Document:

Storage Technology Corporation 2004 Long Term Incentive Plan

 EXHIBIT 4.2 
  
 STORAGE TECHNOLOGY CORPORATION 
 2004 LONG TERM INCENTIVE PLAN 
  
 ARTICLE I 
 INTRODUCTION 
  
 1.1 Establishment. Storage Technology Corporation (the “Company”) has adopted the Storage Technology
Corporation Long Term Incentive Plan (the “Plan”), effective as provided in Section 21.1. 
  
 1.2 Purpose. The purpose of the Plan is to provide employees, directors and consultants selected for participation in the Plan with added
incentives to continue in the service of the Company and its affiliates and to create in such employees, directors and consultants a more direct interest in the future success of the operations of the Company and its affiliated corporations by
relating incentive compensation to the achievement of long-term corporate economic objectives. The Plan is also designed to attract key employees, directors and consultants and to retain and motivate participating employees, directors and
consultants by providing an opportunity for equity investment in the Company. 
  
 1.3 No Effect on Other Options. The provisions of the Plan shall have no effect on options granted pursuant to other plans of the Company, which shall be governed by the terms and provisions of the
agreements and the plans governing such grants, as applicable. 
  
 ARTICLE II 
 DEFINITIONS 
  
 2.1 Definitions. The following terms shall have the meanings set forth below: 
  
 (a) “Affiliated Corporation” means any corporation
that is either a parent corporation with respect to the Company or a subsidiary corporation with respect to the Company (within the meaning of Sections 424(e) and (f), respectively, of the Internal Revenue Code). 
  
 (b) “Award” means a Stock Option, a Restricted Stock
award, a Performance Award, a Dividend Equivalent award, a Restricted Stock Unit award, a Common Stock Equivalent award, a Stock Award, a Stock Appreciation Right, or any other award established pursuant to the Plan that may be awarded or granted
under the Plan (collectively, “Awards”). 
  

 B-1 

 (c) “Award Agreement” means a written agreement executed by an authorized officer
of the Company (and, if required, by the Participant) which shall contain such terms and conditions with respect to an Award as the Committee shall determine, consistent with the Plan. 
  
 (d) “Board” means the Board of Directors of the Company. 
  
 (e) “Bonus Payment” means a payment to a Participant
pursuant to a Bonus Plan of the Company, which payment may be made either in cash, shares of Common Stock, Restricted Stock, Restricted Stock Units, Stock Options, other forms of Award established under this Plan, or in any combination of the
foregoing, as determined in accordance with the provisions of Article XII. 
  
 (f) “Bonus Plan” means a performance-based bonus plan of the Company (including, without limitation, the Company’s Management By Objective Plan), as established by the Board or the
Committee from time to time, pursuant to which Bonus Payments are made from time to time in the manner and under the conditions established by the Board or the Committee. 
  
 (g) “Cause” means performance or conduct problems resulting in termination of employment, as
determined in the sole discretion of the Company or Affiliated Corporation. 
  
 (h) “Change in Control” means the occurrence of any of the following events: 
  
 (i) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of either (A) the then-outstanding shares of common stock of the
Company (the “Outstanding Company Common Stock”) or (B) the combined voting power of the then-Outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting
Securities”); provided, however, that, for purposes of this definition, the following acquisitions shall not constitute a Change in Control: (I) any acquisition directly from the Company, (II) any acquisition by the Company, (III)
any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any company controlled by, controlling or under common control with the Company or (IV) any acquisition by any corporation pursuant to a
transaction that complies with Sections (iii)(A), (iii)(B) and (iii)(C) of this definition; 
  
 (ii) individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at
least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof, whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least
a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; 
  

 B-2 

 (iii) consummation of a reorganization, merger, statutory share exchange or consolidation
or similar corporate transaction involving the Company or any of its subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any of
its subsidiaries (each, a “Business Combination”), in each case unless, following such Business Combination, (A) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common
Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the
then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that, as a result of such
transaction, owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of
the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company
or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then-outstanding shares of common stock of the corporation resulting from such Business Combination or the
combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or 
  
 (iv) approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company. 
  
 (i)
“Committee” means a committee designated by the Board to administer the Plan, which committee shall be comprised of two or more persons each of whom is both a “non-employee director” as defined by Rule 16b-3 and an
“outside director” for purposes of Section 162(m) of the Internal Revenue Code. Committee members shall also be appointed in such a manner as to satisfy applicable laws and stock exchange requirements 
  
 (j) “Common Stock” means the Company’s $.10 par
value voting common stock. 
  
 (k) “Common Stock
Equivalent” means a right to receive Common Stock in the future that may be granted to a Participant pursuant to Article IX in lieu of a current issuance of Common Stock, subject to certain conditions and limitations imposed in accordance
with Article IX. 
  

 B-3 

 (l) “Consultant” means a consultant or adviser to the Company, or any Affiliated
Corporation, or any division thereof, if (i) the consultant or adviser renders bona fide services to the Company; (ii) the services rendered by the consultant or adviser are not in connection with the offer or sale of securities in a capital-raising
transaction and do not directly or indirectly promote or maintain a market for the Company’s securities; and (iii) the consultant or adviser is a natural person who has contracted directly with the Company to render such services. 

 
 (m) “Director” means a member of the Board.

  
 (n) “Dividend Equivalent” shall mean a
right to receive the equivalent value (in cash or Common Stock) of dividends paid on Common Stock, awarded under Section 12.2 of the Plan. 
  
 (o) “Effective Date” means the effective date of the 2004 Plan, as set forth in Section 21.1 hereof. 
  
 (p) “Eligible Employees” means those Employees
designated as eligible to participate in the Plan by the Committee. 
  
 (q) “Employee” means a natural person who is deemed an employee (including, without limitation, an officer or director who is also an employee, or a person who would be deemed an employee if such person were subject
to U.S. income taxes) of the Company, or any Affiliated Corporation, in accordance with the rules contained in Section 3401(c) of the Internal Revenue Code and the regulations thereunder. 
  
 (r) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended. 
  
 (s) “Fair Market Value” means with respect to Common
Stock, as of any date, the closing price of a share of Common Stock on the New York Stock Exchange for the last trading day prior to that date. If no such prices are reported, then Fair Market Value shall mean the average of the high and low sale
prices for the Common Stock (or if no sale prices are reported, the average of the high and low bid prices) as reported by the principal regional stock exchange, or if not so reported, as reported by Nasdaq or a quotation system of general
circulation to brokers and dealers; provided, however, that with respect to same day sales occurring under Section 6.1(c)(ii)(B) of the Plan, Fair Market Value shall mean the per share price actually paid for shares of Common Stock in connection
with such sale. 
  
 (t) “Incentive Stock
Option” means the right to purchase Common Stock granted to an Employee pursuant to Section 6.2, which constitutes an incentive stock option within the meaning of Section 422 of the Internal Revenue Code, and which may not be issued with
related Stock Appreciation Rights. 
  
 (u)
“Internal Revenue Code” means the Internal Revenue Code of 1986, and the regulations thereunder, each as in effect from time to time. 
  
 (v) “Non-Employee Director” means a Director who is not an Employee. 
  

 B-4 

 (w) “Non-Qualified Option” means a right to purchase Common Stock granted to a
Participant pursuant to Section 6.3, which does not qualify as an Incentive Stock Option or which is designated as a Non-Qualified Option, and which may or may not be issued with related Stock Appreciation Rights. 
  
 (x) “Participant” means an Eligible Employee,
Director or Consultant designated by the Committee from time to time during the term of the Plan to receive one or more Awards provided under the Plan. 
  
 (y) “Performance Award” shall mean a bonus that is paid in cash, Common Stock, in the form of an Award provided for under the Plan
or any combination thereof that is awarded under Article XI of the Plan. 
  
 (z) “Performance Criteria” means any measurable criteria using an approach, such as balanced score card, which is tied to the Company’s success that the Committee may determine, including
but not limited to, net order dollars, net profit dollars, net profit growth, net revenue dollars, revenue growth, total shareholder return, cash flow, earnings or earnings per share, growth in earnings or earnings per share, return on equity, stock
price, return on equity or average stockholders’ equity, total stockholder return, return on capital, return on assets or net assets, return on investment, revenue, income or net income, operating income or net operating income, operating
profit or net operating profit, operating margin, return on operating revenue, market share, overhead or other expense reduction, credit rating, strategic plan development and implementation, succession plan development and implementation, customer
satisfaction indicators, and/or employee metrics. These criteria may be measured on an absolute basis or relative to a peer group or index and can be measured at the corporate or business unit level. The Committee is authorized to make adjustments
in the method of calculating attainment of Performance Criteria in recognition of: (i) extraordinary or non-recurring items, (ii) changes in tax laws, (iii) changes in generally accepted accounting principles or changes in accounting policies, (iv)
charges related to restructured or discontinued operations, (v) restatement of prior period financial results, and (vi) any other unusual, non-recurring gain or loss that is separately identified and quantified in the Company’s financial
statements. 
  
 (aa) “Restricted Stock
Award” means an award of shares of Common Stock granted to a Participant pursuant to Section 8.1 that is subject to certain restrictions imposed in accordance with the provisions of such Section. 
  
 (bb) “Restricted Stock Unit” means an award
denominated in shares of Common Stock that represents the right to receive payment for the value of such shares pursuant to Section 8.2. 
  
 (cc) “Rule 16” and subsections thereof mean Rule 16b and the relevant subsections promulgated under the Exchange Act, as such Rule
may be amended from time to time. 
  
 (dd) “Section
162(m) Participant” means an Employee who is determined by the Committee to be, or likely to be, a “covered employee” within the meaning of Section 162(m) of the Internal Revenue Code. 
  

 B-5 

 (ee) “Stock Appreciation Right” means a Tandem Stock Appreciation Right or an
Independent Stock Appreciation Right granted to a Participant pursuant to Article VII to receive payment from the Company equal to the difference between the Fair Market Value of one or more shares of Common Stock, whether or not subject to a Stock
Option, and the exercise price of such shares under the terms of such Stock Appreciation Right. 
  
 (ff) “Stock Option” means an Incentive Stock Option or a Non-Qualified Option. 
  
 (gg) “Stock Award” means an award of that represents
the right to receive shares of Common Stock pursuant to Article X. 
  
 2.2 Gender and Number. Except when otherwise indicated by the context, the masculine gender shall also include the feminine gender, and the definition of any term herein in the singular shall also include the plural.

  
 ARTICLE III 
 PLAN ADMINISTRATION 
  
 3.1 Administration Generally. The Plan shall be administered by the Committee. In accordance with the provisions of the Plan, the Committee,
in its sole discretion: 
  
 (a) shall select the
Participants from Eligible Employees, Directors and Consultants; 
  
 (b) shall determine the number of shares of Common Stock to be subject to Awards granted pursuant to the Plan; 
  
 (c) shall determine the number of shares of Common Stock or Common Stock Equivalents to be issued as Bonus Payments; 
  
 (d) shall determine the time at which such Awards and payments are to
be granted; 
  
 (e) shall fix the exercise price, period
and the manner in which a Stock Option becomes exercisable; 
  
 (f) shall establish the duration and nature of Award restrictions; 
  
 (g) shall determine the Fair Market Value of the Common Stock, in accordance with Section 2.1(s) of the Plan; 
  
 (h) shall determine whether and under what circumstances, if any, an Award may be settled in cash or Common Stock Equivalents instead of Common
Stock; 
  

 B-6 

 (i) may modify or amend the terms and conditions of any Award, subject to Article XIX of the Plan;

  
 (j) may authorize any person to execute on behalf of
the Company any Award Agreement or other instrument required to effect the grant of an Award to be granted or previously granted by the Committee; and 
  
 (k) shall establish such other terms and requirements of the various compensation incentives under the Plan as the Committee may deem necessary or
desirable and consistent with the terms of the Plan. 
  
 The
Committee shall determine the form or forms of the Award Agreements, which shall evidence the particular provisions, terms, conditions, rights and duties of the Company and the Participants with respect to Awards granted pursuant to the Plan, which
provisions need not be identical except as may be provided herein. The Committee may from time to time adopt such rules and regulations for carrying out the purposes of the Plan as it may deem proper and in the best interests of the Company. The
Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any agreement entered into hereunder in the manner and to the extent it shall deem expedient to carry the Plan into effect, and it shall be the
sole and final judge of such expediency. No member of the Committee shall be liable for any action or determination made in good faith. The determinations, interpretations and other actions of the Committee pursuant to the provisions of the Plan
shall be binding and conclusive for all purposes and on all persons, subject only to the review of, and consultation with, the Board on all Plan matters except selection of Participants. Notwithstanding any provisions of this Plan to the contrary,
the Committee may not take any actions that individually or together would constitute a repricing of existing Stock Options. 
  
