Execution Version

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (this “Agreement”) dated as of March 13, 2016, is made
by and between Horry County State Bank, a South Carolina state-chartered
commercial bank (the “Bank” and the “Employer”), which is a wholly owned
subsidiary of HCSB Financial Corporation, a South Carolina corporation (the
“Company”), and J. Ricky Patterson, an individual resident of South Carolina
(the “Executive”).

 

WHEREAS, the Employer is engaged in the business of commercial banking, and the
Executive is knowledgeable with respect to, and experienced in, that business
and the Employer desires to employ the Executive, and the Executive is willing
to serve, as Executive Vice President and Chief Operating Officer of the Bank on
the terms and conditions herein provided;

 

WHEREAS, this Agreement will become effective immediately upon such time that
the Bank shall have obtained all requisite approvals or nonobjections from its
regulatory agencies for the Executive to begin service as Executive Vice
President and Chief Operating Officer of the Bank on the terms and conditions
herein provided (the “Effective Time”); and

 

WHEREAS, certain terms used in this Agreement are defined in Section 18 hereof.

 

In consideration of the foregoing, the mutual covenants contained herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, hereby
agree as follows:

 

1.      Employment. The Employer shall employ the Executive, and the Executive
shall serve the Employer, as Executive Vice President and Chief Operating
Officer of the Bank upon the terms and conditions set forth herein. The
Executive shall have such authority and responsibilities consistent with his
positions as are set forth in the Bank’s Bylaws or assigned by the Bank’s Board
of Directors (the “Board”) from time to time. The Executive shall report to the
Board and shall devote his full business time, attention, skill and efforts to
the performance of his duties hereunder, except during (i) periods of illness or
periods of vacation and leaves of absence consistent with Employer policy and
(ii) periods of service as a referee for the National Football League. The
parties acknowledge that the Executive currently serves and will continue to
serve as a referee and agree to use reasonable efforts to minimize any business
disruptions for the Employer or Executive related to the Executive’s service as
a referee. Further, the Executive’s service on the boards of directors (or
similar body) of other business or charitable entities is subject to the prior
approval of the Board. The Employer shall have the right to require the
Executive to resign from any board or similar body on which the Executive may
then serve if the Board determines that such activity (i) interferes with the
effective discharge of the Executive’s duties and responsibilities to the
Employer or that any business related to such service is then in competition
with any business of the Bank, its successors or assigns or (ii) could adversely
affect the reputation of the Bank.

 

2.      Term. Unless earlier terminated as provided herein, the Executive’s
employment under this Agreement shall be for the period commencing upon the
Effective Date of this Agreement and ending on the third anniversary of the
Effective Date of this Agreement. On each anniversary of the effective date of
this Agreement, the term hereof shall automatically be extended for an
additional one-year period beyond the then-effective expiration date unless a
written Notice of Termination from the Employer or the Executive is received 90
days prior to such anniversary advising the other that this Agreement shall not
be further extended. If either party provides timely notice of non-renewal of
the Agreement, but the Executive continues to provide services to the Employer
as an employee, such post-expiration employment shall be deemed to be performed
on an “at-will” basis and either party may thereafter terminate such employment
with or without notice and for any or no reason and without any obligations
determined by reference to this Agreement.

 

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3.      Compensation and Benefits.

 

(a)      As of the Effective Date, the Employer shall pay the Executive an
annual base salary rate of $200,000, which shall be paid in accordance with the
Employer’s standard payroll procedures. The Board (or an appropriate committee
of the Board) shall evaluate the Executive’s performance at least annually and
make compensation adjustments as determined by the Board based on its evaluation
of the Executive’s performance.

 

(b)      The Executive shall be eligible each year to receive a cash bonus
equaling up to 20% of his annual base salary if the Employer achieves certain
performance levels established from time to time by the Board. Any bonus payment
made pursuant to this Section 3(b) shall be made the earlier of (i) 70 days
after the previous year end for which the bonus was earned by the Executive and
became a payable of the Employer or (ii) the first pay period following the
Company’s press release announcing its previous year’s financial performance.

