FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1996
Commission File Number 0-11448
LSB BANCSHARES, INC.
One LSB Plaza
Lexington, North Carolina 27292
(910) 248-6500
Incorporated in the State of North Carolina
IRS Employer Identification No. 56-1348147
Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, Par Value $5.00 Per Share
LSB Bancshares, Inc., has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and has been subject to
such filing requirements for the past 90 days.
The number of shares outstanding as of September 30, 1996 was
5,403,539.
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LSB BANCSHARES, INC.
FORM 10-Q
INDEX
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
September 30, 1996 and December 31, 1995
Consolidated Statements of Income
Three Months Ended September 30, 1996 and 1995
Nine Months Ended September 30, 1996 and 1995
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1996 and 1995
Notes to Consolidated Financial Statements
Nine Months Ended September 30, 1996 and 1995
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
Item 10. Material Contracts
Signatures
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<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LSB Bancshares, Inc.
Consolidated Balance Sheets
(In Thousands) September 30 December 31
<CAPTION> 1996 1995
Assets <C> <C>
Cash and Due from Banks $ 19,055 $ 17,581
Federal Funds Sold 35,245 10,025
Investment Securities:
Held to Maturity, Market Value $72,454 and $81,414 71,966 82,922
Available for Sale, at Market Value $26,923 and $26,046 26,923 26,046
Loans:
Commercial 92,534 74,980
Installment 52,671 48,972
Mortgage 115,595 102,715
Total Loans 260,800 226,667
Less, Reserve for Loan Losses (2,870) (2,730)
Net Loans 257,930 223,937
Premises and Equipment 8,900 8,733
Other Assets 6,325 5,782
Total Assets $ 426,344 $ 375,026
LIABILITIES
Deposits:
Demand $ 42,304 $ 42,660
Savings, NOW and Money Market Accounts 173,388 159,894
Certificates of Deposit of less than $100,000 101,414 97,757
Certificates of Deposit of $100,000 or more 42,281 22,978
Total Deposits 359,387 323,289
Securities Sold Under Agreements to Repurchase 4,124 1,494
Borrowings from the Federal Home Loan Bank 10,000
Other Liabilities 2,431 2,133
Total Liabilities 375,942 326,916
SHAREHOLDERS' EQUITY
Capital Stock: Common, authorized 10,000,000
shares, Par Value $5, issued 5,403,539 shares
in 1996 and 5,375,035 shares in 1995 27,017 21,495
Paid-In Capital 11,331 11,255
Retained Earnings 12,186 15,048
Net Unrealized Gain (Loss) on Securities Available
for Sale, Net of taxes (132) 312
Total Shareholders' Equity 50,402 48,110
Total Liabilities and Shareholders' Equity $ 426,344 $ 375,026
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<TABLE>
LSB Bancshares, Inc.
Consolidated Statements of Income
(In Thousands Except Share Data) Three Months Ended Nine Months Ended
<CAPTION> September 30 September 30
1996 1995 1996 1995
Interest Income <C> <C> <C> <C>
Interest and Fees on Loans $5,893 $5,241 $16,702 $14,971
Interest on Investment Securities:
Taxable 1,029 1,178 3,309 3,589
Tax Exempt 445 478 1,416 1,452
Federal Home Loan Bank 64 64
Federal Funds Sold 318 333 540 827
Total Interest Income 7,749 7,230 22,031 20,839
Interest Expense
Deposits 3,018 2,978 8,623 8,479
Securities Sold Under Agreements to Repurchase 21 14 57 38
Borrowings from the Federal Home Loan Bank 121 121
Total Interest Expense 3,160 2,992 8,801 8,517
Net Interest Income 4,589 4,238 13,230 12,322
Provision for Loan Losses 103 63 319 189
Net Interest Income After Provision
for Loan Losses 4,486 4,175 12,911 12,133
Noninterest Income
Service Charges on Deposit Accounts 508 442 1,507 1,331
Gains (Losses) on Sales of Mortgages 25 (2) 95 6
Other Operating Income 466 364 1,480 958
Total Noninterest Income 999 804 3,082 2,295
Noninterest Expense
Personnel Expense 1,872 1,882 5,744 5,592
Occupancy Expense 193 191 584 590
Equipment Depreciation and Maintenance 186 169 521 491
Other Operating Expense 991 966 2,908 3,184
Restructuring Charges 5 0 522 0
Total Noninterest Expense 3,247 3,208 10,279 9,857
Income Before Income Taxes 2,238 1,771 5,714 4,571
Income Taxes 666 463 1,566 1,136
Net Income $1,572 $1,308 $4,148 $3,435
Net Income Per Share $0.29 $0.24 $0.77 $0.64
Weighted Average Shares Outstanding 5,403,539 5,371,933 5,390,572 5,362,318
</TABLE>
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<TABLE>
LSB Bancshares, Inc
Consolidated Statements of Cash Flows
(In Thousands) Nine Months Ended September 30
<CAPTION> 1996 1995
Cash Flow From Operating Activities <C> <C>
Net income $ 4,148 $ 3,435
Adjustments to reconcile net income to net cash:
Depreciation and amortization 547 525
Securities premium amortization and
discount accretion, net 32 (244)
(Increase) decrease in loans held for sale (4,078) 699
Deferred income taxes 131 183
Income taxes payable (290) (54)
(Increase) decrease in income earned
but not received (261) (633)
Increase (decrease)in interest accrued
but not paid 224 211
Provision for loan losses 319 189
Gain on sale of investment securities 0 0
Gain on sale of premise and equipment (7) (1)
Net cash provided by operating activities 765 4,310
Cash Flow From Investing Activites
Purchases of securities held to maturity (3,000) (12,438)
Proceeds from maturities of securities held to maturity 13,927 14,499
Proceeds from sales of securities held to maturity 0 0
Purchases of securities available for sale (8,555) (7,983)
Proceeds from maturities of securities available for sale 7,001 9,985
Proceeds from sales of securities available for sale 0 0
Net (increase) decrease in loans made to customers (30,232) (14,608)
Purchases of premises and equipment (739) (400)
Proceeds from sale of premises and equipment 31 39
Net (increase)decrease in Federal Funds sold (25,220) (1,400)
(Increase) decrease in other assets (185) 68
Net cash used by investing activities (46,972) (12,238)
Cash Flow From Financing Activities
Net increase (decrease) in demand deposits,
NOW, money market and savings accounts 13,138 (30)
Net increase (decrease) in time deposits 22,959 7,903
Net increase (decrease) in securities
sold under agreements to repurchase 2,630 344
Proceeds from issuance of long-term debt 10,000
Dividends paid (1,630) (1,545)
Net increase (decrease) in other liabilities 366 (203)
Common stock Issued 218 289
Net cash provided by financing activities 47,681 6,758
Increase (decrease) in cash 1,474 (1,170)
Cash at the beginning of the period 17,581 17,326
Cash at end of period $ 19,055 $ 16,156
Supplemental Disclosures Of Cash Flow Information
Cash paid during the years for:
Interest $ 8,579 $ 8,306
Income Taxes 1,835 1,010
Supplemental Disclosures
Transfer of loans to other real estate owned $ 277 $ 354
Unrealized losses on securities available for sale:
Increase (decrease) in securities available for sale $ (673)$ 787
Increase (decrease) in deferred taxes (229) 268
Increase (decrease) in shareholders' equity (444) 519
</TABLE>
<PAGE>
LSB Bancshares, Inc.
Notes to Consolidated Financial Statements
Nine Months Ended September 30, 1996 and 1995
Note 1. Basis of Presentation
The accompanying unaudited Consolidated Financial Statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
Operating results for the nine-month period ended September 30,
1996 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1996.
The accompanying unaudited Consolidated Financial Statements
include the accounts of LSB Bancshares, Inc., (the Corporation)
and its wholly-owned subsidiary Lexington State Bank (the Bank)
and the Bank's wholly-owned subsidiaries Peoples Finance Company
of Lexington, Inc. and LSB Financial Services, Inc.
For further information, refer to the Consolidated Financial
Statements and footnotes thereto included in the Corporation's
annual report on Form 10-K for the year ended December 31, 1995.
Note 2. Investment Securities
Investment securities totaling $64,148,000 and $52,709,000 as of
September 30, 1996 and 1995, were pledged to secure public
deposits as required by law.
<PAGE>
Note 3. Loans (Table In Thousands)
A summary of consolidated loans follows:
September 30
1996 1995
Commercial $ 92,534 $ 67,147
Installment 49,813 46,669
Mortgage 115,595 102,727
Credit Cards 2,858 2,497
Total $ 260,800 $ 219,040
Bancshares' policy under SFAS 114 for impaired loan accounting
subjects all loans to impairment recognition except for large
groups of smaller-balance homogeneous loans such as credit card,
residential mortgage and consumer loans. Bancshares generally
considers most loans 90 days or more past due and all nonaccrual
loans to be impaired. Interest income on LSB Bancshares, Inc.
Notes to Consolidated Financial Statements (cont.)
Nine Months Ended September 30, 1996 and 1995
impaired loans is recognized consistent with Bancshares' income
recognition policies. For all impaired loans other than
nonaccrual loans, interest income is recorded on an
accrual basis. Interest income on nonaccrual loans is recognized
on a cash basis. The adoption of SFAS 114 and SFAS 118 did not
have a material effect on Bancshares' financial position or
results of operations and required no increase to the reserve for
loan and lease losses.
At September 30, 1996, the total investment in loans that are
considered impaired under SFAS 14 was $2,881,613 of which
$1,057,578 were nonaccrual loans. A related valuation allowance
of $397,684 was determined for the total amount of impaired
loans. The average recorded investment in impaired loans for the
quarter ended September 30, 1996 was approximately $3,057,775.
<PAGE>
Note 4. Reserve for Loan Losses
(In Thousands)
The following set forth the analysis of the consolidated reserve
for loan losses:
Nine Months Ended
September 30
1996 1995
Balances at beginning of periods $ 2,730 $ 2,641
Provision for loan losses 319 189
Recoveries of amounts previously
charged off 86 75
Loan losses (265) (196)
Balances at end of periods $ 2,870 $ 2,709
Note 5. Restructuring Charges
In January 1996, the Board of Directors of Bancshares approved a
strategic plan to improve operating efficiencies. The major
element of the plan was the reduction in staff through an offer
of early retirement to all employees 55 years of age or older
with ten years or more of service. Of the employees offered this
opportunity, 68% opted for early retirement, which was effective
March 31, 1996. The costs associated with increases in the
actuarially determined pension and postretirement medical
expenses totaled $490,000, severance costs associated with the
early retirement package totaled $27,000 and professional fees
for administration of the early retirement totaled $5,000.
<PAGE>
LSB Bancshares, Inc.
Notes to Consolidated Financial Statements (cont.)
Nine Months Ended September 30, 1996 and 1995
Note 6. Stock Split
In January of 1996, the Board of Directors of Bancshares declared
a five-for-four stock split payable February 15, 1996. All
previously reported per share amounts have been restated to
reflect this stock split.
Note 7. Other Accounting Changes
As of January, 1996, Bancshares adopted Financial Accounting
Standards No. 122 (SFAS 122), "Accounting for Mortgage Servicing
Rights". SFAS 122 requires that an entity recognize as separate
assets rights to service mortgage loans for others however those
rights are acquired. This statement amends certain provisions of
SFAS 65 to eliminate the distinction between rights to service
mortgage loans for others that are acquired through loan
origination activities and rights to service mortgage loans for
others that are acquired through purchase transactions. All of
Bancshares' mortgage servicing rights were acquired through loan
origination activities.
