EMPLOYMENT AGREEMENT
THIS AGREEMENT entered into this 30th day of November, 1999, by and between
New South Bank (the "Bank") and H.D. Reaves, Jr. (the "Employee").
WHEREAS, the Employee has heretofore been employed by Home Federal Savings
and Loan Association (the "Association") as President and Chief Executive
Officer and is experienced in all phases of the business of the Association; and
WHEREAS, on August 9, 1999, the Association and its sole stockholder, Green
Street Financial Corp. ("Green Street"), entered into an Agreement and Plan of
Merger (the "Merger Agreement") with NewSouth Bancorp, Inc. ("NewSouth"), Bank
and Washington Financial, Inc. ("New Sub"), pursuant to which New Sub will be
merged with and into Green Street (the "Merger"); and
WHEREAS, the Agreement contemplates that following the Merger Green Street
will be dissolved and the Association will merge with and into Bank (the "Bank
Merger"); and
WHEREAS, following the Merger and the Bank Merger, the Bank desires to
employ the Employee; and
WHEREAS, the parties desire by this writing to set forth the continuing
employment relationship of the Bank and the Employee.
NOW, THEREFORE, it is AGREED as follows:
1. EMPLOYMENT. The Employee is employed in the capacity as an Executive
Vice President of the Bank. The Employee shall render such administrative and
management services to the Bank and NewSouth as are currently rendered and as
are customarily performed by persons situated in a similar executive capacity.
The Employee shall promote the business of the Bank and NewSouth. The Employee's
other duties shall be such as the Board of Directors for the Bank (the "Board of
Directors" or "Board") may from time to time reasonably direct, including normal
duties as an officer of the Bank.
2. BASE COMPENSATION. The Bank agrees to pay the Employee during the term
of this Agreement a salary at the rate of $97,800 per annum, payable in cash not
less frequently than monthly.
3. DISCRETIONARY BONUS. The Employee shall be entitled to participate in
an equitable manner with all other senior management employees of the Bank in
discretionary bonuses that may be authorized and declared by the Board of
Directors to its senior management employees from time to time. No other
compensation provided for in this Agreement shall be deemed a substitute for the
Employee's right to participate in such discretionary bonuses when and as
declared by the Board of Directors.
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4. (a) PARTICIPATION IN RETIREMENT AND MEDICAL PLANS. The Employee shall
be entitled to participate in any plan of the Bank relating to pension,
profit-sharing, or other retirement benefits and medical coverage (including
dependent coverage) or reimbursement plans that the Bank may adopt for the
benefit of its employees. Employee shall be given credit in all such employee
benefit plans for prior service with the Association.
(b) EMPLOYEE BENEFITS; EXPENSES. The Employee shall be eligible to
participate in any fringe benefits which may be or may become applicable to the
Bank's administrative officers, subject to the Board of Directors' approval. The
Bank shall reimburse Employee for all reasonable out-of-pocket expenses which
Employee shall incur in connection with his service for the Bank.
5. TERM. The term of employment of Employee under this Agreement shall be
for the period commencing on the date hereof (the "Effective Date") and ending
thirty-six (36) months thereafter.
6. LOYALTY; NONCOMPETITION.
(a) The Employee shall devote his full attention to the performance of his
employment under this Agreement. During the term of Employee's employment under
this Agreement, the Employee shall not engage in any business or activity
contrary to the business affairs or interests of the Bank or NewSouth.
(b) Nothing contained in this Section 6 shall be deemed to prevent or
limit the right of Employee to invest in the capital stock or other securities
of any business dissimilar from that of the Bank or NewSouth, or, solely as a
passive or minority investor, in any business.
7. STANDARDS. The Employee shall perform his duties under this Agreement
in accordance with such reasonable standards expected of employees with
comparable positions in comparable organizations and as may be established from
time to time by the Board of Directors.
8. VACATION AND SICK LEAVE. At such reasonable times as the Board of
Directors shall in its discretion permit, the Employee shall be entitled,
without loss of pay, to absent himself voluntarily from the performance of his
employment under this Agreement, with all such voluntary absences to count as
vacation time; provided that:
(a) The Employee shall be entitled to annual vacation leave in accordance
with the policies as are periodically established by the Board of Directors for
senior management employees of the Bank.
(b) The Employee shall not be entitled to receive any additional
compensation from the Bank on account of his failure to take vacation leave and
Employee shall not be entitled to accumulate unused vacation from one fiscal
year to the next, except in either case to the extent authorized by the Board of
Directors for senior management employees of the Bank.
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(c) In addition to the aforesaid paid vacations, the Employee shall be
entitled without loss of pay, to absent himself voluntarily from the performance
of his employment with the Bank for such additional periods of time and for such
valid and legitimate reasons as the Board of Directors in its discretion may
determine. Further, the Board of Directors shall be entitled to grant to the
Employee a leave or leaves of absence with or without pay at such time or times
and upon such terms and conditions as the Board of Directors in its discretion
may determine.
(d) In addition, the Employee shall be entitled to an annual sick leave
benefit as established by the Board of Directors for senior management employees
of the Bank. In the event that any sick leave benefit shall not have been used
during any year, such leave shall accrue to subsequent years only to the extent
authorized by the Board of Directors for employees of the Bank.
9. TERMINATION AND TERMINATION PAY.
The Employee's employment under this Agreement shall be terminated upon any
of the following occurrences:
(a) The death of the Employee during the term of this Agreement, in which
event the Employee's estate shall be entitled to continue to receive the
compensation the Employee would otherwise have received for the remainder of the
term of this Agreement.
(b) The Board of Directors may terminate the Employee's employment at any
time, but any termination by the Board of Directors other than termination for
Just Cause, shall not prejudice the Employee's right to compensation or other
benefits under the Agreement. The Employee shall have no right to receive
compensation or other benefits for any period after termination for Just Cause.
Termination for "Just Cause" shall include termination because of the Employee's
personal dishonesty, willful misconduct, breach of fiduciary duty involving
personal profit, willful violation of any law, rule or regulation (other than
traffic violations or similar offenses) or final cease-and-desist order, or
material breach of any provision of the Agreement.
(c) Except as provided pursuant to Section 12 herein, in the event
Employee's employment under this Agreement is terminated by the Board of
Directors without Just Cause, the Bank shall be obligated, for a period of time
equal to the remaining term of this Agreement at the time of such termination,
to continue to pay the Employee the salary provided pursuant to Section 2 herein
and the cost of Employee obtaining all health, life, disability, and other
benefits which the Employee would be eligible to participate in for such period
of time, other than benefits under the Bank's pension plan, 401(k) plan and
employee stock ownership plan, based upon the benefit levels substantially equal
to those being provided Employee and Employee's dependent(s) at the date of
termination of employment. Such compensation to be provided in accordance with
this Section 9 (c) shall be forfeited by the Employee for all periods after the
date that the Employee shall engage in providing professional service or
employment as an employee, director, consultant, representative, or similar
relationship to any financial services enterprises (including but not limited to
a savings and loan association, bank, credit union, or insurance company) with
offices or business activities located in the counties of Cumberland or Robeson
in
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North Carolina, or elsewhere within a 50 mile radius of Fayetteville, North
Carolina. This limitation on future activities shall not affect the payment of
previously vested benefits under the compensation and benefit plans of the Bank
or for compensation payable in accordance with Section 12 of the Agreement.
(d) If the Employee is removed and/or permanently prohibited from
participation in the conduct of the Bank's affairs by an order issued under
Sections 8 (e) (3) or 8 (g) (1) of the Federal Deposit Insurance Act ("FDIA")
(12 U.S.C. 1818 (e) (3) and (g) (1)), all obligations of the Bank under this
Agreement shall terminate, as of the effective date of the order, but the vested
rights of the parties shall not be affected.
