**AGREEMENT
      AND PLAN OF MERGER**











**by
      and between**








**FNB
      FINANCIAL SERVICES CORPORATION**








**and**








**LSB
      BANCSHARES, INC.**











**_________________**








**Dated
      as of February 26, 2007**














**TABLE
      OF CONTENTS**


**AGREEMENT
      AND PLAN OF MERGER**





ARTICLE
                  I
              
              11.1
              The
                  Merger
              11.2
              Effective
                  Time
              11.3
              Effects
                  of the Merger
              21.4
              Conversion
                  of FNB Common Stock.
              21.5
              LSB
                  Capital Stock.
              21.6
              Options
              31.7
              Charter
              31.8
              By-Laws
              31.9
              Tax
                  Consequences
              31.10
              Management
              41.11
              Surviving
                  Bank
              41.12
              Board
                  of Directors
              41.13
              Headquarters
                  of Surviving Corporation and Surviving Bank
              5ARTICLE
                  II
              
              52.1
              LSB
                  to Make Shares Available
              52.2
              Exchange
                  of Shares; Notification and Payment Procedures
              6ARTICLE
                  III
              
              83.1
              Corporate
                  Organization
              83.2
              Capitalization
              93.3
              Authority;
                  No Violation
              103.4
              Consents
                  and Approvals
              113.5
              Reports
              113.6
              Financial
                  Statements
              123.7
              Broker's
                  Fees
              133.8
              Absence
                  of Certain Changes or Events
              133.9
              Legal
                  Proceedings
              133.10
              Taxes
                  and Tax Returns
              143.11
              Employees
              153.12
              SEC
                  Reports
              163.13
              Compliance
                  with Applicable Law
              173.14
              Certain
                  Contracts
              173.15
              Agreements
                  with Regulatory Agencies
              183.16
              Interest
                  Rate Risk Management Instruments.
              183.17
              Undisclosed
                  Liabilities
              183.18
              Insurance
              193.19
              Environmental
                  Liability
              193.20
              State
                  Takeover Laws; Rights Plan
              193.21
              Reorganization
              193.22
              Obstacles
                  to Regulatory Approval
              19ARTICLE
                  IV
              
              204.1
              Corporate
                  Organization
              20













4.2
              Capitalization
              204.3
              Authority;
                  No Violation
              214.4
              Consents
                  and Approvals
              224.5
              Reports
              224.6
              Financial
                  Statements
              234.7
              Broker's
                  Fees
              234.8
              Absence
                  of Certain Changes or Events
              244.9
              Legal
                  Proceedings
              244.10
              Taxes
                  and Tax Returns
              244.11
              Employees
              264.12
              SEC
                  Reports
              274.13
              Compliance
                  with Applicable Law
              274.14
              Certain
                  Contracts
              284.15
              Agreements
                  with Regulatory Agencies
              284.16
              Interest
                  Rate Risk Management Instruments
              294.17
              Undisclosed
                  Liabilities
              294.18
              Insurance
              294.19
              Environmental
                  Liability
              294.20
              State
                  Takeover Laws; Charter Provisions
              304.21
              Reorganization
              304.22
              Obstacles
                  to Regulatory Approval
              30ARTICLE
                  V
              
              305.1
              Conduct
                  of Businesses Prior to the Effective Time
              305.2
              Forbearances
              315.3
              Notice
                  of Action
              33ARTICLE
                  VI
              
              336.1
              Regulatory
                  Matters
              336.2
              Access
                  to Information
              346.3
              Shareholders'
                  Approvals
              356.4
              Legal
                  Conditions to Merger
              356.5
              Affiliates
              366.6
              Stock
                  Quotation
              366.7
              Employee
                  Benefit Plans; Employment Agreements
              366.8
              Indemnification;
                  Directors' and Officers' Insurance
              386.9
              Additional
                  Agreements
              386.10
              Advice
                  of Changes
              396.11
              Dividends
              396.12
              Exemption
                  from Liability Under Section 16(b)
              39ARTICLE
                  VII
              
              397.1
              Conditions
                  to Each Party's Obligation To Effect the Merger
              397.2
              Conditions
                  to Obligations of FNB
              417.3
              Conditions
                  to Obligations of LSB
              41ARTICLE
                  VIII
              
              428.1
              Termination
              428.2
              Effect
                  of Termination
              438.3
              Expenses
              43








8.4
              Wrongful
                  Termination
              438.5
              Termination
                  Fee
              438.6
              Payment
                  Method
              448.7
              Amendment
              448.8
              Extension;
                  Waiver
              44ARTICLE
                  IX
              
              449.1
              Closing
              449.2
              Nonsurvival
                  of Representations, Warranties and Agreements
              459.3
              Notices
              459.4
              Interpretation
              459.5
              Counterparts
              469.6
              Entire
                  Agreement
              469.7
              Governing
                  Law
              469.8
              Publicity
              469.9
              Assignment;
                  Third Party Beneficiaries
              46Exhibit
                  6.5(a)(1)-Form of Affiliate Letter Addressed to LSB








**AGREEMENT
        AND PLAN OF MERGER**
  AGREEMENT
        AND PLAN OF MERGER, dated as of February 26, 2007 (this “Agreement”), by and
        between FNB Financial Services Corporation, a North Carolina corporation
        (“FNB”), and LSB Bancshares, Inc., a North Carolina corporation
        (“LSB”).
  **WITNESSETH:**
  WHEREAS,
        the Boards of Directors of FNB and LSB have determined that it is in the
        best
        interests of their respective corporations and shareholders to consummate
        the
        strategic business combination transaction provided for herein in which FNB
        will, subject to the terms and conditions set forth herein, merge with and
        into
        LSB (the “Merger”), so that LSB is the surviving corporation (hereinafter
        sometimes referred to in such capacity as the “Surviving Corporation”) in the
        Merger, and
  WHEREAS,
        the parties desire to make certain representations, warranties and agreements
        in
        connection with the Merger and also to prescribe certain conditions to the
        Merger.
  NOW,
        THEREFORE, in consideration of the mutual covenants, representations, warranties
        and agreements contained herein, and intending to be legally bound hereby,
        the
        parties agree as follows:
 **ARTICLE
        I**
 **THE
        MERGER**
 1.1  The
        Merger .
  (a)  Subject
        to the terms and conditions of this Agreement, in accordance with Business
        Corporation Act of the State of North Carolina (the “NCBCA”), at the Effective
        Time (as defined below), FNB shall merge with and into LSB. LSB shall be
        the
        Surviving Corporation in the Merger, and shall continue its corporate existence
        under the laws of the State of North Carolina. Upon consummation of the Merger,
        the separate corporate existence of FNB shall terminate.
  (b)  FNB
        and
        LSB may at any time change the method of effecting the combination of FNB
        and
        LSB including without limitation the provisions of this Article I, if and
        to the
        extent they deem such change to be desirable, including without limitation
        to
        provide for a merger of either party with and into a wholly-owned subsidiary
        of
        the other; provided, however, that no such change shall (i) alter or change
        the
        Exchange Ratio (as defined below) to be provided to holders of FNB Common
        Stock
        (as defined below) as provided for in this Agreement, (ii) adversely affect
        the
        tax treatment of shareholders of FNB or (iii) materially impede or delay
        consummation of the transactions contemplated by this Agreement.
  1.2  Effective
        Time . The
        Merger shall become effective as set forth in the Articles of Merger which
        shall
        be filed with the Secretary of State of the State of North Carolina (the
“North
        Carolina Secretary”) on the
  
  Closing
        Date. The term “Effective Time” shall be the date and time when the Merger
        becomes effective, as set forth in the Articles of Merger.
  1.3  Effects
        of the Merger . At
        and
        after the Effective Time, the Merger shall have the effects set forth in
        Section
        55-11-06 of the NCBCA.
  1.4  Conversion
        of FNB Common Stock . At
        the
        Effective Time, by virtue of the Merger and without any action on the part
        of
        FNB, LSB or the holder of any of the following securities:
  (a)  Subject
        to Section 2.2(e), each share of the common stock, no par value per share,
        of
        FNB (the “FNB Common Stock”) issued and outstanding immediately prior to the
        Effective Time, except for shares of FNB Common Stock owned, directly or
        indirectly, by FNB or LSB or any of their respective wholly-owned Subsidiaries
        (other than shares of FNB Common Stock held, directly or indirectly, in trust
        accounts, managed accounts and the like, or otherwise held in a fiduciary
        capacity, that are beneficially owned by third parties (any such shares,
        whether
        held directly or indirectly by FNB or LSB, as the case may be, being referred
        to
        herein as “Trust Account Shares”) or shares of FNB Common Stock held on account
        of a debt previously contracted (“DPC Shares”)), shall be converted into the
        right to receive 1.07 shares (the “Exchange Ratio”) of the common stock, par
        value $5.00 per share, of LSB (the “LSB Common Stock”).
  (b)  All
        of
        the shares of FNB Common Stock shall no longer be outstanding and shall
        automatically be cancelled and shall cease to exist as of the Effective Time,
        and each such share of FNB Common Stock shall thereafter represent only the
        right to receive the number of whole shares of LSB Common Stock and cash
        in lieu
        of fractional shares into which the shares of FNB Common Stock have been
        converted pursuant to this Section 1.4 and Section 2.2. If, prior to the
        Effective Time, the outstanding shares of FNB Common Stock or LSB Common
        Stock
        shall have been increased, decreased, changed into or exchanged for a different
        number or kind of shares or securities as a result of a reorganization,
        recapitalization, reclassification, stock dividend, stock split, reverse
        stock
        split, or other similar change in capitalization, an appropriate and
        proportionate adjustment shall be made to the Exchange Ratio.
  (c)  At
        the
        Effective Time, all shares of FNB Common Stock that are owned, directly or
        indirectly, by FNB or LSB or any of their respective wholly-owned Subsidiaries
        (other than Trust Account Shares and DPC Shares) shall be cancelled and shall
        cease to exist (except that they shall become authorized but unissued shares
        of
        LSB Common Stock) and no stock of LSB or other consideration shall be delivered
        in exchange therefor.
  1.5  LSB
        Capital Stock . Except
        as
        otherwise provided in Section 1.4(c), at and after the Effective Time, each
        share of LSB Common Stock issued and outstanding immediately prior to the
        Closing Date shall remain an issued and outstanding share of capital stock
        of
        the Surviving Corporation and shall not be affected by the
        Merger.
  2
  1.6  Options .
  (a)  At
        the
        Effective Time, each option granted by FNB to purchase shares of FNB Common
        Stock which is outstanding and unexercised immediately prior thereto shall
        cease
        to represent a right to acquire shares of FNB Common Stock and shall be
        converted automatically into an option to purchase shares of LSB Common Stock
        in
        an amount and at an exercise price determined as provided below (and otherwise
        subject to the terms of the FNB Stock Plans (as defined below) and the
        agreements evidencing grants thereunder):
  (i)  The
        number of shares of LSB Common Stock to be subject to the new option shall
        be
        equal to the product of the number of shares of FNB Common Stock subject
        to the
        original option and the Exchange Ratio, provided that any fractional shares
        of
        LSB Common Stock resulting from such multiplication shall be rounded to the
        nearest whole share; and
  (ii)  The
        exercise price per share of LSB Common Stock under the new option shall be
        equal
        to the exercise price per share of FNB Common Stock under the original option
        divided by the Exchange Ratio, provided that such exercise price shall be
        rounded to the nearest whole cent.
  (b)  The
        adjustment provided herein with respect to any options which are “incentive
        stock options” (as defined in Section 422 of the Internal Revenue Code of 1986,
        as amended (the “Code”)), shall be and is intended to be effected in a manner
        which is consistent with Section 424(a) of the Code. The duration and other
        terms of the new option shall be the same as the original option except that
        all
        references to FNB shall be deemed to be references to LSB.
  1.7  Charter . Subject
        to the terms and conditions of this Agreement, at the Effective Time, the
        Articles of Incorporation, as amended, of LSB, with such amendments as to
        which
        the parties may hereafter agree to submit to LSB’s shareholders, including,
        without limitation, amendments to change the corporate name of LSB to a name
        mutually agreeable to LSB and FNB, to alter the terms of the directors, and
        to
        establish in uncontested elections the election of directors by a vote of
        the
        holders of a majority of the shares present at the applicable meeting of
        shareholders, which may be properly approved by LSB’s Board of Directors and by
        such shareholders (the “Charter”), shall be the Charter of the Surviving
        Corporation until thereafter amended in accordance with applicable
        law.
  1.8  By-Laws . Subject
        to the terms and conditions of this Agreement, at the Effective Time, the
        By-Laws of LSB shall be the By-Laws of the Surviving Corporation until
        thereafter amended in accordance with applicable law; provided, however,
        that
        the By-Laws shall be amended as of the Effective Time to reflect the amendments
        to the Charter described in Section 1.7 and as otherwise agreed by LSB and
        FNB.
  1.9  Tax
        Consequences .
        It is
        intended that the Merger shall constitute a “reorganization” within the meaning
        of Section 368(a) of the Code, that this Agreement shall constitute a “plan of
        reorganization” for the purposes of Sections 354 and 361 of the
        Code.
  3
   1.10  Management . At
        the
        Effective Time, Robert F. Lowe shall be Chairman of the Board of Directors,
        Chairman of the Executive Committee of the Board of Directors, and Chief
        Executive Officer of the Surviving Corporation, and shall be Chairman of
        the
        Board of Directors and Chairman of the Executive Committee of the Board of
        Directors of the Surviving Bank (as defined in Section 1.11 below). Barry
        Z.
        Dodson shall be Vice Chairman and lead independent director of the Boards
        of
        Directors of the Surviving Corporation and the Surviving Bank and Vice Chairman
        of the Executive Committees of both such Boards. Pressley A. Ridgill shall
        be
        President of the Surviving Corporation, President and Chief Executive Officer
        of
        the Surviving Bank and a member of the Executive Committees of the Boards
        of
        Directors of the Surviving Corporation and the Surviving Bank. Michael W.
        Shelton shall be an Executive Vice President and the Chief Financial Officer
        of
        the Surviving Corporation and the Surviving Bank. Monty J. Oliver shall be
        the
        Executive Vice President - Finance of the Surviving Corporation.
  1.11  Surviving
        Bank . Following
        the Effective Time, FNB Southeast shall merge with and into Lexington State
        Bank
        (the “Bank Merger”), with Lexington State Bank being the surviving bank of such
        merger (the “Surviving Bank”). The effects of the Bank Merger, including the
        name under which the Surviving Bank shall operate, shall be set forth in
        the
        separate Agreement and Plan of Bank Merger among FNB, LSB, FNB Southeast,
        and
        Lexington State Bank. The name of the Surviving Bank shall be changed to
        a name
        mutually agreeable to LSB and FNB.
  1.12  Board
        of Directors .
  (a)  Subject
        to Section 1.12(c), from and after the Effective Time, until duly changed
        in
        compliance with applicable law and the Charter and By-Laws of the Surviving
        Corporation, the Board of Directors of each of the Surviving Corporation
        and the
        Surviving Bank shall consist of up to twenty (20) directors, and shall initially
        include Mr. Lowe, Mr. Dodson and Mr. Ridgill and an equal number, inclusive
        of
        Mr. Lowe, Mr. Dodson and Mr. Ridgill, of FNB Directors and LSB Directors
        (each
        as defined below). The initial FNB Directors shall be selected by FNB’s Board of
        Directors and the initial LSB Directors shall be selected by LSB’s Board of
        Directors. The FNB Directors shall be appointed to either one year or two
        year
        terms in such a manner that the number of FNB Directors serving one year
        terms
        shall be the same as the number of LSB Directors serving one year terms and
        that
        the number of FNB Directors serving two year terms shall be the same as the
        number of LSB Directors serving two year terms. Subject to Section 1.12(c),
        from
        and after the Effective Time and until the second annual meeting of the
        Surviving Corporation following the 2007 annual meeting, all vacancies on
        the
        Board of Directors of the Surviving Corporation created by (i) the cessation
        of
        service of a FNB Director shall be filled by a nominee selected by the
        continuing FNB Directors and (ii) the cessation of service of a LSB Director
        shall be filled by a nominee selected by the continuing LSB
        Directors.
  4
  (b)  Subject
        to Section 1.12(c), from and after the Effective Time until the second annual
        meeting of the Surviving Corporation following the 2007 annual meeting, each
        of
        the committees of the Boards of Directors of the Surviving Corporation and
        the
        Surviving Bank shall be comprised of an equal number of FNB Directors and
        LSB
        Directors, the identity of the members of such committees to be otherwise
        mutually determined by Mr. Lowe and Mr. Dodson; provided, however, that Mr.
        Lowe, Mr. Dodson and Mr. Ridgill shall serve on the Executive Committees
        of the
        Boards of Directors of the Surviving Corporation and the Surviving Bank during
        such period, Mr. Lowe shall serve as the Chairman of each such Executive
        Committee, and Mr. Dodson shall serve as Vice Chair of each such Executive
        Committee. In the event Mr. Lowe, Mr. Dodson or Mr. Ridgill shall cease to
        be a
        director of the Surviving Corporation and the Surviving Bank during such
        two
        year period or unable to assume or continue in the designated positions during
        such periods, as applicable, (i) an LSB Director selected by the LSB Directors
        shall succeed Mr. Lowe for the remainder of such period as Chairman of the
        Boards of Directors and Chair of the Executive Committees of the Surviving
        Corporation and the Surviving Bank, and (ii) an FNB Director selected by
        the FNB
        Directors shall succeed Mr. Dodson for the remainder of such period as Vice
        Chair of the Boards of Directors and the Executive Committees of the Surviving
        Corporation and the Surviving Bank and as the lead independent director of
        the
        Board of Directors of the Surviving Corporation or Mr. Ridgill for the remainder
        of such period as a member of the Executive Committees of the Boards of
        Directors of the Surviving Corporation and the Surviving Bank.
  (c)  The
        term
“FNB Director” means (i) any person serving as a director of FNB on the date of
        this Agreement who continues as a director of the Surviving Corporation at
        the
        Effective Time and (ii) any person who becomes a director of the Surviving
        Corporation and who is designated as such by the continuing FNB Directors
        prior
        to his or her election; and the term “LSB Director” means (i) any person serving
        as a director of LSB on the date of this Agreement who becomes a director
        of the
        Surviving Corporation at the Effective Time and (ii) any person who becomes
        a
        director of the Surviving Corporation and who is designated as such by the
        continuing LSB Directors prior to his or her election.
  (d)  The
        Agreement and Plan of Bank Merger shall contain provisions with respect to
        the
        Board of Directors of the Surviving Bank, and the committees, to the same
        effect
        as the provisions set forth in the items (a), (b) and (c) of this Section
        1.12.
  1.13  Headquarters
        of Surviving Corporation and Surviving Bank . From
        and
        after the Effective Time until otherwise determined by the Board of Directors
        of
        the Surviving Corporation or the Surviving Bank, as applicable, the headquarters
        and principal executive offices of the Surviving Corporation and the Surviving
        Bank shall be located at FNB’s headquarters in Greensboro, North
        Carolina.
  **ARTICLE
        II**
  **EXCHANGE
        OF SHARES**
  2.1  LSB
        to
        Make Shares Available .
        At or
        prior to the Effective Time, LSB shall deposit, or shall cause to be deposited,
        with LSB’s stock transfer agent (the “Exchange Agent”), for the benefit of the
        holders of FNB Common Stock in certificated or uncertificated form, for exchange
        in accordance with this Article II, the shares of LSB Common Stock, and cash
        in
        lieu of any fractional shares (such cash and shares of LSB Common Stock,
        together with any dividends or distributions with respect thereto, being
        hereinafter referred to as the “Exchange Fund”), to be issued pursuant to
        Section 1.4 and paid pursuant to Section 2.2(a) in exchange for outstanding
        shares of FNB Common Stock.
  5
   2.2  Exchange
        of Shares; Notification and Payment Procedures .
  (a)  As
        soon
        as practicable after the Effective Time, with respect to each share of FNB
        Common Stock held in certificated form (each such certificate, a “Certificate”),
        the Exchange Agent shall mail to each such holder of record of one or more
        Certificates a letter of transmittal (which shall specify that delivery shall
        be
        effected, and risk of loss and title to the Certificates shall pass, only
        upon
        delivery of the Certificates to the Exchange Agent) and instructions for
        use in
        effecting the surrender of the Certificates in exchange for shares of LSB
        Common
        Stock and any cash in lieu of fractional shares into which the shares of
        FNB
        Common Stock represented by such Certificate or Certificates shall have been
        converted pursuant to this Agreement. Upon proper surrender of a Certificate
        or
        Certificates for exchange and cancellation to the Exchange Agent, together
        with
        such properly completed letter of transmittal, duly executed, the holder
        of such
        Certificate or Certificates shall be entitled to receive in exchange therefor,
        as applicable, (i) a book entry on the records of the Surviving Corporation
        showing such holder to hold of record the number of whole shares of LSB Common
        Stock to which such holder of FNB Common Stock shall have become entitled
        pursuant to the provisions of Article I and (ii) a check representing the
        amount
        of any cash in lieu of fractional shares which such holder has the right
        to
        receive in respect of the Certificate or Certificates surrendered pursuant
        to
        the provisions of this Article II, and the Certificate or Certificates so
        surrendered shall forthwith be cancelled. With respect to shares of FNB Common
        Stock held in uncertificated (“book entry” form), the Exchange Agent shall (x)
        enter a book entry on the records of the Surviving Corporation showing the
        holder of such shares to hold of record the number of shares of LSB Common
        Stock
        to which such holder of FNB Common Stock shall have become entitled pursuant
        to
        the provisions of Article I, and (y) cause a check representing the amount
        of
        cash in lieu of fractional shares which such holder has the right to receive
        in
        respect of shares of FNB Common Stock held by such holder in uncertificated
        form. No interest will be paid or accrued on any cash in lieu of fractional
        shares or on any unpaid dividends and distributions payable to holders of
        Certificates. The Exchange Agent, acting as the Surviving Corporation’s stock
        transfer agent, will maintain a book entry list of the whole shares of LSB
        Common Stock to which each former holder of record of FNB Common Stock is
        entitled.
  (b)  No
        dividends or other distributions declared with respect to FNB Common Stock
        shall
        be paid to the holder of any unsurrendered Certificate until the holder thereof
        shall surrender such Certificate in accordance with this Article II (including
        Section 2.2(h) in the case of lost certificates). After the surrender of
        a
        Certificate in accordance with this Article II, the record holder thereof
        shall
        be entitled to receive any such dividends or other distributions, without
        any
        interest thereon, which theretofore had become payable with respect to shares
        of
        LSB Common Stock represented by such Certificate.
  6
  (c)  If
        any
        holder desires the shares of FNB Common Stock to be issued to such holder
        to be
        issued in a name other than that in which the Certificates surrendered in
        exchange therefor are registered or in a name other than the name in which
        the
        book entry record thereof is recorded, as applicable, it shall be a condition
        of
        the issuance thereof that (i) the Certificate or Certificates so surrendered
        shall be properly endorsed (or accompanied by an appropriate instrument of
        transfer) and otherwise in proper form for transfer or (ii) the book entry
        holder provide written transfer instructions in the form required by the
        Exchange Agent, and, in either instance, that the person requesting such
        exchange shall pay to the Exchange Agent in advance any transfer or other
        taxes
        required by reason of the issuance of shares of LSB Common Stock in any such
        other name, or required for any other reason, or shall establish to the
        satisfaction of the Exchange Agent that such tax has been paid or is not
        payable.
  (d)  As
        soon
        as practical after the Effective Time, the Exchange Agent shall mail to each
        holder of shares of FNB Common Stock in uncertificated, book entry form a
        written notice (the “Notice Letter”) confirming the whole shares of LSB Common
        Stock and cash in lieu of fractional shares to be issued and paid to such
        holder
        pursuant to this Agreement and containing such other information as is required
        under Section 55-6-26 of the NCBCA. A check in the amount of such cash shall
        accompany the Notice Letter.
  (e)  After
        the
        Effective Time, there shall be no transfers on the stock transfer books of
        FNB
        of the shares of FNB Common Stock that were issued and outstanding immediately
        prior to the Effective Time. If, after the Effective Time, certificates
        representing such shares are presented for transfer to the Exchange Agent,
        they
        shall be cancelled and, as applicable, shares of LSB Common Stock shall be
        issued in exchange therefor in book entry form as provided by this Article
        II.
  (f)  Notwithstanding
        anything to the contrary contained herein, no certificates or scrip representing
        fractional shares of LSB Common Stock shall be issued upon the surrender
        for
        exchange of Certificates or the exchange of shares of FNB Common Stock held
        in
        uncertificated, book entry form, no dividend or distribution with respect
        to LSB
        Common Stock shall be payable on or with respect to any fractional share,
        and
        such fractional share interests shall not entitle the owner thereof to vote
        or
        to any other rights of a shareholder of LSB. In lieu of the issuance of any
        such
        fractional share, LSB shall pay to each former shareholder of FNB who otherwise
        would be entitled to receive such fractional share an amount in cash determined
        by multiplying (i) the average of the closing-sale prices of LSB Common Stock
        on
        the Global Select Market of The NASDAQ Stock Market, LLC (the “Nasdaq”) as
        reported by *The
        Wall Street Journal* for the
        five (5) trading days immediately preceding the date of the Effective Time
        by
        (ii) the fraction of a share (rounded to the nearest thousandth when expressed
        in decimal form) of LSB Common Stock to which such holder would otherwise
        be
        entitled to receive pursuant to Section 1.4.
  (g)  Any
        portion of the Exchange Fund that remains unclaimed by the shareholders of
        FNB
        for twelve (12) months after the Effective Time shall be paid to LSB. Any
        former
        shareholders of FNB who have not theretofore complied with this Article II
        shall
        thereafter look only to LSB for payment of the shares of LSB Common Stock,
        cash
        in lieu of any fractional shares and any unpaid dividends and distributions
        on
        the LSB Common Stock deliverable in respect of each share of LSB Common Stock,
        as the case may be, such shareholder holds as
  7
  determined
        pursuant to this Agreement, in each case, without any interest thereon.
        Notwithstanding the foregoing, none of FNB, LSB, the Exchange Agent or any
        other
        person shall be liable to any former holder of shares of FNB Common Stock
        for
        any amount delivered in good faith to a public official pursuant to applicable
        abandoned property, escheat or similar laws.
  (h)  In
        the
        event any Certificate shall have been lost, stolen or destroyed, upon the
        making
        of an affidavit of that fact by the person claiming such Certificate to be
        lost,
        stolen or destroyed and, if reasonably required by LSB, the posting by such
        person of a bond in such amount as LSB reasonably may determine is necessary
        as
        indemnity against any claim that may be made against it with respect to such
        Certificate, the Exchange Agent will issue in exchange for such lost, stolen
        or
        destroyed Certificate the shares of LSB Common Stock in book entry form and
        any
        cash in lieu of fractional shares deliverable in respect thereof pursuant
        to
        this Agreement.
 