 3.2 Majority Rule; Unanimous Written Consent. The Committee shall act by a majority of its members in attendance at a meeting at which a
quorum is present or by a memorandum or other written instrument signed by all members of the Committee. 
  
 3.3 Compensation; Professional Assistance; Good Faith Actions. Members of the Committee shall receive such compensation, if any, for their
services as members as may be determined by the Board. All expenses and liabilities which members of the Committee incur in connection with the administration of the Plan shall be borne by the Company. The Committee may, with the approval of the
Board, employ attorneys, consultants, accountants, appraisers, brokers or other persons. The Committee, the Company and the Company’s officers and Directors shall be entitled to rely upon the advice, opinions or valuations of any such persons.
All actions taken and all interpretations and determinations made by the Committee or the Board in good faith shall be final and binding upon all Participants, the Company and all other interested persons. No members of the Committee or Board shall
be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or Awards, and all members of the Committee and the Board shall be fully protected by the Company in respect of any such action,
determination or interpretation. 
  
 3.4 Delegation of
Authority to Grant Awards. The Committee may, but need not, delegate from time to time some or all of its authority to grant Awards under the Plan to a committee consisting of one or more members of the Committee or of one or more officers of
the 

  

 B-7 

 
Company; provided, however, that the Committee may not delegate its authority to grant Awards to individuals (a) who are subject on the date of
the grant to the reporting rules under Section 16(a) of the Exchange Act, (b) who are Section 162(m) Participants, or (c) who are officers of the Company who are delegated authority by the Committee hereunder. Any delegation hereunder shall be
subject to the restrictions and limits that the Committee specifies at the time of such delegation of authority and may be rescinded at any time by the Committee. At all times, any committee appointed under this Section 3.4 shall serve in such
capacity at the pleasure of the Committee. 
  
 3.5
Committee Composition. Once a Committee has been appointed pursuant to this Article III, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. From time to time the Board may increase the
size of the Committee and appoint additional members thereof, remove members (with or without cause) and appoint new members in substitution therefor, fill vacancies (however caused) or remove all members of the Committee and thereafter directly
administer the Plan, all to the extent permitted by applicable laws and to the extent permitted by (a) Rule 16b-3 as it applies to transactions intended to qualify thereunder as exempt transactions and (b) Section 162(m) of the Internal Revenue Code
to preserve the Company’s deductibility of compensation realized by Participants as a result of Awards granted to persons who are Section 162(m) Participants. 
  
 3.6 Grants to Non-Employee Directors. Notwithstanding any provision of the Plan to the contrary, with respect
to Awards made to Non-Employee Directors, the Plan shall be administered by the Board, which shall have all powers the Committee would otherwise have with respect to such Awards. 
  
 ARTICLE IV 
 STOCK SUBJECT TO THE PLAN 
  
 4.1
Number of Shares. Subject to Article XVII, Seven Million Five Hundred Thousand (7,500,000) shares of Common Stock are authorized for issuance under the Plan in accordance with the provisions of the Plan and subject to such restrictions or
other provisions as the Committee may from time to time deem necessary. This authorization may be increased from time to time by approval of the Board and the stockholders of the Company. Shares of Common Stock that are issued pursuant to the grant
or exercise of Awards shall be applied to reduce the number of shares of Common Stock remaining available for future issuance under the Plan. The number of shares of Common Stock covering Awards for which Participants do not have to pay the
aggregate Fair Market Value to receive such shares (determined as of the grant date of the Award) shall not exceed Three Million (3,000,000) shares of Common Stock. 
  
 4.2 Unused and Forfeited Stock; Add-backs. Any shares of Common Stock that are subject to an Award that
expires, is forfeited or is otherwise terminated, other than shares of Common Stock subject to a Stock Option or Stock Appreciation Right to the extent such Award has been exercised, shall automatically become available for use under the Plan.
Shares of Common Stock which are delivered by the Participant or withheld by the Company upon the 

  

 B-8 

 
exercise of any Award under the Plan, in payment of the exercise price thereof or tax withholding thereon, may again be optioned, granted or awarded
hereunder, subject to the limitations of Section 4.1. If any shares of Restricted Stock are surrendered by the Participant or repurchased by the Company, or if any Restricted Stock Units are surrendered by the Participant, the shares subject to such
Award may again be optioned, granted or awarded hereunder, subject to the limitations of Section 4.1. Notwithstanding the provisions of this Section 4.2, no shares of Common Stock may again be optioned, granted or awarded (i) if such action would
cause an Incentive Stock Option to fail to qualify as an incentive stock option under Section 422 of the Internal Revenue Code, or (ii) if prohibited by applicable laws, regulations or exchange rules. 
  
 ARTICLE V 
 PARTICIPATION 
  
 5.1 Eligibility and Participation. Participants in the Plan shall be those Eligible Employees, Directors and Consultants who, in the judgment of the Committee, are performing, or during the term of their
service to the Company are expected to perform, vital services in the management, operation and development of the Company or an Affiliated Corporation, and significantly contribute or are expected to significantly contribute to the achievement of
long-term corporate economic objectives. Participants who are Employees may be granted from time to time one or more Incentive Stock Options (with or without Stock Appreciation Rights), and Participants (whether or not they are Employees) may be
granted one or more Awards that are not Incentive Stock Options; provided, however, that the grant of each such Award shall be separately approved by the Committee, and receipt of one Award shall not result in automatic receipt of, or entitlement
to, any other Award. 
  
 Upon determination by the Committee that
an Award is to be granted to a Participant, written notice shall be given to such person, specifying the terms, conditions, rights and duties related thereto. Each Award shall be evidenced by an Award Agreement. Award Agreements evidencing Awards
intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Internal Revenue Code shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 162(m) of the Internal
Revenue Code. Award Agreements evidencing Incentive Stock Options shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 422 of the Internal Revenue Code. Awards shall be deemed to be granted as of
the date specified in the grant resolution of the Committee, which date shall be the date of any related Award Agreement with the Participant. In the event of any inconsistency between the provisions of the Plan and any such agreement entered into
hereunder, the provisions of the Plan shall govern. 
  
 5.2
Limitations. The following limitations shall apply to grants of Stock Options and Stock Appreciation Rights to Participants: 
  
 (a) No Participant shall be granted, in any fiscal year of the Company, an Award covering more than two million (2,000,000) shares of Common Stock.

  

 B-9 

 (b) If a Stock Option or Stock Appreciation Right is canceled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction described in Article XVII), the canceled Stock Option or Stock Appreciation Right shall be counted against the limit set forth in Section 5.2(a). 
  
 (c) Incentive Stock Options may not be granted to Non-Employee
Directors or to Consultants. 
  
 5.3 Limitations
Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan, the Plan, and any Awards granted to Participants who are subject to Section 16 of the Exchange Act, must comply with the applicable provisions of Rule 16b-3 and
shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive
rule (whether or not set forth in an Award Agreement). To the extent permitted by applicable law, the Plan and Awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.

  
 5.4 Provisions Applicable to Section 162(m)
Participants. 
  
 (a) The Committee, in its discretion,
may determine whether an Award is to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Internal Revenue Code. 
  
 (b) Notwithstanding anything in the Plan to the contrary, the Committee may grant any Award to a Section 162(m) Participant, including Restricted
Stock, the restrictions of which lapse upon the attainment of performance goals that are related to one or more of the Performance Criteria. 
  
 (c) To the extent necessary to comply with the performance-based compensation requirements of Section 162(m)(4)(C) of the Internal Revenue Code,
with respect to any Award granted to one or more Section 162(m) Participants, no later than ninety (90) days following the commencement of any fiscal year in question or any other designated fiscal period or period of service (or such other time as
may be required or permitted by Section 162(m) of the Internal Revenue Code), the Committee shall, in writing, (i) designate one or more Section 162(m) Participants, (ii) select the Performance Criteria applicable to the fiscal year or other
designated fiscal period or period of service, (iii) establish the various performance targets, in terms of an objective formula or standard, and amounts of such Awards, as applicable, which may be earned for such fiscal year or other designated
fiscal period or period of service, and (iv) specify the relationship between Performance Criteria and the performance targets and the amounts of such Awards, as applicable, to be earned by each Section 162(m) Participant for such fiscal year or
other designated fiscal period or period of service. Following the completion of each fiscal year or other designated fiscal period or period of service, the Committee shall certify in writing whether the applicable performance targets have been
achieved for such fiscal year or other designated fiscal period or period of service. In determining the amount earned by a Section 162(m) Participant, the Committee shall have the right to reduce (but not to increase) the amount payable at a given
level of performance to take into account additional factors that the Committee may deem relevant to the assessment of individual or corporate performance for the fiscal year or other designated fiscal period or period of service. 
  

 B-10 

 (d) Notwithstanding any other provision of the Plan or any Award which is granted to a Section
162(m) Participant and is intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Internal Revenue Code shall be subject to any additional limitations set forth in Section 162(m) of the Internal Revenue Code
(including any amendment to Section 162(m) of the Internal Revenue Code) or any regulations or rulings issued thereunder that are requirements for qualification as performance-based compensation as described in Section 162(m)(4)(C) of the Internal
Revenue Code, and the Plan shall be deemed amended to the extent necessary to conform to such requirements. 
  
 ARTICLE VI 
 STOCK OPTIONS 
  
 6.1 General Provisions. 
  
 (a) Grant of Stock Options. Coincident with or following
designation for participation in the Plan, a Participant may be granted one or more Stock Options. The Committee in its sole discretion may designate whether a Stock Option granted to an Employee is to be considered an Incentive Stock Option or a
Non-Qualified Option. The Committee may grant both an Incentive Stock Option and a Non-Qualified Option to the same Employee at the same time or at different times. Incentive Stock Options and Non-Qualified Options, whether granted at the same or
different times, shall be deemed to have been awarded in separate grants, shall be clearly identified, and in no event will the exercise of one Stock Option affect the right to exercise any other Stock Option or affect the number of shares of Common
Stock for which any other Stock Option may be exercised. All Stock Options granted to Participants who are not Employees shall be Non-Qualified Options. 
  
 (b) Manner of Stock Option Exercise. A Stock Option may be exercised by a Participant in whole or in part from time to time, subject to the
conditions contained herein, (i) by delivery of written notice of exercise to the persons specified by the Company from time to time, in person or through mail, facsimile, electronic mail or other electronic transmission, or by delivery of notice of
exercise in such other method as has been approved by the Committee, and (ii) by paying in full, with the written notice of exercise or at such other time as the Committee may establish, the total exercise price under the Stock Option for the shares
being purchased. Such notice shall be in a form satisfactory to the Committee and shall specify the particular Stock Option (or portion thereof) that is being exercised and the number of shares with respect to which the Stock Option is being
exercised. The exercise of the Stock Option shall be deemed effective upon receipt of such notice and payment to the Company. As soon as practicable after the effective exercise of the Stock Option, and upon satisfaction of all applicable
withholding requirements pursuant to Article XIII of the Plan, the Participant, or the Participant’s nominee, shall be recorded on the stock transfer books of the Company as the owner of the shares purchased. The Company may, but is not
required to, deliver to the Participant one or more duly issued and executed stock certificates evidencing such ownership. 
  

 B-11 

 (c) Payment of Stock Option Exercise Price. At the time of the exercise of a Stock Option,
payment of the total Stock Option exercise price for the shares to be purchased shall be made in the manner specified in the Award Agreement relating to such Stock Option, which may include any or all of the following methods of payment: 

 
 (i) at the Participant’s election, either: 
  
 (A) in cash or by check; or 
  
 (B) by transfer from the Participant to the Company of
shares of Common Stock (other than shares of Common Stock that the Committee determines by rule may not be used to exercise Stock Options) that the Participant has held for more than six months with a then current aggregate Fair Market Value equal
to the total Stock Option exercise price; 
  
 (ii) at the Company’s election: 
  
 (A) by the Company retaining a number of shares of Common Stock deliverable upon exercise of a Stock Option whose aggregate Fair Market Value is equal to the exercise price to be paid in connection with such exercise; or 
  
 (B) to, the extent permissible under applicable law,
delivery to the Company of: (I) a properly executed exercise notice, (II) irrevocable instructions to a broker to sell a sufficient number of the shares being exercised to cover the exercise price and to promptly deliver to the Company the amount of
sale proceeds required to pay the exercise price and any required tax withholding relating to the exercise, and (III) such other documentation as the Committee and the broker shall require to effect a same-day exercise and sale. 
  
 (d) Stockholder Privileges. No Participant shall have any
rights as a stockholder with respect to any shares of Common Stock covered by a Stock Option until the Participant or its nominee becomes the holder of record of such Common Stock, and no adjustments shall be made for dividends or other
distributions or other rights as to which there is a record date preceding the date such Participant or its nominee becomes the holder of record of such Common Stock. 
  
