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Exhibit 10
STATE OF NORTH CAROLINA EMPLOYMENT AGREEMENT
COUNTY OF DURHAM
THIS EMPLOYMENT AGREEMENT (the "Agreement")is made and entered into as
of October 1, 2000, by and between Mechanics and Farmers Bank (hereinafter
referred to as the "Bank") and Lee Johnson, Jr. (hereinafter referred to as the
"Officer"),
W I T N E S S E T H:
WHEREAS, the Bank desires to retain the Officer's services as an
executive employee of the Bank for the Term (as defined below), and the Officer
is willing to serve as an executive employee of the Bank for such period, and
WHEREAS, the parties desire to enter into this Agreement to set forth
the terms and conditions of the Officer's employment with the Bank.
NOW, THEREFORE, for and in consideration of the premises and the mutual
promises, covenants and conditions hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the Bank and the Officer hereby agree as follows:
1. Employment. The Bank hereby agrees to employ the Officer, and the
Officer hereby agrees to serve as an executive employee of the Bank, upon the
terms and conditions stated herein. The Officer will (i) serve as President and
Chief Operating Officer of the Bank with such duties, responsibility and
authority as are generally associated with such executive office, and (ii) have
such other duties, responsibilities and authority, and render to the Bank such
other management services, as are customary for a person having such an
executive office with a commercial bank and as are reasonably assigned to him
from time to time by the Board of Directors of the Bank (the "Board"). He shall
be provided with such office, working facilities and staff at the offices of the
Bank in Durham, North Carolina as are necessary for the Officer to perform his
obligations under this Agreement.
The Officer shall faithfully and diligently discharge his duties and
responsibilities under this Agreement and shall use his best effort to implement
the policies established by the Board.
The Officer hereby agrees to devote such number of hours of his working
time and endeavors to his duties and responsibilities hereunder as the Officer
and the Board shall deem to be necessary to discharge such duties and
responsibilities. Except with prior consent of the Board, the Officer shall not
engage in any other occupation which requires a significant amount of the
Officer's personal attention during the Bank's regular business hours or which
otherwise interferes with the Officer's attention to or performance of his
duties and responsibilities under this Agreement. However, nothing herein
contained shall restrict or prevent the Officer from personally, and for the
Officer's own account or for the account of the Officer's immediate family,
trading in stocks, bonds, securities, real estate or other forms of investment
so long as such investment activities do not interfere with the Officer's
attention to or performance of his duties and responsibilities under this
Agreement.
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2. Compensation. For all services rendered by the Officer to the Bank
under this Agreement, the Bank shall pay the Officer a base salary of no less
than $130,000.00 per annum ("Base Salary"), payable in equal monthly or
semi-monthly installments; provided, however, that the amount of the Base Salary
shall be reviewed by the Compensation Committee not less often than annually for
the purpose of considering such increases therein as are appropriate to reflect
the duties, responsibilities and performance of the Officer. Such Base Salary
shall be subject to customary withholding taxes and such other employment taxes
as are required by law. The Officer's Base Salary may be increased by the Board,
and all reference to Base Salary herein shall mean his Base Salary as so
increased. Such rate or salary, or increased rate of salary, as the case may be,
may be further increased (but not decreased) from time to time in such amounts
as the Board, in its discretion, may decide.
In reviewing the Officer's Base Salary, the Board may consider the
employee compensation policies established by the Compensation Committee of the
Board for application to the employees of the Bank, the duties and
responsibilities of the Officer, and the overall performances of the Officer and
the Bank, as well as increases in the cost of living, and may also consider the
appropriateness of performance or merit increases. Neither participation in, or
receipt of payment from, any incentive compensation, deferred compensation,
incentive bonus, discretionary bonus, pension, life insurance, group life
insurance, health benefit, medical coverage, disability coverage, dental
insurance, stock option, restricted stock, stock appreciation rights, salary
continuation, incentive compensation unit, profit sharing, employee stock
ownership, pension, retirement, or other employee welfare or benefits plan of
the Bank (collectively "Benefit Plans"), nor receipt of any fringe benefits
granted to the Officer ("Fringe Benefits") shall reduce, or be deemed an offset
against the Base Salary to the Officer.
