Unassociated Document


    EMPLOYMENT
AGREEMENT

     

    THIS
EMPLOYMENT AGREEMENT (this “Agreement”) dated as of August 24, 2009, is made
among First National Bank of the South, a national bank (the “Bank”), its bank
holding company, First National Bancshares, Inc., a South Carolina corporation
(the “Company”), and J. Barry Mason, an individual resident of South Carolina
(the “Executive”). Certain terms used in this Agreement are defined in Section
17 hereof.

     

    The
Company and the Bank recognize that the Executive's contribution to their growth
and success will be paramount to the overall success of the Company and the
Bank.  The Executive is willing to serve the Bank and the Company on
the terms and conditions herein provided.  Unless otherwise specified
hereafter, any services performed by the Executive shall be for the benefit of
the Bank and therefore any payments or benefits paid to the Executive pursuant
to this Agreement shall be the sole responsibility of the Bank; provided
however, the Bank's obligation to make any payments owed to the Executive under
this Agreement shall be discharged to the extent compensation payments are made
by the Company.  The Company joins as a party to this Agreement for
the purposes of authorizing the issuance and repurchase of its common stock
pursuant to Sections 3(c) and 4(j), respectively.

     

    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
Bank and the Company shall employ the Executive, and the Executive shall serve
as President and Chief Executive Officer of the Bank and the Company upon the
terms and conditions set forth herein.  The Executive shall have such
authority and responsibilities consistent with his position as are set forth in
the Bank's or the Company's Bylaws or assigned the Bank's Board of Directors
(the “Board”) from time to time.  The Executive shall devote his full
business time, attention, skill and efforts to the performance of his duties
hereunder, except during periods of illness or periods of vacation and leaves of
absence consistent with Bank policy.  The Executive may devote
reasonable periods to service as a director or advisor to other organizations,
to charitable and community activities, and to managing his personal
investments, provided that such
activities do not materially interfere with the performance of his duties
hereunder and are not in conflict or competitive with, or adverse to, the
interests of the Company or the Bank.

     

    2.           Term.  Unless
earlier terminated as provided herein, the Executive's employment under this
Agreement shall commence on the date hereof and be for a term (the “Term”) of
three years.  At the end of the third year of the Term, unless written
notice that such term will not be extended is provided to the other party by the
Executive or the Bank at least six months prior to the end of the Term, the Term
shall be extended for an additional year.  Notwithstanding the
foregoing, the Term of employment hereunder will end on the date that the
Executive attains the retirement age, if any, specified in the Bylaws of the
Bank for directors of the Bank.


    
      
         


      

      
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    3.   
 Compensation and
Benefits.

     

    (a)           Executive's
base salary is $275,000.  The Board (or an appropriate committee of
the Board) shall review the Executive's salary at least annually and may
increase, but cannot decrease, the Executive's salary if it determines in its
sole discretion that an increase is appropriate.  The salary shall be
payable in accordance with the Bank’s normal payroll practices,
which shall mean no less frequently than monthly.

     

    (b)           (i)  Upon
execution of this Agreement, the Bank shall pay the Executive a cash bonus in
the amount of $550,000 in a single lump sum payment. The Bank also shall pay the
Executive a cash bonus in the amount of $200,000 in a single lump sum payment
within one week of the successful completion of the Bank's capital restoration
plan submitted to the OCC.

     

    (ii)  In addition, the
Executive will be eligible to receive an annual cash bonus of up to 50% of his
base salary based on the accomplishment of performance goals established in
advance each year by the Board.  Any bonus payment made pursuant to
this Section 3(b)(ii) shall be made no later seventy days after the previous
year end; provided however that, Executive acknowledges that he is required to
and shall return to the Bank all or any portion of a bonus paid to the Executive
by the Bank pursuant to this Section 3(b)(ii) if such bonus or portion of such
bonus is paid based on materially inaccurate financial statements or any other
materially inaccurate performance metric criteria.

     

    (c)           Within
one week of the execution of this Agreement, the Company shall grant to the
Executive (i) 250,000 shares of restricted common stock (no exercise price,
vesting pro rata over five years, or 20% each year) and (ii) an option to
purchase 1,000,000 shares of its common stock (exercise price equal to fair
market value on the date of the grant, which the Company believes will be
$1.00/share, ten year exercise period, vesting pro rata over three years, or 33%
each year); provided however
that upon any Change in Control that occurs after the Company and the
Bank are no longer subject to any currently pending formal or informal
regulatory enforcement action, any such restrictions on any outstanding
incentive awards (including restricted stock) granted to the Executive under the
Company's stock incentive program(s) shall lapse and such awards shall become
100% vested, all stock options and stock appreciation rights granted to the
Executive shall become immediately exercisable and shall become 100% vested, all
performance units granted to the Executive shall become 100%
vested.

