Exhibit 10(vii)

BANK OF OAK RIDGE

SECOND AMENDED AND RESTATED

DIRECTOR STOCK OPTION PLAN

THIS IS THE DIRECTOR STOCK OPTION PLAN (“Plan”) of the Bank of Oak Ridge (the
“Bank”), a North Carolina bank, with its principal office in Oak Ridge, Guilford
County, North Carolina, adopted by the Board of Directors of the Bank, under
which options may be granted from time to time to eligible directors of the Bank
to purchase shares of common stock of the Bank (“Common Stock”), subject to the
provisions set forth below:

1. PURPOSE OF THE PLAN. The purpose of the Plan is to aid the Bank in attracting
and retaining capable directors and to provide a long range incentive for
directors to remain in the management of the Bank, to perform at increasing
levels of effectiveness and to acquire a permanent stake in the Bank with the
interest and outlook of an owner. These objectives will be promoted through the
granting of options to acquire shares of Common Stock pursuant to the terms of
this Plan.

2. ADMINISTRATION. The Plan shall be administered by a committee (the
“Committee”), which shall consist of not less than two members of the Board of
Directors of the Bank (the “Board”) who are “Non-Employee Directors” as defined
in Rule 16b-3(b)(3) of the Rules and Regulations under the Securities Exchange
Act of 1934, as amended, (the “Exchange Act”). Members of the Committee shall
serve at the pleasure of the Board. In the absence at any time of a duly
appointed Committee, this Plan shall be administered by the Board. The Committee
may designate any officers or employees of the Bank to assist in the
administration of the Plan and to execute documents on behalf of the Committee
and perform such other ministerial duties as may be delegated to them by the
Committee.

Subject to the provisions of the Plan, the determinations or the interpretation
and construction of any provision of the Plan by the Committee shall be final
and conclusive upon all persons affected thereby. By way of illustration and not
of limitation, the Committee shall have the discretion (a) to construe and
interpret the Plan and all options granted hereunder and to determine the terms
and provisions (and amendments thereof) of the options granted under the Plan
(which need not be identical); (b) to define the terms used in the Plan and in
the options granted hereunder; (c) to prescribe, amend and rescind the rules and
regulations relating to the Plan; (d) to determine the individuals to whom and
the time or times at which such options shall be granted, the number of shares
to be subject to each option, the option price, and the determination of leaves
of absence which may be granted to participants without constituting a
termination of their employment for the purposes of the Plan; and (e) to make
all other determinations necessary or advisable for the administration of the
Plan.

It shall be in the discretion of the Committee to grant options which qualify as
“incentive stock options,” as that term is defined in Section 422 of the
Internal Revenue Code of 1986, as amended (the “Code”) (“Incentive Stock
Options”) or which do not qualify as Incentive Stock Options (“Nonqualified
Stock Options”) (herein referred to collectively as “Options;” however, whenever
reference is specifically made only to “Incentive Stock Options” or
“Nonqualified Stock Options,” such reference shall be deemed to be made to the
exclusion of the other). Any options granted which fail to satisfy the
requirements for Incentive Stock Options shall become Nonqualified Stock
Options.

 

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3. STOCK AVAILABLE FOR OPTIONS. In the discretion of the Committee, the stock to
be subject to Options under the Plan shall be authorized but unissued shares of
Common Stock which are issued directly to optionees upon exercise of options
and/or shares of Common Stock which are acquired by the Plan or the Bank in the
open market. The total number of shares of Common Stock for which Options may be
granted under the Plan is 143,150 shares, which is 10% of the total number of
shares of Common Stock issued by the Bank in connection with its initial and
second public offerings. Such total number of shares is subject to any capital
adjustments as provided in Section 15. In the event that an Option granted under
the Plan is forfeited, released, expires or is terminated unexercised as to any
shares covered thereby, such shares thereafter shall be available for the
granting of Options under the Plan; however, if the forfeiture, expiration,
release or termination date of an Option is beyond the term of existence of the
Plan as described in Section 20, then any shares covered by forfeited,
unexercised, released or terminated options shall not reactivate the existence
of the Plan and therefore may not be available for additional grants under the
Plan. The Bank, during the term of the Plan, will reserve and keep available a
number of shares of Common Stock sufficient to satisfy the requirements of the
Plan. In the discretion of the Committee, the shares of Common Stock necessary
to be delivered to satisfy exercised options may be from authorized and unissued
shares of Common Stock or may be purchased in the open market.

