Exhibit 10.5

MIDCAROLINA BANK

RESTATED SALARY CONTINUATION AGREEMENT

THIS RESTATED SALARY CONTINUATION AGREEMENT (this “Agreement”) is made and
entered into as of this 27th day of May, 2008, by and between MidCarolina Bank,
a bank chartered under North Carolina law (the “Bank”), and Robert C. Patterson,
its Senior Vice President and Chief Credit Officer (the “Executive”),

WHEREAS, the Bank and the Executive are parties to an Amended Salary
Continuation Agreement dated December 8, 2006 which provides salary continuation
benefits to the Executive pursuant to an unfunded, non-qualified benefit plan;
and

WHEREAS, certain changes to the Agreement are required under Internal Revenue
Code Section 409A so that the Executive will not be subject to the imposition of
excise taxes under Section 409A; and

WHEREAS, further changes to the Agreement are necessary to accurately reflect
the current intent of the parties; and

WHEREAS, none of the conditions or events included in the definition of the term
“golden parachute payment” that is set forth in section 18(k)(4)(A)(ii) of the
Federal Deposit Insurance Act [12 U.S.C. 1828(k)(4)(A)(ii)] and in Federal
Deposit Insurance Corporation Rule 359.1(f)(1)(ii) [12 CFR 359.1(f)(1)(ii)]
exists or, to the best knowledge of the Bank, is contemplated insofar as the
Bank is concerned; and

WHEREAS, the Bank and the Executive intend that this Agreement shall amend and
restate in its entirety the December 8, 2006 Amended Salary Continuation
Agreement, which shall have no further force or effect.

NOW THEREFORE, in consideration of these premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Executive and the Bank hereby agree as follows.

Article 1

Definitions

The following words and phrases used in this Agreement have the meanings
specified.

1.1 “Accrual Balance” means the liability that should be accrued by the Bank
under generally accepted accounting principles (“GAAP”) for the Bank’s
obligation to the Executive under this Agreement, by applying Accounting
Principles Board Opinion No. 12, as amended by Statement of Financial Accounting
Standards No. 106, and the calculation method and discount rate specified
hereinafter. The Accrual Balance shall be calculated assuming a level principal
amount and interest as the discount rate is accrued each period. The principal
accrual is determined such that when it is credited with interest each month,
the Accrual Balance at Normal Retirement Age equals the present value of the
normal retirement benefits. The discount rate means the rate used by the Plan
Administrator for determining the Accrual Balance. The rate is

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based on the yield on a 20-year corporate bond rated Aa by Moody’s, rounded to
the nearest  1/4%. The initial discount rate is 6.50%. In its sole discretion,
the Plan Administrator may adjust the discount rate to maintain the rate within
reasonable standards according to GAAP.

1.2 “Beneficiary” means each designated person, or the estate of the deceased
Executive, entitled to benefits, if any, upon the death of the Executive,
determined according to Article 4.

1.3 “Beneficiary Designation Form” means the form established from time to time
by the Plan Administrator that the Executive completes, signs, and returns to
the Plan Administrator to designate one or more Beneficiaries.

1.4 “Change in Control” shall mean any of the following, each of which shall be
construed in a manner that is consistent with the definition of a “change in
control event” for purposes of Internal Revenue Code Section 409A and the
Regulations thereunder:

(a) Change in Ownership: The date of acquisition by a person or by persons
acting as a group of capital stock of the Bank or of MFC, which when added to
the stock already owned by that person or the persons acting as a group,
constitutes more than 50% of the fair market value or more than 50% of the total
voting power of the Bank or of MFC; provided that the person or persons acting
as a group did not own more than 50% of the fair market value or total voting
power of the Bank or MFC, respectively, prior to such acquisition.

For purposes of determining whether there has been a change in ownership,
persons shall not be considered to be acting as a group simply because they
purchase or own stock at the same time or as a result of the same public
offering. Persons will be considered to be acting as a group if they are owners
of a corporation which enters into a merger, consolidation, purchase of stock or
similar business transaction with the Bank or MFC. If a person is a shareholder
of the Bank or MFC and also of the other corporation that enters into business
transaction with the Bank or MFC, respectively, he shall be treated as acting as
a group only with respect to the ownership of the Bank or MFC and not with
respect to the ownership interest in the other corporation.

(b) Change in Effective Control: The date any one person or more than one person
acting as a group acquires (or has acquired during the 12-month period ending on
the date of the most recent acquisition by such person or persons) stock of MFC
possessing more than 50% of the total voting power of the stock of MFC.