Under SFAS 122, servicing rights are to be calculated based on
the present value of the fair market value of the servicing fees
at the time the loan is sold, with consideration given to any
prepayment assumptions. The value of the servicing rights are
then amortized over the life of the loan. SFAS 122 also requires
that all capitalized servicing rights be evaluated periodically
for impairment based on the excess of the carrying amount of such
rights over their fair value. For purposes of measuring
impairment, capitalized mortgage servicing rights are stratified
on the basis of one or more of the predominant risk
characteristics of the underlying loans. The application of SFAS
122 to originated mortgage servicing rights acquired through loan
origination activities for the nine months ended September 30,
1996 of $84,000 was not material and resulted in no impairment
adjustments.
<PAGE>
Disclosure requirements of Financial Accounting Standards No. 123
(SFAS 123) "Accounting for Stock-Based Compensation" are
applicable for financial statements for fiscal years beginning
after December 15, 1995. SFAS 123 establishes a fair value based
method of accounting for stock options and other equity
instruments used in employee compensation plans. SFAS 123 also
requires significantly expanded disclosures, including disclosure
of the pro forma amount of net income and earnings per share as
if the fair value based method were used to account for stock-
based compensation, if the intrinsic value method of APB -25 is
retained. Bancshares intends to retain APB-25 in its pro forma
disclosure for fiscal year 1996.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Three Months Ended September 30, 1996 Compared to Three
Months Ended September 30, 1995
Net Interest Income
The primary source of earnings for the Corporation is net
interest income, which represents the dollar amount by
which interest generated by earning assets exceeds the cost
of funds. Earning assets consist primarily of loans and
investment securities and cost of funds is the interest paid
on interest-bearing deposits.
Total interest income of $7,749,000 for the third quarter of
1996 was up $519,000 or 7.2% compared to $7,230,000 for the
third quarter of 1995. Total interest expense for the same
period increased $168,000 or 5.6%. The moderate interest
rate environment of the first two quarters of 1996 continued
into the third quarter of the year. The prime interest
rate, which dropped 25 basis points to 8.25% on February 1,
1996, has remained unchanged. The prime interest rate is
used as an interest rate indicator by banks. Stable
interest rates, coupled with extremely strong growth in the
bank's loan portfolio and relatively flat deposit growth,
contributed to the gain in net interest income experienced
in the third quarter of 1996. Net interest income of
$4,589,000 for the third quarter of 1996 was up $351,000 or
8.3% compared to $4,238,000 for the third quarter of 1995.
Noninterest Income and Expense
Noninterest income for the third quarter of 1996 was up
$195,000 or 24.3% compared to the third quarter of 1995.
Fee income from service charges on deposit accounts for the
third quarter of 1996 was up $66,000 or 14.9% compared to
the third quarter of 1995. The Bank announced an increase
in service charge fees in September 1995 which became
effective November 1, 1995. Management believes this
adjustment in service charge fees has significantly
benefitted noninterest income for 1996. Gains on sales of
mortgages increased by a modest $27,000 in the third quarter
of 1996 primarily from the value of servicing rights of
mortgages sold in the secondary market. Bancshares adopted
Financial Accounting Standards No. 122 (SFAS 122),
<PAGE>
"Accounting for Mortgage Servicing Rights" as of January,
1996. The majority of the activity under SFAS 122 occurred
during the second quarter of 1996. Other operating income
for the third quarter of 1996 was up $102,000 or 28.0%
compared to the third quarter of 1995. The majority of this
gain is from increased fee income related to mortgage
lending and increased fee income from the servicing of
mortgage loans sold.
Noninterest expense for the third quarter of 1996 increased
$39,000 or 1.2% compared to the third quarter of 1995. This
small increase was the result of a decline in personnel
expense as well as smaller than normal increases all other
expense categories. The reduction in personnel expense,
which is comprised of salaries and fringe benefits, was due
primarily to the Bank's reorganization in the first quarter
of 1996 by way of an early retirement window for employees
55 years of age with ten years of service. This
reorganization was a part of a strategic plan for improving
operating efficiencies. Occupancy expense for the third
quarter of 1996 increased $2,000 or 1.0% compared to the
third quarter of 1995. Equipment depreciation and
maintenance expense increased $17,000 or 10.1% during the
same period. Other operating expense increased $25,000 or
2.6% in the third quarter of 1996 compared to the third
quarter of 1995.
Nine Months Ended September 30, 1996 Compared to Nine Months
Ended September 30, 1995
Net Interest Income
Net interest income of $13,230,000 for the first nine months
of 1996 was up $908,000 or 7.4% compared to $12,322,000 for
the first nine months of 1995. Strong loan demand for the
first nine months of the year along with a stable interest
rate environment have been contributing factors to the gain
in income. The total loan portfolio at September 30, 1996
was up $34,137,000 or 15.1% compared to December 31, 1995
and $41,760,000 or 19.1% compared to September 30, 1995.
Growth in the commercial loan portfolio has increased in the
third quarter of 1996 and now shows a gain of $25,387,000 or
37.8% over the third quarter of 1995. For the periods being
compared, mortgage loans have increased $12,868,000 or
12.5%. Deposit growth, while much slower during the first
<PAGE>
half of 1996, increased during the third quarter. The
majority of that growth has come from certificates of
deposit in denominations of $100,000 or more. This category
of deposit more than doubled in the third quarter of 1996
compared to the third quarter of 1995. The total deposit
portfolio at September 30, 1996 was up $36,098,000 or 11.2%
compared to December 31, 1995 and $41,608,000 or 13.1%
compared to September 30, 1995.
Noninterest Income and Expense
Noninterest income for the first nine months of 1996 was up
$787,000 or 34.3% compared to the first nine months of 1995.
As with the three-month comparison, the majority of the
increase came from other operating income, which was up
$522,000 or 54.5% over the same period in 1995. This gain
in other operating income came primarily from increased fee
income from the Bank's trust department, increased fee
income related to mortgage lending and increased fees from
the servicing of sold mortgage loans. Fee income from
service charges on deposit accounts for the first nine
months of 1996 was up $176,000 or 13.2% compared to the same
period in 1995. The Bank increased service charge fees in
November, 1995, resulting in a positive effect on fee
income. Gains on sales of mortgages increased $89,000 the
first nine months of 1996 compared to the first nine months
of 1995. This gain was due in part to the new requirements
of SFAS 122, "Accounting for Mortgage Servicing Rights",
which requires a value to be assigned to the loan and the
servicing rights.
Noninterest expense for the first nine months of 1996
increased $422,000 or 4.3% compared to the first nine months
of 1995. Restructuring charges of $517,000 were incurred in
the first quarter of 1996, with an adjustment of $5,000
expensed in the current quarter, as a part of the Bank's
strategic plan for improving operating efficiencies. The
restructuring plan included an offer for early retirement to
all employees 55 years of age with ten years of service. Of
this group, 68% opted for early retirement, which was
effective March 31, 1996. Personnel expense, comprised of
salaries and fringe benefits, increased $152,000 or 2.7% in
the first nine months of 1996 compared to the first nine
months of 1995. Occupancy expense for the first nine months
of 1996 decreased $6,000 or 1.0% compared to the first nine
months of 1995. Equipment depreciation and maintenance
increased $30,000 or 6.1% during the same period. Other
<PAGE>
operating expense decreased $276,000 or 8.7% the first nine
months of 1996 compared to the first nine months of 1995. A
reduction in the FDIC insurance premium at the beginning of
the current year accounts for the majority of this
reduction.
Asset Quality and Provision for Loan Losses
The reserve for loan losses was $2,870,000 or 1.10% of loans
outstanding at September 30, 1996 compared to $2,730,000 or
1.20% of loans outstanding at December 31, 1995 and
$2,709,000 or 1.24% at September 30, 1995. Nonperforming
loans totaled $2,597,000 or 1.00% of loans outstanding at
September 30, 1996 compared to $3,121,000 or 1.42% of loans
outstanding at September 30, 1995. Nonperforming loans
include nonaccrual loans, restructured loans, other real
estate acquired through foreclosed properties and accruing
loans ninety days or more past due. At September 30, 1996
the Bank had $259,000 in restructured loans, $1,093,000 in
nonaccrual loans and $1,080,000 in other real estate.
Accruing loans past due 90 days or more were $164,000 at
September 30, 1996 compared to $878,000 at September 30,
1995. The accrual of interest generally discontinues on any
loan that becomes 90 days past due as to principal or
interest unless collection of both principal and interest is
assured by way of collateralization, guarantees or other
security and the loan is considered to be in the process of
collection. At September 30, 1996, the reserve for loan
losses was 1.11 times the nonperforming loans, compared to
1.08 times at December 31, 1995 and .87 times nonperforming
loans at September 30, 1995.
Loans classified for regulatory purposes as loss, doubtful,
substandard or special mention that have not been disclosed
as nonperforming do not represent or result from trends or
uncertainties which management reasonably expects will
materially impact future operating results, liquidity, or
capital resources, or represent material credits about which
management is aware of any information which causes
management to have serious doubts as to the ability of such
borrowers to comply with the loan repayment terms.
Income Taxes
Accrued taxes applicable to income for the six-month period
ended September 30, 1996 was up $430,000 compared to the
nine-month period ended September 30, 1995. Pretax income
<PAGE>
for the first nine months of 1996 of $5,714,000 was up
$1,143,000, or 25.0% compared to $4,571,000 for the nine-
month period of 1995. The increase in accrued taxes for the
first nine months of 1996 is attributable to this increase
in pretax income.
Capital Resources and Shareholders' Equity
Regulatory guidelines require minimum levels of capital,
based on a risk weighting of each asset category and off-
balance sheet contingencies. At September 30, 1996, based
on these measures, the Bank's ratio for Tier 1 capital was
19.71% compared to the regulatory minimum risk-based capital
ratio requirement of 4%. The Bank's Tier 2 capital ratio at
this date was 20.83% compared to the regulatory requirement
of 8%. Tier 1 or core capital, as defined by federal bank
regulators, equals common shareholders' equity capital less
goodwill and other disallowed intangible assets. Tier 2
capital is the allowable portion, as defined by the federal
regulators, of the allowance for loan losses and 100% of
Tier 1 capital. Federal banking guidelines for risk-based
capital limit the amount of the allowance for loan losses
allowable in Tier 2 or total capital to 1.25% of risk-
weighted assets.
In January of 1996, the Board of Directors of Bancshares
announced a five-for-four stock split payable February 15,
1996. This increased the outstanding shares of capital
stock to 5,382,760. In June of 1996, 7,967 shares of
capital stock were issued under the Bank's stock option
benefit and in July another 12,812 shares were issued
placing total shares outstanding at 5,403,539.
Interest Rate Sensitivity and Liquidity
Asset/liability management is the process used to monitor
exposure to interest rate risk, balance sheet trends and
pricing policies. It also addresses proper liquidity
positioning and sound capital. The goals of asset/liability
management are to ensure profitability and performance,
minimize risk, adhere to proper liquidity and maintain sound
capital.
<PAGE>
Profitability and performance are affected by balance
sheet composition and interest rate movements. Management
responsibility for both liquidity and interest sensitivity
reside with a designated Asset/Liability Management
Committee ("ALCO"). Market conditions, interest rate trends
and the economic environment are all evaluated by the ALCO
as a part of its asset/liability management decision-making
process. Based upon its view of existing and expected
market conditions, the ALCO adopts balance sheet strategies
intended to optimize net interest income to the extent
possible while minimizing the risk associated with
unanticipated changes in interest rates. Core deposits have
historically been the primary funding sources for asset
growth. Correspondent relationships have also been
maintained with several large banks in order to have access
to federal funds purchases when needed. The Bank also has
available lines of credit maintained with the Federal Home
Loan Bank (the "FHLB") which can be used for funding and/or
liquidity needs.