4. ELIGIBILITY. Options shall be granted only to individuals who meet all of the
following eligibility requirements:

(a) Such individual must be a member of the Board of Directors of the Bank. For
this purpose, an individual shall be considered to be an “employee” only if
there exists between the Bank and the individual the legal and bona fide
relationship of employer and employee. In determining whether such relationship
exists, the regulations of the United States Treasury Department relating to the
determination of such relationship for the purpose of collection of income tax
at the source on wages shall be applied.

(b) Such individual must have such knowledge and experience in financial and
business matters that he or she is capable of evaluating the merits and risks of
the investment involved in the exercise of the Options.

(c) Such individual, being otherwise eligible under this Section 4, shall have
been selected by the Committee as a person to whom an Option shall be granted
under the Plan.

In determining the directors to whom Options shall be granted and the number of
shares to be covered by each Option, the Committee shall take into account the
nature of the services rendered by respective directors, their present and
potential contributions to the success of the Bank and such other factors as the
Committee shall deem relevant. A director who has been granted an Option under
the Plan may be granted an additional Option or Options under the Plan if the
Committee shall so determine.

 

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If, pursuant to the terms of the Plan, it is necessary that the percentage of
stock ownership of any individual be determined, stock ownership in the Bank or
of a related corporation which is owned (directly or indirectly) by or for such
individual’s brothers and sisters (whether by the whole or half blood), spouse,
ancestors, and lineal descendants or by or for any corporation, partnership,
estate or trust of which such employee is a shareholder, partner or beneficiary
shall be considered as owned by such director.

5. OPTION GRANTS. Subject to the provisions of this Plan, Options shall be
awarded to the directors in such amounts as are determined by the Committee. The
proper officers on behalf of the Bank and each Optionee shall execute a Stock
Option Grant and Agreement (the “Option Agreement”) which shall set forth the
total number of shares of Common Stock to which it pertains, the exercise price,
whether it is a Nonqualified Stock Option or an Incentive Stock Option, and such
other terms, conditions, restrictions and privileges as the Committee in each
instance shall deem appropriate, provided they are not inconsistent with the
terms, conditions and provisions of this Plan. Each Optionee shall receive a
copy of his executed Option Agreement. Any Option granted with the intention
that it will be an Incentive Stock Option but which fails to satisfy a
requirement for Incentive Stock Options shall continue to be valid and shall be
treated as a Nonqualified Stock Option.

6. OPTION PRICE.

(a) The option price of each Option granted under the Plan shall be not less
than 100% of the market value of the stock on the date of grant of the Option.
In the case of incentive stock options granted to a shareholder who owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Bank (a “ten percent shareholder”), the option price of each Option
granted under the Plan shall not be less than 110% of the market value of the
stock on the date of grant of the Option. If the Common Stock is listed on a
national securities exchange (including for this purpose the Nasdaq Stock
Market, Inc. National Market) on the date in question, then the market value per
share shall not be less than the average of the highest and lowest selling price
on such exchange on such date, or if there were no sales on such date, then the
market price per share shall be equal to the average between the bid and asked
price on such date. If the Common Stock is traded otherwise than on a national
securities exchange (including for this purpose the Nasdaq Stock Market, Inc.
National Market) on the date in question, then the market price per share shall
be equal to the average between the bid and asked price on such date, or, if
there is no bid and asked price on such date, then on the next prior business
day on which there was a bid and asked price. If no such bid and asked price is
available, then the market value per share shall be its fair market value as
determined by the Committee, in its sole and absolute discretion. The Committee
shall maintain a written record of its method of determining such value.

