Document:

EX-10.10

 

Exhibit 10.10

EMPLOYMENT CONTINUITY AGREEMENT

     THIS EMPLOYMENT CONTINUITY AGREEMENT (this “Agreement”) is between LSB BANCSHARES, INC., a
North Carolina Corporation (referred to in this Agreement as the “Company,” which term includes any
subsidiary of the Company where the context so requires), and Monroe Jackson Smith, Jr., a resident
of Forsyth, North Carolina (“Executive”), and is effective as of October 15, 2001 (the “Effective
Date”).

     The Company’s Board of Directors (the “Board”) acknowledges that Executive’s contributions to
the growth and success of the Company will be substantial. As a publicly held corporation, the
Board recognizes that there exists a possibility of a change in control of the Company. The Board
also recognizes that the possibility of such a change in control may contribute to uncertainty on
the part of the Executive and may result in the departure or distraction of the Executive from his
responsibilities to the Company.

     The Board believes that outstanding management is essential to advancing the best interests of
the Company and its shareholders. In the event of a threat or occurrence of a bid to acquire or
change control of the Company or to effect a business combination, it is particularly important
that the Company’s business be continued with a minimum of disruption. The Board believes that the
objective of securing and retaining the Executive will be achieved if the Executive is given
assurances of employment security so that he will not be distracted by personal uncertainties and
risks created by such circumstances.

     The Board believes that such assurances will secure the continued services of the Executive in
the performance of his regular duties and such extra duties as may be required of him during such
periods of uncertainty and enable the Company to rely on such Executive to manage its affairs
during any such period with less concern for his personal risks.

     The Stock Option and Compensation Committee of the Board (the “Committee”) has recommended,
and the Board has approved, entering into this Agreement with the Executive in order to achieve the
foregoing objectives.

     Accordingly, the Company and Executive enter into this Agreement to induce Executive to remain
an employee of the Company and to continue to devote his full energy to the Company’s affairs.

	1)  	Term. Upon execution by the Company and Executive, this Agreement is effective as of
the Effective Date. Unless terminated in accordance with Section 5 of this Agreement, the term
of this Agreement will commence as of the Effective Date and continue until the first
anniversary of the Effective Date, and the term of this Agreement shall automatically be
extended an additional one day whenever the term of the Agreement has less than one year
remaining, so that the term of the Agreement shall always have at least one year remaining,
unless terminated in accordance with Section 5 of this Agreement.

1

 

	2)  	Employment.

	 	a)  	Effective Date. The Company and Executive hereby agree that
Executive’s employment shall continue on and after the Effective Date. The terms and
conditions of Executive’s employment are further described in Section 3 of this
Agreement.
	 
	 	b)  	Employment Period. If Executive is employed by the Company on a
Control Change Date (as defined in Section 2(c) of this Agreement), the Company further
agrees that the Company or its successor shall continue to employ Executive, and
Executive further agrees that he shall continue as an employee of the Company, for a
period not less than the Continued Employment Period. For purposes of this Agreement,
the Continued Employment Period begins on the Control Change Date and ends on the
earlier to occur of the (i) first anniversary of such Control Change Date or (ii)
Executive’s Normal Retirement Date (as defined under the Lexington State Bank Employees
Pension Plan, as in effect on the Effective Date or as amended thereafter prior to a
Control Change Date). During the Continued Employment Period and thereafter, the terms
and conditions of Executive’s employment shall be as described in Section 4 of this
Agreement.
	 
	 	c)  	Change in Control and Control Change Date. For purposes of this
Agreement, a Change in Control occurs if, after the Effective Date, (i) either: (A) any
Person (other than a trustee or other fiduciary holding securities under an employee
benefit plan of the Company or the Company itself) becomes the owner or beneficial
owner of Company securities having 20% or more of the combined voting power of the then
outstanding Company securities that may be cast for the election of the Board (other
than as a result of an issuance of securities initiated by the Company, or open market
purchases approved by the Board, as long as the majority of the Board approving the
purchases are directors at the time the purchases are made); or (B) a cash tender or
exchange offer for 20% or more of the combined voting power of the then outstanding
Company securities that may be cast for the election of the Board is effected, a
merger, consolidation, reorganization or other business combination involving the
Company occurs, a sale of all or substantially all of the Company’s assets occurs, a
contested election of directors occurs, or any combination of these transactions or
similar events occur, and (ii) at any time, the Continuing Directors (as defined below)
cease to constitute a majority of the Board, or any successor’s board for whatever
reason. For purposes of the preceding sentence, “Continuing Director” means any member
of the Board while a member of the Board, and who (A) was a director of the Company
before the consummation of the transactions described in the preceding sentence or (B)
whose subsequent nomination for election or election to the Board was recommended or
approved by a majority of the Continuing Directors serving on the Board before the
consummation of the transactions described in the preceding sentence, with each such
member then being treated as a director described in (ii)(A) of this Section; and
“Person” means any individual, firm, corporation, partnership, limited liability
company, trust or other entity, including a “group” as defined in Section 13(d)(3) of
the Securities Exchange Act of 1934, and any successor (by merger or otherwise) of such
entity.
	 
	 	   	For purposes of this Agreement, a Control Change Date is the date on which a Change
in Control occurs. If a Change in Control is effectuated through the consummation of a
series of transactions, a Control Change Date is the closing date of the last of such
transactions.

	3)  	Terms of Employment Before a Control Change Date.

	 	a)  	General Duties. Executive shall continue to exercise such authority
and perform such executive duties as are commensurate with the authority being
exercised and duties being

2

 

	 	   	performed by Executive as of the Effective Date or such other authority and duties as
the Company and Executive may agree.
	 
	 	b)  	Place of Employment. Executive’s services shall be performed at the
location where Executive was employed immediately before the Control Change Date or
such other location as the Company and Executive may agree.
	 
	 	c)  	Working Facilities and Support Staff. Executive is entitled to an
office of a size and with furnishings and other appointments reasonably equal to those
provided to Executive as of the Effective Date. Executive is entitled to secretarial
and other assistance, and to such other facilities, equipment, and supplies at least
equal to those provided to Executive as of the Effective Date.
	 
	 	d)  	Expenses Generally. Executive is entitled to receive prompt
reimbursement for all reasonable expenses incurred by Executive in connection with the
performance of Executive’s duties of employment hereunder. Reimbursement shall be made
in accordance with the Company’s policies and procedures in effect on the Effective
Date or as amended prior to a Control Change Date.
	 
	 	e)  	Meetings, Conventions, and Seminars. Executive is encouraged to attend
seminars, professional meetings and conventions, and educational courses that are
reasonably related to Executive’s employment with the Company. The reasonable cost of
travel, tuition or registration, food, and lodging for attending those activities shall
be paid by the Company. Other costs shall be paid by Executive, unless the Company
authorizes those costs. If such other costs are authorized expenses, Executive shall be
reimbursed after satisfying the Company’s policies and procedures for such
reimbursement.
	 
	 	f)  	Promotional Expenses. Executive is encouraged to incur reasonable
expenses for promoting the Company’s business. Such promotional expenses include
travel, entertainment (including memberships in social and athletic clubs),
professional advancement, and community service expenses. Executive agrees to bear
those expenses except to the extent that those expenses are incurred at the Company’s
specific direction or those expenses are specifically authorized by the Company as
expenses that the Company may pay directly or indirectly through reimbursement to
Executive.
	 
	 	g)  	Outside Activities. Executive may (i) serve on corporate, civic, or
charitable boards or committees; (ii) deliver lectures, fulfill speaking engagements,
or teach at educational institutions; and (iii) manage personal investments, provided
that such activities do not materially interfere with the performance of Executive’s
responsibilities for the Company or violate any applicable law. To the extent that any
such activities have been conducted by Executive before the Effective Date, such prior
conduct of activities and any subsequent conduct of activities similar in nature and
scope shall not be deemed to interfere with the performance of Executive’s
responsibilities for the Company.
	 
	 	h)  	Compensation and Benefits. Executive’s compensation and benefits shall
be the same as those in effect on the Effective Date, subject to periodic review and
adjustment by the Company or as adjusted prior to a Control Change Date.
	 
