EXHIBIT 10.1

COMPREHENSIVE EQUITY COMPENSATION PLAN
FOR DIRECTORS AND EMPLOYEES

DIRECTOR FEE DEFERRAL AGREEMENT

LSB BANCSHARES, INC.

Participant’s Name: _________________________

Year: 200___

     THIS DIRECTOR FEE DEFERRAL AGREEMENT (“Deferral Agreement”) is between LSB
Bancshares, Inc., a North Carolina corporation (the “Company”), and the
Participant named above (“Participant”). This Deferral Agreement together with
any attachments is an “Award Agreement” within the meaning of and made pursuant
and subject to the provisions of the LSB Bancshares, Inc. Comprehensive Equity
Compensation Plan for Directors and Employees (the “Equity Plan”), a copy of
which has been furnished to Participant. All capitalized terms used but not
defined herein have the same meaning given them in the Equity Plan.

Deferral Election

Instructions to Participant: To defer Board retainers, select A; to defer Board
meeting fees, select B (you may select both A and B if you wish). Choose C if
you do not wish to defer Board meeting fees or quarterly retainers. (To make
your selection(s), put an “X” in the brackets of your choice or choices below.)

         
A.
  Deferral of Quarterly Retainers
 
       

  o   For the year specified above, I hereby elect to defer all of the Quarterly
Retainers not yet earned to which I will become entitled for such year.
 
       
B.
  Deferral of Meeting Fees
 
       

  o   For the year specified above, I hereby elect to defer all of the Board of
Directors Meeting Fees not yet earned to which I will become entitled for such
year.
 
       
C.
  No Deferral of Quarterly Retainers or Meeting Fees
 
       

  o   For the year specified above, I hereby elect not to defer any Quarterly
Retainers or Meeting Fees for such year, but rather to be paid all Quarterly
Retainers and Meeting Fees to which I will become entitled for such year as and
when such amounts are otherwise payable to me by the Company.

 

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Deferred Stock Units

     The Quarterly Retainers and Board Meeting Fees deferred pursuant to this
Deferral Agreement will be converted into Deferred Stock Units in accordance
with the additional provisions established by the Committee and described in
Exhibit A attached hereto and incorporated herein by reference (the “Deferral
Provisions”). Deferred Stock Units may be redeemed and paid only as provided in
the Deferral Provisions and the Equity Plan.

Effective Date

     This Deferral Agreement shall be effective as of the later of (a) the date
of execution below, or (b) the date on which the Committee approves this
Deferral Agreement and the final form of the Deferral Provisions. The
undersigned Participant may revoke this Deferral Agreement by delivering written
notice of revocation to the Company’s Chief Financial Officer or Secretary no
later than 5:00 p.m. Eastern Standard Time on December 31, 2004.

Acknowledgment and Agreement

     By signing this Deferral Agreement, I agree to be bound by all the terms
and provisions of this Deferral Agreement, the Deferral Provisions and the
Equity Plan. I hereby acknowledge receipt of the Equity Plan and a draft of the
Deferral Provisions and I understand and acknowledge that the final Deferral
Provisions attached hereto as Exhibit A will reflect such changes as the
Committee or its designee may approve. I understand that no monies or Shares
will be set aside in trust in my name with respect to any of my deferrals or any
Deferred Stock Units credited to my account under the Deferral Provisions, and
that I will at all times be an unsecured creditor of the Company with respect to
benefits that may become payable hereunder.

         

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Date
  Director
 
       

  Address:    

     

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Return your completed Fee Deferral Agreement to the Committee, care of:
Mr. Monty Oliver
LSB Bancshares, Inc.
One LSB Plaza
Lexington, North Carolina 27292

Approval/Rejection of Election

     The Committee hereby (please check one box): o accepts o rejects the
deferral elections contained herein.