(b) The option price shall be payable to the Bank in cash or by check, bank
draft or money order payable to the order of the Bank. No shares shall be
delivered until full payment has been made.

7. EXPIRATION OF OPTIONS. The Committee shall determine the expiration date or
dates of each Option, but such expiration date shall not be later than ten years
after the date such Option is granted. In the event an Incentive Stock Option is
granted

 

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to a ten percent shareholder, the expiration date or dates of each Option shall
be not later than five years after the date such Option is granted. The
Committee, in its discretion, may extend the expiration date or dates of an
Option after such date was originally set; however, such expiration date may not
exceed the maximum expiration date described in this Section 7.

8. TERMS AND CONDITIONS OF OPTIONS.

(a) All Options must be granted within ten years of the Effective Date of this
Plan as defined in Section 19.

(b) The Committee may grant Options which are intended to be Incentive Stock
Options and Nonqualified Stock Options, either separately or jointly, to an
eligible employee.

(c) The grant of Options shall be evidenced by a written instrument (an Option
Agreement) containing terms and conditions established by the Committee
consistent with the provisions of this Plan.

(d) Not less than 100 shares may be purchased at any one time unless the number
purchased is the total number at that time purchasable under the Plan.

(e) The recipient of an Option shall have no rights as a shareholder with
respect to any shares covered by his Option until payment in full by him for the
shares being purchased. Except as provided in Section 15, no adjustment shall be
made for dividends (ordinary or extraordinary, whether in cash, securities or
other property) or distributions or other rights for which the record date is
prior to the date such stock is fully paid for.

(f) The aggregate fair market value of the stock (determined as of the time the
Option is granted) with respect to which Incentive Stock Options are exercisable
for the first time by any participant during any calendar year (under all
benefit plans of the Bank, if applicable) shall not exceed $100,000; provided,
however, that such $100,000 limit of this subsection (f) shall not apply to the
grant of Nonqualified Stock Options. The Committee may grant Options which are
exercisable in excess of the foregoing limitations, in which case Options
granted which are exercisable in excess of such limitation shall be Nonqualified
Stock Options.

(g) All stock obtained pursuant to an option which qualifies as an Incentive
Stock Option shall be held in escrow for a period which ends on the later of
(i) two years from the date of the granting of the Option or (ii) one year after
the transfer of the stock pursuant to the exercise of the Option. The stock
shall be held by the Bank or its designee. The employee who has exercised the
Option shall during such holding period have all rights of a shareholder,
including but not limited to the rights to vote, receive dividends and sell the
stock. The sole purpose of the escrow is to inform the Bank of a disqualifying
disposition of the stock within the meaning of Section 422 of the Code, as
amended, and it shall be administered solely for that purpose.

 

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(h) No more than 40% of the shares which have been set aside for option may be
allocated to any one participant under the Plan.

9. EXERCISE OF OPTIONS.

(a) Options granted to an optionee by virtue of his position as a director of
the Bank (as stated in the Option Agreement) shall become vested and exercisable
at the times, at the rate and subject to such limitations as may be set forth in
the Option Agreement executed in connection therewith; provided, however, that
all outstanding and nonforfeited options shall be exercisable, if not sooner, on
the day prior to the expiration date thereof.

(b) Unless the Committee shall specifically state otherwise at the time an
Option is granted, all Options granted hereunder shall become vested and
exercisable upon the optionee’s death or disability within the meaning of
Section 22(e)(3) of the Code, and in the event of a change in control as set
forth in Section 12 of this Plan.

(c) The exercise of any Option must be evidenced by written notice to the Bank
that the optionee intends to exercise his Option. In no event shall an Option be
deemed granted by the Bank or exercisable by a recipient prior to the mutual
execution by the Bank and the recipient of an Option Agreement which comports
with the requirements of Section 5 and Section 8(c).

(d) Any right to exercise Options in annual installments shall be cumulative and
any vested installments may be exercised, in whole or in part, at the election
of the optionee.