	 	   	As of the Effective Date, Executive’s compensation includes, but is not limited to, the
following: (i) an annual base salary of eighty-three thousand dollars ($83,000.00); (ii)
incentive compensation pursuant to the Company’s Management Incentive Plan; (iii)

3

 

	 	   	participation in the Lexington State Bank Employees Savings Plus Plan; (iv)
participation in the Lexington State Bank Employees Pension Plan; and (v) participation
in the Company’s 1996 Omnibus Stock Incentive Plan.
	 
	 	   	As of the Effective Date, Executive’s benefits include, but are not limited to, the
following: (i) reimbursement in accordance with the policies of the Company for business
use of Executive’s personal automobile and related expenses; (ii) group life, accidental
death and dismemberment, long-term disability, and medical insurance; and (iii) Paid
Time Off Days.
	 
	 	   	This Section 3(h) does not change the terms of any compensation arrangement, benefit
program or benefit plan maintained by the Company and does not give Executive any
additional vested interest in any compensation or benefit to which Executive is not
already entitled under any such program or plan on the Effective Date.

	4)  	Terms of Employment On and After a Control Change Date.

	 	(a)  	General. During the Continued Employment
Period and thereafter, the terms and conditions of Executive’s employment,
as described in Section 3, shall continue in effect, except that such terms
and conditions are fixed as of the day before a Control Change Date and
Executive’s compensation and benefits are governed by Section 4(b).
	 
	 	(b)  	Compensation and Benefits. During the
Continued Employment Period and thereafter, the Company shall: (1) continue
to pay Executive an annual base salary not less than Executive’s annual
base salary in effect on the day before a Control Change Date; (ii) pay
Executive during each successive twelve-month period beginning on a Control
Change Date incentive compensation in amounts not less in amount than those
paid to Executive during the twelve-month period preceding the day before a
Control Change Date; and (iii) continue all compensation and employee
benefit plans and programs, including all compensation, plans and benefits
described in Section 3(h) of this Agreement, at levels in effect on the day
before a Control Change Date (to the extent practicable and subject to such
reductions as may be required to maintain such plans in compliance with
applicable nondiscrimination and other federal laws regulating employee
benefit plans and programs) or pay Executive an amount necessary to provide
essentially comparable benefits (assuming, in the case of insured benefits,
that Executive is then insurable at standard rates).

	5)  	Disability or Death of Executive.

	 	a)  	Termination of Employment on Disability. The Company, pursuant to a
resolution duly adopted by the Board, may terminate Executive’s employment if Executive
becomes Disabled (defined below) by giving Executive written notice of its intention to
terminate Executive’s employment, subject to the terms and conditions specific in the
notice. If Executive becomes Disabled and does not return to the performance of his
duties for the Company in accordance with the terms and conditions set forth in the
notice, Executive’s employment with the Company shall terminate (the “Disability
Effective Date”). For purposes of this Agreement, “Disabled” has the meaning set forth
under the Long Term Disability Plan of Lexington State Bank or any successor plan or
amendment to such Plan. If Executive’s employment is terminated because Executive is
Disabled, Executive will not receive any Continued Compensation under Section 6 but is
entitled, after the Disability

4

 

	 	   	Effective Date, to receive disability and other benefits on a basis comparable to those provided by the Company to
disabled employees and their families in accordance with such plans, programs, and
policies relating to Executive’s disability, if any, as in effect on the Effective Date
or as instituted or amended thereafter.
	 
	 	b)  	Termination of Employment on Death. If Executive dies, his employment
shall automatically terminate as of the date of death of the Executive. If Executive’s
employment is terminated because Executive dies, Executive will not receive any
Continued Compensation under Section 6 but is entitled, after the date of death, to
receive death and other benefits on a basis comparable to those provided by the Company
to deceased employees and their families in accordance with such plans, programs, and
policies relating to Executive’s death, if any, as in effect on the Effective Date or
as instituted or amended thereafter.

	6)  	Liquidated Damages Upon Termination of Employment Other Than by Disability or Death.

	 	a)  	General. Executive is entitled to receive Continued Compensation
according to the remaining provisions of this Section 6 if Executive’s employment with
the Company terminates due to an event described in Section 6(b) or 6(c). If
Executive’s employment terminates and an event described in Section 6(b) or 6(c) has
not occurred, Executive is not entitled to any Continued Compensation under this
Section 6. If Executive’s employment terminates before a Control Change Date and if
Executive reasonably demonstrates that such termination of employment was effectuated
at the request or direction of a third party who had taken steps reasonably calculated
to effect a Change of Control or otherwise arose in connection with or in anticipation
of a Change of Control, then for purposes of this Agreement, the Executive’s employment
shall be treated as if it had terminated during the Continued Employment Period.
	 
	 	b)  	Termination by the Company. Subject to the conditions of Section 7,
Executive is entitled to receive Continued Compensation if Executive’s employment is
terminated by the Company without cause (“cause” being limited to Executive’s acts of
knowingly or willfully violating any federal or state law or regulation applicable to
the performance of Executive’s duties, theft, embezzlement, fraud, or moral turpitude
involving or negatively affecting the Company or material failure to satisfy the
specific duties and/or responsibilities of the Executive’s position.
	 
	 	c)  	Voluntary Termination. Subject to the conditions of Section 7,
Executive is entitled to receive Continued Compensation if Executive voluntarily
terminates his employment with the Company after: (i) Executive does not receive salary
increases, incentive compensation, stock options and other benefits comparable to that
which Executive received in prior years, unless such failure to increase compensation
is part of, and consistent with, an across-the-board reduction in compensation of
senior officers of the Company; or (ii) Executive’s salary, incentive compensation,
stock options or other benefits are reduced, unless such reduction is part of, and
consistent with, an across-the-board reduction in compensation of senior officers of
the Company; or (iii) Executive’s status, title(s), office(s), working conditions, or
management responsibilities are diminished (other than changes in reporting or
management responsibilities required by applicable federal or state law); or (iv)
Executive’s place of employment is relocated more than fifty (50) miles without
Executive’s consent. Executive will be entitled to receive Continued Compensation on
account of his voluntary termination under this Section 6(c) only if such voluntary
termination occurs within three months after an event described in (i), (ii), (iii), or
(iv) above, or within three months after the last in a series of such events.

5

 

	 	d)  	Continued Compensation. If Executive’s employment terminates before a
Control Change Date or after the Continued Employment Period because of an event
described in Section 6(b) or 6(c), subject to the conditions of Section 7, Continued
Compensation equal to Executive’s Base Period Income (calculated in accordance with
Section 6(e)) shall be paid to Executive or his designee in twelve equal monthly
installments. If Executive’s employment terminates during the Continued Employment
Period because of an event described in Section 6(b) or 6(c), subject to the conditions
of Section 7, Continued Compensation equal to Executive’s Base Period Income shall be
paid in twelve equal monthly installments to Executive or his designee, commencing on
the first day of the month following Executive’s termination of employment with the
Company because of an event described in Section 6(b) or 6(c) and shall continue on the
first day of each month thereafter until paid in full, subject to receipt by the
Company of notification from the Accounting Firm (defined below) of its determination
regarding the reduction, if any, of Continued Compensation according to Section 6(g).
	 
	 	e)  	Base Period Income. Executive’s “Base Period Income” shall equal his
annual base salary as of his termination date, plus an amount equal to the incentive
compensation awarded to or accrued for Executive for the fiscal year immediately prior
to the fiscal year in which Executive’s termination date occurs (but in no event shall
such amount be less then the Incentive compensation amount required to be paid during
the Continued Employment Period under Section 4(b)(ii), hereof, if the Executive’s
employment terminates during the Continued Employment Period). Amounts of such base
salary and incentive compensation that Executive has elected to defer during the
relevant period shall be included in the calculation of Base Period Income.
	 