 6.2 Incentive Stock Options. 
  
 (a) Incentive Stock Option Exercise Price. The per share price to be paid by a Participant at the time an
Incentive Stock Option is exercised shall be determined by the Committee at the time an Incentive Stock Option is granted (or deemed to have been granted under applicable tax rules), but in no event shall such exercise price be less than:

  

 B-12 

 (i) one hundred percent of the Fair Market Value, on the date the Incentive Stock
Option is granted (or deemed to have been granted under applicable tax rules), of one share of the stock to which such Stock Option relates; or 
  
 (ii) one hundred and ten percent of the Fair Market Value, on the date the Incentive Stock Option is granted (or deemed to have
been granted under applicable tax rules), of one share of the stock to which such Stock Option relates if, at the time the Incentive Stock Option is granted, the Participant owns, directly or indirectly (as determined pursuant to Section 424(d) of
the Internal Revenue Code), ten percent or more of the total combined voting power of all classes of stock of the Company or of any Affiliated Corporation (such a Participant is referred to as a “10% Holder”). 
  
 (b) Number of Option Shares. The number of shares of Common
Stock subject to an Incentive Stock Option shall be designated by the Committee at the time the Committee decides to grant an Incentive Stock Option. 
  
 (c) Aggregate Limitation of Stock Exercisable Under Options. To the extent the aggregate Fair Market Value, determined as of the time an
Incentive Stock Option is granted, of the shares of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by a Participant in any calendar year under the Plan or otherwise, granted by the Company and
Affiliated Corporations, exceeds $100,000, such excess shall be treated as a Non-Qualified Option. 
  
 (d) Duration of Incentive Stock Options. The period during which an Incentive Stock Option may be exercised shall be fixed by the Committee,
but in no event shall such period be more than ten years from the date the Stock Option is granted, or, in the case of Participants who are 10% Holders as described in Section 6.2(a)(ii), five years from the date the Stock Option is granted. Upon
the expiration of such exercise period, the Incentive Stock Option, to the extent not then exercised, shall terminate. Except as otherwise provided in Article XIV, all Incentive Stock Options granted to a Participant hereunder shall terminate and
may no longer be exercised if the Participant ceases to be an Employee. 
  
 (e) Restrictions on Exercise of Incentive Stock Options. Incentive Stock Options may be granted subject to such restrictions as to the timing of exercise of all or various portions thereof as the Committee may determine at the
time it grants Incentive Stock Options to Participants. 
  
 (f)
Disposition of Stock Acquired Pursuant to the Exercise of Incentive Stock Options. In the event that a Participant makes a disposition (as defined in Section 422(c) of the Internal Revenue Code) of any Common Stock acquired pursuant to
the exercise of an Incentive Stock Option prior to the expiration of two years from the date on which the Incentive Stock Option was granted or prior to the expiration of one year from the date on which the Stock Option was exercised, the
Participant shall send written notice to the Company at its principal office in Louisville, Colorado (Attention: Corporate Secretary) of the date of such disposition, the number of shares disposed of, the amount of proceeds received from such
disposition and any other information relating to such disposition as the Company may reasonably request. The Participant shall, in the event of such a disposition, make appropriate arrangements with the Company to provide for the amount of any
additional withholding required by federal, state and local income and other tax laws. 
  

 B-13 

 6.3 Non-Qualified Stock Options. 
  
 (a) Option Exercise Price. The per share price to be paid by
the Participant at the time a Non-Qualified Option is exercised shall be determined by the Committee at the time the Stock Option is granted or amended, but in no event shall such exercise price per share be less than one hundred (100) percent of
the Fair Market Value of one share of Common Stock on the date the Stock Option is granted or amended. 
  
 (b) Number of Option Shares. The number of shares of Common Stock subject to a Non-Qualified Option shall be designated by the Committee at
the time the Committee decides to grant a Non-Qualified Option. 
  
 (c) Duration of Non-Qualified Options; Restrictions on Exercise. The period during which a Non-Qualified Option may be exercised, and the installment restrictions on option exercise during such period, if any, shall be fixed
by the Committee, but in no event shall such period be more than ten years from the date the Stock Option is granted. Upon the expiration of such exercise period, the Non-Qualified Option, to the extent not then exercised, shall terminate. Except as
otherwise provided in Article XIV, all Non-Qualified Options granted to a Participant hereunder shall terminate and may no longer be exercised if the Participant ceases to be an Employee, Director or Consultant. 
  
 ARTICLE VII 
 STOCK APPRECIATION RIGHTS 
  
 7.1 Grant of Rights. A Stock Appreciation Right may be granted to any Participant selected by the Committee. A Stock Appreciation Right may be granted (a) in connection and simultaneously with the grant
of an Option, (b) with respect to a previously granted Option, or (c) independent of an Option. A Stock Appreciation Right shall be subject to such terms and conditions not inconsistent with the Plan as the Committee shall impose and shall be
evidenced by an Award Agreement. 
  
 7.2 Tandem Stock
Appreciation Rights. A Stock Appreciation Right may be granted to a Participant in conjunction with any Incentive Stock Option or Non-Qualified Option granted to such Participant, as determined by the Committee, (i) at the time of the grant of
such Stock Option in the case of an Incentive Stock Option or (ii) at the time of grant, or at any subsequent time during the term of the Stock Option, in the case of a Non-Qualified Option. Once granted, the term of a Tandem Stock Appreciation
Right shall be equal to the term of its related Stock Option. A Tandem Stock Appreciation Right shall be exercisable, in whole or in part, at such time or times and only to the extent that the Stock Option to which it relates shall be exercisable.
Upon exercise of a Tandem Stock Appreciation Right by a Participant for a share of Common Stock, the related Stock Option shall be terminated with respect to such share. Incentive Stock Options and Non-Qualified Options shall not be exercisable with
respect to shares of Common Stock for which Tandem Stock Appreciation Rights have been exercised. Upon the exercise of a Tandem Stock Appreciation Right, the Participant shall be entitled to receive the economic value of such Tandem Stock
Appreciation Right determined in the manner prescribed in Section 7.4 
  

 B-14 

 7.3 Independent Stock Appreciation Rights. Stock Appreciation Rights may be granted to a
Participant independent of any Stock Option grant (an “Independent Stock Appreciation Right”) and shall be unrelated to any Option and shall have a term set by the Committee. An Independent Stock Appreciation Right shall be exercisable in
such installments as the Committee may determine. An Independent Stock Appreciation Right shall cover such number of shares of Common Stock as the Committee may determine. The exercise price per share of Common Stock subject to each Independent
Stock Appreciation Right shall be set by the Committee, but shall not be less than the Fair Market Value of a share of Common Stock on the date on which the Independent Stock Appreciation Right is granted. Upon exercise of a Independent Stock
Appreciation Right, the Participant shall be entitled to receive the economic value of such Independent Stock Appreciation Right determined in the manner prescribed in Section 7.4. 
  
 7.4 Exercise of Stock Appreciation Rights. Stock Appreciation Rights shall be subject to such terms and
conditions consistent with other provisions of the Plan as may be determined from time to time by the Committee and shall include the following: 
  
 (a) Manner of Exercise. A Stock Appreciation Right shall be exercised by the giving of notice in the same manner in which a Stock Option may
be exercised. 
  
 (b) Payment Upon Exercise. Upon
the exercise of a Stock Appreciation Right, a Participant shall be entitled to receive the economic value thereof, which shall be equal to (i) the excess of the then Fair Market Value of one share of Common Stock over the exercise price per share
specified in the related Stock Option, multiplied by (ii) the number of shares in respect of which the Stock Appreciation Right is being exercised (the “SAR Value”). 
  
 (c) Form of Payment. Unless otherwise specified (i) in the Award Agreement relating to the Stock Appreciation
Right or (ii) in writing by the Committee, a Participant shall receive the SAR Value in shares of Common Stock. 
  
 7.5 Stockholder Privileges. No Participant shall have any rights as a stockholder with respect to any shares of Common Stock covered by a
Stock Appreciation Right until the Participant becomes the holder of record of such Common Stock, and no adjustments shall be made for dividends or other distributions or other rights as to which there is a record date preceding the date such
Participant becomes the holder of record of such Common Stock. 
  
 ARTICLE VIII 
 RESTRICTED AWARDS 
  
 8.1 Restricted Stock Awards 
  
 (a) Awards Granted by Committee. Coincident with or following designation for participation in the Plan, a
Participant may be granted one or more Restricted Stock Awards consisting of shares of Common Stock. The number of shares granted as a 
  

 B-15 

 Restricted Stock Award shall be determined by the Committee. To the extent required by applicable law, a Participant
shall be required to pay to the Company an amount equal to the par value of the Common Stock subject to the Restricted Stock Award as a condition precedent to the issuance of Common Stock to the Participant. 
  
 (b) Restrictions. A Participant’s right to retain a
Restricted Stock Award granted to him or her under Section 8.1(a) shall be subject to such restrictions, including but not limited to the Participant’s continuous status as an Employee, Director or Consultant for a restriction period specified
by the Committee, or the attainment of any one or more of the Performance Criteria or other specific performance criteria determined appropriate by the Committee with respect to such Award. The Committee may in its sole discretion require different
periods of employment, director service or consulting service or different performance criteria with respect to different Participants, to different Restricted Stock Awards or to separate, designated portions of the Common Stock shares constituting
a Restricted Stock Award. Subject to the provisions of Articles XVI and XIX, if a Participant’s continuous status as an Employee, Director or Consultant terminates prior to the end of such restriction period or the attainment of such
performance criteria as may be specified by the Committee, the Restricted Stock Award shall be forfeited and all shares of Common Stock related thereto shall be immediately returned to the Company. 
  
 (c) Privileges of a Stockholder; Transferability. A Participant
shall have all voting, dividend, liquidation and other rights with respect to Common Stock in accordance with its terms received by him or her as a Restricted Stock Award under this Article VIII upon becoming the holder of record of such Common
Stock; provided, however, that the Participant’s right to sell, encumber, or otherwise transfer such Common Stock (and any other securities issued in respect of such shares of Common Stock as a stock dividend, stock split or the like) shall be
subject to the limitations of Section 16.2 hereof. 
  
 (d)
Enforcement of Restrictions. In the event a Participant receives a stock certificate evidencing the grant of Restricted Stock, the Committee may in its sole discretion require one or more of the following methods of enforcing the
restrictions referred to in Section 8.1(b) and 8.1(c): 
  
 (i) Placing a legend on the stock certificates referring to the restrictions; 
  
 (ii) Requiring the Participant to keep the stock certificates, duly endorsed, in the custody of the Company while the restrictions
remain in effect; or 
  
 (iii) Requiring
that the stock certificates, duly endorsed, be held in the custody of a third party while the restrictions remain in effect. 
  
 8.2 Restricted Stock Units. Coincident with or following designation for participation in the Plan, a Participant may be granted one or more
Restricted Stock Units. The number of shares of Restricted Stock Units shall be determined by the Committee and may be linked to the Performance Criteria or other specific performance criteria determined to be appropriate by the Committee, in each
case on a specified date or dates or over any period or periods determined by the Committee. Unless otherwise specified (a) in the Award Agreement relating to the Restricted Stock Unit or (b) in writing by the Committee, a Participant shall receive
the payment for the Restricted Stock Unit in shares of Common Stock. Payment for a 
  

 B-16 

 Restricted Stock Unit will not be made until the Award has vested, pursuant to a vesting schedule or achievement of
performance criteria set by the Committee. In the event payment for an Award of Restricted Stock Units is made in a form other than in shares of Common Stock pursuant to the terms of this Section 8.2, such payment shall be in an amount equal to the
product of (i) Fair Market Value of a share of Common Stock with respect to the relevant vesting, multiplied by (ii) the number of Restricted Stock Units vesting on such date. Holders of Restricted Stock Units shall have no rights as Company
stockholders with respect to such Award. No Dividend Equivalents awards shall be granted in connection with Restricted Stock Units. 
  
 ARTICLE IX 
 DIRECTOR STOCK AND
STOCK EQUIVALENTS 
  
 9.1 Director Stock and
Stock Equivalents. Each Non-Employee Director may receive all or a portion of his or her annual retainer and any meeting fees (which shall include any additional annual retainer or fees paid to a committee chair) in shares of Common Stock or, if
elected by the Director, in Common Stock Equivalents. An election pursuant to this Section 9.1 must be made in writing on or before the first day of the fiscal year to which the election relates and shall entitle the Non-Employee Director to a
number of shares of Common Stock or Common Stock Equivalents determined by dividing (a) the dollar amount of the portion of the retainer for a given quarterly fiscal period that is to be paid in shares of Common Stock or Common Stock Equivalents by
(b) the Fair Market Value of one share of Common Stock as of the last day of such fiscal period, rounded up to the next full number of shares. In the event any person becomes a Non-Employee Director other than at the beginning of an annual retainer
period, such person may elect, within thirty (30) days of the date on which such person becomes a Non-Employee Director, to receive his or her retainer and any meeting fees in shares of Common Stock or Common Stock Equivalents as described above for
the balance of such annual retainer period in accordance with the formula set forth in the preceding sentence. 
  