The extremely strong loan demand experienced in 1996 coupled
with a much slower deposit growth, while producing increased
earnings, began to show signs of pressure on the Bank's
volatile liability ratios and liquidity ratio. To improve
the Bank's balance sheet position, management decided to
draw on its line of credit with the FHLB in the amount of
$10,000,000. This borrowing was executed in July as a
principal reducing credit ("PRC") with a term of three
years, with quarterly payments of principal and monthly
payments of interest. This strategy serves to improve the
volatile liability ratios and gives the Bank the ability to
service the strong loan demand being experienced while
allowing deposit growth to build.
The asset/liability management process also seeks to match
maturities and repricing opportunities of interest-sensitive
assets and liabilities to minimize risk of interest rate
movements. On that date, the gap between interest-sensitive
assets and interest-sensitive liabilities was a negative
$90,151,000 or .69. Management believes that is an
acceptable level under current economic conditions.
Accounting and Regulatory Issues
As of January, 1996, the Bank adopted Financial Accounting
Standards No. 121 (SFAS 121), "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of". SFAS 121 requires long-lived assets and
<PAGE>
certain identifiable intangibles to be separated into two
categories for purposes of accounting for an impairment of
assets. Assets to be held and used are to be reviewed
whenever events or changes in circumstances indicate that
the carrying value may not be recoverable. Long-lived
assets to be disposed of that are not subject to APB-30
requirements are to be accounted for at the lower of
carrying amount or fair value less cost to sell when
management has committed to a plan to dispose of the assets.
The Bank's policy is to review all assets to be held and
used and long-lived assets to be disposed of in accordance
to SFAS 121 and recognize any impairment loss at the time
of occurrence. As of September 30, 1996, the Bank had no
assets to be held and used requiring impairment recognition
and no long-lived assets to be disposed of.
As of January, 1996, the Bank adopted Financial Accounting
Standards No. 122 (SFAS 122), "Accounting for Mortgage
Servicing Rights". SFAS 122 requires that an entity
recognize as separate assets rights to service mortgage
loans for others however those rights are acquired. Certain
provisions of SFAS 65 are amended by SFAS 122 to eliminate
the distinction between rights to service mortgage loans for
others acquired through loan origination activities, and
rights to service mortgage loans that are acquired through
purchase transactions. While the Bank does have mortgage
servicing rights acquired through loan origination
activities, it does not have purchased mortgage servicing
rights acquired through purchase transactions.
Under SFAS 122, servicing rights are to be calculated based
on the present value of the fair market value of the
servicing fees, with consideration given to any prepayment
assumptions and amortization over the life of the loan.
SFAS 122 also requires that all capitalized servicing rights
be evaluated for impairment based on the excess of the
carrying amount of such rights over their fair value. For
purposes of measuring impairment, capitalized mortgage
serving rights are stratified on the basis of one or more of
the predominant risk characteristics of the underlying
loans. The application of SFAS 122 to originated mortgage
servicing rights acquired through loan origination
activities for the nine months ended September 30, 1996, was
not material and resulted in no impairment adjustments to
capitalized mortgage servicing rights.
<PAGE>
Disclosure requirements of Financial Accounting Standards
No. 123 (SFAS 123) "Accounting for Stock-Based Compensation"
are applicable for financial statements for fiscal years
beginning after December 15, 1995. SFAS 123 establishes a
fair value based method of accounting for stock options and
other equity instruments used in employee compensation
plans. SFAS 123 also requires significantly expanded
disclosures, including disclosure of the pro forma amount of
net income and earnings per share as if the fair value based
method were used to account for stock-based compensation, if
the intrinsic value method of APB-25 is retained. The Bank
intends to retain APB-25 in its pro forma disclosure for
fiscal year 1996.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. None filed.
Item 10. Material Contracts
Exhibit A
EMPLOYMENT CONTINUITY AGREEMENT
THIS EMPLOYMENT CONTINUITY AGREEMENT (this "Agreement") is between
LSB BANCSHARES, INC., a North Carolina Corporation (referred to in this
Agreement as the "Company," which term includes any subsidiary of the
Company where the context so requires), and ROBERT F. LOWE, Chairman of
the Board, President and Chief Executive Officer of the Company and
a resident of Lexington, North Carolina ("Executive"), and is effective
as of July 9, 1996.
<PAGE>
The Company's Board of Directors (the "Board") acknowledges
that Executive's contributions to the past and future growth and
success of the Company have been and will continue to be substantial.
As a publicly held corporation, the Board recognizes that there exists
a possibility of a change in control of the Company. The Board also
recognizes that the possibility of such a change in control may
contribute to uncertainty on the part of executive officers and may
result in the departure or distraction of executive officers from their
operating responsibilities.
Outstanding management of the Company is essential to
advancing the best interests of the Company and its shareholders. In
the event of a threat or occurrence of a bid to acquire or change
control of the Company or to effect a business combination, it is
particularly important that the Company's business be continued with
a minimum of disruption. The Board believes that the objective of
securing and retaining outstanding management will be achieved if the
Company's key management employees are given assurances of
employment security so they will not be distracted by personal
uncertainties and risks created by such circumstances.
The Board believes that such assurances will secure the
continued services of the Company's key operational and management
executives in the performance of both their regular duties and such
extra duties as may be required of them during such periods of
uncertainty, enable the Company to rely on such executives to manage
its affairs during any such period with less concern for their personal
risks, and enhance the Company's ability to attract new key executives
as needed.
<PAGE>
The Stock Option and Compensation Committee of the Board
(the "Committee") has recommended, and the Board has approved,
entering into employment continuity agreements with the Company's
key management executives, including Executive, in order to achieve
the foregoing objectives.
The Company and Executive enter into this Agreement to
induce Executive to remain an employee of the Company and to
continue to devote his full energy to the Company's affairs.
1. Employment.
(a) Effective Date. The Company and Executive
hereby agree that Executive's employment shall continue on and after
July 9, 1996 (the "Effective Date"). The terms and conditions of
Executive's employment are further described in Section 2 of this Agreement.
(b) Employment Period. If Executive is employed
by the Company on a Control Change Date (as defined in Section 1(c)
of this Agreement), the Company further agrees that the Company
shall continue to employ Executive and Executive further agrees that
he shall continue as an employee of the Company for the Employment
Period. For purposes of this Agreement, the Employment Period
begins on a Control Change Date and ends on the earlier of the third
anniversary of a Control Change Date or on Executive's Normal
Retirement Date (as defined under the Lexington State Bank
Employees Pension Plan, as in effect on the Effective Date or as
amended prior to a Control Change Date). During the Employment
Period, the terms and conditions of Executive's employment shall be
as described in Section 3 of this Agreement.
(c) Change in Control and Control Change Date.
For purposes of this Agreement, a Change in Control occurs if, after
the Effective Date, (i) any Person (other than a trustee or other
fiduciary holding securities under an employee benefit plan of the
Company) 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 (ii) as the direct
or indirect result of, or in connection with, a cash tender or exchange
offer, a merger, consolidation, reorganization or other business
combination, a sale of all or substantially all of the Company's assets,
a contested election of directors, or any combination of these
transactions, and, with respect to (i) or (ii) above, the Continuing
<PAGE>
Directors (as defined below) cease to constitute a majority of the
Board, or any successor's board, within two years after the closing
date of the last of such transactions. For purposes of the preceding
sentence, "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; and "Person" means any individual, firm,
corporation, partnership or other entity, including a "group" as defined
in Section 13(d)(3) of the Securities Exchange Act of 1934, and any
successor (by merger or otherwise) of such entity.
For purposes of this Agreement, a Control Change Date
is the date on which an event described in (i) or (ii) of the first
sentence of this Section 1(c) is consummated. If a Change in Control
occurs on account of a series of transactions, a Control Change Date
is the closing date of the last of such transactions.
2. Terms of Employment Before a Control Change Date.
(a) General Duties. Excluding periods of vacation
and sick leave to which Executive is entitled, Executive shall continue
to exercise such authority and perform such executive duties as are
commensurate with the authority being exercised and duties being
performed by Executive immediately before the Effective Date.
(b) Place of Employment. Executive's services shall
be performed at the location where Executive was employed
immediately before the Effective Date. However, if the Company and
Executive agree, the location of Executive's employment may be
changed without affecting Executive's rights under this Agreement.
(c) Working Facilities and Support Staff. Executive
is entitled to an office of a size and with furnishings and other
appointments at least equal to those provided to Executive before the
Effective Date. Executive is entitled to secretarial and other
assistance, and to such other facilities, equipment, and supplies at least
equal to those provided to Executive before the Effective Date.
(d) Expenses Generally. Executive is entitled to
receive prompt reimbursement for all reasonable expenses incurred by
Executive. Reimbursement shall be made in accordance with the
Company's policies and procedures in effect on the Effective Date or
amended prior to a Control Change Date.
<PAGE>
(e) Meetings, Conventions, and Seminars.
Executive is encouraged to attend seminars, professional meetings and
conventions, and educational courses. The cost of travel, tuition or
registration, food, and lodging for attending those activities shall be
paid by the Company. Other costs shall be paid by Executive, unless
the Company authorizes those costs. If such other costs are authorized
expenses, Executive shall be reimbursed after satisfying the
Company's policies and procedures for such reimbursement.
(f) Promotional Expenses. Executive is encouraged
to incur reasonable expenses for promoting the Company's business.
Such promotional expenses include travel, entertainment (including
memberships in social and athletic clubs), professional advancement,
and community service expenses. Executive agrees to bear those
expenses except to the extent that those expenses are incurred at the
Company's specific direction or those expenses are specifically
authorized by the Company as expenses that the Company may pay
directly or indirectly through reimbursement to Executive.
(g) Outside Activities. Executive may (i) serve on
corporate, civic, or charitable boards or committees; (ii) deliver
lectures, fulfill speaking engagements, or teach at educational
institutions; and (iii) manage personal investments, provided that such
activities do not materially interfere with the performance of
Executive's responsibilities for the Company . To the extent that any
such activities have been conducted by Executive before the Effective
Date, such prior conduct of activities and any subsequent conduct of
activities similar in nature and scope shall not be deemed to interfere
with the performance of Executive's responsibilities for the Company.
(h) Compensation and Benefits. Executive's
compensation and benefits shall be the same as those in effect on the
Effective Date, subject to periodic review and adjustment by the
Company or as amended prior to a Control Change Date.
As of the Effective Date, Executive's
compensation includes, but is not limited to, the following: (i) base
salary; (ii) incentive compensation pursuant to the Company's
Management Incentive Plan; (iii) deferred compensation pursuant to
the Company's Deferred Compensation Plan; (iv) participation in the
Lexington State Bank Employees Savings Plus Plan; (v) participation
in the Lexington State Bank Employees Pension Plan; (vi) participation
in the Company's 1986 Employee Incentive Stock Option Plan; and
(vii) participation in the Company's 1996 Omnibus Stock Incentive
Plan.
<PAGE>
As of the Effective Date, Executive's benefits
include, but are not limited to, the following: (i) use of an automobile
and payment of related expenses; (ii)
group life, accidental death and dismemberment, long-term disability,
and medical insurance; (iii) paid vacation and holidays; and (iv) sick
leave.