(e) If the Bank is in default (as defined in Section 3 (x) (1) of FDIA)
all obligations under this Agreement shall terminate as of the date of default,
but this paragraph shall not affect any vested rights of the contracting
parties.
(f) All obligations under this Agreement shall be terminated, except to
the extent determined that continuation of this Agreement is necessary for the
continued operation of the Bank: (i) by the North Carolina Banking Commission at
the time that the Federal Deposit Insurance Corporation ("FDIC") enters into an
agreement to provide assistance to or on behalf or the Bank under the authority
contained in Section 13 (c) of FDIA; or (ii) by the North Carolina Banking
Commission at the time that the North Carolina Banking Commission approves a
supervisory merger to resolve problems related to operation of the Bank or when
the Bank is determined by the North Carolina Banking Commission to be in an
unsafe or unsound condition. Any rights of the parties that have already vested,
however, shall not be affected by such action.
(g) The voluntary termination by the Employee during the term of this
Agreement with the delivery of no less than 30 days written notice to the Board
of Directors, other than pursuant to Section 12. In the event of such voluntary
termination, the Bank shall be obligated, for a period of time equal to the
remaining term of this Agreement at the time of such termination, to continue to
pay the Employee the salary provided pursuant to Section 2 herein.
(h) Notwithstanding anything herein to the contrary, any payments made to
the Employee pursuant to the Agreement, or otherwise, shall be subject to and
conditioned upon compliance with 12 USC ss.1828 (k) and any regulations
promulgated thereunder.
10. SUSPENSION OF EMPLOYMENT. If the Employee is suspended and/or
temporarily prohibited from participation in the conduct of the Bank's affairs
by a notice served under Section 8 (e) (3) or (g) (1) of the FDIA (12 U.S.C.
1818 (e) (3) and (g) (1)), the Bank's obligations under the Agreement shall be
suspended as of the date of service, unless stayed by appropriate proceedings.
If the charges in the notice are dismissed, the Bank may in its discretion (i)
pay the Employee all or part of the compensation withheld while its contract
obligations were suspended and (ii) reinstate any of its obligations which were
suspended.
11. DISABILITY.
(a) The Bank may terminate the Employee's employment after having
established the Employee's disability. In the event of such termination, the
Bank shall pay Employee the salary
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provided pursuant to Section 2 herein for a period of time equal to the
remaining term of this Agreement at the time of such termination.
(b) During any period that the Employee shall receive disability benefits
and to the extent that the Employee shall be physically and mentally able to do
so, he shall furnish such information, assistance and documents so as to assist
in the continued ongoing business of the Bank and, if able, shall make himself
available to the Bank to undertake reasonable assignments consistent with his
prior position and his physical and mental health. The Bank shall pay all
reasonable expenses incident to the performance of any assignment given to the
Employee during the disability period.
12. CHANGE IN CONTROL.
Notwithstanding any provision herein to the contrary, in the event of the
involuntary termination of Employee's employment during the term of this
Agreement following any change in control of the Bank or NewSouth, absent Just
Cause, Employee shall be paid an amount equal to the sum of the base
compensation he would have received under Section 2 of this Agreement for the
remaining term of the Agreement, and the cost of Employee obtaining all health,
life, disability, and other benefits which the Employee would be eligible to
participate in for such period of time, other than benefits under the Bank's
pension plan, 401(k) plan and employee stock ownership plan, based upon the
benefit levels substantially equal to those being provided Employee and
Employee's dependent(s) at the date of termination of employment. Said sum shall
be paid, at the option of Employee, either in one (1) lump sum within thirty
(30) days of such termination, or in periodic payments over the remaining term
of this Agreement, as if Employee's employment had not been terminated, and such
payments shall be in lieu of any other future payments which the Employee would
be otherwise entitled to receive under Section 9 of this Agreement.
