Document:

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                                                                   EXHIBIT 10.12

                    AGREEMENT AS TO EXPENSES AND LIABILITIES

     This Agreement as to Expenses and Liabilities (the "Agreement"), dated as
of November 10, 2003, is between Southern Community Financial Corporation, a
North Carolina corporation (the "Company"), and Southern Community Capital Trust
II, a Delaware statutory trust (the "Trust").

     WHEREAS, the Trust intends to issue common securities (the "Common
Securities") to, and receive 7.95% Deferrable Interest Junior Subordinated
Debentures due December 31, 2033 (the "Debentures") from, the Company and to
issue and sell the 7.95% Cumulative Trust Preferred Securities (the "Preferred
Securities") with such powers, preferences and special rights and restrictions
as are set forth in the Amended and Restated Trust Agreement of the Trust dated
as of November 10, 2003, as the same may be amended from time to time (the
"Trust Agreement"); and

     WHEREAS, the Company will directly or indirectly own all of the Common
Securities of the Trust and will issue the Debentures.

     NOW, THEREFORE, in consideration of the purchase by each holder of the
Preferred Securities, which purchase the Company hereby agrees shall benefit the
Company and which purchase the Company acknowledges will be made in reliance
upon the execution and delivery of this Agreement, the Company, including in its
capacity as holder of the Common Securities, and the Trust hereby agree as
follows:

                                    ARTICLE I

     SECTION 1.01. GUARANTEE BY THE COMPANY. Subject to the terms and conditions
hereof, the Company, including in its capacity as holder of the Common
Securities, hereby irrevocably and unconditionally guarantees to each person or
entity to whom the Trust is now or hereafter becomes indebted or liable (the
"Beneficiaries") the full payment, when and as due, of any and all Obligations
(as hereinafter defined) to such Beneficiaries. As used herein, "Obligations"
means any costs, expenses or liabilities of the Trust other than obligations of
the Trust to pay to holders of any Preferred Securities or other similar
interests in the Trust the amounts due such holders pursuant to the terms of the
Preferred Securities or such other similar interests, as the case may be. This
Agreement is intended to be for the benefit of, and to be enforceable by, all
such Beneficiaries, whether or not such Beneficiaries have received notice
hereof.

     SECTION 1.02. TERM OF AGREEMENT. This Agreement shall terminate and be of
no further force and effect upon the later of: (a) the date on which full
payment has been made of all amounts payable to all holders of all the Preferred
Securities (whether upon redemption, liquidation, exchange or otherwise); or (b)
the date on which there are no Beneficiaries remaining; provided, however, that
this Agreement shall continue to be effective or shall be reinstated, as the
case may be, if at any time any holder of Preferred Securities or any
Beneficiary must restore payment of any sums paid under the Preferred
Securities, under any Obligation, under the Preferred Securities Guarantee
Agreement dated the date hereof by the

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Company and Property Trustee as Guarantee Trustee (as defined in the Preferred
Securities Guarantee Agreement) or under this Agreement, for any reason
whatsoever. This Agreement is continuing, irrevocable, unconditional and
absolute.

     SECTION 1.03. WAIVER OF NOTICE. The Company hereby waives notice of
acceptance of this Agreement and of any Obligation to which it applies or may
apply, and the Company hereby waives presentment, demand for payment, protest,
notice of nonpayment, notice of dishonor, notice of redemption and all other
notices and demands.

     SECTION 1.04. NO IMPAIRMENT. The obligations, covenants, agreements and
duties of the Company under this Agreement shall in no way be affected or
impaired by reason of the happening from time to time of any of the following:

          (a) the extension of time for the payment by the Trust of all or any
     portion of the Obligations or for the performance of any other obligation
     under, arising out of, or in connection with, the Obligations;

          (b) any failure, omission, delay or lack of diligence on the part of
     the Beneficiaries to enforce, assert or exercise any right, privilege,
     power or remedy conferred on the Beneficiaries with respect to the
     Obligations or any action on the part of the Trust granting indulgence or
     extension of any kind; or

          (c) the voluntary or involuntary liquidation, dissolution, sale of any
     collateral, receivership, insolvency, bankruptcy, assignment for the
     benefit of creditors, reorganization, arrangement, composition or
     readjustment of debt of, or other similar proceedings affecting, the Trust
     or any of the assets of the Trust. The Beneficiaries shall not be obligated
     to give notice to, or obtain the consent of, the Company with respect to
     the happening of any of the foregoing.

     SECTION 1.05. ENFORCEMENT. A Beneficiary may enforce this Agreement
directly against the Company, and the Company waives any right or remedy to
require that any action be brought against the Trust or any other person or
entity before proceeding against the Company.

                                   ARTICLE II

     SECTION 2.01. BINDING EFFECT. All guarantees and agreements contained in
this Agreement shall bind the successors, assigns, receivers, trustees and
representatives of the Company and shall inure to the benefit of the
Beneficiaries.

     SECTION 2.02. AMENDMENT. So long as there remains any Beneficiary or any
Preferred Securities outstanding, this Agreement shall not be modified or
amended in any manner adverse to such Beneficiary or to the holders of the
Preferred Securities.

     SECTION 2.03. NOTICES. Any notice, request or other communication required
or permitted to be given hereunder shall be given in writing by delivering the
same by facsimile

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transmission (confirmed by mail) or by registered or certified mail, addressed
as follows (and if so given, shall be deemed given when mailed):

                             Southern Community Capital Trust II
                             c/o Wilmington Trust Company
                             Rodney Square North
                             1100 North Market Street
                             Attention:  Corporate Trust Services

                             Southern Community Financial Corporation
                             4605 Country Club Road
                             Winston-Salem, NC 27012
                             Attention:  Richard Cobb

     SECTION 2.04. GOVERNING LAW. This Agreement shall be governed by and
construed and interpreted in accordance with the laws of the State of North
Carolina (without regard to conflict of laws principles).

     THIS AGREEMENT is executed as of the day and year first above written.

                            SOUTHERN COMMUNITY FINANCIAL CORPORATION

                             By:      /s/ F. Scott Bauer
                                ----------------------------------
                               F. Scott Bauer
                               President, Chief Executive Officer and
                               Chairman of the Board of Directors

                             SOUTHERN COMMUNITY CAPITAL TRUST II

                                 /s/ F. Scott Bauer
                             ----------------------------------------
                             Name: F. Scott Bauer
                             Title: As Administrative Trustee

                                 /s/ Richard M. Cobb
                             ---------------------------------------
                               Name: Richard Cobb
                               Title: As Administrative Trustee

                                 /s/ Jeff T. Clark
                             ----------------------------------------
                               Name: Jeff T. Clark
                               Title: As Administrative Trustee<PAGE>
                                                                   EXHIBIT 10.13

                    SOUTHERN COMMUNITY FINANCIAL CORPORATION
                        2002 EMPLOYEE STOCK PURCHASE PLAN

         1. DEFINITIONS. In this Plan, except where the context otherwise
indicates, the following definitions apply:

                  1.1. "Account" means a bookkeeping account established and
maintained hereunder by the Administrator or its designee in the name of each
Participant. The term "Account" shall not include a Brokerage Account.

                  1.2. "Administrator" means the Compensation Committee of the
Board of the Corporation.

                  1.3. "Affiliate" means a parent or subsidiary corporation of
the Corporation, as defined in Code Sections 424(e) and (f) (but substituting
"the Corporation" for "employer corporation"), including parents or subsidiaries
of the Corporation that become such after adoption of the Plan.

                  1.4. "Board" means the Board of Directors of the Corporation.

                  1.5. "Brokerage Account" means an account established and
maintained by a broker-dealer or financial institution in the name of each
Participant to which shall be transferred Shares purchased hereunder on behalf
of such Participant. In addition, the Administrator may transfer cash to a
Participant's Brokerage Account in the event a cash refund is owed to such
Participant under any provision of the Plan.

                  1.6. "Business Day" means any day other than a Saturday,
Sunday or legal holiday in Winston Salem, North Carolina, except as otherwise
determined by the Administrator.

                  1.7. "Code" means the Internal Revenue Code of 1986, as
amended.

                  1.8. "Common Stock" means the common stock of the Corporation.

                  1.9. "Compensation" means base cash compensation received by
an Employee from the Corporation or its Designated Affiliate. By way of
illustration, but not limitation, Compensation includes regular compensation
such as salary and commissions, but excludes overtime, bonuses, relocation
payments or reimbursements, expense reimbursements, tuition or other
reimbursements, automobile allowances, housing allowances, cash payments in lieu
of sick or vacation time benefits and income realized as a result of
participation in any stock option, stock purchase, or similar plan of the
Corporation or its Designated Affiliate.

                  1.10. "Corporation" means Southern Community Financial
Corporation, a North Carolina corporation, and any successor thereto.

                  1.11. "Designated Affiliate" means any Affiliate that has
been designated by the Board or the Administrator as eligible to participate in
the Plan.

                  1.12. "Employee" means any person, including an Officer, who
is customarily employed for at least twenty (20) hours per week and more than
five (5) months in a calendar year by the Corporation or one of its Designated
Subsidiaries. The status of an individual as an Employee shall not be affected
by a leave of absence from employment with the Corporation or a Designated
Affiliate, as the case may be, provided that such leave is for a period of not
more than 90 days or reemployment upon the expiration of such leave is
guaranteed by contract, policy, or statute.

                  1.13. "Enrollment Form" means the form prescribed by the
Administrator (or its designee) that shall be (a) completed and executed by an
Employee (through written, telephonic, or electronic means, or through other
means of communication) who elects to participate in the Plan, and (b) filed
(through written, telephonic, or electronic means, or through other means of
communication) with the Administrator (or its designee).

