)
subject to Section 1.5(f), investing his
personal assets in any manner which will not require any services
on the part of the Executive in their operation or affairs and in
which his participation is solely that of an investor;
and
(b)
participating in civic and professional
affairs and organizations and conferences, preparing or publishing
papers or books, teaching or serving on the board of directors of
an entity so long as the Chief Executive Officer of the Employer
approves in writing of such activities prior to the
Executive’s engaging in them.
3
Term and Termination
.
3.1
Term .
This Agreement shall begin as of the
Effective Date and shall continue through the third anniversary of
the Effective Date. Beginning on
the third anniversary of the Effective Date, and on each subsequent
anniversary of the Effective Date thereafter, the Term shall be
extended for a successive twelve-month period unless and until
either party gives written notice to the other of its or his intent
not to extend this Agreement with such written notice to be given
not less than ninety (90) days prior to any such anniversary date,
in which case this Agreement shall terminate at the end of the Term
then in effect as of the date of such notice. Notwithstanding
the foregoing, the Term shall end at such earlier date that the
Executive’s employment is terminated pursuant to Section 3.2
hereof.
3.2
Termination . During
the Term, the employment of the Executive under this Agreement may
be terminated only as follows:
3.2.1
By the Employer:
(a)
For Cause, upon written notice to the
Executive pursuant to Section 1.5 hereof, to the extent applicable,
or upon expiration of the Disability Period; or
(b)
Without Cause at any time, provided that
the Employer shall give the Executive thirty (30) days’ prior
written notice of its intent to terminate, in which event the
Employer shall pay the Executive an amount equal to fifty percent
(50%) of the Executive’s Base Salary rate then in effect with
such amount to be paid in substantially equal installments for a
period of six (6) months commencing within sixty (60) days of the
effective date of the Executive’s termination of employment
in accordance with the Employer’s normal payroll practices;
provided such termination constitutes a “separation from
service” within the meaning of Treasury Regulations Section
1.409A-1(h).
3.2.2
By the Executive for any reason, provided
that the Executive shall give the Employer sixty (60) days’
prior written notice of his intent to terminate.
3.2.3
At any time upon mutual, written
agreement of the parties.
3.2.4
Upon expiration of the Term.
3.2.5
Notwithstanding anything in this
Agreement to the contrary, the Term shall end automatically upon
the Executive’s death.
3.3
Change of Control
.
(a)
Payment . If, within twenty-four (24) months following
a Change of Control, the Employer terminates the Executive’s
employment without Cause or the Executive terminates his employment
for Good Reason and such termination of employment constitutes a
“separation from service” within the meaning the
meaning of Treasury Regulations Section 1.409A-1(h), the Executive,
or in the event of his subsequent death, his designated
beneficiaries or his estate, as the case may be, shall receive, as
liquidated damages, in lieu of the payment under