 

(c)      The Executive shall be eligible to participate in the Company’s
long-term equity incentive program and for the grant of stock options,
restricted stock, and other awards thereunder or under any similar plan adopted
by the Company. The Board anticipates adopting an appropriate equity incentive
plan in which the Company’s and the Bank’s employees will be eligible to
participate. The Board anticipates granting to Employee significant
to-be-determined equity award(s) under such plan. The award agreements for such
equity award(s) would vest upon achievement of certain performance and time
vesting metrics and would contain other customary terms and conditions. Any
options or similar awards shall be issued to the Executive at an exercise price
of not less than the stock’s current fair market value (as determined in
compliance with Treasury Regulation § 1.409A-1(b)(5)(iv)) as of the date of
grant, and the number of shares subject to such grant shall be fixed on the date
of grant.

 

(d)      In addition to the benefits specifically described in this Agreement,
the Executive shall be eligible to participate in all retirement, welfare,
health or other benefits plans or programs of the Employer now or hereafter
applicable generally to employees of the Employer or to a class of employees
that includes senior executives of the Employer. The parties agree that the
benefits stated in this Section 3(d) shall be subject to the terms of such plans
or programs applicable generally to employees of the Employer or to a class of
employees that includes senior executives of the Employer.

 

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(e)      The Employer shall reimburse the Executive for reasonable and necessary
travel, mobile cellular and data plan, and other business expenses related to
the Executive’s duties in accordance with the Employer’s business expense
reimbursement policy; provided however that the Executive shall, as a condition
of any such reimbursement, submit verification of the nature and amount of such
expenses in accordance with such reimbursement policies and in sufficient detail
to comply with rules and regulations promulgated by the United States Treasury
Department. In addition, the Employer shall reimburse the Executive for
educational expenses related to the Executive’s professional development and for
membership in professional and civic organizations to the extent such activities
are consistent with the Employer’s strategic objectives.

 

All expenses eligible for reimbursements described in this Agreement must be
incurred by the Executive during the Term of this Agreement to be eligible for
reimbursement. All in-kind benefits described in this Section 3 must be provided
by the Employer during the Term of this Agreement. The amount of reimbursable
expenses incurred, and the amount of in-kind benefits provided, in one taxable
year shall not affect the expenses eligible for reimbursement, or in-kind
benefits provided, in any other taxable year. Each category of reimbursement
shall be paid as soon as administratively practicable, but in no event shall any
such reimbursement be paid after the last day of the calendar year following the
calendar year in which the expense was incurred. Neither rights to reimbursement
nor in-kind benefits are subject to liquidation or exchanges for other benefits.

 

(f)      The Employer shall provide Executive with a $500 monthly automobile
allowance, paid in accordance with Employer’s standard payroll procedures, but
in any case, no less frequently than monthly.

 

(g)      The Employer shall provide the Executive with four weeks’ paid vacation
per year, which shall be taken in accordance with (i) any banking rules or
regulations governing vacation and (ii) the Employer’s vacation or other paid
time off policy. The parties agree that reasonable periods of service as a
referee for the National Football League during the business week shall not be
deemed vacation days under the Employer’s vacation or other paid time off
policy. Any payments made by the Employer to the Executive as compensation for
paid vacation shall be paid in accordance with the Employer’s standard payroll
procedures.

 

(h)       The Executive agrees to repay any compensation previously paid or
otherwise made available to the Executive under this Agreement that is subject
to recovery under any applicable law (including any rule of any exchange or
service through which the securities of the Company are then traded), including,
but not limited to, the following circumstances:

 

(i)      where such compensation was in excess of what should have been paid or
made available because the determination of the amount due was based, in whole
or in part, on materially inaccurate financial information of the Company or the
Bank, including but not limited to, when the Company or the Bank shall have a
restatement of financial results attributable to the Executive’s actions,
whether intentional or negligent;

 

(ii)      where such compensation constitutes “excessive compensation” within
the meaning of 12 C.F.R. Section 263;

 

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(iii)      where the Executive has committed, is substantially responsible for,
or has violated, the respective acts, omissions, conditions, or offenses
outlined under 12 C.F.R. Section 359.4(a)(4); and

 

(iv)      if, while the Executive is also a senior executive officer of the
Bank, the Bank becomes, and for so long as the Bank remains, subject to the
provisions of 12 U.S.C. Section 1831o(f), where such compensation exceeds the
restrictions imposed on the senior executive officers of such an institution.

 

The Executive agrees to return promptly any such compensation identified by the
Employer by written notice provided pursuant to Section 11. If the Executive
fails to return such compensation promptly, the Executive agrees that the amount
of such compensation may be deducted from any and all other compensation owed to
the Executive by the Employer. If the Executive is then employed by the
Employer, the Executive acknowledges that the Employer may take appropriate
disciplinary action (up to, and including, Termination of Employment) if the
Executive fails to return such compensation. The Executive acknowledges the
Employer’s rights to engage in any legal or equitable action or proceeding in
order to enforce the provisions of this Section 3(h). The provisions of this
Section 3(h) shall be modified to the extent, and remain in effect for the
period, required by applicable law.

 

4.      Termination.

 

(a)      The Executive’s employment under this Agreement may be terminated prior
to the end of the term of this Agreement, if applicable, only as follows (each a
“Terminating Event”):

 

(i)      upon the death of the Executive. If the Executive’s employment is
terminated because of the Executive’s death, the Employer shall pay the
Executive’s estate any sums due his as base salary or reimbursement of expenses
through the end of the month during which death occurred in accordance with the
Employer’s standard payroll procedures. The Employer shall also pay the
Executive’s estate any bonus earned through the date of death. Any bonus for
previous years which was not yet paid will be paid pursuant to the terms as set
forth in Section 3(b) of this Agreement. Any bonus that is earned in the year of
death will be paid on the earlier of (i) 70 days after the year end in which the
Executive died or (ii) the first pay period following the Company’s press
release announcing its financial performance for the year in which the Executive
died. To the extent that the bonus is performance-based, the amount of the bonus
will be calculated by taking into account the performance of the Company or the
Bank for the entire year and prorated through the date of the Executive’s death.

 

(ii)      upon the Disability of the Executive for a period of 90 days, which
includes any period of payment under the Employer’s accident and health plan.
During the period of any Disability leading up to the termination of the
Executive’s employment under this provision, the Employer shall continue to pay
the Executive his full base salary at the rate then in effect and all
perquisites and other benefits (other than any bonus) in accordance with the
Employer’s standard payroll procedures until the Executive becomes eligible for
benefits under any long-term disability plan or insurance program maintained by
the Employer; provided, however that, the amount of any such payments to the
Executive shall be reduced by the sum of the amounts, if any, payable to the
Executive for the same period under any other disability benefit or pension plan
covering the Executive. Furthermore, the Employer shall pay the Executive any
bonus earned through the date of onset of the physical or mental impairment that
led to the Disability. Any bonus for previous years which was not yet paid will
be paid pursuant to the terms as set forth in Section 3(b) of this Agreement.
Any bonus that is earned in the year which includes the date of onset of the
physical or mental impairment that led to the Disability will be paid on the
earlier of (i) 70 days after the year end in which the Executive became Disabled
or (ii) the first pay period following the Company’s press release announcing
its financial performance for the year in which the Executive became Disabled.

 

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(iii)      by the Employer for Cause upon delivery of a Notice of Termination to
the Executive. If the Executive’s employment is terminated for Cause under this
provision, the Executive shall receive only any sums due his as base salary and
reimbursement of expenses through the date of such termination, which shall be
paid in accordance with the Employer’s standard payroll procedures.