    


    In
addition, the Executive shall also be eligible to participate in the Company's long-term equity
incentive programs and be eligible for additional grants of stock options,
restricted stock, and other awards under the Company's 2000 Stock Incentive
Plan, 2008 Restricted Stock Plan, or under any similar plan adopted by the Company.  Any options
or similar awards shall be issued to Executive (i) at an exercise price of not
less than the stock's current fair market value as of the date of grant and (ii)
the number of shares subject to such grant shall be fixed on the date of
grant.

    


    (d)           The
Executive shall participate in all retirement, welfare and other benefit plans
or programs of the Bank
now or hereafter applicable generally to employees of the Bank or to a
class of employees that includes senior executives of the Bank.


    
      
         


      

      
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    (e)           The
Bank shall provide the
Executive with a term life insurance policy providing for death benefits
totaling $500,000 payable to the Executive's spouse and heirs (and may provide
for additional death benefits payable to the Bank), and the Executive shall
cooperate with the Bank in the securing and maintenance of such
policy.  In addition, the Bank shall provide a separate
disability policy for the Executive with terms acceptable to the Board and the
Executive.  The Bank shall require and pay the cost of an annual
physical for the Executive.

    


    (f)             The
Bank shall provide Executive with either an automobile owned or leased by the
Bank of a make and model appropriate to the Executive's status, or a monthly
automobile allowance, which shall be paid no less frequently than
monthly.  The Bank shall provide for
reasonable expenses associated with the automobile, including, but not limited
to insurance, taxes, etc.  The Bank shall reimburse Executive for such
expenses no later than the last day of the calendar year following the calendar
year in which the expense was incurred.

     

    (g)           The
Bank shall pay on a
monthly basis Executive’s membership dues pertaining to Spartanburg Country Club
and The Piedmont Club for so long as the Executive remains the President or
Chief Executive Officer of the Company or the Bank and this Agreement remains in
force.

     

    (h)           The
Bank shall reimburse
the Executive for reasonable travel and other business development expenses
related to the Executive's duties which are incurred and accounted for in
accordance with the normal practices of the Bank.  The expenses
described in this Section 3(h) must be incurred by the Executive during the term
of this Agreement to be eligible for reimbursement.  All
reimbursements shall be paid as soon as administratively practicable, but in no
event shall any reimbursement be paid after the last day of the calendar year
following the calendar year in which the expense was incurred, nor shall the
amount of reimbursable expenses incurred in one taxable year affect the expenses
eligible for reimbursement in any other taxable year.

     

    
      4.     Termination.

    

     

    (a)           The
Executive's employment under this Agreement may be terminated prior to the end
of the Term only as provided in this Section 4.

     

    (b)           The
Agreement will be terminated upon the death of the Executive.  In this
event, the Bank shall pay the Executive's estate any sums due him as base salary
and/or reimbursement of expenses through the end of the month during which death
occurred in accordance with the Bank’s normal payroll practices, which shall
mean no less frequently than monthly. The Bank shall also pay the Executive's
estate any bonus earned or accrued through the date of death (including any
amounts awarded for previous years but which were not yet
vested).  Any bonus for previous years which was not yet paid will be
paid pursuant to the terms as set forth in Section 3(b).  Any bonus
that is earned in the year of death will be paid on the earlier of (i) seventy
days after the year end in which the Executive died or (ii) the first pay period
following the Bank's or 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 Bank and Company for the entire
year and prorated through the date of Executive's death.


    
      
         


      

      
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    (c)           The
Bank may terminate the Executive's employment upon the Disability of the
Executive for a period of 180 days.  During the period of any
Disability leading up to the Executive’s Termination of Employment under this
provision, the Bank 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 Bank's normal payroll schedule (and in no event
less frequently than monthly) until the Executive becomes eligible for benefits
under any long-term disability plan or insurance program maintained by the Bank,
provided 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 Bank shall pay the Executive any bonus
earned or accrued through the date of Disability (including any amounts awarded
for previous years but which were not yet vested).  Any bonus for
previous years which was not yet paid will be paid pursuant to the terms as set
forth in Section 3(b).  Any bonus that is earned in the year of
Disability will be paid on the earlier of (i) seventy days after the year end in
which Executive became Disabled or (ii) the first pay period following the
Bank's or Company's press release announcing its financial performance for the
year in which the Executive became Disabled.  Nothing herein shall
prohibit the Bank or Company from hiring an acting chief executive officer or
president prior to the expiration of this 180-day period.