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                  1.14. "Exercise Date" means May 31 of each Plan Year and/or
such other date(s) as may be specified by the Administrator; provided, however,
that, if any Exercise Date shall not be a Business Day in any Plan Year, then
for purposes of that Plan Year such Exercise Date shall be the first Business
Day following such Exercise Date.

                  1.15. "Fair Market Value" means, unless otherwise determined
by the Administrator, an amount equal to the regular closing price (not taking
into account extended trading sessions) for a Share on a given date on the
NASDAQ National Market System, or, if such price is not reported, the mean of
the bid and asked prices per share of the Common Stock as reported by NASDAQ or,
in the event the Common Stock is listed on a stock exchange, the Fair Market
Value per share shall be the closing sales price on such exchange on such date
(or, in the event that the Common Stock is not traded on such date, on the
immediately preceding trading date), as reported in The Wall Street Journal. If
such price quotations of the Common Stock are not then reported, then the fair
market value of a Share, as determined by the Administrator, pursuant to a
reasonable method adopted in good faith for such purpose.

                  1.16. "Notice" means a notice provided by an Employee to the
Administrator (or its designee) in such form (which may be written, telephonic,
electronic, or other means of communication) as may be specified by the
Administrator (or its designee).

                  1.17. "Offering Date" means June 1 of each Plan Year and/or
such other date(s) as may be specified by the Administrator; provided, however,
that, if any Offering Date shall not be a Business Day in any Plan Year, then
for purposes of that Plan Year such Offering Date shall be the first Business
Day following such Offering Date.

                  1.18. "Option" means an option granted pursuant to Section 8.

                  1.19. "Option Period" means the period beginning on an
Offering Date and ending on the next succeeding Exercise Date.

                  1.20. "Option Price" means the purchase price of shares of
Common Stock hereunder as provided in Section 9 hereof.

                  1.21. "Participant" means any Employee who (a) is eligible to
participate in the Plan under Section 5 hereof, and (b) elects with respect to
an Option Period to participate in this Plan pursuant to Section 5 hereof.

                  1.22. "Plan" means the Southern Community Financial
Corporation Employee Stock Purchase Plan, as amended from time to time.

                  1.23. "Plan Year" means the 12-month period beginning June 1
of each calendar year and ending on the next following May 31.

                  1.24. "Share" means a share of Common Stock.

         2. PURPOSE The purpose of this Plan is to provide Employees of the
Corporation and its Designated Affiliates with an opportunity to purchase shares
of Common Stock of the Corporation and thereby to encourage Employee
participation in the ownership and economic success of the Corporation. It is
the Corporation's intention that this Plan qualify as an employee stock purchase
plan under Code Section 423 and be construed in a manner consistent with the
requirements thereof.

         3. ADMINISTRATION OF PLAN

                  3.1. The Administrator shall administer the Plan. Subject to
the provisions of the Plan, the Administrator shall have complete authority and
power to:

                  (a)      construe and interpret the Plan and any Enrollment
                           Form or Notice;

                  (b)      prescribe, adopt, amend and rescind rules and
                           regulations not inconsistent with the Plan or Code
                           Section 423 relating to, and, in the Administrator's
                           discretion, deemed desirable and appropriate for, the
                           administration of the Plan, including, but not

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                           limited to, (i) determining whether, when and to what
                           extent to credit Accounts with interest, (ii)
                           determining the time and manner in which to refund
                           amounts credited to a Participant's Account upon such
                           Participant's withdrawal from, or termination of
                           eligibility to participate in, the Plan, (iii)
                           specifying Offering Dates and Exercise Dates,
                           including special Offering Dates for Employees who do
                           not satisfy the Plan's service requirements on or
                           before a regular Offering Date, to the extent
                           permitted by Treasury Regulation Section
                           1.423-2(f)(4), (iv) specifying the duration of any
                           Option Period, provided, however, that in no event
                           may the duration of any Option Period exceed one
                           year, and (v) specifying Option Prices; and

                  (c)      make all other determinations deemed necessary or
                           advisable for the administration of the Plan.

                  3.2. The interpretations, determinations and decisions of the
Administrator in respect of the Plan shall be final, binding and conclusive.

                  3.3. Notwithstanding any other provision of the Plan, the
Administrator shall have the authority to appoint any other person (or persons)
or entity (or entities) to manage the Plan (or specified aspects thereof) and to
delegate to them such authority with respect to the administration of the Plan
as the Administrator, in its sole discretion, deems advisable from time to time.

         4. EFFECTIVE DATE; TERM OF PLAN

                  4.1. The Plan shall become effective as of June 1, 2003. For
purposes of qualifying the Plan under Code Section 423, the Plan shall be
submitted for approval by the Corporation's stockholders at the Corporation's
2003 annual meeting of stockholders.