 

(iv)       by the Employer without Cause upon delivery of a Notice of
Termination. If the Executive’s employment is terminated without Cause under
this provision, the Executive shall receive any sums due him as base salary or
reimbursement of expenses through the date of such termination, which shall be
paid in accordance with the Employer’s standard payroll procedures.

 

(v)      by the Executive effective upon the 30th day after delivery of a Notice
of Termination. If the Executive resigns under this provision, the Executive
shall receive any sums due him as base salary or reimbursement of expenses
through the date of such termination, which shall be paid in accordance with the
Employer’s standard payroll procedures.

 

(b)      With the exceptions of the provisions of this Section 4, and the
express terms of any benefit plan under which the Executive is a participant, it
is agreed that, upon termination of the Executive’s employment, the Employer
shall have no obligation to the Executive for, and the Executive waives and
relinquishes, any further compensation or benefits (exclusive of COBRA
benefits). Unless otherwise stated in this Section 4, the effect of termination
on any outstanding incentive awards, stock options, stock appreciation rights,
performance units, or other incentives shall be governed by the terms of the
applicable benefit or incentive plan and/or the agreements governing such
incentives. Within 60 days of termination of the Executive’s employment, and as
a condition to the Employer’s obligation to pay any severance hereunder, the
Employer and the Executive shall enter into a release in the form provided by
the Employer, and Executive may not revoke such release within the revocation
period stated in such release, which shall acknowledge such remaining
obligations and discharge the Employer and its officers, directors and employees
with respect to their actions for or on behalf of the Employer, from any other
claims or obligations arising out of or in connection with the Executive’s
employment by the Employer, including the circumstances of such termination. In
addition, if such severance payment is made by the Employer, and if the 60 day
period spans two calendar years, regardless of when such release is executed by
the Executive, such severance payment must be made in the subsequent calendar
year, regardless of when the release is executed by the Executive.

 

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(c)      Notwithstanding anything contained in this Agreement to the contrary,

 

(i)       if the Executive is suspended or temporarily prohibited from
participating, in any way or to any degree, in the conduct of the Company’s or
the Bank’s affairs by (1) a notice served under Section 8(e) or (g) of Federal
Deposit Insurance Act (“FDIA”) (12 U.S.C. Section 1818 (e) or (g)) or (2) as a
result of any other regulatory or legal action directed at the Executive by any
regulatory or law enforcement agency having jurisdiction over the Executive
(each of the foregoing referred to herein as a “Suspension Action”), and if this
Agreement is not terminated, the Employer’s obligations under this Agreement
shall be suspended as of the earlier of the effective date of such Suspension
Action or the date on which the Executive was provided notice of the Suspension
Action, unless stayed by appropriate proceedings. If the charges underlying the
Suspension Action are dismissed, the Employer shall (i)       pay on the first
day of the first month following such dismissal of charges (or as provided
elsewhere in this Agreement) the Executive all of the compensation withheld
while the obligations under this Agreement were suspended; and (ii) reinstate
any such obligations which were suspended.

 

(ii)      if the Executive is removed or permanently prohibited from
participating, in any way or to any degree, in the conduct of the Company’s or
the Bank’s affairs by (1) an order issued under Section 8(e)(4) or (g)(1) of the
FDIA (12 U.S.C. Section 1818 (e)(4) or (g)(1)) or (2) any other legal or law
enforcement action (each of the foregoing referred to herein as a “Removal
Action”), all obligations of the Executive under this Agreement shall terminate
as of the effective date of the Removal Action, but any vested rights of the
parties hereto shall not be affected.

 

(iii)      if the Company or the Bank is in default (as defined in Section
3(x)(1) of the FDIA, 12 U.S.C. Section 1813(x)(1)), all obligations under this
Agreement shall terminate as of the date of default, but this Section (4)(f)
shall not affect any vested rights of the parties hereto.

 

(iv)      if the FDIC is appointed receiver or conservator under Section 11(c)
of the FDIA (12 U.S.C. Section 1821(c)) of the Bank, the Company shall have the
right to terminate all obligations of the Company under this Agreement as of the
date of such receivership or conservatorship, other than any rights of the
Executive that vested prior to such appointment. Any vested rights of the
Executive may be subject to such modifications that are consistent with the
authority of the FDIC.

 

(d)      If the FDIC provides open bank assistance under Section 13(c) of the
FDIA (12

U.S.C. 1823(c)) to the Company or the Bank, but excluding any such assistance
provided to the industry generally, the Employer shall have the right to
terminate all obligations of the Employer under this Agreement as of the date of
such assistance, other than any rights of the Executive that vested prior to the
FDIC action. Any vested rights of the Executive may be subject to such
modifications that are consistent with the authority of the FDIC.

 

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(e)      If the FDIC requires a transaction under Section 13(f) or 13(k) of the
FDIA (12 U.S.C. 1823(f) and (k)) by the Company or the Bank, the Employer shall
have the right to terminate all obligations of the Employer under this Agreement
as of the date of such transaction, other than any rights of the Executive that
vested prior to the transaction. Any vested rights of the Executive may be
subject to such modifications that are consistent with the authority of the
FDIC.

 

(f)      Notwithstanding anything contained in this Agreement to the contrary,
any payments made to the Executive pursuant to this Agreement, or otherwise, are
subject to and conditioned upon their compliance with 12 U.S.C. Section 1828(k)
and any regulations promulgated thereunder. In addition, all obligations under
this Agreement are further subject to such conditions, restrictions, limitations
and forfeiture provisions as may separately apply pursuant to any applicable
state banking laws.

 

(g)      In the event that the Company or the Bank is subject to Part 359 of the
FDIC Rules and Regulations (12 C.F.R. Section 359, et seq.), then
notwithstanding the timing for the payment of any severance amounts described in
this Section 4, no such payments shall be made or commence, as applicable, that
require the concurrence or consent of the appropriate federal banking agency of
the Company or the Bank pursuant to Part 359 prior to the receipt of such
concurrence or consent. Any payments suspended by operation of this Section 4(g)
shall be paid as a lump sum within 30 days following receipt of the concurrence
or consent of the appropriate federal banking agency of the Company or the Bank
or as otherwise directed by such federal banking agency.

 

5.      Ownership of Work Product. The Employer shall own all Work Product
arising during the course of the Executive’s employment (prior, present or
future). For purposes hereof, “Work Product” shall mean all intellectual
property rights, including all Trade Secrets, U.S. and international copyrights,
patentable inventions, and other intellectual property rights in any
programming, documentation, technology or other work product that relates to the
Company or any Affiliates, their business or customers and that the Executive
conceives, develops, or delivers to the Employer at any time during his
employment, during or outside normal working hours, in or away from the
facilities of the Employer, and whether or not requested by the Employer. If the
Work Product contains any materials, programming or intellectual property rights
that the Executive conceived or developed prior to, and independent of, the
Executive’s work for the Employer, the Executive agrees to point out the
pre-existing items to the Employer and the Executive grants the Employer a
worldwide, unrestricted, royalty-free right, including the right to sublicense
such items. The Executive agrees to take such actions and execute such further
acknowledgments and assignments as the Employer may reasonably request to give
effect to this provision.

 

6.      Protection of Trade Secrets. The Executive agrees to maintain in strict
confidence and, except as necessary to perform his duties for the Employer, the
Executive agrees not to use or disclose any Trade Secrets of the Company or any
Affiliates during or after his employment. “Trade Secret” means information,
including a formula, pattern, compilation, program, device, method, technique,
process, drawing, cost data or customer list, that (i) 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 (ii) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy.