	 	f)  	Other Payments or Benefits. In addition to any payments provided under
this Agreement or under any other arrangement between the Company and Executive,
Executive shall be entitled on termination of employment to (i) any cash or property
due him as a result of the exercise of a stock option granted under the Company’s 1996
Omnibus Stock Incentive Plan or a successor plan or under any other incentive, benefit
or compensation plan of the Company and (ii) any payments or benefits due him, whether
or not “parachute payments” as defined in Section 280G of the Internal Revenue Code of
1986, as amended (the “Code”)(but subject to Section 6(g)), including amounts that
Executive is entitled to receive under Company maintained tax-qualified plans and any
health care coverage under Company maintained welfare plans for which Executive pays
the cost.
	 
	 	g)  	Certain Reduction of Continued Compensation.

	 	i)  	For purposes of this Section 6(g),

	 	(A)  	A “Payment” means any amount that, if paid, would be a
payment or distribution in the nature of compensation to or for the benefit
of Executive, whether paid or payable pursuant to this Agreement or
otherwise;
	 
	 	(B)  	“Continued Compensation” means a Payment paid or
payable pursuant to Section 6(d) (calculated as if there were no reduction
of Continued Compensation according to this Section 6(g));
	 
	 	(C)  	“Net After Tax Receipts” means the Present Value of a
Payment net of all taxes imposed on Executive with respect to that Payment
under Sections 1 and 4999 of the Code, determined by applying the highest
marginal rate under

6

 

	 	   	Section 1 of the Code that applied to Executive’s taxable income for the immediately
preceding taxable year;
	 
	 	(D)  	“Present Value” means the value determined in
accordance with Section 280G(d)(4) of the Code; and
	 
	 	(E)  	“Reduced Amount” means the smallest aggregate amount of
all Payments that (1) is less than the sum of all Payments and (2) results
in aggregate Net After Tax Receipts that are equal to or greater than the
Net After Tax Receipts that would result if the aggregate Payments were any
other amount less than the sum of all Payments.

	 	ii)  	Notwithstanding any other Section of this Agreement, if the accounting
firm that is engaged to audit the Company’s financial statements (the “Accounting
Firm”) determines that receipt of all Payments would subject Executive to tax under
Section 4999 of the Code, it shall determine whether some amount of Payments would
meet the definition of a “Reduced Amount.” If the Accounting Firm determines that
there is a Reduced Amount, one or more Payments shall be reduced to that Reduced
Amount, but not below zero. If any reduction of Payments is required by the
preceding sentence, (A) Payments other than Continued Compensation shall be reduced
first, and (B) Continued Compensation shall be reduced in a manner that shortens
the period over which Continued Compensation is paid (and, thus, the number of
monthly installments payable) but does not reduce the amount of a monthly
installment that would be paid but for this Section 6(g).
	 
	 	iii)  	If the Accounting Firm determines that one or more Payments should be
reduced to the Reduced Amount, the Company shall promptly notify Executive of that
determination, sending a copy of the detailed calculations by the Accounting Firm.
All determinations made by the Accounting Firm under this Section 6(g) are binding
upon the Company and Executive and shall be made within sixty (60) days after
Executive’s employment termination, unless reasonable cause requires an extension
of time. The Accounting Firm shall furnish written notice to the Company and
Executive of any required extension before the end of the sixty (60) day period;
but the Accounting Firm shall make its determinations under this Section as soon as
possible and not later than six months after Executive’s employment terminates.
	 
	 	iv)  	It is the intention of the Company and Executive to reduce one or more
Payments only if the aggregate Net After Tax Receipts to Executive would be
increased by that reduction. However, it is possible that, as a result of
uncertainty in the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm under this Section, amounts shall have
been paid or distributed under this Agreement to or for the benefit of Executive,
which amounts should not have been so paid or distributed (“Overpayment”), or that
additional amounts not paid or distributed under the Plan to or for the benefit of
Executive could have been so paid or distributed (“Underpayment”), in each case,
consistent with the calculation of the Reduced Amount. If the Accounting Firm,
based either upon the assertion of a deficiency by the Internal Revenue Service
against the Company or Executive, which assertion the Accounting Firm believes has
a high probability of success, or based upon controlling precedent or other
substantial authority, determines that an Overpayment has been made, any such
Overpayment shall be treated for all purposes as a loan to Executive, which loan
Executive shall repay to the Company on terms

7

 

	 	   	acceptable to Executive and the Company together with interest at the applicable
federal rate under Section 7872(f)(2) of the Code; provided, however, that no
such loan shall be deemed to have been made and no amount is payable by
Executive to the Company if and to the extent such deemed loan and payment would
not either reduce the amount on which Executive is subject to tax under Section
1 or 4999 of the Code or generate a refund of such taxes. If the Accounting
Firm, based upon controlling precedent or other substantial authority,
determines that an Underpayment has occurred, the Accounting Firm shall promptly
notify the Company of the amount of the Underpayment. The Company shall take
action to address the Underpayment in a manner that as nearly as possible
restores Executive to the position he would have been in if there had been no
Underpayment.

	   	 
	 
	7)  	Executive Covenants.

	 	a)  	Confidential Information. Executive acknowledges that the Confidential
Information (as defined below) relating to the business of the Company which Executive
has obtained or will obtain during the course of his association with the Company are
the property of the Company. Executive agrees that he has not disclosed or used for
personal gain prior to the Effective Date, and will not disclose or use for personal
gain at any time, either during or after his employment with the Company, any
Confidential Information without the written consent of the Board. Executive agrees to
deliver to the Company at the completion of his employment with the Company, or at any
other time that the Company may request, all memoranda, lists, notes, plans, records,
documentation and other materials (and copies thereof) containing Confidential
Information relating to the business of the Company, no matter where such material is
located and no matter what form the material may be in, which Executive may then
possess or have under his control. If requested by the Company, Executive shall provide
to the Company written confirmation that all such materials have been delivered to the
Company or have been destroyed. Executive shall take all appropriate steps to safeguard
the Confidential Information and to protect it against disclosure, misuse, espionage,
loss, theft, and publication.

	 	(i)  	“Confidential Information” shall mean information which is not
generally known to the public and which is used, developed or obtained by the
Company relating to the businesses of the Company or the business of any customer
thereof, including, without limitation: products or services; fees, costs and
pricing structure; designs; analyses; formulae; drawings; photographs; reports;
computer software; including operating systems, applications, program listings,
flow charts, manuals and documentation; databases; accounting and business methods;
inventions and new developments and methods, whether patentable or unpatentable and
whether or not reduced to practice; all copyrightable works; a listing of the
customers of the Company, the Confidential Information of any customer thereof, all
records and files concerning the Company or the Company’s customers; and all
similar and related information in whatever form. Confidential information shall
not include any information which (i) was rightfully known by Executive prior to
employment with the Company; (ii) is publicly disclosed by law or in response to an
order of a court or governmental agency; (iii) becomes publicly available through
no fault of Executive or anyone under his control; or (iv) has been published in a
form generally available to the public prior to the date upon which Executive
proposes to disclose or use such information. Information shall not be deemed to
have been published merely because individual portions of the information have been
separately published, but only if all

8

 

	 	  	of the material features comprising such information have been published in
combination.

	 	b)  	Records and Files. All records and files concerning the Company or the
Company’s customers belong to and shall remain the property of the Company.
	 
	 	c)  	Covenant Not to Compete. Executive acknowledges that his services are
of a special, unique and extraordinary value to the Company and that he has access to
the Company’s trade secrets, Confidential Information and strategic plans of the most
valuable nature. Accordingly, Executive agrees that during the term of his Employment
with the Company and for one (1) year following the date of termination of such
employment (the “Termination Date”) Executive shall not directly or indirectly own,
manage, control, participate in, consult with, or render services for a bank, financial
institution or similar entity that has a banking office located either in a county in
which the Company has a banking office or plans to open a baking office on the
Termination Date (a “Company County”) or in a county contiguous to a Company County,
Nothing herein shall prohibit Executive from being a passive owner of not more than 1 %
of the outstanding stock of any class of a competing corporation which is publicly
traded, so long as Executive has no active participation in the business of such
corporation.