(e) The inability of the Bank to obtain approval from any regulatory body or
authority deemed by counsel to be necessary to the lawful issuance and sale of
any shares of Common Stock hereunder shall relieve the Bank of any liability in
respect of the non-issuance or sale of such shares. As a condition to the
exercise of an option, the Bank may require the person exercising the Option to
make such representations and warranties as may be necessary to assure the
availability of an exemption from the registration requirements of federal or
state securities laws.

(f) The Committee shall have the discretionary authority to impose in the Option
Agreements such restrictions on shares of Common Stock as it may deem
appropriate or desirable, including but not limited to the authority to impose a
right of first refusal or to establish repurchase rights or both of these
restrictions.

(g) Notwithstanding anything to the contrary herein, an optionee receiving the
grant of an Option by virtue of his position as a director of the Bank (as
stated in the Option Agreement), shall be required to exercise his Options
within the periods set forth in Sections 10 and 11 below.

 

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10. TERMINATION OF EMPLOYMENT - EXCEPT BY DISABILITY OR DEATH. If any optionee
receiving the grant of an Option by virtue of his position as an employee (as
stated in the Option Agreement) ceases to be an employee of the Bank for any
reason other than death or disability (as defined in Section 11), he may, at any
time within three months after his date of termination, but not later than the
date of expiration of the Option, exercise any Option only to the extent it was
vested and he was entitled to exercise the Option on the date of termination.
Any Options or portions of Options of terminated optionees not so exercised
shall terminate and be forfeited.

11. TERMINATION OF EMPLOYMENT - DISABILITY OR DEATH. If any optionee receiving
the grant of an Option by virtue of his position as an employee (as stated in
the Option Agreement) dies while in the employment of the Bank or ceases to be
employed by the Bank due to his becoming disabled within the meaning of
Section 22(e)(3) of the Code, all unvested and forfeitable Options of such
optionee shall immediately become vested and nonforfeitable and he, or the
person or persons to whom the Option is transferred by will or by the laws of
descent and distribution, may, at any time within twelve months after the death
or date of termination, but not later than the date of expiration of the Option,
exercise any Option with respect to all shares subject thereto. Any portions of
Options of optionees who die or who are terminated because they become disabled
which are not so exercised shall terminate.

12. CHANGE IN CONTROL. In the event that a “change in control” occurs prior to
the time that all shares allocated to an optionee would be 100% vested,
nonforfeitable and exercisable in accordance with Sections 9, 10 and 11 above,
then, notwithstanding Sections 9, 10 and 11 above, all Options granted to such
optionee shall immediately become fully vested and nonforfeitable. For purposes
of this Plan, a “change in control” shall mean (i) an affirmative vote of the
Bank’s shareholders approving a change in control of a nature that would be
required to be reported by the Bank in response to Item 1 of the Current Report
on Form 8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of
the Exchange Act; (ii) such time as any “person” (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Bank representing 25% or more of the combined
voting power of the outstanding Common Stock of the Bank; or (iii) individuals
who constitute the Board of the Bank on the date hereof (the “Incumbent Board”)
cease for any reason to constitute at least a majority thereof, provided that
any person becoming a director subsequent to the date hereof whose election was
approved by a vote of at least three-quarters of the directors comprising the
Incumbent Board, or whose nomination for election by the Bank’s shareholders was
approved by the Bank’s Board of Directors or Nominating Committee, shall be
considered as though he were a member of the Incumbent Board; or (iv) an
affirmative vote of the Bank’s shareholders approving the Bank’s consolidation
or merger with or into another corporation, association or entity or other
reorganization, where the Bank is not the surviving entity in such transaction;
or (v) an affirmative vote of the Bank’s shareholders approving the sale or
other transfer or acquisition of all or substantially all of the assets of the
Bank by any other entity or group.

In the event of such a change in control, the Optionee must exercise any Options
within three months, but in no event later than the date of expiration of the
Option.