                  4.2. Unless sooner terminated pursuant to Section 16 or 23
hereof, the Plan shall terminate on January 20, 2013. Upon any termination of
the Plan, the amount, if any, credited to each Participant's Account, including
interest, if any, shall be refunded, in the manner prescribed by the
Administrator, to each such Participant or, in cases where such a refund may not
be possible, otherwise disposed of in accordance with policies and procedures
prescribed by the Administrator.

         5. ELIGIBILITY

         Any Employee shall be eligible to participate in the Plan as of the
first Offering Date occurring at least 90 days after becoming an Employee. An
eligible Employee may become a Participant as of such Offering Date or as of any
subsequent Offering Date by executing and filing an Enrollment Form with the
Administrator (or its designee) on or before the date prescribed by the
Administrator (or its designee). Notwithstanding any other provision of this
Plan, no Employee may participate in the Plan if, immediately after an Offering
Date, such Employee would be deemed for purposes of Code Section 423(b)(3) to
possess five percent (5%) or more of the total combined voting power or value of
all classes of stock of the Corporation or any Affiliate.

         6. PAYROLL DEDUCTIONS

                  6.1. Payment by a Participant for Shares to be purchased by
the Participant under the Plan shall be made by authorized after-tax payroll
deductions from the portion of Compensation paid to the Participant on each
payday during an Option Period of a whole percentage, from one percent to twenty
percent (or such other maximum percentage as the Administrator may establish
from time to time before an Offering Date), of such Compensation in accordance
with the Enrollment Form executed by the Participant.

                  6.2. Payroll deductions for each Option Period shall commence
on the first payday following the Offering Date for the applicable Option Period
and shall end on the last payday prior to the Exercise Date of the applicable
Option Period.

                  6.3. All amounts deducted from a Participant's Compensation
pursuant to this Section 6 shall be credited to such Participant's Account. A
Participant may not make any payments or contributions to his Account other than
payroll deductions pursuant to the provisions of this Section 6.

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                  6.4. A Participant may increase or decrease the percentage of
his or her payroll deductions on one occasion only during any Option Period by
completing and filing with the Corporation a new Enrollment Form authorizing a
change in the payroll deduction rate. Any change in rate of contributions
pursuant to the preceding sentence shall be effective as of the beginning of the
next calendar month following the date of filing of the new subscription
agreement, provided the agreement indicating such change is filed at least ten
(10) business days prior to such date and, if not, then as of the beginning of
the next succeeding calendar month. A Participant may discontinue payroll
deductions during any Option Period. If a Participant elects to discontinue
payroll deductions during any Option Period pursuant to this Section 6.4, the
Participant shall withdraw from the Plan in accordance with Section 19 hereof.

                  6.5. If a Participant does not withdraw from the Plan during
an Option Period and elects to continue, his or her Enrollment Form shall remain
effective for subsequent Option Periods. If a Participant does not elect to have
his or her Enrollment Form remain effective for subsequent Option Periods, he or
she must complete a new Enrollment Form for the any such subsequent Option
Period in order to participate in the Plan during any such subsequent Option
Period.

                  6.6. Notwithstanding any election to the contrary under
Section 6.5 hereof, a Participant may increase or decrease the percentage of his
payroll deductions for any subsequent Option Period by executing and filing a
new Enrollment Form with the Administrator (or its designee) on or before the
date prescribed by the Administrator (or its designee).

                  6.7. Notwithstanding the foregoing, to the extent necessary
to comply with Section 423(b)(8) of the Code, a Participant's payroll deductions
may be decreased by the Corporation to 0% at any time during an Option Period.
Payroll deductions shall re-commence at the rate provided in such Participant's
subscription agreement at the beginning of the subsequent Option Period, unless
terminated by the participant as provided in Section 19.

         7. INTEREST CREDITS

         The Administrator may, but shall not be obligated to, credit each
Participant's Account with interest, at such rate and at such times as shall be
determined by the Administrator.

         8. GRANT OF OPTION

         Subject to the provisions of the Plan, on the Offering Date for each
Option Period, each Participant shall be granted an Option to purchase the
largest number of whole Shares that can be purchased with the Participant's
projected Account balance as of the Exercise Date for such Option Period. The
number of whole Shares purchased during an Option Period shall be determined by
(a) dividing the Participant's Account balance as of such Exercise Date by the
Option Price per Share, and (b) rounding the number obtained in clause (a) down
to the nearest whole number.

         9. OPTION PRICE

         The Option Price per Share purchased by a Participant pursuant to the
exercise of an Option shall be eighty five percent (85%) of Fair Market Value of
a Share on the Offering Date, or such other amount as may be specified by the
Administrator, but in no event shall the Option Price per Share be less than the
lesser of (i) 85% of the Fair Market Value of a Share on the Offering Date of
the Option, or (ii) 85% of the Fair Market Value of a Share on the Exercise Date
of the Option.