     

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Date
  Authorized Signer on Behalf of Committee

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EXHIBIT A

DEFERRAL PROVISIONS ASSOCIATED WITH

DIRECTOR FEE DEFERRAL AGREEMENT

ARTICLE 1
PARTICIPATION

     Section 1.1 Applicability. The Committee has established a form of Director
Fee Deferral Agreement (“Deferral Agreement”) to provide a vehicle for members
of the Board (each, a “Participant”) to defer receipt of quarterly retainers
(“Quarterly Retainers”) and/or regular monthly meeting fees (“Meeting Fees”) for
serving on the Board. Absent a deferral election, the aggregate amount of the
Participant’s Quarterly Retainers and Meeting Fees for a calendar year are
generally paid in full in a single payment during the first calendar quarter of
such year.

     Section 1.2 Deferral Elections. The Participant may elect to defer receipt
of Quarterly Retainers and/or Meeting Fees by filing a completed Deferral
Agreement with the Committee in accordance with the provisions of this Section.
The Participant must file the Deferral Agreement with the Committee prior to the
first day of the calendar year for which it is to be effective (the “Deferral
Year”). The Deferral Agreement shall, to the extent set forth therein, apply
only to Quarterly Retainers and/or Meeting Fees payable in the Deferral Year but
not yet earned by the Participant and to which he has not yet become entitled at
the time he files his Deferral Agreement with the Committee. Once filed in
accordance with this paragraph, the Participant’s Deferral Agreement shall
remain in effect for the entire Deferral Year and shall expire on December 31 of
the Deferral Year or, if earlier, on the effective date of the Participant’s
termination of Service as a member of the Board.

     Section 1.3 Crediting Deferred Stock Units to the Participant’s Account.
The Committee shall establish and maintain a separate bookkeeping account for
each Participant who defers Quarterly Retainers or Meeting Fees under the
Deferral Agreement. Whenever payment of a Quarterly Retainer or Meeting Fee is
deferred pursuant to a Participant’s Deferral Agreement (a “Deferral Date”), the
Committee shall credit to the Participant’s account the number of Deferred Stock
Units equal to:

         (a) the dollar amount deferred on the Deferral Date, divided by      
     (b) the Fair Market Value of a Share on the Deferral Date as determined by
the Committee in its sole and absolute discretion.

For purposes hereof, each “Deferred Stock Unit” is a bookkeeping entry
representing a single or fractional Share, as applicable.

     Section 1.4 Crediting Dividend Equivalents. Whenever the Company pays a
dividend on its Shares, the Committee shall credit to the Participant’s account
the number of Deferred Stock Units equal to:

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         (a) in the case of a dividend paid in Shares,

         (i) the number of Shares the Participant would have received had he
been the record owner on the dividend record date of actual Shares represented
by the Deferred Stock Units credited to his account on such record date, as
determined by the Committee, divided by            (ii) the Fair Market Value of
a Share on the record date as determined by the Committee in its sole and
absolute discretion.

         (b) in the case of a dividend paid in cash,

         (i) the amount of cash dividends that the Participant would have
received had he been the record owner on the dividend record date of actual
Shares represented by the Deferred Stock Units credited to his account on such
record date, as determined by the Committee, divided by            (ii) the Fair
Market Value of a Share on the record date as determined by the Committee in its
sole and absolute discretion.

     Section 1.5 Statement of Account. As soon as administratively practicable
following the Participant’s written request, the Committee shall provide to him
a statement showing the number of Deferred Stock Units credited to his account.
Notwithstanding the foregoing, the Committee is not required to provide a
written statement more than once per year.

ARTICLE 2
BENEFIT PAYMENTS

     Section 2.1 Termination of Service. Upon a Participant’s termination of
Service on the Board for any reason other than death, the Participant shall be
entitled to receive payment with respect to the Deferred Stock Units credited to
his account as provided in this Section. At the time of payment, the Company
shall redeem the Participant’s Deferred Stock Units by delivering to the
Participant one Share for each one Deferred Stock Unit. Except as provided in
Section 2.3, the Company shall deliver the Shares payable under this Section in
a single transaction as soon as administratively practicable in the calendar
year immediately following the year in which the Participant terminates Service.
Notwithstanding the foregoing:

         (a) if the Participant is a “specified employee” within the meaning of
Code Section 409A(a)(2)(B)(i), delivery of such Shares shall not occur before
the date which is six months after the date of such termination of Service; and
           (b) delivery of such Shares shall not occur in any event prior to the
Participant’s “separation from service” within the meaning of Code
Section 409A(a)(2)(A)(i).

     Section 2.2 Survivor Benefits. If a Participant dies while in Service on
the Board, the Participant’s Beneficiary shall be entitled to receive payment
with respect to the Deferred Stock Units credited to the Participant’s account
as provided in this Section. At the time of payment,

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the Company shall redeem the Deferred Stock Units credited to the Participant’s
account by delivering to the Beneficiary one Share for each one Deferred Stock
Unit. Except as provided in Section 2.3, the Company shall deliver the Shares
payable under this Section in a single transaction as soon as administratively
practicable in the calendar year immediately following the year in which the
Participant dies.

     Section 2.3 Installment Payout Election. Notwithstanding the provisions of
Sections 2.1 and 2.2, a Participant who makes an installment payout election in
accordance with this Section 2.3 shall have his Deferred Stock Units redeemed
into Shares and delivered in five substantially equal annual installments
(subject to adjustments on account of the continuing crediting of dividend
equivalents pursuant to Section 1.3) beginning at the time specified in
Section 2.3(b)(i) or 2.3(b)(ii), as applicable. The following rules shall apply
to installment payout elections:

         (a) A Participant who desires to have his benefits paid in installments
must complete and file with the Committee, at least 12 months prior to the date
benefits would have otherwise been payable under Section 2.1 or 2.2, an
installment payout election in such form as the Committee may require.      
     (b) If the Participant makes a timely election pursuant to Section 2.3(a),
installment payments shall commence:

         (i) in the case of benefits payable pursuant to an event described in
Section 2.1, five years after the date the benefits would have otherwise been
payable under Section 2.1; or            (ii) in the case of benefits payable
pursuant to an event described in Section 2.2, on the date the benefits would
have otherwise been payable under Section 2.2 or, if later, 12 months after
filing of the installment payout election.

         (c) A Participant’s installment payout election will not apply if the
Participant has fewer than 1,000 Deferred Stock Units credited to his account at
the time of his termination of Service.            (d) If the Participant dies
while receiving installments but before receiving the last payment due, the
remaining benefit payments shall be paid to the Participant’s Beneficiary in the
same manner as they would have been paid to the Participant. If the
Participant’s Beneficiary dies while receiving installments but before receiving
the last payment due, the remaining benefit payments shall be paid in a lump sum
to the Beneficiary’s estate.

     Section 2.4 Payment Before Service as Director Terminates. Except as
permitted in Section 2.5, benefits are not payable prior to the Participant’s
termination of Service.

     Section 2.5 Hardship Withdrawals. Notwithstanding any other provision
hereof, a Participant may apply for early payment with respect to some or all of
his Deferred Stock Units in the event of an unforeseeable emergency. An
“unforeseeable emergency” is a severe financial hardship to the Participant
resulting from an illness or accident of the Participant, his spouse, or a

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dependent of the Participant (as defined in Code Section 152(a); loss of the
Participant’s property due to casualty; or other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the control of
the Participant. If the Committee determines in its discretion that the
Participant has experienced an unforeseeable emergency, the Committee may direct
the Company to redeem some or all of his Deferred Stock Units by issuing or
delivering to the Participant Shares having a Fair Market Value not exceeding
the amount necessary to satisfy the emergency plus amounts necessary to pay
taxes reasonably anticipated as a result of the early payment, and to deliver
such Shares to the Participant. In determining the amount necessary to satisfy
the emergency, the Committee shall take into account the extent to which the
Participant’s hardship is or may be relieved through reimbursement or
compensation by insurance or otherwise or by liquidation of the Participant’s
assets (to the extent the liquidation of such assets would not itself cause
severe financial hardship). The Participant must apply to the Committee for an
early payment pursuant to this Section 2.5 in such form and in accordance with
such procedures as the Committee shall prescribe.

     Section 2.6 Payment in Shares. Payments hereunder shall be made in whole
Shares. Fractional shares shall not be issuable hereunder, and when any
provision hereof would otherwise entitle the Participant to receive a fractional
share the Fair Market Value of such fractional share shall be paid to the
Participant in cash.