 

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13. OPTIONAL CASH PAYMENT. Upon the exercise of an Option, at the written
request of the optionee, the Committee, in its sole and absolute discretion, may
make a cash payment to the optionee, in whole or in part, in lieu of the
delivery of shares of Common Stock. Such cash payment to be paid in lieu of
delivery of Common Stock shall be equal to the difference between the market
value per share (determined as set forth in Section 6 above) of Common Stock on
the date of the Option exercise and the exercise price per share of the Option.
Such cash payment shall be in exchange for the cancellation of such Option.
Notwithstanding the above, such cash payment shall not be made in the event that
such transaction would result in liability to the optionee and the Bank under
Section 16(b) of the Exchange Act, and the regulations promulgated thereunder.

14. RESTRICTIONS ON TRANSFER. An Option granted under this Plan may not be
transferred except by will or the laws of descent and distribution and, during
the lifetime of the optionee to whom it was granted, may be exercised only by
such optionee.

15. CAPITAL ADJUSTMENTS AFFECTING COMMON STOCK.

(a) If the outstanding shares of Common Stock of the Bank are increased,
decreased, changed into or exchanged for a different number or kind of shares or
other securities of the Bank or another entity as a result of a
recapitalization, reclassification, stock dividend, stock split, amendment to
the Bank’s Articles of Incorporation, reverse stock split, merger or
consolidation, an appropriate adjustment shall be made in the number and/or kind
of securities allocated to the Options previously and subsequently granted under
the Plan, without change in the aggregate purchase price applicable to the
unexercised portion of the outstanding Options but with a corresponding
adjustment in the option price for each share or other unit of any security
covered by the Options.

(b) To the extent that the foregoing adjustments described in Section 15(a)
above relate to particular Options or to particular stock or securities of the
Bank subject to Option under this Plan, such adjustments shall be made by the
Committee, whose determination in that respect shall be final and conclusive.

(c) The grant of an Option pursuant to this Plan shall not affect in any way the
right or power of the Bank to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge or
to consolidate or to dissolve, liquidate or sell, or transfer all or any part of
its business or assets.

(d) No fractional shares of stock shall be issued under the Plan for any such
adjustment.

(e) Any adjustment made pursuant to this Section 15, shall be made, to the
extent practicable, in such manner as not to constitute a modification of any
outstanding Incentive Stock Options within the meaning of Section 424(h) of the
Code.

16. INVESTMENT PURPOSE. At the discretion of the Committee, any Option Agreement
may provide that the optionee shall, by accepting the Option, represent and
agree, for himself and his transferees by will or the laws of descent and
distribution,

 

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that all shares of stock purchased upon the exercise of the Option will be
acquired for investment and not for resale or distribution, and that upon each
exercise of any portion of an Option, the person entitled to exercise the same
shall furnish evidence of such facts which is satisfactory to the Bank.
Certificates for shares of stock acquired under the Plan may be issued bearing
such restrictive legends as the Bank and its counsel may deem necessary to
ensure that the optionee is not an “underwriter” within the meaning of the
regulations of the Securities and Exchange Commission.

17. APPLICATION OF FUNDS. The proceeds received by the Bank from the sale of
Common Stock pursuant to Options will be used for general corporate purposes.

18. NO OBLIGATION TO EXERCISE. The granting of an Option shall impose no
obligation upon the optionee to exercise such Option.

19. EFFECTIVE DATE OF PLAN. This Plan shall not be effective until adopted by
the Board of Directors and approved by the holders of at least two-thirds of the
Common Stock and by the Commissioner of Banks. The effective date of the Plan
shall be as designated by the Board of Directors in accordance with applicable
law.

20. TERM OF PLAN. Options may be granted pursuant to this Plan from time to time
within ten years from the effective date of the Plan.

21. TIME OF GRANTING OF OPTIONS. Nothing contained in the Plan or in any
resolution adopted or to be adopted by the Committee or the shareholders of the
Bank and no action taken by the Committee shall constitute the granting of any
Option hereunder. The granting of an Option pursuant to the Plan shall take
place only when an Option Agreement shall have been duly executed and delivered
by and on behalf of the Bank at the direction of the Committee.