 

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7.      Protection of Other Confidential Information. In addition, the Executive
agrees to maintain in strict confidence and, except as necessary to perform his
duties for the Employer, not to use or disclose any Confidential Business
Information of the Company or any Affiliates during his employment and for a
period of 24 months following termination of the Executive’s employment.
“Confidential Business Information” shall mean any internal, non-public
information (other than Trade Secrets already addressed above) concerning the
Company’s or its Affiliate’s financial position and results of operations
(including revenues, assets, net income, etc.); annual and long-range business
plans, product or service plans; marketing plans and methods; training,
education and administrative manuals; customer and supplier information and
purchase histories; and employee lists. The provisions of Sections 6 and 7 shall
also apply to protect Trade Secrets and Confidential Business Information of
third parties provided to the Employer under an obligation of secrecy.

 

8.      Return of Materials. The Executive shall surrender to the Employer,
promptly upon its request and in any event upon termination of the Executive’s
employment, all media, documents, notebooks, computer programs, handbooks, data
files, models, samples, price lists, drawings, customer lists, prospect data, or
other material of any nature whatsoever (in tangible or electronic form) in the
Executive’s possession or control, including all copies thereof, relating to the
Company or its Affiliates, their businesses or customers. Upon the request of
the Employer, the Executive shall certify in writing compliance with the
foregoing requirement.

 

9.      Withholding. The Employer may deduct from each payment of compensation
hereunder all amounts required to be deducted and withheld in accordance with
applicable federal and state income, FICA and other withholding requirements.

 

10.      Successors; Binding Agreement. The rights and obligations of this
Agreement shall bind and inure to the benefit of the surviving entity in any
merger or consolidation in which the Company or the Bank is a party, or any
assignee of all or substantially all of the Company’s or the Bank’s business and
properties. The Executive’s rights and obligations under this Agreement may not
be assigned by him, except that his right to receive accrued but unpaid
compensation, unreimbursed expenses and other rights, if any, provided under
this Agreement, which survive termination of this Agreement shall pass after
death to the personal representatives of his estate.

 

11.      Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered or sent by certified
mail, return receipt requested, postage prepaid, addressed to the respective
addresses last given by each party to the other; provided however that all
notices to the Employer shall be directed to the attention of the Employer with
a copy to the Chief Executive Officer. All notices and communications shall be
deemed to have been received on the date of delivery thereof.

 

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12.      Governing Law. This Agreement and all rights hereunder shall be
governed by the laws of the State of South Carolina, except to the extent
governed by the laws of the United States of America in which case federal laws
shall govern. The parties agree that any appropriate state court located in
Horry County, South Carolina or federal court for the District of South Carolina
shall have exclusive jurisdiction of any case or controversy arising under or in
connection with this Agreement shall be a proper forum in which to adjudicate
such case or controversy. The parties consent and waive any objection to the
jurisdiction or venue of such courts.

 

13.      Non-Waiver. Failure of the Employer to enforce any of the provisions of
this Agreement or any rights with respect thereto shall in no way be considered
to be a waiver of such provisions or rights, or in any way affect the validity
of this Agreement.

 

14.      Saving Clause. 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. If any
provision or clause of this Agreement, or portion thereof, shall be held by any
court or other tribunal of competent jurisdiction to be illegal, void, or
unenforceable in such jurisdiction, the remainder of such provision shall not be
thereby affected and shall be given full effect, without regard to the invalid
portion. It is the intention of the parties that, if any court construes any
provision or clause of this Agreement, or any portion thereof, to be illegal,
void, or unenforceable because of the duration of such provision or the area or
matter covered thereby, such court shall reduce the duration, area, or matter of
such provision, and, in its reduced form, such provision shall then be
enforceable and shall be enforced.

