Document:

EX-10.8

 

Exhibit 10.8

EMPLOYMENT CONTINUITY AGREEMENT

     THIS EMPLOYMENT CONTINUITY AGREEMENT (this “Agreement”) is between LSB
BANCSHARES, INC., a North Carolina Corporation (referred to in this Agreement
as the “Company,” which term includes any subsidiary of the Company unless the
context clearly indicates otherwise), and H. FRANKLIN SHERRON, JR., Vice
President of the Company and a resident of North Carolina (the “Executive”),
and is effective as of January 1, 2004 (the “Effective Date”).

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

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

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

     The Executive previously entered into an Employment Continuity Agreement
dated June 9, 1998, by and between the Company and the Executive (the “Prior
Employment Contract”), and such Prior Employment Contract currently sets forth
the terms and conditions of the Executive’s employment with the Company.

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

     1. Prior Employment Contract. As of the Effective Date, the Executive and
the Company agree that the Prior Employment Contract shall be amended and
restated in its entirety in the form of this Agreement.

     2. Term. Upon execution by the Company and the Executive, this Agreement
is effective as of the Effective Date. Unless terminated in accordance with
Sections 4(a)(i) or 4(a)(ii) of this Agreement, the term of this Agreement will
commence as of the Effective Date and continue until the first anniversary of
the Effective Date, and the term of this Agreement shall automatically be
extended an additional one day whenever the term of the Agreement has less than
two years remaining, so that the term of the Agreement shall always have at
least two years remaining, unless terminated in accordance with Sections
4(a)(i) or 4(a)(ii) of this Agreement.

 

 

     3. Terms of Employment.

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

     (b) Working Facilities and Support Staff. The Executive is entitled
to an office of a size and with furnishings and other appointments at
least equal to those provided to the Executive before the Effective Date.
The Executive is entitled to secretarial and other assistance, and to
such other facilities, equipment, and supplies at least equal to those
provided to the Executive before the Effective Date.

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

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

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

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

2

 

     (g) Compensation. The Executive shall be entitled to an annual base
salary of no less than $177,500.00, as the same may be adjusted by the
Company from time to time (“Annual Base Salary”). In addition, the
Executive shall be entitled to participate in the various plans and
programs (including employee benefit plans) as may be offered by the
Company from time to time, in accordance with the terms and provisions of
such plans or programs.

     4. Termination of Employment. The Executive’s employment with the Company
may be terminated at any time for any or no reason, with or without cause,
including any of the following events listed in Sections 4(a) or 4(b) below:

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

     (i) Termination of Employment on Disability. The Company,
pursuant to a resolution duly adopted by the Board, may terminate
the Executive’s employment if the Executive becomes Disabled by
giving the Executive written notice of its intention to terminate
the Executive’s employment, subject to the terms and conditions
specified in the notice. If the Executive becomes Disabled and does
not return to the performance of his duties for the Company in
accordance with the terms and conditions set forth in the notice,
the Executive’s employment with the Company shall terminate. For
purposes of this Agreement, “Disabled” has the meaning set forth
under the Long Term Disability Plan of Lexington State Bank or any
successor plan or amendment to such Plan.

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

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

     (a) Use of illegal drugs by the Executive;

     (b) Any material breach by the Executive of any
covenant, including the covenant in Section 6(a) of this
Agreement, causing material injury to the Company or to the
business reputation of the Company;

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

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

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

3

 

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

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

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

     (iv) Voluntary resignation by the Executive without Good
Reason, as defined in subparagraph (b)(ii) of this Section 4.

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

     (i) Company’s Termination of Executive Without Cause and
Without an Offer of Comparable Employment. The Company’s
termination of the Executive’s employment (1) without Cause (as
defined in Section 4(a)(iii)) and (2) without an offer of
Comparable Employment with a Successor Employer or a Code §414
Affiliated Employer of the Company or of a Successor Employer that
agrees to assume and be bound by all terms and conditions of this
Agreement and to become the “Company” under this Agreement.