For purposes of determining whether there has been a change in effective
control, persons shall not be considered to be acting as a group simply because
they purchase or own stock at the same time or as a result of the same public
offering. Persons will be considered to be acting as a group if they are owners
of a corporation which enters into a merger, consolidation, purchase of stock or
similar business transaction with MFC. If a person is a shareholder of MFC and
also of the other corporation that enters into purchase transaction with MFC, he
shall be treated as acting as a group only with respect to the ownership of MFC
and not with respect to the ownership interest in the other corporation.

 

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(c) Change in Board Composition: The date a majority of the members of MFC’s
Board of Directors are replaced during any 12-month period by directors whose
appointment or election is not endorsed by a majority of the members of MFC’s
Board of Directors prior to the date of the appointment or election.

(d) Change in Ownership of Assets: The date a person or persons acting as a
group acquires (or has acquired during the 12-month period ending on the date of
the most recent acquisition) assets of the Bank that have a total gross fair
market value exceeding 50% of the total fair market value of all of the assets
of the Bank, determined immediately before such acquisition or acquisitions;
provided that the acquirer is not a related person as defined in Regs. § 1.
409A-3(i)(5)(vii)(B). Gross fair market value of the assets shall be determined
without regard to any liabilities associated with such assets.

Persons will not be considered to be acting as a group solely because they
acquire assets of the Bank at the same time; however, persons will be considered
to be acting as a group if they are owners of a corporation which enters into a
merger, consolidation, purchase of assets or similar business transaction with
the Bank or MFC. If a person, including an entity shareholder, owns stock in
both corporations that enter into a merger, consolidation, purchase or
acquisition of assets or similar transaction, the shareholder shall be
considered as acting as a group with other shareholders only to the extent of
the ownership of the corporation before the transaction giving rise to the
change and not with respect to the ownership interest in the other corporation.

1.5 “Disability” means the Executive is either (a) unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment that can be expected to result in death or can be expected to
last for a continuous period of no less than 12 months; or (b) by reason of any
medically determinable physical or mental impairment that can be expected to
result in death or can be expected to last for a continuous period of no less
than 12 months, receiving income replacement benefits for a period of not less
than 3 months under a disability plan covering employees of the Bank. Disability
shall be determined by a physician chosen by or acceptable to the Bank, in its
reasonable discretion. A determination by the Social Security Administration
that the Executive is totally and permanently disabled shall also be a
sufficient determination of Disability provided the Executive submits to the
Bank proof of the Social Security Administration’s determination.

1.6 “Early Termination” means Termination of Employment before Normal Retirement
Age for reasons other than death, Disability, Termination for Cause or following
a Change in Control.

1.7 “Early Termination Date” means the date on which Early Termination occurs.

1.8 “Good Reason” means:

(a) a material reduction in the Executive’s base compensation;

(b) a material reduction in the Executive’s authority, duties or
responsibilities;

(c) a material reduction in the budget over which the Executive has authority;

 

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(d) a material change in the geographic location at which the Executive must
perform services; or

(e) any other action or inaction that constitutes a material breach by the Bank
of any employment agreement between the Bank and the Executive;

Provided, however, the Executive shall be required to give written notice to the
Bank of the occurrence of the applicable event described in this Section 1.8
within sixty (60) days of the initial occurrence of the event, and the Bank
shall have a period of thirty (30) days from the receipt of the notice to remedy
the matter. If the Executive fails to give such notice or if the event is so
remedied, there shall not be Good Reason.

1.9 “Intentional,” for purposes of this Agreement, no act or failure to act on
the part of the Executive shall be deemed to have been intentional if it was due
primarily to an error in judgment or negligence. An act or failure to act on the
Executive’s part shall be considered intentional if it is not in good faith and
if it is without a reasonable belief that the action or failure to act is in the
best interests of the Bank.

1.10 “MFC” means MidCarolina Financial Corporation, a North Carolina corporation
which currently owns 100% of the capital stock of the Bank.

1.11 “Normal Retirement Age” means the Executive’s 65th birthday.

1.12 “Normal Retirement Date” means the date of Termination of Employment
occurring on or after attainment of Normal Retirement Age.

1.13 “Plan Administrator” means the plan administrator described in Article 8.

1.14 “Plan Year” means a twelve-month period commencing on January 1 and ending
on December 31 of each year.