 **ARTICLE
        III**
  **REPRESENTATIONS
        AND WARRANTIES OF LSB**
  Except
        as
        disclosed in the LSB disclosure schedule delivered to FNB concurrently herewith
        (the “LSB Disclosure Schedule”), LSB hereby represents and warrants to FNB as
        follows:
 3.1  Corporate
        Organization .
  (a)  LSB
        is a
        corporation duly organized, validly existing and in good standing under the
        laws
        of the State of North Carolina. LSB has the corporate power and authority
        to own
        or lease all of its properties and assets and to carry on its business as
        it is
        now being conducted, and is duly licensed or qualified to do business in
        each
        jurisdiction in which the nature of the business conducted by it or the
        character or location of the properties and assets owned or leased by it
        makes
        such licensing or qualification necessary, except where the failure to be
        so
        licensed or qualified would not, either individually or in the aggregate,
        have a
        Material Adverse Effect on LSB. LSB is duly registered as a bank holding
        company
        under the Bank Holding Company Act of 1956, as amended (the “BHC Act”). True and
        complete copies of the Charter and By-Laws of LSB, as in effect as of the
        date
        of this Agreement, have previously been made available by LSB to
        FNB.
  As
        used
        in this
        Agreement, the term “Material Adverse Effect” means, with respect to FNB, LSB or
        the Surviving Corporation, as the case may be, a material adverse effect
        on (i)
        the business, operations, results of operations or financial condition of
        such
        party and its Subsidiaries taken as a whole or (ii) the ability of such party
        to
        timely consummate the transactions contemplated hereby on a timely basis;
        provided that, in determining whether a Material Adverse Effect has occurred,
        there shall be excluded any effect to the extent attributable to or resulting
        from (A) any changes in laws, regulations or interpretations of laws or
        regulations generally affecting the banking, bank holding company or financial
        holding company businesses, (B) any change in generally accepted accounting
        principles recognized in the United States
  8
  (“GAAP”)
        or regulatory accounting requirements, generally affecting the banking, bank
        holding company or financial holding company businesses, (C) events, conditions
        or trends in economic, business or financial conditions generally affecting
        the
        banking, bank holding company or financial holding company businesses
        specifically, (D) changes in national or international political or social
        conditions including the engagement by the United States in hostilities,
        whether
        or not pursuant to the declaration of a national emergency or war, or the
        occurrence of any military or terrorist attack upon or within the United
        States,
        or any of its territories, possessions or diplomatic or consular offices
        or upon
        any military installation, equipment or personnel of the United States, (E)
        the
        effect of the actions expressly permitted or required by this Agreement or
        that
        are taken with the prior informed written consent of the other party in
        contemplation of the transactions contemplated hereby, and (F) the announcement
        of this Agreement and the transactions contemplated hereby. As used in this
        Agreement, the word “Subsidiary” when used with respect to any party means any
        bank, savings bank, corporation, partnership, limited liability company,
        business trust, or other organization, whether incorporated or unincorporated,
        which is consolidated with such party for financial reporting purposes or
        is a
        special purpose entity which issues trust preferred securities.
  (b)  Each
        LSB
        Subsidiary (i) is duly organized and validly existing under the laws of its
        jurisdiction of organization, (ii) is duly qualified to do business and in
        good
        standing in all jurisdictions (whether federal, state, local or foreign)
        where
        its ownership or leasing of property or the conduct of its business requires
        it
        to be so qualified and in which the failure to be so qualified would have
        a
        Material Adverse Effect on LSB and (iii) has all requisite corporate power
        and
        authority to own or lease its properties and assets and to carry on its business
        as now conducted.
  3.2  Capitalization .
  (a)  The
        authorized capital stock of LSB consists of (i) 50,000,000 shares of LSB
        Common
        Stock, of which, as of February 22, 2007, 8,412,567 shares were issued and
        outstanding and (ii) 10,000,000 shares of preferred stock, $.01 par value
        per
        share (the “LSB Preferred Stock” and, together with the LSB Common Stock, the
“LSB Capital Stock”), of which, as of the date hereof, no shares are issued and
        outstanding. All of the issued and outstanding shares of LSB Common Stock
        have
        been duly authorized and validly issued and are fully paid, nonassessable
        and
        free of preemptive rights, with no personal liability attaching to the ownership
        thereof. As of the date of this Agreement, except pursuant to the terms of
        (i)
        options to acquire 604,925 shares of LSB Common Stock issued pursuant to
        employee and director stock plans of LSB in effect as of the date hereof
        (the
“LSB Stock Plans”), and (ii) rights issued under and shares reserved for
        issuance pursuant to the LSB Rights Agreement, dated as of February 10, 1998
        (the “LSB Rights Agreement”), LSB does not have and is not bound by any
        outstanding subscriptions, options, warrants, calls, commitments or agreements
        of any character calling for the purchase or issuance of any shares of LSB
        Capital Stock or any other equity securities of LSB or any securities
        representing the right to purchase or otherwise receive any shares of LSB
        Capital Stock (collectively, including the items contemplated by clauses
        (i) and
        (ii) of this sentence, the “LSB Rights”). As of the date hereof, no shares of
        LSB Capital Stock were reserved for issuance, except for 10,000,000 shares
        of
        LSB Common Stock reserved for issuance under the LSB Rights Agreement and
        604,925 shares of LSB Common Stock reserved for issuance upon the exercise
        of
        stock options pursuant to the LSB Stock Plans. Since December
  9
  31,
        2005,
        LSB has not issued any shares of LSB Capital Stock or any securities convertible
        into or exercisable for any shares of LSB Capital Stock, other than as would
        be
        permitted by Section 5.2(b) hereof and pursuant to employee or director stock
        options granted prior to that date. LSB has previously provided FNB with
        a list
        of the option holders, the date of each option to purchase LSB Common Stock
        granted, the number of shares subject to each such option, the expiration
        date
        of each such option and the price at which each such option may be exercised
        under an applicable LSB Stock Plan. In no event will the aggregate number
        of
        shares of LSB Common Stock outstanding at the Effective Time (including all
        shares of LSB Common Stock subject to then outstanding LSB Rights) exceed
        the
        number specified in Section 3.2(a) of the LSB Disclosure Schedule.
  (b)  LSB
        owns,
        directly or indirectly, all of the issued and outstanding shares of capital
        stock or other equity ownership interests of each of the LSB Subsidiaries,
        free
        and clear of any liens, pledges, charges, encumbrances and security interests
        whatsoever (“Liens”), and all of such shares or equity ownership interests are
        duly authorized and validly issued and are fully paid, nonassessable (subject
        to
        N.C. Gen. Stat. § 53-42) and free of preemptive rights, with no personal
        liability attaching to the ownership thereof. No LSB Subsidiary has or is
        bound
        by any outstanding subscriptions, options, warrants, calls, commitments or
        agreements of any character calling for the purchase or issuance of any shares
        of capital stock or any other equity security of such Subsidiary or any
        securities representing the right to purchase or otherwise receive any shares
        of
        capital stock or any other equity security of such Subsidiary. Section 3.2(b)
        of
        the LSB Disclosure Schedule sets forth a list of the material investments
        of LSB
        in Non-Subsidiary Affiliates. As used in this Agreement, the term
“Non-Subsidiary Affiliate” when used with respect to any party means any
        corporation, partnership, limited liability company, trust, joint venture
        or
        other entity other than such party’s Subsidiaries.
  (c)  This
        Agreement and the transactions it contemplates do not give rise to any rights
        to
        purchase LSB Common Stock or other Securities under the LSB Rights
        Agreement.
  3.3  Authority;
        No Violation .
  (a)  LSB
        has
        full corporate power and authority to execute and deliver this Agreement
        and to
        consummate the transactions contemplated hereby and thereby. The execution
        and
        delivery of this Agreement and the consummation of the transactions contemplated
        hereby and thereby have been duly and validly approved by the Board of Directors
        of LSB. The Board of Directors of LSB has directed that this Agreement and
        the
        transactions contemplated hereby be submitted to LSB’s shareholders for adoption
        at a meeting of such shareholders and, except for the adoption of this Agreement
        by the affirmative vote of the holders of a majority of the outstanding shares
        of LSB Common Stock, no other corporate proceedings on the part of LSB are
        necessary to approve this Agreement and to consummate the transactions
        contemplated hereby. This Agreement has been duly and validly executed and
        delivered by LSB and (assuming due authorization, execution and delivery
        by FNB)
        constitute a valid and binding obligation of LSB, enforceable against LSB
        in
        accordance with its terms (except as may be limited by bankruptcy, insolvency,
        moratorium, reorganization or similar laws affecting the rights of creditors
        generally and the availability of equitable remedies).
  10
  (b)  Neither
        the execution and delivery by LSB of this Agreement nor the consummation
        by LSB
        of the transactions contemplated hereby or thereby, nor compliance by LSB
        with
        any of the terms or provisions hereof or thereof, will (i) violate any provision
        of the LSB Charter or By-Laws or (ii) assuming that the consents and approvals
        referred to in Section 3.4 are duly obtained, (x) violate any statute, code,
        ordinance, rule, regulation, judgment, order, writ, decree or injunction
        applicable to LSB, any of its Subsidiaries or Non-Subsidiary Affiliates or
        any
        of their respective properties or assets or (y) violate, conflict with, result
        in a breach of any provision of or the loss of any benefit under, constitute
        a
        default (or an event which, with notice or lapse of time, or both, would
        constitute a default) under, result in the termination of or a right of
        termination or cancellation under, accelerate the performance required by,
        or
        result in the creation of any Lien upon any of the respective properties
        or
        assets of LSB, any of its Subsidiaries or Non-Subsidiary Affiliates under,
        any
        of the terms, conditions or provisions of any note, bond, mortgage, indenture,
        deed of trust, license, lease, agreement or other instrument or obligation
        to
        which LSB, any of its Subsidiaries or its Non-Subsidiary Affiliates is a
        party,
        or by which they or any of their respective properties or assets may be bound
        or
        affected, except (in the case of clause (y) above) for such violations,
        conflicts, breaches or defaults which, either individually or in the aggregate,
        will not have a Material Adverse Effect on LSB.
  3.4  Consents
        and Approvals . Except
        for (i) the filing of applications and notices, as applicable, with the Board
        of
        Governors of the Federal Reserve System (the “Federal Reserve Board”) under the
        BHC Act, and approval of such applications and notices, (ii) the filing of
        any
        other required applications or notices with any state, federal or foreign
        agencies and approval of such applications and notices (the “State Approvals”),
        (iii) the filing with the Securities and Exchange Commission (the “SEC”) of a
        joint proxy statement in definitive form relating to the meetings of LSB’s and
        FNB’s shareholders to be held in connection with this Agreement and the
        transactions contemplated hereby (the “Joint Proxy Statement”), and of the
        registration statement on Form S-4 (the “S-4”) in which the Joint Proxy
        Statement will be included as a prospectus, (iv) the filing of the Articles
        of
        Merger with the North Carolina Secretary pursuant to the NCBCA and Chapter
        53 of
        the North Carolina General Statutes, (v) any consents, authorizations,
        approvals, filings or exemptions in connection with compliance with the
        applicable provisions of federal and state securities laws relating to the
        regulation of broker-dealers, investment advisers or transfer agents, and
        the
        rules and regulations thereunder, and of any applicable industry self-regulatory
        organization (“SRO”), or which are required under consumer finance, mortgage
        banking and other similar laws, (vi) such filings and approvals as are required
        to be made or obtained under the securities or “Blue Sky” laws of various states
        in connection with the issuance of the shares of LSB Common Stock pursuant
        to
        this Agreement and (vii) the approval of this Agreement by the requisite
        votes
        of the shareholders of FNB and LSB (including the approval of the amendments
        of
        the Charter contemplated by Sections 1.1 and 1.7), no consents or approvals
        of
        or filings or registrations with any court, administrative agency or commission
        or other governmental authority or instrumentality (each a “Governmental
        Entity”) are necessary in connection with (A) the execution and delivery by LSB
        of this Agreement and (B) the consummation by LSB of the Merger and the other
        transactions contemplated hereby.
  3.5  Reports .
        LSB and
        each of its Subsidiaries have timely filed all reports, registrations and
        statements, together with any amendments required to be made with respect
        thereto, that they were required to file since January 1, 2003 with (i) the
        Federal Reserve Board, (ii) the Federal Deposit Insurance Corporation (“FDIC”),
        (iii) any state regulatory authority (each a “State Regulator”), (iv) the SEC,
        and (v) any SRO (collectively “Regulatory Agencies”), and all other reports and
        statements required to be filed by them since January 1, 2003, including,
        without limitation, any report or statement
  11
  required
        to be filed pursuant to the laws, rules or regulations of the United States,
        any
        state, or any Regulatory Agency (“LSB Reports”), and have paid all fees and
        assessments due and payable in connection therewith, except where the failure
        to
        file such report, registration or statement or to pay such fees and assessments,
        either individually or in the aggregate, will not have a Material Adverse
        Effect
        on LSB. Except for normal examinations conducted by a Regulatory Agency in
        the
        ordinary course of the business of LSB and its Subsidiaries, no Regulatory
        Agency has initiated any proceeding or, to the best knowledge of LSB,
        investigation into the business or operations of LSB or any of its Subsidiaries
        since January 1, 2003, except where such proceedings or investigation will
        not,
        either individually or in the aggregate, have a Material Adverse Effect on
        LSB.
        There is no unresolved violation, criticism, or exception by any Regulatory
        Agency with respect to any report or statement relating to any examinations
        of
        LSB or any of its Subsidiaries which, in the reasonable judgment of LSB,
        will,
        either individually or in the aggregate, have a Material Adverse Effect on
        LSB.
  3.6  Financial
        Statements . LSB
        has
        previously made available to FNB true and correct copies of the consolidated
        balance sheets of LSB and its Subsidiaries as of December 31, 2004 and 2005
        and
        the related consolidated statements of income and changes in stockholders’
equity and cash flows for the fiscal years 2004 and 2005 and its unaudited
        consolidated balance sheets and related consolidated statements of income
        and
        changes in stockholders’ equity and cash flows as of September 30, 2006, and
        will promptly make available to FNB true and correct copies of the consolidated
        balance sheets of LSB and its Subsidiaries as of December 31, 2006 and the
        related consolidated statements of income, changes in stockholders’ equity and
        cash flows for the 2006 fiscal year (the “LSB Financial Statements”), in each
        case, other than the unaudited statements as of September 30, 2006, accompanied
        by the audit report of Turlington and Company, LLP, independent registered
        public accounting firm with respect to LSB. The December 31, 2005 and September
        30, 2006 consolidated balance sheet of LSB (including the related notes,
        where
        applicable) fairly present, and the December 31, 2006 consolidated balance
        sheet
        of LSB (including related notes where applicable) will fairly present, in
        all
        material respects the consolidated financial position of LSB and its
        Subsidiaries as of the dates thereof, and the other financial statements
        referred to in this Section 3.6 (including the related notes, where applicable)
        fairly present or will fairly present in all material respects the results
        of
        the consolidated operations, changes in stockholders’ equity, cash flows and
        consolidated financial position of LSB and its Subsidiaries for the respective
        fiscal periods or as of the respective dates therein set forth, subject to
        normal adjustments in the case of unaudited statements; each of such statements
        (including the related notes, where applicable) complies in all material
        respects with applicable accounting requirements and with the published rules
        and regulations of the SEC with respect thereto; and each of such statements
        (including the related notes, where applicable) has been prepared in all
        material respects in accordance with GAAP consistently applied during
        the
  12
  periods
        involved, except, in each case, as indicated in such statements or in the
        notes
        thereto. The books and records of LSB and its Subsidiaries have been, and
        are
        being, maintained in all material respects in accordance with GAAP and any
        other
        applicable legal and accounting requirements and reflect only actual
        transactions.
  3.7  Broker’s
        Fees . Except
        for BankersBanc Capital Corporation, neither LSB nor any LSB Subsidiary nor
        any
        of their respective officers or directors has employed any broker or finder
        or
        incurred any liability for any broker’s fees, commissions or finder’s fees in
        connection with the Merger or related transactions contemplated by this
        Agreement.
  3.8  Absence
        of Certain Changes or Events .
  (a)  Except
        as
        publicly disclosed in LSB Reports filed prior to the date hereof, since December
        31, 2005, no event or events have occurred that have had, either individually
        or
        in the aggregate, a Material Adverse Effect on LSB.
  (b)  Except
        as
        publicly disclosed in LSB Reports filed prior to the date hereof, since December
        31, 2005, LSB and its Subsidiaries have carried on their respective businesses
        in all material respects in the ordinary course.
  (c)  Since
        December 31, 2005, neither LSB nor any of its Subsidiaries has (i) except
        for
        such actions as are in the ordinary course of business or except as required
        by
        applicable law, (A) increased the wages, salaries, compensation, pension,
        or
        other fringe benefits or perquisites payable to any executive officer, employee,
        or director from the amount thereof in effect as of December 31, 2005, or
        (B)
        granted any severance or termination pay, entered into any contract to make
        or
        grant any severance or termination pay, or paid any bonuses, which in the
        aggregate exceed 5% of LSB’s 2005 salary and employee benefits expenses (other
        than customary year-end bonuses for fiscal years 2005 and 2006) or (ii) suffered
        any strike, work stoppage, slowdown, or other labor disturbance which will,
        either individually or in the aggregate, have a Material Adverse Effect on
        LSB.
  3.9  Legal
        Proceedings .
  (a)  Neither
        LSB nor any of its Subsidiaries is a party to any, and there are no pending
        or,
        to the best of LSB’s knowledge, threatened, legal, administrative, arbitral or
        other proceedings, claims, actions or governmental or regulatory investigations
        of any nature against LSB or any of its Subsidiaries or challenging the validity
        or propriety of the transactions contemplated by this Agreement as to which,
        in
        any such case, there is a reasonable probability of an adverse determination
        and
        which, if adversely determined, will, either individually or in the aggregate,
        have a Material Adverse Effect on LSB.
  (b)  There
        is
        no injunction, order, judgment, decree, or regulatory restriction (other
        than
        those that apply to similarly situated bank holding companies or banks) imposed
        upon LSB, any of its Subsidiaries or the assets of LSB or any of its
        Subsidiaries that has had, or will have, either individually or in the
        aggregate, a Material Adverse Effect on LSB or the Surviving
        Corporation.
  13
  3.10  Taxes
        and Tax Returns.
  (a)  Each
        of
        LSB and its Subsidiaries has duly filed all federal, state, foreign and local
        information returns and tax returns required to be filed by it on or prior
        to
        the date hereof (all such returns being accurate and complete in all material
        respects) and has duly paid or made provisions for the payment of all Taxes
        (as
        defined below) and other governmental charges which have been incurred or
        are
        due or claimed to be due from it by federal, state, foreign or local taxing
        authorities on or prior to the date of this Agreement (including, without
        limitation, if and to the extent applicable, those due in respect of its
        properties, income, business, capital stock, deposits, franchises, licenses,