         10. PURCHASE OF SHARES

         Subject to the provisions of the Plan, on the Exercise Date for each
Option Period, the Option granted to each Participant under Section 8 hereof on
the Offering Date for such Option Period shall be exercised automatically, and
the largest number of whole Shares subject to such Option shall be purchased by
the Participant by charging the Participant's Account with the amount equal to
the product of (a) the Option Price of such Option, and (b) the number of Shares
covered by the Option as determined in accordance with Section 8 hereof. If any
balance remains in the Participant's Account after the purchase of Shares on an
Exercise Date for an Option Period, such remaining Account balance, including
interest, if any, shall be automatically credited to the Participant's Account
for the following year.

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         11. LIMITATIONS ON PURCHASE

         Notwithstanding any provision of this Plan to the contrary, no
Participant shall be granted an Option under Section 8 hereof if such option
would permit his or her rights to purchase stock under all employee stock
purchase plans (described in Section 423 of the Code) of the Corporation and its
Designated Affiliates to accrue at a rate which exceeds Twenty-Five Thousand
Dollars ($25,000) of the Fair Market Value of such stock (determined at the time
such option is granted) for each calendar year in which such option is
outstanding.

         12. TRANSFERABILITY OF RIGHTS

         During a Participant's lifetime, an Option granted to a Participant
hereunder shall be exercisable only by the Participant. Neither amounts credited
to a Participant's Account nor any rights of a Participant with regard to an
Option may be assigned, alienated, encumbered, transferred, pledged or otherwise
disposed of in any way by the Participant other than by will or the laws of
descent and distribution. Any attempt by a Participant to make any such
prohibited assignment, alienation, encumberment, transfer, pledge or disposition
shall be null and void and without effect, provided that the Administrator (or
its designee) may treat any such attempted assignment, transfer, pledge or
disposition as a withdrawal Notice in accordance with Section 19 hereof.

         13. DELIVERY

         As promptly as practicable after each Option Period, the Corporation
shall arrange for the Shares purchased by each Participant on the Exercise Date
for such Option Period to be delivered to the custodian of the Participant's
Brokerage Account.

         14. COMMON STOCK SUBJECT TO THE PLAN

                  14.1. Subject to adjustment as provided in Section 15 hereof,
there is hereby reserved for issuance upon exercise of Options granted under the
Plan an aggregate of 1,000,000 Shares.

                  14.2. If an Option shall terminate or be cancelled for any
reason without being exercised under Section 10 hereof, the unissued Shares
which had been subject to such Option shall continue to be reserved for issuance
and shall be available for the grant of additional Options and for issuance and
sale under the Plan.

         15. CAPITAL ADJUSTMENTS

         In the event of any change or adjustment in the outstanding Shares by
reason of any stock dividend, stock split (or reverse stock split),
recapitalization, reclassification, reorganization, reincorporation, combination
or exchange of shares, merger, consolidation, liquidation or other similar
change in corporate structure or otherwise, equitable proportionate adjustments
shall be made by the Administrator in, (a) the number and class of stock or
other securities that may be reserved for purchase or purchased under the Plan,
(b) the number of Shares covered by each Option that has not yet been exercised,
(c) the maximum number of Shares that may be purchased by a Participant with
respect to any Option Period (in accordance with law), (d) the Option Price, and
(e) the aggregate number and class of Shares that may be issued and purchased
under the Plan.

         16. INSUFFICIENT SHARES

         Notwithstanding any provision of this Plan to the contrary, if the
aggregate funds available for the purchase of Shares on any Exercise Date would
cause an issuance of Shares in excess of the number of Shares then available for
issuance and sale under the Plan, then (a) the Administrator shall
proportionately reduce the number of Shares which would otherwise be purchased
by each Participant on such Exercise Date in order to eliminate such excess, and
(b) the Plan shall automatically terminate immediately after such Exercise Date.
In such event, the Corporation shall give notice of such reduction to each
Participant affected thereby.

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         17. CONFIRMATION

         Each purchase of Shares under the Plan by a Participant shall be
confirmed by the Corporation in writing to the Participant.

         18. RIGHTS AS STOCKHOLDERS

         Shares purchased by a Participant on any Exercise Date shall, for all
purposes, be deemed to have been issued, sold and transferred to the Participant
as of the close of business on such Exercise Date. Prior to such time, none of
the rights or privileges of a stockholder of the Corporation shall exist with
respect to such Shares, and the Participant shall have no interest, or voting or
dividend rights, in such Shares.