 9.2 Common Stock Equivalents. The number of Common Stock Equivalents determined under Section 9.1 for each Non-Employee Director shall be
credited to a bookkeeping account established in the name of that Director subject to the following terms and conditions: 
  
 (a) If the Company pays a cash dividend with respect to the Common Stock at any time while Common Stock Equivalents are credited to a Non-Employee
Director’s account, there shall be credited to the Non-Employee Director’s account additional Common Stock Equivalents equal to (i) the dollar amount of the cash dividend the Director would have received had he or she been the actual owner
of the Common Stock to which the Common Stock Equivalents then credited to the Director’s account relate, divided by (ii) the Fair Market Value of one share of the Company’s Common Stock on the dividend payment date. The Company will pay
the Director a cash payment in lieu of fractional stock equivalents on the date of such dividend payment. 
  
 (b) Upon the death or other termination of the Non-Employee Director’s service on the Board, or, if authorized by the Committee, such other
time or times as specified by the Non-Employee Director at the time of his or her annual election(s), the Company shall deliver 
  

 B-17 

 to the Non-Employee Director (or his or her designated beneficiary or estate) a number of shares of Common Stock equal to
the whole number of Common Stock Equivalents then credited to the Director’s account, together with a cash payment equal to the Fair Market Value of any fractional Common Stock Equivalent. 
  
 (c) The Company’s obligation with respect to Common Stock
Equivalents shall not be funded or secured in any manner, nor shall a Non-Employee Director’s right to receive Common Stock equivalents be assigned or transferable, voluntarily or involuntarily, except as expressly provided herein; and

  
 (d) An Non-Employee Director shall not be entitled to
any voting or other stockholder rights as a result of the credit of Common Stock Equivalents to the Director’s account until certificates representing shares of Common Stock are delivered to the Director (or his or her designated beneficiary or
estate) hereunder. 
  
 9.3 Elections. The Committee
shall determine the form of Non-Employee Director’s elections pursuant to this Article IX, which form shall evidence the particular provisions, terms, conditions, rights and duties of the Company and the Non-Employee Directors with respect to
Common Stock and Common Stock Equivalents paid with respect to the Director’s annual retainer and any meeting fees and which may constitute the Award Agreement with respect to such Common Stock Equivalents. 
  
 ARTICLE X 
 STOCK AWARDS 
  
 Coincident with or following designation for participation in the Plan, a Participant may be granted one or more Stock Awards in the manner determined from time to time by the Committee. The number of shares shall be
determined by the Committee and may be, but are not required to be, based upon the Performance Criteria or other specific performance criteria determined appropriate by the Committee, in each case on a specified date or dates or over any period or
periods determined by the Committee. Common Stock underlying a Stock Award will not be issued until the Stock Award has vested, pursuant to a vesting schedule or performance criteria, if any, set by the Committee. To the extent required by
applicable law, a Participant shall be required to pay to the Company an amount equal to the par value of the Common Stock subject to the Stock Award as a condition precedent to the issuance of Common Stock to the Participant. 
  

 B-18 

 ARTICLE XI 
 PERFORMANCE AWARDS 
  
 11.1 Performance Awards. 
  
 (a)
Coincident with or following designation for participation in the Plan, a Participant may be granted one or more Performance Awards. The value of such Performance Awards may be linked to any one or more of the Performance Criteria or other
specific performance criteria determined appropriate by the Committee, in each case on a specified date or dates or over any period or periods determined by the Committee. 
  
 (b) Without limiting Section 11.1(a), the Committee may grant Performance Awards to any 162(m) Participant in the
form of a cash bonus payable upon the attainment of objective performance goals which are established by the Committee and relate to one or more of the Performance Criteria, in each case on a specified date or dates or over any period or periods
determined by the Committee. Any such bonuses paid to 162(m) Participants shall be based upon objectively determinable bonus formulas. The maximum amount of any Performance Award payable to a 162(m) Participant under this Section 11.1(b) shall not
exceed $7 million with respect to any fiscal year of the Company calendar year. Unless otherwise specified by the Committee at the time of grant, the Performance Criteria with respect to a Performance Award payable to a 162(m) Participant shall be
determined on the basis of generally accepted accounting principles. 
  
 (c) The form of payment to a Participant in respect of a Performance Award may be cash, shares of Common Stock, any type of other Award under the Plan, or any combination of the foregoing, as determined by the Committee in it sole
discretion. 
  
 ARTICLE XII  
 OTHER AWARDS 
  
 12.1 Awards in Lieu of Bonus. 
  
 (a) Participant Election As to Bonus Payment. At such time as the Committee determines that a Participant has or may become eligible for a
Bonus Payment pursuant to a Bonus Plan, the Committee may notify the Participant as to whether or not the Participant will be required by the Committee to, or will be given the right to elect to, accept all or a part of such Bonus Payment in the
form of shares of Common Stock or other forms of Awards. If the Committee grants the Participant the right to elect whether to accept the Bonus Payment in Common Stock or other forms of Awards, then the Participant shall have ten (10) business days
after the receipt of such notice from the Committee to make such election. The Participant shall notify the Committee with respect to his or her election on such form as may be provided for this purpose by the Committee, setting forth thereon the
dollar value of the portion of the Bonus Payment which he or she desires to receive in shares of Common Stock or other forms of Awards. If a Participant fails to make an election pursuant to this Section 12.1(a) with respect to the mode of payment
of a Bonus Payment, the entire Bonus Payment shall be made in cash. 
  
 (b) Determination of Number of Shares. The number of shares of Common Stock or other forms of Awards that shall be issued or credited as a Bonus Payment shall be determined by using a reasonable valuation method specified by
the Committee in its sole discretion. No fractional shares of Common Stock or other forms of Awards shall be issued or credited as a part of a Bonus Payment and the value of any such fractional share that would otherwise be issued pursuant to the
Participant’s election shall be paid in cash. 
  

 B-19 

 (c) Decision of Committee. The Committee shall have the sole discretion to either accept
the Participant’s election with respect to the payment of a Bonus Payment, in whole or in part, in shares of Common Stock or other forms of Awards or to determine that a lesser portion, or none, of the Bonus Payment will be made in shares of
Common Stock or other forms of Awards, and the Committee’s determination in this regard shall be final and binding on the Participant. 
  
 12.2 Dividend Equivalents. 
  
 (a) Coincident with or following designation for participation in the Plan, a Participant may be granted Dividend Equivalents based on the
dividends declared on Common Stock, to be credited as of dividend payment dates, during the period between the date any Award denominated in shares of Common Stock is granted, and the date such Award is exercised, vests or expires, as determined by
the Committee. Such Dividend Equivalents shall be converted to cash or additional shares of Common Stock by such formula and at such time and subject to such limitations as may be determined by the Committee. 
  
 (b) Dividend Equivalents granted with respect to Stock Options
intended to be qualified performance-based compensation for purposes of Section 162(m) of the Internal Revenue Code shall be payable, with respect to pre-exercise periods, regardless of whether such Option is subsequently exercised. 
  
 12.3 Other Forms of Award. From time to time during the
duration of the Plan, the Committee may, in its sole discretion, adopt one or more other forms of awards for Eligible Employees, Directors or Consultants pursuant to which such Eligible Employees, Directors or Consultants may acquire shares of
Common Stock or the economic equivalent thereof, whether by purchase, outright grant or otherwise. Any such arrangements shall be subject to the general provisions of the Plan. 
  
 ARTICLE XIII  
 WITHHOLDING 
  
 13.1 Withholding Requirement. The Company’s obligations to deliver shares of Common Stock upon the exercise or receipt of any Award shall be subject to the Participant’s satisfaction of all applicable federal, state
and local income and other tax withholding requirements. 
  
 13.2 Withholding With Common Stock. The Company may, in its sole discretion, allow or require Participants to pay all or any portion of any tax withholding obligation that results from Awards by the Company withholding from
shares otherwise issuable to the Participant, shares of Common Stock having a value equal to the amount required to be 
  

 B-20 

 withheld or such lesser amount. Any such withholding of shares of Common Stock shall be subject to such terms and
conditions as the Company may, from time to time, establish; provided, that, in the case of a Participant who is an officer or director of the Company within the meaning of Section 16 of the Exchange Act, then the approval by the Committee of the
grant of the award shall be deemed to include approval by the Committee of this withholding provision, unless otherwise specified in the Award Agreement. 
  
 ARTICLE XIV 
 EFFECT OF TERMINATION
OF SERVICE ON AWARDS 
  
 Except as otherwise provided in a written
agreement between the Company and a Participant, the provisions of this Article XIV will apply as follows: 
  
 14.1 Effect of Termination of Service on Stock Options and Stock Appreciation Rights. No Stock Option or Stock Appreciation Right may be
exercised unless, at the time of such exercise, the Participant is an Employee, Director or Consultant, except as follows: 
  
 (a) Subject to Section 14.1(c), if such termination is due to the death of the Participant, or the Participant dies within three months after such
termination, or if such termination occurs after the Participant becomes disabled (within the meaning of Section 22(e)(3) of the Internal Revenue Code), the Stock Option or Stock Appreciation Right may be exercised, to the extent vested at the time
of the Participant’s termination of employment, by the Participant (or, in the case of death, by the person to whom it is transferred by will of the laws of descent and distribution) within a period of one year after the date of death (but in
no event longer than the term of the Stock Option or Stock Appreciation Right). 
  
 (b) Subject to Section 14.1(c), if the Participant’s employment is terminated for any reason other than those reasons covered by Section 14.1(a), then the Stock Option or Stock Appreciation Right shall be
exercisable, to the extent vested at the time of such termination, for a period of ninety (90) days after the date of such termination. 
  
 (c) Notwithstanding the provisions of Sections 14.1(a) and (b) above: 
  
 (i) With respect to all grants of Stock Options or Stock Appreciation Rights, no such grants shall be
exercisable after the date of termination of employment if either the termination was for Cause, or if the former Employee, Consultant or Director is then, in the sole judgment of the Company, in material breach of any contractual, statutory,
fiduciary or other legal obligation to the Company; and 
  
 (ii) In addition to the provisions of paragraph (i) above, unless otherwise provided in the Option or Stock Appreciation Right Award Agreement, with respect to all grants of Stock Options, or Stock Appreciation
Rights, if at any time within six months before or within six months after voluntary or involuntary termination of the Participant’s employment or service for any reason, the former Employee, Consultant or 
  

 B-21 

 Director is, in the sole judgment of the Company, engaging or has engaged in any activity in competition
with any activity of the Company, or harmful or contrary to the interests of the Company, including, but not limited to: accepting employment with or serving as a consultant or advisor to any employer that is in competition with the Company or
acting against the interests of the Company, including employing or recruiting any Employee of the Company; or disclosing or misusing any confidential, proprietary or material information concerning the Company (such information includes, without
limitation, information regarding the Company’s operations, its products, product designs, business plans, strategic plans, marketing and distribution plans and arrangements, customers, and financial statements, budgets and forecasts); or
participating in any hostile takeover attempt of the Company, then: (A) any Options, or Stock Appreciation Rights still held by the Participant shall immediately cease to be exercisable and shall be canceled, and (B) if the Employee, Consultant or
Director exercises any Stock Options or Stock Appreciation Rights within six months prior to the date of termination of employment or service, or upon or at any time after termination of employment or service, then any gain represented by the Fair
Market Value with respect to the date of exercise over the exercise price multiplied by the number of shares such individual purchased shall be paid by such individual to the Company. 
  
 14.2 Effect of Termination of Service on Other Awards. 
  
 (a) In the event of the death or disability (as defined in Section
14.1(a)) of a Participant, all period of service and other restrictions applicable to Awards, other than Stock Options and Stock Appreciation Rights, then held by such Participant shall lapse, and such awards shall become fully vested and
nonforfeitable. In the event of a Participant’s termination of service for any other reason, any Awards other than Stock Options and Stock Appreciation Rights as to which the employment period or other restrictions have not been satisfied shall
be forfeited. 
  
 (b) Unless otherwise provided in the
Restricted Stock or Restricted Stock Unit Award Agreement, if at any time within six months before or within six months after voluntary or involuntary termination of the Participant’s employment or service for any reason, the former Employee,
Consultant or Director is, in the sole judgment of the Company, engaging or has engaged in any activity in competition with any activity of the Company, or harmful or contrary to the interests of the Company, including, but not limited to: accepting
employment with or serving as a consultant or advisor to any employer that is in competition with the Company or acting against the interests of the Company, including employing or recruiting any Employee of the Company; or disclosing or misusing
any confidential, proprietary or material information concerning the Company (such information includes, without limitation, information regarding the Company’s operations, its products, product designs, business plans, strategic plans,
marketing and distribution plans and arrangements, customers, and financial statements, budgets and forecasts); or participating in any hostile takeover attempt of the Company, then if any shares of Restricted Stock or Restricted Stock Units had
vested within six months prior to the date of termination of employment or service, then any gain represented by the Fair Market Value with respect to the date of vest over the purchase price multiplied by the number of shares vested shall be paid
by such individual to the Company. 
  