     

    (d)           The
Bank may terminate the Executive's employment upon delivery of a Notice of
Termination to the Executive at least 30 days prior to the Executive’s date of
termination. If the Executive's employment is terminated under this provision,
the Executive shall receive only any sums due him as base salary and/or
reimbursement of expenses through the date of termination, which shall be paid
in accordance with the Bank’s normal payroll practices,
which shall mean no less frequently than monthly.  The Bank shall also
pay the Executive any bonus earned or accrued through the date of termination
(including any amounts awarded for previous years but which were not yet
vested).  Any bonus for previous years which was not yet paid will be
paid pursuant to the terms as set forth in Section 3(b).  Any bonus
that is earned in the year of termination will be paid on the earlier of (i)
seventy days after the year end in which the Executive is terminated or (ii) the
first pay period following the Bank's or Company's press release announcing its
financial performance for the year in which the Executive is
terminated.  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 Bank and Company for the entire year and prorated through the date of
Executive's termination.

     

    (e)           The
Executive may terminate his employment at any time by delivering a Notice of
Termination at least 30 days prior to the Executive’s date of
termination.  If the Executive terminates his employment under this
provision, the Executive shall receive any sums due him as base salary and/or
reimbursement of expenses through the date of such termination, which shall be
paid in accordance with the Bank’s normal payroll practices,
which shall mean no less frequently than monthly.


    
      
         


      

      
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    (f)           If
Executive's employment with the Bank and Company shall terminate due to the Bank
being taken into receivership by the FDIC, the Executive shall receive any sums
due him as base salary and/or reimbursement of expenses through the date of such
termination, which shall be paid in accordance with the Bank’s normal payroll practices,
which shall mean no less frequently than monthly.

     

    (g)           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
Executive's Termination of Employment, the Bank 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.  At
the time of Termination of Employment, and as a condition to the Bank’s
obligation to pay any severance hereunder, the Bank and the Executive shall
enter into a release substantially in the form attached hereto as Exhibit A
acknowledging such remaining obligations and discharging both parties, as well
as the Bank's officers, directors and employees with respect to their actions
for or on behalf of the Bank, from any other claims or obligations arising out
of or in connection with the Executive's employment by the Bank, including the
circumstances of such termination.

    


    (h)           In
the event that the Executive's employment is terminated for any reason, as a
condition to the Bank’s obligation to pay any severance hereunder, if the
Executive is currently serving as a director of the Company and/or the Bank, the
Executive shall resign from such position.

     

    (i)           In
the event that the Executive's employment is terminated for any reason prior to
a Change in Control, the Company shall have the right of first refusal during
the twelve-month period following the date of termination to repurchase any or
all shares of common stock then held by the Executive. The Company may assign
this right to one or more other persons.  Executive agrees not to sell
or convey his shares or any portion thereof without notice to Company of
Executive's intention to do so. To that end, Executive shall not sell or convey
said shares except by binding written agreement, which agreement shall be
expressly subject to Company's rights under this option of first refusal.
Executive shall notify Company in writing of such proposed conveyance or sale
and shall furnish Company with a true and correct copy of the aforesaid written
agreement. Thereafter, Company shall have the option for a period of fifteen
(15) days from the date of receipt of such notice and copy, during which Company
may determine and notify Executive whether Company desires to purchase the
shares for the same price and on the same terms as set forth in said written
agreement. If Company exercises the option granted herein, Executive shall
transfer to Company said shares in accordance with the terms of said written
agreement and upon such delivery, Company shall pay to Executive the purchase
money called for in the written agreement. If Company fails to exercise the
option to purchase, Executive shall be at liberty to conclude the sale or
conveyance of said shares only at the exact price and terms submitted to
Company. Any failure to consummate the sale on the exact terms and conditions
within a reasonable time after Company's notification of its intent not to
exercise its rights hereunder shall cause the provisions of this option of first
refusal to remain in full force and effect and fully applicable to any
subsequent conveyances or sales.


    
      
         


      

      
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    (j)           The
parties intend that the severance payments and other compensation provided for
herein are reasonable compensation for the Executive's services to the Bank and
shall not constitute “excess parachute payments” within the meaning of Section
280G of the Internal Revenue Code of 1986 and any regulations
thereunder.  In the event that the Bank's independent accountants
acting as auditors for the Bank on the date of a Change in Control determine
that the payments provided for herein constitute “excess parachute payments,”
then the compensation payable hereunder shall be reduced to an amount the value
of which is $1.00 less than the maximum amount that could be paid to the
Executive without the compensation being treated as “excess parachute payments”
under Section 280G.  The allocations of the reduction required hereby
among the termination benefits payable to the Executive shall be determined by
the Executive.

     

    (k)           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
(12 U.S.C. 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 this Agreement is not terminated, the Bank'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 Bank 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.

     

    Notwithstanding
anything to the contrary herein, 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 Federal Deposit Insurance Act (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.