	 	(i)  	In addition, during the employment with the Company and for a period of
one (1) year following the Termination Date, neither Executive, nor anyone under
his control, shall (i) induce or attempt to induce any employee of the Company to
leave the employ of the Company, or in any way interfere with the relationship
between the Company and any employee thereof, (ii) hire directly or through another
entity any person who was an employee of the Company or any subsidiary at any time
during the time in which the Executive was employed by the Company, or (iii) induce
or attempt to induce any customer, supplier, licensee or other business relation of
the Company to cease doing business with the Company, or in any way interfere with
the relationship between any such customer, supplier, licensee or business relation
and the Company.
	 
	 	(ii)  	Executive agrees that these restrictions on competition and
solicitation shall be deemed to be a series of separate covenants not-to-compete
and a series of separate non-solicitation covenants for each month within the
specified periods, separate covenants not-to-compete and non-solicitation covenants
for each county within the state and for each state within the United States, and
separate covenants not-to-compete for each area of competition. If any court of
competent jurisdiction shall determine any of the foregoing covenants to be
unenforceable with respect to the term thereof or the scope of the subject matter
or geography covered thereby, the parties hereto agree that such remaining
covenants shall nonetheless be enforceable by such court against such other party
or parties or upon such shorter term or within such lesser scope as may be
determined by the court to be enforceable.
	 
	 	(iii)  	Because Executive’s services are unique and because Executive has
access to Confidential information and strategic plans of the Company of the most
valuable nature, the parties agree that the covenants contained in this Section 7
are necessary to protect the value of the business of the Company and that a breach
of any covenant would result in irreparable and continuing damage for which there
would be no adequate remedy at law. The parties agree therefore that in the event
of a breach or threatened breach of this Agreement, the Company or its successors
or assigns may,

9

 

	 	   	in addition to other rights and remedies existing in their favor, apply to any
court of competent jurisdiction for specific performance and/or injunctive or
other relief in order to enforce, or prevent any violations of, the provisions
hereof.

	 	d)  	Notwithstanding Sections 3, 4 or 6, if Executive violates this Section 7, any
unpaid Continued Compensation shall immediately be forfeited as of the date of any
violation.

	8)  	Legal Fees and Expenses. Each party hereto shall be responsible for bearing its own
costs in seeking to obtain, enforce or defend any right or benefit provided by this Agreement.
	 
	9)  	Governing Law. This Agreement and performance hereunder and all suits, actions and
other proceedings hereunder shall be construed in accordance with and under and pursuant to
the laws of the State of North Carolina, (except its choice of law provisions to the extent
that they would require the application of the laws of a state other than the State of North
Carolina), and in any suit, action or other proceeding that may be brought arising out of, in
connection with, or by reason of this Agreement, the laws of the State of North Carolina
(except its choice of law provisions to the extent that they would require the application of
the laws of a state other than the State of North Carolina) shall be applicable and shall
govern to the exclusion of the law of any other forum, without regard to the jurisdiction in
which any suit, action or other proceeding may be instituted.
	 
	10)  	Amendment. This Agreement may not be amended except by the written agreement of
Executive and the Company (with the Company acting by adoption of a resolution by the Board
recommended by the Committee).
	 
	11)  	Binding Effect. The parties agree that this Agreement is enforceable under the laws
of the State of North Carolina. This Agreement is binding on the Company, its successors, and
assigns and on Executive and his personal representatives; and the Company will not
consolidate or merge into or with another corporation, or transfer all or substantially all of
its assets to another corporation (the “Successor Corporation”) unless the Successor
Corporation shall assume this Agreement, and upon such assumption, Executive and the Successor
Corporation shall become obligated to perform the terms and conditions of this Agreement. This
Agreement inures to the benefit of and is enforceable by the Executive’s personal or legal
representatives, executors, administrators, successors, heirs, distributees, devisees, and
legatees. If Executive dies while any amounts are payable under this Agreement, all such
amounts, unless otherwise provided, shall be paid in accordance with the terms of this
Agreement to Executive’s spouse, or if none, to his devisee, legatee, or other designee, or,
if there be no such designee, to his estate.
	 
	12)  	Notice. For purposes of this Agreement, notices and all other communications shall
be in writing (except notice of termination of employment by the Company without cause or for
cause, which may be oral and shall be effective when given orally, but which shall be
confirmed in writing to the Executive within two (2) business days thereafter, and except for
notice of a voluntary termination of employment by Executive, which may be oral and shall be
effective when given orally, but which shall be confirmed in writing to the Company within two
(2) business days thereafter) and are effective when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to Executive or his
personal representative at his last known address. All notices to the Company shall be
directed to the attention of the Chairman of the Board. Such other addresses may be used as
either party may have furnished to the other in writing. Notices of change of address are
effective only upon receipt.

10

 

	13)  	Miscellaneous. This Agreement contains all of the understandings and representations
between the parties hereto pertaining to the subject matter hereof and supersedes all
undertakings and agreements, whether oral or in writing, if any, previously entered into by
them with respect thereto. Headings contained herein are for convenience reference only and
shall not in any way affect the meaning or interpretation of this Agreement. All payments
under this Agreement shall be subject to applicable income, excise and employment tax
withholding requirements. No provision of this Agreement may be modified, waived, or
discharged unless such waiver, modification, or discharge is agreed to in writing signed by
Executive and the Company. A waiver of any breach of or compliance with any provisions or
condition of this Agreement is not a waiver of similar or dissimilar provisions or conditions.
The invalidity or unenforceability of any provision of this Agreement does not affect the
validity or enforceability of any other provision of this Agreement, which remains in full
force and effect.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

11

 

The parties have executed this Agreement effective as of the 9th day of January, 2002.

	 	 	 	 	 	 	 
	 	 	LSB BANCSHARES, INC.
	 
	 	 	 	 	 	 
	 	 	/s/ Robert F. Lowe 
	

	 	By:
	 	ROBERT F. LOWE	 	 
	 	 	Chairman, President & CEO

	 
	 	 	 	 	 	 
	 	 	MONROE JACKSON SMITH, JR.

	 
	 	 	 	 	 	 
	 	 	/s/ Monroe Jackson Smith, Jr. 

12EX-10.16

 

Exhibit 10.16

EMPLOYMENT CONTINUITY AGREEMENT

     THIS EMPLOYMENT CONTINUITY AGREEMENT (this “Agreement”) is between LSB BANCSHARES, INC., a
North Carolina Corporation (referred to in this Agreement as the “Company,” which term includes any
subsidiary of the Company unless the context clearly indicates otherwise), and DAVID P. BARKSDALE,
an executive of the Company and a resident of North Carolina (the “Executive”), and is effective as
of August 16, 2004 (the “Effective Date”).

     The Company’s Board of Directors (the “Board”) acknowledges that the Executive’s contributions
to the growth and success of the Company will be substantial.

     Outstanding management of the Company is essential to advancing the best interests of the
Company and its shareholders. The Board believes that the objective of securing and retaining the
Executive will be achieved if the Executive is given assurances of employment security so that he
will not be distracted by personal uncertainties and risks.

     The Board believes that such assurances will secure the continued services of the Executive in
the performance of his regular duties and such extra duties as may be required of him during
periods of uncertainty and will enable the Company to rely on such Executive to manage its affairs
with less concern for his personal risks.

     The Stock Option and Compensation Committee of the Board (the “Committee”) has recommended,
and the Board has approved, entering into this Agreement with the Executive in order to achieve the
foregoing objectives.

