EMPLOYMENT AGREEMENT (DAVID ZABRISKIE)

EMPLOYMENT AGREEMENT

(DAVID ZABRISKIE)

THIS EMPLOYMENT AGREEMENT (this “Agreement”), dated as of December 31, 2008, by and between First National Bank of the South (d.b.a First National Bank of Spartanburg) (“Employer”), having its principal office at 215 North Pine Street, Spartanburg, South Carolina 29304, and David Zabriskie (“Employee”).

Employer presently employs Employee as its Executive Vice-President and Senior Lending Officer.  Employer recognizes that Employee's contributions to the growth and success of Employer is substantial.  Employer has previously entered into an Employment Agreement with Employee as of January 31, 2005, which Employer and Employee now desire to restate principally to reflect changes in tax laws.  Employee is willing to continue to serve Employer on the terms and conditions herein provided.  Certain terms used in this Agreement are defined in Section 28 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 .  Employer hereby continues to employ Employee and Employee continues to accept employment on the terms and conditions hereafter set forth.

2.            Term .  Unless earlier terminated as hereinafter provided in Section 16, Employee's employment under this Agreement shall commence on the date hereof and be for a term (the “Term”) of two 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 two years; provided that the Employee or the Employer may at any time, by written notice, fix the Term to a finite term of two years commencing with the year of the notice.

3.            Duties .  Employee shall continue to serve as an Executive Vice-President and Senior Lending Officer of Employer and in such capacity shall perform such duties as are consistent with that position, and as Employer from time to time may direct.  Such duties shall be performed at Employer’s principal corporate offices or subsidiary office as agreed upon by Employer and Employee.  Employer reserves the right from time to time to extend, curtail or change the title and duties of Employee.

4.            Extent of Services .  Employee shall, during normal working hours, devote his best efforts as well as his full time, attention and energies to the business of Employer and shall diligently perform to the best of his ability such duties as may be reasonable assigned to Employee.

Employee shall not, during the term of this Agreement, be engaged in any other business activity whether or not such business activity is pursued for gain, profit or pecuniary advantage and whether or not such activity is carried on outside normal working hours, but this prohibition shall not be construed as preventing Employee from investing his assets in such form or manner as will not require any services on the part of Employee in the operation of the affairs of the companies in which investments are made.  Employee hereby confirms that he is under no contractual commitments inconsistent with his obligations set forth in this Agreement, and that, during the term of this Agreement, he will not render or perform services, or enter into any contract to do so, for any of the corporation, firm, entity or person which are inconsistent with the provisions of this Agreement.

5.            Base Salary .  For all services rendered by Employee under this Agreement, Employer shall pay Employee a base salary of $180,000.00 per year, payable in accordance with the salary payment practices of Employer, which for purposes of this Agreement shall mean no less frequently than monthly.  Employer shall have the right to increase the compensation provided by this Agreement, but any such increase shall not affect any of the other terms and conditions of this Agreement.  Employee’s base salary and performance will be reviewed annually.  The base salary may be increased, but will not decrease, in the Employer’s sole discretion as a result of the review.

6.            Benefits .

(a)           Employee shall be entitled, to the extent that Employee’s position, title, tenure, salary, age, health, performance, and other qualifications make him eligible, to participate in all employee benefit plans or programs of Employer currently in existence on the date hereof including but not limited to any executive management incentive plans.  Employee’s participation in any such plan or program shall be subject to the provisions, rules and regulations applicable thereto.

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

(c)           Employer shall pay the annual dues for Employee’s membership at the Piedmont Club for so long as Employee remains an Executive Vice President of Employer and this Agreement remains in force.

7.            Working Facilities .  Employee shall be furnished with an office and such other facilities and services as may be necessary or suitable to his position and adequate for the performance of his duties.

8.            Expenses .  Employee is authorized to incur reasonable expenses for promoting the business of Employer, including expenses for entertainment, travel and similar items, but only to the extent that such expenses are allowable deductions to Employer on its Federal income tax return.  Employer shall promptly reimburse Employee for all such expenses upon the presentation by Employee, from time to time, of an itemized account of such expenditures.   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.  Employee shall repay to Employer the amounts of any expenses claimed which, for lack of proper documentation or otherwise, are not allowed to Employer as deductions for Federal income tax purposes.

9.            Vacations .  Employee shall be entitled each fiscal year to 20 paid days off, which number of days is granted by Employer to employees of similar tenure and compensation rank, pursuant to Employer’s paid days off policy.  Employer reserves the right to modify this and any other personnel policy from time to time.  Any payments made by Employer to Employee as compensation for paid vacation leave shall be paid in accordance with Employer's salary payment practices.

10.            Stock Options .  Employee shall have the opportunity to participate in 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 Employer.  Any options or similar awards shall be issued to Employee (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.  Awards under this plan are in the discretion of the board of directors and shall be made pursuant to a separate agreement.

11.            Ownership of Work Product .

(a)           Employee shall diligently disclose to Employer as soon as it is created or conceived by Employee, and Employer shall own, all Work Product (as defined below).  To the extent permitted by law, all Work Product shall be considered work made for hire by Employee and owned by Employer.

(b)           If any of the work Product may not, by operation of law, be considered work made for hire by Employee for Employer (or if ownership of all right, title and interest of the intellectual property rights therein shall not otherwise vest exclusively in Employer), Employee agrees to assign, and upon creation thereof automatically assigns, without further consideration, the ownership of all Work Product to Employer, its successors and assigns.

(c)           Employer, and its successors and assigns, shall have the right to obtain and hold in its or their own name copyrights, registrations, and any other protection available in the foregoing.

(d)           Employee agrees to perform upon the reasonable request of Employer, during or after Employee’s employment, such further acts as may be necessary or desirable to transfer, perfect and defend Employer’s ownership of the Work Product.  When requested, Employee will

(i)           Execute, acknowledge and deliver any requested affidavits and documents of assignment and conveyance;

(ii)           Obtain and aid in the enforcement of copyrights (and, if applicable, patents) with respect to the Work Product in any countries.

(iii)           Provide testimony in connection with any proceeding affecting the right, title or interest of Employer in any Work Product; and

(iv)           Perform any other acts deemed necessary or desirable to carry out the purposes of this Agreement.

Employer shall reimburse all reasonable out-of-pocket expenses incurred by Employee at Employer’s request in connection with the foregoing.  Any reimbursements made pursuant to this Section 11(d) 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.

(e)           For purposes hereof, “Work Product” shall mean all intellectual property rights, including all Trade Secrets, U.S. and international copyrights, patentable inventions, discoveries and improvements, and other intellectual property rights, in any programming, documentation, technology or other work product that relates to the business and interest of Employer and that Employee conceives, develops, or delivers to Employer at any time during the term of Employee’s employment.  “Work Product” shall also include all intellectual property rights in any programming, documentation, technology or other work product that is now contained in any of the products or systems (including development and support systems) of Employer prior to the date of this Agreement while Employee was engaged as an independent contractor or employee of Employer.  Employee hereby irrevocably relinquishes for the benefit of Employer and its assigns any moral rights in the Work Product recognized by applicable law.

(a)           Through exercise of his rights and performance of his obligations under this Agreement, Employee will be exposed to “Trade Secrets” and “Confidential Information” (as those terms are defined below).  “Trade Secrets” shall mean information or data of or about Employer or any affiliated entity, including, but not limited to, technical or non-technical data, formulas, patterns, compilations, progr