        sales and payrolls) other than (i) Taxes or other charges which are not yet
        delinquent or are being contested in good faith and have not been finally
        determined, or (ii) information returns, tax returns, Taxes or other
        governmental charges as to which the failure to file, pay or make provision
        for
        will not, either individually or in the aggregate, have a Material Adverse
        Effect on LSB. No Tax return or report of LSB or its Subsidiaries has been
        subjected to audit or examination by the Internal Revenue Service (the “IRS”) or
        the North Carolina Department of Revenue in the last five years and neither
        LSB
        nor any of its Subsidiaries has received any indication of a pending audit
        or
        examination in connection with any Tax return or report and, to the best
        of
        LSB’s knowledge, no such return or report is subject to adjustment. Neither LSB
        nor any of its Subsidiaries has executed any waiver or extended the statute
        of
        limitations (or been asked to execute a waiver or extend a statute of
        limitations) with respect to any tax year, the audit of any such tax return
        or
        report, or the assessment or collection of any tax. To the best of LSB’s
        knowledge, there are no material disputes pending, or claims asserted for,
        Taxes
        or assessments upon LSB or any of its Subsidiaries for which LSB does not
        have
        adequate reserves. In addition, (A) proper and accurate amounts have been
        withheld by LSB and its Subsidiaries from their employees for all prior periods
        in compliance in all material respects with the tax withholding provisions
        of
        applicable federal, state and local laws, except where failure to do so will
        not, either individually or in the aggregate, have a Material Adverse Effect
        on
        LSB, (B) federal, state, and local returns which are accurate and complete
        in
        all material respects have been filed by LSB and its Subsidiaries for all
        periods for which returns were due with respect to income tax withholding,
        Social Security and unemployment taxes, except where failure to do so will
        not,
        either individually or in the aggregate, have a Material Adverse Effect on
        LSB,
        (C) the amounts shown on such federal, state or local returns to be due and
        payable have been paid in full or adequate provision therefor has been included
        by LSB in its consolidated financial statements, except where failure to
        do so
        will not, either individually or in the aggregate, have a Material Adverse
        Effect on LSB and (D) there are no Tax liens upon any property or assets
        of LSB
        or its Subsidiaries except liens for current taxes not yet due or liens that
        will not, either individually or in the aggregate, have a Material Adverse
        Effect on LSB. Neither LSB nor any of its Subsidiaries has been required
        to
        include in income any adjustment pursuant to Section 481 of the Code by reason
        of a voluntary change in accounting method initiated by LSB or any of its
        Subsidiaries, and the IRS has not initiated or proposed any such adjustment
        or
        change in accounting method, in either case which has had or will have, either
        individually or in the aggregate, a Material Adverse Effect on LSB. Except
        as
        set forth in the financial statements described in Section 3.6, neither LSB
        nor
        any of its Subsidiaries has entered into a transaction which is being accounted
        for as an installment obligation under Section 453 of the Code, which will
        have,
        either individually or in the aggregate, a Material Adverse Effect on
        LSB.
  14
  (b)  As
        used
        in this Agreement, the term “Tax” or “Taxes” means all federal, state, local,
        and foreign income, excise, gross receipts, gross income, ad valorem, profits,
        gains, property, capital, sales, transfer, use, payroll, employment, severance,
        withholding, duties, intangibles, franchise, backup withholding, and other
        taxes, charges, levies or like assessments together with all penalties and
        additions to tax and interest thereon.
  (c)  Neither
        LSB nor any of its Subsidiaries is a party to or is bound by any Tax sharing,
        allocation or indemnification agreement or arrangement (other than such an
        agreement or arrangement solely among LSB and its Subsidiaries). Neither
        LSB nor
        any of its Subsidiaries has any liability for the Taxes of any person (other
        than LSB and its Subsidiaries) under Treasury Regulation Section 1.1502-6
        (or
        any similar provision of state, local or foreign law). Within the past five
        years, neither LSB nor any of its Subsidiaries has been a “distributing
        corporation” or a “controlled corporation” in a distribution intended to qualify
        under Section 355 (a) of the Code.
  (d)  No
        disallowance of a deduction under Section 162(m) of the Code for employee
        remuneration of any amount paid or payable by LSB or any Subsidiary of LSB
        under
        any contract, plan, program, arrangement or understanding will have, either
        individually or in the aggregate, a Material Adverse Effect on LSB.
  3.11  Employees .
  (a)  The
        LSB
        Disclosure Schedule sets forth a true and complete list of each material
        employee or director benefit plan, arrangement or agreement that is maintained,
        or contributed to, as of the date of this Agreement (the “LSB Benefit Plans”) by
        LSB, any of its Subsidiaries or by any trade or business, whether or not
        incorporated (a “LSB ERISA Affiliate”), all of which together with LSB would be
        deemed a “single employer” within the meaning of Section 4001 of the Employee
        Retirement Income Security Act of 1974, as amended (“ERISA”).
  (b)  LSB
        has
        heretofore made available to FNB true and complete copies of each of the
        LSB
        Benefit Plans and certain related documents, including, but not limited to,
        (i)
        the actuarial report for such LSB Benefit Plan (if applicable) for each of
        the
        last two years and (ii) the most recent determination letter from the IRS
        (if
        applicable) for such LSB Benefit Plan.
  (c)  (i)
        Each
        of the LSB Benefit Plans has been operated and administered in all material
        respects in compliance with applicable laws, including, but not limited to,
        ERISA and the Code, (ii) each of the LSB Benefit Plans intended to be
“qualified” within the meaning of Section 401(a) of the Code is so qualified,
        and there are no existing circumstances or any events that have occurred
        that
        will adversely affect the qualified status of any such LSB Benefit Plan,
        (iii)
        with respect to each LSB Benefit Plan that is subject to Title IV of ERISA,
        the
        present value of accrued benefits under such LSB Benefit Plan, based upon
        the
        actuarial assumptions used for funding purposes in the most recent actuarial
        report prepared by such LSB Benefit Plan’s actuary with respect to such LSB
        Benefit Plan, did not, as of its latest valuation date, exceed the then current
        value of the assets of such LSB Benefit Plan allocable to such accrued benefits,
        (iv) no LSB Benefit Plan provides benefits, including, without limitation,
        death
        or medical benefits (whether or not insured), with respect to current or
        former
        employees or directors of LSB or its Subsidiaries beyond their retirement
        or
        other termination of service, other than (A) coverage mandated by applicable
        law, (B) death benefits or retirement benefits under any
“employee
  15
  pension
        plan” (as such term is defined in Section 3(2) of ERISA), (C) deferred
        compensation benefits accrued as liabilities on the books of LSB or its
        Subsidiaries or (D) benefits the full cost of which is borne by the current
        or
        former employee or director (or his beneficiary), (v) no material liability
        under Title IV of ERISA has been incurred by LSB, its Subsidiaries or any
        LSB
        ERISA Affiliate that has not been satisfied in full, and no condition exists
        that presents a material risk to LSB, its Subsidiaries or any LSB ERISA
        Affiliate of incurring a material liability thereunder, (vi) no LSB Benefit
        Plan
        is a “multiemployer pension plan” (as such term is defined in Section 3(37) of
        ERISA), (vii) all contributions or other amounts payable by LSB or its
        Subsidiaries as of the Effective Time with respect to each LSB Benefit Plan
        in
        respect of current or prior plan years have been paid or accrued in accordance
        with GAAP and Section 412 of the Code, (viii) none of LSB, its Subsidiaries
        or
        any other person, including any fiduciary, has engaged in a transaction in
        connection with which LSB, its Subsidiaries or any LSB Benefit Plan will
        be
        subject to either a material civil penalty assessed pursuant to Section 409
        or
        502(i) of ERISA or a material tax imposed pursuant to Section 4975 or 4976
        of
        the Code, and (ix) to the best knowledge of LSB there are no pending, threatened
        or anticipated claims (other than routine claims for benefits) by, on behalf
        of
        or against, any of the LSB Benefit Plans or any trusts related thereto that
        will
        have, either individually or in the aggregate, a Material Adverse Effect
        on
        LSB.
  (d)  Neither
        the execution and delivery of this Agreement nor the consummation of the
        transactions contemplated hereby will (either alone or in conjunction with
        any
        other event) (i) result (either alone or upon the occurrence of any additional
        acts or events) in any payment (including, without limitation, severance,
        unemployment compensation, “excess parachute payment” (within the meaning of
        Section 280G of the Code), forgiveness of indebtedness or otherwise) becoming
        due to any director or any employee of LSB or any of its affiliates from
        LSB or
        any of its affiliates under any LSB Benefit Plan or otherwise, (ii) increase
        any
        benefits otherwise payable under any LSB Benefit Plan or (iii) other than
        the
        LSB Corporation Directors’ Stock Deferral Plan with respect to directors of LSB
        not continuing their service on the Board of Directors of the Surviving
        Corporation, result in any acceleration of the time of payment or vesting
        of any
        such benefits which will, either individually or in the aggregate, have a
        Material Adverse Effect on LSB.
  (e)  The
        Lexington State Bank Employees’ Pension Plan was “frozen” by LSB and Lexington
        State Bank, effective as of December 31, 2006.
  3.12  SEC
        Reports . LSB
        has
        previously made available to FNB an accurate and complete copy of each (a)
        final
        registration statement, prospectus, report, schedule and definitive proxy
        statement filed since January 1, 2003 by LSB (the “LSB SEC Reports”) with the
        SEC pursuant to the Securities Act of 1933, as amended (the “Securities Act”),
        or the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and
        prior to the date hereof and (b) communication mailed by LSB to its shareholders
        since January 1, 2003 and prior to the date hereof, and no such LSB SEC Report
        or communication, as of the date thereof, contained any untrue statement
        of a
        material fact or omitted to state any material fact required to be stated
        therein or necessary in order to make the statements therein, in light of
        the
        circumstances in which they were made, not misleading, except that information
        as of a later date (but before the date hereof) shall be deemed to
        modify
  16
  information
        as of an earlier date. Since January 1, 2003, as of their respective dates,
        all
        LSB SEC Reports filed under the Securities Act and the Exchange Act complied
        in
        all material respects with the published rules and regulations of the SEC
        with
        respect thereto.
  3.13  Compliance
        with Applicable Law .
  (a)  LSB
        and
        each of its Subsidiaries hold all material licenses, franchises, permits
        and
        authorizations necessary for the lawful conduct of their respective businesses
        under and pursuant to each, and have complied in all material respects with
        and
        are not in default in any material respect under any, applicable law, statute,
        order, rule, regulation, policy and/or guideline of any Governmental Entity
        relating to LSB or any of its Subsidiaries, except where the failure to hold
        such license, franchise, permit or authorization or such noncompliance or
        default will not, either individually or in the aggregate, have a Material
        Adverse Effect on LSB.
  (b)  Except
        as
        will not have, either individually or in the aggregate, a Material Adverse
        Effect on LSB, LSB and each LSB Subsidiary have properly administered all
        accounts for which it acts as a fiduciary, including accounts for which it
        serves as a trustee, agent, custodian, personal representative, guardian,
        conservator or investment advisor, in accordance with the terms of the governing
        documents, applicable state and federal law and regulation and common law.
        None
        of LSB, any LSB Subsidiary, or any director, officer or employee of LSB or
        of
        any LSB Subsidiary, has committed any breach of trust with respect to any
        such
        fiduciary account that will have a Material Adverse Effect on LSB, and the
        accountings for each such fiduciary account are true and correct in all material
        respects and accurately reflect the assets of such fiduciary
        account.
  3.14  Certain
        Contracts .
  (a)  Neither
        LSB nor any of its Subsidiaries is a party to or bound by any contract,
        arrangement, commitment or understanding (whether written or oral) (i) with
        respect to the employment of any directors, officers or employees, other
        than in
        the ordinary course of business consistent with past practice, (ii) which,
        upon
        the consummation or shareholder approval of the transactions contemplated
        by
        this Agreement will (either alone or upon the occurrence of any additional
        acts
        or events) result in any payment (whether of severance pay or otherwise)
        becoming due from FNB, LSB, the Surviving Corporation, or any of their
        respective Subsidiaries to any officer or employee thereof which, individually
        or in the aggregate, will have a Material Adverse Effect on LSB, (iii) which
        is
        a “material contract” (as such term is defined in Item 601(b)(10) of Regulation
        S-K of the SEC) to be performed after the date of this Agreement that has not
        been filed or incorporated by reference in the LSB Reports, (iv) which
        materially restricts the conduct of any line of business by LSB or upon
        consummation of the Merger will materially restrict the ability of the Surviving
        Corporation to engage in any line of business in which a bank holding company
        may lawfully engage, (v) with or to a labor union or guild (including any
        collective bargaining agreement) or (vi) (including any stock option plan,
        stock
        appreciation rights plan, restricted stock plan or stock purchase plan) any
        of
        the benefits of which will be increased, or the vesting of the benefits of
        which
        will be accelerated, by the occurrence of any shareholder approval or the
        consummation of any of the transactions contemplated by this Agreement, or
        the
        value of any of the benefits of which will be calculated on the basis of
        any of
        the transactions contemplated by this Agreement which, individually or in
        the
        aggregate, will
  17
  have
        a
        Material Adverse Effect on LSB. LSB has previously made available to FNB
        true
        and correct copies of all employment and deferred compensation agreements
        which
        are in writing and to which LSB is a party. Each contract, arrangement,
        commitment or understanding of the type described in this Section 3.14(a),
        whether or not set forth in the LSB Disclosure Schedule, is referred to herein
        as a “LSB Contract”, and neither LSB nor any of its Subsidiaries knows of, or
        has received notice of, any violation of the above by any of the other parties
        thereto which, either individually or in the aggregate, will have a Material
        Adverse Effect on LSB.
  (b)
        (i)
        Each LSB Contract is valid and binding on LSB or any of its Subsidiaries,
        as
        applicable, and in full force and effect, (ii) LSB and each of its Subsidiaries
        has in all material respects performed all obligations required to be performed
        by it to date under each LSB Contract, except where such noncompliance, either
        individually or in the aggregate, will not have a Material Adverse Effect
        on
        LSB, and (iii) no event or condition exists which constitutes or, after notice
        or lapse of time or both, will constitute, a material default on the part
        of LSB
        or any of its Subsidiaries under any such LSB Contract, except where such
        default, either individually or in the aggregate, will not have a Material
        Adverse Effect on LSB.
  3.15  Agreements
        with Regulatory Agencies . Neither
        LSB nor any of its Subsidiaries is subject to any cease-and-desist or other
        order issued by, or is a party to any written agreement, consent agreement
        or
        memorandum of understanding with, or is a party to any commitment letter
        or
        similar undertaking to, or is subject to any order or directive by, or has
        been
        since January 1, 2003, a recipient of any supervisory letter from, or since
        January 1, 2003, has adopted any board resolutions at the request of any
        Regulatory Agency or other Governmental Entity that currently restricts in
        any
        material respect the conduct of its business or that in any material manner
        relates to its capital adequacy, its credit policies, its management or its
        business (each, whether or not set forth in the LSB Disclosure Schedule,
        an “LSB
        Regulatory Agreement”), nor has LSB or any of its Subsidiaries been advised
        since January 1, 2003, by any Regulatory Agency or other Governmental Entity
        that it is considering issuing or requesting any such Regulatory
        Agreement.
  3.16  Interest
        Rate Risk Management Instruments . All
        interest rate swaps, caps, floors and option agreements and other interest
        rate
        risk management arrangements, whether entered into for the account of LSB
        or for
        the account of a customer of LSB or one of its Subsidiaries, were entered
        into
        in the ordinary course of business and, to the best of LSB’s knowledge, in
        accordance with prudent banking practice and applicable rules, regulations
        and
        policies of any Regulatory Authority and with counterparties believed to
        be
        financially responsible at the time and are legal, valid and binding obligations
        of LSB or one of its Subsidiaries enforceable in accordance with their terms
        (except as may be limited by bankruptcy, insolvency, moratorium, reorganization
        or similar laws affecting the rights of creditors generally and the availability of equitable remedies), and are
        in full
        force and effect. LSB and each of its Subsidiaries have duly performed in
        all
        material respects all of their material obligations thereunder to the extent
        that such obligations to perform have accrued; and, to LSB’s knowledge, there
        are no material breaches, violations or defaults or allegations or assertions
        of
        such by any party thereunder.
  3.17  Undisclosed
          Liabilities. Except
          for those liabilities that are fully reflected or reserved against on the
          consolidated balance sheet of LSB included in the LSB Financial Statements
          and
          for liabilities incurred in the ordinary course of business consistent
          with past
          practice, since December 31, 2005, neither LSB nor
  18
  any
        of
        its Subsidiaries has incurred any liability of any nature whatsoever (whether
        absolute, accrued, contingent or otherwise and whether due or to become due)
        that, either individually or in the aggregate, has had or will have a Material
        Adverse Effect on LSB.
  3.18  Insurance . LSB
        and
        its Subsidiaries have in effect insurance coverage with reputable insurers
        or
        are self-insured, which in respect of amounts, premiums, types and risks
        insured, constitutes reasonably adequate coverage against all risks customarily
        insured against by bank holding companies and their subsidiaries comparable
        in
        size and operations to LSB and its Subsidiaries.
  3.19  Environmental
        Liability . There
        are
        no legal, administrative, arbitral or other proceedings, claims, actions,
        causes
        of action, private environmental investigations or remediation activities
        or
        governmental investigations of any nature seeking to impose, or that could
        reasonably result in the imposition, on LSB of any liability or obligation
        arising under common law or under any local, state or federal environmental
        statute, regulation or ordinance including, without limitation, the
        Comprehensive Environmental Response, Compensation and Liability Act of 1980,
        as
        amended (“CERCLA”), pending or threatened against LSB, which liability or
        obligation will, either individually or in the aggregate, have a Material
        Adverse Effect on LSB. To the best knowledge of LSB, there is no reasonable
        basis for any such proceeding, claim, action or governmental investigation
        that
        would impose any liability or obligation that will, individually or in the
        aggregate, have a Material Adverse Effect on LSB. LSB is not subject to any
        agreement, order, judgment, decree, letter or memorandum by or with any court,
        governmental authority, regulatory agency or third party imposing any liability
        or obligation with respect to the foregoing that will have, either individually
        or in the aggregate, a Material Adverse Effect on LSB.
  3.20  State
        Takeover Laws; Rights Plan . The
        Board
        of Directors of LSB has approved the transactions contemplated by this Agreement
        for purposes of Sections 55-9A-01 through -09 of the NCBCA, such that the
        provisions of such Sections of the NCBCA will not apply to this Agreement
        or any
        of the transactions contemplated hereby. LSB is not and has not been the
        “beneficial owner” of more than 20% of the “voting shares” of FNB, as those
        terms are defined in Sections 55-9-01 through -05 of the NCBCA. The Board
        of
        Directors of LSB has taken all actions necessary under the Rights Plan to
        provide that the provisions of the Rights Plan will not be or become operative
        with respect to the Merger.
  3.21  Reorganization . As
        of the
        date of this Agreement, LSB has no reason to believe that the Merger will
