Exhibit 10(xxxx)
 
INDEMNIFICATION AGREEMENT
 
This INDEMNIFICATION AGREEMENT (this “Agreement”) is made and entered into as of
February 23, 2011, by and among CRESCENT FINANCIAL CORPORATION, a North
Carolina-chartered bank holding company (the “Company”), CRESCENT STATE BANK, a
North Carolina-chartered bank and wholly-owned subsidiary of the Company (the
“Bank”), and MICHAEL G. CARLTON (“Indemnitee”).

WHEREAS, the Indemnitee is an officer and a director of both the Company and the
Bank; and

WHEREAS, the Bylaws of the Company and the Bank authorize and require
indemnification of its officers and directors for service on the board of
directors of other corporations or entities provided that such service was at
the request of the Company’s Board of Directors (“Other Service”); and

WHEREAS, the Indemnitee, the Company and the Bank entered into that certain
Employment Agreement, dated September 10, 2008, as amended December 31, 2010 and
as modified January 1, 2009 (collectively, with such amendments and
modifications, the “Employment Agreement”), which further entitles the
Indemnitee to certain indemnification rights; and

WHEREAS, the Indemnitee served as a director on the Boards of Directors of
another bank holding company (the “Other Bank Holding Company”) and its
wholly-owned banking subsidiary (the “Other Bank”), at the joint request of the
Boards of Directors of the Company and the Bank; and

WHEREAS, the Other Bank was closed by the Office of the Comptroller of the
Currency prior to the date of this agreement, with the Federal Deposit Insurance
Corporation (“FDIC”) named as its receiver, and the Other Bank Holding Company
filed a Voluntary Petition for relief under chapter 7 of title 11 of the United
States Code, 11 U.S.C. §§ 101 et seq. (“Bankruptcy Code”), in the United States
Bankruptcy Court on  June 5, 2009; and

WHEREAS, the FDIC has asserted certain claims against the Indemnitee for which
Indemnitee is entitled to seek indemnification; and

WHEREAS, Indemnitee’s service as a director of each of the Other Bank Holding
Company and the Other Bank constituted Other Service as defined above; and

WHEREAS, in order to facilitate a transaction contemplated by that certain
Investment Agreement (the “Investment Agreement”) of even date herewith and
among the Company, the Bank and Piedmont Community Bank Holdings, Inc., a
Delaware-chartered bank holding company, that will result in the investment of
additional capital into the Company and the Bank, the parties believe it
appropriate to modify and limit the obligations of the Company and the Bank,
under their respective Articles of Incorporation and Bylaws, the Employment
Agreement and applicable law to indemnify the Indemnitee with respect to his
Other Service rendered prior to January 1, 2011;

NOW, THEREFORE, in consideration of the mutual agreements herein contained, the
parties agree as follows:
 
 
 

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1.           AGREEMENT TO INDEMNIFY.
 
 
(a)           The Company shall indemnify the Indemnitee for reasonable legal
fees (“Defense Expenses”), in the single aggregate amount up to, but no more
than, ONE MILLION AND NO/100 DOLLARS ($1,000,000.00) (“Maximum Aggregate
Indemnification Limit”), incurred by the Indemnitee after January 1, 2011
(including the balances of any retainers for legal services paid prior to the
date of this Agreement but unexhausted as of January 1, 2011), in the defense of
any and all proceedings based on, arising out of, or in any way relating to the
Other Service that he has rendered prior to the date of this
Agreement.  Indemnitee agrees that he will be entitled to receive only up to the
Maximum Aggregate Indemnification Limit as a result of all his Other Service
rendered prior to January 1, 2011, whether under the Articles of Incorporation
or Bylaws of the Company or the Bank, the Employment Agreement or applicable law
and regardless of the number of claims, claimants or proceedings, the number of
entities to which Indemnitee rendered Other Service, the positions in which he
served, the duration of such Other Service or whether requested or authorized to
render such Other Service by the Company, the Bank or both, and regardless of
whether the proceedings are pending, threatened, brought in the future or
completed.

(b)           The Indemnitee shall be entitled to seek advancement of Defense
Expenses he incurs in advance of the termination of a proceeding, and the
Company and the Bank agree to advance Defense Expenses, upon his compliance with
the requirements of the Company’s Bylaws and applicable law.