    
      
         


      

      
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    Notwithstanding
anything to the contrary herein, if the  Bank or the Company are in
default (as defined in section 3(x)(1) of the Federal Deposit Insurance Act, 12
U.S.C. Section 1813(x)(1)), all obligations under this Agreement shall terminate
as of the date of default, but this paragraph (4)(k) shall not affect any vested
rights of the parties hereto.

     

    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.

     

    5.           Ownership of Work
Product.  The Bank 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 Bank, its business or its customers and that Executive conceives,
develops, or delivers to the Bank at any time during his employment, during or
outside normal working hours, in or away from the facilities of the Bank, and
whether or not requested by the Bank.  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 Bank, the Executive agrees to point out the pre-existing items to the Bank
and the Executive grants the Bank 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 Bank 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 Bank, the Executive
agrees not to use or disclose any Trade Secrets of the Bank 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.

    


    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
Bank, not to use or disclose any Confidential Business Information of the Bank
during his employment and for a period of 36 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 Bank's or the Company'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, educational and administrative manuals; customer and supplier
information and purchase histories; and employee lists.  The
provisions of Sections 6 and 7 above shall also apply to protect Trade Secrets
and Confidential Business Information of third parties provided to the Bank
under an obligation of secrecy.


    
      
         


      

      
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    8.           Return of
Materials.  The Executive shall surrender to the Bank, 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
Bank or the Company, their businesses or customers.  Upon the request
of the Bank, Executive shall certify in writing compliance with the foregoing
requirement.

    


    9.           Restrictive
Covenants.

    


    (a)           No Solicitation of
Customers.  During the Executive's employment with the Bank,
the Executive shall not (except on behalf of or with the prior written consent
of the Bank), either directly or indirectly, on the Executive's own behalf or in
the service or on behalf of others, (A) solicit, divert, or appropriate to or
for a Competing Business, or (B) attempt to solicit, divert, or appropriate to
or for a Competing Business, any person or entity that is or was a customer of
the Bank or any of its Affiliates on the date of termination and is located in
the Territory and with whom the Executive has had material contact.

    


    (b)           No Recruitment of
Personnel.  During the Executive's employment with the Bank,
the Executive shall not, either directly or indirectly, on the Executive's own
behalf or in the service or on behalf of others, (A) solicit, divert, or hire
away, or (B) attempt to solicit, divert, or hire away, to any Competing Business
located in the Territory, any employee of or consultant to the Bank or any of
its Affiliates engaged or experienced in the Business, regardless of whether the
employee or consultant is full-time or temporary, the employment or engagement
is pursuant to written agreement, or the employment is for a determined period
or is at will.

    


    (c)           Non-Competition
Agreement. During the Executive's employment with the Bank, the Executive
shall not (without the prior written consent of the Bank) compete with the Bank
or any of its Affiliates by, directly or indirectly, forming, serving as an
organizer, director or officer of, or consultant to, or acquiring or maintaining
more than a 1% passive investment in, a depository financial institution or
holding company therefor if such depository institution or holding company has
one or more offices or branches located in the
Territory.  Notwithstanding the foregoing, the Executive may serve as
an officer of or consultant to a depository institution or holding company
therefor even though such institution operates one or more offices or branches
in the Territory, if the Executive's employment does not directly involve, in
whole or in part, the depository financial institution's or holding company's
operations in the Territory.

    


    (d)           Bank
Receivership.  Notwithstanding Sections 9(a-c) above, if
Executive's employment with the Employer shall terminate due to the Bank being
taken into receivership by the FDIC, then the restrictive covenants of this
Section 9 shall not apply to the Executive beginning as of the date of such
receivership.


    
      
         


      

      
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    10.           Independent
Provisions.  The provisions in each of the above Sections 9(a),
9(b), and 9(c) are independent, and the unenforceability of any one provision
shall not affect the enforceability of any other provision.

    


    11.           Successors; Binding
Agreement. The rights and obligations of this Agreement shall bind and
inure to the benefit of the surviving corporation in any merger or consolidation
in which the Bank is a party, or any assignee of all or substantially all of 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.

    


    12.           Notice.  For
the purposes of this Agreement, notices and all other communications provided
for in the 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 Bank shall be directed to the attention of the Bank with a copy
to the Secretary of the Bank.  All notices and communications shall be
deemed to have been received on the date of delivery thereof.

    


    13.           Governing
Law.  This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of South Carolina without
giving effect to the conflict of laws principles thereof.  Any action
brought by any party to this Agreement shall be brought and maintained in a
court of competent jurisdiction in State of South Carolina.