        not
        qualify as a “reorganization” within the meaning of Section 368(a) of the
        Code.
  3.22  Obstacles
          to Regulatory Approval. To
          the
          best knowledge of the management of LSB, there exists no facts or condition
          relating to LSB that may reasonably be expected to prevent or materially
          impede
          or delay the parties hereto from obtaining the Requisite Regulatory Approvals
          (as defined in Section 7.1(c)); and, if any such fact or condition becomes
          known
          to LSB, LSB shall promptly (and in any event within three (3) days after
          obtaining such knowledge) give notice of such fact or condition to FNB
          in the
          manner provided herein.
  19
  **ARTICLE
        IV**
  **REPRESENTATIONS
        AND WARRANTIES OF FNB**
  Except
        as
        disclosed in the FNB disclosure schedule delivered to LSB concurrently herewith
        (the “FNB Disclosure Schedule”), FNB hereby represents and warrants to LSB as
        follows:
  4.1  Corporate
        Organization .
  (a)  FNB
        is a
        corporation duly organized, validly existing and in good standing under the
        laws
        of the State of North Carolina. FNB has the corporate power and authority
        to own
        or lease all of its properties and assets and to carry on its business as
        it is
        now being conducted, and is duly licensed or qualified to do business in
        each
        jurisdiction in which the nature of the business conducted by it or the
        character or location of the properties and assets owned or leased by it
        makes
        such licensing or qualification necessary, except where the failure to be
        so
        licensed or qualified would not, either individually or in the aggregate,
        have a
        Material Adverse Effect on FNB. FNB is duly registered as a bank holding
        company
        under the BHC Act. True and complete copies of the Articles of Incorporation,
        as
        amended (the “FNB Articles”), and By-Laws of FNB, as in effect as of the date of
        this Agreement, have previously been made available by FNB to LSB.
  (b)  Each
        FNB
        Subsidiary (i) is duly organized and validly existing under the laws of its
        jurisdiction of organization, (ii) is duly qualified to do business and in
        good
        standing in all jurisdictions (whether Federal, state, local or foreign)
        where
        its ownership or leasing of property or the conduct of its business requires
        it
        to be so qualified and in which the failure to be so qualified would have
        a
        Material Adverse Effect on FNB, and (iii) has all requisite corporate power
        and
        authority to own or lease its properties and assets and to carry on its business
        as now conducted.
  4.2  Capitalization .
  (a)  The
        authorized capital stock of FNB consists of (i) 75,000,000 shares of FNB
        Common
        Stock, of which, as of February 21, 2007, 7,063,952 shares were issued and
        outstanding, and (ii) 10,000,000 shares of serial preferred stock, no par
        value
        per share (the “FNB Preferred Stock” and together with the FNB Common Stock, the
“FNB Capital Stock”) of which, as of the date hereof, no shares are issued and
        outstanding. All of the issued and outstanding shares of FNB Common Stock
        have
        been duly and validly issued and are fully paid, nonassessable and free of
        preemptive rights, with no liability attaching to the ownerships thereof.
  20
  As
        of the
        date hereof, no shares of FNB Common Stock or FNB Preferred Stock were reserved
        for issuance, except for options to acquire 823,498 shares of FNB Common
        Stock
        issued pursuant to the employee and director stock option plans of FNB in
        effect
        as of the date hereof (the “FNB Stock Plans”) and options granted pursuant to a
        severance agreement set forth in the FNB Disclosure Schedule (“FNB Severance
        Options”). All of the issued and outstanding shares of FNB Common Stock have
        been duly authorized and validly issued and are fully paid, nonassessable
        and
        free of preemptive rights, with no personal liability attaching to the ownership
        thereof. As of the date of this Agreement, except pursuant to the terms of
        the
        FNB Stock Plans and the FNB Severance Options, FNB does not have and is not
        bound by any outstanding subscriptions, options, warrants, calls, commitments
        or
        agreements of any character calling for the purchase or issuance of any shares
        of FNB Capital Stock or any other equity securities of FNB or any securities
        representing the right to purchase or otherwise receive any shares of FNB
        Capital Stock (collectively, “FNB Rights”). Since December 31, 2005, FNB has not
        issued any shares of FNB Capital Stock or any securities convertible into
        or
        exercisable for any shares of FNB Capital Stock, other than as permitted
        by
        Section 5.2(b) and pursuant to the exercise of employee or director stock
        options granted prior to such date. FNB has previously provided LSB with
        a list
        of the option holders, the date of each option to purchase FNB Common Stock
        granted, the number of shares subject to each such option, the expiration
        date
        of each such option and the price at which each such option may be exercised
        under an applicable FNB Stock Plan. In no event will the aggregate number
        of
        shares of FNB Common Stock outstanding at the Effective Time (including all
        shares of FNB Common Stock subject to then outstanding FNB Rights) exceed
        the
        number specified in Section 4.2(a) of the FNB Disclosure Schedule.
  (b)  FNB
        owns,
        directly or indirectly, all of the issued and outstanding shares of capital
        stock or other equity ownership interests of each of the FNB Subsidiaries,
        free
        and clear of any Liens, and all of such shares or equity ownership interests
        are
        duly authorized and validly issued and are fully paid, nonassessable (subject
        to
        N.C. Gen. Stat. §54-42) and free of preemptive rights, with no personal
        liability attaching to the ownership. thereof. No FNB Subsidiary has or is
        bound
        by any outstanding subscriptions, options, warrants, calls, commitments or
        agreements of any character calling for the purchase or issuance of any shares
        of capital stock or any other equity security of such Subsidiary or any
        securities representing the right to purchase or otherwise receive any shares
        of
        capital stock or any other equity security of such Subsidiary. Section 4.2(b)
        of
        the FNB Disclosure Schedule sets forth a list of the material investments
        of FNB
        in Non-Subsidiary Affiliates.
  4.3  Authority;
        No Violation .
  (a)  FNB
        has
        full corporate power and authority to execute and deliver this Agreement
        and to
        consummate the transactions contemplated hereby and thereby. The execution
        and
        delivery of this Agreement and the consummation of the transactions contemplated
        hereby and thereby have been duly and validly approved by the Board of Directors
        of FNB. The Board of Directors of FNB has directed that this Agreement and
        the
        transactions contemplated hereby be submitted to FNB’s shareholders for adoption
        at a meeting of such shareholders and, except for the adoption of this Agreement
        by the affirmative vote of the holders of a majority of the outstanding shares
        of FNB Common Stock, no other corporate proceedings on the part of FNB are
        necessary to approve this Agreement and to consummate the transactions
        contemplated hereby. This Agreement has been duly and validly executed and
        delivered by FNB and
  21
  (assuming
        due authorization, execution and delivery by LSB) constitute valid and binding
        obligations of FNB, enforceable against FNB in accordance with their terms
        (except as may be limited by bankruptcy, insolvency, moratorium, reorganization
        or similar laws affecting the rights of creditors generally and the availability
        of equitable remedies).
  (b)  Neither
        the execution and delivery of this Agreement by FNB, nor the consummation
        by FNB
        of the transactions contemplated hereby, nor compliance by FNB with any of
        the
        terms or provisions hereof or thereof, will (i) violate any provision of
        the FNB
        Articles or By-Laws, or (ii) assuming that the consents and approvals referred
        to in Section 4.4 are duly obtained, (x) violate any statute, code, ordinance,
        rule, regulation, judgment, order, writ, decree or injunction applicable
        to FNB,
        any of its Subsidiaries or Non-Subsidiary Affiliates or any of their respective
        properties or assets or (y) violate, conflict with, result in a breach of
        any
        provision of or the loss of any benefit under, constitute a default (or an
        event
        which, with notice or lapse of time, or both, would constitute a default)
        under,
        result in the termination of or a right of termination or cancellation under,
        accelerate the performance required by, or result in the creation of any
        Lien
        upon any of the respective properties or assets of FNB, any of its Subsidiaries
        or its Non-Subsidiary Affiliates under, any of the terms, conditions or
        provisions of any note, bond, mortgage, indenture, deed of trust, license,
        lease, agreement or other instrument or obligation to which FNB, any of its
        Subsidiaries or Non-Subsidiary Affiliates is a party, or by which they or
        any of
        their respective properties or assets may be bound or affected, except (in
        the
        case of clause (y) above) for such violations, conflicts, breaches or defaults
        which either individually or in the aggregate will not have a Material Adverse
        Effect on FNB.
  4.4  Consents
        and Approvals . Except
        for (i) the filing of applications and notices, as applicable, with the Federal
        Reserve Board under the BHC Act and the Federal Reserve Act, as amended,
        and
        approval of such applications and notices, (ii) the State Approvals, (iii)
        the
        filing with the SEC of the Joint Proxy Statement and the S-4, (iv) the filing
        of
        the Articles of Merger with the North Carolina Secretary pursuant to the
        NCBCA
        and Chapter 53 of the North Carolina General Statutes, (v) any consents,
        authorizations, approvals, filings or exemptions in connection with compliance
        with the applicable provisions of federal and state securities laws relating
        to
        the regulation of broker-dealers, investment advisers or transfer agents,
        and
        the rules and regulations thereunder, and of any applicable SRO, or which
        are
        required under consumer finance, mortgage banking and other similar laws,
        (vi)
        such filings and approvals as are required to be made or obtained under the
        securities or “Blue Sky” laws of various states in connection with the issuance
        of the shares of LSB Common Stock pursuant to this Agreement and (vii) the
        approval of this Agreement by the requisite votes of the shareholders of
        FNB and
        LSB (including the approval of the amendments of the Charter contemplated
        by
        Sections 1.1 and 1.7), no consents or approvals of or filings or registrations
        with any Governmental Entity are necessary in connection with (A) the execution
        and delivery by FNB of this Agreement and (B) the consummation by FNB of
        the
        Merger and the other transactions contemplated hereby.
  4.5  Reports . FNB
        and
        each of its Subsidiaries have timely filed all reports, registrations and
        statements, together with any amendments required to be made with respect
        thereto, that they were required
  22
  to
        file
        since January 1, 2003 with the Regulatory Agencies, and all other reports
        and
        statements required to be filed by them since January 1, 2003, including,
        without limitation, any report or statement required to be filed pursuant
        to the
        laws, rules or regulations of the United States, any state, or any Regulatory
        Agency (“FNB Reports”), and have paid all fees and assessments due and payable
        in connection therewith, except where the failure to file such report,
        registration or statement or to pay such fees and assessments, either
        individually or in the aggregate, will not have a Material Adverse Effect
        on
        FNB. Except for normal examinations conducted by a Regulatory Agency in the
        ordinary course of the business of FNB and its Subsidiaries, no Regulatory
        Agency has initiated any proceeding or, to the best knowledge of FNB,
        investigation into the business or operations of FNB or any of its Subsidiaries
        since January 1, 2003, except where such proceedings or investigation will
        not
        have, either individually or in the aggregate, a Material Adverse Effect
        on FNB.
        There is no unresolved violation, criticism, or exception by any Regulatory
        Agency with respect to any report or statement relating to any examinations
        of
        FNB or any of its Subsidiaries which, in the reasonable judgment of FNB,
        will
        have, either individually or in the aggregate, a Material Adverse Effect
        on
        FNB.
  4.6  Financial
        Statements . FNB
        has
        previously made available to LSB true and correct copies of the consolidated
        balance sheets of FNB and its Subsidiaries as of December 31, 2004 and 2005
        and
        the related consolidated statements of income and changes in stockholders’
equity and cash flows for the fiscal years 2004 and 2005, and its unaudited
        consolidated balance sheets and the related consolidated statements of income
        and changes in stockholders’ equity and cash flows as of September 30, 2006, and
        will promptly make available to LSB true and correct copies of the consolidated
        balance sheets of FNB and its Subsidiaries as of December 31, 2006 and the
        related consolidated statements of income, changes in stockholders’ equity and
        cash flows for the 2006 fiscal year (the “FNB Financial Statements”), in each
        case, other than the unaudited statements as of September 30, 2006, accompanied
        by the audit report of Dixon Hughes, LLP, independent registered public
        accounting firm with respect to FNB. The December 31, 2005 and September
        30,
        2006 consolidated balance sheet of FNB (including the related notes, where
        applicable) fairly present, and the December 31, 2006 consolidated balance
        sheet
        of FNB (including related notes where applicable, will fairly present, in
        all
        material respects the consolidated financial position of FNB and its
        Subsidiaries as of the dates thereof, and the other financial statements
        referred to in this Section 4.6 (including the related notes, where applicable)
        fairly present or will fairly present in all material respects the results
        of
        the consolidated operations, changes in stockholders’ equity, cash flows and
        consolidated financial position of FNB and its Subsidiaries for the respective
        fiscal periods or as of the respective dates therein set forth, subject to
        normal adjustments in the case of unaudited statements; each of such statements
        (including the related notes, where applicable) complies in all material
        respects with applicable accounting requirements and with the published rules
        and regulations of the SEC with respect thereto; and each of such statements
        (including the related notes, where applicable) has been prepared in all
        material respects in accordance with GAAP consistently applied during the
        periods involved, except, in each case, as indicated in such statements or
        in
        the notes thereto. The books and records of FNB and its Subsidiaries have
        been,
        and are being, maintained in all material respects in accordance with GAAP
        and
        any other applicable legal and accounting requirements and reflect only actual
        transactions.
  4.7  Broker’s
          Fees. Except
          for Howe Barnes Hoefer & Arnett, Inc., neither FNB nor any FNB Subsidiary
          nor any of their respective officers or directors has employed any broker
          or
          finder or incurred any liability for any broker’s fees, commissions or finder’s
          fees in connection with the Merger or related transactions contemplated
          by this
          Agreement.
  23
  4.8  Absence
        of Certain Changes or Events .
  (a)  Except
        as
        publicly disclosed in FNB Reports filed prior to the date hereof, since December
        31, 2005, no event or events have occurred which have had, individually or
        in
        the aggregate, a Material Adverse Effect on FNB.
  (b)  Except
        as
        publicly disclosed in FNB Reports filed prior to the date hereof, since December
        31, 2005, FNB and its Subsidiaries have carried on their respective businesses
        in all material respects in the ordinary course.
  (c)  Since
        December 31, 2005, neither FNB nor any of its Subsidiaries has (i) except
        for
        such actions as are in the ordinary course of business or except as required
        by
        applicable law, (A) increased the wages, salaries, compensation, pension,
        or
        other fringe benefits or perquisites payable to any executive officer, employee,
        or director from the amount thereof in effect as of December 31, 2005, or
        (B)
        granted any severance or termination pay, entered into any contract to make
        or
        grant any severance or termination pay, or paid any bonuses, which in the
        aggregate exceed 5% of FNB’s 2005 salary and employee benefit expenses (other
        than customary year-end bonuses for fiscal years 2005 and 2006) or (ii) suffered
        any strike, work stoppage, slowdown, or other labor disturbance which will
        have,
        either individually or in the aggregate, a Material Adverse Effect on
        FNB.
  4.9  Legal
        Proceedings .
  (a)  Neither
        FNB nor any of its Subsidiaries is a party to any, and there are no pending
        or,
        to the best of FNB’s knowledge, threatened, legal, administrative, arbitral or
        other proceedings, claims, actions or governmental or regulatory investigations
        of any nature against FNB or any of its Subsidiaries or challenging the validity
        or propriety of the transactions contemplated by this Agreement as to which,
        in
        any such case, there is a reasonable probability of an adverse determination
        and
        which, if adversely determined, will have, either individually or in the
        aggregate, a Material Adverse Effect on FNB.
  (b)  There
        is
        no injunction, order, judgment, decree, or regulatory restriction (other
        than
        those that apply to similarly situated bank holding companies or banks) imposed
        upon FNB, any of its Subsidiaries or the assets of FNB or any of its
        Subsidiaries that has had or will have, either individually or in the aggregate,
        a Material Adverse Effect on FNB or the Surviving Corporation.
  4.10  Taxes
        and Tax Returns .
  (a)  Each
        of
        FNB and its Subsidiaries has duly filed all federal, state, foreign and local
        information returns and tax returns required to be filed by it on or prior
        to
        the date hereof (all
  24
  such
        returns being accurate and complete in all material respects) and has duly
        paid
        or made provisions for the payment of all Taxes and other governmental charges
        which have been incurred or are due or claimed to be due from it by federal,
        state, foreign or local taxing authorities on or prior to the date of this
        Agreement (including, without limitation, if and to the extent applicable,
        those
        due in respect of its properties, income, business, capital stock, deposits,
        franchises, licenses, sales and payrolls) other than (i) Taxes or other charges
        which are not yet delinquent or are being contested in good faith and have
        not
        been finally determined, or (ii) information returns, tax returns, Taxes
        or
        other governmental charges as to which the failure to file, pay or make
        provision for will not have, either individually or in the aggregate, a Material
        Adverse Effect on FNB. No Tax return or report of FNB or its Subsidiaries
        has
        been subjected to audit or examination by the Internal Revenue Service (the
        “IRS”) or the North Carolina Department of Revenue in the last five years and
        neither FNB nor any of its Subsidiaries has received any indication of a
        pending
        audit or examination in connection with any Tax return or report and, to
        the
        best of FNB’s knowledge, no such return or report is subject to adjustment.
        Neither FNB nor any of its Subsidiaries has executed any waiver or extended
        the
        statute of limitations (or been asked to execute a waiver or extend a statute
        of
        limitations) with respect to any tax year, the audit of any such tax return
        or
        report, or the assessment or collection of any tax. To the best of FNB’s
        knowledge, there are no material disputes pending, or claims asserted for,
        Taxes
        or assessments upon FNB or any of its Subsidiaries for which FNB does not
        have
        adequate reserves. In addition, (A) proper and accurate amounts have been
        withheld by FNB and its Subsidiaries from their employees for all prior periods
        in compliance in all material respects with the tax withholding provisions
        of
        applicable federal, state and local laws, except where failure to do so will
        not, either individually or in the aggregate, have a Material Adverse Effect
        on
        FNB, (B) federal, state and local returns which are accurate and complete
        in all
        material respects have been filed by FNB and its Subsidiaries for all periods
        for which returns were due with respect to income tax withholding, Social
        Security and unemployment taxes, except where failure to do so will not,
        either
        individually or in the aggregate, have a Material Adverse Effect on FNB,
        (C) the
        amounts shown on such federal, state or local returns to be due and payable
        have
        been paid in full or adequate provision therefor has been included by FNB
        in its
        consolidated financial statements, except where failure to do so will not,
        individually or in the aggregate, have a Material Adverse Effect on FNB and
        (D)
        there are no Tax liens upon any property or assets of FNB or its Subsidiaries
        except liens for current taxes not yet due or liens that will not have, either
        individually or in the aggregate, a Material Adverse Effect on FNB. Neither
        FNB
        nor any of its Subsidiaries has been required to include in income any
        adjustment pursuant to Section 481 of the Code by reason of a voluntary change
        in accounting method initiated by FNB or any of its Subsidiaries, and the
        IRS
        has not initiated or proposed any such adjustment or change in accounting