1.15 “Termination for Cause” means the Bank terminates the Executive’s
employment for any of the following reasons —

(a) the Executive’s gross negligence or gross neglect of duties or intentional
and material failure to perform stated duties after written notice thereof, or

(b) disloyalty or dishonesty by the Executive in the performance of his or her
duties, or a breach of the Executive’s fiduciary duties for personal profit, in
any case whether in his or her capacity as a director or officer, or

(c) intentional wrongful damage by the Executive to the business or property of
the Bank or its affiliates, including without limitation, the reputation of the
Bank, which in the judgment of the Bank causes or is likely to cause material
harm to the Bank or affiliates, or

(d) a willful violation by the Executive of any applicable law or significant
policy of the Bank or an affiliate that, in the Bank’s judgment, results in an
adverse effect

 

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on the Bank or the affiliate, regardless of whether the violation leads to
criminal prosecution or conviction. For purposes of this Agreement, applicable
laws include any statute, rule, regulatory order, statement of policy, or final
cease-and-desist order of any governmental agency or body having regulatory
authority over the Bank, or

(e) the occurrence of any event that results in the Executive being excluded
from coverage, or having coverage limited for the Executive as compared to other
executives of the Bank, under the Bank’s blanket bond or other fidelity or
insurance policy covering its directors, officers, or employees, or

(f) the Executive is removed from office or permanently prohibited from
participating in the Bank’s affairs by an order issued under section 8(e)(4) or
section 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. 1818(e)(4) or
(g)(1), or

(g) conviction of the Executive for or plea of nolo contendere to a felony or
conviction of or plea of nolo contendere to a misdemeanor involving moral
turpitude, or the actual incarceration of the Executive for 45 consecutive days
or more.

1.16 “Termination of Employment” means the Executive ceases to be employed by
the Bank, MFC or any member of their controlled group of corporations, (as
defined in Treas. Regs. Sec. 1-409A-1(h)(3)), for any reason other than because
of a bona fide leave of absence, as defined in Treas. Regs. Sec. 1-409A-1(h)(1).

Article 2

Lifetime Benefits

2.1 Normal Retirement Benefit. For Termination of Employment on or after the
Normal Retirement Age for reasons other than death, the Bank shall pay to the
Executive the benefit described in this Section 2.1 instead of any other benefit
under this Agreement.

2.1.1 Amount of Benefit. The annual benefit under this Section 2.1 is $70,000.

2.1.2 Payment of Benefit. The Bank shall pay the annual benefit to the Executive
in 12 equal monthly installments on the first day of each month beginning
immediately after the expiration of six (6) months after Normal Retirement Date
and continuing for the Executive’s lifetime.

2.2 Early Termination Benefit. After Early Termination, the Bank shall pay to
the Executive the benefit described in this Section 2.2 instead of any other
benefit under this Agreement.

2.2.1 Amount of Benefit. The benefit under this Section 2.2 is the vested Early
Termination annual benefit amount set forth on Schedule A for the Plan Year
ending immediately before the Early Termination Date.

2.2.2 Payment of Benefit. The Bank shall pay the annual benefit to the Executive
in 12 equal monthly installments on the first day of each month beginning with
the later of (a) the calendar month immediately after the Executive attains the
Normal Retirement Age or (b) the calendar month beginning immediately after the
expiration of six (6) months after Early Termination. The annual benefit shall
be paid to the Executive for his lifetime.

 

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2.3 Disability Benefit. After Termination of Employment because of Disability
before Normal Retirement Age, the Bank shall pay to the Executive the benefit
described in this Section 2.3 instead of any other benefit under this Agreement.

2.3.1 Amount of Benefit. The benefit under this Section 2.3 is the Disability
annual benefit amount set forth on Schedule A for the Plan Year ended
immediately before the date on which Termination of Employment occurs.

2.3.2 Payment of Benefit. The Bank shall pay the Disability benefit to the
Executive in 12 equal monthly installments on the first day of each month
beginning with the calendar month immediately following the expiration of six
(6) months from the Executive’s Termination of Employment. The annual benefit
shall be paid to the Executive for his or her lifetime.

2.4 Change-in-Control Benefit. If the Executive has an involuntary Termination
of Employment within 12 months after a Change in Control, or if an event
constituting Good Reason occurs within 12 months after a Change in Control and,
after giving the required notice and after expiration of the cure period without
such cure, the Executive terminates employment for Good Reason within 30 days
after expiration of the cure period, the Bank shall pay to the Executive the
benefit described in this Section 2.4 instead of any other benefit under this
Agreement. No benefits shall be payable under this Agreement if the Executive’s
employment is terminated under circumstances described in Article 5 of this
Agreement.

2.4.1 Amount of Benefit: The benefit under this Section 2.4 is the Normal
Retirement Age Accrual Balance required by Section 2.1, without discount for the
time value of money.