22. WITHHOLDING TAXES. Whenever the Bank proposes or is required to cause to be
issued or transferred shares of stock, cash or other assets pursuant to this
Plan, the Bank shall have the right to require the optionee to remit to the Bank
an amount sufficient to satisfy any federal, state and/or local withholding tax
requirements prior to the issuance of any certificate or certificates for such
shares or delivery of such cash or other assets. Alternatively, the Bank may
issue or transfer such shares of stock or make other distributions of cash or
other assets net of the number of shares or other amounts sufficient to satisfy
the withholding tax requirements. For withholding tax purposes, the shares of
stock, cash and other assets to be distributed shall be valued on the date the
withholding obligation is incurred.

23. TERMINATION AND AMENDMENT. The Board may at any time alter, suspend,
terminate or discontinue the Plan, subject to any applicable regulatory
requirements and any required shareholder approval or any shareholder approval
which the Board may deem advisable for any reason, such as for the purpose of
obtaining or retaining any statutory or regulatory benefits under tax,
securities or other laws or satisfying applicable stock exchange or quotation
system listing requirements. The Board may not, without the consent of the
holder of an Option previously granted, make any alteration which would deprive
the optionee of his rights with respect thereto.

 

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24. CAPTIONS AND HEADINGS; GENDER AND NUMBER. Captions and paragraph headings
used herein are for convenience only, do not modify or affect the meaning of any
provision herein, are not a part, and shall not serve as a basis for
interpretation or construction of, this Plan. As used herein, the masculine
gender shall include the feminine and neuter, and the singular number shall
include the plural, and vice versa, whenever such meanings are appropriate.

25. COST OF PLAN; EXCULPATION AND INDEMNIFICATION. All costs and expenses
incurred in the operation and administration of the Plan shall be borne by the
Bank. In connection with this Plan, no member of the Board and no member of the
Committee shall be personally liable for any act or omission to act, nor for any
mistake in judgment made in good faith, unless arising out of, or resulting
from, such person’s own bad faith, willful misconduct or criminal acts. To the
extent permitted by applicable law and regulation, the Bank shall indemnify,
defend and hold harmless the members of the Board and members of the Committee,
and each other officer or employee of the Bank to whom any power or duty
relating to the administration or interpretation of this Plan may be assigned or
delegated, from and against any and all liabilities (including any amount paid
in settlement of a claim with the approval of the Board), and any costs or
expenses (including counsel fees) incurred by such persons arising out of or as
a result of, any act or omission to act, in connection with the performance of
such person’s duties, responsibilities and obligations under this Plan, other
than such liabilities, costs, and expenses as may arise out of, or result from
the bad faith, willful misconduct or criminal acts of such persons.

26. GOVERNING LAW. Without regard to the principles of conflicts of laws, the
laws of the State of North Carolina shall govern and control the validity,
interpretation, performance, and enforcement of this Plan.

27. INSPECTION OF PLAN. A copy of this Plan, and any amendments thereto, shall
be maintained by the Secretary of the Bank and shall be shown to any proper
person making inquiry about it.

28. OTHER PROVISIONS. The Option Agreements authorized under this Plan shall
contain such other provisions not inconsistent with the foregoing, including,
without limitation, increased restrictions upon the exercise of options, as the
Committee may deem advisable.

29. REGULATORY REQUIREMENT OF EXERCISE OR FORFEITURE. Notwithstanding any
provision to the contrary in this Plan, the Bank’s primary federal regulator can
direct the Bank to require Plan participants to exercise or forfeit their
options if the Bank’s capital falls below the minimum regulatory requirements as
determined by such primary federal regulator. In such event, any options not so
exercised shall terminate and be forfeited.