        method, in either case, which has had or will have, either individually or
        in
        the aggregate, a Material Adverse Effect on FNB. Except as set forth in the
        financial statements described in Section 4.6, neither FNB nor any of its
        Subsidiaries has entered into a transaction which is being accounted for
        as an
        installment obligation under Section 453 of the Code, which will have, either
        individually or in the aggregate, a Material Adverse Effect on FNB.
  (b)  Neither
        FNB nor any of its Subsidiaries is a party to or is bound by any Tax sharing,
        allocation or indemnification agreement or arrangement (other than such an
        agreement or arrangement solely among FNB and its Subsidiaries). Neither
        FNB nor
        any of its Subsidiaries has any liability for the Taxes of any person (other
        than FNB and its Subsidiaries) under
  25
  Treasury
        Regulation Section 1.1502-6 (or any similar provision of state, local or
        foreign
        law). Within the past five years, neither FNB nor any of its Subsidiaries
        has
        been a “distributing corporation” or a “controlled corporation” in a
        distribution intended to qualify under Section 355(a) of the Code.
  (c)  No
        disallowance of a deduction under Section 162(m) of the Code for employee
        remuneration of any amount paid or payable by FNB or any Subsidiary of FNB
        under
        any contract, plan, program, arrangement or understanding will have, either
        individually or in the aggregate, a Material Adverse Effect on FNB.
  4.11  Employees .
  (a)  The
        FNB
        Disclosure Schedule sets forth a true and complete list of each material
        employee benefit plan, arrangement or agreement that is maintained, or
        contributed to, as of the date of this Agreement (the “FNB Benefit Plans”) by
        FNB, any of its Subsidiaries or by any trade or business, whether or not
        incorporated (a “FNB ERISA Affiliate”), all of which together with FNB would be
        deemed a “single employer” within the meaning of Section 4001 of
        ERISA.
  (b)  FNB
        has
        heretofore made available to LSB true and complete copies of each of the
        FNB
        Benefit Plans and certain related documents, including, but not limited to,
        (i)
        the actuarial report for such FNB Benefit Plan (if applicable) for each of
        the
        last two years, and (ii) the most recent determination letter from the IRS
        (if
        applicable) for such FNB Benefit Plan.
  (c)  (i)
        Each
        of the FNB Benefit Plans has been operated and administered in all material
        respects in compliance with applicable laws, including, but not limited to,
        ERISA and the Code, (ii) each of the FNB Benefit Plans intended to be
“qualified” within the meaning of Section 401(a) of the Code is so qualified,
        and there are no existing circumstances or any events that have occurred
        that
        will adversely affect the qualified status of any such FNB Benefit Plan,
        (iii)
        with respect to each FNB Benefit Plan which is subject to Title IV of ERISA,
        the
        present value of accrued benefits under such FNB Benefit Plan, based upon
        the
        actuarial assumptions used for funding purposes in the most recent actuarial
        report prepared by such FNB Benefit Plan’s actuary with respect to such FNB
        Benefit Plan, did not, as of its latest valuation date, exceed the then current
        value of the assets of such FNB Benefit Plan allocable to such accrued benefits,
        (iv) no FNB Benefit Plan provides benefits, including, without limitation,
        death
        or medical benefits (whether or not insured), with respect to current or
        former
        employees or directors of FNB or its Subsidiaries beyond their retirement
        or
        other termination of service, other than (A) coverage mandated by applicable
        law, (B) death benefits or retirement benefits under any “employee pension plan”
(as such term is defined in Section 3(2) of ERISA), (C) deferred compensation
        benefits accrued as liabilities on the books of FNB or its Subsidiaries or
        (D)
        benefits the full cost of which is borne by the current or former employee
        or
        director (or his beneficiary), (v) no material liability under Title IV of
        ERISA
        has been incurred by FNB, its Subsidiaries or any FNB ERISA Affiliate that
        has
        not been satisfied in full, and no condition exists that presents a material
        risk to FNB, its Subsidiaries or any FNB ERISA Affiliate of incurring a material
        liability thereunder, (vi) no FNB Benefit Plan is a “multiemployer pension plan”
(as such term is defined in Section 3(37) of ERISA), (vii) all contributions
        or
        other amounts payable by FNB or its Subsidiaries as of the Effective Time
        with
        respect to each FNB Benefit Plan in respect of current or prior plan years
        have
        been paid or accrued in accordance
  26
  with
        GAAP
        and Section 412 of the Code, (viii) none of FNB, its Subsidiaries or any
        other
        person, including any fiduciary, has engaged in a transaction in connection
        with
        which FNB, its Subsidiaries or any FNB Benefit Plan will be subject to either
        a
        material civil penalty assessed pursuant to Section 409 or 502(i) of ERISA
        or a
        material tax imposed pursuant to Section 4975 or 4976 of the Code, and (ix)
        to
        the best knowledge of FNB there are no pending, threatened or anticipated
        claims
        (other than routine claims for benefits) by, on behalf of or against any
        of the
        FNB Benefit Plans or any trusts related thereto which will have, either
        individually or in the aggregate, a Material Adverse Effect on FNB.
  (d)  Neither
        the execution and delivery of this Agreement nor the consummation of the
        transactions contemplated hereby will (either alone or in conjunction with
        any
        other event) (i) result (either alone or upon the occurrence of any additional
        acts or events) in any payment (including, without limitation, severance,
        unemployment compensation, “excess parachute payment” (within the meaning of
        Section 280G of the Code), forgiveness of indebtedness or otherwise) becoming
        due to any director or any employee of FNB or any of its affiliates from
        FNB or
        any of its affiliates under any FNB Benefit Plan or otherwise, (ii) increase
        any
        benefits otherwise payable under any FNB Benefit Plan or (iii) result in
        any
        acceleration of the time of payment or vesting of any such benefits that
        will
        have, either individually or in the aggregate, a Material Adverse Effect
        on
        FNB.
  4.12  SEC
        Reports . FNB
        has
        previously made available to LSB an accurate and complete copy of each (a)
        final
        registration statement, prospectus, report, schedule and definitive proxy
        statement filed since January 1, 2003 by FNB with the SEC pursuant to the
        Securities Act or the Exchange Act (the “FNB SEC Reports”) and prior to the date
        hereof and (b) communication mailed by FNB to its shareholders since January
        1,
        2003 and prior to the date hereof, and no such FNB SEC Report or communication,
        as of the date thereof, contained any untrue statement of a material fact
        or
        omitted to state any material fact required to be stated therein or necessary
        in
        order to make the statements therein, in light of the circumstances in which
        they were made, not misleading, except that information as of a later date
        (but
        before the date hereof) shall be deemed to modify information as of an earlier
        date. Since January 1, 2003, as of their respective dates, all FNB SEC Reports
        filed under the Securities Act and the Exchange Act complied in all material
        respects with the published rules and regulations of the SEC with respect
        thereto.
  4.13  Compliance
        with Applicable Law .
  (a)  FNB
        and
        each of its Subsidiaries hold all material licenses, franchises, permits
        and
        authorizations necessary for the lawful conduct of their respective businesses
        under and pursuant to each, and have complied in all material respects with,
        and
        are not in default in any material respect under, any applicable law, statute,
        order, rule, regulation, policy and/or guideline of any Governmental Entity
        relating to FNB or any of its Subsidiaries, except where the failure to hold
        such license, franchise, permit or authorization or such noncompliance or
        default will not, either individually or in the aggregate, have a Material
        Adverse Effect on FNB.
  (b)  Except
        as
        will not have, either individually or in the aggregate, a Material Adverse
        Effect on FNB, FNB and each FNB Subsidiary have properly administered all
        accounts
  27
  for
        which
        it acts as a fiduciary, including accounts for which it serves as a trustee,
        agent, custodian, personal representative, guardian, conservator or investment
        advisor, in accordance with the terms of the governing documents, applicable
        state and federal law and regulation and common law. None of FNB, any FNB
        Subsidiary, or any director, officer or employee of FNB or of any FNB
        Subsidiary, has committed any breach of trust with respect to any such fiduciary
        account that will have a Material Adverse Effect on FNB, and the accountings
        for
        each such fiduciary account are true and correct in all material respects
        and
        accurately reflect the assets of such fiduciary account.
  4.14  Certain
        Contracts .
  (a)  Neither
        FNB nor any of its Subsidiaries is a party to or bound by any contract,
        arrangement, commitment or understanding (whether written or oral) (i) with
        respect to the employment of any directors, officers or employees other than
        in
        the ordinary course of business consistent with past practice, (ii) which,
        upon
        the consummation or shareholder approval of the transactions contemplated
        by
        this Agreement will (either alone or upon the occurrence of any additional
        acts
        or events) result in any payment (whether of severance pay or otherwise)
        becoming due from FNB, LSB, the Surviving Corporation, or any of their
        respective Subsidiaries to any officer or employee thereof which, individually
        or in the aggregate, will have a Material Adverse Effect on FNB, (iii) which
        is
        a “material contract” (as such term is defined in Item 601(b)(10) of Regulation
        S-K of the SEC) to be performed after the date of this Agreement that has
        not
        been filed or incorporated by reference in the FNB Reports, (iv) which
        materially restricts the conduct of any line of business by FNB or upon
        consummation of the Merger will materially restrict the ability of the Surviving
        Corporation to engage in any line of business in which a bank holding company
        may lawfully engage, (v) with or to a labor union or guild (including any
        collective bargaining agreement) or (vi) (including any stock option plan,
        stock
        appreciation rights plan, restricted stock plan or stock purchase plan) any
        of
        the benefits of which will be increased, or the vesting of the benefits of
        which
        will be accelerated, by the occurrence of any shareholder approval or the
        consummation of any of the transactions contemplated by this Agreement, or
        the
        value of any of the benefits of which will be calculated on the basis of
        any of
        the transactions contemplated by this Agreement which, individually or in
        the
        aggregate, will have a Material Adverse Effect on FNB. FNB has previously
        made
        available to LSB true and correct copies of all employment and deferred
        compensation agreements which are in writing and to which FNB is a party.
        Each
        contract, arrangement, commitment or understanding of the type described
        in this
        Section 4.14(a), whether or not set forth in the FNB Disclosure Schedule,
        is
        referred to herein as a “FNB Contract”, and neither FNB nor any of its
        Subsidiaries knows of, or has received notice of, any violation of the above
        by
        any of the other parties thereto which will have, individually or in the
        aggregate, a Material Adverse Effect on FNB.
  (b)  (i)
        Each
        FNB Contract is valid and binding on FNB or any of its Subsidiaries, as
        applicable, and in full force and effect, (ii) FNB and each of its Subsidiaries
        has in all material respects performed all obligations required to be performed
        by it to date under each FNB Contract, except where such noncompliance, either
        individually or in the aggregate, will not have a Material Adverse Effect
        on
        FNB, and (iii) no event or condition exists which constitutes or, after notice
        or lapse of time or both, will constitute, a material default on the part
        of FNB
        or any of its Subsidiaries under any such FNB Contract, except where such
        default, either individually or in the aggregate, will not have a Material
        Adverse Effect on FNB.
  28
  4.15  Agreements
        with Regulatory Agencies.  Neither
        FNB nor any of its Subsidiaries is subject to any cease-and-desist or other
        order issued by, or is a party to any written agreement, consent agreement
        or
        memorandum of understanding with, or is a party to any commitment letter
        or
        similar undertaking to, or is subject to any order or directive by, or has
        been
        since January 1, 2003, a recipient of any supervisory letter from, or since
        January 1, 2003, has adopted any board resolutions at the request of any
        Regulatory Agency or other Governmental Entity that currently restricts in
        any
        material respect the conduct of its business or that in any material manner
        relates to its capital adequacy, its credit policies, its management or its
        business (each, whether or not set forth in the FNB Disclosure Schedule,
        a “FNB
        Regulatory Agreement”), nor has FNB or any of its Subsidiaries been advised
        since January 1, 2003, by any Regulatory Agency or other Governmental Entity
        that it is considering issuing or requesting any such Regulatory
        Agreement.
  4.16  Interest
        Rate Risk Management Instruments . All
        interest rate swaps, caps, floors and option agreements and other interest
        rate
        risk management arrangements, whether entered into for the account of FNB
        or for
        the account of a customer of FNB or one of its Subsidiaries, were entered
        into
        in the ordinary course of business and, to the best of FNB’s knowledge, in
        accordance with prudent banking practice and applicable rules, regulations
        and
        policies of any Regulatory Authority and with counterparties believed to
        be
        financially responsible at the time and are legal, valid and binding obligations
        of FNB or one of its Subsidiaries enforceable in accordance with their terms
        (except as may be limited by bankruptcy, insolvency, moratorium, reorganization
        or similar laws affecting the rights of creditors generally and the availability
        of equitable remedies), and are in full force and effect. FNB and each of
        its
        Subsidiaries have duly performed in all material respects all of their material
        obligations thereunder to the extent that such obligations to perform have
        accrued; and to FNB’s knowledge, there are no material breaches, violations or
        defaults or allegations or assertions of such by any party
        thereunder.
  4.17  Undisclosed
        Liabilities . Except
        for those liabilities that are fully reflected or reserved against on the
        consolidated balance sheet of FNB included in the FNB Financial Statements
        and
        for liabilities incurred in the ordinary course of business consistent with
        past
        practice, since December 31, 2005, neither FNB nor any of its Subsidiaries
        has
        incurred any liability of any nature whatsoever (whether absolute, accrued,
        contingent or otherwise and whether due or to become due) that, either
        individually or in the aggregate, has had or will have, a Material Adverse
        Effect on FNB.
  4.18  Insurance . FNB
        and
        its Subsidiaries have in effect insurance coverage with reputable insurers
        or
        are self-insured, which in respect of amounts, premiums, types and risks
        insured, constitutes reasonably adequate coverage against all risks customarily
        insured against by bank holding companies and their subsidiaries comparable
        in
        size and operations to FNB and its Subsidiaries.
  4.19  Environmental
        Liability .
        There
        are no legal, administrative, arbitral or other proceedings, claims, actions,
        causes of action, private environmental investigations or remediation activities
        or governmental investigations of any nature seeking to impose, or that
        reasonably could result in the imposition, on FNB of any liability or obligation
        arising under common law or under any local, state or federal environmental
        statute, regulation or ordinance including, without limitation, CERCLA, pending
        or threatened against FNB, which liability or obligation will have, either
        individually or in the aggregate, a Material Adverse Effect
  29
  on
        FNB.
        To the best knowledge of FNB, there is no reasonable basis for any such
        proceeding, claim, action or governmental investigation that would impose
        any
        liability or obligation that will have, either individually or in the aggregate,
        a Material Adverse Effect on FNB. FNB is not subject to any agreement, order,
        judgment, decree, letter or memorandum by or with any court, governmental
        authority, regulatory agency or third party imposing any liability or obligation
        with respect to the foregoing that will have, either individually or in the
        aggregate, a Material Adverse Effect on FNB.
  4.20  State
        Takeover Laws; Charter Provisions . The
        Board
        of Directors of FNB has approved the transactions contemplated by this Agreement
        for purposes of Sections 55-9A-01 through 09 of the NCBCA and the 75% voting
        share requirement of Article VI of the Amended and Restated Articles of
        Incorporation of FNB, such that the provisions of such Sections and Article
        VI
        will not apply to this Agreement or any of the transactions contemplated
        hereby.
        FNB is not and has not been the “beneficial owner” of more than 20% of the
“voting shares” of LSB, as those terms are used in Section 55-9-01 through -05
        of the NCBCA.
  4.21  Reorganization .  As
        of the
        date of this Agreement, FNB has no reason to believe that the Merger will
        not
        qualify as a “reorganization” within the meaning of Section 368(a) of the
        Code.
  4.22  Obstacles
        to Regulatory Approval . To
        the
        best knowledge of management of FNB, there exists no facts or condition relating
        to FNB that may reasonably be expected to prevent or materially impede or
        delay
        the parties hereto from obtaining the Requisite Regulatory Approvals; and,
        if
        any such fact or condition becomes known to FNB, FNB shall promptly (and
        in any
        event within three (3) days after obtaining such knowledge) give notice of
        such
        fact or condition to LSB in the manner provided herein.
  **ARTICLE
        V**
  **COVENANTS
        RELATING TO CONDUCT OF BUSINESS**
  5.1  Conduct
        of Businesses Prior to the Effective Time . During
        the period from the date of this Agreement to the Effective Time, except
        as
        expressly contemplated or permitted by this Agreement (including the LSB
        Disclosure Schedule and the FNB Disclosure Schedule), each of LSB and FNB
        shall,
        and shall cause each of their respective Subsidiaries to, (a) conduct its
        business in the ordinary course, (b) use reasonable best efforts to maintain
        and
        preserve intact its business organization, employees and advantageous
        business
  30
  relationships
        and retain the services of its key officers and key employees and (c) take
        no
        action which would adversely affect or delay the ability of either LSB or
        FNB to
        obtain any necessary approvals of any Regulatory Agency or other Governmental
        Entity required for the transactions contemplated hereby or to perform its
        covenants and agreements under this Agreement or to consummate the transactions
        contemplated hereby.
  5.2  Forbearances . During
        the period from the date of this Agreement to the Effective Time, except
        as set
        forth in the FNB Disclosure Schedule or the LSB Disclosure Schedule, as the
        case
        may be, and, except as expressly contemplated or permitted by this Agreement,
        neither FNB nor LSB shall, and neither FNB nor LSB shall permit any of their
        respective Subsidiaries to, without the prior written consent of the other
        party
        to this Agreement, which consent will not be unreasonably withheld:
  (a)  other
        than in the ordinary course of business, incur any indebtedness for borrowed
        money (other than short-term indebtedness incurred to refinance short-term
        indebtedness and indebtedness of LSB or any of its wholly-owned Subsidiaries
        to
        LSB or any of its Subsidiaries, on the one hand, or of FNB or any of its
        Subsidiaries to FNB or any of its wholly-owned Subsidiaries, on the other
        hand),
        assume, guarantee, endorse or otherwise as an accommodation become responsible
        for the obligations of any other individual, corporation or other entity,
        or
        make any loan or advance (it being understood and agreed that incurrence
        of
        indebtedness in the ordinary course of business shall include, without
        limitation, the creation of deposit liabilities, purchases of federal funds,
        sales of certificates of deposit and entering into repurchase
        agreements);
  (b) (i)  adjust,
        split, combine or reclassify any capital stock;
  (ii)
              make,
                  declare or pay any dividend, or make any other distribution on,
                  or
                  directly or indirectly redeem, purchase or otherwise acquire, any
                  shares
                  of its capital stock or any securities or obligations convertible
                  (whether
                  currently convertible or convertible only after the passage of
                  time or the
                  occurrence of certain events) into or exchangeable for any shares
                  of its
                  capital stock (except (A) in the case of LSB, for regular quarterly
                  cash
                  dividends at a rate not in excess of $.17 per share of LSB Common
                  Stock,
                  (B) in the case of FNB, for regular quarterly cash dividends on
                  FNB Common
                  Stock at a rate not in excess of $.13 per share of FNB Common Stock,
                  and
                  (C) dividends paid by any of the Subsidiaries of each of FNB and