 

15.      Compliance with Internal Revenue Code Section 409A. All payments that
may be made and benefits that may be provided pursuant to this Agreement are
intended to qualify for an exclusion from Section 409A of the Code and any
related regulations or other pronouncements thereunder and, to the extent not
excluded, to meet the requirements of Section 409A of the Code. Any payments
made under Sections 3 and 4 of this Agreement which are paid on or before the
last day of the applicable period for the short-term deferral exclusion under
Treasury Regulation § 1.409A-1(b)(4) are intended to be excluded under such
short-term deferral exclusion. Any remaining payments under Sections 3 and 4 are
intended to qualify for the exclusion for separation pay plans under Treasury
Regulation § 1.409A-1(b)(9). Each payment made under Sections 3 and 4 shall be
treated as a "separate payment", as defined in Treasury Regulation §
1.409A-2(b)(2), for purposes of Code Section 409A. Further, notwithstanding
anything to the contrary, all severance payments payable under the provisions of
Section 4, if any, shall be paid to the Executive no later than the last day of
the second calendar year following the calendar year in which occurs the date of
Executive's termination of employment. None of the payments under this Agreement
are intended to result in the inclusion in Executive's federal gross income on
account of a failure under Section 409A(a)(1) of the Code. The parties intend to
administer and interpret this Agreement to carry out such intentions. However,
the Employer does not represent, warrant or guarantee that any payments that may
be made pursuant to this Agreement will not result in inclusion in the
Executive's gross income, or any penalty, pursuant to Section 409A(a)(1) of the
Code or any similar state statute or regulation. Notwithstanding any other
provision of this Agreement, to the extent that the right to any payment
(including the provision of benefits) hereunder provides for the “deferral of
compensation” within the meaning of Section 409A(d)(1) of the Code, the payment
shall be paid (or provided) in accordance with the following:

 

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(a)      If the Executive is a “Specified Employee” within the meaning of
Section 409A(a)(2)(B)(i) of the Code on the date of the Executive’s termination
(the “Separation Date”), and if an exemption from the six month delay
requirement of Code Section 409A(a)(2)(B)(i) is not available, then no such
payment that is payable on account of the Executive's termination shall be made
or commence during the period beginning on the Separation Date and ending on the
date that is six months following the Separation Date or, if earlier, on the
date of the Executive’s death. The amount of any payment that would otherwise be
paid to the Executive during this period shall instead be paid to the Executive
on the first day of the first calendar month following the end of the period.

 

(b)      Payments with respect to reimbursements of expenses or benefits or
provision of fringe or other in-kind benefits shall be made on or before the
last day of the calendar year following the calendar year in which the relevant
expense or benefit is incurred. The amount of expenses or benefits eligible for
reimbursement, payment or provision during a calendar year shall not affect the
expenses or benefits eligible for reimbursement, payment or provision in any
other calendar year.

 

16.      Compliance with the Dodd–Frank Wall Street Reform and Consumer
Protection Act. Notwithstanding anything to the contrary herein, any incentive
payments to the Executive shall be limited to the extent required under the
Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank
Act”), including, but not limited to, clawbacks for such incentive payments as
required by the Dodd-Frank Act and Section 10D of the Securities Exchange Act of
1934. The Executive agrees to such amendments, agreements, or waivers that are
required by the Dodd-Frank Act or requested by the Employer to comply with the
terms of the Dodd-Frank Act.

17.      Compliance with Regulatory Restrictions. Notwithstanding anything to
the contrary herein, and in addition to any restrictions stated above, any
compensation or other benefits paid to the Executive shall be limited to the
extent required by any federal or state regulatory agency having authority over
the Bank or, if applicable, the Company. The Executive agrees that compliance by
the Bank or the Company with such regulatory restrictions, even to the extent
that compensation or other benefits paid to the Executive are limited, shall not
be a breach of this Agreement by such entity. The Executive agrees that such
restrictions include any restrictions applicable due to the Company’s
participation in the Treasury’s Troubled Asset Relief Program - Capital Purchase
Program (the “CPP”).

 

18.      Certain Definitions.

 

(a)      “Affiliate” shall mean any business entity controlled by, controlling
or under common control with the Company, including but not limited to the Bank.