(c)           The Indemnitee hereby waives any other rights to indemnification
and advancement by the Company or the Bank based upon or arising out of Other
Service rendered prior to the date of this Agreement, whether pursuant to
provisions of (i) the Articles of Incorporation of the Company or the Bank; (ii)
the Bylaws of the Company or the Bank; (iii) the Employment Agreement; (iv) any
other resolution, agreement or understanding of the Board of Directors; (v) any
other agreement with the Company or the Bank or (vi) applicable law.  The
Indemnitee agrees that all his rights to indemnification under the Articles of
Incorporation of the Company and the Bank, the Bylaws of the Company and the
Bank, the Employment Agreement and applicable law are limited to Defense
Expenses and that he waives any and all rights of indemnification for any
judgments, settlements, fines, penalties, excise taxes or other liabilities
(other than liability for Defense Expenses) that he may incur as a result of
such Other Service rendered prior to January 1, 2011.

(d)           No provision in this Agreement shall require the Company or the
Bank to provide the Indemnitee with any indemnification, advancement,
reimbursement or payment (i) that constitutes a “prohibited indemnification
payment” within the meaning of 12 C.F.R.    § 359.1(l)(1) or 12 C.F.R. § 359.5;
(ii) that violates the requirements of other applicable law; or (iii) that is
otherwise prohibited under the Articles of Incorporation of either the Company
or the Bank, the Bylaws of either the Company or the Bank, or the Employment
Agreement, as each such document is in effect as of the date of this Agreement.

(e)           The Indemnitee shall continue to retain all rights to
indemnification he may have, arising under (i) the Articles of Incorporation of
the Company and the Bank; (ii) the Bylaws of the Company or the Bank; (iii) the
Employment Agreement, (iv) any other resolution, agreement or understanding of
the Board of Directors; (v) any other agreement with the Company or the Bank;
(vi) applicable law; or (vii) otherwise, with respect to proceedings based upon
or arising out of his service as an officer or director of the Company or the
Bank, or any subsidiary of the Company or the Bank, or Other Service, provided
such Other Service is rendered after the date of this Agreement.

 
 

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2.           PROCEDURE FOR MAKING AND RESPONDING TO DEMANDS FOR INDEMNIFICATION
AND ADVANCEMENT.  Requests for advancement or indemnification shall be paid to
Indemnitee (or to Indemnitee’s counsel) only upon Indemnitee’s and the Company’s
compliance with their respective duties and obligations under all applicable
terms and conditions of the Company’s Bylaws (in effect as of the date of this
Agreement) and applicable law.

3.           EFFECTIVENESS.  This Agreement shall only be effective as of the
Closing Date of the Investment Agreement, as that term is defined in Section 2.2
thereto.

4.           SUCCESSORS.  This Agreement establishes contract rights which shall
be binding upon, and shall inure to the benefit of, the successors, assigns,
heirs and legal representatives of the parties hereto.

5.           THIRD PARTIES.  The parties agree that this Agreement is not
intended to benefit, convey and interest or provide any rights to any other
person or entity.

6.           SEVERABILITY.  Should any provision of this Agreement, or any
clause hereof, be held to be invalid, illegal or unenforceable, in whole or in
part, the remaining provisions and clauses of this Agreement shall remain fully
enforceable and binding on the parties.

7.           MODIFICATION AND WAIVER.  No supplement, modification or amendment
of this Agreement shall be binding unless executed in writing by all of the
parties hereto.  No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.

8.           CHOICE OF LAW.  The validity, interpretation, performance and
enforcement of this Agreement shall be governed by the laws of the State of
North Carolina and any applicable federal laws and regulations.

(Signature Page Follows)
 
 
 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
 

 
CRESCENT FINANCIAL CORPORATION
         
 
By:
/s/ Bruce W. Elder     Name: Bruce W. Elder     Title: Vice President  

 

 
CRESCENT STATE BANK
         
 
By:
/s/ Bruce W. Elder     Name: Bruce W. Elder     Title: Senior Vice President  

 

 
INDEMNITEE
         
 
By:
/s/ Michael G. Carlton       Michael G. Carlton