3. Participation in Benefit Plans; Fringe Benefits. During the Term,
the Officer shall be entitled to participate in any and all Benefit Plans from
time to time maintained by the Bank and available to either executive officers
and/or all employees of the Bank, all in accordance with the terms and
conditions (including eligibility requirements) of such Benefit Plans and the
policies adopted by the Board in establishing such Benefit Plans. The Officer
shall be entitled to paid vacation leave in accordance with the Board's policy
for the senior executive employees of the Bank now or hereafter in effect.
During the Term, the Officer shall also be entitled to receive any
Fringe Benefits which are now or may be or become applicable to executive
officers of the Bank, including the payment of reasonable expenses for attending
(i) annual and periodic meetings of trade associations and (ii) continuing
education courses necessary for the Officer to maintain professional
certifications, and any other Fringe Benefits which are commensurate with the
duties and responsibilities to be performed by the Officer under this Agreement.
Additionally, the Officer shall be entitled to such customary Fringe Benefits,
including such vacation and sick leave, as are consistent with the normal
practices and established policies of the Bank.
In addition to the other compensation and other benefits described in
the Agreement, the Bank shall promptly reimburse the Officer for all reasonable
and duly documented expenses incurred by him in the performance
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of his duties and responsibilities under this Agreement in accordance with the
policies established by the Board.
4. Term. Unless sooner terminated as provided in this Agreement and
except as otherwise provided in Paragraph 7, the term of this Agreement and the
Officer's employment hereunder ("Term") shall be for a period commencing on the
date hereof and continuing until the close of business on the third anniversary
of such date; provided, however that unless the Bank or the Officer gives
written notice to the other of non-extension at least sixty (60) days prior to
any anniversary of the date hereof, the term of this Agreement shall be extended
for a one (1) year period on each such anniversary of the date hereof (i.e.,
absent the giving of such notice, the remainder of the Term shall not be less
than two (2) nor more than three (3) years at any time).
5. Non-Competition and Confidentiality.
(a) Confidential Information. The Officer hereby acknowledges and
agrees that; (i) in the course of his service as an executive officer of the
Bank, he will gain substantial knowledge of and familiarity with the Bank's
customers and its dealings with them, and other Confidential Information (as
defined below) concerning the Bank's business, all of which constitute valuable
and privileged assets that are particularly sensitive due to the fiduciary
responsibilities inherent in the banking business and (ii) in order to protect
the Bank's interest in and to assure the benefit of its business, it is
reasonable and necessary to place certain restrictions on the Officer's ability
to Compete (as defined below) against the Bank and on his disclosure of
Confidential Information.
All Confidential Information shall be considered and kept by the
Officer as the confidential, private and proprietary property of the Bank. At
all times during and following the term of this Agreement or his employment for
any reasons, and except as shall be required in the course of the performance by
the Officer of his duties on behalf of the Bank or permitted by a direct,
written authorization of the Board, he will not divulge any such Confidential
Information to any Person (as defined below) not employed by the Bank (except as
required by applicable Laws (as defined below)), remove any such Confidential
Information in written or other recorded form from the Bank's premises, or make
any use of any Confidential Information for his own purposes or for the benefit
of any Person other than the Bank. Following the termination of the Officer's
employment with the Bank, this Paragraph 5(a) shall not apply to any
Confidential Information which then is in the public domain (provided that the
Officer was not responsible, directly or indirectly, for permitting such
Confidential Information to enter the public domain without the Bank's consent)
or which was obtained by the Officer from a Person who is not obligated under an
agreement of confidentiality with respect to such information.