 

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(b)      “Cause” shall consist of any of (i) the commission by the Executive of
a willful act (including, without limitation, a dishonest or fraudulent act) or
a grossly negligent act, or the willful or grossly negligent omission to act by
the Executive, which is intended to cause, does cause or is reasonably likely to
cause material harm to the Company or any Affiliate (including harm to its
business reputation); (ii) the indictment of the Executive for the commission or
perpetration by the Executive of any felony or any crime involving dishonesty,
moral turpitude or fraud; (iii) the material breach by the Executive of this
Agreement that, if susceptible of cure, remains uncured 10 days following
written notice to the Executive of such breach; (iv) the receipt of any formal
written notice that any regulatory agency having jurisdiction over the Company
or the Bank intends to institute any form of formal regulatory action against
the Executive, the Company or the Bank (provided that the Board determines in
good faith, with the Executive abstaining from participating in the
consideration of and vote on the matter, that the subject matter of such action
involves acts or omissions by the Executive and further provided that, the
parties acknowledge that any regulatory action currently issued to the Company
or the Bank shall not constitute the basis for a determination of cause by the
Board); (v) the exhibition by the Executive of a standard of behavior within the
scope of his employment that is materially disruptive to the orderly conduct of
the Employer’s business operations (including, without limitation, substance
abuse or sexual misconduct) to a level which, in the Board’s good faith and
reasonable judgment, with the Executive abstaining from participating in the
consideration of and vote on the matter, is materially detrimental to the
Employer’s best interest, that, if susceptible of cure remains uncured 10 days
following written notice to the Executive of such specific inappropriate
behavior; or (vi) the failure of the Executive to devote his full business time
and attention to his employment as provided under this Agreement that, if
susceptible of cure, remains uncured 30 days following written notice to the
Executive of such failure. In order for the Board of Directors to make a
determination that termination shall be for Cause, the Board must provide the
Executive with notice of the grounds providing the purported basis for
termination and provide the Executive an opportunity to meet with the Board in
person to address the proposed grounds.

 

(c)      “Code” shall mean the Internal Revenue Code of 1986.

 

(d)      “Disability” or “Disabled” shall mean as defined by Treasury Regulation
§ 1.409A-3(i)(4); provided however that, for purposes of this definition, the
accident and health plan covering the Executive shall only be the long term
disability plan and not any other the accident and health plan.

 

(e)      “Notice of Termination” shall mean a written notice of termination from
the Employer or the Executive which specifies an effective date of termination
(not less than 30 days from the date of the notice), indicates the specific
termination provision in this Agreement relied upon and sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive’s employment under the provision so indicated.

 

(f)      “Standard payroll procedures” shall mean payment no less frequently
than monthly.

 

(g)      “Terminate,” “terminated,” “termination,” or “termination of the
Executive’s employment” shall mean separation from service as defined by
Treasury Regulation § 1.409A-1(h).

 

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19.      Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements, if any
understandings and arrangements, oral or written, including the Consulting
Agreement, between the parties hereto with respect the subject matter hereof.

 

20.      Survival. The obligations of the parties pursuant to Sections 3(h), 5
through 8, and 12, as applicable, shall survive the Executive’s Termination of
Employment hereunder for the period designated under each of those respective
sections.

 

23.       Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.

 

[signatures appear on following page]

 

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Execution Version

 

IN WITNESS WHEREOF, the Bank has caused this Agreement to be executed and its
seal to be affixed hereunto by its officers thereunto duly authorized and the
Executive has signed and sealed this Agreement, effective as of the date
described above.

 

    HORRY COUNTY STATE BANK    ATTEST:         By:     By: /s/ Jan H. Hollar    
          Name:     Name:   Jan H. Hollar                     Title: Chief
Executive Officer                                 EXECUTIVE                /s/
J. Ricky Patterson         J. Ricky Patterson  

 

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