This Section 2(h) does not change the terms of
any compensation arrangement, benefit program or benefit plan
maintained by the Company and does not give Executive any
additional vested interest in any compensation or benefit to which
Executive is not already entitled under any such program or plan on
the Effective Date.
(i) Disability.
(i) The Company, pursuant to a resolution
duly adopted by the Board, may terminate this Agreement if Executive
becomes Disabled by giving Executive written notice of its intention
to terminate Executive's employment, subject to the terms and
conditions specified in the notice. If Executive becomes Disabled and
does not return to the performance of his duties for the Company in
accordance with the terms and conditions set forth in the notice,
Executive's employment with the Company shall terminate (the
"Disability Effective Date"). For purposes of this Agreement,
"Disabled" has the meaning set forth under the Long Term Disability
Plan of Lexington State Bank or any successor plan or amendment to
such Plan.
(ii) If Executive's employment is terminated
because Executive is Disabled, Executive is entitled, after the
Disability Effective Date, to receive disability and other benefits on a
basis comparable to those provided by the Company to disabled
employees and their families in accordance with such plans, programs,
and policies relating to disability, if any, as in effect on the Effective
Date or as amended prior to a Control Change Date.
(j) Confidential Information. 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 Executive during Executive's
employment by the Company and which is not public knowledge
(other than by acts by Executive or his representatives in violation of
this Agreement). After the termination of Executive's employment
with the Company, 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. In
no event may an asserted violation of this Section 2(j) constitute a
basis for deferring or withholding any amounts otherwise payable to
Executive under this Agreement.
<PAGE>
(k) 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.
3. Terms of Employment On and After a Control Change
Date.
(a) General. During the Employment Period, the
terms and conditions of Executive's employment, as described in
Section 2, shall continue in effect, except that such terms and
conditions are fixed as of the day before a Control Change Date and
Executive's compensation and benefits are governed by Section (3)(b)
.
(b) Compensation and Benefits. During the
Employment Period, the Company shall (i) continue to pay Executive
an annual base salary not less than Executive's annual base salary on
the day before a Control Change Date, (ii) pay Executive incentive
compensation in amounts not less in amount than those paid to
Executive during the twelve-month period preceding the day before a
Control Change Date, and (iii) continue all compensation and
employee benefit plans and programs, including all compensation,
plans and benefits described in Section 2(h) of this Agreement, at
levels in effect on the day before a Control Change Date (to the extent
practicable and subject to such reductions as may be required to
maintain such plans in compliance with applicable nondiscrimination
and other federal laws regulating employee benefit plans and
programs) or pay Executive an amount necessary to provide essentially
comparable benefits (assuming, in the case of insured benefits, that
Executive is then insurable at standard rates).
4. Liquidated Damages Upon Termination of Employment.
(a) General. Executive is entitled to receive
Continued Compensation according to the remaining provisions of this
Section if Executive's employment with the Company terminates
during the Employment Period because of an event described in
Section 4(b) or 4(c). If Executive's employment terminates during the
Employment Period and if an event described in Section 4(b) or 4(c)
has not occurred, this Agreement terminates on the date Executive's
employment terminates.
(b) Termination by the Company. Subject to the
conditions of Section 4(h), Executive is entitled to receive Continued
Compensation if Executive's employment is terminated by the
Company during the Employment Period without cause ("cause" being
limited to Executive's acts of theft, embezzlement, fraud, or moral
turpitude).
<PAGE>
(c) Voluntary Termination. Subject to the
conditions of Section 4(h), Executive is entitled to receive Continued
Compensation if Executive voluntarily terminates employment during
the Employment Period after (i) Executive does not receive salary
increases, comparable incentive compensation, stock options and other
benefits that Executive received in prior years or, if greater, that other
executives in comparable positions in comparable companies receive
in the current year; or (ii) Executive's compensation is reduced or
benefits are reduced and such reduction is not consistent with
comparable companies; or (iii) Executive's status, title(s), office(s),
working conditions, or management responsibilities are diminished
(other than changes in reporting or management responsibilities
required by applicable federal or state law); or (iv) Executive's place
of employment is changed in any way without Executive's consent.
Executive will be entitled to receive Continued Compensation on
account of his voluntary termination under this Section 4(c) only if
such voluntary termination occurs within six months after an event
described in (i), (ii), (iii), or (iv) above, or within six months after the
last in a series of such events.
(d) Continued Compensation. Continued
Compensation equal to three times Executive's Base Period Income
shall be paid in thirty-six equal monthly installments. Continued
Compensation payments to Executive shall commence on the first day
of the month following Executive's termination of employment with
the Company because of an event described in Section 4(b) or 4(c) and
shall continue on the first day of each of the next thirty-five months,
subject to receipt by the Company of notification from the Accounting
Firm (defined below) of its determination regarding the reduction, if
any, of Continued Compensation according to Section 4(g) .
(e) Base Period Income. Executive's Base Period
Income shall equal his annual base salary as of his termination date,
plus an amount equal to the incentive compensation awarded to or
accrued for Executive for the fiscal year immediately prior to the
fiscal year in which Executive's termination date occurs (but in no
event shall such amount be less than the incentive compensation
amount required to be paid during the Employment Period under
Section 3(b)(ii)). Amounts of such base salary and incentive
compensation that Executive has elected to defer during the relevant
period shall be included in Base Period Income.
<PAGE>
(f) Other Payments or Benefits. In addition to any
payments provided under this Agreement or under any other
arrangement between the Company and Executive, Executive shall be
entitled to (i) any cash or property due him as a result of the exercise
of a stock option granted under the Company's 1996 Omnibus Stock
Incentive Plan or an earlier plan or a successor plan, and (ii) any
payments or benefits due him, whether or not "parachute payments"
as defined in Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code") (but subject to Section 4(g)) including amounts
that Executive is entitled to receive under Company maintained tax-
qualified plans and any health care coverage under Company
maintained welfare plans for which Executive pays the cost.
(g) Certain Reduction of Continued Compensation.
(i) For purposes of this Section 4(g),
(A) A "Payment" means any amount
that, if paid, would be a payment or distribution in the nature
of compensation to or for the benefit of Executive, whether
paid or payable pursuant to this Agreement or otherwise;
(B) "Continued Compensation" means
a Payment paid or payable pursuant to Section 4(d) (calculated
as if there were no reduction of Continued Compensation
according to this Section 4(g));
(C) "Net After Tax Receipts" means
the Present Value of a Payment net of all taxes imposed on
Executive with respect to that Payment under Sections 1 and
4999 of the Code, determined by applying the highest marginal
rate under Section 1 of the Code that applied to Executive's
taxable income for the immediately preceding taxable year;
(D) "Present Value" means the value
determined in accordance with Section 280G(d)(4) of the Code;
and
(E) "Reduced Amount" means the
smallest aggregate amount of all Payments that (1) is less than
the sum of all Payments and (2) results in aggregate Net After
Tax Receipts that are equal to or greater than the Net After
Tax Receipts that would result if the aggregate Payments were
any other amount less than the sum of all Payments.
(ii) Notwithstanding any other Section of this
Agreement, if the accounting firm that is engaged to audit the
Company's financial statements (the "Accounting Firm") determines
that receipt of all Payments would subject Employee to tax under
Section 4999 of the Code, it shall determine whether some amount of
Payments would meet the definition of a "Reduced Amount." If the
<PAGE>
Accounting Firm determines that there is a Reduced Amount, one or
more Payments shall be reduced to that Reduced Amount, but not
below zero. If any reduction of Payments is required by the preceding
sentence, (A) Payments other than Continued Compensation shall be
reduced first, and (B) Continued Compensation shall be reduced in a
manner that shortens the period over which Continued Compensation
is paid (and, thus, the number of monthly installments payable) but
does not reduce the amount of a monthly installment that would be
paid but for this Section 4(g).
(iii) If the Accounting Firm determines that
one or more Payments should be reduced to the Reduced Amount, the
Company shall promptly notify Executive of that determination,
sending a copy of the detailed calculations by the Accounting Firm.
All determinations made by the Accounting Firm under this Section
4(g) are binding upon the Company and Executive and shall be made
within sixty days after Executive's employment termination, unless
reasonable cause requires an extension of time. The Accounting Firm
shall furnish written notice to the Company and Executive of any
required extension before the end of the sixty-day period; but the
Accounting Firm shall make its determinations under this Section as
soon as possible and not later than six months after Executive's
employment termination.
(iv) It is the intention of the Company and
Executive to reduce one or more Payments only if the aggregate Net
After Tax Receipts to Executive would be increased by that reduction.
However, it is possible that, as a result of uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm under this Section, amounts
shall have been paid or distributed under this Agreement to or for the
benefit of Executive, which amounts should not have been so paid or
distributed ("Overpayment"), or that additional amounts not paid or
distributed under the Plan to or for the benefit of Executive could have
been so paid or distributed ("Underpayment"), in each case, consistent
with the calculation of the Reduced Amount. If the Accounting Firm,
based either upon the assertion of a deficiency by the Internal Revenue
Service against the Company or Executive, which assertion the
Accounting Firm believes has a high probability of success or
controlling precedent or other substantial authority, determines that an
Overpayment has been made, any such Overpayment shall be treated
for all purposes as a loan to Executive, which loan Executive shall
repay to the Company on terms acceptable to Executive and the
Company together with interest at the applicable federal rate under
Section 7872(f)(2) of the Code; provided, however, that no such loan
shall be deemed to have been made and no amount is payable by
Executive to the Company if and to the extent such deemed loan and
<PAGE>
payment would not either reduce the amount on which Executive is
subject to tax under Section 1 or 4999 of the Code or generate a
refund of such taxes. If the Accounting Firm, based upon controlling
precedent or other substantial authority, determines that an
Underpayment has occurred, the Accounting Firm shall promptly
notify the Company of the amount of the Underpayment. The
Company shall take action to address the Underpayment in a manner
that as nearly as possible restores Executive to the position he would
have been in if there had been no Underpayment.
(h) Covenant Not to Compete.
(i) Executive agrees that if his employment
terminates for any reason during the Employment Period, then during
the period in which Executive is entitled to Continued Compensation
under Section 4, 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
has a banking office in Davidson County, North Carolina, counties
contiguous to Davidson County, North Carolina, or counties in which
the Company has a banking office on a Control Change Date.
Executive further agrees that during the period in which Executive is
entitled to Continued Compensation under Section 4, 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 Executive or Executive's post-termination employer.
(ii) Executive agrees and acknowledges that
any breach of the covenants contained in this Section 4(h) 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.
(iii) The covenants contained in this Section
4(h) shall inure to the benefit of the Company and its affiliated
employers and subsidiaries and their successors.
(iv) The restrictions contained in this Section
4(h) are considered by the parties hereto to be fair and reasonable and
necessary for the protection of the legitimate business interests of the
Company.
(v) Notwithstanding Section 3(a), 3(b) or 4,
if Executive violates Section 4(h), any unpaid Continued Compensation
shall immediately be forfeited as of the date of any violation.
<PAGE>
5. Legal Fees and Expenses. The Company shall pay all
legal fees and expenses, if any, incurred by Executive in obtaining,
enforcing, or defending any right or benefit provided by this
Agreement, whether successful or not. Payments under this Section
are not Continued Compensation and are not subject to reduction
under any other Section of this Agreement.
6. 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.
7. Amendment. This Agreement may not be amended
except by the written agreement of Executive and the Company (with
the Company acting by adoption of a resolution by the Board
recommended by the Committee).
8. Binding Effect. The parties agree that this Agreement
is enforceable under the laws of the State of North Carolina. This
Agreement is binding on the Company, its successors, and assigns and
on Executive and his personal representatives; and the Company will
not consolidate or merge into or with another corporation, or transfer
all or substantially all of its assets to another corporation (the
"Successor Corporation") unless the Successor Corporation shall
assume this Agreement, and upon such assumption, Executive and the
Successor Corporation shall become obligated to perform the terms
and conditions of this Agreement. This Agreement inures to the
benefit of and is enforceable by Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees, and legatees. If Executive dies while any
amounts are payable under this Agreement, all such amounts, unless
otherwise provided, shall be paid in accordance with the terms of this
Agreement to Executive's spouse, or if none, to his devisee, legatee,
or other designee or, if there be no such designee, to his estate.
9. Notice. For purposes of this Agreement, notices and all
other communications shall be in writing and are effective when
delivered or mailed by United States registered mail, return receipt
<PAGE>
requested, postage prepaid, addressed to Executive or his personal
representative at his last known address. All notices to the Company
shall be directed to the attention of the Chairman of the Board. Such
other addresses may be used as either party may have furnished to the
other in writing. Notices of change of address are effective only upon
receipt.
10. Miscellaneous. No provision of this Agreement may be
modified, waived, or discharged unless such waiver, modification, or
discharge is agreed to in writing signed by Executive and the
Company. A waiver of any breach of or compliance with any
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.
11. No Assignment. Executive may not assign, alienate,
anticipate, or otherwise encumber any rights, duties, or amounts that
he might be entitled to receive under this Agreement.
12. Term. Upon execution by the Company and
Executive, this Agreement is effective as of the Effective Date. This
Agreement automatically continues in effect through December 31,
1996, and thereafter through each successive December 31 unless the
Company notifies Executive in writing thirty days before the end of
any calendar year that this Agreement shall terminate as of the end of
that calendar year. After a Change in Control of the Company (as
defined in Section 1(c)), the Company may not terminate this
Agreement for thirty-six months from the date Continued
Compensation becomes payable under Section 4 (although this
Agreement may terminate automatically under Section 4(a)); and this
Agreement automatically continues in effect from year to year
thereafter unless the Company notifies Executive in writing thirty days
before the end of the initial thirty-six-month period or thirty days
before any anniversary of the end of that period that this Agreement
shall terminate as of that date.
The parties have executed this Agreement effective as of the
9th day of July, 1996.
LSB BANCSHARES, INC.
By: H. FRANKLIN SHERRON, JR.
Its: Vice President
ROBERT F. LOWE
<PAGE>
Exhibit B
EMPLOYMENT CONTINUITY AGREEMENT
THIS EMPLOYMENT CONTINUITY AGREEMENT (this "Agreement") is between
LSB BANCSHARES, INC., a North Carolina Corporation (referred to in
this Agreement as the "Company," which term includes any subsidiary of
the Company where the context so requires), and H. FRANKLIN SHERRON, JR.,
Vice President of the Company and a resident of Lexington, North
Carolina ("Executive"), and is effective as of July 9, 1996.
The Company's Board of Directors (the "Board") acknowledges
that Executive's contributions to the past and future growth and
success of the Company have been and will continue to be substantial.
As a publicly held corporation, the Board recognizes that there exists
a possibility of a change in control of the Company. The Board also
recognizes that the possibility of such a change in control may
contribute to uncertainty on the part of executive officers and may
result in the departure or distraction of executive officers from their
operating responsibilities.
Outstanding management of the Company is essential to
advancing the best interests of the Company and its shareholders. In
the event of a threat or occurrence of a bid to acquire or change
control of the Company or to effect a business combination, it is
particularly important that the Company's business be continued with
a minimum of disruption. The Board believes that the objective of
securing and retaining outstanding management will be achieved if the
Company's key management employees are given assurances of
employment security so they will not be distracted by personal
uncertainties and risks created by such circumstances.
<PAGE>
The Board believes that such assurances will secure the
continued services of the Company's key operational and management
executives in the performance of both their regular duties and such
extra duties as may be required of them during such periods of
uncertainty, enable the Company to rely on such executives to manage
its affairs during any such period with less concern for their personal
risks, and enhance the Company's ability to attract new key executives
as needed.
The Stock Option and Compensation Committee of the Board
(the "Committee") has recommended, and the Board has approved,
entering into employment continuity agreements with the Company's
key management executives, including Executive, in order to achieve
the foregoing objectives.
The Company and Executive enter into this Agreement to
induce Executive to remain an employee of the Company and to
continue to devote his full energy to the Company's affairs.
1. Employment.
(a) Effective Date. The Company and Executive
hereby agree that Executive's employment shall continue on and after
July 9, 1996 (the "Effective Date"). The terms and conditions of
Executive's employment are further described in Section 2 of this
Agreement.
(b) Employment Period. If Executive is employed
by the Company on a Control Change Date (as defined in Section 1(c)
of this Agreement), the Company further agrees that the Company
shall continue to employ Executive and Executive further agrees that
he shall continue as an employee of the Company for the Employment
Period. For purposes of this Agreement, the Employment Period
begins on a Control Change Date and ends on the earlier of the third
anniversary of a Control Change Date or on Executive's Normal
Retirement Date (as defined under the Lexington State Bank
Employees Pension Plan, as in effect on the Effective Date or as
amended prior to a Control Change Date). During the Employment
Period, the terms and conditions of Executive's employment shall be
as described in Section 3 of this Agreement.
(c) Change in Control and Control Change Date.
For purposes of this Agreement, a Change in Control occurs if, after
the Effective Date, (i) any Person (other than a trustee or other
fiduciary holding securities under an employee benefit plan of the
Company) 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
<PAGE>
Board, as long as the majority of the Board approving the purchases
are directors at the time the purchases are made); or (ii) as the direct
or indirect result of, or in connection with, a cash tender or exchange
offer, a merger, consolidation, reorganization or other business
combination, a sale of all or substantially all of the Company's assets,
a contested election of directors, or any combination of these
transactions, and, with respect to (i) or (ii) above, the Continuing
Directors (as defined below) cease to constitute a majority of the
Board, or any successor's board, within two years after the closing
date of the last of such transactions. For purposes of the preceding
sentence, "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; and "Person" means any individual, firm,
corporation, partnership or other entity, including a "group" as defined
in Section 13(d)(3) of the Securities Exchange Act of 1934, and any
successor (by merger or otherwise) of such entity.
For purposes of this Agreement, a Control Change Date
is the date on which an event described in (i) or (ii) of the first
sentence of this Section 1(c) is consummated. If a Change in Control
occurs on account of a series of transactions, a Control Change Date
is the closing date of the last of such transactions.
2. Terms of Employment Before a Control Change Date.
(a) General Duties. Excluding periods of vacation
and sick leave to which Executive is entitled, Executive shall continue
to exercise such authority and perform such executive duties as are
commensurate with the authority being exercised and duties being
performed by Executive immediately before the Effective Date.
(b) Place of Employment. Executive's services shall
be performed at the location where Executive was employed
immediately before the Effective Date. However, if the Company and
Executive agree, the location of Executive's employment may be
changed without affecting Executive's rights under this Agreement.
(c) Working Facilities and Support Staff. Executive
is entitled to an office of a size and with furnishings and other
appointments at least equal to those provided to Executive before the
Effective Date. Executive is entitled to secretarial and other
assistance, and to such other facilities, equipment, and supplies at least
equal to those provided to Executive before the Effective Date.
<PAGE>
(d) Expenses Generally. Executive is entitled to
receive prompt reimbursement for all reasonable expenses incurred by
Executive. Reimbursement shall be made in accordance with the
Company's policies and procedures in effect on the Effective Date or
amended prior to a Control Change Date.
(e) Meetings, Conventions, and Seminars.
Executive is encouraged to attend seminars, professional meetings and
conventions, and educational courses. The cost of travel, tuition or
registration, food, and lodging for attending those activities shall be
paid by the Company. Other costs shall be paid by Executive, unless
the Company authorizes those costs. If such other costs are authorized
expenses, Executive shall be reimbursed after satisfying the
Company's policies and procedures for such reimbursement.
(f) Promotional Expenses. Executive is encouraged
to incur reasonable expenses for promoting the Company's business.
Such promotional expenses include travel, entertainment (including
memberships in social and athletic clubs), professional advancement,
and community service expenses. Executive agrees to bear those
expenses except to the extent that those expenses are incurred at the
Company's specific direction or those expenses are specifically
authorized by the Company as expenses that the Company may pay
directly or indirectly through reimbursement to Executive.
(g) Outside Activities. Executive may (i) serve on
corporate, civic, or charitable boards or committees; (ii) deliver
lectures, fulfill speaking engagements, or teach at educational
institutions; and (iii) manage personal investments, provided that such
activities do not materially interfere with the performance of
Executive's responsibilities for the Company . To the extent that any
such activities have been conducted by Executive before the Effective
Date, such prior conduct of activities and any subsequent conduct of
activities similar in nature and scope shall not be deemed to interfere
with the performance of Executive's responsibilities for the Company.
(h) Compensation and Benefits. Executive's
compensation and benefits shall be the same as those in effect on the
Effective Date, subject to periodic review and adjustment by the
Company or as amended prior to a Control Change Date.
As of the Effective Date, Executive's
compensation includes, but is not limited to, the following: (i) base
salary; (ii) incentive compensation pursuant to the Company's
Management Incentive Plan; (iii) deferred compensation pursuant to
the Company's Deferred Compensation Plan; (iv) participation in the
Lexington State Bank Employees Savings Plus Plan; (v) participation
in the Lexington State Bank Employees Pension Plan; (vi) participation
<PAGE>
in the Company's 1986 Employee Incentive Stock Option Plan; and
(vii) participation in the Company's 1996 Omnibus Stock Incentive
Plan.
As of the Effective Date, Executive's benefits
include, but are not limited to, the following: (i) use of an automobile
and payment of related expenses; (ii)
group life, accidental death and dismemberment, long-term disability,
and medical insurance; (iii) paid vacation and holidays; and (iv) sick
leave.
This Section 2(h) does not change the terms of
any compensation arrangement, benefit program or benefit plan
maintained by the Company and does not give Executive any
additional vested interest in any compensation or benefit to which
Executive is not already entitled under any such program or plan on
the Effective Date.
(i) Disability.
(i) The Company, pursuant to a resolution
duly adopted by the Board, may terminate this Agreement if Executive
becomes Disabled by giving Executive written notice of its intention
to terminate Executive's employment, subject to the terms and
conditions specified in the notice. If Executive becomes Disabled and
does not return to the performance of his duties for the Company in
accordance with the terms and conditions set forth in the notice,
Executive's employment with the Company shall terminate (the
"Disability Effective Date"). For purposes of this Agreement,
"Disabled" has the meaning set forth under the Long Term Disability
Plan of Lexington State Bank or any successor plan or amendment to
such Plan.
(ii) If Executive's employment is terminated
because Executive is Disabled, Executive is entitled, after the
Disability Effective Date, to receive disability and other benefits on a
basis comparable to those provided by the Company to disabled
employees and their families in accordance with such plans, programs,
and policies relating to disability, if any, as in effect on the Effective
Date or as amended prior to a Control Change Date.