     Section 2.7 Certain Equity Plan Provisions Inapplicable. The provisions of
Section 9(c) of the Equity Plan shall not apply to the Participant’s Deferral
Agreements or these Deferral Provisions.

ARTICLE 3
BENEFICIARY

     Each Participant shall have the right, at any time, to designate a
beneficiary or beneficiaries (each a “Beneficiary”) who will receive any
payments with respect to any Deferred Stock Units remaining in the Participant’s
account at the time of his death. The Participant’s Beneficiary designation
shall become effective only when filed in writing with the Committee during the
Participant’s lifetime on a form prescribed by the Committee. The filing of a
new Beneficiary designation form will cancel all Beneficiary designations
previously filed by the Participant. If the Participant fails to designate a
Beneficiary, or if he revokes his Beneficiary designation without executing a
new designation, or if the designated Beneficiary predeceases the Participant,
then the Company shall deliver any payments due on account of the Participant’s
death to the Participant’s estate.

ARTICLE 4
AMENDMENT AND TERMINATION OF AWARD AGREEMENT

     Section 4.1 Amendment or Termination. The Committee may at any time and
from time to time amend the provisions hereof, cease allowing Participants to
defer fees pursuant hereto, or terminate all aspects of this arrangement in its
entirety; provided, however, that no such action shall retroactively decrease
the benefits payable to any Participant or Beneficiary under any existing
Deferral Agreement.

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     Section 4.2 Notice of Amendment or Termination. Within 60 days following a
Committee action pursuant to Section 4.1, the Committee shall give written
notice thereof to the Participant.

     Section 4.3 Payments Upon Termination. Upon the Committee’s decision to
terminate all aspects of this arrangement in its entirety or to cease allowing
Participants to defer fees pursuant hereto, as of the last day of the calendar
year in which the decision becomes effective each Participant’s Deferral
Agreement shall be of no further force and effect and no additional Deferred
Stock Units may be credited to his account for any reason but, rather, his
Quarterly Retainers and Meeting Fees will thereafter be payable to him when
earned. In addition, to the extent permitted by Code Section 409A and applicable
guidance thereunder without triggering adverse tax consequences to the
Participant or his Beneficiary (other than inclusion of amounts payable in
taxable income in the year of termination), the Company shall redeem the
Participant’s Deferred Stock Units into Shares and deliver such Shares to the
Participant as soon as administratively practicable following the date of such
termination. If the Company does not redeem the Participant’s Deferred Stock
Units into Shares in accordance with the prior sentence, such Deferred Stock
Units will be payable to the Participant in accordance with the other terms and
conditions hereof.

ARTICLE 5
MISCELLANEOUS

     Section 5.1 Notices. Any notice or other communication given pursuant
hereto shall be in writing and shall be personally delivered, sent by overnight
delivery service, or mailed by United States registered or certified mail,
postage prepaid, return receipt requested, to the following addresses:

     
If to the Company:
  LSB Bancshares, Inc.

  One LSB Plaza

  Lexington, North Carolina 27293-0867

  Attention: Secretary
 
   
If to Participant:
  Participant’s address of record with the Company. (Participant agrees to
notify the Company of any change of address)

Notwithstanding the foregoing, the Company in its discretion may allow the
Participant to provide any notice or other communication pursuant to this
Agreement in another form, including but not limited to oral or electronic form.

     Section 5.2 Interpretation of Deferral Agreement and Deferral Provisions
Consistent with Deferred Compensation Rules. The Committee intends that amounts
deferred by the Participant under a Deferral Agreement shall not be included in
the Participant’s income for federal, state or local income tax purposes until
benefits are actually paid or delivered to the Participant. Accordingly, the
Deferral Agreement and any installment payout or other election hereunder shall
be interpreted and administered consistently with the requirements of Code
Section 409A, as amended or supplanted from time to time, and current and future
Internal

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Revenue Service guidance thereunder. Notwithstanding any provision hereof or
within the Participant’s Deferral Agreement to the contrary, the Committee shall
have the power to amend these Deferral Provisions from time to time without the
consent of any other party to the extent the Committee deems necessary or
appropriate to preserve the intended tax treatment of amounts deferred under a
Deferral Agreement and/or installment payout or other election hereunder.