 B-22 

 ARTICLE XV 
 NON-U.S. PARTICIPANTS 
  
 The Committee may grant awards to Employees, Consultants and Directors whose relationship with the Company or an Affiliated Corporation is subject to the laws of a foreign jurisdiction (a “Non-U.S. Participant”). However, no Award
shall be granted that, as a result of the operation of the laws of a foreign jurisdiction, shall limit the authority, rights and powers of the Company, the Board or the Committee under the Plan, including without limitation, the authority of the
Committee to determine whether Awards will be granted and under what circumstances Awards become exercisable, nonforfeitable or payable, unless such limitation is explicitly acknowledged by the Company in the relevant Award Agreement. Any grant of
an Award that results in the imposition of any of the foregoing limitations shall be null and void ab initio. Subject to the limitations of this Article XV, the Committee may impose whatever requirements and provisions it deems necessary in its sole
discretion to permit an Award to be made to a Non-U.S. Participant. 
  
 The Committee shall have the authority to adopt such modifications, procedures and subplans as may be necessary or desirable to comply with provisions of the laws of foreign countries in which the Company or an Affiliated Corporation may
operate to asssure the viability of the benefits of Awards made to Participants employed in the such countries and to meet the intent of the Plan. 
  
 ARTICLE XVI 
 RIGHTS OF
PARTICIPANTS 
  
 16.1 Employment, Directorship
or Consulting Relationship. Nothing contained in the Plan or in any Award granted under the Plan shall confer upon any Participant any right with respect to the continuation of his or her employment, service as a director or consulting
relationship with the Company or any Affiliated Corporation, or interfere in any way with the right of the Company or any Affiliated Corporation at any time to terminate such service or to increase or decrease the compensation of the Participant
from the rate in existence at the time of the grant of an Award. Whether an authorized leave of absence, or absence in military or government service, shall constitute termination of service shall be determined by the Committee at the time.

  
 16.2 Meaning of Continuous Status. For all
purposes of the Plan and unless otherwise specified in the Award Agreement, so long as a Participant is either an Employee or a Director or a Consultant, without a break in between any change in status, he or she shall be considered to be in
continuous status as an Employee, Director or Consultant, even if the person is serving in one capacity when the award is granted and subsequently changes to service in a different capacity, such as terminating employment but continuing to serve as
a Consultant. 
  

 B-23 

 16.3 Nontransferability. Except as otherwise (a) approved by the Committee and set forth in
the Award Agreement between the Company and the Participant or (b) required pursuant to a qualified domestic relations order, no right or interest of any Participant in an Award prior to the completion of the restriction period applicable thereto
shall be assignable or transferable during the lifetime of the Participant, either voluntarily or involuntarily, or subjected to any lien, directly or indirectly, by operation of law, or otherwise, including execution, levy, garnishment, attachment,
pledge or bankruptcy. If permitted by applicable law (including Rule 16b-3, as amended from time to time), the Committee may (but need not) permit the transfer of Awards either generally, to a limited class of persons or on a case-by-case basis. In
the event of a Participant’s death, a Participant’s rights and interest in any Awards shall be transferable by testamentary will or the laws of descent and distribution, and payment of any amounts due under the Plan shall be made to, and
exercise of any Stock Options or Stock Appreciation Rights may be made by, the Participant’s legal representatives, heirs or legatees. If in the opinion of the Committee a person entitled to payments or to exercise rights with respect to the
Plan is disabled from caring for his or her affairs because of mental condition, physical condition, or age, payment due such person may be made to, and such rights shall be exercised by, such person’s guardian, conservator or other legal
personal representative upon furnishing the Committee with evidence satisfactory to the Committee of such status. 
  
 16.4 Other Benefits. The amount of any compensation deemed to be received by an Employee, Director or Consultant as a result of the receipt,
vesting, exercise of an Award will not constitute “earnings” with respect to which any other benefits provided by the Company or an Affiliated Corporation to such person are determined, including without limitation benefits under any
pension, profit sharing, life insurance or salary continuation plan. 
  
 ARTICLE XVII 
 CHANGE IN CAPITAL STRUCTURE; CHANGE IN CONTROL 
  
 17.1 Change in Capital Structure. Subject to Section 17.4, in
the event that the Committee determines that any dividend or other distribution (whether in the form of cash, Common Stock, other securities or other property), recapitalization, reclassification, stock split, reverse stock split, reorganization,
merger, consolidation, split-up, spin-off, combination, repurchase, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company, or exchange of Common Stock or other securities
of the Company, issuance of warrants or other rights to purchase Common Stock or other securities of the Company, or other similar corporate transaction or event, in the Committee’s sole discretion, affects the Common Stock such that an
adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to an Award, then the Committee shall, in such
manner as it may deem equitable, adjust any or all of: 
  

 B-24 

 (a) The number and kind of shares of Common Stock (or other securities or property) with respect
to which Awards may be granted or awarded (including, but not limited to, adjustments of the limitations in Article IV); 
  
 (b) The number and kind of shares of Common Stock (or other securities or property) subject to outstanding Awards; and 
  
 (c) The grant or exercise price with respect to any Award; provided
that no such adjustment shall be effected if it results in a repricing of a Stock Option or Stock Appreciation Right. 
  
 17.2 Extraordinary Events. Subject to Sections 17.2(f) and 17.4, in the event of any transaction or event described in Section 17.1 or any
unusual or nonrecurring transactions or events affecting the Company, any affiliate of the Company, or the financial statements of the Company or any affiliate, or of changes in applicable laws, regulations or accounting principles, the Committee,
in its sole and absolute discretion, and on such terms and conditions as it deems appropriate, either by the terms of the Award or by action taken prior to the occurrence of such transaction or event and either automatically or upon the
Participant’s request, is hereby authorized to take any one or more of the following actions whenever the Committee determines that such action is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan or with respect to any Award under the Plan, to facilitate such transactions or events or to give effect to such changes in laws, regulations or principles: 
  
 (a) To provide for the cancellation of the Award in exchange for an
amount of cash equal to the amount that could have been attained upon the exercise of such Award or realization of the Participant’s rights had such Award been currently exercisable or payable or fully vested (including an amount equal to zero
for Awards with respect to which no cash could have been so attained or realized); 
  
 (b) To provide that the Award cannot vest, be exercised or become payable after such event; 
  
 (c) To provide that such Award shall be vested, exercisable and nonforfeitable as to all shares covered thereby and that all restrictions with
respect thereto shall lapse, notwithstanding anything to the contrary in the Plan or an Award Agreement; 
  
 (d) To provide that such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for
by similar options, rights or awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices; and 
  
 (e) To make adjustments in the number and type of shares of Common
Stock (or other securities or property) subject to outstanding Awards, and in the number and kind of outstanding Restricted Stock or Restricted Stock Units and/or in the terms and conditions of (including the grant or exercise price), and the
criteria included in, outstanding options, rights and awards and options, rights and awards which may be granted in the future; provided that no such adjustment shall be effected if it results in a repricing of a Stock Option or Stock Appreciation
Right. 
  

 B-25 

 (f) Notwithstanding any other provision of the Plan, in the event of a Change in Control, each
outstanding Award shall, immediately prior to the effective date of such transaction, automatically become (i) fully exercisable for all of the shares of Common Stock at the time subject to such Award, (ii) fully vested and nonforfeitable, (iii) no
longer subject to any restrictions and (iv) fully payable, each as applicable to a given Award. 
  
 17.3 162(m); Rule 16(b)-3. With respect to Awards which are granted to Section 162(m) Participants and are intended to qualify as
performance-based compensation under Section 162(m)(4)(C), other than in the event of a Change in Control, no adjustment or action described in this Article XVII or in any other provision of the Plan shall be authorized to the extent that such
adjustment or action would cause such Award to fail to so qualify under Section 162(m)(4)(C), or any successor provisions thereto. No adjustment or action described in this Article XVII or in any other provision of the Plan shall be authorized to
the extent that such adjustment or action would cause the Plan to violate Section 422(b)(1) of the Internal Revenue Code. Furthermore, no such adjustment or action shall be authorized to the extent such adjustment or action would result in
short-swing profits liability under Section 16 or violate the exemptive conditions of Rule 16b-3 unless the Committee determines that the Award is not to comply with such exemptive conditions. 
  
 17.4 No Limitation on Company or Shareholders. The existence of
the Plan, the Award Agreement and the Awards granted hereunder shall not affect or restrict in any way the right or power of the Company or the shareholders of the Company to make or authorize any adjustment, recapitalization, reorganization or
other change in the Company’s capital structure or its business, any merger or consolidation of the Company, any issue of stock or of options, warrants or rights to purchase stock or of bonds, debentures, preferred or prior preference stocks
whose rights are superior to or affect the Common Stock or the rights thereof or which are convertible into or exchangeable for Common Stock, or the dissolution or liquidation of the company, or any sale or transfer of all or any part of its assets
or business, or any other corporate act or proceeding, whether of a similar character or otherwise. 
  
 ARTICLE XVIII 
 GENERAL RESTRICTIONS 
  
 18.1 Investment Representations. The Company may require any
person to whom an Award is granted, as a condition of exercising or receiving such Award, to give written assurances in substance and form satisfactory to the Company and its counsel to the effect that such person is acquiring the Common Stock
subject to the Award for his or her own account for investment and not with any present intention of selling or otherwise distributing the same, and to such other effects as the Company deems necessary or appropriate in order to comply with federal
and applicable state securities laws. 
  
 18.2
Compliance with Securities Laws. Each Award shall be subject to the requirement that, if at any time counsel to the Company shall determine that the listing, registration or qualification of the shares subject to such Award upon any
securities exchange or under any state or federal law, or the consent or approval of any governmental or regulatory body, 
  

 B-26 

 is necessary as a condition of, or in connection with, the issuance or purchase of shares thereunder, such Award may not
be delivered, accepted or exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained on conditions acceptable to the Committee. Nothing herein shall be deemed to require
the Company to apply for or to obtain such listing, registration or qualification. 
  
 18.3 Changes in Accounting Rules. Notwithstanding any other provision of the Plan to the contrary, if, during the term of the Plan, any changes in the financial or tax accounting rules applicable to any
Awards shall occur that, in the sole judgment of the Committee, may have a material adverse effect on the reported earnings, assets or liabilities of the Company, the Committee shall have the right and power to modify as necessary, or cancel, any
then outstanding Award. 
  
 ARTICLE XIX 
 PLAN AMENDMENT, MODIFICATION AND TERMINATION 
  
 19.1 Amendment or Termination. The Board, upon recommendation of the Committee or at its own initiative, at any time may terminate the Plan.
The Committee, at any time and from time to time and in any respect, may amend or modify the Plan. No such amendment shall be effective unless, the Company shall obtain stockholder approval of any amendment to the extent necessary to comply with the
requirements relating to the Plan under U.S. state corporate laws, U.S. federal and state securities laws, the Internal Revenue Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any
foreign country or jurisdiction where Awards are, or will be, granted under the Plan. 
  
 19.2 Effect of Amendment. 
  
 (a) With regard to any Award that has been granted to a Participant, the terms and conditions of the Plan in effect on the date of such grant was made shall govern, notwithstanding subsequent amendments, unless
otherwise agreed upon by the Participant; provided, however, that this sentence shall not impair the right of the Committee to take whatever action it deems appropriate under Section 18.3, Article XV or Article XVII. 
  
 (b) Except as set forth in Section 19.2 (a) hereof, the termination or
any modification or amendment of the Plan shall not, without the consent of a Participant, affect his or her rights under an Award previously granted to him or her without the Participant’s consent. With the consent of the Participant affected,
the Committee may amend outstanding Award Agreements in a manner not inconsistent with the Plan. 
  
 19.3 Preservation of Incentive Stock Options. The Board or the Committee shall have the right to amend or modify the terms and provisions of
the Plan and of any outstanding Incentive Stock Options granted under the Plan to the extent necessary to qualify any or all such Stock Options for such favorable treatment as may be afforded Incentive Stock Options under Section 422 of the Internal
Revenue Code. 
  

 B-27 

 ARTICLE XX 
 REQUIREMENTS OF LAW 
  
 20.1 Requirements of Law. The issuance of stock and the payment of cash pursuant to the Plan shall be subject to all applicable laws, rules and regulations. 
  
 20.2 Governing Law. The Plan and all Award Agreements hereunder shall be construed in accordance with and
governed by the laws of the State of Colorado. 
  