(b) Noncompetition. In consideration of employment of the Officer,
during the Term and any subsequent Payment Period (as defined below), the
Officer agrees that he will not, within the North Carolina counties in which the
Bank has banking offices during the Term (the "Market"), directly or indirectly,
own, manage, operate, join, control or participate in the management, operation
or control of, or be employed by or connected in any manner with, any Person who
Competes with the Bank, without the prior written consent of the Board;
provided, however, that the provisions of this Paragraph 5(b) shall not apply
prospectively in the
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event this Agreement is terminated by the Bank at will (as defined below); and,
provided further, however, that if the Officer is terminated for Cause under
Paragraph 7(d), the period of noncompetition shall extend until the first
anniversary of the date of such termination. Notwithstanding the foregoing, the
Officer shall be free, without such consent, to purchase or hold as an
investment or otherwise up to five percent (5%) of the outstanding stock or
other securities of any Person which has its securities listed on any national
securities exchange or which has transactions in its securities quoted on any
level of The Nasdaq Stock Market, Inc. or other over-the-counter market or
inter-dealer quotation system.
(c) Remedies for Breaches. The Officer understands and agrees that a
breach by him of the covenants contained in Paragraphs 5(a) or 5(b) of this
Agreement will be deemed a material breach of this Agreement and will cause
irreparable injury to the Bank, and that it would be difficult to ascertain the
amount of monetary damages that would result from any such breach. In the event
of the Officer's actual or threatened breach of the covenants contained in
Paragraphs 5(a) or 5(b), the Bank shall be entitled to bring a civil action
seeking an injunction restraining the Officer from breaching or continuing to
breach those covenants or from any threatened breach thereof, or any other legal
or equitable relief relating to the breach of such covenants. The Officer agrees
that, if the Bank institutes any action or proceeding against him seeking to
enforce any of such covenants or to recover other relief relating to an actual
or threatened breach of any of such covenants, he shall be deemed to have waived
any claim or defense that the Bank has an adequate remedy at law and shall not
urge in any such action or proceeding the claim or defense that such a remedy at
law exists. The exercise by the Bank of any such right, remedy, power or
privilege, however, shall not preclude the Bank from pursuing any other remedy
or exercising any other right, power or privilege available to it for any such
breach, whether at law or in equity, including the recovery of damages, all of
which shall be cumulative and in addition to all other rights, remedies, powers
or privileges of the Bank.
Notwithstanding anything contained to the contrary, the Officer agrees
that the provisions of Paragraphs 5(a) and 5(b) above and the remedies provided
in this Paragraph 5(c) for a breach shall be in addition to, and shall not be
deemed to supersede or to otherwise restrict, limit or impair, the rights of the
Bank under the Trade Secrets Protection Act contained in Article 24, Chapter 66
of the North Carolina General Statutes, or any other state or federal law or
regulation dealing with or providing a remedy for this wrongful disclosure,
misuse or misappropriation of trade secrets or other proprietary or confidential
information.
(d) Survival of Covenants. The Officer's covenants and agreements
and the Bank's rights and remedies provided for in this Paragraph 5 shall
survive any termination of this Agreement or the Officer's employment with the
Bank.
(e) Definitions. For purposes of this Agreement:
(i) "Confidential Information" means any and all data, figures,
projections, estimates, lists, files, records, documents, manuals or other such
materials or information (financial or otherwise) relating to the Bank and its
banking business, regulatory examinations, financial results and condition,
lending and deposit operations, customers (including lists of customers and
information regarding their accounts and business dealings
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with the Bank), policies and procedures, computer system and software,
stockholders, employees, officers and directors.
(ii) A Person that "Competes" means a Person that (A) solicits
or secures deposits from any Person, (B) solicits or makes loans to any Person,
(C) induces or attempts to induce any Person who was a customer of the Bank at
the time of the termination of the Officer's employment to change the customer's
depository, loan, or other banking relationship from the Bank to another
financial institution, or (D) otherwise provides any type of commercial banking
services, in each case from banking offices located within the Market,
(iii) "Person" means (A) an individual or a corporation,
partnership (limited or general), trust, limited liability company, business
trust, association (mutual or stock, including a mutual holding company), joint
venture, pool, syndicate, unincorporated organization or any other form of
entity; and (B) any Affiliate (as defined below) of any individual or entity
listed in item (A). "Affiliate" means any Person who controls, is under control
with, or is controlled by the Person to whom reference is being made; and for
the purposes of the definition of Affiliate, control shall be deemed to exist in
a Person who beneficially owns ten percent (10%) or more of the outstanding
equity interests (or options, warrants or other rights to acquire such equity
interests) of another Person.