2.4.2 Payment of Benefit: The Bank shall pay the Change-in-Control benefit under
Section 2.4 of this Agreement to the Executive in one lump sum on the first
business day occurring after expiration of the six (6) month period immediately
following such Termination of Employment.

2.5 Change-in-Control Payout of Normal Retirement Benefit, Early Termination
Benefit, or Disability Benefit Being Paid to the Executive at the Time of a
Change in Control. If a Change in Control occurs at any time during the salary
continuation benefit payment period, and if at the time of that Change in
Control the Executive is receiving the benefit provided by Section 2.1.2, 2.2.2,
or 2.3.2, the Bank shall pay the remaining salary continuation benefits to the
Executive in a single lump sum within three days after the Change in Control.
The lump-sum payment due to the Executive as a result of a Change in Control
shall be an amount equal to the Accrual Balance amount corresponding to that
particular benefit then being paid. If a Change in Control occurs after a
Termination of Employment other than for Cause but before payment of the
benefits to the Executive is to commence under Section 2.1.2, 2.2.2 or 2.3.2,
then the salary continuation benefits shall be paid to the Executive in a lump
sum on the date payment of the benefits would otherwise commence had there been
no Change in Control. The lump-sum payment due to the Executive as a result of a
Change in Control shall be an amount equal to the Accrual Balance amount
corresponding to that particular benefit to be paid.

 

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2.6 Contradiction in Terms of Agreement and Schedule A. If there is a
contradiction in the terms of this Agreement and Schedule A attached hereto
concerning the actual amount of a particular benefit due to the Executive under
Section 2.2, 2.3, or 2.4 hereof, then the actual amount of the benefit set forth
in this Agreement shall control.

Article 3

Death Benefits

3.1 Death During Active Service. Except as provided in Section 5.2, if the
Executive dies in active service to the Bank before the Normal Retirement Age,
the Bank shall pay to the Executive’s Beneficiary (a) a lump sum payment equal
to the Accrual Balance at the time of the Executive’s death, and (b) the benefit
described in the Split Dollar Agreement attached to this Agreement as Addendum
A.

3.2 Death after Termination of Employment. If the Executive dies after
Termination of Employment and the Executive is entitled to the normal retirement
benefit provided by Section 2.1, the Early Termination benefit provided by
Section 2.2, or the Disability benefit provided by Section 2.3, the Bank shall
pay to the Executive’s Beneficiary a lump sum payment equal to the Accrual
Balance remaining at the time of the Executive’s death; provided, however, that
no benefits under this Agreement shall be paid or payable to the Executive or
the Executive’s Beneficiary if this Agreement is terminated according to Article
5.

Article 4

Beneficiaries

4.1 Beneficiary Designations. The Executive shall have the right to designate at
any time a Beneficiary to receive any benefits payable under this Agreement upon
the death of the Executive. The Beneficiary designated under this Agreement may
be the same as or different from the beneficiary designation under any other
benefit plan of the Bank in which the Executive participates.

4.2 Beneficiary Designation: Change. The Executive shall designate a Beneficiary
by completing, dating and signing the Beneficiary Designation Form and
delivering it to the Plan Administrator or its designated agent prior to the
Executive’s death. The Executive’s Beneficiary designation shall be deemed
automatically revoked if the Executive names a spouse as Beneficiary and the
marriage is subsequently dissolved. The Executive shall have the right to change
a Beneficiary by completing, dating, signing, and filing the Beneficiary
Designation Form prior to the Executive’s death and otherwise complying with the
terms of the Beneficiary Designation Form and the Plan Administrator’s rules and
procedures. Upon the acceptance by the Plan Administrator of a new Beneficiary
Designation Form, all Beneficiary designations previously filed shall become
null and void. The Plan Administrator shall be entitled to rely on the last
Beneficiary Designation Form filed by the Executive and accepted by the Plan
Administrator before the Executive’s death.

4.3 Acknowledgment. No designation or change in designation of a Beneficiary
shall be effective until received, accepted, and acknowledged in writing by the
Plan Administrator or its designated agent.

 

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4.4 No Beneficiary Designation. If the Executive dies without a valid
beneficiary designation, or if all designated Beneficiaries predecease the
Executive, then the Executive’s spouse shall be the designated Beneficiary. If
the Executive has no surviving spouse, the benefits shall be paid to the
personal representative of the Executive’s estate.