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

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

4

 

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

     (ii) Termination By the Executive With Good Reason. The
termination of the Executive’s employment with the Company by the
Executive with Good Reason. Good Reason shall exist if the Company,
without the Executive’s consent: (a) substantially reduces the
overall importance of the Executive’s then current role, as
determined by balancing any increase or decrease in the scope of
the Executive’s management responsibilities against any increase or
decrease in the relative sizes of the businesses, activities or
functions (or portions thereof) for which the Executive has
responsibility; provided, however, that none of (i) a change in the
Executive’s title, (ii) a change in the hierarchy, (iii) a change
in the Executive’s responsibilities from line to staff or vice
versa, and (iv) placing the Executive on temporary leave pending an
inquiry into whether the Executive has engaged in conduct that
could constitute “Cause” under this Agreement, either individually
or in the aggregate, shall be considered Good Reason; (b) reduces
the Executive’s Annual Base Salary, unless a similar reduction is
made for other senior executives of the Company in response to
market conditions, (c) substantially reduces the aggregate benefits
(on a cost basis) to which the Executive is entitled on the
Effective Date, unless a similar reduction is made for other senior
executive employees of the Company, (d) commits a breach of this
Agreement which is not remedied by the Company within thirty (30)
days of receiving written notice from the Executive of such breach,
(e) requires the Executive to relocate more than twenty-five (25)
miles from the Executive’s principal place of employment as of the
Effective Date, (f) following a Change in Control, requires the
Executive to travel on Company business, without his consent, at
least 50% more, on average, than during the 12 months immediately
preceding the Change in Control, or (g) any successor or assignee
of the Company fails to assume and perform the Company’s
obligations under this Agreement. Executive will be entitled to
receive Severance Payments under Section 5(b)(i) of this Agreement
on account of his voluntary termination under this Section 4(b)(ii)
only if such voluntary termination with Good Reason occurs within
six months after an event described in this Section 4(b)(ii), or
within six months after the last in a series of such events.

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

     (c) Other Terminations. Any termination of the Executive’s
employment with the Company that is not listed in Sections 4(a) or 4(b)
above shall be deemed to be a Non-Covered Termination under Section 4(a)
above.

     (d) Change in Control. For purposes of this Agreement, a “Change in

5

 

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

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

       5. Post-Termination Payment Obligations of the Company.

     (a) Non-Covered Terminations. If the Executive’s employment with
the Company terminates by reason of a Non-Covered Termination under
Section 4(a), then no further remuneration shall be paid to the Executive
pursuant to this Agreement after such termination of employment, and the
Executive shall only be entitled to remuneration thereafter pursuant to
the terms and conditions of his employment with the Company which has
accrued but not been paid.

     (b) Covered Terminations. If the Executive’s employment with the
Company terminates by reason of a Covered Termination under Section 4(b),
then, in addition to any accrued remuneration to which the Executive may
otherwise be entitled pursuant to the terms and conditions of his
employment with the Company, the Executive shall receive the following
additional remuneration from the Company:

     (i) Severance Payments. The Company shall pay to the
Executive an amount on the first day of each month during the
Severance Period equal to one-twelfth (1/12) of the Annual Base
Salary. Additionally, the Company shall pay to the Executive an
amount on the first day of each month during the Severance Period
equal to one-twelfth (1/12) of any bonuses or other taxable cash
compensation other than the Annual Base Salary which was awarded to
the

6

 

Executive during the calendar year preceding the calendar year
in which occurs the date of the Executive’s termination of
employment with the Company. For purposes of this Agreement, the
term “Severance Period” means a two- (2) year period beginning on
the date on which the Executive’s employment with the Company
terminated, unless the Executive’s employment with the Company
terminates within six (6) months after a Change in Control has
occurred, in which case the term “Severance Period” means a three-
(3) year period beginning on the date on which the Executive’s
employment with the Company terminated. The Company’s obligation to
make and the Executive’s right to receive the payments described in
Section 5(b) (the “Severance Payments”) shall cease immediately in
the event that the Executive violates the Covenant Not to Compete
contained in Section 6(c)(i).

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

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

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

     (e) Payment Limitation. If the amounts to be paid to the Executive
under this Agreement would cause the Executive to be subject to the Code
§4999 excise tax, then to the extent that the total “parachute payments”
(as defined in Code §280G(b)(2) are equal to or greater than three (3)
times the Executive’s “base amount” (as defined in Code §280G(b)(3)), the
amounts to be paid to the Executive under this Agreement which would
constitute “parachute payments” shall be reduced to the extent necessary
so that the total “parachute payments” shall be $1.00 less than three (3)
times the Executive’s “base amount”; but the amounts to be paid shall be
so reduced only if the Executive

7

 

would be economically better off, on an after tax (federal and state
income and federal excise) basis, receiving less under this Agreement
because of the Code §4999 excise tax that would otherwise apply to the
higher amount otherwise payable under this Agreement. The Company shall
have complete discretion to appoint competent tax experts to make the
calculations required by this Section, and the calculations made by such
experts shall be final and binding upon both the Company and the
Executive. Any reductions required under this Section shall come first
from the payments required under Section 5(b)(i), and then from other
payments required under Section 5(b) in the sole discretion of the
Company.

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

     (g) Waiver and Release. The Company’s obligation to pay amounts to
be paid under Section 5(b) of this Agreement shall be contingent upon the
Executive executing and not revoking a Waiver and Release in the form
attached to this Agreement as Exhibit A.

        6. Executive Covenants.

     (a) Confidential Information. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge, or data relating to the Company and
its business, which is obtained by the Executive during the Executive’s
employment by the Company and which is not public knowledge (other than
by acts by the Executive or his representatives in violation of this
Agreement). During and after the termination of the Executive’s
employment with the Company, the Executive shall not, without the
Company’s prior written consent, communicate or divulge any such
information, knowledge, or data to anyone other than the Company and
those designated by it to receive such information, knowledge, or data
except pursuant to an order of a court or governmental agency. If the
Executive violates this Section 6(a), any unpaid remuneration under
Section 5(b) shall immediately be forfeited as of the date of the
violation.

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

8

 

     (c) Covenant Not to Compete.

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

     (ii) The Executive agrees and acknowledges that any breach of
the covenants contained in this Section 6(c) shall cause
irreparable injury to the Company, and that the remedy at law for
any such breach shall be inadequate, and that the Company shall be
entitled to appropriate equitable relief, including injunctive
relief, in addition to any other available remedies.

     (iii) The covenants contained in this Section 6(c) shall inure
to the benefit of the Company and its affiliated employers and
subsidiaries and their successors.

     (iv) The Executive acknowledges that the extension of the
Severance Period following a termination of employment that occurs
within six (6) months following a Change in Control, constitutes
valuable additional consideration beyond the consideration provided
to the Executive under the Prior Employment Contract, and that such
consideration is adequate for the Executive’s promises in this
Agreement. The restrictions contained in this Section 6(c) are
considered by the parties hereto to be fair and reasonable and
necessary for the protection of the legitimate business interests
of the Company. If the scope of any restriction contained in this
Section 6(c) is determined by a court of competent jurisdiction to
be too broad to permit enforcement of such restriction to its full
extent, then such restriction shall be enforced to the maximum
extent permitted by law, and the Executive hereby consents and
agrees to such scope as may be judicially modified.

     (v) Notwithstanding Section 5(b), if the Executive violates
this Section 6(c), any unpaid remuneration under Section 5(b) shall
immediately be forfeited as of the date of any violation.

     (vi) The Executive agrees that the time period of the
covenants in this

9

 

Section 6(c) shall not be reduced, but shall be extended, by
any period of time during which the Executive is in violation of
any such covenant or any period of time required for litigation by
the Company to enforce any such covenant.

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

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

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

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

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

10

 

Board. Such other addresses may be used as either party may have furnished
to the other in writing. Notices of change of address are effective only upon
receipt.

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

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

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

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

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

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

11

 

legal fees and expenses, the payment of which shall be governed by the
provisions of Section 7 of this Agreement, shall be borne exclusively by the
Company.

     The parties have executed this Agreement effective as of the 1st day of
January, 2004.

	 	 	 	 	 
	

	 	 
	 	LSB BANCSHARES, INC.
	 
	 	 	 	 
	

	 	 	 	

	

	 	 	 	By: Robert F. Lowe
	

	 	 	 	Its: Chairman, President and Chief
Executive Officer
	 
	 	 	 	 
	

	 	 	 	H. FRANKLIN SHERRON
	 
	 	 	 	 
	

	 	 	 	

12

 

EXHIBIT A

WAIVER AND RELEASE AGREEMENT

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

	I.	 	Payment to Executive

Following the eighth day after the execution of this Release by Executive, the
Company agrees to pay to Executive the Severance Payments and reimburse
Executive for COBRA premiums as provided under Section 5 of that certain
Employment Continuity Agreement between Executive and the Company effective as
of           , less all required payroll tax withholdings.

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

	II.	 	Release and Waiver

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

 

 

permitted by law, any claims for breach of any covenant of good faith and fair
dealing, and any other claims relating to Executive’s employment with the
Company and termination thereof.

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

Executive expressly waives all claims, including those which he or she does not
know or suspect to exist in her favor as of the date of this Agreement. As used
herein, the parties understand the word “claims” to include all actions,
claims, and grievances, whether actual or potential, known or unknown, and
specifically but not exclusively including all claims against the Company and
the Releasees arising from or relating to Executive’s employment with the
Company, the termination thereof or any other conduct by the Company or the
Releasees occurring on or prior to the date Executive signs this Agreement. All
such claims are forever barred by this Agreement whether they arise in contract
or tort or under a statute or any other law.

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

	III.	 	Voluntary Agreement and Other Acknowledgments

Executive acknowledges that:

	•	 	I have read this Waiver and Release Agreement, and I
understand its legal and binding effect. I am knowingly and
voluntarily executing this Waiver and Release Agreement of
my own free will.
	 
	•	 	No other promises or agreements of any kind have been made
to or with me by any person or entity to cause me to sign
this Waiver and Release Agreement.
	 
	•	 	I have had the opportunity to seek, and the Company has
expressly advised me to seek, legal counsel prior to
signing this Waiver and Release Agreement.
	 
	•	 	I have been given at least 45 days from the date I received
this form to consider the severance benefits being offered
to me and the terms of this Waiver and Release Agreement.
	 
	•	 	If I am age 40 or more, on the date that I received a copy
of this Waiver and Release Agreement, I also received a
description of:

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

2

 

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

	IV.	 	Revocation of Waiver and Release Agreement

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

	V.	 	Non-Disparagement.

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

	VI.	 	Complete Agreement.

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

	VII.	 	Governing Law

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

	 	 	 
	

	 	

	H. FRANKLIN SHERRON, JR.

	 	Date

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

3

 

Schedule to Exhibit 10.8:

The only material details in which the Employment Continuity Agreement between
LSB Bancshares, Inc. (“Bancshares”) and Monty J. Oliver differs from the filed
Employment Continuity Agreement between Bancshares and H. Franklin Sherron,
Jr., are as follows:

	•	 	Monty J. Oliver is the party to his Employment Continuity Agreement
and Exhibit A thereto; and
	 
	•	 	Monty J. Oliver is addressed as the Secretary and Treasurer of
Bancshares in the opening paragraph of his Employment Continuity
Agreement.EX-10.9

 

Exhibit 10.9

EMPLOYMENT CONTINUITY AGREEMENT

     THIS EMPLOYMENT CONTINUITY AGREEMENT (this “Agreement”) is between LSB
BANCSHARES, INC., a North Carolina Corporation (referred to in this Agreement
as the “Company,” which term includes any subsidiary of the Company unless the
context clearly indicates otherwise), and KATHY V. RICHARDSON, an executive of
the Company and a resident of North Carolina (the “Executive”), and is
effective as of January 1, 2004 (the “Effective Date”).

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

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

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

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

     1. Reserved.

     2. Term. Upon execution by the Company and the Executive, this Agreement
is effective as of the Effective Date. Unless terminated in accordance with
Sections 4(a)(i) or 4(a)(ii) of this Agreement, the term of this Agreement will
commence as of the Effective Date and continue until the first anniversary of
the Effective Date, and the term of this Agreement shall automatically be
extended an additional one day whenever the term of the Agreement has less than
one year remaining, so that the term of the Agreement shall always have at
least one year remaining, unless terminated in accordance with Sections 4(a)(i)
or 4(a)(ii) of this Agreement.

     3. Terms of Employment.

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

 

 

     (b) Working Facilities and Support Staff. The Executive is entitled
to an office of a size and with furnishings and other appointments at
least equal to those provided to the Executive before the Effective Date.
The Executive is entitled to secretarial and other assistance, and to
such other facilities, equipment, and supplies at least equal to those
provided to the Executive before the Effective Date.

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

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

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

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

     (g) Compensation. The Executive shall be entitled to an annual base
salary of no less than $82,000.00, as the same may be adjusted by the
Company from time to time (“Annual Base Salary”). In addition, the
Executive shall be entitled to participate in the various plans and
programs (including employee benefit plans) as may be offered by the
Company from time to time, in accordance with the terms and provisions of
such plans or programs.

     4. Termination of Employment. The Executive’s employment with the Company
may be terminated at any time for any or no reason, with or without cause,
including any of the following events listed in Sections 4(a) or 4(b) below:

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

2

 

     (i) Termination of Employment on Disability. The Company,
pursuant to a resolution duly adopted by the Board, may terminate
the Executive’s employment if the Executive becomes Disabled by
giving the Executive written notice of its intention to terminate
the Executive’s employment, subject to the terms and conditions
specified in the notice. If the Executive becomes Disabled and does
not return to the performance of her duties for the Company in
accordance with the terms and conditions set forth in the notice,
the Executive’s employment with the Company shall terminate. For
purposes of this Agreement, “Disabled” has the meaning set forth
under the Long Term Disability Plan of Lexington State Bank or any
successor plan or amendment to such Plan.

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

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

     (a) Use of illegal drugs by the Executive;

     (b) Any material breach by the Executive of any
covenant, including the covenant in Section 6(a) of this
Agreement, causing material injury to the Company or to the
business reputation of the Company;

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

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

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

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

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

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

     (iv) Voluntary resignation by the Executive without Good
Reason, as

3

 

defined in subparagraph (b)(ii) of this Section 4.

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

     (i) Company’s Termination of Executive Without Cause and
Without an Offer of Comparable Employment. The Company’s
termination of the Executive’s employment (1) without Cause (as
defined in Section 4(a)(iii)) and (2) without an offer of
Comparable Employment with a Successor Employer or a Code §414
Affiliated Employer of the Company or of a Successor Employer that
agrees to assume and be bound by all terms and conditions of this
Agreement and to become the “Company” under this Agreement.

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

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

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

     (ii) Termination By the Executive With Good Reason. The
termination of the Executive’s employment with the Company by the
Executive with Good Reason. Good Reason shall exist if the Company,
without the Executive’s consent: (a) substantially reduces the
overall importance of the Executive’s then current role, as
determined by balancing any increase or decrease in the scope of
the Executive’s management responsibilities against any increase or
decrease in the relative sizes of the businesses, activities or
functions (or portions thereof) for which the Executive has
responsibility; provided, however, that none of (i) a change in the
Executive’s title, (ii) a change in the hierarchy, (iii) a change
in the Executive’s responsibilities from line to staff or vice
versa, and (iv) placing the Executive on temporary leave pending an
inquiry

4

 

into whether the Executive has engaged in conduct that could
constitute “Cause” under this Agreement, either individually or in
the aggregate, shall be considered Good Reason; (b) reduces the
Executive’s Annual Base Salary, unless a similar reduction is made
for other senior executives of the Company in response to market
conditions, (c) substantially reduces the aggregate benefits (on a
cost basis) to which the Executive is entitled on the Effective
Date, unless a similar reduction is made for other senior executive
employees of the Company, (d) commits a breach of this Agreement
which is not remedied by the Company within thirty (30) days of
receiving written notice from the Executive of such breach, (e)
requires the Executive to relocate more than twenty-five (25) miles
from the Executive’s principal place of employment as of the
Effective Date, (f) following a Change in Control, requires the
Executive to travel on Company business, without her consent, at
least 50% more, on average, than during the 12 months immediately
preceding the Change in Control, or (g) any successor or assignee
of the Company fails to assume and perform the Company’s
obligations under this Agreement. Executive will be entitled to
receive Severance Payments under Section 5(b)(i) of this Agreement
on account of her voluntary termination under this Section 4(b)(ii)
only if such voluntary termination with Good Reason occurs within
six months after an event described in this Section 4(b)(ii), or
within six months after the last in a series of such events.

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

     (c) Other Terminations. Any termination of the Executive’s
employment with the Company that is not listed in Sections 4(a) or 4(b)
above shall be deemed to be a Non-Covered Termination under Section 4(a)
above.

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

5

 

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

     5. Post-Termination Payment Obligations of the Company.

     (a) Non-Covered Terminations. If the Executive’s employment with
the Company terminates by reason of a Non-Covered Termination under
Section 4(a), then no further remuneration shall be paid to the Executive
pursuant to this Agreement after such termination of employment, and the
Executive shall only be entitled to remuneration thereafter pursuant to
the terms and conditions of her employment with the Company which has
accrued but not been paid.

     (b) Covered Terminations. If the Executive’s employment with the
Company terminates by reason of a Covered Termination under Section 4(b),
then, in addition to any accrued remuneration to which the Executive may
otherwise be entitled pursuant to the terms and conditions of her
employment with the Company, the Executive shall receive the following
additional remuneration from the Company:

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

     (ii) Payment of COBRA Premiums. During the Executive’s
Severance Period, the Company shall reimburse the Executive for the
premiums required to be paid under the Company’s group health plans
to provide the Executive and all

6

 

dependents of the Executive with the continuation coverage
available under Code §4980B and ERISA §§601-608. Such
reimbursements shall be provided to the Executive promptly
following the date of submission of such expenses to the Company.
Notwithstanding the foregoing, no provisions of this subsection (b)
shall be interpreted, or are intended to, change the terms and
provisions of any group health plan of the Company. Reimbursements
under this subsection (b) shall only be made to the extent that the
Executive and/or her eligible dependents have obtained continuation
coverage under the terms and provisions of the group health plans
of the Company, and the ability of the Executive and/or her
eligible dependents to obtain such coverage shall be governed
exclusively by the terms and provisions of the group health plans
themselves.

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

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

     (e) Payment Limitation. If the amounts to be paid to the Executive
under this Agreement would cause the Executive to be subject to the Code
§4999 excise tax, then to the extent that the total “parachute payments”
(as defined in Code §280G(b)(2) are equal to or greater than three (3)
times the Executive’s “base amount” (as defined in Code §280G(b)(3)), the
amounts to be paid to the Executive under this Agreement which would
constitute “parachute payments” shall be reduced to the extent necessary
so that the total “parachute payments” shall be $1.00 less than three (3)
times the Executive’s “base amount”; but the amounts to be paid shall be
so reduced only if the Executive would be economically better off, on an
after tax (federal and state income and federal excise) basis, receiving
less under this Agreement because of the Code §4999 excise tax that would
otherwise apply to the higher amount otherwise payable under this
Agreement. The Company shall have complete discretion to appoint
competent tax experts to make the calculations required by this Section,
and the calculations made by such experts shall be final and binding upon
both the Company and the Executive. Any reductions required under this
Section shall come first from the payments required under Section
5(b)(i), and then from other payments required under Section 5(b) in the
sole discretion of the Company.

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

7

 

regulations will occur.

     (g) Waiver and Release. The Company’s obligation to pay amounts to
be paid under Section 5(b) of this Agreement shall be contingent upon the
Executive executing and not revoking a Waiver and Release in the form
attached to this Agreement as Exhibit A.

     6. Executive Covenants.

     (a) Confidential Information. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge, or data relating to the Company and
its business, which is obtained by the Executive during the Executive’s
employment by the Company and which is not public knowledge (other than
by acts by the Executive or her representatives in violation of this
Agreement). During and after the termination of the Executive’s
employment with the Company, the Executive shall not, without the
Company’s prior written consent, communicate or divulge any such
information, knowledge, or data to anyone other than the Company and
those designated by it to receive such information, knowledge, or data
except pursuant to an order of a court or governmental agency. If the
Executive violates this Section 6(a), any unpaid remuneration under
Section 5(b) shall immediately be forfeited as of the date of the
violation.

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

     (c) Covenant Not to Compete.

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

8

 

     (ii) The Executive agrees and acknowledges that any breach of
the covenants contained in this Section 6(c) shall cause
irreparable injury to the Company, and that the remedy at law for
any such breach shall be inadequate, and that the Company shall be
entitled to appropriate equitable relief, including injunctive
relief, in addition to any other available remedies.

     (iii) The covenants contained in this Section 6(c) shall inure
to the benefit of the Company and its affiliated employers and
subsidiaries and their successors.

     (iv) The Executive acknowledges that the potential of
receiving severance payments pursuant to Section 5(b)(i) hereunder
constitutes valuable new consideration, and that such consideration
is adequate for the Executive’s promises in this Agreement. The
restrictions contained in this Section 6(c) are considered by the
parties hereto to be fair and reasonable and necessary for the
protection of the legitimate business interests of the Company. If
the scope of any restriction contained in this Section 6(c) is
determined by a court of competent jurisdiction to be too broad to
permit enforcement of such restriction to its full extent, then
such restriction shall be enforced to the maximum extent permitted
by law, and the Executive hereby consents and agrees to such scope
as may be judicially modified.

     (v) Notwithstanding Section 5(b), if the Executive violates
this Section 6(c), any unpaid remuneration under Section 5(b) shall
immediately be forfeited as of the date of any violation.

     (vi) The Executive agrees that the time period of the
covenants in this Section 6(c) shall not be reduced, but shall be
extended, by any period of time during which the Executive is in
violation of any such covenant or any period of time required for
litigation by the Company to enforce any such covenant.

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

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

9

 

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

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

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

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

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

10

 

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

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

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

     17. Non-Binding Mediation Required Prior to Litigation. The parties agree
that in the event that any disagreement arises under this Agreement concerning
any payment of remuneration to be made under this Agreement, or the
interpretation or application of this Agreement, or any of the provisions of
this Agreement, or any other matter with respect to the employment of the
Executive by the Company pursuant to this Agreement, other than matters covered
by Section 6 of this Agreement, then prior to the institution of any litigation
by either party, such disagreement shall be first mediated by the parties who
will use one mediator agreeable to them (or who is selected by two mediators
each agreeable to one of the parties hereto if the parties are unable to agree
unanimously on one mediator). Notwithstanding the foregoing, the parties agree
that such non-binding mediation shall not be required prior to the institution
of litigation by the Company to obtain injunctive or other equitable relief to
enforce any of the covenants in Section 6 of this Agreement. Any such
mediation shall not be binding upon either party, and the cost of any such
mediation proceedings, other than the Executive’s legal fees and expenses, the
payment of which shall be governed by the provisions of Section 7 of this
Agreement, shall be borne exclusively by the Company.

     The parties have executed this Agreement effective as of the 1st day of
January, 2004.

	 	 	 	 	 
	

	 	 
	 	LSB BANCSHARES, INC.
	 
	 	 	 	 
	

	 	 	 	

	

	 	 	 	By: Robert F. Lowe
	

	 	 	 	Its: Chairman, President and Chief
Executive Officer
	 
	 	 	 	 
	

	 	 	 	KATHY V. RICHARDSON
	 
	 	 	 	 
	

	 	 	 	

11

 

EXHIBIT A

WAIVER AND RELEASE AGREEMENT

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

	I.	 	Payment to Executive

Following the eighth day after the execution of this Release by Executive, the
Company agrees to pay to Executive the Severance Payments and reimburse
Executive for COBRA premiums as provided under Section 5 of that certain
Employment Continuity Agreement between Executive and the Company effective as
of           , less all required payroll tax withholdings.

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

	II.	 	Release and Waiver

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

 

 

permitted by law, any claims for breach of any covenant of good faith and fair
dealing, and any other claims relating to Executive’s employment with the
Company and termination thereof.

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

Executive expressly waives all claims, including those which she or he does not
know or suspect to exist in her favor as of the date of this Agreement. As used
herein, the parties understand the word “claims” to include all actions,
claims, and grievances, whether actual or potential, known or unknown, and
specifically but not exclusively including all claims against the Company and
the Releasees arising from or relating to Executive’s employment with the
Company, the termination thereof or any other conduct by the Company or the
Releasees occurring on or prior to the date Executive signs this Agreement. All
such claims are forever barred by this Agreement whether they arise in contract
or tort or under a statute or any other law.

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

	III.	 	Voluntary Agreement and Other Acknowledgments

Executive acknowledges that:

	•	 	I have read this Waiver and Release Agreement, and I
understand its legal and binding effect. I am knowingly and
voluntarily executing this Waiver and Release Agreement of
my own free will.
	 
	•	 	No other promises or agreements of any kind been have been made
to or with me by any person or entity to cause me to sign
this Waiver and Release Agreement.
	 
	•	 	I have had the opportunity to seek, and the Company has
expressly advised me to seek, legal counsel prior to
signing this Waiver and Release Agreement.
	 
	•	 	I have given at least 45 days from the date I received
this form to consider the severance benefits being offered
to me and the terms of this Waiver and Release Agreement.
	 
	•	 	If I am age 40 or more, on the date that I received a copy
of this Waiver and Release Agreement, I also received a
description of:

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

2

 

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

	IV.	 	Revocation of Waiver and Release Agreement

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

	V.	 	Non-Disparagement.

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

	VI.	 	Complete Agreement.

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

	VII.	 	Governing Law

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

	 	 	 
	

	 	

	KATHY V. RICHARDSON

	 	Date

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

3

 

Schedule to Exhibit 10.9:

The material details in which the Employment Continuity Agreement between LSB
Bancshares, Inc. (“Bancshares”) and Pamela J. Varela differs from the filed
Employment Continuity Agreement between Bancshares and Kathy Richardson, are as
follows:

	•	 	Pamela J. Varela is the party to her Employment Continuity Agreement and Exhibit A thereto; and
	 
	•	 	Section 3(g) provides for an annual base salary of no less than $85,000.00.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00062-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00062-of-00352.parquet"}]]