     1. Term. Upon execution by the Company and the Executive, this Agreement is
effective as of the Effective Date. Unless terminated in accordance with Sections 3(a)(i) or
3(a)(ii) of this Agreement, the term of this Agreement will commence as of the Effective Date and
continue until the first anniversary of the Effective Date, and the term of this Agreement shall
automatically be extended an additional one day whenever the term of the Agreement has less than
one year remaining, so that the term of the Agreement shall always have at least one year
remaining, unless terminated in accordance with Sections 3(a)(i) or 3(a)(ii) of this Agreement.

     2. Terms of Employment.

          (a) Positions and Duties. The Company agrees to employ the Executive, and the
Executive agrees to serve as an employee of the Company. The Executive shall perform such
duties and responsibilities, in such capacity and with such authority, for the Company as
the Company may designate from time to time. Such duties shall be of a type for which the
Executive is suited by background, experience and training, in the Company’s reasonable
discretion. Excluding any periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote his full professional attention and time during
normal business hours to the business and affairs of the Company and to perform the
responsibilities assigned to the Executive.

          (b) Working Facilities and Support Staff. The Executive is entitled to an
office of a size and with furnishings and other appointments comparable to other executives
in similar positions with the Company. The Executive is entitled to secretarial and other
assistance, and to

1

 

such other facilities, equipment, and supplies comparable to other executives in
similar positions with the Company.

          (c) Expenses Generally. The Executive is entitled to receive prompt
reimbursement for all reasonable expenses incurred by the Executive in accordance with the
Company’s policies and procedures.

          (d) Meetings, Conventions, and Seminars. The Executive is encouraged to attend
seminars, professional meetings and conventions, and educational courses that are reasonably
related to the Executive’s employment with the Company. The cost of travel, tuition or
registration, food, and lodging for attending those activities shall be paid by the Company
in accordance with the Company’s policies and procedures for such reimbursement.

          (e) Promotional Expenses. The Executive is encouraged to incur reasonable
expenses for promoting the Company’s business. Such promotional expenses include travel,
entertainment (including memberships in social and athletic clubs), professional
advancement, and community service expenses. The Executive agrees to bear those expenses
except to the extent that those expenses are incurred at the Company’s specific direction or
those expenses are specifically authorized by the Company as expenses that the Company may
pay directly or indirectly through reimbursement to the Executive.

          (f) Outside Activities. The Executive may (i) serve on corporate, civic, or
charitable boards or committees; (ii) deliver lectures, fulfill speaking engagements, or
teach at educational institutions; and (iii) manage personal investments, provided that such
activities do not materially interfere with the performance of the Executive’s
responsibilities for the Company. To the extent that any such activities have been conducted
by the Executive before the Effective Date, such prior conduct of activities and any
subsequent conduct of activities similar in nature and scope shall not be deemed to
interfere with the performance of the Executive’s responsibilities for the Company.

          (g) Compensation. The Executive shall be entitled to an annual base salary of
no less than $117,500.00, as the same may be adjusted by the Company from time to time
(“Annual Base Salary”). In addition, the Executive shall be entitled to participate in the
various plans and programs (including employee benefit plans) as may be offered by the
Company from time to time, in accordance with the terms and provisions of such plans or
programs.

     3. Termination of Employment. The Executive’s employment with the Company may be
terminated at any time for any or no reason, with or without cause, including any of the following
events listed in Sections 3(a) or 3(b) below:

          (a) Non-Covered Terminations. The following events shall be considered
“Non-Covered Terminations” under this Agreement:

               (i) Termination of Employment on Disability. The Company, pursuant to a
resolution duly adopted by the Board, may terminate the Executive’s employment if
the Executive becomes Disabled by giving the Executive written notice of its
intention to terminate the Executive’s employment, subject to the terms and
conditions specified in the notice. If the Executive becomes Disabled and does not
return to the performance of his duties for the Company in accordance with the terms
and conditions set forth in the notice, the Executive’s employment with the Company
shall terminate. For purposes of

2

 

this Agreement, “Disabled” has the meaning set forth under the Long Term
Disability Plan of Lexington State Bank or any successor plan or amendment to such
Plan.

               (ii) Termination of Employment on Death. If the Executive dies, his
employment shall automatically terminate as of the date of the Executive’s death.

               (iii) Company’s Termination of the Executive for Cause. The Company’s
termination of the Executive’s employment with the Company for Cause. For purposes
of this Agreement “Cause” shall mean any of the following:

                    (a) Use of illegal drugs by the Executive;

                    (b) Any material breach by the Executive of any covenant, including the
covenant in Section 5(a) of this Agreement, causing material injury to the
Company or to the business reputation of the Company;

                    (c) Any willful act or omission of the Executive which is injurious to
the Company or to the business reputation of the Company;

                    (d) The dishonesty, fraud, malfeasance, negligence or misconduct of the
Executive;

                    (e) The conviction of, or entry of a plea of guilty or no contest to, a
felony or crime involving moral turpitude by the Executive;

                    (f) Failure of the Executive to materially comply with the policies of
the Company;

                    (g) The continued failure of the Executive to perform substantially the
Executive’s duties with the Company (other than any such failure resulting
from incapacity due to physical or mental illness), after a written demand
for substantial performance is delivered to the Executive by the Company
which specifically identifies the manner in which the Company believes that
the Executive has not substantially performed the Executive’s duties.

                    (h) Failure of the Executive to materially follow lawful instructions
of the Board.

               (iv) Voluntary resignation by the Executive without Good Reason, as defined in
subparagraph (b)(ii) of this Section 3.

          (b) Covered Terminations. The following events shall be considered “Covered
Terminations” under this Agreement:

               (i) Company’s Termination of Executive Without Cause and Without an Offer
of Comparable Employment. The Company’s termination of the Executive’s
employment (1) without Cause (as defined in Section 3(a)(iii)) and (2) without an
offer of Comparable Employment with a Successor Employer or a Code §414 Affiliated
Employer of the Company or of a Successor Employer that agrees to assume and be
bound by all terms and conditions of this Agreement and to become the “Company”
under this Agreement.

3

 

                    (a) Code §414 Affiliated Employer shall mean an employer whose
employees would be aggregated with the employees of the Company, and treated
as employed by a single employer along with the employees of the Company,
pursuant to Code §414(b) “controlled groups of corporations”), Code 414(c)
(“entities under common control”), or Code 414(m)(5) (management affiliated
service groups).

                    (b) Comparable Employment shall mean, with respect to the
Executive and a termination of his employment with the Company, employment
by a Successor Employer or by a Code §414 Affiliated Employer (1) for salary
or wages which are equal to or greater than the salary or wages paid to the
Executive by the Company immediately prior to such termination of employment
of the Executive, (2) which does not require the Executive to relocate more
than twenty-five (25) miles from the Executive’s primary place of employment
as of the Effective Date, and (3) which does not result in a substantial
reduction of the benefits to which the Executive is entitled immediately
prior to such termination of employment of the Executive.

                    (c) Successor Employer shall mean any entity that acquires
substantially all of the Company’s assets or any entity into which the
Company was merged or consolidated.

               (ii) Termination By the Executive With Good Reason. The termination of
the Executive’s employment with the Company by the Executive with Good Reason. Good
Reason shall exist if the Company, without the Executive’s consent: (a)
substantially reduces the overall importance of the Executive’s then current role,
as determined by balancing any increase or decrease in the scope of the Executive’s
management responsibilities against any increase or decrease in the relative sizes
of the businesses, activities or functions (or portions thereof) for which the
Executive has responsibility; provided, however, that none of (i) a change in the
Executive’s title, (ii) a change in the hierarchy, (iii) a change in the Executive’s
responsibilities from line to staff or vice versa, and (iv) placing the Executive on
temporary leave pending an inquiry into whether the Executive has engaged in conduct
that could constitute “Cause” under this Agreement, either individually or in the
aggregate, shall be considered Good Reason; (b) reduces the Executive’s Annual Base
Salary, unless a similar reduction is made for other senior executives of the
Company in response to market conditions, (c) substantially reduces the aggregate
benefits (on a cost basis) to which the Executive is entitled on the Effective Date,
unless a similar reduction is made for other executive employees of the Company, (d)
commits a breach of this Agreement which is not remedied by the Company within
thirty (30) days of receiving written notice from the Executive of such breach, (e)
requires the Executive to relocate more than twenty-five (25) miles from the
Executive’s principal place of employment as of the Effective Date, (f) following a
Change in Control, requires the Executive to travel on Company business, without his
consent, at least 50% more, on average, than during the 12 months immediately
preceding the Change in Control, or (g) any successor or assignee of the Company
fails to assume and perform the Company’s obligations under this Agreement.
Executive will be entitled to receive Severance Payments under Section 4(b)(i) of
this Agreement on account of his voluntary termination under this Section 3(b)(ii)
only if such voluntary termination with Good Reason occurs within six months after
an event described in this Section 3(b)(ii), or within six months after the last in
a series of such events.