4.5 Facility of Payment. If a benefit is payable to a minor, to a person
declared incapacitated, or to a person incapable of handling the disposition of
his or her property, the Bank may pay such benefit to the guardian, legal
representative, or person having the care or custody of the minor, incapacitated
person, or incapable person. The Bank may require proof of incapacity, minority,
or guardianship as it may deem appropriate before distribution of the benefit.
Distribution shall completely discharge the Bank from all liability for the
benefit.

Article 5

General Limitations

5.1 Termination for Cause. Notwithstanding any provision of this Agreement to
the contrary, the Bank shall not pay any benefit under this Agreement, and this
Agreement shall terminate upon the Executive’s Termination of Employment as a
result of Termination for Cause. Likewise, no benefits shall be paid under the
Split Dollar Agreement attached to this Agreement as Addendum A, and the Split
Dollar Agreement also shall terminate, upon Termination of Employment as a
result of Termination for Cause.

5.2 Misstatement. No benefits shall be paid under this Agreement or under the
Split Dollar Agreement attached as Addendum A if the Executive makes any
material misstatement of fact on any application or resume provided to the Bank
or on any application for benefits provided by the Bank.

5.3 Removal. If the Executive is removed from office or permanently prohibited
from participating in the Bank’s affairs by an order issued under section
8(e)(4) or (g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. 1818(e)(4) or
(g)(1), all obligations of the Bank under this Agreement shall terminate as of
the effective date of the order.

5.4 Default. Notwithstanding any provision of this Agreement to the contrary, if
the Bank is in “default” or “in danger of default,” as those terms are defined
in section 3(x) of the Federal Deposit Insurance Act, 12 U.S.C. 1813(x), all
obligations under this Agreement shall terminate.

5.5 FDIC Open-Bank Assistance. All obligations under this Agreement shall
terminate, except to the extent determined that continuation of the contract is
necessary for the continued operation of the Bank, when the Federal Deposit
Insurance Corporation enters into an agreement to provide assistance to or on
behalf of the Bank under the authority contained in Federal Deposit Insurance
Act section 13(c). 12 U.S.C. 1823(c). Rights of the parties that have already
vested shall not be affected by such action, however.

 

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Article 6

Claims and Review Procedures

6.1 Claims Procedure. A person or beneficiary (“claimant”) who has not received
benefits under the Agreement that he or she believes should be paid shall make a
claim for such benefits as follows

6.1.1 Initiation — Written Claim. The claimant initiates a claim by submitting
to the Bank a written claim for the benefits.

6.1.2 Timing of Bank Response. The Bank shall respond to the claimant within 90
days after receiving the claim. If the Bank determines that special
circumstances require additional time for processing the claim, the Bank may
extend the response period by an additional 90 days by notifying the claimant in
writing before the end of the initial 90-day period that an additional period is
required. The notice of extension must state the special circumstances and the
date by which the Bank expects to render its decision.

6.1.3 Notice of Decision. If the Bank denies the claim in whole or in part, the
Bank shall notify the claimant in writing of the denial. The Bank shall write
the notification in a manner calculated to be understood by the claimant. The
notification shall set forth —

 

  6.1.3.1 the specific reasons for the denial,

 

  6.1.3.2 a reference to the specific provisions of the Agreement on which the
denial is based,

 

  6.1.3.3 a description of any additional information or material necessary for
the claimant to perfect the claim and an explanation of why it is needed,

 

  6.1.3.4 an explanation of the Agreement’s review procedures and the time
limits applicable to such procedures, and

 

  6.1.3.5 a statement of the claimant’s right to bring a civil action under
ERISA section 502(a) following an adverse benefit determination on review,

6.2 Review Procedure. If the Bank denies all or any part of the claim, the
claimant shall have the opportunity for a full and fair review by the Bank of
the denial, as follows -

6.2.1 Initiation — Written Request. To initiate the review, within 60 days after
receiving the Bank’s notice of denial the claimant must file with the Bank a
written request for review.

6.2.2 Additional Submissions — Information Access. The claimant shall then have
the opportunity to submit written comments, documents, records, and other
information relating to the claim. Upon request and free of charge, the Bank
shall also provide the claimant reasonable access to and copies of all
documents, records, and other information relevant (as defined in applicable
ERISA regulations) to the claimant’s claim for benefits.

 

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6.2.3 Considerations on Review. In considering the review, the Bank shall take
into account all materials and information the claimant submits relating to the
claim, without regard to whether the information was submitted or considered in
the initial benefit determination.

6.2.4 Timing of Bank Response. The Bank shall respond in writing to the claimant
within 60 days after receiving the request for review. If the Bank determines
that special circumstances require additional time for processing the claim, the
Bank may extend the response period by an additional 60 days by notifying the
claimant in writing before the end of the initial 60-day period that an
additional period is required. The notice of extension must state the special
circumstances and the date by which the Bank expects to render its decision.