    


    14.           Non-Waiver.  Failure
of the Bank 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.

    


    15.           Enforcement.  The
Executive agrees that in the event of any breach or threatened breach by the
Executive of any covenant contained in Section 9(a), 9(b), or 9(c) hereof, the
resulting injuries to the Bank would be difficult or impossible to estimate
accurately, even though irreparable injury or damages would certainly
result.  Accordingly, an award of legal damages, if without other
relief, would be inadequate to protect the Bank.  The Executive,
therefore, agrees that in the event of any such breach, the Bank shall be
entitled to obtain from a court of competent jurisdiction an injunction to
restrain the breach or anticipated breach of any such covenant, and to obtain
any other available legal, equitable, statutory, or contractual
relief.  Should the Bank have cause to seek such relief, no bond shall
be required from the Bank, and the Executive shall pay all attorney's fees and
court costs which the Bank may incur to the extent the Bank prevails in its
enforcement action.


    
      
         


      

      
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    16.           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.
The Executive and the Bank hereby agree that they will negotiate in good faith
to amend this Agreement from time to time to modify the terms of Sections 9(a),
9(b), and 9(c), the definition of the term “Territory,” and the definition of
the term “Business,” to reflect changes in the Bank's business and affairs so
that the scope of the limitations placed on the Executive's activities by
Section 9 accomplishes the parties' intent in relation to the then current facts
and circumstances.  Any such amendment shall be effective only when
completed in writing and signed by the Executive and the Bank.

    


    17.           Certain
Definitions.

    


    (a)           “Affiliate” shall mean
any business entity controlled by, controlling or under common control with the
Bank.

    


    
      (b)           “Business” shall mean
the operation of a depository financial institution, including,
without limitation, the solicitation and acceptance of deposits of money and
commercial paper, the solicitation and funding of loans and the provision of
other banking services, and any other related business engaged in by the Bank or
any of its Affiliates as of the date of termination.

    

    


    (c)           “Change in Control”
shall mean as defined by Treasury Regulation § 1.409A-3(i)(5).

    


    (d)           “Competing Business”
shall mean any business that, in whole or in part, is the same or substantially
the same as the Business.

    


    (e)           "Disability" or "Disabled" shall mean
as defined by Treasury Regulation § 1.409A-3(i)(4).

    


    (f)           “Good Reason” shall
mean as defined by Treasury Regulation § 1.409A-1(n)(2).

    


    (g)           “Territory” shall mean
a radius of 40 miles from (i) the main office of the Bank or (ii) any branch or
loan production office of the Bank.


    
      
         


      

      
        10

        
          

        

      

      
         


      

    

    


    (h)           “Notice of
Termination” shall mean a written notice of termination from the Bank or
the Executive which specifies an effective date of termination, 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.

    


    (i)           "Terminate," "terminated," "termination," or
"Termination” of
Employment" shall mean separation from service as defined by Regulation
1.409A-1(h).

    


                18.             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, between the parties hereto
with respect to the subject matter hereof.

    


                19.             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.

    


    20.    Compliance with Internal
Revenue Code Section 409A.  The Bank and the Executive intend
that their exercise of authority or discretion under this Agreement shall comply
with section 409A of the Internal Revenue Code of 1986.  If any
provision of this Agreement does not satisfy the requirements of section 409A,
such provision shall nevertheless be applied in a manner consistent with those
requirements. If any provision of this Agreement would subject the Executive to
additional tax or interest under section 409A, the Bank shall reform the
provision.  However, the Bank shall maintain to the maximum extent
practicable the original intent of the applicable provision without subjecting
the Executive to additional tax or interest, and the Bank shall not be required
to incur any additional compensation expense as a result of the reformed
provision.  Notwithstanding any other provision in this Agreement, if
the Executive is determined by the Board, as of the date of termination of
employment with the Bank, to be a "specified employee," as such term is defined
in Treasury Regulation §1.409A-1(i), and if any benefits paid to the Executive
hereunder would be considered deferred compensation under Section 409A, and
finally if an exemption from the six month delay requirement of Section
409A(a)(2)(B)(i) is not available, then all severance payments and other
payment, except for other payments of base salary at the normal payroll
schedule, reimbursement of expenses, and other than as a result of death, that
would normally be paid within six months and one day from the date of
termination of employment shall be paid on the first day of the seventh month
following termination of employment.

     

    
      
         


      

      
        11

        
          

        

      

      
         


      

    

    


    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 first
above written.

     

    
      
        
          
            
              
                
                  
                    
                      
                        	 
      	 	
                                FIRST
      NATIONAL BANCSHARES, INC.