 ARTICLE XXI

 EFFECTIVE DATE OF THE PLAN 
  
 21.1 Effective Date. The Plan became effective as of the date it is approved by the Stockholders of the Company. 
  
 21.2 Duration of the Plan. The Plan shall terminate at midnight
on the date that is the day before the tenth anniversary of the Effective Date, and may be terminated prior thereto by Board action; and no Award shall be granted after such termination. Awards outstanding at the time of the Plan termination may
continue to be exercised, or become free of restrictions or payable, in accordance with their terms. 
  

 B-28Exhibit 10.35

 Exhibit 10.35 
  
 EMPLOYMENT AGREEMENT 
  
 This EMPLOYMENT AGREEMENT is entered into effective as of this
25th day of May, 2005, by and between Citizens South Banking Corporation, a Delaware corporation and sole owner of
Citizens South Bank, a federally chartered savings bank, and David C. McGuirt (the “Executive”). Citizens South Banking Corporation and Citizens South Bank are hereinafter sometimes referred to together or individually as
“Citizens South.” 
  
 WHEREAS, the Executive is the Chief Executive Officer of Trinity Bank, which pursuant to an agreement and plan of merger dated May 25, 2005, will merge with and into Citizens South Bank, with Citizens
South Bank the surviving entity; and 
  
 WHEREAS, Citizens South desires to assure itself of the continuity of management and desires to establish minimum severance benefits for certain of its officers and other key employees, including the
Executive, if a Change in Control (as defined herein) occurs, 
  
 WHEREAS, Citizens South wishes to ensure that officers and other key employees are not practically disabled from discharging their duties if a proposed or actual transaction involving a Change in Control
arises, 
  
 WHEREAS, Citizens
South desires to provide additional inducement for the Executive to remain in the employ of Citizens South as Executive Vice President, 
  
 WHEREAS, Citizens South and the Executive desire to set forth in this Employment Agreement the terms and conditions
of the Executive’s employment, and 
  
 WHEREAS, none of the conditions or events included in the definition of the term “golden parachute payment” that is set forth in Section 18(k)(4)(A)(ii) of the Federal Deposit Insurance Act [12
U.S.C. 1828(k)(4)(A)(ii)] and in Federal Deposit Insurance Corporation Rule 359.1(f)(1)(ii) [12 CFR 359.1(f)(1)(ii)] exists or, to the best knowledge of Citizens South, is contemplated insofar as Citizens South or any affiliates are concerned.

  
 NOW
THEREFORE, in consideration of these premises, the mutual covenants contained herein, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree
as follows. 
  
 ARTICLE 1 
 EMPLOYMENT 
  
 Citizens South Banking Corporation and Citizens South Bank hereby employ the Executive to serve as Executive Vice President according to the terms and
conditions of this Employment Agreement and for the period stated in Article 3. The Executive hereby accepts employment according to the terms and conditions of this Employment Agreement and for the period stated in Article 3. The Executive also
agrees to serve as an officer or director of any subsidiary or affiliate of Citizens South, if elected. For purposes of this Employment Agreement, the term “affiliate” means any entity that directly or indirectly through one
or more intermediaries controls, is controlled by, or is under common control with Citizens South Bank. 
  
 ARTICLE 2 
 DUTIES 
  
 The Executive shall serve under the direction of the President of Citizens
South Bank and in accordance with the Citizens South Banking Corporation’s Articles of Incorporation and Bylaws, as each may be amended or restated as well as in accordance with Citizens South Bank’s Charter and Bylaws, as each may be
amended or restated from time to time. The Executive shall report directly to the President of Citizens South Bank. He shall serve Citizens South faithfully, diligently, competently, and to the best of his ability, and he shall exclusively devote
his full time, energy, and 

 
attention to the business of Citizens South and to the promotion of Citizens South’s interests throughout the term of this Employment Agreement. Without
the written consent of the President of Citizens South Bank, the Executive shall not render services to or for any person, firm, corporation, or other entity or organization in exchange for compensation, regardless of the form in which such
compensation is paid and regardless of whether it is paid directly or indirectly to the Executive. Nothing in this Article 2 shall prevent the Executive from managing his personal investments and affairs, provided that doing so does not interfere
with the proper performance of his duties and responsibilities as Executive Vice President. 
  
 ARTICLE 3 
 TERM OF EMPLOYMENT

  
 The term of this Employment Agreement shall be for a
period of two years, commencing at the effective time of the Merger (“Effective Time”) 
  
 For one full year after expiration of the term of this Employment Agreement or termination of the Executive’s employment, the Executive shall furnish
information and assistance to Citizens South as may reasonably be required by Citizen South in any litigation in which Citizens South or any of subsidiary or affiliate is or may become a party, upon reasonable notice to the Executive. 
  
 ARTICLE 4 
 COMPENSATION AND OTHER BENEFITS 
  
 4.1 BASE SALARY. In
consideration of the Executive’s performance of his obligations under this Employment Agreement, Citizens South Banking Corporation shall pay or cause to be paid to the Executive a salary at the annual rate of not less than $151,594, payable in
semi-monthly installments. The Executive’s salary shall be reviewed annually by the Compensation Committee of Citizens South’s board of directors or by such other board committee as has jurisdiction over executive compensation. The
Executive’s salary may be increased at the discretion of the committee having jurisdiction over executive compensation. However, the Executive’s salary shall not be reduced. The Executive’s salary, as the same may be increased from
time to time, is referred to in this Employment Agreement as the “Base Salary.” Nothing in this Employment Agreement is intended to govern or restrict the kind or amount of compensation the Executive may receive in his
capacity as a director of Citizens South. 
  
 4.2
BENEFIT PLANS AND PERQUISITES. The Executive shall be entitled throughout the term of this Employment Agreement to participate in any and all officer or employee
compensation, bonus, incentive, and benefit plans in effect from time to time, including without limitation plans providing pension, medical, dental, disability, and group life benefits, including Citizens South’s 401(k) Plan, and to receive
any and all other fringe benefits provided from time to time, provided that the Executive satisfies the eligibility requirements for any such plans or benefits the Executive shall be entitled to reimbursement of all reasonable business expenses
incurred in performing his obligations under this Employment Agreement, including but not limited to all reasonable business travel and entertainment expenses incurred while acting at the request of or in the service of Citizens South and reasonable
expenses for attendance at annual and other periodic meetings of trade associations. 
  
 4.3 VACATION. The Executive shall be entitled to paid annual vacation and sick leave in accordance with the policies established from time to time by Citizens South. The Executive
shall not be entitled to any additional compensation for failure to use allotted vacation or sick leave, nor shall the Executive be entitled to accumulate unused sick leave from one year to the next unless authorized by Citizens South’s board
of directors to do so. Vacation days not used in a given year may not be carried over from one calendar year to the next. 
  
 4.4 INDEMNIFICATION AND INSURANCE. (a) Indemnification. Citizens South Banking
Corporation shall indemnify the Executive or cause the Executive to be indemnified with respect to his activities as a director, officer, employee, or agent of Citizens South Banking Corporation or Citizens South Bank or as a person who is serving
or has served at the request of Citizens South Banking Corporation (a “representative”) as a director, officer, employee, 

  

 2 

 
agent, or trustee of an affiliated corporation, joint venture trust or other enterprise, domestic or foreign, in which Citizens South Banking Corporation has
a direct or indirect ownership interest against expenses (including without limitation attorneys’ fees, judgments, fines, and amounts paid in settlement) actually and reasonably incurred by him (“Expenses”) in connection
with any claim against the Executive that is the subject of any threatened, pending, or completed action, suit, or other type of proceeding, whether civil, criminal, administrative, investigative, or otherwise and whether formal or informal (a
“Proceeding”), to which the Executive was, is, or is threatened to be made a party by reason of the Executive being or having been such a director, officer, employee, agent, or representative. 
  
 The indemnification provided herein shall not be exclusive of any other
indemnification or right to which the Executive may be entitled and shall continue after the Executive has ceased to occupy a position as an officer, director, employee, agent or representative with respect to Proceedings relating to or arising out
of the Executive’s acts or omissions during his service in such position. The benefits provided to the Executive under this Employment Agreement for the Executive’s service as a representative shall be payable if and only if and only to
the extent that reimbursement to the Executive by the affiliated entity with which the Executive has served as a representative, whether pursuant to agreement, applicable law, articles of incorporation or association, by-laws or regulations of the
entity, or insurance maintained by such affiliated entity, is insufficient to compensate the Executive for Expenses actually incurred and otherwise payable by Citizens South under this Employment Agreement. Any payments in fact made to or on behalf
of the Executive directly or indirectly by the affiliated entity with which the Executive served as a representative shall reduce the obligation of Citizens South hereunder. 
  
 (b) Exclusions. Anything herein to the contrary notwithstanding, however, nothing in this section 4.4 requires
indemnification, reimbursement, or payment by Citizens South Banking Corporation or Citizens South Bank, and the Executive shall not be entitled to demand indemnification, reimbursement or payment hereunder : 
  
 (1) if and to the extent indemnification, reimbursement, or
payment constitutes a “prohibited indemnification payment” within the meaning of Federal Deposit Insurance Corporation Rule 359.1(l)(1) [12 CFR 359.1(l)(1)], or 
  
 (2) for any claim or any part thereof as to which the Executive shall have been determined by a court of
competent jurisdiction, from which no appeal is or can be taken, by clear and convincing evidence, to have acted with deliberate intent to cause injury to Citizens South Banking Corporation or Citizens South Bank or with reckless disregard for the
best interests of Citizens South Banking Corporation, or 
  
 (3) for any claim or any part thereof arising under Section 16(b) of the Securities Exchange Act of 1934 as a result of which the Executive is required to pay any penalty, fine, settlement, or judgment, or 

 
 (4) for any obligation of the Executive based upon or
attributable to the Executive gaining in fact any personal gain, profit, or advantage to which he was not entitled, or 
  
 (5) any proceeding initiated by the Executive without the consent or authorization of Citizens South Banking Corporation’s board of
directors, but this exclusion shall not apply with respect to any claims brought by the Executive (a) to enforce his rights under this Employment Agreement, or (b) in any Proceeding initiated by another person or entity whether or not such claims
were brought by the Executive against a person or entity who was otherwise a party to such proceeding. 
  
 (c) Insurance. Citizens South Banking Corporation shall maintain or cause to be maintained liability insurance covering the Executive throughout
the term of this Employment Agreement. 
  

 3 

 ARTICLE 5 
 TERMINATION OF EMPLOYMENT 
  
 5.1 TERMINATION BY THE EMPLOYER. (a) Death or Disability. The
Executive’s employment shall terminate automatically on the date of the Executive’s death. If the Executive dies in active service to Citizens South, his estate, legal representatives, or named beneficiaries (as directed by Executive in
writing) shall for one year after the date of the Executive’s death be paid the Base Salary at the rate in effect at the time Executive’s death, and Citizens South shall continue to provide medical, dental, family, and other benefits
normally provided for an executive’s family for one year after the Executive’s death. 
  
 By delivery of written notice 30 days in advance to the Executive, Citizens South may terminate the Executive’s employment if the Executive is
disabled. For purposes of this Employment Agreement, the Executive shall be deemed to be “disabled” if an independent physician selected by Citizens South and reasonably acceptable to the Executive or his legal representative
determines that, because of illness or accident, the Executive is unable to perform his duties and will be unable to perform his duties for a period of 180 consecutive days. The Executive shall not be deemed to be disabled, however, if he returns to
work on a full-time basis within 30 days after Citizens South gives him notice of termination due to disability. If the Executive is terminated by either of Citizens South Banking Corporation or Citizens South Bank because of disability, his
employment with the other shall also terminate at the same time. 
  
 (b) Termination Without Cause. With written notice to the Executive 60 days in advance, Citizens South may terminate the Executive’s employment without Cause. If the Executive is terminated without Cause by either of Citizens
South Banking Corporation or Citizens South Bank, he shall be deemed also to have been terminated without Cause by the other. 
  
 (c) Termination with Cause. Effective on the date on which termination notice is given to the Executive and without the requirement of advance
notice to the Executive, Citizens South may terminate the Executive’s employment with Cause. If the Executive is terminated for Cause by either of Citizens South Banking Corporation or Citizens South Bank, he shall be deemed also to have been
terminated for Cause by the other. The Executive shall not be deemed to have been terminated for Cause under this Employment Agreement unless and until there is delivered to him a copy of a resolution duly adopted at a meeting of the board of
directors called and held for such purpose, which resolution shall (1) contain findings that, in the good faith opinion of the board, the Executive has committed an act constituting Cause, and (2) specify the particulars thereof. The resolution
shall be deemed to have been duly adopted if and only if it is adopted by the affirmative vote of at least 75% of the directors of Citizens South Banking Corporation then in office or 75% of the directors of Citizens South Bank then in office, in
either case excluding the Executive, at a meeting duly called and held for that purpose. Notice of the meeting and the proposed termination for Cause shall be given to the Executive a reasonable amount of time before the board’s meeting. The
Executive and his counsel (if the Executive chooses to have counsel present) shall have a reasonable opportunity to be heard by the board at the meeting. Nothing in this Employment Agreement limits the Executive’s or his beneficiaries’
right to contest the validity or propriety of the board’s determination of Cause. 
  