6.2.5 Notice of Decision. The Bank shall notify the claimant in writing of its
decision on review. The Bank shall write the notification in a manner calculated
to be understood by the claimant. The notification shall set forth—

 

  6.2.5.1 the specific reason for the denial,

 

  6.2.5.2 a reference to the specific provisions of the Agreement on which the
denial is based,

 

  6.2.5.3 a statement that the claimant is entitled to receive, upon request and
free of charge, reasonable access to and copies of all documents, records, and
other information relevant (as defined in applicable ERISA regulations) to the
claimant’s claim for benefits, and

 

  6.2.5.4 a statement of the claimant’s right to bring a civil action under
ERISA section 502(a),

Article 7

Miscellaneous

7.1 Amendments and Termination. This Agreement may be amended or terminated by
the Bank, except that no amendment or termination may be made without the
written agreement of the Executive if the amendment or termination would reduce
or eliminate a vested, accrued benefit of the Executive or would have a
materially adverse impact on the Executive’s reasonably expected economic
benefit under this Agreement (including, by way of example and not by
limitation, the Change of Control Benefit described in Sections 2.4, 2.4.1 and
2.4.2), with the exception of a termination occurring under Article 5 or an
amendment required in order to comply with applicable law.

7.2 Binding Effect. This Agreement shall bind the Executive, the Bank, and their
beneficiaries, survivors, executors, successors, administrators, and
transferees.

7.3 No Guarantee of Employment. This Agreement is not an employment policy or
contract. It does not give the Executive the right to remain an employee of the
Bank, nor does it interfere with the Bank’s right to discharge the Executive. It
also does not require the Executive to remain an employee nor interfere with the
Executive’s right to terminate employment at any time.

 

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7.4 Non-Transferability. Benefits under this Agreement cannot be sold,
transferred, assigned, pledged, attached, or encumbered in any manner.

7.5 Successors; Binding Agreement. The Bank will require any successor (whether
direct or indirect, by purchase, merger, consolidation, or otherwise) to all or
substantially all of the business or assets of the Bank, by an assumption
agreement in form and substance satisfactory to the Executive, to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Bank would be required to perform this Agreement if no such
succession had occurred. The Bank’s failure to obtain an assumption agreement
before effectiveness of any such succession shall be a breach of this Agreement
and shall entitle the Executive to the Change-in-Control benefit provided in
Section 2.4.

7.6 Tax Withholding. The Bank shall withhold any taxes that are required to be
withheld from the benefits provided under this Agreement.

7.7 Applicable Law. This Agreement and all rights hereunder shall be governed by
the laws of the State of North Carolina, except to the extent preempted by the
laws of the United States of America.

7.8 Unfunded Arrangement. The Executive and Beneficiary are general unsecured
creditors of the Bank for the payment of benefits under this Agreement. The
benefits represent the mere promise by the Bank to pay benefits. Rights to
benefits are not subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, attachment, or garnishment by
creditors. Any insurance on the Executive’s life is a general asset of the Bank
to which the Executive and Beneficiary have no preferred or secured claim.

7.9 One Benefit Only. Only one benefit shall be payable under this Agreement to
the Executive or the Beneficiary, which shall be determined by the first event
to occur for which benefits are payable hereunder. No subsequent occurrence of
an event shall entitle the Executive or Beneficiary to other or additional
benefits under this Agreement; however the payments may be accelerated in
accordance with the terms of Sections 2.5 or 3.2.

7.10 Entire Agreement. This Agreement and the Split Dollar Agreement attached as
Addendum A constitute the entire agreement between the Bank and the Executive
concerning the subject matter hereof. No rights are granted to the Executive
under this Agreement other than those specifically set forth herein. This
Agreement restates, supersedes and replaces in its entirety any previous version
of the Agreement and each prior version shall be of no further force or effect.

7.11 Severability. If for any reason any provision of this Agreement is held
invalid, such invalidity shall not affect any other provision of this Agreement
not held invalid, and each such other provision shall continue in full force and
effect to the full extent consistent with law. If any provision of this
Agreement is held invalid in part, such invalidity shall not affect the
remainder of the provision not held invalid, and the remainder of such provision
together with all other provisions of this Agreement shall continue in full
force and effect to the full extent consistent with law.

 

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7.12 Headings. Caption headings and subheadings herein are included solely for
convenience of reference and shall not affect the meaning or interpretation of
any provision of this Agreement.

7.13 Notices. All notices, requests, demands, and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered by
hand or mailed, certified or registered mail, return receipt requested, with
postage prepaid. Unless otherwise changed by notice, notice shall be properly
addressed to the Executive if addressed to the address of the Executive on the
books and records of the Bank at the time of the giving of such notice, and
properly addressed to the Bank if addressed to the Board of Directors,
MidCarolina Bank, 3101 South Church Street, Burlington, North Carolina 27215.

Article 8

Administration of Agreement

8.1 Plan Administrator Duties. This Agreement shall be administered by a Plan
Administrator consisting of the board or such committee or person(s) as the
board shall appoint. The Executive may be a member of the Plan Administrator.
The Plan Administrator shall also have the discretion and authority to (a) make,
amend, interpret, and enforce all appropriate rules and regulations for the
administration of this Agreement and (b) decide or resolve any and all
questions, including interpretations of this Agreement, as may arise in
connection with the Agreement.

8.2 Agents. In the administration of this Agreement, the Plan Administrator may
employ agents and delegate to them such administrative duties as it sees fit
(including acting through a duly appointed representative) and may from time to
time consult with counsel, who may be counsel to the Bank.

8.3 Binding Effect of Decisions. The decision or action of the Plan
Administrator with respect to any question arising out of or in connection with
the administration, interpretation, and application of the Agreement and the
rules and regulations promulgated hereunder shall be final and conclusive and
binding upon all persons having any interest in the Agreement. No Executive or
Beneficiary shall be deemed to have any right, vested or nonvested, regarding
the continued use of any previously adopted assumptions, including but not
limited to the discount rate and calculation method described in Section 1.1.

8.4 Indemnity of Plan Administrator. The Bank shall indemnify and hold harmless
the members of the Plan Administrator against any and all claims, losses,
damages, expenses, or liabilities arising from any action or failure to act with
respect to this Agreement, except in the case of willful misconduct by the Plan
Administrator or any of its members.

8.5 Bank Information. To enable the Plan Administrator to perform its functions,
the Bank shall supply full and timely information to the Plan Administrator on
all matters relating to the date and circumstances of the retirement,
Disability, death, or Termination of Employment of the Executive and such other
pertinent information as the Plan Administrator may reasonably require.

 

12

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IN WITNESS WHEREOF, the Executive and a duly authorized officer of the Bank have
executed this Salary Continuation Agreement as of the date first written above.

 

Executive:     Bank:     MidCarolina Bank

/S/ Robert C. Patterson

    By  

/S/ Charles Canaday

Robert C. Patterson     Its:   President     And By:  

/S/ Chris Redcay

    Its:   Corp.Sec.

 

13

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BENEFICIARY DESIGNATION

MIDCAROLINA BANK

SALARY CONTINUATION AGREEMENT

I, Robert C. Patterson, designate the following as beneficiary of any death
benefits under this Salary Continuation Agreement:

 

Primary:  

 

 

If no Primary Beneficiary survives me, the death benefits shall be paid to the
following Contingent Beneficiary:

 

Contingent:  

 

 

Note: If more than one person is named as the Primary Beneficiary or as the
Contingent Beneficiary, each shall receive an equal share of the death benefits
unless a different percentage is specified on this form.

To name a trust as beneficiary, please provide the name of the trustee(s) and
the exact name and date of the trust agreement.

I understand that I may change these beneficiary designations by filing a new
written designation with the Bank. I further understand that the designations
will be automatically revoked if the beneficiary predeceases me, or if I have
named my spouse as beneficiary and our marriage is subsequently dissolved.

 

Signature:  

 

  Robert C. Patterson Date:  

 

Accepted by the Bank this 27th day of May, 2008. By:  

 

Print Name:  

 

Title:  

 

 

14

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Plan Year Reporting

Salary Continuation Plan

Schedule A

 

Robert C. Patterson

 

Birth Dale: 8/24/1961

Plan Anniversary Date: 1/1/2005

Normal Retirement: 8/4/2026 , Age 65

Normal Retirement Payment: Monthly for 17 years

   Early Termination    Disability    Change in Control    Annual Benefit2
Amount Payable at
Normal Retirement Age    Annual Benefit2
Amount Payable at
Normal Retirement Age    Lump Sum Benefit
Amount Payable at
Separation from Service

Values

us of

   Discount
Rate     Benefit
Level    Accrual
Balance    Vesting     Based On
Accrual    Vesting     Based On
Accrual    Vesting     Based On
Accrual    (1)     (2)    (3)    (4)     (5)    (6)     (7)    (8)     (9)

Sep 2004

        65,768    60 %   15,816    100 %   26,361    100 %   65,768

9/30/2004 Accrual Balance Rollover

Dec 2004

   6.50 %   48,000    68,006    70 %   18,774    100 %   26,819    100 %  
68,006

Dec 2005

   6.50 %   48,000    77,328    80 %   22,865    100 %   28,581    100 %  
77,328

Dec 2006

   6.50 %   48,000    87,273    90 %   27.210    100 %   30,233    100 %  
87,273

Dec 2007

   6.50 %   70,000    103,788    100 %   33,697    100 %   33,697    100 %  
723,065

Dec 2008

   6.50 %   70,000    121,409    100 %   36,944    100 %   36,944    100 %  
723,065

Dec 2009

   6.50 %   70,000    140,210    100 %   39,987    100 %   39987    100 %   723
065

Dec 2010

   6.50 %   70,000    160,271    100 %   42,839    100 %   42,839    100 %  
723,065

Dec 2011

   6.50 %   70,000    181,674    100 %   45,512    100 %   45,512    100 %  
723,065

Dec 2012

   6,50 %   70,000    204,511    100 %   48,017    100 %   48,017    100 %  
723,065

Dec 2013

   6,50 %   70,000    228,878    100 %   50,365    100 %   50,365    100 %  
723,065

Dec 2014

   6,50 %   70,000    254,876    100 %   52,566    100 %   52,566    100 %  
723,065

Dec 2015

   6,50 %   70,000    282,616    100 %   54,628    100 %   54,628    100 %  
723,065

Dec 2016

   6.50 %   70,000    312,213    100 %   56,561    100 %   56,561    100 %  
723,065

Dec 2017

   6.50 %   70,000    343,793    100 %   58,373    100 %   58,373    100 %  
723,065

Dec 2018

   6.50 %   70,000    377,487    100 %   60,071    100 %   60,071    100 %  
723,065

Dec 2019

   6.50 %   70,000    413,438    100 %   61,662    100 %   61,662    100 %  
723,065

Dec 2020

   6.50 %   70,000    451,797    100 %   63,154    100 %   63,154    100 %  
723,065

Dec 2021

   6.50 %   70,000    492,725    100 %   64,551    100 %   64,551    100 %  
723,065

Dec 2022

   6,50 %   70,000    536,393    100 %   65,862    100 %   65,862    100 %  
723,065

Dec 2023

   6.50 %   70,000    582,987    100 %   67,089    100 %   67,089    100 %  
723,065

Dec 2024

   6,50 %   70,000    632,700    100 %   68,240    100 %   68,240    100 %  
723,065

Salary Continuation Plan for Mid Carolina Bank – Burlington, NC

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Plan Year Reporting

Salary Continuation Plan

Schedule A

 

Robert C. Patterson

 

                     Early Termination    Disability    Change in Control

Birth Dale: 8/24/1961

Plan Anniversary Date: 1/1/2005

Normal Retirement: 8/4/2026 , Age 65

Normal Retirement Payment: Monthly for 17 years

   Annual Benefit2
Amount Payable at
Normal Retirement Age    Annual Benefit2
Amount Payable at
Normal Retirement Age    Lump Sum Benefit
Amount Payable at
Separation from Service

Values

as of

   Discount
Rate     Benefit
Level    Accrual
Balance    Vesting     Based On
Accrual    Vesting     Based On
Accrual    Vesting     Based On
Accrual    (1)     (2)    (3)    (4)     (5)    (6)     (7)    (8)     (9)

Dec 2025

   6.50 %   70,000    685,743    100 %   69,319    100 %   69,319    100 %  
723,065

Aug 2026

   6.50 %   70,000    723,065    100 %   70,000    100 %   70,000    100 %  
723,065

August 4, 2026 Retirement; September 1, 2026 First Payment Date

 

1

The first line reflects 12 months of data, January 2008 to December 2008.

2

The annual benefit amount will be distributed in 12 equal monthly payments for a
total of 204 monthly payments.

*

IF THERE IS A CONFLICT IN ANY TERMS OR PROVISIONS BETWEEN THIS SCHEDULE A AND
THE AGREEMENT, THE TERMS AND PROVISIONS OF THE AGREEMENT SHALL PREVAIL. IF A
TRIGGERING EVENT OCCURS, REFER TO THE AGREEMENT TO DETERMINE THE ACTUAL BENEFIT
AMOUNT BASED ON THE DATE OF THE EVENT.

Salary Continuation Plan for Mid Carolina Bank – Burlington, NC

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