                              
	 
      	 	 
      
	
                                ATTEST:

                              	 	 
      
	 	 	 	 
	 
      	 	
                                By:

                              	      
                                /s/
      C. Dan Adams

                              
	
                                Witness

                              	 	 
      	
                                C.
      Dan Adams

                              
	 
      	 	
                                Title:
      Chairman

                              
	 
      	 	 
      
	 
      	 	
                                FIRST
      NATIONAL BANK OF THE SOUTH

                              
	 
      	 	 
      	 
      
	
                                ATTEST:

                              	 	 
      	 
      
	 
      	 	 
      	 
      
	 
      	 	
                                By:

                              	      
                                /s/
      C. Dan Adams

                              
	
                                Witness

                              	 	 
      	
                                C.
      Dan Adams

                              
	 
      	 	
                                Title:
      Chairman

                              
	 
      	 	 
      
	 
      	 	
                                EXECUTIVE

                              
	 
      	 	 
      	 
      
	 
      	 	      
                                /s/
      J. Barry Mason

                              
	
                                Witness

                              	 	
                                J.
      Barry
Mason

                              


                      

                    

                  

                

              

            

          

        

      

    

     

    
      
         


      

      
        12

        
          

        

      

      
         


      

    

    Exhibit
A

    


    Form
of Release of Claims

    


    This
Severance Agreement and Release (the “Agreement”) is made between J. Barry
Mason, an individual resident of South Carolina (“Employee”) First National Bank
of the South, a national bank (the “Bank”).

    


    As used
in this Agreement, the term “Employee” shall include the employee’s heirs,
executors, administrators, and assigns, and the term “Bank” shall include the
Bank, its holding company, any other related or affiliated entities, and the
current and former officers, directors, shareholders, employees, and agents of
them.

    


    Effective August __, 2009, the Bank and
Employee entered into an Employment Agreement governing the relationship between
the parties.  Section 4(d) provides that the Bank may terminate the
Employment Agreement.  Section 4 of the Employment Agreement also
provides that Employee shall be entitled to severance pay if the Employment
Agreement is terminated by the Bank, on the condition that Employee enter into
this release or a substantially similar release.  Effective __________
2009, the Bank and Employee also entered into a Noncompete Agreement governing
the post-termination relationship between the parties.

    


    Employee desires to receive severance
pay and the Bank is willing to provide severance pay on the condition the
Employee enter into this Agreement.

    


    Now, in consideration for the mutual
promises and covenants set forth herein, and in full and complete settlement of
all matters between Employee and the Bank, the parties agree as
follows:

    


    1.           Termination
Date:  The Employee
agrees that his employment with the Bank terminates as of ________________ (the
“Termination Date”).

    


    2.           Severance
Payments:  Subsequent to his
Termination Date, the Bank shall pay Employee severance pay as noted in
Paragraph 4(d) of the Employment Agreement, dated August __, 2009 (the
“Severance Payment”), less applicable deductions and
withholdings.  These payments are in addition to and not in lieu of
any payments due to the Employee under the Noncompete Agreement.

    


    3.     
      Legal
Obligations

    


    The parties acknowledge that pursuant
to Section 4(g) of the Employment Agreement they agreed that at the time of
termination and as a condition of payment of severance they would enter into
this release acknowledging any remaining obligations and discharging each other
from any other claims or obligations arising out of or in connection with
Employee’s employment by the Bank, including the circumstances of such
termination.


    
      
         


      

      
        13

        
          

        

      

      
         


      

    

    


    Employee
acknowledges that the Bank has no prior legal obligations to make the payments
described in Section 2 above which are exchanged for the promises of Employee
set forth in this Agreement.  It is specifically agreed that the
payments described in Section 2 are valuable and sufficient consideration for
each of the promises of Employee set forth in this Agreement and are payments in
addition to anything of value to which Employee is otherwise
entitled.

    


    4.           Waiver and
Release:

    


    
      	
               
      

            	
              a)

            	
              Employee
      unconditionally releases and discharges the Bank from any and all causes
      of action, suits, damages, claims, proceedings, and demands that the
      Employee has ever had, or may now have, against the Bank, whether asserted
      or unasserted, whether known or unknown, concerning any matter occurring
      up to and including the date of the signing of this
    Agreement.

            


    

    


    
      	
               
      

            	
              b)

            	
              Employee
      acknowledges that he is waiving and releasing, to the full extent
      permitted by law, all claims against the Bank, including (but not limited
      to) all claims arising out of, or related in any way to, his employment
      with the Bank or the termination of that employment, including (but not
      limited to) any and all breach of contract claims, tort claims, claims of
      wrongful discharge, claims for breach of an express or implied employment
      contract, defamation claims, claims under Title VII of the Civil Rights
      Act of 1964 as amended, the Equal Pay Act, the Age Discrimination in
      Employment Act, the Rehabilitation Act of 1973, the Americans with
      Disabilities Act, the South Carolina Human Affairs Law, any and all other
      applicable local, state and federal non-discrimination statutes, the
      Employee Retirement Income Security Act, the Fair Labor Standards Act, the
      South Carolina Payment of Wages Law and all other statutes relating to
      employment, the common law of the State of South Carolina, or any other
      state, and any and all claims for attorneys’
  fees.