 (d) Definition of Cause. For purposes of this Employment Agreement, “Cause” means any of the following : 
  
 (1) an intentional act of fraud, embezzlement, or theft by the Executive in the course of his employment with Citizens South
Banking Corporation or Citizens South Bank. For purposes of this Employment Agreement, no act or failure to act on the part of the Executive shall be deemed to have been intentional if it was due primarily to an error in judgment or negligence. An
act or failure to act on the Executive’s part shall be considered intentional if it is not in good faith and if it is without a reasonable belief that the action or failure to act is in the best interests of Citizens South, or 
  

 4 

 (2) intentional violation of any law or significant policy of Citizens South Banking Corporation or
Citizens South Bank committed in connection with the Executive’s employment, which, in Citizens South Banking Corporation’s or Citizens South Bank’s sole judgment, has an adverse effect on Citizens South Banking Corporation or
Citizens South Bank, or 
  
 (3) the Executive’s gross
negligence or gross neglect of duties in the performance of his duties as an officer of Citizens South Banking Corporation or Citizens South Bank, or 
  
 (4) intentional wrongful damage by the Executive to the business or property of Citizens South Banking Corporation or Citizens South Bank, including
without limitation the reputation of Citizens South Banking Corporation or Citizens South Bank, which in Citizens South’s sole judgment causes material harm to Citizens South Banking Corporation or Citizens South Bank, or 
  
 (5) a breach by the Executive of his fiduciary duties to Citizens South
Banking Corporation and its stockholders or misconduct involving dishonesty, in either case whether in his capacity as an officer or as a director of Citizens South Banking Corporation or Citizens South Bank, or 
  
 (6) a breach by the Executive of this Employment Agreement that, in the sole
judgment of Citizens South Banking Corporation or Citizens South Bank, is a material breach of this Agreement, which breach is not corrected by the Executive within 10 days after receiving written notice of the breach, or 
  
 (7) conviction of the Executive for or plea of nolo contendere to a
felony or conviction of or plea of nolo contendere to a misdemeanor involving moral turpitude, or the actual incarceration of the Executive for 45 consecutive days or more. 
  
 5.2 TERMINATION BY THE EXECUTIVE. The
Executive may terminate his employment with written notice to Citizens South Banking Corporation 60 days in advance, whether with or without Good Reason. If the Executive terminates with Good Reason, the termination will take effect at the
conclusion of the 60-day period unless the event or circumstance constituting Good Reason is cured by Citizens South or unless the notice of termination for Good Reason is revoked by the Executive within the 60-day period. For purposes of this
Agreement, “Good Reason” means any of the following events occur: 
  
 (a) Reduced Base Salary: involuntary reduction of the Executive’s Base Salary, 
  
 (b) Participation in Benefit Plans Reduced or Terminated: involuntary reduction of the Executive’s bonus, incentive, and other compensation
award opportunities under Citizens South Banking Corporation’s benefit plans and Citizens South Bank’s benefit plans, unless in the case of either company a company-wide reduction of all officers’ award opportunities occurs
simultaneously, or involuntary termination of the Executive’s participation in any officer or employee benefit plan maintained by Citizens South Banking Corporation or by Citizens South Bank, unless the plan is terminated because of changes in
law or loss of tax deductibility to Citizens South with respect to contributions to the plan, or unless the plan is terminated as a matter of Citizens South Banking Corporation policy or Citizens South Bank policy applied equally to all participants
in the plan, 
  
 (c) Reduced Responsibilities or Status:
assignment to the Executive of duties that are materially inconsistent with the Executive’s position as Citizens South Banking Corporation’s principal executive officer or that represent a reduction of his authority, 
  
 (d) Failure to Obtain Assumption Agreement: failure to obtain an
assumption of Citizens South’s obligations under this Employment Agreement by any successor to Citizens South Banking Corporation, regardless of whether such entity becomes a successor to Citizens South Banking Corporation as a result of a
merger, consolidation, sale of assets, or other form of reorganization, 
  

 5 

 (e) Material Breach: a material breach of this Employment Agreement by Citizens South that is not
corrected within a reasonable time, or 
  
 (f) Relocation of
the Executive: relocation of Citizens South Banking Corporation’s principal executive offices, or requiring the Executive to change his principal work location, to any location that is more than 15 miles from the location at which Executive
is employed on the effective date of this Employment Agreement. 
  
 5.3 NOTICE. Any purported termination by Citizens South or by the Executive shall be communicated by written notice of termination to the other. The notice must state the specific termination provision
of this Employment Agreement relied upon. The notice must also state the date on which termination shall become effective, which shall be a date not earlier than the date of the termination notice. If termination is for Cause or with Good Reason,
the notice must state in reasonable detail the facts and circumstances forming the basis for termination of the Executive’s employment. 
  
 ARTICLE 6 
 COMPENSATION AND BENEFITS AFTER TERMINATION 
  
 6.1 CAUSE. If the Executive’s employment terminates for Cause, the Executive shall receive the salary to which
he was entitled through the date on which termination became effective and any other benefits that may be available to him under Citizens South’s benefit plans and policies in effect on the date of termination. 
  
 6.2 TERMINATION BY THE
EXECUTIVE OTHER THAN FOR GOOD REASON. If the Executive terminates employment other than for Good Reason, the Executive shall receive the
salary to which he is entitled through the date on which his termination becomes effective and any other benefits that may be available to him under Citizens South’s benefit plans and policies. 
  
 6.3 CONTINUED BASE SALARY
IN THE CASE OF TERMINATION BECAUSE OF DISABILITY. If the Executive’s employment terminates because of
disability, the Executive shall continue to receive his Base Salary for the remaining term of this Employment Agreement or for one year, whichever is longer. Amounts actually paid to the Executive under any disability insurance or other similar such
program that Citizens South provides on behalf of employees or under any workman’s or social security disability program shall reduce by a like amount the compensation to be paid to the Executive under this Section 6.3. 
  
 6.4 TERMINATION WITHOUT CAUSE
AND TERMINATION FOR GOOD REASON. (a) If Citizens South terminates the Executive’s employment without Cause or if the Executive terminates employment
for Good Reason, the Executive shall continue to receive the Base Salary for the unexpired term of this Employment Agreement, but he shall not be entitled to continued participation in Citizens South’s or a subsidiary’s 401(k) retirement
plan or any stock-based plans. Payments of Base Salary under this Section 6.4(a) shall not be reduced or offset by any other compensation the Executive receives through other employment after termination of his employment with Citizens South. If
Citizens South Bank is not in compliance with its minimum capital requirements or if payments under this Section 6.4(a) would cause Citizens South Bank’s capital to be reduced below minimum capital requirements, payments under this Section
6.4(a) shall be deferred until such time as Citizens South Bank is in capital compliance. The provisions of this Section 6.4 are subject to Article 9 of this Employment Agreement. 
  
 Citizens South and the Executive acknowledge and agree that the compensation and benefits under this Section 6.4 shall not
be payable if compensation and benefits are payable or shall have been previously paid to the Executive under Article 7 of this Agreement. That is, the parties acknowledge and agree that the Executive shall not be entitled to duplicative
compensation and benefit payments under this Section 6.4 and under Article 7 if the Executive’s employment is terminated without Cause or if the Executive terminates employment with Good Reason. 
  
 (b) Cash-out of the Executive’s 401(k) Retirement Plan Account. If
Citizens South terminates the Executive’s employment without Cause or if the Executive terminates employment with Good Reason before full vesting of the amounts credited to his account as a result of matching or discretionary contributions by
Citizens South under Citizens 

  

 6 

 
South’s 401(k) Plan, the Executive shall be entitled to receive from Citizens South an amount in cash equal to the value of any unvested contributions
as of the effective date of termination. 
  
 6.5
POST-TERMINATION LIFE AND MEDICAL COVERAGE. If the Executive’s employment terminates involuntarily but without Cause, or voluntarily
but with Good Reason, or because of disability, until expiration of the remaining term of this Employment Agreement Citizens South shall continue or cause to be continued at Citizens South’s expense life, medical, dental, and disability
coverage substantially identical to the coverage maintained by the Bank for Executive prior to his termination; provided, however, that such benefits shall not be provided if they would constitute an unsafe or unsound banking practice
relating to executive compensation and employment contracts according to 12 CFR 563.39 and 12 CFR 563.161, as in effect currently or as in effect hereafter. 
  
 ARTICLE 7 
 CHANGE IN CONTROL BENEFITS 
  
 7.1 CHANGE IN CONTROL TERMINATION BENEFITS. (a)
Termination of Executive Within One Year After a Change in Control. If a Change in Control occurs during the term of this Employment Agreement, the Executive shall be entitled to the lump sum payment specified in paragraph (b) below if the
Executive’s employment is involuntarily terminated without Cause within 12 months after the Change in Control or if the Executive terminates his employment with Good Reason within 12 months after the Change in Control. If the Executive is
removed from office or if his employment terminates before a Change in Control occurs but after discussions with a third party regarding a Change in Control commence, and if those discussions ultimately conclude with a Change in Control, then for
purposes of this Employment Agreement the removal of the Executive or termination of his employment shall be deemed to have occurred after the Change in Control. The Executive’s rights under this Section 7.1 and under Section 7.4 are subject to
Article 9 of this Employment Agreement. 
  
 (b) Lump Sum
Payment: Citizens South shall make or cause to be made a lump-sum payment to the Executive in an amount in cash equal to the Executive’s Base Salary for the remainder of the term of this Employment Agreement (if Section 409A of the Internal
Revenue Code applies, such lump-sum payment will be made no earlier than the seventh month following the termination of executive’s employment). The amount payable to the Executive hereunder shall not be reduced to account for the time value of
money or discounted to present value. The payment required under this paragraph (b) is payable no later than five business days after the Executive’s employment terminates. 
  
 (c) Benefit Plans: In addition to life, medical, dental, and disability coverage under Section 6.5 of this Employment
Agreement and any benefits to which the Executive may be entitled under the Salary Continuation Agreement referred to in Section 6.6 of this Employment Agreement, if the Executive’s employment is terminated by Citizens South without Cause
within 12 months after a Change in Control or if the Executive terminates his employment with Good Reason within 12 months after a Change in Control, Citizens South shall (1) cause the Executive to become fully vested in any non-qualified plans,
programs, or arrangements in which the Executive participated if the plan, program, or arrangement does not address the effect of a change in control, and (2) contribute or cause to be contributed to the Executive’s 401(k) plan account the
matching and profit-sharing contributions, if any, that would have been made had the Executive’s employment not terminated before the end of the plan year, to the extent permitted by applicable law. 
  
 7.2 DEFINITION OF CHANGE
IN CONTROL. For purposes of this Employment Agreement, “Change in Control” means any one of the following events occurs : 
  
 (a) Merger: Citizens South Banking Corporation merges into or
consolidates with another corporation, or merges another corporation into Citizens South Banking Corporation, and as a result less than a majority of the combined voting power of the resulting corporation immediately after the merger or
consolidation is held by persons who were holders of Citizens South Banking Corporation’s voting securities immediately before the merger or consolidation. For purposes of this Employment Agreement, the term “person”
means an individual, corporation, 

  

 7 

 
partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated organization, or other entity, 
  
 (b) Acquisition of Significant Share Ownership: after the date of this
Employment Agreement a report on Schedule 13D, Schedule TO, or another form or schedule (other than Schedule 13G) is filed or is required to be filed under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if the schedule discloses
that the filing person or persons acting in concert has or have become the beneficial owner of 25% or more of the combined voting power of Citizens South Banking Corporation’s voting securities outstanding (but this paragraph (b) shall not
apply to beneficial ownership of voting shares held by Citizens South Bank in a fiduciary capacity or beneficial ownership of voting shares held by an employee benefit plan of Citizens South Bank), 
  
 (c) Change in Board Composition: during any period of two consecutive
years, individuals who constitute Citizens South Banking Corporation’s board of directors at the beginning of the two-year period cease for any reason to constitute at least a majority thereof; provided, however, that : for purposes of
this paragraph (c) : each director who is first elected by the board (or first nominated by the board for election by stockholders) by a vote of at least two-thirds (b) of the directors who were directors at the beginning of the period shall be
deemed to have been a director at the beginning of the two-year period, or 
  
 (d) Sale of Assets: Citizens South Banking Corporation sells to a third party all or substantially all of Citizens South Banking Corporation’s assets. For this purpose, sale of all or substantially all of
Citizens South Banking Corporation’s assets includes sale of Citizens South Bank alone. 
  