(iv) "Payment Period" means the period of time following the
end of the Term during which the Officer receives payments of money,
participates in Benefit Plans and/or receives Fringe Benefits under Paragraph
7(b), 7(c), 7(e), 7(f) or 7(g), as applicable.
6. Standards. The Officer, in the execution of his duties and
responsibilities under this Agreement, shall at all times and in all respects
comply with the policies of the Board, including any code of business conduct or
code of ethics adopted by the Board for application to the Bank's employees, and
with all applicable Laws.
7. Termination and Termination Pay.
(a) Termination by Death. This Agreement shall be terminated upon
the death of the Officer during the Term. Upon the Officer's death, the
Officer's estate shall be entitled to receive all compensation and benefits
payable to, or vested for the benefit of, the Officer under this Agreement
through the end of the calendar month in which the Officer's death shall have
occurred.
(b) Termination by Total Disability. This Agreement shall be
terminated upon the Total Disability (as defined below) of the Officer during
the Term. In the event of his Total Disability, the Officer shall receive all
compensation and benefits payable to, or vested for the benefit of, the Officer
under this Agreement through the date of the determination of his Total
Disability and for a period of one (1) year thereafter. The Officer shall be
deemed to have suffered Total Disability upon the determination of his total
permanent disability by the United States Social Security Administration or the
Bank's receipt of a certification to such effect by the Officer's regular
physician, in each case such total permanent disability meaning the Officer's
loss of ability to perform at least the majority of his then applicable duties
hereunder.
(c) Termination by Officer. This Agreement may be terminated at any
time by the Officer upon sixty (60) days prior written notice to the Bank.
Unless the provisions of Paragraphs 7(f)(ii) or 7(g) are applicable
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and the Officer elects to apply the applicable provisions, upon such
termination, the Officer shall be entitled to receive the compensation and
benefits payable to, or vested for the benefit of, the Officer under this
Agreement through the effective date of such termination.
(d) Termination for Cause. The Board may terminate this Agreement
for Cause, in which event the Officer shall have no right to receive, or to have
accrued or vested for his benefit, compensation or other benefits hereunder for
any period after such termination. Termination for Cause shall mean termination
of this Agreement because of the Officer's (A) breach of fiduciary duty
involving personal profit, (B) intentional and material failure to perform
stated duties (after written notice thereto, (C) conviction of a crime of
dishonesty or moral turpitude, (D) willful and material violation of any
statute, or of any rule, regulation order, statement of policy or final
cease-and-desist order ("Laws") of any governmental agency or body having
regulatory authority over the Bank ("Regulatory Authorities') whether or not
resulting in criminal prosecution or conviction, (E) a material and continuing
breach of any provision of this Agreement (after written notice thereof or (F)
the occurrence of any event that shall result in the Officer being excluded from
coverage, or having coverage limited as to the Officer as compared to other
executives of the Bank, under the Bank's then current "blanket bond" or other
fidelity or insurance policy covering its directors, officers or employees. With
respect to the first occurrence of any instance listed above specifically
requiring written notice, the Bank shall give the Officer written notice which
describes the failure or breach, and the Officer shall have thirty (30) days to
cure such breach or failure to the reasonable satisfaction of the Board;
provided, however, that no opportunity to cure shall be allowed for any
subsequent substantially similar failure or breach and termination for Cause in
such circumstances shall be effective upon the giving of such written notice
(which rating and second notice may not be given less than ninety-one (91) days
after the first such rating and written notice).
(e) Termination At Will. The Board may terminate this Agreement at
will at any time upon sixty (60) days prior written notice to the Officer;
provided, however, that in the event of such termination, unless the provisions
of Paragraph 7(d) are applicable, the Officer will continue to receive his Base
Salary and all other benefits (including bonuses and continuation of all Benefit
Plans and Fringe Benefits except for qualified retirement plans) for a period of
two (2) years from the date of termination. At the election of the Officer, the
Present Value of such Base Salary and bonuses, determined as provided in
Paragraph 7(g), shall be paid within sixty (60) days of the date of termination.