         19. VOLUNTARY WITHDRAWAL FROM THE PLAN

         A Participant may withdraw from participation in the Plan during an
Option Period by filing with the Administrator (or its designee) a withdrawal
Notice on or before the date prescribed by the Administrator (or its designee).
Upon withdrawal, (a) the entire amount of a Participant's Account balance,
including interest, if any, shall be refunded to the Participant at the time and
in the manner prescribed by the Administrator, but no such refund shall be made
later than the Exercise Date coincident with or immediately following the date
of the Participant's withdrawal from the Plan (or as soon as practicable
thereafter); (b) the Participant's Option for the Option Period during which the
Participant filed a withdrawal Notice automatically shall terminate; (c) the
Participant shall not purchase any Shares under Section 10 hereof on the
Exercise Date for such Option Period; (d) no further payroll deductions for the
purchase of Shares under the Plan may be made by the Participant during such
Option Period; and (e) the withdrawing Participant shall cease to be a
Participant with respect to subsequent Option Periods. Any Participant who
withdraws from the Plan pursuant to this Section 19 may again become a
Participant with respect to subsequent Option Periods in accordance with Section
5 hereof.

         20. SALE OR WITHDRAWAL OF SHARES FROM ACCOUNT

                  20.1. During the first two years from the Offering Date for
an Option Period, a Participant may not elect to withdraw Shares acquired on the
Exercise Date for such Option Period from his Brokerage Account or transfer such
Shares from his Brokerage Account to an account of the Participant maintained
with a broker-dealer, financial institution or other person or entity, but the
Participant may sell or otherwise transfer title to such Shares at any time.
Such sales and title transfers shall be effectuated only by the custodian of the
Participant's Brokerage Account on the Participant's behalf. Sales and other
title transfers shall be subject to any fees imposed in accordance with Section
32 hereof.

                  20.2. Following the completion of two years from the Offering
Date for an Option Period, a Participant may elect to withdraw Shares acquired
on the Exercise Date for such Option Period from his Brokerage Account in
certificated form or to transfer such Shares from his Brokerage Account to an
account of the Participant maintained with a broker-dealer, financial
institution or such other person or entity as may be permitted by the custodian
of the Brokerage Account. If a Participant elects to withdraw Shares, one or
more certificates for whole Shares shall be issued in the name of, and delivered
to, the Participant, with such Participant receiving cash in lieu of fractional
Shares based on the Fair Market Value of a Share on the date of withdrawal (such
fractional Shares resulting from the Participant's election to reinvest
dividends, if any, paid on Shares held in his Brokerage Account). If Shares are
transferred from a Participant's Brokerage Account to a broker-dealer, financial
institution or other permitted recipient, only whole Shares shall be transferred
and cash in lieu of any fractional Share shall be paid to such Participant based
on the Fair Market Value of a Share on the date of transfer (such fractional
Shares resulting from the Participant's election to reinvest dividends, if any,
paid on Shares held in his Brokerage Account). A Participant seeking to withdraw
or transfer Shares from his Brokerage Account shall provide instructions to the
custodian thereof in such manner and form as may be prescribed by such
custodian. Withdrawals and transfers shall be subject to any fees imposed in
accordance with Section 32 hereof.

                  20.3. Upon termination of employment of a Participant for any
reason, (a) the Administrator (or its designee) shall cause the Participant's
Brokerage Account to continue to be

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<PAGE>

maintained until the earlier of such time as the Participant sells or otherwise
transfers title to all Shares in his Brokerage Account or two years after the
Offering Date immediately preceding or coincident with the date on which the
Participant ceases to be employed by the Corporation and its Affiliates, and (b)
upon the expiration of such two-year period, the Participant may elect to
continue to maintain the Brokerage Account, at the Participant's expense, or to
sell, withdraw or transfer the Shares credited thereto, as permitted by the
custodian of the Brokerage Account.

         21. TERMINATION OF ELIGIBILITY

                  21.1. Except as provided in Section 21.2, 21.3 or 21.4
hereof, if a Participant ceases to be an Employee during an Option Period, then
(a) the entire amount of his Account balance, including interest, if any, shall
be refunded to the Participant at the time and in the manner prescribed by the
Administrator, but no such refund shall be made later than the Exercise Date
coincident with or immediately following the date the Participant ceases to be
an Employee (or as soon as practicable thereafter); (b) such Participant's
Option for the Option Period during which such Participant ceases to be an
Employee automatically shall terminate as of the date such Participant ceases to
be an Employee; (c) such Participant shall not purchase any Shares under Section
10 hereof on the Exercise Date for such Option Period; and (d) no further
payroll deductions for the purchase of Shares under the Plan may be made by such
Participant after he or she ceases to be an Employee.

                  21.2. If a Participant ceases to be an Employee during an
Option Period by reason of death, such Participant's estate or his or her
beneficiary may elect either (a) to be treated as a terminated Employee under
Section 21.1 hereof and to have the entire amount of the Account balance,
including interest, if any, refunded pursuant to Section 21.1 hereof, or (b) to
have the entire amount of the Account balance applied toward the purchase of
Shares on the Exercise Date for the Option Period in which the Participant dies.