 7.3 NO MULTIPLE SEVERANCE PAYMENTS. If the Executive receives payment under Section 7.1 he shall not be entitled to any additional
severance benefits under Section 6.4 of this Employment Agreement. 
  
 ARTICLE 8 
 MISCELLANEOUS 
  
 8.1 SUCCESSORS AND ASSIGNS. (a) This Employment
Agreement Is Binding on Citizens South’s Successors. This Employment Agreement shall be binding upon Citizens South Banking Corporation and any successor to Citizens South Banking Corporation, including any persons acquiring directly
or indirectly all or substantially all of the business or assets of Citizens South Banking Corporation by purchase, merger, consolidation, reorganization, or otherwise. Any such successor shall thereafter be deemed to be “Citizens South Banking
Corporation” for purposes of this Employment Agreement. But this Employment Agreement and Citizens South’s obligations under this Employment Agreement are not otherwise assignable, transferable, or delegable by Citizens South. By agreement
in form and substance satisfactory to the Executive, Citizens South Banking Corporation shall require any successor to all or substantially all of the business or assets of Citizens South Banking Corporation expressly to assume and agree to perform
this Employment Agreement in the same manner and to the same extent Citizens South would be required to perform if no such succession had occurred. 
  
 (b) This Employment Agreement Is Enforceable by the Executive and His Heirs. This Employment Agreement will enure to the benefit of and be
enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, and legatees. 
  
 (c) This Employment Agreement Is Personal in Nature and Is Not Assignable. This Employment Agreement is personal in nature. Without written consent
of the other parties, no party shall assign, transfer, or delegate this Employment Agreement or any rights or obligations under this Employment Agreement, except as expressly provided herein. Without limiting the generality or effect of the
foregoing, the Executive’s right to receive payments hereunder is not assignable or transferable, whether by pledge, creation of a security interest, or otherwise, except for a transfer by the Executive’s will or by the laws of descent and
distribution. If the Executive attempts an assignment or transfer that is contrary to this Section 8.1, Citizens South shall have no liability to pay any amount to the assignee or transferee. 
  

 8 

 8.2 GOVERNING LAW, JURISDICTION AND
FORUM. This Employment Agreement shall be construed under and governed by the internal laws of the State of North Carolina, without giving effect to any conflict of laws provision or rule (whether of the State of
North Carolina or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of North Carolina. By entering into this Employment Agreement, the Executive acknowledges that he is subject to the
jurisdiction of both the federal and state courts in the State of North Carolina. Any actions or proceedings instituted under this Employment Agreement shall be brought and tried solely in courts located in Gaston County, North Carolina or in the
federal court having jurisdiction in Gastonia, North Carolina. The Executive expressly waives his rights to have any such actions or proceedings brought or tried elsewhere. 
  
 8.3 ENTIRE AGREEMENT. This Employment Agreement sets forth the entire
agreement of the parties concerning the employment of the Executive by Citizens South, and any oral or written statements, representations, agreements, or understandings made or entered into prior to or contemporaneously with the execution of this
Employment Agreement, are hereby rescinded, revoked, and rendered null and void by the parties. 
  
 8.4 NOTICES. Any notice under this Employment Agreement shall be deemed to have been effectively made or given if in
writing and personally delivered, delivered by mail properly addressed in a sealed envelope, postage prepaid by certified or registered mail, delivered by a reputable overnight delivery service, or sent by facsimile. Unless otherwise changed by
notice, notice shall be properly addressed to the Executive if addressed to the address of the Executive on the books and records of Citizens South Banking Corporation at the time of the delivery of such notice, and properly addressed to Citizens
South Banking Corporation if addressed to Citizens South Banking Corporation at 519 South New Hope Road, Gastonia, North Carolina 28054-4040, Attention: Corporate Secretary. 
  
 8.5 SEVERABILITY. In the case of conflict between any provision of this Employment
Agreement and any statute, regulation, or judicial precedent, the latter shall prevail, but the affected provisions of this Employment Agreement shall be curtailed and limited solely to the extent necessary to bring them within the requirements of
law. If any provision of this Employment Agreement is held by a court of competent jurisdiction to be indefinite, invalid, void or voidable, or otherwise unenforceable, the balance of this Employment Agreement shall continue in full force and effect
unless such construction would clearly be contrary to the intentions of the parties or would result in an injustice. 
  
 8.6 CAPTIONS AND COUNTERPARTS. The captions in this Employment Agreement are solely for
convenience. The captions in no way define, limit, or describe the scope or intent of this Employment Agreement. This Employment Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument. 
  
 8.7
NO DUTY TO MITIGATE. Citizens South hereby acknowledges that it will be difficult and could be impossible (a) for the Executive to find reasonably comparable employment
after his employment terminates, and (b) to measure the amount of damages the Executive may suffer as a result of termination. Additionally, Citizens South acknowledges that its general severance pay plans do not provide for mitigation, offset, or
reduction of any severance payment received thereunder. Accordingly, Citizens South further acknowledges that the payment of severance and termination benefits under this Employment Agreement is reasonable and shall be liquidated damages. The
Executive shall not be required to mitigate the amount of any payment provided for in this Employment Agreement by seeking other employment. Moreover, the amount of any payment provided for in this Employment Agreement shall not be reduced by any
compensation earned or benefits provided as the result of employment of the Executive or as a result of the Executive being self-employed after termination of his employment. 
  
 8.8 AMENDMENT AND WAIVER. This Employment Agreement may
not be amended, released, discharged, abandoned, changed, or modified in any manner, except by an instrument in writing signed by each of the parties hereto. The failure of any party hereto to enforce at any time any of the provisions of this
Employment Agreement shall in no way be construed to be a waiver of any such provision, nor in any way to affect the validity of this Employment Agreement or any part thereof or the right of any party thereafter to enforce each and every such
provision. No waiver or any breach of this Employment Agreement shall be held to be a waiver of any other or subsequent breach. 
  

 9 

 8.9 PAYMENT OF LEGAL
FEES. Citizens South is aware that after a Change in Control management could cause or attempt to cause Citizens South to refuse to comply with its obligations under this Employment Agreement, or could institute or
cause or attempt to cause Citizens South to institute litigation seeking to have this Employment Agreement declared unenforceable, or could take or attempt to take other action to deny Executive the benefits intended under this Employment Agreement.
In these circumstances, the purpose of this Employment Agreement would be frustrated. It is Citizens South’s intention that the Executive not be required to incur the expenses associated with the enforcement of his rights under this Employment
Agreement, whether by litigation or other legal action, because the cost and expense thereof would substantially detract from the benefits intended to be granted to the Executive hereunder. It is Citizens South’s intention that the Executive
not be forced to negotiate settlement of his rights under this Employment Agreement under threat of incurring expenses. Accordingly, if after a Change in Control occurs it appears to the Executive that (a) Citizens South has failed to comply with
any of its obligations under this Employment Agreement, or (b) Citizens South or any other person has taken any action to declare this Employment Agreement void or unenforceable, or instituted any litigation or other legal action designed to deny,
diminish, or to recover from the Executive the benefits intended to be provided to the Executive hereunder, Citizens South irrevocably authorizes the Executive from time to time to retain counsel of his choice, at Citizens South’s expense as
provided in this Section 8.9, to represent the Executive in connection with the initiation or defense of any litigation or other legal action, whether by or against Citizens South or any director, officer, stockholder, or other person affiliated
with Citizens South, in any jurisdiction. Notwithstanding any existing or previous attorney-client relationship between Citizens South and any counsel chosen by the Executive under this Section 8.9, Citizens South irrevocably consents to the
Executive entering into an attorney-client relationship with that counsel, and Citizens South and the Executive agree that a confidential relationship shall exist between the Executive and that counsel. The fees and expenses of counsel selected from
time to time by the Executive as provided in this section shall be paid or reimbursed to the Executive by Citizens South on a regular, periodic basis upon presentation by the Executive of a statement or statements prepared by such counsel in
accordance with such counsel’s customary practices, up to a maximum aggregate amount of $500,000. Citizens South’s obligation to pay the Executive’s legal fees provided by this Section 8.9 operates separately from and in addition to
any legal fee reimbursement obligation Citizens South Banking Corporation or Citizens South Bank may have with the Executive under any separate severance or other agreement. 
  
 ARTICLE 9 
 REQUIRED PROVISIONS 
  
 9.1 CITIZENS SOUTH’S RIGHT TO TERMINATE THE EXECUTIVE’S
EMPLOYMENT. Citizens South’s board of directors may terminate the Executive’s employment at any time, but any termination by the board of directors, other than termination for Cause, shall not prejudice
the Executive’s right to compensation or other benefits under this Employment Agreement. The Executive shall not have the right to receive compensation or other benefits for any period after termination for Cause. 
  
 9.2 SUSPENSION OF
CITIZENS’S SOUTH OBLIGATIONS IF THE EXECUTIVE IS SUSPENDED. If the Executive is suspended
from office or temporarily prohibited from participating in Citizens South Bank’s affairs by a notice served under section 8(e)(3) (12 U.S.C. 1818(e)(3)) or 8(g) (12 U.S.C. 1818(g)) of the Federal Deposit Insurance Act, Citizens South’s
obligations under this Employment Agreement shall be suspended as of the date of service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, Citizens South may in its discretion (1) pay the Executive all or part of
the compensation withheld while Citizens South’s obligations were suspended and (2) reinstate in whole or in part any of the obligations that were suspended. 
  
 9.3 TERMINATION OF CITIZENS SOUTH’S
OBLIGATIONS IF THE EXECUTIVE IS REMOVED. If the Executive is removed or permanently prohibited from participating in Citizens South
Bank’s affairs by an order issued under section 8(e) (12 U.S.C. 1818(e)) or 8(g) (12 U.S.C. 1818(g)) of the Federal Deposit Insurance Act, all obligations of Citizens South under this Employment Agreement shall terminate as of the effective
date of the order, but vested rights of the parties shall not be affected. 
  

 10 

 9.4 TERMINATION IF CITIZENS SOUTH
BANK IS IN DEFAULT. If Citizens South Bank is in default as defined in section 3(x) (12 U.S.C. 1813(x)(1)) of the Federal Deposit Insurance Act, all obligations of
Citizens South under this Employment Agreement shall terminate as of the date of default, but this paragraph (d) shall not affect any vested rights of the parties. 
  
 9.5 TERMINATION ASSOCIATED WITH REGULATORY
ACTION. All obligations of Citizens South under this Employment Agreement shall terminate, except to the extent determined that continuation of the contract is necessary for the continued operation of the
institution, (1) by the Director of the Office of Thrift Supervision or the Director’s designee, when the Federal Deposit Insurance Corporation enters into an agreement to provide assistance to or on behalf of Citizens South Bank under the
authority contained in section 13(c) of the Federal Deposit Insurance Act (12 USC 1823(c)), or (2) by the Director or the Director’s designee when the OTS approves a supervisory merger to resolve problems related to the operations of Citizens
South Bank or when Citizens South Bank is determined by the OTS or by the FDIC to be in an unsafe or unsound condition. Vested rights of the parties shall not be affected, however. 
  
 9.6 PAYMENTS ARE SUBJECT TO COMPLIANCE
WITH 12 USC 1828(k). Any payments made to the Executive under this Employment Agreement or otherwise are subject to and conditioned upon their compliance with section 18(k) of the Federal Deposit Insurance Act (12
USC 1828(k)) and any regulations promulgated thereunder. 
  

 11 

 IN WITNESS WHEREOF, the parties have
executed this Employment Agreement as of the date first written above. 
  

									
	WITNESSES	 	 	 	CITIZENS SOUTH BANKING CORPORATION
				
	 /s/ Anellia S. Windt
	 	 	 	By:	 	 /s/ Kim S. Price

				
	 	 	 	 	 Its:
	 	 President / CEO

  

									
	WITNESSES	 	 	 	CITIZENS SOUTH BANK
				
	 /s/ Anellia S. Windt
	 	 	 	By:	 	 /s/ Kim S. Price

				
	 	 	 	 	 Its:
	 	 President / CEO

  

									
	WITNESSES	 	 	 	EXECUTIVE
			
	 /s/ Pam P. Sanders
	 	 	 	 /s/ David C. McGuirt

  

					
	 County of Gaston
	  	 )
	 	 
	 	  	)	 	 ss:

	 State of North Carolina
	  	)	 	 

  
 Before me this
25th day of May, 2005, personally appeared the above named Pam P. Sanders and David C. McGuirt, who acknowledged
that they did sign the foregoing instrument and that the same was their free act and deed. 
  

					
	 	 	 	 	 /s/ Lynn H. Boyles

	 (Notary Seal)
	 	 	 	 Notary Public

			
	  	 	 	 	 My Commission Expires: June 28, 2008

  

 12

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00090-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00090-of-00352.parquet"}]]