(f) Constructive Termination of Employment by the Bank At Will;
Minimum Annual Compensation Payment. Employment under this Agreement may, at the
option of the Executive, be deemed constructively terminated by the Bank at will
if any of the following occurs:
(i) The Bank assigns the Executive to any duties materially
inconsistent with his status as the Senior Principal Banking Officer of the
Bank, or an arbitrary and material alteration in the nature of such position or
status. The Bank has conveyed to the Executive that there will not be a position
of CEO at the Bank level;
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(ii) The material breach of commitments to the Executive as to
responsibilities, position, title and the obligations of the Bank under this
agreement.
If the Executive deems this Agreement constructively terminated by the
Bank because of the occurrence of any of the foregoing, the Executive shall give
the Bank thirty (30) days written notice that he deems the Bank to have
constructively terminated his employment at will and such notice shall specify
with reasonable detail the basis for such claim including the specific conduct,
transactions and occurrences with reference to the applicable subparagraph of
this paragraph 7(f). The employment of the Executive shall be deemed
constructively terminated at will thirty (30) days after the giving of such
written notice unless the Bank has removed any basis for a claim under this
Paragraph 7(f).
In the event of constructive termination by the Bank at will under this
Paragraph 7(f), the Bank shall pay the Executive at a rate equivalent to the
Minimum Annual compensation as calculated on a monthly basis to which he would
be entitled in such installments and on such dates as regularly paid under
Paragraph 2, for the remainder of the unexpired term of this Agreement in lieu
of any and all damages which the Executive may claim. Other rights and benefits
of the Executive under employee benefit plans and programs of the Bank in which
the Executive is a participant will be determined in accordance with the terms
and provisions of such plans and programs. The Bank shall thereafter have no
further obligations to the Executive under this agreement.
(g) Unapproved Change in Control Termination. In the event of (i)
the termination of this Agreement At Will or (ii) the voluntary termination of
this Agreement by the Officer, in each case in connection with, or within two(2)
years after, any Change in Control (as defined below) which has not been
approved in advance by a formal resolution of two-thirds (2/3) of the members of
the Board who are not Affiliates of the Person effecting or proposing to effect
the Change in Control ("Independent Directors"), the Officer shall be entitled
at his election:
(a) to continue to receive his Base Salary and bonuses as
approved in this Agreement for a period of two and ninety-nine one hundredths
(2.99) years subsequent to the effective date of such termination; and (b) to
continue to participate in all Benefit Plans and Fringe Benefits, except
qualified retirement plans for the period of two and ninety-nine one hundredths
(2.99) years.
Upon written notice by the Officer to the Bank, in lieu of paying the
amount in item (g)(ii)(a)and (b) above for a period of two and ninety-nine one
hundredths (2.99) years in installments, the Officer shall be paid the Present
Value of such Base Salary and bonuses in a lump sum within sixty (60) days of
the termination of his employment. The calculation of the amount due shall be
made by the independent accounting firm then performing the Bank's independent
audit (the "Auditor") at the expense of the Bank. If Officer does not agree with
the calculation performed by the Auditor, then Officer may choose an auditor to
perform such calculation on his behalf and at his expense. Following such
calculation, if the Bank's auditor and the auditor appointed by the Officer are
unable to agree on the calculation, the Bank and the Officer shall agree on an
independent third-party auditor who shall be appointed to determine the
calculation of the amount due to Officer pursuant to
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this paragraph. The determination of such third-party auditor shall be
conclusive and binding on all parties herein. In the event Officer elects such
lump sum payment, the Officer shall continue to participate in the Benefit Plans
and Fringe Benefits for the aforesaid two and ninety-nine one hundredths (2.99)
year period. The Officer shall also be entitled to a cash payment of an amount
equal to the amount of any and all excise tax liability incurred by Officer
pursuant to Section 4999 of the Internal Revenue Code of 1986, as amended, in
connection with the payments and benefits compensation in Paragraph 7 and sub
paragraphs (such amount to be determined by the Auditor at the Bank's expense).