                  LSB to
                  FNB or LSB or any of their Subsidiaries, respectively, and dividends
                  paid
                  in the ordinary course of business consistent with past practice
                  by any
                  subsidiaries (whether or not wholly-owned) of each of FNB and
                  LSB);
 (iii)
              grant
                  any stock appreciation rights or grant any individual, corporation
                  or
                  other entity any right to acquire any shares of its capital stock,
                  other
                  than pursuant to the LSB Stock Plans, or the FNB Stock Plans, as
                  the case
                  may be, in the ordinary course of business consistent with past
                  practice;
                  or
  31
  (iv)
              issue
                  any additional shares of capital stock except pursuant to the exercise
                  of
                  stock options outstanding as of the date hereof or issued in compliance
                  with Section 5.2(b)(iii);
 (c)  sell,
        transfer, mortgage, encumber or otherwise dispose of any of its material
        properties or assets to any individual, corporation or other entity other
        than a
        Subsidiary, or cancel, release or assign any indebtedness to any such person
        or
        any claims held by any such person, except in the ordinary course of business
        or
        pursuant to contracts or agreements in force at the date of this
        Agreement;
  (d)  except
        for transactions in the ordinary course of business or pursuant to contracts
        or
        agreements in force at the date of or permitted by this Agreement, make any
        material investment either by purchase of stock or securities, contributions
        to
        capital, property transfers, or purchase of any property or assets of any
        other
        individual, corporation or other entity other than a Subsidiary
        thereof;
  (e)  except
        for transactions in the ordinary course of business, terminate, or waive
        any
        material provision of, any LSB Contract or FNB Contract, as the case may
        be, or
        make any change in any instrument or agreement governing the terms of any
        of its
        securities, or material lease or contract, other than normal renewals of
        contracts and leases without material adverse changes of terms;
  (f)  increase
        in any manner the compensation or fringe benefits of any of its employees
        or pay
        any pension or retirement allowance not required by any existing plan or
        agreement to any such employees or become a party to, amend or commit itself
        to
        any pension, retirement, profit-sharing or welfare benefit plan or agreement
        or
        employment agreement with or for the benefit of any employee other than in
        the
        ordinary course of business, or accelerate the vesting of, or the lapsing
        of
        restrictions with respect to, any stock options or other stock-based
        compensation;
  (g)  solicit
        or encourage from any third party or enter into any negotiations, discussions
        or
        agreement in respect of, or authorize any individual, corporation or other
        entity to solicit or encourage from any third party or enter into any
        negotiations, discussions or agreement in respect of, or provide or cause
        to be
        provided any confidential information in connection with any inquiries or
        proposals relating to, the disposition of all or substantially all of its
        business or assets, or the acquisition of its voting securities, or the merger
        of it or any of its Subsidiaries with any corporation or other entity, other
        than as provided by this Agreement (and each party shall promptly notify
        the
        other of all of the relevant details relating to all inquiries and proposals
        which it may receive relating to any of such matters);
  (h)  settle
        any material claim, action or proceeding involving money damages, except
        in the
        ordinary course of business;
  (i)  knowingly
        take any action that would prevent or impede the Merger from qualifying as
        a
        reorganization within the meaning of Section 368 of the Code;
  (j)  amend
        its
        charter or articles of incorporation or its bylaws;
  32
  (k)  other
        than in prior consultation with the other party to this Agreement, restructure
        or materially change its investment securities portfolio or its gap position,
        through purchases, sales or otherwise, or the manner in which the portfolio
        is
        classified or reported;
  (l)  take
        any
        action that is intended or expected to result in any of its representations,
        warranties, covenants or agreements set forth in this Agreement being or
        becoming untrue in any material respect at any time prior to the Effective
        Time,
        or in any of the conditions to the Merger set forth in Article VII not being
        satisfied or in a violation of any provision of this Agreement, except, in
        every
        case, as may be required by applicable law;
  (m)  implement
        or adopt any change in its accounting principles, practices or methods, other
        than as may be required by GAAP or regulatory guidelines;
  (n)  enter
        into any new line of business or change its lending, investment, underwriting,
        risk and asset liability management or other banking or operating policies
        that
        are material to its and its Subsidiaries, taken as a whole, except as required
        by applicable law or any regulation or policy imposed on it by any Governmental
        Entity;
  (o)  make
        or
        agree to make any charitable contribution of $50,000 or more, whether in
        a
        single contribution or a series of contributions to the same donee;
  (p)  agree
        to
        take, make any commitment to take, or adopt any resolutions of its board
        of
        directors in support of, any of the actions prohibited by this Section
        5.2.
  5.3  Notice
        of Action . Except
        acting reasonably and with prior notice to the other party, neither FNB nor
        LSB
        shall, and neither FNB nor LSB shall permit any of their respective Subsidiaries
        to enter into an agreement, contract, commitment or understanding which would
        obligate or commit it to make expenditures over any period of time of more
        than
        $100,000 (other than contracts, agreements, commitments or understandings
        occurring in the ordinary course of lending business).
  **ARTICLE
        VI**
  **ADDITIONAL
        AGREEMENTS**
  6.1  Regulatory
        Matters .
  (a)  FNB
        and
        LSB shall promptly prepare and file with the SEC the Joint Proxy Statement
        and
        LSB shall promptly prepare and file with the SEC the S-4, in which the Joint
        Proxy Statement will be included as a prospectus. Each of FNB and LSB shall
        use
        their reasonable best efforts to have the S-4 declared effective under the
        Securities Act as promptly as practicable after such filing, and FNB and
        LSB
        shall thereafter mail or deliver the Joint Proxy Statement to their respective
        shareholders. LSB shall also use its reasonable best efforts to obtain all
        necessary state securities law or “Blue Sky” permits and approvals required to
        carry out the transactions contemplated by this Agreement, and FNB shall
        furnish
        all information concerning FNB and the holders of FNB Common Stock as may
        be
        reasonably requested in connection with any such action.
  33
  (b)  The
        parties hereto shall cooperate with each other and use their reasonable best
        efforts to promptly prepare and file all necessary documentation to effect
        all
        applications, notices, petitions and filings, to obtain as promptly as
        practicable all permits, consents, approvals and authorizations of all third
        parties and Governmental Entities which are necessary or advisable to consummate
        the transactions contemplated by this Agreement (including, without limitation,
        the Merger), and to comply with the terms and conditions of all such permits,
        consents, approvals and authorizations of all such Governmental Entities.
        FNB
        and LSB shall have the right to review in advance, and, to the extent
        practicable, each will consult the other on, in each case subject to applicable
        laws relating to the exchange of information, all the information relating
        to
        FNB or LSB, as the case may be, and any of their respective Subsidiaries,
        which
        appear in any filing made with, or written materials submitted to, any third
        party or any Governmental Entity in connection with the transactions
        contemplated by this Agreement. In exercising the foregoing right, each of
        the
        parties hereto shall act reasonably and as promptly as practicable. The parties
        hereto agree that they will consult with each other with respect to the
        obtaining of all permits, consents, approvals and authorizations of all third
        parties and Governmental Entities necessary or advisable to consummate the
        transactions contemplated by this Agreement and each party will keep the
        other
        apprised of the status of matters relating to completion of the transactions
        contemplated herein.
  (c)  FNB
        and
        LSB shall, upon request, furnish each other with all information concerning
        themselves, their Subsidiaries, directors, officers and shareholders and
        such
        other matters as may be reasonably necessary or advisable in connection with
        the
        Joint Proxy Statement, the S-4 or any other statement, filing, notice or
        application made by or on behalf of FNB, LSB or any of their respective
        Subsidiaries to any Governmental Entity in connection with the Merger and
        the
        other transactions contemplated by this Agreement.
  (d)  FNB
        and
        LSB shall promptly advise each other upon receiving any communication from
        any
        Governmental Entity whose consent or approval is required for consummation
        of
        the transactions contemplated by this Agreement that causes such party to
        believe that there is a reasonable likelihood that any Requisite Regulatory
        Approval (as defined below) will not be obtained or that the receipt of any
        such
        approval will be materially delayed.
  6.2  Access
        to Information .
  (a)  Upon
        reasonable notice and subject to applicable laws relating to the exchange
        of
        information, each of LSB and FNB, for the purposes of verifying the
        representations and warranties of the other and preparing for the Merger
        and the
        other matters contemplated by this Agreement, shall, and shall cause each
        of
        their respective Subsidiaries to, afford to the officers, employees,
        accountants, counsel and other representatives of the other party, access,
        during normal business hours during the period prior to the Effective Time,
        to
        all its properties, books, contracts, commitments and records and, during
        such
        period, each of LSB and FNB shall, and shall cause their respective Subsidiaries
        to, make available to the other party (i) a copy of each report, schedule,
        registration statement and other document filed or received by it during
        such
        period pursuant to the requirements of federal securities laws or federal
        or
        state banking laws (other than reports or documents which LSB or FNB, as
        the
        case may be, is not permitted to disclose under applicable law) and (ii)
        all
        other information concerning its business, properties and personnel as such
        party may reasonably request. Neither LSB nor FNB nor any of
        their
  34
  respective
        Subsidiaries shall be required to provide access to or to disclose information
        where such access or disclosure would violate or prejudice the rights of
        LSB’s
        or FNB’s, as the case may be, customers, jeopardize the attorney-client
        privilege of the institution in possession or control of such information
        or
        contravene any law, rule, regulation, order, judgment, decree, fiduciary
        duty or
        binding agreement entered into prior to the date of this Agreement. The parties
        hereto will make appropriate substitute disclosure arrangements under
        circumstances in which the restrictions of the preceding sentence
        apply.
  (b)  Each
        of
        LSB and FNB agrees that it will not, and will cause its representatives not
        to,
        use any information obtained pursuant to this Section 6.2 (as well as any
        other
        information obtained prior to the date hereof in connection with entering
        into
        this Agreement) for any purpose unrelated to the consummation of the
        transactions contemplated by this Agreement. Subject to the requirements
        of law,
        each party will keep confidential, and will cause its representatives to
        keep
        confidential, all information and documents obtained pursuant to this Section
        6.2 (as well as any other information obtained prior to the date hereof in
        connection with the entering into of this Agreement) unless such information
        (i)
        was already known to such party, (ii) becomes available to such party from
        other
        sources not known by such party to be bound by a confidentiality obligation,
        (iii) is disclosed with the prior written approval of the providing party
        or
        (iv) is or becomes readily ascertainable from publicly available sources.
        If
        this Agreement is terminated or the transactions contemplated by this Agreement
        shall otherwise fail to be consummated, each party shall promptly cause all
        copies of documents or extracts thereof containing information and data as
        to
        the other party to be returned to the other party.
  (c)  No
        investigation by either of the parties or their respective representatives
        shall
        affect the representations and warranties of the other set forth
        herein.
  6.3  Shareholders’
        Approvals . Each
        of
        FNB and LSB shall call a meeting of its shareholders to be held as soon as
        reasonably practicable for the purpose of obtaining the requisite shareholder
        approvals required in connection with this Agreement and the Merger, and
        each
        shall use its reasonable best efforts, except as may otherwise be required
        by
        applicable law, to cause such meetings to occur as soon as reasonably
        practicable and on the same date. The Board of Directors of each of LSB and
        FNB
        shall recommend approval of the Merger to the shareholders of LSB and FNB,
        as
        the case may be, and shall use its reasonable best efforts to obtain from
        the
        shareholders of LSB and FNB, as the case may be, the vote in favor of, the
        adoption of this Agreement required by the NCBCA to consummate the transactions
        contemplated hereby.
  6.4  Legal
        Conditions to Merger .  Each
        of
        FNB and LSB shall, and shall cause its Subsidiaries to, use their reasonable
        best efforts (a) to take, or cause to be taken, all actions necessary, proper
        or
        advisable to comply promptly with all legal requirements that may be imposed
        on
        such party or its Subsidiaries with respect to the Merger and, subject to
        the
        conditions set forth in Article VII hereof, to consummate the transactions
        contemplated by this Agreement, and (b) to obtain (and to cooperate with
        the
        other party to obtain) any material consent, authorization, order or approval
        of, or any exemption by, any Governmental Entity and any other third party
        that
        is required to be obtained by FNB or
  35
  LSB
        or
        any of their respective Subsidiaries in connection with the Merger and the
        other
        transactions contemplated by this Agreement.
  6.5  Affiliates .  FNB
        shall
        use its reasonable best efforts to cause each director, executive officer
        and
        other person who is an “affiliate” (for purposes of Rule 145 under the
        Securities Act) of FNB to deliver to LSB, as soon as practicable after the
        date
        of this Agreement, and prior to the date of the shareholders’ meetings called by
        FNB and LSB to approve this Agreement, a written agreement, in the form of
        Exhibit 6.5(a)(1) hereto, providing that such person will not sell, pledge,
        transfer or otherwise dispose of any shares of FNB Common Stock held by such
        “affiliate” to be received by such “affiliate” in the Merger except in
        compliance with Rule 145 promulgated by the SEC.
  6.6  Stock
        Quotation . LSB
        shall
        cause the shares of LSB Common Stock to be issued in the Merger to be qualified
        for quotation on the Nasdaq, subject to official notice of issuance, prior
        to
        the Effective Time. The symbol for the shares of LSB Common Stock after the
        Effective Time shall be that agreed upon by FNB and LSB and available for
        use.
  6.7  Employee
        Benefit Plans; Employment Agreements .
  (a)  From
        and
        after the Effective Time, unless otherwise mutually determined, the LSB Benefit
        Plans and FNB Benefit Plans in effect as of the date of this Agreement shall
        remain in effect with respect to employees of LSB or FNB (or their
        Subsidiaries), respectively, covered by such plans at the Effective Time
        until
        such time as the Surviving Corporation shall, subject to applicable law,
        the
        terms of this Agreement and the terms of such plans, adopt new benefit plans
        with respect to employees of the Surviving Corporation and its Subsidiaries
        (the
“New Benefit Plans”), or otherwise merge or combine existing FNB Benefit Plans
        into LSB Benefit Plans, or vice versa. Prior to the Closing Date, LSB and
        FNB
        shall cooperate in reviewing, evaluating and analyzing the LSB Benefit Plans
        and
        FNB Benefit Plans with a view towards developing appropriate New Benefit
        Plans
        or combining or merging existing benefit plans for the employees covered
        thereby.
  (b)  The
        foregoing notwithstanding, the Surviving Corporation agrees to honor in
        accordance with their terms all benefits vested as of the date hereof under
        the
        FNB Benefit Plans or the LSB Benefit Plans or under other contracts,
        arrangements, commitments, or understandings described in the FNB Disclosure
        Schedule and the LSB Disclosure Schedule.
  (c)  Nothing
        in this Section 6.7 shall be interpreted as preventing the Surviving Corporation
        from amending, modifying or terminating any FNB Benefit Plans, LSB Benefit
        Plans, or other contracts, arrangements, commitments or understandings, in
        accordance with their terms and applicable law. In particular, FNB and LSB
        agree
        that FNB shall “freeze” its defined benefit plan prior to the Effective
        Time.
  (d)  It
        is the
        intention of LSB and FNB, during the period shortly following the execution
        of
        this Merger Agreement, to coordinate efforts towards establishing a retention
        and
  36
  severance
        program, consistent with the strategy for the Merger, in an effort to retain
        and
        provide incentives to key personnel for the benefit of the Surviving Corporation
        in a manner that provides for equitable treatment of similarly situated
        employees of LSB and FNB.
  (e)  During
        the period following the execution of this Merger Agreement, LSB and FNB
        shall
        (i) coordinate efforts toward amending employment agreements between either
        of
        them, or their Subsidiaries, and various of their or such Subsidiaries’
employees to bring such agreements into conformity with applicable federal
        income tax laws and regulations and to increase the consistency of the
        provisions of those employment agreements with employment agreements of the
        Surviving Corporation and the Surviving Bank with its or their employees,
        and
        (ii) seek to obtain waivers of “change of control” severance payment provisions
        of those employees of LSB or FNB, or any Subsidiary of either, whose employment
        agreements would require such payments as a consequence of the
        Merger.
  (f)  Any
        employee of an FNB Subsidiary or an LSB Subsidiary as of the Effective Time
        who
        is not a party to an employment agreement with such Subsidiary and whose
        employment is terminated by the Surviving Bank or a Subsidiary thereof at,
        or
        within six (6) months after, the Effective Time, other than for “cause” as set
        forth in the employment policies of the Surviving Bank as of the Effective
        Time
        (“Non-Continuing Employee”), will be paid such severance as the Surviving
        Corporation or the Surviving Bank, as applicable, determine on a case-by-case
        basis, but in no event shall such severance be less than that provided for
        in
        the severance payment policies of FNB or LSB, as applicable, prior to the
        execution of this Agreement. Any Non-Continuing Employee will be permitted
        to
        obtain continued health insurance coverage through the exercise of his or
        her
        COBRA rights offered under the Surviving Bank’s health insurance coverage, and
        the Surviving Bank will give any required COBRA notices.
  (g)  Except
        as
        otherwise provided in this Agreement and subject to Section 6.7(a), any employee
        of an FNB Subsidiary who becomes an employee of the Surviving Bank or a
        Subsidiary thereof at the Effective Time (a “New Employee”) shall be given
        credit for his or her full years of service with the FNB Subsidiary for:
        (i)
        eligibility for participation and vesting, but not funding, in the Surviving
        Bank’s Section 401(k) savings plan; and (ii) all purposes under the Surviving
        Bank’s other benefit plans (including entitlement to vacation and sick leave).
        For purposes of the Surviving Bank’s health insurance coverage, a New Employee’s
        participation will be without regard to pre-existing condition requirements
        under the Surviving Bank’s health insurance plan, provided that any such
        pre-existing condition at the Effective Time was covered under health insurance
        plan(s) of the FNB Subsidiary at the Effective Time and the New Employee
        provides evidence of such previous coverage in a form satisfactory to the
        Surviving Bank’s health insurance carrier. Subject to Section 6.7(a), for the
        calendar year during which the Effective Time occurs, the Surviving Bank
        or
        applicable Subsidiary thereof will grant to each New Employee a number of
        days
        of sick, vacation and personal leave, respectively, equal, in each case,
        to (i)
        the full number of such days to which the New Employee would be entitled
        for
        that year, based on his or her credited years of service and in accordance
        with
        the Surviving Bank’s standard policies, less (ii) the number of days of sick,
        vacation and personal leave used by the New Employee as an employee of an
        FNB
        Subsidiary during that calendar year.
 