            


    

    


    
      	
               
      

            	
              c)

            	
              This
      Waiver and Release provision ((a) through (c) of this paragraph) shall be
      construed to release all claims to the full extent allowed by
      law.  If any term of this paragraph shall be declared
      unenforceable by a court or other tribunal of competent jurisdiction, it
      shall not adversely affect the enforceability of the remainder of this
      paragraph.

            


    

    


    
      	
               
      

            	
              d)

            	
              The
      Bank unconditionally releases and discharges Employee from any and all
      causes of action, suits, damages, claims, proceedings, and demands that
      the Bank has ever had, or may now have, against Employee, whether asserted
      or unasserted, whether known or unknown, concerning any matter occurring
      up to and including the date of the signing of this Agreement with the
      exception of any claims for breach of trust, or any act which constitutes
      a felony or crime involving dishonesty, theft, or
  fraud.

            


    


    
      
         


      

      
        14

        
          

        

      

      
         


      

    

    


    5.           Restrictive Covenants and
Other Obligations

    


    The
parties agree that Section 5 – “Ownership of Work Product,” Section 6 –
“Protection of Trade Secret,” Section 7 – “Protection of Confidential
Information,” Section 8 – “Return of Materials,” Section 9 – “Restrictive
Covenants,” Section 10 – “Independent Provisions,” Section 15 – “Enforcement,”
and Section 16 – “Savings Clause,” of the Employment Agreement shall remain in
full force and effect.  In addition, the parties agree that the
Noncompete Agreement shall remain in full force and effect.  The
parties agree that the Employee will perform his obligations under the sections
referenced above and those sections are incorporated by reference as if set
forth fully herein.  In the event Employee breaches any obligation
under this Section 5, the Bank’s obligation to make severance payments to
Employee shall terminate immediately and the Bank shall have no further
obligations to Employee.

    


    6.       
    Duty of
Loyalty/Nondisparagement

    


    The parties shall not (except as
required by law) communicate to anyone, whether by word or deed, whether
directly or through any intermediary, and whether expressly or by suggestion or
innuendo, any statement, whether characterized as one of fact or of opinion,
that is intended to cause or that reasonably would be expected to cause any
person to whom it is communicated to have a lowered opinion of the other
party.

    


    7.           Confidentiality Of The Terms
Of This Agreement

    


    Employee agrees not to publicize or
disclose the contents of this Agreement, including the amount of the monetary
payments, except (i) to his immediate family; (ii) to his attorney(s),
accountant(s), and/or tax preparer(s); (iii) as may be required by law; or (iv)
as necessary to enforce the terms of this Agreement.  Employee further
agrees that he will inform anyone to whom the terms of this Agreement are
disclosed of the confidentiality requirements contained
herein.  Notwithstanding the foregoing, the parties agree that where
business needs dictate, Employee may disclose to a third party that he has
entered into an agreement with the Bank, which agreement contains restrictive
covenants including noncompetition and nondisclosure provisions, one or more of
which prohibit him from performing the requested service.

    


    Employee recognizes that the disclosure
of any information regarding this Agreement by him, his family, his attorneys,
his accountants or financial advisors, could cause the Bank irreparable injury
and damage, the amount of which would be difficult to determine.  In
the event the Bank establishes a violation of this paragraph of the Agreement by
Employee, his attorneys, immediate family, accountants, or financial advisors,
or others to whom Employee disclosed information in violation of the terms of
this Agreement.  The Bank shall be entitled to injunctive relief
without the need for posting a bond and shall also be entitled to recover from
Employee the amount of attorneys’ fees and costs incurred by the Bank in
enforcing the provisions of this paragraph.


    
      
         


      

      
        15

        
          

        

      

      
         


      

    

    


    8.           Continued
Cooperation

    


    Employee agrees that he will cooperate
fully with the Bank in the future regarding any matters in which he was involved
during the course of his employment, and in the defense or prosecution of any
claims or actions now in existence or which may be brought or threatened in the
future against or on behalf of the Bank.  Employee’s cooperation in
connection with such matters, actions and claims shall include, without
limitation, being available to meet with the Bank’s officials regarding
personnel or commercial matters in which he was involved; to prepare for any
proceeding (including, without limitation, depositions, consultation, discovery
or trial); to provide affidavits; to assist with any audit, inspection,
proceeding or other inquiry; and to act as a witness in connection with any
litigation or other legal proceeding affecting the Bank.  Employee
further agrees that should he be contacted (directly or indirectly) by any
person or entity adverse to the Bank, he shall within 48 hours notify the
then-current Chairman of the Board of the Bank.  Employee shall be
reimbursed for any reasonable costs and expenses incurred in connection with
providing such cooperation.

    


    9.           Entire Agreement;
Modification of Agreement

    


    Except as otherwise expressly noted
herein, this Agreement and the Noncompete Agreement constitute the entire
understanding of the parties and supersedes all prior discussions,
understandings, and agreements of every nature between them relating to the
matters addressed herein.  Accordingly, no representation, promise, or
inducement not included or incorporated by reference in this Agreement shall be
binding upon the parties.  Employee affirms that the only
consideration for the signing of this Agreement are the terms set forth above
and that no other promises or assurances of any kind have been made to him by
the Bank or any other entity or person as an inducement for him to sign this
Agreement.  This Agreement may not be changed orally, but only by an
agreement in writing signed by the parties or their respective heirs, legal
representatives, successors, and assigns.

    


    10.         Partial
Invalidity

    


    The parties agree that the provisions
of this Agreement and any paragraphs, subsections, sentences, or provisions
thereof shall be deemed severable and that the invalidity or unenforceability of
any paragraph, subsection, sentence, or provision shall not affect the validity
or enforceability of the remainder of the Agreement.

    


    11.         Waiver

    


    The waiver of the breach of any term or
provision of this Agreement shall not operate as or be construed to be a waiver
of any other subsequent breach of this Agreement.

    


    12.         Successors and
Assigns

    


    This Agreement shall inure to and be
binding upon the Bank and Employee, their respective heirs, legal
representatives, successors, and assigns.


    
      
         


      

      
        16

        
          

        

      

      
         


      

    

    


    13.         Governing
Law

    


    This Agreement shall be construed in
accordance with the laws of the state of South Carolina and any applicable
federal laws.

    


    14.          Headings

    


    The headings or titles of sections and
subsections of this Agreement are for convenience and reference only and do not
constitute a part of this Agreement.

    


    15.          Notice

    


    Any notice or communication required or
permitted under this Agreement shall be made in writing and sent by certified
mail, return receipt requested, addressed as follows:

    


    If to Employee:

    J. Barry Mason

    


    If to the Bank:

    First National Bank of the
South

    215 North Pine Street

    Spartanburg,
SC  29304

    


    16.          Representations:  Employee
acknowledges that:

    


    
      	
               
      

            	
              a)

            	
              He
      has read this Agreement and understands its meaning and
      effect.

            


    

    


    
      	
               
      

            	
              b)

            	
              He
      has knowingly and voluntarily entered into this Agreement of his own free
      will.

            


    

    


    
      	
               
      

            	
              c)

            	
              By
      signing this Agreement, Employee has waived, to the full extent permitted
      by law, all claims against the Bank based on any actions taken by the Bank
      up to the date of the signing of this Agreement, and the Bank may plead
      this Agreement as a complete defense to any claim the Employee may
      assert.

            


    

    


    
      	
               
      

            	
              d)

            	
              He
      would not otherwise be entitled to the consideration described in this
      Agreement, and that the Bank is providing such consideration in return for
      Employee’s agreement to be bound by the terms of this
      Agreement.

            


    

    


    
      	
               
      

            	
              e)

            	
              He
      has been advised to consult with an attorney before signing this
      Agreement.

            


    

    


    
      	
               
      

            	
              f)

            	
              He
      has been given up to 21 days to consider the terms of this
      Agreement.

            


    


    
      
         


      

      
        17

        
          

        

      

      
         


      

    

    


    
      	
               
      

            	
              g)

            	
              He
      has seven days, after Employee has signed the Agreement and it has been
      received by the Bank, to revoke it by notifying the Chairman of the Board
      of his intent to revoke acceptance.  For such revocation to be
      effective, the notice of revocation must be received no later than 5:00
      p.m. on the seventh day after the signed Agreement is received by the
      Bank.  This Agreement shall not become effective or enforceable
      until the revocation period has
expired.

            


    

    


    
      	
               
      

            	
              h)

            	
              He
      is not waiving or releasing any rights or claims that may arise after the
      date the Employee signs this
Agreement.

            


    

    


    As to
Employee:


    


    
      
        	
                August 24, 2009

              	 
      	
                      
                  /s/
      J. Barry Mason

                

              
	
                Date

              	 
      	
                J.
      Barry Mason

              
	 
      	 
      	 
      
	
                As
      to the Bank:

              	 
      	 
      
	 
      	 
      	 
      
	
                      
                  August 24,
      2009

                

              	 
      	
                      
                  /s/
      C. Dan Adams

                

              
	
                Date

              	 
      	
                Chairman
      of the Board

              


      

    

    


    



    
      
         


      

      
        18