4

 

               (iii) Termination by the Executive Following a Change in Control. The
termination of the Executive’s employment with the Company by the Executive if the
Company or the Board, without the Executive’s written consent, violates or takes
direct action or inaction that would violate the Company’s code of ethics as in
effect immediately prior to the Change in Control.

          (c) Other Terminations. Any termination of the Executive’s employment with the
Company that is not listed in Sections 3(a) or 3(b) above shall be deemed to be a
Non-Covered Termination under Section 3(a) above.

          (d) Change in Control. For purposes of this Agreement, a “Change in Control”
occurs if, after the Effective Date, (i) either (A) any Person (other than a trustee or
other fiduciary holding securities under an employee benefit plan of the Company or the
Company itself) becomes the owner or beneficial owner of Company securities having 20% or
more of the combined voting power of the then outstanding Company securities that may be
cast for the election of the Board (other than as a result of an issuance of securities
initiated by the Company, or open market purchases approved by the Board, as long as the
majority of the Board approving the purchases are directors at the time the purchases are
made); or (B) a cash tender or exchange offer for 20% or more of the combined voting power
of the then outstanding Company securities that may be cast for the election of the Board is
effected, a merger, consolidation, reorganization or other business combination involving
the Company occurs, a sale of all or substantially all of the Company’s assets occurs, a
contested election of directors occurs, or any combination of these transactions or similar
events occur, and (ii) at any time, the Continuing Directors (as defined below) cease to
constitute a majority of the Board or any successor’s board for whatever reason.

          For purposes of the preceding paragraph, “Continuing Director” means any member of the
Board while a member of the Board, and who (i) was a director of the Company before the
consummation of the transactions described in the preceding sentence or (ii) whose
subsequent nomination for election or election to the Board was recommended or approved by a
majority of the Continuing Directors then serving on the Board with each such member then
being treated as a director in (i); and “Person” means any individual, firm, corporation,
partnership, limited liability company, trust or other entity, including a “group” as
defined in Section 13(d)(3) of the Securities Exchange Act of 1934, and any successor (by
merger or otherwise) of such entity.

4. Post-Termination Payment Obligations of the Company.

          (a) Non-Covered Terminations. If the Executive’s employment with the Company
terminates by reason of a Non-Covered Termination under Section 3(a), then no further
remuneration shall be paid to the Executive pursuant to this Agreement after such
termination of employment, and the Executive shall only be entitled to remuneration
thereafter pursuant to the terms and conditions of his employment with the Company which has
accrued but not been paid.

          (b) Covered Terminations. If the Executive’s employment with the Company
terminates by reason of a Covered Termination under Section 3(b), then, in addition to any
accrued remuneration to which the Executive may otherwise be entitled pursuant to the terms
and conditions of his employment with the Company, the Executive shall receive the following
additional remuneration from the Company:

               (i) Severance Payments. The Company shall pay to the Executive an
amount on the first day of each month during the Severance Period equal to
one-twelfth (1/12) of the Annual Base Salary. Additionally, the Company shall pay
to the Executive

5

 

an amount on the first day of each month during the Severance Period equal to
one-twelfth (1/12) of any bonuses or other taxable cash compensation other than the
Annual Base Salary which was awarded to the Executive during the calendar year
preceding the calendar year in which occurs the date of the Executive’s termination
of employment with the Company. For purposes of this Agreement, the term “Severance
Period” means a one- (1) year period beginning on the date on which the Executive’s
employment with the Company terminated, unless the Executive’s employment with the
Company terminates within six (6) months after a Change in Control has occurred, in
which case the term “Severance Period” means a two- (2) year period beginning on the
date on which the Executive’s employment with the Company terminated. The Company’s
obligation to make and the Executive’s right to receive the payments described in
Section 4(b) (the “Severance Payments”) shall cease immediately in the event that
the Executive violates the Covenant Not to Compete contained in Section 5(c)(i).

               (ii) Payment of COBRA Premiums. During the Executive’s Severance
Period, the Company shall reimburse the Executive for the premiums required to be
paid under the Company’s group health plans to provide the Executive and all
dependents of the Executive with the continuation coverage available under Code
§4980B and ERISA §§601-608. Such reimbursements shall be provided to the Executive
promptly following the date of submission of such expenses to the Company.
Notwithstanding the foregoing, no provisions of this subsection (b) shall be
interpreted, or are intended to, change the terms and provisions of any group health
plan of the Company. Reimbursements under this subsection (b) shall only be made to
the extent that the Executive and/or his eligible dependents have obtained
continuation coverage under the terms and provisions of the group health plans of
the Company, and the ability of the Executive and/or his eligible dependents to
obtain such coverage shall be governed exclusively by the terms and provisions of
the group health plans themselves.

          (c) Withholding on Payments. All payments made or services provided to the
Executive under this Agreement shall be subject to applicable withholdings, including
federal and state income or other taxes and Social Security taxes.

          (d) Other Remuneration from Company. As of the date of termination of the
Executive’s employment with the Company, the Executive’s rights to any particular employee
benefit will be governed by applicable law and the terms and provisions of the Company’s
various employee benefit plans and arrangements. The date of termination of the Executive’s
employment with the Company shall be used in determining benefits under all Company employee
benefit plans.

          (e) Payment Limitation. If the amounts to be paid to the Executive under this
Agreement would cause the Executive to be subject to the Code §4999 excise tax, then to the
extent that the total “parachute payments” (as defined in Code §280G(b)(2) are equal to or
greater than three (3) times the Executive’s “base amount” (as defined in Code §280G(b)(3)),
the amounts to be paid to the Executive under this Agreement which would constitute
“parachute payments” shall be reduced to the extent necessary so that the total “parachute
payments” shall be $1.00 less than three (3) times the Executive’s “base amount”; but the
amounts to be paid shall be so reduced only if the Executive would be economically better
off, on an after tax (federal and state income and federal excise) basis, receiving less
under this Agreement because of the Code §4999 excise tax that would otherwise apply to the
higher amount otherwise payable under this Agreement. The Company shall have complete
discretion to appoint competent tax experts to make the calculations required by this
Section, and the calculations made by such experts shall be

6

 

final and binding upon both the Company and the Executive. Any reductions required
under this Section shall come first from the payments required under Section 4(b)(i), and
then from other payments required under Section 4(b) in the sole discretion of the Company.

          (f) FDIC Compliance Limitation. If the amounts to be paid to the Executive
under this Agreement would cause the Executive to receive a payment in violation of 12 CFR
§359 (or the corresponding provisions of any future regulations promulgated under Section
18(k) of the Federal Deposit Insurance Act (12 U.S.C. §1828(k)), then, after seeking the
approval of the FDIC to nonetheless make payment of such amounts, if such approval is not
forthcoming, such amounts shall be limited so that no violation of such regulations will
occur.

          (g) Waiver and Release. The Company’s obligation to pay amounts to be paid
under Section 4(b) of this Agreement shall be contingent upon the Executive executing and
not revoking a Waiver and Release in the form attached to this Agreement as Exhibit A.