  37
  6.8Indemnification;
        Directors’ and Officers’
Insurance .
  (a)  In
        the
        event of any threatened or actual claim, action, suit, proceeding or
        investigation, whether civil, criminal or administrative, including, without
        limitation, any such claim, action, suit, proceeding or investigation in
        which
        any individual who is now, or has been at any time prior to the date of this
        Agreement, or who becomes prior to the Effective Time, a director or officer
        or
        employee of FNB, any of its Subsidiaries, any of its Non-Subsidiary Affiliates
        or a fiduciary or administrator of a plan for the benefit of its directors
        or
        employees including any entity specified in the FNB Disclosure Schedule (the
        “Indemnified Parties”), is, or is threatened to be, made a party based in whole
        or in part on, or arising in whole or in part out of, or pertaining to (i)
        the
        fact that he or she is or was a director, officer or employee of FNB or any
        of
        its Subsidiaries or any entity specified in the FNB Disclosure Schedule or
        any
        of their respective predecessors or (ii) this Agreement or any of the
        transactions contemplated hereby or thereby, whether in any case asserted
        or
        arising before or after the Effective Time, the parties hereto agree to
        cooperate and use their best efforts to defend against and respond thereto.
        It
        is understood and agreed that after the Effective Time, LSB shall indemnify
        and
        hold harmless, as and to the fullest extent permitted by law, each such
        Indemnified Party against any losses, claims, damages, liabilities, costs,
        expenses (including reasonable attorney’s fees and expenses in advance of the
        final disposition of any claim, suit, proceeding or investigation to each
        Indemnified Party to the fullest extent permitted by law upon receipt of
        any
        undertaking required by applicable law), judgments, fines and amounts paid
        in
        settlement in connection with any such threatened or actual claim, action,
        suit,
        proceeding or investigation.
  (b)  LSB
        shall
        use its reasonable best efforts to cause the individuals serving as officers
        and
        directors of FNB, its Subsidiaries, its Non-Subsidiary Affiliates or a fiduciary
        or administrator of a plan for the benefit of its employees or directors
        or any
        entity specified in the FNB Disclosure Schedule immediately prior to the
        Effective Time to be covered for a period of six (6) years from the Effective
        Time (or the period of the applicable statute of limitations, if longer)
        by the
        directors’ and officers’ liability insurance policy maintained by LSB (provided
        that LSB may substitute therefor policies of at least the same coverage and
        amounts containing terms and conditions which are not less advantageous than
        such policy) with respect to acts or omissions occurring prior to the Effective
        Time which were committed by such officers and directors in their capacity
        as
        such.
  (c)  In
        the
        event LSB or any of its successors or assigns (i) consolidates with or merges
        into any other person and shall not be the continuing or surviving corporation
        or entity of such consolidation or merger, or (ii) transfers or conveys all
        or
        substantially all of its properties and assets to any person, then, and in
        each
        such case, to the extent necessary, proper provision shall be made so that
        the
        successors and assigns of LSB assume the obligations set forth in this Section
        6.8.
  (d)  The
        provisions of this Section 6.8 shall survive the Effective Time and are intended
        to be for the benefit of, and shall be enforceable by, each Indemnified Party
        and his or her heirs and representatives.
  6.9  Additional
        Agreements .
        In case
        at any time after the Effective Time any further action is necessary or
        desirable to carry out the purposes of this Agreement (including, without
        limitation, any merger between a Subsidiary of LSB, on the one hand, and
        a
        Subsidiary of FNB, on the other) or to vest the Surviving Corporation with
        full
        title to all properties, assets, rights, approvals, immunities and franchises
        of
        any of the parties to the Merger, the
  38
  proper
        officers and directors of each party to this Agreement and their respective
        Subsidiaries shall take all such necessary action as may be reasonably requested
        by, and at the sole expense of, LSB.
  6.10  Advice
        of Changes .  FNB
        and
        LSB shall each promptly advise the other party of any change or event (i)
        having
        a Material Adverse Effect on it or (ii) which it believes would or would
        be
        reasonably likely to cause or constitute a material breach of any of its
        representations, warranties, covenants or agreements contained
        herein.
  6.11  Dividends . After
        the
        date of this Agreement, each of FNB and LSB shall coordinate with the other
        the
        declaration of any dividends in respect of FNB Common Stock and LSB Common
        Stock
        and the record dates and payment dates relating thereto, it being the intention
        of the parties hereto that holders of FNB Common Stock shall not receive
        two
        dividends, or fail to receive one dividend, for any quarter with respect
        to
        their shares of FNB Common Stock and any shares of LSB Common Stock any such
        holder receives in exchange therefor in the Merger.
  6.12  Exemption
        from Liability Under Section 16(b) . If
        FNB
        delivers to LSB in a timely fashion prior to the Effective Time accurate
        information regarding those officers and directors of FNB subject to the
        reporting requirements of Section 16(a) of the Exchange Act (the “FNB
        Insiders”), the number of shares of LSB Common Stock held or to be held by each
        such FNB Insider expected to be exchanged for LSB Common Stock in the Merger,
        and the number and description of the options to purchase shares of FNB Common
        Stock held by each such FNB Insider and expected to be converted into options
        to
        purchase LSB Common Stock in the Merger, the Board of Directors of LSB, or
        a
        committee of nonemployee directors thereof (as such term is defined for purposes
        of Rule 16b-3(d) under the Exchange Act), shall reasonably promptly thereafter,
        and in any event prior to the Effective Time, adopt a resolution providing
        that
        the receipt by the FNB Insiders of LSB Common Stock in exchange for shares
        of
        FNB Common Stock, and of option to purchase shares of LSB Common Stock upon
        conversion of options to purchase FNB Common Stock, in each case pursuant
        to the
        transactions contemplated hereby and to the extent such securities are listed
        in
        the information provided by FNB, are approved by such Board of Directors
        or by
        such committee thereof, and are intended to be exempt from liability pursuant
        to
        Section 16(b) of the Exchange Act, such that any such receipt shall be so
        exempt.
  **ARTICLE
        VII**
  **CONDITIONS
        PRECEDENT**
  7.1  Conditions
        to Each Party’s Obligation To Effect the Merger .
        The
        respective obligations of the parties to effect the Merger shall be subject
        to
        the satisfaction at or prior to the Effective Time of the following
        conditions:
  39
   (a)  Shareholder
        Approval .
        This
        Agreement (including the amendments of the Charter contemplated by Sections
        1.1
        and 1.7) shall have been adopted by the respective requisite affirmative
        votes
        of the holders of LSB Common Stock and FNB Common Stock entitled to vote
        thereon.
  (b)  Nasdaq
        Listing .
        The
        shares of LSB Common Stock which shall be issued to the shareholders of FNB
        upon
        consummation of the Merger shall have been qualified for quotation on the
        Nasdaq, subject to official notice of issuance.
  (c)  Other
        Approvals .
        All
        regulatory approvals required to consummate the transactions contemplated
        hereby, including the Bank Merger, shall have been obtained and shall remain
        in
        full force and effect and all statutory waiting periods in respect thereof
        shall
        have expired (all such approvals and the expiration of all such waiting periods
        being referred to herein as the “Requisite Regulatory Approvals”).
  (d)  S-4 .
        The S-4
        shall have become effective under the Securities Act and no stop order
        suspending the effectiveness of the S-4 shall have been issued and no
        proceedings for that purpose shall have been initiated or threatened by the
        SEC.
  (e)  Bank
        Merger .
        The
        Agreement and Plan of Merger with respect to the Bank Merger shall have been
        executed by the parties thereto.
  (f)  No
        Injunctions or Restraints; Illegality .
        No
        order, injunction or decree issued by any court or agency of competent
        jurisdiction or other legal restraint or prohibition (an “Injunction”)
        preventing the consummation of the Merger or any of the other transactions
        contemplated by this Agreement shall be in effect. No statute, rule, regulation,
        order, injunction or decree shall have been enacted, entered, promulgated
        or
        enforced by any Governmental Entity which prohibits, materially restricts
        or
        makes illegal consummation of the Merger.
  (g)  Federal
        Tax Opinion .
        The
        parties hereto shall have received the opinion of Brooks, Pierce, McLendon,
        Humphrey & Leonard, L.L.P., in form and substance reasonably satisfactory to
        FNB and LSB, dated the Closing Date, substantially to the effect that, on
        the
        basis of facts, representations and assumptions set forth in each such opinion
        which are consistent with the state of facts existing at the Effective
        Time:
  (i)  The
        Merger will constitute a reorganization under Section 368(a) of the Code
        and FNB
        and LSB will each be a party to the reorganization;
  (ii)  No
        gain
        or loss will be recognized by FNB or LSB as a result of the Merger;
        and
  (iii)  No
        gain
        or loss will be recognized by shareholders of FNB who exchange their FNB
        Common
        Stock solely for LSB Common Stock pursuant to the Merger (except with respect
        to
        cash received in lieu of a fractional share interest in LSB Common
        Stock).
  40
  In
        rendering such opinions, counsel may require and rely upon representations
        contained in certificates of officers of FNB, LSB and others.
  7.2  Conditions
        to Obligations of FNB . The
        obligation of FNB to effect the Merger is also subject to the satisfaction,
        or
        waiver by FNB, at or prior to the Effective Time, of the following
        conditions:
  (a)  Representations
        and Warranties .
        The
        representations and warranties of LSB set forth in this Agreement shall be
        true
        and correct in all material respects as of the date of this Agreement and
        (except to the extent such representations and warranties speak as of an
        earlier
        date) as of the Closing Date as though made on and as of the Closing Date;
        provided, however, that for purposes of this paragraph, such representations
        and
        warranties (other than the representation set forth in the last sentence
        of
        Section 3.2(a)) shall be deemed to be true and correct unless the failure
        or
        failures of such representations and warranties to be so true and correct,
        either individually or in the aggregate, and without giving effect to any
        qualification as to materiality set forth in such representations or warranties,
        will have a Material Adverse Effect on LSB or the Surviving Corporation.
        FNB
        shall have received a certificate signed on behalf of LSB by the Chief Executive
        Officer and the Chief Financial Officer of LSB to the foregoing
        effect.
  (b)  Performance
        of Obligations of LSB .
        LSB
        shall have performed in all material respects all obligations required to
        be
        performed by it under this Agreement at or prior to the Closing Date, and
        FNB
        shall have received a certificate signed on behalf of LSB by the Chief Executive
        Officer and the Chief Financial Officer of LSB to such effect.
  (c)  Fairness
        Opinion .
        Prior
        to the execution of this Agreement, FNB shall have received an opinion of
        Howe
        Barnes Hoefer & Arnett, Inc. dated as of the date of this Agreement, to the
        effect that, as of such date and based upon and subject to the matters set
        forth
        therein, the Exchange Ratio is fair, from a financial point of view, to the
        shareholders of FNB, and such opinion shall not have been modified or rescinded
        at the time of the execution of this Agreement.
  7.3  Conditions
        to Obligations of LSB . The
        obligation of LSB to effect the Merger is also subject to the satisfaction
        or
        waiver by LSB at or prior to the Effective Time of the following
        conditions:
  (a)  Representations
        and Warranties .
        The
        representations and warranties of FNB set forth in this Agreement shall be
        true
        and correct in all material respects as of the date of this Agreement and
        (except to the extent such representations and warranties speak as of an
        earlier
        date) as of the Closing Date as though made on and as of the Closing Date,
        provided, however, that for purposes of this paragraph, such representations
        and
        warranties (other than the representation set forth in the last sentence
        of
        Section 4.2(a)) shall be deemed to be true and correct unless the failure
        or
        failures of such representations and warranties to be so true and correct,
        either individually or in the aggregate, and without giving effect to any
        qualification as to materiality set forth in such representations or warranties,
        will have a Material Adverse Effect
  41
  on
        FNB.
        LSB shall have received a certificate signed on behalf of FNB by the Chief
        Executive Officer and the Chief Financial Officer of FNB to the foregoing
        effect.
  (b)  Performance
        of Obligations of FNB .
        FNB
        shall have performed in all material respects all obligations required to
        be
        performed by it under this Agreement at or prior to the Closing Date, and
        LSB
        shall have received a certificate signed on behalf of FNB by the Chief Executive
        Officer and the Chief Financial Officer of FNB to such effect.
  (c)  Fairness
        Opinion .
        Prior
        to the execution of this Agreement, LSB shall have received an opinion of
        BankersBanc Capital Corporation, dated as of the date of this Agreement,
        to the
        effect that, as of such date and based upon and subject to the matters set
        forth
        therein, the Exchange Ratio is fair, from a financial point of view, to the
        shareholders of LSB, and such opinion shall not have been modified or rescinded
        at the time of the execution of this Agreement.
  **ARTICLE
        VIII**
  **TERMINATION
        AND AMENDMENT**
  8.1  Termination .  This
        Agreement may be terminated at any time prior to the Effective Time, whether
        before or after approval of the matters presented in connection with the
        Merger
        by the shareholders of FNB or LSB:
  (a)  by
        mutual
        consent of FNB and LSB in a written instrument, if the Board of Directors
        of
        each so determines by a vote of a majority of the members of its entire
        Board;
  (b)  by
        either
        the Board of Directors of FNB or the Board of Directors of LSB if any
        Governmental Entity that must grant a Requisite Regulatory Approval has denied
        approval of the Merger or the Bank Merger and such denial has become final
        and
        nonappealable or any Governmental Entity of competent jurisdiction shall
        have
        issued a final nonappealable order permanently enjoining or otherwise
        prohibiting the consummation of the transactions contemplated by this Agreement
        or Bank Agreement, or if approval has been granted on terms reasonably believed
        to be unduly onerous, unless the failure to receive such Requisite Regulatory
        Approval or the imposition of unduly onerous terms shall be due to the failure
        of the party seeking to terminate this Agreement to perform or observe the
        covenants and agreements of such party set forth herein;
  (c)  by
        either
        the Board of Directors of FNB or the Board of Directors of LSB if the Merger
        shall not have been consummated on or before the first anniversary of the
        date
        of this Agreement, unless the failure of the Closing to occur by such date
        shall
        be due to the failure of the party seeking to terminate this Agreement to
        perform or observe the covenants and agreements of such party set forth herein;
        or
  (d)  by
        either
        the Board of Directors of FNB or the Board of Directors of LSB (provided
        that
        the terminating party is not then in breach of any representation, warranty,
        covenant or other agreement contained herein) if there shall have been a
        breach
        of any of the covenants or agreements or any of the representations or
        warranties set forth in this Agreement
  42
  on
        the
        part of LSB, in the case of a termination by FNB, or FNB, in the case of
        a
        termination by LSB, which breach, either individually or in the aggregate,
        would
        constitute, if occurring or continuing on the Closing Date, the failure of
        the
        conditions set forth in Section 7.2 or 7.3, as the case may be, and which
        is not
        cured within 45 days following written notice to the party committing such
        breach or by its nature or timing cannot be cured prior to the Closing
        Date.
  8.2  Effect
        of Termination . In
        the
        event of termination of this Agreement by both FNB or LSB or either of them
        as
        provided in Section 8.1(a), (b) or (c), this Agreement shall forthwith become
        void and have no effect, and none of FNB, LSB, any of their respective
        Subsidiaries or any of the officers or directors of any of them shall have
        any
        liability of any nature whatsoever hereunder, or in connection with the
        transactions contemplated hereby (other than the Confidentiality Agreement
        entered into by LSB and FNB, which shall terminate in accordance with its
        terms), except that Sections 6.2(b), 8.2, 9.2 and 9.3 shall survive any
        termination of this Agreement, and notwithstanding anything to the contrary
        contained in this Agreement, neither FNB nor LSB shall be relieved or released
        from any liabilities or damages arising out of its willful breach of any
        provision of this Agreement.
  8.3  Expenses .  Unless
        Sections 8.4 or 8.5 are applicable, each party shall pay all Expenses incurred
        by it in connection with this Agreement and the transactions contemplated
        hereby, whether or not the Merger is consummated. “Expenses” mean all
        out-of-pocket expenses (including fees and expenses of attorneys, accountants,
        investment bankers, consultants, experts and other third persons advising
        or
        assisting a party) incurred by a party or on its behalf.
  8.4  Wrongful
        Termination . Notwithstanding
        the provisions of Sections 8.1 and 8.2, and except as otherwise provided
        in
        Section 8.5, if the Merger fails to be consummated because of the wrongful
        termination of this Agreement or a willful or grossly negligent breach by
        LSB or
        by FNB of any representation, warranty, covenant, undertaking, term, agreement
        or restriction contained herein applicable to it that results in a Material
        Adverse Effect, then the party wrongfully terminating or breaching this
        Agreement shall pay the other party $9,000,000 as liquidated damages in full
        compensation of all Expenses, damages, costs and other harm suffered by such
        party as a result thereof.
  8.5  Termination
        Fee .  (a)
        If
        (i) this Agreement is terminated because LSB has entered theretofore into
        a
        letter of intent or an agreement with a person or entity other than FNB that
        provides for an entity to acquire LSB, merge with or into LSB, or purchase
        all
        or substantially all of the assets of LSB or (ii) prior to termination of
        this
        Agreement LSB engages in negotiations relating to any such transaction and
        a
        letter of intent or agreement with respect thereto is entered into within
        twelve
        (12) months following the termination of this Agreement, and FNB has not
        consented in writing to such negotiations by LSB, then LSB shall pay to FNB
        a
        termination fee of $9,000,000; and (b) if (i) this Agreement is terminated
        because FNB has entered theretofore into a letter of intent or an agreement
        with
        a person or entity other than LSB that provides for an entity to acquire
        FNB,
  43
  merge
        with or into FNB, or purchase all or substantially all of the assets of FNB
        or
        (ii) prior to termination of this Agreement FNB engages in negotiations relating
        to any such transaction and a letter of intent or agreement with respect
        thereto
        is entered into within twelve (12) months following the termination of this
        Agreement, and LSB has not consented in writing to such negotiations by FNB,
        then FNB shall pay to LSB a termination fee of $9,000,000.
  8.6  Payment
        Method .  Any
        sum
        due to a party under Section 8.4 or 8.5 shall be made by wire transfer of
        immediately available funds to such account as the receiving party may
        designate.
  8.7  Amendment .  Subject
        to compliance with applicable law and Section 1.1(b), this Agreement may
        be
        amended by the parties hereto, by action taken or authorized by their respective
        Boards of Directors, at any time before or after approval of the matters
        presented in connection with the Merger by the shareholders of FNB and LSB;
        provided, however, that after any approval of the transactions contemplated
        by
        this Agreement by the respective shareholders of FNB or LSB, there may not
        be,
        without further approval of such shareholders, any amendment of this Agreement
        that changes the amount or the form of the consideration to be delivered
        hereunder to the holders of FNB Common Stock, other than as contemplated
        by this
        Agreement. This Agreement may not be amended except by an instrument in writing
        signed on behalf of each of the parties hereto.
  8.8  Extension;
        Waiver . At
        any
        time prior to the Effective Time, the parties hereto, by action taken or
        authorized by their respective Board of Directors, may, to the extent legally
        allowed, (a) extend the time for the performance of any of the obligations
        or
        other acts of the other parties hereto, (b) waive any inaccuracies in the
        representations and warranties contained herein or in any document delivered
        pursuant hereto and (c) waive compliance with any of the agreements or
        conditions contained herein; provided, however, that after any approval of
        the
        transactions contemplated by this Agreement by the respective shareholders
        of
        FNB or LSB, there may not be, without further approval of such shareholders,
        any
        extension or waiver of this Agreement or any portion thereof which reduces
        the
        amount or changes the form of the consideration to be delivered to the holders
        of FNB Common Stock hereunder, other than as contemplated by this Agreement.
        Any
        agreement on the part of a party hereto to any such extension or waiver shall
        be
        valid only if set forth in a written instrument signed on behalf of such
        party,
        but such extension or waiver or failure to insist on strict compliance with
        an
        obligation, covenant, agreement or condition shall not operate as a waiver
        of,
        or estoppel with respect to, any subsequent or other failure.
  **ARTICLE
        IX**
  **GENERAL
        PROVISIONS**
  9.1  Closing .  Subject
        to the terms and conditions of this Agreement, the closing of the Merger
        (the
“Closing”) will take place at 10:00 a.m. on a date and at a place to be
        specified by the parties, which shall be
  44
  no
        later
        than five (5) business days after the satisfaction or waiver (subject to
        applicable law) of the latest to occur of the conditions set forth in Article
        VII hereof, unless extended by mutual agreement of the parties (the “Closing
        Date”).
  9.2  Nonsurvival
        of Representations, Warranties and Agreements .  None
        of
        the representations, warranties, covenants and agreements in this Agreement
        or
        in any instrument delivered pursuant to this Agreement (other than the
        Confidentiality Agreement entered into by LSB and FNB, which shall terminate
        in
        accordance with its terms) shall survive the Effective Time, except for Sections
        6.2(b) and 6.8 and for those other covenants and agreements contained herein
        and
        therein which by their terms apply in whole or in part after the Effective
        Time.
  9.3  Notices .  All
        notices and other communications hereunder shall be in writing and shall
        be
        deemed given if delivered personally, telecopied (with confirmation), mailed
        by
        registered or certified mail (return receipt requested) or delivered by an
        express courier (with confirmation) to the parties at the following addresses
        (or at such other address for a party as shall be specified by like
        notice):
  (a)
                if
                    to FNB, to:
 FNB
          Financial Services Corporation
 1501
          Highwoods Blvd, Suite 400
 Greensboro,
          North Carolina 27410
 Attention:
                Pressley
                    A. Ridgill
 President
          and Chief Executive Officer
 Facsimile:
          (336) 369-0935
 
 and
 
 (b)
                if
                    to LSB, to:
 LSB
          Bancshares, Inc.
 P.
          O. Box
          867
 Lexington,
          North Carolina 27292-3394
 Attention:
                Robert
                    F. Lowe
 Chairman,
          President and Chief Executive Officer
 Facsimile:
                (336)
                    249-1589
 9.4  Interpretation .  When
        a
        reference is made in this Agreement to Sections, Exhibits or Schedules, such
        reference shall be to a Section of or Exhibit or Schedule to this Agreement,
        unless otherwise indicated. The table of contents and headings contained
        in this
        Agreement are for reference purposes only and shall not affect in any way
        the
        meaning or interpretation of this Agreement. Whenever the words “include,”
“includes” or “including” are used in this Agreement, they shall be deemed to be
        followed by the words “without limitation”.
  45
  9.5  Counterparts.  This
        Agreement may be executed in counterparts, all of which shall be considered
        one
        and the same agreement and shall become effective when counterparts have
        been
        signed by each of the parties and delivered to the other parties, it being
        understood that all parties need not sign the same counterpart.
  9.6  Entire
        Agreement .  This
        Agreement (including the documents and the instruments referred to herein)
        constitutes the entire agreement and supersedes all prior agreements and
        understandings, both written and oral, among the parties with respect to
        the
        subject matter hereof.
  9.7  Governing
        Law .  This
        Agreement shall be governed and construed in accordance with the laws of
        the
        State of North Carolina, without regard to any applicable conflicts of law
        principles, except to the extent mandatory provisions of federal law
        apply.
  9.8  Publicity .  Except
        as
        otherwise required by applicable law or the NASDAQ Marketplace Rules, neither
        FNB or LSB shall, or shall permit any of its Subsidiaries to, issue or cause
        the
        publication of any press release or other public announcement with respect
        to,
        or otherwise make any public statement concerning, the transactions contemplated
        by this Agreement without the consent of LSB, in the case of a proposed
        announcement or statement by FNB, or FNB, in the case of a proposed announcement
        or statement by LSB, which consent shall not be unreasonably
        withheld.
  9.9  Assignment;
        Third Party Beneficiaries .  Neither
        this Agreement nor any of the rights, interests or obligations shall be assigned
        by any of the parties hereto (whether by operation of law or otherwise) without
        the prior written consent of the other parties. Subject to the preceding
        sentence, this Agreement will be binding upon, inure to the benefit of and
        be
        enforceable by the parties and their respective successors and assigns. Except
        as otherwise specifically provided in Section 6.8, this Agreement (including
        the
        documents and instruments referred to herein) is not intended to confer upon
        any
        person other than the parties hereto any rights or remedies
        hereunder.
 
 
 
 ***Remainder
        of Page Intentionally Left Blank***
  46
   IN
          WITNESS WHEREOF, FNB and LSB have caused this Agreement to be executed
          by their
          respective officers thereunto duly authorized as of the date first above
          written.
   LSB
                    BANCSHARES, INC.By:Name:
                Robert
                    F. LoweTitle:
                Chairman,
                    President andChief
                    Executive OfficerFNB
                    FINANCIAL SERVICES CORPORATIONBy:Name:
                Pressley
                    A. RidgillTitle:
                President
                    and ChiefExecutive
                    Officer
 
 
 
   47
  
 **EXHIBIT
        6.5(a)(1)**
 
 
 
 ______________,
        2007
 
 
 
 LSB
        Bancshares, Inc.
 P.
        O. Box
        867
 Lexington,
        North Carolina 27292-3394
 
 Ladies
        and Gentlemen:
 
 I
        have
        been advised that as of the date hereof I may be deemed to be an “affiliate” of
        FNB Financial Services Corporation, a North Carolina corporation (“FNB”), as the
        term “affiliate” is defined for purposes of paragraphs (c) and (d) of Rule 145
        of the Rules and Regulations (the “Rules and Regulations”) of the Securities and
        Exchange Commission (the “Commission”) under the Securities Act of 1933, as
        amended (the “Act”). I have been further advised that pursuant to the terms of
        the Agreement and Plan of Merger, dated as of February __, 2007 (the “Merger
        Agreement”), by and between FNB and LSB Bancshares, Inc., a North Carolina
        corporation (“LSB”), FNB will be merged with and into LSB (the “Merger”) and
        that as a result of the Merger, I may receive shares of LSB Common Stock
        (as
        defined in the Merger Agreement) in exchange for shares of FNB Common Stock
        (as
        defined in the Merger Agreement) owned by me.
 
 I
        represent, warrant and covenant to LSB that in the event I receive any LSB
        Common Stock as a result of the Merger:
 
 a.
              I
                  shall not make any sale, transfer or other disposition of the LSB
                  Common
                  Stock in violation of the Act or the Rules and
                  Regulations.
 
 b.
              I
                  have carefully read this letter and the Merger Agreement and discussed
                  its
                  requirements and other applicable limitations upon my ability to
                  sell,
                  transfer or otherwise dispose of LSB Common Stock to the extent
                  I believed
                  necessary with my counsel or counsel for
                  FNB.
 
 c.
              I
                  have been advised that the issuance of LSB Common Stock to me pursuant
                  to
                  the Merger has been registered with the Commission under the Act
                  on a
                  Registration Statement of Form S-4. I have also been advised, however,
                  that, since at the time the Merger was submitted for a vote of
                  the
                  shareholders of FNB I was deemed to have been an affiliate of FNB
                  and
  LSB
            Bancshares, Inc.
 ______________,
            2007
 Page
            2
  the
        distribution by me of the LSB Common Stock has not been registered under
        the
        Act, I may not sell, transfer or otherwise dispose of LSB Common Stock issued
        to
        me in the Merger unless (i) such sale, transfer or other disposition has
        been
        registered under the Act, (ii) such sale, transfer or other disposition is
        made
        in conformity with the provisions of Rule 145 promulgated by the Commission
        under the Act, or (iii) in the opinion of counsel reasonably acceptable to
        LSB,
        such sale, transfer or other disposition is otherwise exempt from registration
        under the Act.
 
 d.
              I
                  understand that LSB is under no obligation to register the sale,
                  transfer
                  or other disposition of the LSB Common Stock by me or on my behalf
                  under
                  the Act or to take any other action necessary in order to make
                  compliance
                  with an exemption from such registration
                  available.
 
 e.
              I
                  also understand that stop transfer instructions will be given to
                  LSB’s
                  transfer agent with respect to the LSB Common Stock and that there
                  will be
                  placed on the certificates for the LSB Common Stock issued to me,
                  or any
                  substitutions therefor, a legend stating in the
                  substance:
 
 “The
        securities represented by this certificate have been issued in a transaction
        to
        which Rule 145 promulgated under the Securities Act of 1933 applies and may
        only
        be sold or otherwise transferred in compliance with the requirements of Rule
        145
        or pursuant to a registration statement under said act or an exemption from
        such
        registration.”
 
 f.
              I
                  also understand that unless the transfer by me of my LSB Common
                  Stock has
                  been registered under the Act or is a sale made in conformity with
                  the
                  provisions of Rule 145, LSB reserves the right to put the following
                  legend
                  on the certificates issued to my
                  transferee:
 
 “The
        shares represented by this certificate have not been registered under the
        Securities Act of 1933 and were acquired from a person who received such
        shares
        in a transaction to which Rule 145 promulgated under the Securities Act of
        1933
        applies. The shares have been acquired by the holder not with a view to,
        or for
        resale in connection with, any distribution thereof within the meaning of
        Securities Act of 1933 and may not be sold, pledged or otherwise transferred
        except in accordance with an exemption from the registration requirements
        of the
        Securities Act of 1933.”
 
   LSB
            Bancshares, Inc.
 ______________,
            2007
 Page
            3
  It
        is
        understood and agreed that the legends set forth in paragraphs (e) and (f)
        above
        shall be removed by delivery of substitute certificates without such legend
        if
        the undersigned shall have delivered to LSB a copy of a letter from the staff
        of
        the Commission, or an opinion of counsel in form and substance reasonably
        satisfactory to LSB, to the effect that such legend is not required for purposes
        of the Act.
 
 Very
                    truly yours,(Please
                    print name)
  Accepted
          this ___ day of
 _____________,
          2007 by
 
 LSB
          BANCSHARES, INC.
 
 
 
 By:Name:Title: