EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) dated as of December 31, 2008, is made among First National Bancshares, Inc., a South Carolina corporation (the “Company”), its wholly owned subsidiary, First National Bank of the South, a national bank (the “Bank”), and Jerry L. Calvert, an individual resident of South Carolina (the “Executive”).  The Company and the Bank are referred to collectively as the “Employer.”

The Employer recognizes the Executive's contribution to the growth and success of the Employer and has previously entered into an Employment Agreement with Executive as of September 10, 2004, which Employer and Employer now desire to restate principally to reflect changes in tax laws.  The Executive is willing to continue to serve the Employer on the terms and conditions herein provided.  Certain terms used in this Agreement are defined in Section 17 hereof.

In consideration of the foregoing, the mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

1.            Employment .  The Employer shall employ the Executive, and the Executive shall serve the Employer, as President and Chief Executive Officer of the Bank and the Company upon the terms and conditions set forth herein.  The Executive shall also serve on the Board of Directors of the Company and the Bank.  The Executive shall have such authority and responsibilities consistent with his position as are set forth in the Company's or the Bank's Bylaws or assigned by the Company's or the Bank's Board of Directors (the “Board”) from time to time.  The Executive shall devote his full business time, attention, skill and efforts to the performance of his duties hereunder, except during periods of illness or periods of vacation and leaves of absence consistent with Bank policy.  The Executive may devote reasonable periods to service as a director or advisor to other organizations, to charitable and community activities, and to managing his personal investments, provided that such activities do not materially interfere with the performance of his duties hereunder and are not in conflict or competitive with, or adverse to, the interests of the Company or the Bank.

2.            Term .  Unless earlier terminated as provided herein, the Executive's employment under this Agreement shall commence on the date hereof and be for a term (the “Term”) of three years.  At the end of each year of the Term, the Term shall be extended for an additional year so that the remaining term shall continue to be three years; provided that the Executive or the Employer may at any time, by written notice, fix the Term to a finite term of three years commencing with the year of the notice.  Notwithstanding the foregoing, the Term of employment hereunder will end on the date that the Executive attains the retirement age, if any, specified in the Bylaws of the Bank for directors of the Bank.

3.       Compensation and Benefits .

(a)           Executive's base salary is $286,000, plus his medical insurance premium.   The Board (or an appropriate committee of the Board) shall review the Executive's salary at least annually and may increase, but cannot decrease, the Executive's salary if it determines in its sole discretion that an increase is appropriate.  The salary shall be payable in accordance with the Employer’s normal payroll practices, which shall mean no less frequently than monthly.

(b)           The Executive will be eligible to receive an annual cash bonus of up to 50% of his base salary based on the accomplishment of performance goals established in advance each year by the Board of Directors.  Any bonus payment made pursuant to this Section 3(b) shall be made the earlier of (i) seventy days after the previous year end or (ii) the first pay period following the Employer's press release announcing its previous year's financial performance.

(c)           The Executive shall participate in the Employer's long-term equity incentive program and be eligible for the grant of stock options, restricted stock, and other awards thereunder or under any similar plan adopted by the Employer.  Nothing herein shall be deemed to preclude the granting to the Executive of warrants or options under a director option plan in addition to the options granted hereunder.  Any options or similar awards shall be issued to Executive (i) at an exercise price of not less than the stock's current fair market value as of the date of grant and (ii) the number of shares subject to such grant shall be fixed on the date of grant.

(d)           The Executive shall participate in all retirement, welfare and other benefit plans or programs of the Employer now or hereafter applicable generally to employees of the Employer or to a class of employees that includes senior executives of the Employer.

(e)           The Employer shall provide the Executive with a term life insurance policy providing for death benefits totaling $500,000 payable to the Executive's spouse and heirs (and may provide for additional death benefits of up to $500,000 payable to the Employer), and the Executive shall cooperate with the Employer in the securing and maintenance of such policy.  The Employer shall also pay for an accident liability policy on the Executive totaling $1,000,000 to protect the Employer from damages or lawsuits resulting from injuries to third parties caused by the Executive. In addition, the Employer shall provide a separate disability policy for the Executive with terms acceptable to the Board and the Executive.  The Employer shall require and pay the cost of an annual physical for the Executive.

(f)             The Employer shall provide Executive with either an automobile owned or leased by the Employer of a make and model appropriate to the Executive's status, or a monthly automobile allowance, which shall be paid no less frequently than monthly.  The Employer shall provide for reasonable expenses associated with the automobile, including, but not limited to insurance, taxes, etc.  The Employer shall reimburse Executive for such expenses no later than the last day of the calendar year following the calendar year in which the expense was incurred.

(g)           The Employer shall pay on a monthly basis Executive’s membership dues pertaining to an area country club and The Piedmont Club for so long as the Executive remains the President and Chief Executive Officer of the Company or the Bank and this Agreement remains in force.

(h)           The Employer shall reimburse the Executive for reasonable travel and other business development expenses related to the Executive's duties which are incurred and accounted for in accordance with the normal practices of the Employer.  The expenses described in this Section 3(h) must be incurred by the Executive during the term of this Agreement to be eligible for reimbursement.  All reimbursements shall be paid as soon as administratively practicable, but in no event shall any reimbursement be paid after the last day of the calendar year following the calendar year in which the expense was incurred, nor shall the amount of reimbursable expenses incurred in one taxable year affect the expenses eligible for reimbursement in any other taxable year.

(a)           The Executive's employment under this Agreement may be terminated prior to the end of the Term only as provided in this Section 4.

(b)           The Agreement will be terminated upon the death of the Executive.  In this event, the Employer shall pay the Executive's estate any sums due him as base salary and/or reimbursement of expenses through the end of the month during which death occurred in accordance with the Employer’s normal payroll practices, which shall mean no less frequently than monthly. The Employer shall also pay the Executive's estate any bonus earned or accrued through the date of death (including any amounts awarded for previous years but which were not yet vested).  Any bonus for previous years which was not yet paid will be paid pursuant to the terms as set forth in Section 3(b).  Any bonus that is earned in the year of death will be paid on the earlier of (i) seventy days after the year end in which the Executive died or (ii) the first pay period following the Employer's press release announcing its financial performance for the year in which the Executive died.  To the extent that the bonus is performance-based, the amount of the bonus will be calculated by taking into account the performance of the Company for the entire year and prorated through the date of Executive's death.

(c)           The Employer may terminate the Executive's employment upon the Disability of the Executive for a period of 180 days.  During the period of any Disability leading up to the Executive’s Termination of Employment under this provision, the Employer shall continue to pay the Executive his full base salary at the rate then in effect and all perquisites and other benefits (other than any bonus) in accordance with the Employer's normal payroll schedule (and in no event less frequently than monthly) until the Executive becomes eligible for benefits under any long-term disability plan or insurance program maintained by the Employer, provided that the amount of any such payments to the Executive shall be reduced by the sum of the amounts, if any, payable to the Executive for the same period under any other disability benefit or pension plan covering the Executive.  Furthermore, the Employer shall pay the Executive any bonus earned or accrued through the date of Disability (including any amounts awarded for previous years but which were not yet vested).  Any bonus for previous years which was not yet paid will be paid pursuant to the terms as set forth in Section 3(b).  Any bonus that is earned in the year of Disability will be paid on the earlier of (i) seventy days after the year end in which Executive became Disabled or (ii) the first pay period following the Employer's press release announcing its financial performance for the year in which the Executive became Disabled.  Nothing herein shall prohibit the Employer from hiring an acting president or chief executive officer prior to the expiration of this 180-day period.

(d)           The Employer may terminate the Executive's employment for Cause upon delivery of a Notice of Termination to the Executive.  If the Executive's employment is terminated for Cause under this provision, the Executive shall receive only any sums due him as base salary and/or reimbursement of expenses through the date of termination, which shall be paid in accordance with the Employer’s normal payroll practices, which shall mean no less frequently than monthly.

(e)           The Employer may terminate the Executive's employment without Cause upon delivery of a Notice of Termination to the Executive.  If the Executive's employment is terminated without Cause under this provision, subject to the possibility of a six-month delay described below in this Section 4(e), beginning on the first day of the month following the date of the Executive's termination, and continuing on the first day of the month for the next 23 months, the Employer shall pay to the Executive severance compensation in an amount equal to 100% of his then current monthly base salary.  Employer shall also pay the Executive any bonus earned or accrued through the date of termination (including any amounts awarded for previous years but which were not yet vested).  Any bonus for previous years which was not yet paid will be paid pursuant to the terms as set forth in Section 3(b). Any bonus that is earned in the year of the Executive's termination will be paid on the earlier of (i) seventy days after the date of Executive's termination or (ii) the first pay period following the Employer's press release announcing its financial performance for the year of the Executive's termination.  In addition, for a period of 24 months following termination, the Employer shall at its expense continue on behalf of the Executive and his dependents and beneficiaries the life insurance, disability, medical, dental, and hospitalization benefits provided (x) to the Executive at any time during the 90-day period prior to the termination hereunder or (y) to other similarly situated executives who continue in the employ of the Employer. Such coverage and benefits (including deductibles and costs) shall be no less favorable to the Executive and his dependents and beneficiaries than the most favorable of such coverages and benefits referred to above.  The Employer's obligation hereunder with respect to the foregoing benefits shall be limited to the extent that the Executive obtains any such benefits pursuant to a subsequent employer's benefit plans, in which case the Employer may reduce the coverage of any benefits it is required to provide the Executive hereunder as long as the aggregate coverages and benefits of the combined benefit plans is no less favorable to the Executive than the coverages and benefits required to be provided hereunder.  If when the Executive's employment terminates he is a specified employee within the meaning of Section 409A of the Code, and if the benefits under this Section 4(e) would be considered deferred compensation under Section 409A, and finally if an exemption from the six-month delay requirement of Section 409A(a)(2)(B)(i) is not available, the following benefits under this Section 4(e) shall be paid to the Executive as follows: severance compensation in an amount equal to 7 times his then current monthly base salary, any bonus for previous years which was not yet paid will be paid in a single lump sum on the date that is six months and one day following date of Executive's termination; thereafter on the first day of the month for the next 17 months, the Employer shall pay to the Executive severance compensation in an amount equal to 100% of his then current monthly base salary.  Any bonus that is earned in the year of the Executive's termination will be paid pursuant to the terms as set forth above.  This provision shall not be interpreted so as to limit any benefits to which the Executive or his dependents or beneficiaries may be entitled under any of the Employer's employee benefit plans, programs, or practices following the Executive's Termination of Employment, including, without limitation, retiree medical and life insurance benefits.

(f)           The Executive may terminate his employment at any time by delivering a Notice of Termination at least 30 days prior to the Executive’s date of termination.  If the Executive terminates his employment under this provision, the Executive shall receive any sums due him as base salary and/or reimbursement of expenses through the date of such termination, which shall be paid in accordance with the Employer’s normal payroll practices, which shall mean no less frequently than monthly.

(g)           The Executive may terminate this Agreement for Good Reason upon delivery of a Notice of Termination to the Employer within a 90-day period beginning on the 30th day after the occurrence of a Change in Control or within a 90-day period beginning on the one year anniversary of the occurrence of a Change in Control.  If the Executive's employment is terminated by the Executive pursuant to this provision, in addition to other rights and remedies available in law or equity, the Executive shall be entitled to the following: