Exhibit (10)(iii)

STOCK OPTION PLAN FOR NON-EMPLOYEES/DIRECTORS

1. Purposes of Plan. The purpose of this Plan is to provide incentives for the
Original Incorporators (as indicated on pages 10-12 of the offering circular
dated September 25, 1989, and amended July 31, 1990) and Directors of Bank of
North Carolina, a North Carolina corporation (the “Company”), and its subsidiary
corporations by encouraging their ownership of the common stock, $ 5.00 par
value, of the Company.

2. Definitions. As used herein, and in any Option granted hereunder, the
following definitions shall apply:

(a) “Board” shall mean the Board of Directors of Bank of North Carolina.

(b) “Code” shall mean the Internal Revenue Code of 1986, as amended, or
corresponding provisions of future revenue laws.

(c) “Committee” shall mean the Stock Option Committee appointed by the Board in
accordance with paragraph 3 of the Plan. If no Committee is appointed, the term
“Committee” shall refer to the Board.

(d) “Company” shall mean Bank of North Carolina.

(e) “Incentive Stock Option” shall mean any stock option granted in accordance
with the provisions of paragraph 7 of the Plan.

(f) “Option” shall mean a stock option granted pursuant to the Plan.

(g) “Optioned Shares” shall mean the Stock subject to an Option granted pursuant
to the Plan.

(h) “Optioned shall mean a person who receives an Option under the Plan.

(i) “Plan” shall mean this Stock Option Plan for Non-Employees/Directors.

(j) “Stock” shall mean the $ 5.00 par value common stock of the Company.

(k) “Subsidiary” shall mean any subsidiary corporation of the Company within the
meaning of Section 425(f) of the Code.

3. Administration. The Plan shall be administered by the Stock Option Committee
of the Board, as hereinafter provided. For purposes of administration, the
Committee, subject to the terms of the Plan, shall have plenary authority to
establish such rules and regulations, make such determinations and
interpretations, and take such administrative actions as it deems necessary or
advisable. All determinations and interpretations made by the Committee shall be
final, conclusive, and binding on all persons, including Optionees and their
legal representatives and beneficiaries.

--------------------------------------------------------------------------------

The Committee shall be appointed from time to time by the Board of Directors and
shall consist of not fewer than three of its members. The Board of Directors
shall designate one of the members of the Committee as its chairman. The
Committee shall hold its meetings at, such times and places as it may determine.
A majority of its members shall constitute a quorum. All determinations of the
Committee shall be made by a majority of its members. Any decision or
determination reduced to writing signed by all members shall be as effective as
if it had been made by a majority vote at a meeting duly called and held. The
Committee may appoint a secretary (who need not be a member of the Committee).
No member of the Committee shall be liable for any act or omission with respect
to his service on the Committee, if he acts in good faith and in a manner he
reasonably believes to be in or not opposed to the best interests of the
Company. Service on the Committee shall constitute service as a director of the
Company for all purposes.

4. Stock Available for Option. There shall be available for Options under the
Plan a total of twenty-one thousand three hundred twenty-six (21,326) shares of
stock or five percent (5 %) of total shares subscribed at the conclusion of the
offering subject to adjustments which may be made pursuant to Section 6(e) of
the Plan. Shares of Stock used for purposes of the Plan shall be authorized and
unissued shares. Shares of Stock covered by Options which have terminated or
expired prior to exercise shall be available for further Options hereunder.

5. Eligibility. Options under the Plan may be granted to Original Incorporators
for up to twenty percent (20%) of the number of shares purchased by them as of
August 31, 1989. Additionally, Options may be granted to Directors whether or
not they hold or have held options previously granted under the Plan or
otherwise granted or assumed by the Company.

6. Terms and Conditions of Options. Each Option granted under the Plan shall be
evidenced by a Stock Option Certificate in a form approved by the Committee. The
Committee shall, in its discretion, prescribe the terms and conditions of, and
the number of shares of Stock subject to, the Options to be granted hereunder,
which terms, conditions, and number of shares need not be the same in each case,
subject to the following:

(a) Option Price. The price at which each share of Stock covered by an Option
granted under the Plan shall be determined by the Committee and shall not be
less than the greater of Eleven Dollars (S 11.00) per share or the fair market
value per share at the time the Option is granted. The date of the granting of
an Option shall be the date specified by the Committee in its grant of the
Option. The fair market value of a share of Stock shall be determined by the
Committee in accordance with the regulations promulgated under Section 2031 of
the Code, or by other appropriate methods selected by the Committee.