     Section 5.3 Unsecured General Creditor. Each Deferral Agreement is an
unfunded arrangement providing deferred compensation benefits. Neither the
Participant nor his Beneficiaries shall have any legal or equitable right,
interest or claim in any specific property or assets of the Company, nor shall
the Participant or his Beneficiaries have any rights, claims or interests in any
life insurance policies, Shares or other assets (or the proceeds therefrom)
owned or which may be acquired by the Company. The assets of the Company shall
not be held under any trust for the benefit of the Participant or his
Beneficiaries or held in any way as security for the fulfillment of the
obligations of the Company hereunder. With respect to benefits payable under a
Deferral Agreement and/or installment payout election, the Participant and his
Beneficiaries are and shall remain unsecured general creditors of the Company.

     Section 5.4 Nonassignability. Neither a Participant nor any other person
shall have any right to commute, sell, assign, transfer, pledge, anticipate,
mortgage or otherwise encumber, hypothecate or convey in advance of actual
receipt any benefits payable under a Deferral Agreement and/or installment
payout election and all rights created herein are expressly declared to be
non-assignable and nontransferable. No part of the benefits payable under a
Deferral Agreement and/or installment payout election shall, prior to actual
payment, be subject to seizure or sequestration for the payment of any debts,
judgments, alimony or separate maintenance owed by a Participant or any other
person, nor shall any such benefits be transferable by operation of law in the
event of a Participant’s or any other person’s bankruptcy or insolvency.

     Section 5.5 Obligations to Company. At the time benefits are payable to the
Participant or Beneficiary pursuant to Article 2, any amount due to the Company
from the Participant may be deducted from such benefits. Such determination
shall be made by the Committee.

     Section 5.6 No Shareholder Rights. The Participant shall not have any
shareholder rights with respect to Deferred Stock Units credited to his account
pursuant hereto.

     Section 5.7 No Entitlement or Claims for Compensation. The deferral of fees
contemplated hereby is wholly discretionary in nature and is not to be
considered part of the Participant’s normal or expected compensation subject to
severance, resignation, redundancy or similar compensation.

     Section 5.8 Change in Capital Structure. The Deferred Stock Units are
subject to adjustment by the Committee as provided in the Equity Plan, including
but not limited to Section 5(e) thereof.

     Section 5.9 Governing Law. This Agreement shall be governed by the internal
laws of the State of North Carolina.

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     Section 5.10 Compliance with Laws. The issuance of Shares upon redemption
of Deferred Stock Units shall be subject to compliance by the Company and the
Participant with all applicable requirements of law relating thereto and with
all applicable regulations of the Nasdaq National Market (or any stock exchange
or automated trading system on which the Shares may be listed and trading at the
time of such issuance). The inability of the Company to obtain approval from any
regulatory body having authority deemed by the Company to be necessary to the
lawful issuance and delivery of any Shares pursuant hereto shall relieve the
Company of any liability with respect to the non-issuance or delivery of the
Shares as to which such approval shall not have been obtained. The Company,
however, shall use its reasonable efforts to obtain all such approvals.

     Section 5.11 Conflicts. In the event of any conflict between the provisions
of the Equity Plan as in effect on the date hereof and the provisions of these
Deferral Provisions, the provisions of the Equity Plan shall govern. All
references herein to the Equity Plan shall mean the Equity Plan as in effect on
the date hereof.

     Section 5.12 Binding Effect. Subject to the limitations stated above and in
the Equity Plan, these Deferral Provisions shall be binding upon and inure to
the benefit of the legatees, distributees, and personal representatives of the
Participant and the successors of the Company.

     IN WITNESS WHEREOF, the Company’s Stock Option and Compensation Committee,
by its duly authorized Chairman, has executed this instrument.

         
 
  LSB BANCSHARES, INC.
STOCK OPTION AND COMPENSATION COMMITTEE
 
       

  By:    

     

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      R. B. Smith, Chairman
 
       

  Date:    

     

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