                  21.3. If a Participant ceases to be an Employee during an
Option Period by reason of (a) retirement under the normal or early retirement
provisions of the Corporation's retirement plan, or (b) disability under any
disability plan maintained by the Corporation or a Designated Affiliate, as the
case may be, within the three-month period ending on the Exercise Date for such
Option Period, such Participant may elect either (a) to be treated as a
terminated Employee under Section 21.1 hereof and to have the entire amount of
the Account balance, including interest, if any, refunded pursuant to Section
21.1 hereof, or (b) to have the entire amount of the Account balance applied
toward the purchase of Shares on the Exercise Date for the Option Period during
which such Participant ceases to be an Employee. If such Participant elects the
option described in clause (b), no further payroll deductions for the purchase
of Shares under Section 10 hereof may be made by such Participant after he or
she ceases to be an Employee.

         22. NOTICES

         Any Notice that a Participant provides pursuant to the Plan shall be
made in such form and manner as prescribed by the Administrator (or its
designee) and any such Notice or other communications by a Participant to the
Administrator (or its designee) under or in connection with the Plan shall be
effective when received by the Administrator (or its designee).

         23. TERMINATION OR AMENDMENT OF PLAN

                  23.1. The Board may amend or terminate this Plan in any
respect at any time; provided, however, that, after this Plan has been approved
by the stockholders of the Corporation, no amendment or termination of the Plan
shall be made by the Board without approval of (a) the Corporation's
stockholders to the extent stockholder approval is required by applicable law or
regulations or the requirements of the NASDAQ or the principal securities
exchange upon which the Common Stock then is listed or quoted, if any; and (b)
each affected Participant if such amendment or termination would adversely
affect his or her rights or obligations under any Option granted prior to the
date of such amendment or termination. No Options may be granted, no Shares may
be issued and no payroll deductions may be made under the Plan after any
termination of the Plan. In the event of the termination of the Plan during an
Option Period, the entire amount, if any, in the Participant's Account,
including interest, if any, shall be refunded, as soon as practicable after
termination of the Plan and in the manner prescribed by the Administrator, to
the Participant or, in the event of the Participant's death, to the beneficiary
designated by the Participant pursuant to Section 28 hereof.

                                       7

<PAGE>

                  23.2. Notwithstanding Section 23.1 hereof, the Administrator
shall have the power to (a) change the duration and/or frequency of Option
Periods with respect to future offerings; (b) change the Option Price with
respect to future offerings; and (c) determine the extent to which interest, if
any, will be credited to Participant Accounts, without stockholder or
Participant approval. Any change in Option Period or Option Price, or in the
amount of interest, if any, to be credited to Participant Accounts during an
Option Period, shall be communicated to Participants prior to the scheduled
beginning of the first Option Period to be so affected.

         24. USE OF FUNDS

         All funds received by the Corporation in connection with this Plan may
be used by the Corporation for any corporate purpose, and the Corporation shall
be under no obligation to segregate such funds.

         25. LEGAL RESTRICTIONS

                  25.1. Notwithstanding any other provision of the Plan, the
Corporation shall not be obligated to issue or sell Shares under the Plan (a)
unless the approval of all regulatory bodies deemed necessary by the
Administrator have been obtained and unless the issuance, sale and delivery of
such Shares pursuant to the Plan shall comply, to the Administrator's complete
satisfaction, with all provisions of federal, state or local law deemed
applicable by the Administrator and all rules and regulations thereunder, and
the requirements of the NASDAQ or any securities exchange upon which the Common
Stock may then be listed, or (b) if the Corporation determines that the
issuance, sale or delivery of such Shares pursuant hereto would violate any
applicable law or regulation.

                  25.2. The Administrator (or its designee), may require any
person acquiring Shares pursuant to the Plan hereunder to represent to, and
agree with, the Corporation in writing that such person is acquiring the Shares
without a view to distribution thereof. The certificates for such Shares may
include any legend that the Administrator deems appropriate to reflect any
restrictions on transfer. All certificates for Shares issued pursuant to this
Plan shall be subject to such stock transfer orders and other restrictions as
the Administrator may deem advisable under the rules, regulations and other
requirements of the Securities and Exchange Commission, the NASDAQ or any stock
exchange upon which the Common Stock is then listed, and any applicable federal
or state securities laws. The Administrator (or its designee) may place or cause
to be placed a legend or legends on any such certificates to make appropriate
reference to such restrictions.

         26. GOVERNING LAW

         The Plan and all rights and obligations thereunder shall be governed,
construed, administered and enforced in accordance with the laws of the State of
North Carolina.

         27. NOTICE OF DISPOSITION OF SHARES

         Each Participant shall agree in such form as may be prescribed by the
Administrator (or its designee) to promptly provide Notice to the Administrator
(or its designee) of any disposition of Shares purchased under the Plan that
occurs within one year after the Exercise Date of the Option pursuant to which
such Shares were purchased.

         28. DESIGNATION OF BENEFICIARY

         A Participant's Beneficiary shall be the Participant's beneficiary
under the Corporation's life insurance plan unless the Participant designates
otherwise. To designate a different beneficiary, a Participant may file with the
Administrator (or its designee) a written designation of beneficiary, which
designation shall be effective when filed with the Administrator (or its
designee). Such designation of beneficiary may be changed by the Participant in
writing at any time.

                                       8

<PAGE>

         29. INDEMNIFICATION OF ADMINISTRATOR

         In addition to such other rights of indemnification as they may have as
members of the Board, each person serving as the Administrator (either alone or
with one or more other persons) shall be indemnified by the Corporation against
the reasonable expenses, including attorneys' fees, actually and reasonably
incurred in connection with the defense of any action, suit or proceeding, or in
connection with any appeal therein, to which such person may be a party by
reason of any action taken or failure to act under or in connection with the
Plan or any Option and against all amounts reasonably paid by such person in
settlement thereof or paid by such person in satisfaction of a judgment in any
such action, suit or proceeding, if such person acted in good faith and in a
manner which such person believed to be in, and not opposed to, the best
interests of the Corporation.

         30. REPORTS

         Individual Accounts shall be maintained for all Participants. A
statement of Account shall be provided to each Participant as soon as possible
following the Exercise Date of each Option Period, which statement shall set
forth the amounts credited to the Participant's Account during such Option
Period, the Option Price per share for Shares purchased by the Participant on
the Exercise Date for such Option Period, the number of Shares purchased on the
Exercise Date for such Option Period, and the Participant's remaining Account
balance after the purchase of such Shares, if any, to be refunded to the
Participant after the Exercise Date for such Option Period.

         31. WITHHOLDING

         The Corporation or any Designated Affiliate shall be authorized to
withhold from any payment to be made to a Participant, including any payroll or
other payments not related to the Plan, amounts of withholding and other taxes
due in connection with any transaction under the Plan, including any disposition
of Shares acquired under the Plan. A Participant's enrollment in the Plan by
executing an Enrollment Form shall be deemed to constitute his consent to such
withholding. At the time of a Participant's exercise of an Option or the
disposition of Shares acquired under the Plan, the Corporation may require the
Participant to make other arrangements to satisfy tax withholding obligations as
a condition to exercise of rights or the distribution of Shares or other amounts
credited to the Participant's Account. If so required by the Administrator (or
its designee), a Participant shall provide Notice to the Corporation of sales
and other dispositions of Shares acquired under the Plan in order to permit the
Corporation to comply with tax laws and to claim any tax deductions to which the
Corporation may be entitled with respect to the Plan.

         32. COSTS

         Costs and expenses incurred in the administration of the Plan and
maintenance of Accounts shall be paid by the Corporation, including annual fees
for maintenance of Brokerage Accounts pursuant to Sections 20.1, 20.2 and
20.3(a) hereof, provided that brokerage fees and commissions for the purchase of
Shares upon any reinvestment of dividends and in connection with distributions
shall be charged to Participants' Brokerage Accounts to the extent not paid by
the Corporation. The custodian of Participants' Brokerage Accounts may impose or
charge to Participants' Brokerage Accounts a reasonable fee for the withdrawal
of Shares in the form of stock certificates, and reasonable fees for other
services unrelated to the purchase of Shares under the Plan, to the extent
communicated to Participants by the custodian of Participants' Brokerage
Accounts in connection with the establishment thereof. In no event shall the
Corporation pay any brokerage fees and commissions for the sale of Shares
acquired under the Plan by a Participant.

         33. NUMBER AND GENDER.

         Where necessary or appropriate to the meaning hereof, the singular
shall be deemed to include the plural, the plural to include the singular, the
masculine to include the feminine and neuter, the feminine to include the
masculine and neuter, and the neuter to include the masculine and feminine.

                                       9

<PAGE>

         34. MISCELLANEOUS

                  34.1. The establishment of the Plan shall not confer upon any
Employee any legal or equitable right against the Corporation, any Affiliate or
the Administrator (or its designee), except as expressly provided in the Plan.

                  34.2. Participation in this Plan shall not give an Employee
any right to be retained in the service of the Corporation or any Affiliate.

                  34.3. Neither the adoption of the Plan nor its submission to,
or approval by, the stockholders of the Corporation shall be taken to impose any
limitations on the powers of the Corporation or its Affiliates to issue, grant,
or assume options otherwise than under this Plan, or to adopt other stock option
plans, stock purchase plans, or other plans, or to impose any requirement of
stockholder approval upon the same.

Adopted by the Board on February 20, 2003 to be effective June 1, 2003

                                       10

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