Notwithstanding the foregoing, all sums payable hereunder shall be reduced in
such manner and to such extent so that no such payments made hereunder when
aggregated with all other payments to be made to the Employee by the Bank or the
NewSouth shall be deemed an "excess parachute payment" in accordance with
Section 280G of the Code and be subject to the excise tax provided at Section
4999(a) of the Code. The term "control" shall refer to the ownership, holding or
power to vote more than 25% of the NewSouth's or the Bank's voting stock, the
control of the election of a majority of the NewSouth's or the Bank's directors,
or the exercise of a controlling influence over the management or policies of
NewSouth or the Bank by any person or by persons acting as a group within the
meaning of Section 13(d) of the Securities Exchange Act of 1934. The term
"person" means an individual other than the Employee, or a corporation,
partnership, trust, association, joint venture, pool, syndicate, sole
proprietorship, unincorporated organization or any other form of entity not
specifically listed herein.
13. SUCCESSOR AND ASSIGNS.
(a) This Agreement shall inure to the benefit of and be binding upon any
corporate or other successor of the Bank or NewSouth which shall acquire,
directly or indirectly, by merger, consolidation, purchase or otherwise, all or
substantially all of the assets or stock of the Bank or NewSouth.
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(b) Since the Bank is contracting for the unique and personal skills of
the Employee, the Employee shall be precluded from assigning or delegating his
rights or duties hereunder without first obtaining the written consent of the
Bank.
14. AMENDMENTS. No amendments or additions to this Agreement shall be
binding upon the parties hereto unless made in writing and signed by both
parties, except as herein otherwise specifically provided.
15. APPLICABLE LAW. This agreement shall be governed in all respects
whether as to validity, construction, capacity, performance or otherwise, by the
laws of the State of North Carolina, except to the extent that Federal law shall
be deemed to apply.
16. SEVERABILITY. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
17. ARBITRATION. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the rules then in effect of the district office of the American
Arbitration Association ("AAA") nearest to the home office of the Bank, and
judgement upon the award rendered may be entered in any court having
jurisdiction thereof, except to the extent that the parties may otherwise reach
a mutual settlement of such issue. The Bank shall incur the cost of all fees and
expenses associated with filing a request for arbitration with the AAA, whether
such filing is made on behalf of the Bank or the Employee, and the costs and
administrative fees associated with employing the arbitrator and related
administrative expenses assessed by the AAA. The Bank shall reimburse Employee
for all reasonable costs and expenses, including reasonable attorneys' fees,
arising from such dispute, proceedings or actions, following the delivery of the
decision of the arbitrator finding in favor of the Employee; provided that if
such finding of the Arbitrator is not in favor of the Employee then such
Employee shall reimburse the Bank for the initial filing fee paid by the Bank to
the AAA. Further, the settlement of the dispute to be approved by the Board of
the Bank or NewSouth may include a provision for the reimbursement by the Bank
or NewSouth to the Employee for all reasonable costs and expenses, including
reasonable attorneys' fees, arising from such dispute, proceedings or actions,
or the Board of the Bank or the NewSouth may authorize such reimbursement of
such reasonable costs and expenses by separate action upon a written action and
determination of the Board following settlement of the dispute. Such
reimbursement shall be paid within ten (10) days of Employee furnishing to the
Bank or NewSouth evidence, which may be in the form, among other things, of a
canceled check or receipt, of any costs or expenses incurred by Employee.
18. ENTIRE AGREEMENT. This agreement together with any understanding or
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement between the parties hereto, and shall supersede any and all
preexisting employment or severance agreements or insurance arrangements between
the Employee and the Association or Green Street. Agreements and arrangements
specifically superseded pursuant to this Section 18 include but are not limited
to the employment agreement dated April 3, 1996 by and between the Association
and the Employee.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
month hereinabove written.
NEWSOUTH BANK
ATTEST: By: /s/ Thomas A. Vann
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Thomas A. Vann
President
/s/ William L. Wall
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William L. Wall
Secretary
WITNESS:
/s/ Allen Lloyd /s/ H.D. Reaves, Jr.
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H.D. Reaves, Jr., Employee
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