5. Executive Covenants.

          (a) Confidential Information. The Executive shall hold in a fiduciary capacity
for the benefit of the Company all secret or confidential information, knowledge, or data
relating to the Company and its business, which is obtained by the Executive during the
Executive’s employment by the Company and which is not public knowledge (other than by acts
by the Executive or his representatives in violation of this Agreement). During and after
the termination of the Executive’s employment with the Company, the Executive shall not,
without the Company’s prior written consent, communicate or divulge any such information,
knowledge, or data to anyone other than the Company and those designated by it to receive
such information, knowledge, or data except pursuant to an order of a court or governmental
agency. If the Executive violates this Section 5(a), any unpaid remuneration under Section
4(b) shall immediately be forfeited as of the date of the violation.

          (b) Records and Files. All records and files concerning the Company or the
Company’s customers belong to and shall remain the property of the Company. In the event
that the Executive’s employment is terminated for any reason, he shall immediately return to
the Company all such records and files, including copies and files and records stored on
disks or in other electronic format.

          (c) Covenant Not to Compete.

               (i) The Executive agrees that if his employment terminates for any reason other
than when he becomes Disabled or dies, then during the Severance Period (defined in
Section 4(b)(i)) and within Forsyth County, North Carolina, all counties contiguous
to Forsyth County, North Carolina, and all counties in which the Company has a
banking office on the date of termination of the Executive’s employment, he shall
not serve as an employee of, or become a director of, or render advisory or other
services for, or in connection with, or make any financial investment in excess of
5% of the outstanding capital stock of, a bank or other financial institution that
provides services or products that are the same as, similar to, or otherwise
competitive with the services or products provided by the Company. The Executive
further agrees that during the Severance Period (defined in Section 4(b)(i)), he
shall not actively induce any Company employee to terminate employment with the
Company in favor of promised or prospective employment with or on behalf of the
Executive or the Executive’s post-termination employer. The Company’s obligation to
make the Executive’s right to receive payments

7

 

described in Section 4(b) (the “Severance Payments”) shall cease immediately in
the event that the Executive violates the Covenant Not to Compete contained in
Section 5(c)(i).

               (ii) The Executive agrees and acknowledges that any breach of the covenants
contained in this Section 5(c) shall cause irreparable injury to the Company, and
that the remedy at law for any such breach shall be inadequate, and that the Company
shall be entitled to appropriate equitable relief, including injunctive relief, in
addition to any other available remedies.

               (iii) The covenants contained in this Section 5(c) shall inure to the benefit
of the Company and its affiliated employers and subsidiaries and their successors.

               (iv) The restrictions contained in this Section 5(c) are considered by the
parties hereto to be fair and reasonable and necessary for the protection of the
legitimate business interests of the Company. If the scope of any restriction
contained in this Section 5(c) is determined by a court of competent jurisdiction to
be too broad to permit enforcement of such restriction to its full extent, then such
restriction shall be enforced to the maximum extent permitted by law, and the
Executive hereby consents and agrees to such scope as may be judicially modified.

               (v) Notwithstanding Section 4(b), if the Executive violates this Section 5(c),
any unpaid remuneration under Section 4(b) shall immediately be forfeited as of the
date of any violation.

               (vi) The Executive agrees that the time period of the covenants in this Section
5(c) shall not be reduced, but shall be extended, by any period of time during which
the Executive is in violation of any such covenant or any period of time required
for litigation by the Company to enforce any such covenant.

     6. Legal Fees and Expenses. The Company shall pay all reasonable legal fees and
expenses, if any, incurred by the Executive in successfully obtaining, enforcing, or defending any
right or benefit provided by this Agreement. Payments under this Section are in addition to the
remuneration provided by other sections of this Agreement.

     7. Governing Law. This Agreement and performance hereunder and all suits, actions and
other proceedings hereunder shall be construed in accordance with and under and pursuant to the
laws of the State of North Carolina (except its choice of law provisions to the extent that they
would require the application of the laws of a state other than the State of North Carolina), and
in any suit, action or other proceeding that may be brought arising out of, in connection with, or
by reason of this Agreement, the laws of the State of North Carolina (except its choice of law
provisions to the extent that they would require the application of the laws of a state other than
the State of North Carolina) shall be applicable and shall govern to the exclusion of the law of
any other forum, without regard to the jurisdiction in which any suit, action or other proceeding
may be instituted.

     8. Amendment. This Agreement may not be amended except by the written agreement of the
Executive and the Company (with the Company acting by adoption of a resolution by the Board
recommended by the Committee).

     9. Binding Effect. The parties agree that this Agreement is enforceable under the laws
of the State of North Carolina. This Agreement is binding on the Company, its successors, and
assigns and on

8

 

the Executive and his personal representatives; and the Company will not consolidate or merge
into or with another corporation, or transfer all or substantially all of its assets to another
entity (the “Successor”) unless the Successor entity shall assume this Agreement, and upon such
assumption, the Executive and the Successor shall become obligated to perform the terms and
conditions of this Agreement. This Agreement inures to the benefit of and is enforceable by the
Executive’s personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees, and legatees. If the Executive dies while any amounts are payable under
this Agreement, all such amounts, unless otherwise provided, shall be paid in accordance with the
terms of this Agreement to the Executive’s spouse, or if none, to his devisee, legatee, or other
designee or, if there be no such designee, to his estate.

     10. Notice. For purposes of this Agreement, notices and all other communications shall
be in writing (except notice of termination of employment by the Company without cause or for
cause, which may be oral and shall be effective when given orally, but which shall be confirmed in
writing to the Executive within five business days thereafter, and except for notice of a voluntary
termination of employment by the Executive, which may be oral and shall be effective when given
orally, but which shall be confirmed in writing to the Company within five business days
thereafter) and are effective when delivered or mailed by United States registered mail, return
receipt requested, postage prepaid, addressed to the Executive or his personal representative at
his last known address or when hand delivered to the Executive’s last known address. All notices
to the Company shall be directed to the attention of the Chairman of the Board. Such other
addresses may be used as either party may have furnished to the other in writing. Notices of change
of address are effective only upon receipt.

     11. Miscellaneous. This Agreement contains all of the understandings and
representations between the parties hereto pertaining to the subject matter hereof and supersedes
all undertakings and agreements, whether oral or in writing, if any, previously entered into by
them with respect thereto. Headings contained herein are for convenience reference only and shall
not in any way affect the meaning or interpretation of this Agreement. All payments under this
Agreement shall be subject to applicable income, excise and employment tax withholding
requirements. No provision of this Agreement may be modified, waived, or discharged unless such
waiver, modification, or discharge is agreed to in writing signed by the Executive and the Company.
A waiver of any breach of or compliance with any provision or condition of this Agreement is not a
waiver of similar or dissimilar provisions or conditions. The invalidity or unenforceability of any
provision of this Agreement does not affect the validity or enforceability of any other provision
of this Agreement, which remains in full force and effect.

     12. No Assignment. The Executive may not assign, alienate, anticipate, or otherwise
encumber any rights, duties, or amounts that he might be entitled to receive under this Agreement.

     13. No Strict Construction. If there is a dispute about the language of this
Agreement, the fact that one party drafted this Agreement shall not be used in its interpretation
or enforcement.

     14. Affirmation. The Executive acknowledges that he has carefully read this
Agreement, that he knows and understands its terms and conditions, and that he has had the
opportunity to ask the Company any questions he might have had prior to signing this Agreement.
The Executive also acknowledges that he has had the opportunity to consult an attorney of his
choice (at his expense) to review this Agreement before signing it.

     15. Covenants. The covenants contained in this Agreement shall survive cessation of
the Executive’s employment with the Company as set forth in this Agreement, regardless of who
causes the cessation or the reason for the cessation.