(h) Approved Change in Control Termination. Upon ten (10) days prior
written notice, the Officer may declare this Agreement to have been terminated
At Will by the Bank, upon the occurrence of any of the following events, which
have not been consented to in advance by the Officer in writing, following a
Change in Control, approved in advance by a formal resolution of at least
two-thirds (2/3) of the Independent Directors; (i) if the Officer is required to
move his personal residence or perform his principal executive functions more
than twenty (50) miles from the city limits of Durham, North Carolina: (ii) if
the Bank should fail to maintain Benefit Plans and Fringe Benefits providing to
him at least substantially the same level of benefits afforded the Officer as of
the date of the change in Control; or (iii) if in the Officer's sole discretion,
his responsibilities or authority in the capacity described in Paragraph 1 have
been diminished materially.
Upon such termination, or upon any other termination of this Agreement
At Will by the Bank within Two (2) years following an approved Change in
Control, the Officer shall be entitled to receive the compensation and benefit
continuation when and as provided in Paragraph 7(g) above.
(i) Definitions. A "Change in Control" means a change in control of
the Bank of a nature that would be required to be reported in response to Item
6(e) of Regulation 14A promulgated under the Securities and Exchange Act of
1934, as amended (the "1934 Act"), or the acquisition of control, within the
meaning of Section 2(a) (2) of the Bank Holding Act of 1956, as amended, or
Section 602 of the Change in Control Act of 1978, of the Bank by any Person;
provided that, without limitation, a Change in Control also shall be deemed to
have occurred if:
(1) Any Person is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the 1934 Act), directly or indirectly, of securities of the
Bank representing 30% or more of the combined voting power of the Bank's then
outstanding securities; or
(2) During any period of two (2) consecutive years, individuals
who at the beginning of the Term constitute the Board cease for any reason to
constitute at least a majority thereof unless the election, or the nomination
for election by the Bank's stockholders, of each new director was approved by a
vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the Term.
8. Additional Regulatory Requirements. Notwithstanding anything
contained in this Agreement to the contrary, it is understood and agreed that
the Bank shall not be required to make any payment or take any action under this
Agreement if (a) the Bank is declared by any Regulatory
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Authority to be insolvent, in default or operating in an unsafe or unsound
manner, (b) such payment or action would be prohibited by or would violate any
Law or (c) such payment or action otherwise would be prohibited by any
Regulatory Authority.
9. Successors and Assigns.
This Agreement shall inure to the benefit of and be binding upon any corporate
or other successor of the Bank, including any Person who shall acquire, directly
or indirectly, by merger, share exchange, purchase or otherwise, all or
substantially all of the capital stock or assets of the Bank.
10. Modification; Waiver; Amendments,. No provision of this Agreement
may be modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing and signed by the parties hereto. No waiver by
either party hereto, at any time, or any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provision or
conditions at the same or at any prior or subsequent time. No amendments or
additions to this Agreement shall be binding unless in writing and signed by
both parties, except as herein otherwise provided.
11. Applicable Law. This Agreement shall be governed in all respects,
whether as to validity, construction, capacity, performance or otherwise, by the
laws of North Carolina.
12. Severability. The provisions of this Agreement shall be deemed
several and the invalidity or unenforceability of any provision shall not affect
the validity or enforceability of the other provisions hereof.
13. Entire Agreement. This Agreement contains the entire agreement of
the parties with respect to the transactions described herein and supersedes any
and all other oral or written agreement(s) heretofore made, and there are no
representations or inducements by or to, or any agreements between, any of the
parties hereto other than those contained herein in writing.
IN WITNESS WHEREOF, the parties have executed this Agreement under seal
to be effective as of the day and year first hereinabove written.
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Signed: Lee Johnson, Jr. Date___________
COMPANY NAME:
MECHANICS AND FARMERS BANK
-----------------------------------------
By: J. W. Taylor, Chairman, President/CEO
Date_____________
(CORPORATE SEAL)
Date
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By: Fohliette W. Becote
Corporate Secretary