 

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BANK OF OAK RIDGE

STOCK OPTION GRANT AND AGREEMENT

THIS STOCK OPTION GRANT AND AGREEMENT (“Agreement”), being made according to and
subject to the terms and conditions of the Employee or the Director Stock Option
Plan of the Bank of Oak Ridge (each separately referred to hereafter as the
“Plan”), a copy of the applicable Plan of which is attached hereto as Annex A
and is hereby incorporated by reference and made a part of this Agreement, is
herein executed and effective the      day of                     ,
            , between the Bank of Oak Ridge (the “Bank”) and
                     (“Optionee”):

 

1. Grant. As of the above date, the Bank hereby grants to the Optionee
(applicable provisions are marked):

¨ an Incentive Stock Option [as that term is defined in Section 422 of the
Internal Revenue Code of 1986, as amended (the “Code”)] to purchase             
shares of Common Stock of the Bank at the price stated in this Agreement;

¨ a Nonqualified Stock Option to purchase              shares of Common Stock of
the Bank at the price stated in this Agreement.

The Option(s) granted under this section and as described in this Agreement is
(are) in all respects subject to and conditioned by the terms, definitions, and
provisions of this Agreement and of the Plan. Capitalized terms in this
Agreement which are not otherwise defined but which are defined in the Plan
shall have the same meaning given to those terms in the Plan.

The Optionee has been granted Options under the Plan as a result of the
Optionee’s position as a ¨ director ¨ employee of the Bank.

 

2. Price. The Option price is $             for each share.

 

3. Exercise of Option. The Option(s) granted under this Agreement shall be
exercisable pursuant to the terms and conditions of the Plan and as set forth
below:

(a) Right to Exercise: In addition to the terms and conditions imposed on the
Optionee’s right to exercise his Options imposed in the Plan, the following
terms and conditions are applicable:

(b) ¨ (Marked if applicable) Annual Installments: Subject to the terms and
conditions of the Plan, the Incentive Stock Options can be exercised in annual
installments as follows:

             shares beginning on                     , 20     

 

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             shares beginning on                     , 20     

             shares beginning on                     , 20     

             shares beginning on                     , 20     

             shares beginning on                     , 20     

Subject to the terms and conditions of the Plan, the Nonqualified Options can be
exercised in annual installments as follows:

             shares beginning on                     , 20     

             shares beginning on                     , 20     

             shares beginning on                     , 20     

             shares beginning on                     , 20     

             shares beginning on                     , 20     

The right to exercise the Option(s) in annual installments shall be cumulative.
In addition, the Option(s) shall be exercisable upon disability, death and a
change in control as set forth in the Plan.

(c) ¨ (Marked if applicable) Immediate Vesting: Subject to the terms and
conditions of the Plan, all of the Options are vested, nonforfeitable and
exercisable.

(d) Method of Exercise: The Options granted under this Agreement shall be
exercisable by a written notice to the Secretary of the Bank which shall:

(1) State the election to exercise the Option, the number of shares in respect
of which the Option is being exercised, the person in whose name any stock
certificate or certificates for such shares of Common Stock is to be registered
or to whom any cash is to be paid, his or her address, and social security
number;

(2) Contain any such representation and agreements as to Optionee’s investment
intent with respect to shares of Common Stock as may be required by the
Committee;

(3) Be signed by the person entitled to exercise the Option and, if the Option
is being exercised by any person or persons other than the Optionee, be
accompanied by proof, satisfactory to the Bank, of the right of such person or
persons to exercise the Option in accordance with the Plan; and

 

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(4) Be accompanied by payment of the purchase price of any shares with respect
to which the Option is being exercised which payment shall be in form acceptable
to the Committee pursuant to Section 6(b) of the Plan.

(e) Representations and Warranties: In order to exercise an Option, the person
exercising the Option must make the representations and warranties to the Bank
as may be required by any applicable law or regulation, or as may otherwise be
required pursuant to the Plan.

(f) Approvals. In order for an Option to be exercised, all filings and approvals
required by applicable law and regulations or pursuant to the Plan must have
been made and obtained.

 

4. Non-transferability. This Option may not be transferred in any manner
otherwise than by will or the laws of descent and distribution and such Option
may be exercised during the life of the Optionee only by him or her.

 

5. Investment Purpose. This Option may not be exercised if the issuance of
shares or payment of cash upon such exercise would constitute a violation of any
applicable federal or state securities law or other law or valid regulation.

 

6. Expiration. This Option shall expire on                     , 20    .

 

7. Escrow. All stock purchased pursuant to an Incentive Stock Option shall be
held in escrow for a period which ends on the later of (i) two years from the
date of the granting of the option or (ii) one year after the transfer of the
stock pursuant to the exercise of the Option. The stock shall be held by the
Bank or its designee. The Optionee who has exercised the Option shall have all
rights of a stockholder, including, but not limited to, the rights to vote,
receive dividends and sell the stock. The sole purpose of the escrow is to
inform the Bank of a disqualifying disposition of the stock within the meaning
of Section 422 of the Code, and it shall be administered solely for this
purpose.

 

8. Tax Withholding. All stock, cash and other assets distributed pursuant to
this Agreement shall be subject to applicable federal, state and local
withholding for taxes. The Optionee expressly acknowledges and agrees to such
withholding. The Optionee acknowledges and agrees to the tax withholding
provisions which are set forth in the Plan.

 

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9. Resolution of Disputes. Any dispute or disagreement which should arise under,
or as a result of, or in any way relate to, the interpretation, construction, or
application of this Agreement or the Plan will be determined by the Committee
designated in Section 2 of the Plan. Any determination made by such Committee
shall be final, binding, and conclusive for all purposes.

 

10. Construction Controlled by Plan. The Options evidenced hereby shall be
subject to all of the requirements, conditions and provisions of the Plan. This
Agreement shall be construed so as to be consistent with the Plan; and the
provisions of the Plan shall be deemed to be controlling in the event that any
provision should appear to be inconsistent therewith.

 

11. Severability. Whenever possible, each provision of this Agreement shall be
interpreted in such a manner as to be valid and enforceable under applicable
law, but if any provision of this Agreement is determined to be unenforceable,
invalid or illegal, the validity of any other provision or part thereof shall
not be affected thereby and this Agreement shall continue to be binding on the
parties hereto as if such unenforceable, invalid or illegal provision or part
thereof had not been included herein.

 

12. Modification of Agreement; Waiver. This Agreement may be modified, amended,
suspended or terminated, and any terms, representations or conditions may be
waived, but only by a written instrument signed by each of the parties hereto
and only subject to the limitations set forth in the Plan. No waiver hereunder
shall constitute a waiver with respect to any subsequent occurrence or other
transaction hereunder or of any other provision.

 

13. Captions and Headings; Gender and Number. Captions and paragraph headings
used herein are for convenience only, do not modify or affect the meaning of any
provision herein, are not a part, and shall not serve as a basis for
interpretation or construction, of this Agreement. As used herein, the masculine
gender shall include the feminine and neuter, and the singular number shall
include the plural, and vice versa, whenever such meanings are appropriate.

 

14. Governing Law; Venue and Jurisdiction. Without regard to the principles of
conflicts of laws, the laws of the State of North Carolina shall govern and
control the validity, interpretation, performance, and enforcement of this
Agreement.

 

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15. Binding Effect. This Agreement shall be binding upon and shall inure to the
benefit of the Bank, and its successors and assigns, and shall be binding upon
and inure to the benefit of the Optionee, and his or her heirs, legatees,
personal representative, executor, administrator and permitted assigns.

 

16. Entire Agreement. This Agreement and the Plan constitute and embody the
entire understanding and agreement of the parties hereto and, except as
otherwise provided hereunder, there are no other agreements or understandings,
written or oral, in effect between the parties hereto relating to the matters
addressed herein.

 

17. Counterparts. This Agreement may be executed in any number of counterparts,
each of which when executed and delivered shall be deemed an original, but all
of which taken together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the parties have set their hands and seals the day and year
first above written.

 

ATTEST:     BANK OF OAK RIDGE  

 

    By:  

 

  President (Corporate Seal)               OPTIONEE:   (SEAL)        

 

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