9

 

     16. Non-Binding Mediation Required Prior to Litigation. The parties agree that in the
event that any disagreement arises under this Agreement concerning any payment of remuneration to
be made under this Agreement, or the interpretation or application of this Agreement, or any of the
provisions of this Agreement, or any other matter with respect to the employment of the Executive
by the Company pursuant to this Agreement, other than matters covered by Section 5 of this
Agreement, then prior to the institution of any litigation by either party, such disagreement shall
be first mediated by the parties who will use one mediator agreeable to them (or who is selected by
two mediators each agreeable to one of the parties hereto if the parties are unable to agree
unanimously on one mediator). Notwithstanding the foregoing, the parties agree that such
non-binding mediation shall not be required prior to the institution of litigation by the Company
to obtain injunctive or other equitable relief to enforce any of the covenants in Section 5 of this
Agreement. Any such mediation shall not be binding upon either party, and the cost of any such
mediation proceedings, other than the Executive’s legal fees and expenses, the payment of which
shall be governed by the provisions of Section 6 of this Agreement, shall be borne exclusively by
the Company.

10

 

     The parties have executed this Agreement effective as of the 16th day of August,
2004.

	 	 	 	 	 
	 	LSB BANCSHARES, INC.

 	 
	 	/s/ Robert F. Lowe
 	 
	 	By: Robert F. Lowe 	 
	 	Its: Chairman, President and Chief Executive Officer 	 
	 
	 	DAVID P. BARKSDALE

 	 
	 	/s/ David P. Barksdale
 	 
	 	 	 
	 	 	 

11

 

	 	 	 	 	 

EXHIBIT A

WAIVER AND RELEASE AGREEMENT

This Waiver and Release Agreement reflects the promises, releases, understanding and agreement made
by DAVID P. BARKSDALE (“Executive”) regarding the termination of Executive’s employment with LSB
BANCSHARES, INC. (the “Company”).

I. Payment to Executive

Following the eighth day after the execution of this Release by Executive, the Company agrees to
pay to Executive the Severance Payments and reimburse Executive for COBRA premiums as provided
under Section 4 of that certain Employment Continuity Agreement between Executive and the Company
effective as of August 16, 2004, less all required payroll tax withholdings.

Executive agrees and acknowledges that these payments constitute consideration in addition to
anything of value to which he or she would otherwise have been entitled absent the execution of
this Agreement. Other than the payment of said amounts and any benefits due to Executive under
existing retirement and fringe benefits plans in which Executive is a participant, in accordance
with the terms of such plans, Executive shall not be entitled to any other payments or benefits
from the Company.

II. Release and Waiver

For the consideration described herein, Executive hereby releases, waives, and forever discharges
the Company and all of their benefit plans, plan administrators, agents, subsidiaries, affiliates,
employees, officers, shareholders, successors, and assigns (hereafter “the Releasees”) from any and
all liability, actions, charges, causes of action, demands, damages, attorneys’ fees, or claims for
relief or remuneration of any kind whatsoever, whether known or unknown at this time, arising out
of or in any way connected with Executive’s employment or the termination of his or her employment
with the Company. These include, but are not limited to, any claim (including related attorneys’
fees and costs) under the Age Discrimination in Employment Act, Title VII of the Civil Rights Act
of 1964, the Americans with Disabilities Act, the Worker’s Adjustment and Retraining Notification
Act, the Equal Pay Act, the Post Civil War Civil Rights Act, or any other federal, state, or local
law or ordinance, and any claim for benefits or other claims under the Employee Retirement Income
Security Act, except those which relate to the payment of 401(k) benefits if any, which Executive
is entitled to receive. This waiver, release and discharge also includes without limitation, any
wrongful or unlawful discharge claims, discipline or retaliation claims, any claims relating to any
contract of employment, whether express or implied, any claims related to promotions or demotions,
any claims for or relating to relocation, compensation including commissions, short term or long
term incentives, the 401(k) plan and the management thereof, any claims for defamation, slander,
libel, invasion of privacy, misrepresentation, fraud, infliction of emotional distress, any claims
based on stress to the extent permitted by law, any claims for breach of any covenant of good faith
and fair dealing, and any other claims relating to Executive’s employment with the Company and
termination thereof.

This Waiver and Release Agreement (“Agreement”) does not apply to any claims or rights that may
arise under the Age Discrimination in Employment Act after the date that this Agreement is
signed.

Executive expressly waives all claims, including those which he or she does not know or suspect to
exist in her favor as of the date of this Agreement. As used herein, the parties understand the
word “claims” to include all actions, claims, and grievances, whether actual or potential, known or
unknown, and specifically but not exclusively including all claims against the Company and the
Releasees arising from

12

 

or relating to Executive’s employment with the Company, the termination thereof or any other
conduct by the Company or the Releasees occurring on or prior to the date Executive signs this
Agreement. All such claims are forever barred by this Agreement whether they arise in contract or
tort or under a statute or any other law.

It is expressly understood and agreed by the parties that this Agreement is in full accord,
satisfaction and discharge of any and all doubtful and/or disputed claims by Executive against the
Releasees, and that this Agreement has been signed with the express intent of extinguishing all
claims, obligations, actions or causes of action as herein described.

III. Voluntary Agreement and Other Acknowledgments

Executive acknowledges that:

	•  	I have read this Waiver and Release Agreement, and I
understand its legal and binding effect. I am knowingly and
voluntarily executing this Waiver and Release Agreement of
my own free will.

	•  	No other promises or agreements of any kind have been made
to or with me by any person or entity to cause me to sign
this Waiver and Release Agreement.

	•  	I have had the opportunity to seek, and the Company has
expressly advised me to seek, legal counsel prior to
signing this Waiver and Release Agreement.

	•  	I have been given at least 45 days from the date I received
this form to consider the severance benefits being offered
to me and the terms of this Waiver and Release Agreement.

	•  	If I am age 40 or more, on the date that I received a copy
of this Waiver and Release Agreement, I also received a
description of:

	 	1)  	The class, unit, or group of individuals whose employment is being terminated
as part of the same employment termination program (if any), the eligibility factors
for this program, and any time limits applicable to the program; and
	 
	 	2)  	The job titles and ages of all individuals covered under the termination
program (if any) and the ages of all individuals in the same job classification or
organizational unit who are not covered.

	•  	I understand that in signing this Waiver and Release Agreement, I
am waiving and releasing all claims I have against the Company and
the Releasees which have arisen up to and including the date I
execute this document, including without limitation, those arising
under the Age Discrimination In Employment Act of 1967, as
amended.

	•  	I have been paid in full all wages, incentives, bonuses and other
compensation owed to me by the Company.

IV. Revocation of Waiver and Release Agreement

I understand that, if I am age 40 or more, I can change my mind and revoke my signature on the
Waiver and Release Agreement within seven days after signing it by hand delivering notice of such
revocation to the President of the Company. I understand that, unless properly revoked by me during
this seven-day

13

 

period, the release and waiver in the first section above will become effective seven days after I
sign the Waiver and Release Agreement.

V. Non-Disparagement.

Executive represents and agrees that he or she has not, and will not, except to the extent required
by law, disparage or defame any person associated with the Company, or any programs or services
offered by or through the Company.

VI. Complete Agreement.

Executive acknowledges that no representation, promise or inducement has been made other than as
set forth in this Agreement, and that he or she does not enter into this Agreement in reliance upon
any representation, promise or inducement not set forth herein. This Agreement supersedes all prior
negotiations and understandings of any kind with respect to the subject matter and contains all of
the terms and provisions of the agreement between Executive and the Company with respect to the
subject matter hereof. Any representation, promise or condition, whether written or oral, not
specifically incorporated herein, shall be of no binding effect.

VII. Governing Law

This Agreement shall be governed by the Employee Retirement Income Security Act and, where
applicable, the law of the State of North Carolina.

	 	 	 
	 

	 	 
	DAVID P. BARKSDALE

	 	Date

o I have voluntarily elected to accept the benefits described herein and execute this Waiver
and Release Agreement prior to the end of the 45-day period offered to me, and I have made this
decision without coercion.

14

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00079-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00079-of-00352.parquet"}]]