(j) Confidential Information. 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 Executive during Executive's
employment by the Company and which is not public knowledge
(other than by acts by Executive or his representatives in violation of
<PAGE>
this Agreement). After the termination of Executive's employment
with the Company, 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. In
no event may an asserted violation of this Section 2(j) constitute a
basis for deferring or withholding any amounts otherwise payable to
Executive under this Agreement.
(k) 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.
3. Terms of Employment On and After a Control Change
Date.
(a) General. During the Employment Period, the
terms and conditions of Executive's employment, as described in
Section 2, shall continue in effect, except that such terms and
conditions are fixed as of the day before a Control Change Date and
Executive's compensation and benefits are governed by Section (3)(b)
.
(b) Compensation and Benefits. During the
Employment Period, the Company shall (i) continue to pay Executive
an annual base salary not less than Executive's annual base salary on
the day before a Control Change Date, (ii) pay Executive incentive
compensation in amounts not less in amount than those paid to
Executive during the twelve-month period preceding the day before a
Control Change Date, and (iii) continue all compensation and
employee benefit plans and programs, including all compensation,
plans and benefits described in Section 2(h) of this Agreement, at
levels in effect on the day before a Control Change Date (to the extent
practicable and subject to such reductions as may be required to
maintain such plans in compliance with applicable nondiscrimination
and other federal laws regulating employee benefit plans and
programs) or pay Executive an amount necessary to provide essentially
comparable benefits (assuming, in the case of insured benefits, that
Executive is then insurable at standard rates).
4. Liquidated Damages Upon Termination of Employment.
(a) General. Executive is entitled to receive
Continued Compensation according to the remaining provisions of this
Section if Executive's employment with the Company terminates
during the Employment Period because of an event described in
Section 4(b) or 4(c). If Executive's employment terminates during the
<PAGE>
Employment Period and if an event described in Section 4(b) or 4(c)
has not occurred, this Agreement terminates on the date Executive's
employment terminates.
(b) Termination by the Company. Subject to the
conditions of Section 4(h), Executive is entitled to receive Continued
Compensation if Executive's employment is terminated by the
Company during the Employment Period without cause ("cause" being
limited to Executive's acts of theft, embezzlement, fraud, or moral
turpitude).
(c) Voluntary Termination. Subject to the
conditions of Section 4(h), Executive is entitled to receive Continued
Compensation if Executive voluntarily terminates employment during
the Employment Period after (i) Executive does not receive salary
increases, comparable incentive compensation, stock options and other
benefits that Executive received in prior years or, if greater, that other
executives in comparable positions in comparable companies receive
in the current year; or (ii) Executive's compensation is reduced or
benefits are reduced and such reduction is not consistent with
comparable companies; or (iii) Executive's status, title(s), office(s),
working conditions, or management responsibilities are diminished
(other than changes in reporting or management responsibilities
required by applicable federal or state law); or (iv) Executive's place
of employment is changed in any way without Executive's consent.
Executive will be entitled to receive Continued Compensation on
account of his voluntary termination under this Section 4(c) only if
such voluntary termination occurs within six months after an event
described in (i), (ii), (iii), or (iv) above, or within six months after the
last in a series of such events.
(d) Continued Compensation. Continued
Compensation equal to three times Executive's Base Period Income
shall be paid in thirty-six equal monthly installments. Continued
Compensation payments to Executive shall commence on the first day
of the month following Executive's termination of employment with
the Company because of an event described in Section 4(b) or 4(c) and
shall continue on the first day of each of the next thirty-five months,
subject to receipt by the Company of notification from the Accounting
Firm (defined below) of its determination regarding the reduction, if
any, of Continued Compensation according to Section 4(g) .
(e) Base Period Income. Executive's Base Period
Income shall equal his annual base salary as of his termination date,
plus an amount equal to the incentive compensation awarded to or
accrued for Executive for the fiscal year immediately prior to the
fiscal year in which Executive's termination date occurs (but in no
<PAGE>
event shall such amount be less than the incentive compensation
amount required to be paid during the Employment Period under
Section 3(b)(ii)). Amounts of such base salary and incentive
compensation that Executive has elected to defer during the relevant
period shall be included in Base Period Income.
(f) Other Payments or Benefits. In addition to any
payments provided under this Agreement or under any other
arrangement between the Company and Executive, Executive shall be
entitled to (i) any cash or property due him as a result of the exercise
of a stock option granted under the Company's 1996 Omnibus Stock
Incentive Plan or an earlier plan or a successor plan, and (ii) any
payments or benefits due him, whether or not "parachute payments"
as defined in Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code") (but subject to Section 4(g)) including amounts
that Executive is entitled to receive under Company maintained tax-
qualified plans and any health care coverage under Company
maintained welfare plans for which Executive pays the cost.
(g) Certain Reduction of Continued Compensation.
(i) For purposes of this Section 4(g),
(A) A "Payment" means any amount
that, if paid, would be a payment or distribution in the nature
of compensation to or for the benefit of Executive, whether
paid or payable pursuant to this Agreement or otherwise;
(B) "Continued Compensation" means
a Payment paid or payable pursuant to Section 4(d) (calculated
as if there were no reduction of Continued Compensation
according to this Section 4(g));
(C) "Net After Tax Receipts" means
the Present Value of a Payment net of all taxes imposed on
Executive with respect to that Payment under Sections 1 and
4999 of the Code, determined by applying the highest marginal
rate under Section 1 of the Code that applied to Executive's
taxable income for the immediately preceding taxable year;
(D) "Present Value" means the value
determined in accordance with Section 280G(d)(4) of the Code;
and
(E) "Reduced Amount" means the
smallest aggregate amount of all Payments that (1) is less than
the sum of all Payments and (2) results in aggregate Net After
<PAGE>
Tax Receipts that are equal to or greater than the Net After
Tax Receipts that would result if the aggregate Payments were
any other amount less than the sum of all Payments.
(ii) Notwithstanding any other Section of this
Agreement, if the accounting firm that is engaged to audit the
Company's financial statements (the "Accounting Firm") determines
that receipt of all Payments would subject Employee to tax under
Section 4999 of the Code, it shall determine whether some amount of
Payments would meet the definition of a "Reduced Amount." If the
Accounting Firm determines that there is a Reduced Amount, one or
more Payments shall be reduced to that Reduced Amount, but not
below zero. If any reduction of Payments is required by the preceding
sentence, (A) Payments other than Continued Compensation shall be
reduced first, and (B) Continued Compensation shall be reduced in a
manner that shortens the period over which Continued Compensation
is paid (and, thus, the number of monthly installments payable) but
does not reduce the amount of a monthly installment that would be
paid but for this Section 4(g).
(iii) If the Accounting Firm determines that
one or more Payments should be reduced to the Reduced Amount, the
Company shall promptly notify Executive of that determination,
sending a copy of the detailed calculations by the Accounting Firm.
All determinations made by the Accounting Firm under this Section
4(g) are binding upon the Company and Executive and shall be made
within sixty days after Executive's employment termination, unless
reasonable cause requires an extension of time. The Accounting Firm
shall furnish written notice to the Company and Executive of any
required extension before the end of the sixty-day period; but the
Accounting Firm shall make its determinations under this Section as
soon as possible and not later than six months after Executive's
employment termination.
(iv) It is the intention of the Company and
Executive to reduce one or more Payments only if the aggregate Net
After Tax Receipts to Executive would be increased by that reduction.
However, it is possible that, as a result of uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm under this Section, amounts
shall have been paid or distributed under this Agreement to or for the
benefit of Executive, which amounts should not have been so paid or
distributed ("Overpayment"), or that additional amounts not paid or
distributed under the Plan to or for the benefit of Executive could have
been so paid or distributed ("Underpayment"), in each case, consistent
with the calculation of the Reduced Amount. If the Accounting Firm,
based either upon the assertion of a deficiency by the Internal Revenue
<PAGE>
Service against the Company or Executive, which assertion the
Accounting Firm believes has a high probability of success or
controlling precedent or other substantial authority, determines that an
Overpayment has been made, any such Overpayment shall be treated
for all purposes as a loan to Executive, which loan Executive shall
repay to the Company on terms acceptable to Executive and the
Company together with interest at the applicable federal rate under
Section 7872(f)(2) of the Code; provided, however, that no such loan
shall be deemed to have been made and no amount is payable by
Executive to the Company if and to the extent such deemed loan and
payment would not either reduce the amount on which Executive is
subject to tax under Section 1 or 4999 of the Code or generate a
refund of such taxes. If the Accounting Firm, based upon controlling
precedent or other substantial authority, determines that an
Underpayment has occurred, the Accounting Firm shall promptly
notify the Company of the amount of the Underpayment. The
Company shall take action to address the Underpayment in a manner
that as nearly as possible restores Executive to the position he would
have been in if there had been no Underpayment.
(h) Covenant Not to Compete.
(i) Executive agrees that if his employment
terminates for any reason during the Employment Period, then during
the period in which Executive is entitled to Continued Compensation
under Section 4, 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
has a banking office in Davidson County, North Carolina, counties
contiguous to Davidson County, North Carolina, or counties in which
the Company has a banking office on a Control Change Date.
Executive further agrees that during the period in which Executive is
entitled to Continued Compensation under Section 4, 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 Executive or Executive's post-termination employer.
(ii) Executive agrees and acknowledges that
any breach of the covenants contained in this Section 4(h) 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.
(iii) The covenants contained in this Section
4(h) shall inure to the benefit of the Company and its affiliated
employers and subsidiaries and their successors.
<PAGE>
(iv) The restrictions contained in this Section
4(h) are considered by the parties hereto to be fair and reasonable and
necessary for the protection of the legitimate business interests of the
Company.
(v) Notwithstanding Section 3(a), 3(b) or 4,
if Executive violates Section 4(h), any unpaid Continued Compensation
shall immediately be forfeited as of the date of any violation.
5. Legal Fees and Expenses. The Company shall pay all
legal fees and expenses, if any, incurred by Executive in obtaining,
enforcing, or defending any right or benefit provided by this
Agreement, whether successful or not. Payments under this Section
are not Continued Compensation and are not subject to reduction
under any other Section of this Agreement.
6. 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.
7. Amendment. This Agreement may not be amended
except by the written agreement of Executive and the Company (with
the Company acting by adoption of a resolution by the Board
recommended by the Committee).
8. Binding Effect. The parties agree that this Agreement
is enforceable under the laws of the State of North Carolina. This
Agreement is binding on the Company, its successors, and assigns and
on Executive and his personal representatives; and the Company will
not consolidate or merge into or with another corporation, or transfer
all or substantially all of its assets to another corporation (the
"Successor Corporation") unless the Successor Corporation shall
assume this Agreement, and upon such assumption, Executive and the
Successor Corporation shall become obligated to perform the terms
and conditions of this Agreement. This Agreement inures to the
benefit of and is enforceable by Executive's personal or legal
<PAGE>
representatives, executors, administrators, successors, heirs,
distributees, devisees, and legatees. If Executive dies while any
amounts are payable under this Agreement, all such amounts, unless
otherwise provided, shall be paid in accordance with the terms of this
Agreement to Executive's spouse, or if none, to his devisee, legatee,
or other designee or, if there be no such designee, to his estate.
9. Notice. For purposes of this Agreement, notices and all
other communications shall be in writing and are effective when
delivered or mailed by United States registered mail, return receipt
requested, postage prepaid, addressed to Executive or his personal
representative at his last known address. All notices to the Company
shall be directed to the attention of the Chairman of the Board. Such
other addresses may be used as either party may have furnished to the
other in writing. Notices of change of address are effective only upon
receipt.
10. Miscellaneous. No provision of this Agreement may be
modified, waived, or discharged unless such waiver, modification, or
discharge is agreed to in writing signed by Executive and the
Company. A waiver of any breach of or compliance with any
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.
11. No Assignment. Executive may not assign, alienate,
anticipate, or otherwise encumber any rights, duties, or amounts that
he might be entitled to receive under this Agreement.
12. Term. Upon execution by the Company and
Executive, this Agreement is effective as of the Effective Date. This
Agreement automatically continues in effect through December 31,
1996, and thereafter through each successive December 31 unless the
Company notifies Executive in writing thirty days before the end of
any calendar year that this Agreement shall terminate as of the end of
that calendar year. After a Change in Control of the Company (as
defined in Section 1(c)), the Company may not terminate this
Agreement for thirty-six months from the date Continued
Compensation becomes payable under Section 4 (although this
Agreement may terminate automatically under Section 4(a)); and this
Agreement automatically continues in effect from year to year
thereafter unless the Company notifies Executive in writing thirty days
before the end of the initial thirty-six-month period or thirty days
before any anniversary of the end of that period that this Agreement
shall terminate as of that date.
<PAGE>
The parties have executed this Agreement effective as of the
9th day of July, 1996.
LSB BANCSHARES, INC.
By: ROBERT F. LOWE
Its: President
H. FRANKLIN SHERRON, JR.
<PAGE>
Exhibit C
EMPLOYMENT CONTINUITY AGREEMENT
THIS EMPLOYMENT CONTINUITY AGREEMENT (this "Agreement") is between
LSB BANCSHARES, INC., a North Carolina Corporation (referred to in this
Agreement as the "Company," which term includes any subsidiary of the
Company where the context so requires), and MONTY J. OLIVER, Secretary
and Treasurer of the Company and a resident of Lexington, North
Carolina ("Executive"), and is effective as of July 9, 1996.
The Company's Board of Directors (the "Board")
acknowledges that Executive's contributions to the past and future
growth and success of the Company have been and will continue to
be substantial. As a publicly held corporation, the Board recognizes
that there exists a possibility of a change in control of the Company.
The Board also recognizes that the possibility of such a change in
control may contribute to uncertainty on the part of executive officers
and may result in the departure or distraction of executive officers
from their operating responsibilities.
Outstanding management of the Company is essential to
advancing the best interests of the Company and its shareholders. In
the event of a threat or occurrence of a bid to acquire or change
control of the Company or to effect a business combination, it is
particularly important that the Company's business be continued with
a minimum of disruption. The Board believes that the objective of
securing and retaining outstanding management will be achieved if the
Company's key management employees are given assurances of
employment security so they will not be distracted by personal
uncertainties and risks created by such circumstances.
The Board believes that such assurances will secure the
continued services of the Company's key operational and management
executives in the performance of both their regular duties and such
extra duties as may be required of them during such periods of
uncertainty, enable the Company to rely on such executives to
manage its affairs during any such period with less concern for their
personal risks, and enhance the Company's ability to attract new key
executives as needed.
The Stock Option and Compensation Committee of the Board
(the "Committee") has recommended, and the Board has approved,
entering into employment continuity agreements with the Company's
key management executives, including Executive, in order to achieve
the foregoing objectives.
<PAGE>
The Company and Executive enter into this Agreement to
induce Executive to remain an employee of the Company and to
continue to devote his full energy to the Company's affairs.
1. Employment.
(a) Effective Date. The Company and Executive
hereby agree that Executive's employment shall continue on and after
July 9, 1996 (the "Effective Date"). The terms and conditions of
Executive's employment are further described in Section 2 of this
Agreement.
(b) Employment Period. If Executive is employed
by the Company on a Control Change Date (as defined in Section
1(c) of this Agreement), the Company further agrees that the
Company shall continue to employ Executive and Executive further
agrees that he shall continue as an employee of the Company for the
Employment Period. For purposes of this Agreement, the
Employment Period begins on a Control Change Date and ends on the
earlier of the third anniversary of a Control Change Date or on
Executive's Normal Retirement Date (as defined under the Lexington
State Bank Employees Pension Plan, as in effect on the Effective
Date or as amended prior to a Control Change Date). During the
Employment Period, the terms and conditions of Executive's
employment shall be as described in Section 3 of this Agreement.
(c) Change in Control and Control Change Date.
For purposes of this Agreement, a Change in Control occurs if, after
the Effective Date, (i) any Person (other than a trustee or other
fiduciary holding securities under an employee benefit plan of the
Company) 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 (ii) as the direct
or indirect result of, or in connection with, a cash tender or exchange
offer, a merger, consolidation, reorganization or other business
combination, a sale of all or substantially all of the Company's assets,
a contested election of directors, or any combination of these
transactions, and, with respect to (i) or (ii) above, the Continuing
Directors (as defined below) cease to constitute a majority of the
Board, or any successor's board, within two years after the closing
date of the last of such transactions. For purposes of the preceding
sentence, "Continuing Director" means any member of the Board
<PAGE>
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; and "Person" means any
individual, firm, corporation, partnership or other entity, including
a "group" as defined in Section 13(d)(3) of the Securities Exchange
Act of 1934, and any successor (by merger or otherwise) of such
entity.
For purposes of this Agreement, a Control Change
Date is the date on which an event described in (i) or (ii) of the first
sentence of this Section 1(c) is consummated. If a Change in Control
occurs on account of a series of transactions, a Control Change Date
is the closing date of the last of such transactions.
2. Terms of Employment Before a Control Change Date.
(a) General Duties. Excluding periods of vacation
and sick leave to which Executive is entitled, Executive shall continue
to exercise such authority and perform such executive duties as are
commensurate with the authority being exercised and duties being
performed by Executive immediately before the Effective Date.
(b) Place of Employment. Executive's services
shall be performed at the location where Executive was employed
immediately before the Effective Date. However, if the Company
and Executive agree, the location of Executive's employment may be
changed without affecting Executive's rights under this Agreement.
(c) Working Facilities and Support Staff.
Executive is entitled to an office of a size and with furnishings and
other appointments at least equal to those provided to Executive
before the Effective Date. Executive is entitled to secretarial and
other assistance, and to such other facilities, equipment, and supplies
at least equal to those provided to Executive before the Effective
Date.
(d) Expenses Generally. Executive is entitled to
receive prompt reimbursement for all reasonable expenses incurred
by Executive. Reimbursement shall be made in accordance with the
Company's policies and procedures in effect on the Effective Date or
amended prior to a Control Change Date.
(e) Meetings, Conventions, and Seminars.
Executive is encouraged to attend seminars, professional meetings and
conventions, and educational courses. The cost of travel, tuition or
<PAGE>
registration, food, and lodging for attending those activities shall be
paid by the Company. Other costs shall be paid by Executive, unless
the Company authorizes those costs. If such other costs are
authorized expenses, Executive shall be reimbursed after satisfying
the Company's policies and procedures for such reimbursement.
(f) Promotional Expenses. Executive is encouraged
to incur reasonable expenses for promoting the Company's business.
Such promotional expenses include travel, entertainment (including
memberships in social and athletic clubs), professional advancement,
and community service expenses. Executive agrees to bear those
expenses except to the extent that those expenses are incurred at the
Company's specific direction or those expenses are specifically
authorized by the Company as expenses that the Company may pay
directly or indirectly through reimbursement to Executive.
(g) Outside Activities. Executive may (i) serve on
corporate, civic, or charitable boards or committees; (ii) deliver
lectures, fulfill speaking engagements, or teach at educational
institutions; and (iii) manage personal investments, provided that such
activities do not materially interfere with the performance of
Executive's responsibilities for the Company . To the extent that any
such activities have been conducted by Executive before the Effective
Date, such prior conduct of activities and any subsequent conduct of
activities similar in nature and scope shall not be deemed to interfere
with the performance of Executive's responsibilities for the Company.
(h) Compensation and Benefits. Executive's
compensation and benefits shall be the same as those in effect on the
Effective Date, subject to periodic review and adjustment by the
Company or as amended prior to a Control Change Date.
As of the Effective Date, Executive's
compensation includes, but is not limited to, the following: (i) base
salary; (ii) incentive compensation pursuant to the Company's
Management Incentive Plan; (iii) deferred compensation pursuant to
the Company's Deferred Compensation Plan; (iv) participation in the
Lexington State Bank Employees Savings Plus Plan; (v) participation
in the Lexington State Bank Employees Pension Plan; (vi)
participation in the Company's 1986 Employee Incentive Stock
Option Plan; and (vii) participation in the Company's 1996 Omnibus
Stock Incentive Plan.
As of the Effective Date, Executive's benefits
include, but are not limited to, the following: (i) use of an automobile
and payment of related expenses; (ii)
group life, accidental death and dismemberment, long-term disability,
<PAGE>
and medical insurance; (iii) paid vacation and holidays; and (iv) sick
leave.
This Section 2(h) does not change the terms of
any compensation arrangement, benefit program or benefit plan
maintained by the Company and does not give Executive any
additional vested interest in any compensation or benefit to which
Executive is not already entitled under any such program or plan on
the Effective Date.
(i) Disability.
(i) The Company, pursuant to a resolution
duly adopted by the Board, may terminate this Agreement if
Executive becomes Disabled by giving Executive written notice of its
intention to terminate Executive's employment, subject to the terms
and conditions specified in the notice. If Executive becomes Disabled
and does not return to the performance of his duties for the Company
in accordance with the terms and conditions set forth in the notice,
Executive's employment with the Company shall terminate (the
"Disability Effective Date"). For purposes of this Agreement,
"Disabled" has the meaning set forth under the Long Term Disability
Plan of Lexington State Bank or any successor plan or amendment to
such Plan.
(ii) If Executive's employment is terminated
because Executive is Disabled, Executive is entitled, after the
Disability Effective Date, to receive disability and other benefits on
a basis comparable to those provided by the Company to disabled
employees and their families in accordance with such plans,
programs, and policies relating to disability, if any, as in effect on
the Effective Date or as amended prior to a Control Change Date.
(j) Confidential Information. 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 Executive during Executive's
employment by the Company and which is not public knowledge
(other than by acts by Executive or his representatives in violation of
this Agreement). After the termination of Executive's employment
with the Company, 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. In
no event may an asserted violation of this Section 2(j) constitute a
basis for deferring or withholding any amounts otherwise payable to
Executive under this Agreement.
<PAGE>
(k) 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.
3. Terms of Employment On and After a Control Change
Date.
(a) General. During the Employment Period, the
terms and conditions of Executive's employment, as described in
Section 2, shall continue in effect, except that such terms and
conditions are fixed as of the day before a Control Change Date and
Executive's compensation and benefits are governed by Section (3)(b)
.
(b) Compensation and Benefits. During the
Employment Period, the Company shall (i) continue to pay Executive
an annual base salary not less than Executive's annual base salary on
the day before a Control Change Date, (ii) pay Executive incentive
compensation in amounts not less in amount than those paid to
Executive during the twelve-month period preceding the day before
a Control Change Date, and (iii) continue all compensation and
employee benefit plans and programs, including all compensation,
plans and benefits described in Section 2(h) of this Agreement, at
levels in effect on the day before a Control Change Date (to the
extent practicable and subject to such reductions as may be required
to maintain such plans in compliance with applicable
nondiscrimination and other federal laws regulating employee benefit
plans and programs) or pay Executive an amount necessary to provide
essentially comparable benefits (assuming, in the case of insured
benefits, that Executive is then insurable at standard rates).
4. Liquidated Damages Upon Termination of
Employment.
(a) General. Executive is entitled to receive
Continued Compensation according to the remaining provisions of
this Section if Executive's employment with the Company terminates
during the Employment Period because of an event described in
Section 4(b) or 4(c). If Executive's employment terminates during
the Employment Period and if an event described in Section 4(b) or
4(c) has not occurred, this Agreement terminates on the date
Executive's employment terminates.
(b) Termination by the Company. Subject to the
conditions of Section 4(h), Executive is entitled to receive Continued
Compensation if Executive's employment is terminated by the
Company during the Employment Period without cause ("cause"
being limited to Executive's acts of theft, embezzlement, fraud, or
moral turpitude).
<PAGE>
(c) Voluntary Termination. Subject to the
conditions of Section 4(h), Executive is entitled to receive Continued
Compensation if Executive voluntarily terminates employment during
the Employment Period after (i) Executive does not receive salary
increases, comparable incentive compensation, stock options and
other benefits that Executive received in prior years or, if greater,
that other executives in comparable positions in comparable
companies receive in the current year; or (ii) Executive's
compensation is reduced or benefits are reduced and such reduction
is not consistent with comparable companies; or (iii) Executive's
status, title(s), office(s), working conditions, or management
responsibilities are diminished (other than changes in reporting or
management responsibilities required by applicable federal or state
law); or (iv) Executive's place of employment is changed in any way
without Executive's consent. Executive will be entitled to receive
Continued Compensation on account of his voluntary termination
under this Section 4(c) only if such voluntary termination occurs
within six months after an event described in (i), (ii), (iii), or (iv)
above, or within six months after the last in a series of such events.
(d) Continued Compensation. Continued
Compensation equal to three times Executive's Base Period Income
shall be paid in thirty-six equal monthly installments. Continued
Compensation payments to Executive shall commence on the first day
of the month following Executive's termination of employment with
the Company because of an event described in Section 4(b) or 4(c)
and shall continue on the first day of each of the next thirty-five
months, subject to receipt by the Company of notification from the
Accounting Firm (defined below) of its determination regarding the
reduction, if any, of Continued Compensation according to Section
4(g) .
(e) Base Period Income. Executive's Base Period
Income shall equal his annual base salary as of his termination date,
plus an amount equal to the incentive compensation awarded to or
accrued for Executive for the fiscal year immediately prior to the
fiscal year in which Executive's termination date occurs (but in no
event shall such amount be less than the incentive compensation
amount required to be paid during the Employment Period under
Section 3(b)(ii)). Amounts of such base salary and incentive
compensation that Executive has elected to defer during the relevant
period shall be included in Base Period Income.
(f) Other Payments or Benefits. In addition to any
payments provided under this Agreement or under any other
<PAGE>
arrangement between the Company and Executive, Executive shall be
entitled to (i) any cash or property due him as a result of the exercise
of a stock option granted under the Company's 1996 Omnibus Stock
Incentive Plan or an earlier plan or a successor plan, and (ii) any
payments or benefits due him, whether or not "parachute payments"
as defined in Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code") (but subject to Section 4(g)) including amounts
that Executive is entitled to receive under Company maintained tax-
qualified plans and any health care coverage under Company
maintained welfare plans for which Executive pays the cost.
(g) Certain Reduction of Continued Compensation.
(i) For purposes of this Section 4(g),
(A) A "Payment" means any amount
that, if paid, would be a payment or distribution in the nature
of compensation to or for the benefit of Executive, whether
paid or payable pursuant to this Agreement or otherwise;
(B) "Continued Compensation"
means a Payment paid or payable pursuant to Section 4(d)
(calculated as if there were no reduction of Continued
Compensation according to this Section 4(g));
(C) "Net After Tax Receipts" means
the Present Value of a Payment net of all taxes imposed on
Executive with respect to that Payment under Sections 1 and
4999 of the Code, determined by applying the highest
marginal rate under Section 1 of the Code that applied to
Executive's taxable income for the immediately preceding
taxable year;
(D) "Present Value" means the value
determined in accordance with Section 280G(d)(4) of the
Code; and
(E) "Reduced Amount" means the
smallest aggregate amount of all Payments that (1) is less than
the sum of all Payments and (2) results in aggregate Net After
Tax Receipts that are equal to or greater than the Net After
Tax Receipts that would result if the aggregate Payments were
any other amount less than the sum of all Payments.
(ii) Notwithstanding any other Section of this
Agreement, if the accounting firm that is engaged to audit the
Company's financial statements (the "Accounting Firm") determines
<PAGE>
that receipt of all Payments would subject Employee to tax under
Section 4999 of the Code, it shall determine whether some amount of
Payments would meet the definition of a "Reduced Amount." If the
Accounting Firm determines that there is a Reduced Amount, one or
more Payments shall be reduced to that Reduced Amount, but not
below zero. If any reduction of Payments is required by the
preceding sentence, (A) Payments other than Continued
Compensation shall be reduced first, and (B) Continued
Compensation shall be reduced in a manner that shortens the period
over which Continued Compensation is paid (and, thus, the number
of monthly installments payable) but does not reduce the amount of
a monthly installment that would be paid but for this Section 4(g).
(iii) If the Accounting Firm determines that
one or more Payments should be reduced to the Reduced Amount, the
Company shall promptly notify Executive of that determination,
sending a copy of the detailed calculations by the Accounting Firm.
All determinations made by the Accounting Firm under this Section
4(g) are binding upon the Company and Executive and shall be made
within sixty days after Executive's employment termination, unless
reasonable cause requires an extension of time. The Accounting Firm
shall furnish written notice to the Company and Executive of any
required extension before the end of the sixty-day period; but the
Accounting Firm shall make its determinations under this Section as
soon as possible and not later than six months after Executive's
employment termination.
(iv) It is the intention of the Company and
Executive to reduce one or more Payments only if the aggregate Net
After Tax Receipts to Executive would be increased by that
reduction. However, it is possible that, as a result of uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm under this Section, amounts
shall have been paid or distributed under this Agreement to or for the
benefit of Executive, which amounts should not have been so paid or
distributed ("Overpayment"), or that additional amounts not paid or
distributed under the Plan to or for the benefit of Executive could
have been so paid or distributed ("Underpayment"), in each case,
consistent with the calculation of the Reduced Amount. If the
Accounting Firm, based either upon the assertion of a deficiency by
the Internal Revenue Service against the Company or Executive,
which assertion the Accounting Firm believes has a high probability
of success or controlling precedent or other substantial authority,
determines that an Overpayment has been made, any such
Overpayment shall be treated for all purposes as a loan to Executive,
which loan Executive shall repay to the Company on terms acceptable
to Executive and the Company together with interest at the applicable
<PAGE>
federal rate under Section 7872(f)(2) of the Code; provided, however,
that no such loan shall be deemed to have been made and no amount
is payable by Executive to the Company if and to the extent such
deemed loan and payment would not either reduce the amount on
which Executive is subject to tax under Section 1 or 4999 of the Code
or generate a refund of such taxes. If the Accounting Firm, based
upon controlling precedent or other substantial authority, determines
that an Underpayment has occurred, the Accounting Firm shall
promptly notify the Company of the amount of the Underpayment.
The Company shall take action to address the Underpayment in a
manner that as nearly as possible restores Executive to the position
he would have been in if there had been no Underpayment.
(h) Covenant Not to Compete.
(i) Executive agrees that if his employment
terminates for any reason during the Employment Period, then during
the period in which Executive is entitled to Continued Compensation
under Section 4, 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
has a banking office in Davidson County, North Carolina, counties
contiguous to Davidson County, North Carolina, or counties in which
the Company has a banking office on a Control Change Date.
Executive further agrees that during the period in which Executive is
entitled to Continued Compensation under Section 4, 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 Executive or Executive's post-termination employer.
(ii) Executive agrees and acknowledges that
any breach of the covenants contained in this Section 4(h) 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.
(iii) The covenants contained in this Section
4(h) shall inure to the benefit of the Company and its affiliated
employers and subsidiaries and their successors.
(iv) The restrictions contained in this Section
4(h) are considered by the parties hereto to be fair and reasonable and
necessary for the protection of the legitimate business interests of the
Company.
<PAGE>
(v) Notwithstanding Section 3(a), 3(b) or 4,
if Executive violates Section 4(h), any unpaid Continued
Compensation shall immediately be forfeited as of the date of any
violation.
5. Legal Fees and Expenses. The Company shall pay all
legal fees and expenses, if any, incurred by Executive in obtaining,
enforcing, or defending any right or benefit provided by this
Agreement, whether successful or not. Payments under this Section
are not Continued Compensation and are not subject to reduction
under any other Section of this Agreement.
6. 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.
7. Amendment. This Agreement may not be amended
except by the written agreement of Executive and the Company (with
the Company acting by adoption of a resolution by the Board
recommended by the Committee).
8. Binding Effect. The parties agree that this Agreement
is enforceable under the laws of the State of North Carolina. This
Agreement is binding on the Company, its successors, and assigns
and on Executive and his personal representatives; and the Company
will not consolidate or merge into or with another corporation, or
transfer all or substantially all of its assets to another corporation
(the "Successor Corporation") unless the Successor Corporation shall
assume this Agreement, and upon such assumption, Executive and the
Successor Corporation shall become obligated to perform the terms
and conditions of this Agreement. This Agreement inures to the
benefit of and is enforceable by Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees, and legatees. If Executive dies while any
amounts are payable under this Agreement, all such amounts, unless
otherwise provided, shall be paid in accordance with the terms of this
Agreement to Executive's spouse, or if none, to his devisee, legatee,
or other designee or, if there be no such designee, to his estate.
<PAGE>
9. Notice. For purposes of this Agreement, notices and
all other communications shall be in writing and are effective when
delivered or mailed by United States registered mail, return receipt
requested, postage prepaid, addressed to Executive or his personal
representative at his last known address. All notices to the Company
shall be directed to the attention of the Chairman of the Board. Such
other addresses may be used as either party may have furnished to the
other in writing. Notices of change of address are effective only
upon receipt.
10. Miscellaneous. No provision of this Agreement may
be modified, waived, or discharged unless such waiver, modification,
or discharge is agreed to in writing signed by Executive and the
Company. A waiver of any breach of or compliance with any
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.
11. No Assignment. Executive may not assign, alienate,
anticipate, or otherwise encumber any rights, duties, or amounts that
he might be entitled to receive under this Agreement.
12. Term. Upon execution by the Company and
Executive, this Agreement is effective as of the Effective Date. This
Agreement automatically continues in effect through December 31,
1996, and thereafter through each successive December 31 unless the
Company notifies Executive in writing thirty days before the end of
any calendar year that this Agreement shall terminate as of the end
of that calendar year. After a Change in Control of the Company (as
defined in Section 1(c)), the Company may not terminate this
Agreement for thirty-six months from the date Continued
Compensation becomes payable under Section 4 (although this
Agreement may terminate automatically under Section 4(a)); and this
Agreement automatically continues in effect from year to year
thereafter unless the Company notifies Executive in writing thirty
days before the end of the initial thirty-six-month period or thirty
days before any anniversary of the end of that period that this
Agreement shall terminate as of that date.
<PAGE>
The parties have executed this Agreement effective as of the
9th day of July, 1996.
LSB BANCSHARES, INC.
By: ROBERT F. LOWE
Its: President
MONTY J. OLIVER
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Date November 12, 1996 LSB BANCSHARES. INC.
(Registrant)
Monty J. Oliver
Chief Financial Officer
Principal Accounting Officer
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