(b) Option Period. The period for exercise of an Option shall be no more than
five (5) years from date of the grant. Options may, in the discretion of the
Committee, be made exercisable in installments during the option period. Any
shares not purchased on any applicable installment date may be purchased
thereafter at any time before the expiration of the option period.

--------------------------------------------------------------------------------

(c) Exercise of Options. In order to exercise an Option, the Optionee shall
deliver to the Company a written notice specifying the number of shares of Stock
to be purchased, together with cash or a certified or a bank cashier’s check
payable to the order of the Company in the full amount of the purchase price
therefor; provided, that the purchase price may be paid in shares of Stock owned
by Optionee having a fair market value on the date of exercise equal to the
aggregate purchase price, or in a combination of cash and Stock. The fair market
value of the Stock shall be determined by the Committee in accordance with the
regulations promulgated under Section 2031 of the Code or by other appropriate
methods selected by the Committee. In the event the Optionee shall elect to pay
the purchase price, or any portion thereof, in Stock, simultaneously with the
delivery of the notice of exercise, the Optionee shall tender certificate(s) for
such Stock to the Company, duly endorsed to the Company with signature
guaranteed.

(d) Non-Transferability of Options. During the lifetime of an Optionee, Options
held by such Optionee shall be exercisable only by him. No Option shall be
transferable other than by will or the laws of dissent and distribution.

(e) Adjustments for Change in Stock Subject to Plan and Other Events. The
existence of outstanding Options shall not affect in any way the right or power
of the Company or its stockholders to make or authorize any and all adjustments,
recapitalizations, reorganizations, or other changes in the Company’s capital
structure or its business, or any merger or consolidation of the Company, or any
issuance of stock or subscription rights thereto, or any issuance of bonds,
debentures, preferred or prior preference Stock, ahead of or affecting the Stock
or the rights thereto, or the dissolution or liquidation of the Company, or any
sale or transfer of all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar character or otherwise.
Provided, however, that if the outstanding shares of Stock of the Company shall
at any time be changed or exchanged by declaration of a stock dividend, stock
split, reverse stock split, combination of shares or recapitalization, the
number and kinds of shares subject to the Plan or subject to any Options
theretofore granted, and the option prices, shall be appropriately and equitably
adjusted so as to maintain a proportionate number of shares without changing the
aggregate option price.

In connection with any merger or consolidation in which the Company is not the
surviving corporation or any sale or transfer by the Company of all or
substantially all of its assets, the Committee is hereby authorized and shall
either:

(i) Give notice to the Optionee that pursuant hereto the Option shall terminate
as of the effective date of the merger, consolidation, or sale; provided, that
the Optionee is afforded a reasonable time prior to such effective date in which
to exercise his Option and provided further, that upon the giving of such
notice, the exercisability of the Option shall be accelerated to permit its
exercise in full prior to such termination; or

(ii) Require any Optionee, at any time following the consummation of such a
merger, consolidation, or sale or transfer of assets to surrender any Option (or
portion thereof) to the Company in return for substitute option which is issued

--------------------------------------------------------------------------------

by the corporation surviving such merger or consolidation or the corporation
which acquired such assets (or by an affiliate of such corporation) and which
the Committee, in its sole discretion, determines to have a value to the
Optionee substantially equivalent to the value to the Optionee of the Option (or
portion thereof) so surrendered; or

(iii) Cause lawful and adequate provisions to be made whereby upon any exercise
of an Option after such merger, consolidation, or sale or transfer of assets and
at no additional cost other than the payment of the purchase price upon such
exercise, the Optionee shall be entitled to receive in lieu of the Stock:
(1) the number and class of shares or other securities, or (2) the amount of
cash, or (3) the property, or (4) a combination of the foregoing, to which the
Optionee would have been entitled pursuant to the terms of such merger,
consolidation, sale, or transfer of assets, if holder of record of the number of
shares of Stock for which such Option shall be so exercised.

(f) Registration. Listing. and Qualification of Shares of Stock. Each Option
shall be subject to the requirement that if at any time the Board shall
determine that the registration, listing, or qualification of the shares of
Stock covered thereby upon any securities exchange or under any federal or state
law, or the consent or approval of any governmental regulatory body is necessary
or desirable as a condition of, or in connection with, the granting of such
option or the purchase of shares of Stock thereunder, no such Option may be
exercised unless and until such registration, listing, qualification, consent,
or approval shall have been effected or obtained free of any conditions not
acceptable to the Board. The Company may require that any person exercising an
Option make such representations and agreements and furnish such information as
the Company deans appropriate to assure compliance with the foregoing or any
other applicable legal requirement.

(g) Other Terms and Conditions. The Committee may impose such other terms and
conditions, not inconsistent with the terms hereof, on the grant or exercise of
Options, as it deems advisable.

7. Provisions Applicable to Incentive Stock Options. The Committee may not grant
additional Options under the Plan to the original Incorporators (beyond the
specified amount indicated in Section 5). However, the Committee may, in its
discretion, grant Options under the Plan to eligible Directors which constitute
Incentive Stock Options within the meaning of Section 422(b) of the Code;
provided, however, that (a) no Incentive Stock Option shall cover a number of
shares in excess of those permitted to be covered by Section 422(d) of the Code,
(b) no Incentive Stock Option shall be granted at an option price which is less
than the fair market value per share on the date of grant, (c) if the Optionee
owns on the date of grant securities possessing more than ten percent (10%) of
the total combined voting power of all classes of securities of the Company or
any Subsidiary, the price per share shall not be less than one hundred ten
percent (110%) of the market value per share on the date of grant, and
(d) Section 6(e)(ii) hereof shall not apply to any Incentive Stock Option.

--------------------------------------------------------------------------------

8. Amendment and Termination. Unless the Plan shall theretofore have been
terminated as hereinafter provided, the Plan shall terminate on, and no Option
shall be granted hereunder, after November 30, 2001. Provided, however, that the
Board of Directors may at any time prior to that date terminate the Plan. The
Board of Directors may at any time amend the Plan; provided, however, that
except as contemplated in Sections 6(b) and 6(e), the Board shall not, without
approval by a majority of the votes cast by the stockholders of the Company at a
meeting of the stockholders on which a proposal to amend the Plan is voted upon,
and approval of the North Carolina Banking Commissioner’s office, (i) increase
the number of shares of Stock for which Options may be granted under the Plan,
(ii) change the minimum option prices, (iii) extend the period during which
Options may be granted or exercised, or (iv) except as otherwise provided in the
Plan, amend the requirements as to the class of Non-Employees/Directors eligible
to receive Options. No termination or amendment of the Plan may, without the
consent of an Optionee, adversely affect the rights of such Optionee under any
Option held by such Optionee.

9. Effectiveness of Plan. The Plan shall be effective on the date the Board
adopts the Plan and Options may thereafter be granted hereunder subject to the
following conditions: Within twelve (12) months after the adoption of the Plan
by the Directors, the Plan must be approved (i) by the affirmative vote of not
less than two-thirds ( 2/3) of the issued and outstanding shares of the stock of
the Company at a meeting of the stockholders duly called and held and (ii) by
the North Carolina Commissioner of Banks. No Options granted hereunder shall be
exercisable prior to the approval of the shareholders and the approval of the
North Carolina Commissioner of Banks as aforesaid. In the event that the Plan
shall not have been approved by the stockholders and the North Carolina
Commissioner of Banks within twelve (12) months after the adoption of this Plan
by the Board, the Plan shall thereupon terminate and all Options previously
granted under the Plan shall become void and of no effect.

10. Other Actions. Nothing contained in this Plan shall be construed to limit
the authority of the Company to exercise its corporate rights and powers,
including but not by way of limitation, the right of the Company to grant or
assume options for proper purposes other than under the Plan with respect to any
employee or other person, firm, corporation, or association.

11. Miscellaneous Provisions. The Plan and the Options granted hereunder shall
be governed by and construed in accordance with the laws of the State of North
Carolina. Words used herein in the masculine gender shall include the feminine
whenever the context so requires.