Salary Continiuation Agreement dated October 1, 2004



 Exhibit 10.11 
 MIDCAROLINA BANK 
 SALARY
CONTINUATION AGREEMENT 
 THIS SALARY CONTINUATION
AGREEMENT (this “Agreement”) is made and entered into as of this 1st day
of October, 2004, by and between MidCarolina Bank, a bank chartered under North Carolina law (the “Bank”), and Charles T. Canaday, its Executive Vice President and Chief Operating Officer (the “Executive”). 
 WHEREAS, the Executive has contributed substantially to the success of the Bank, and the Bank desires that the
Executive continue in its employ, 
 WHEREAS, to encourage the Executive to remain an employee of the
Bank, the Bank is willing to provide salary continuation benefits to the Executive. The Bank will pay the benefits from its general assets, 
 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, 
 WHEREAS, the parties hereto intend that this Agreement shall be considered an unfunded arrangement maintained
primarily to provide supplemental retirement benefits for the Executive, and to be considered a non-qualified benefit plan for purposes of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). The Executive is fully
advised of the Bank’s financial status, 
 WHEREAS, the Bank and the Executive are parties to an
Executive Indexed Retirement Agreement dated as of January 25, 2002, and 
 WHEREAS, the Bank and
the Executive intend that this Agreement shall amend and restate in its entirety the January 25, 2002 Executive Indexed Retirement Agreement, and from and after the Effective Date (as hereinafter defined) of this Agreement the January 25,
2002 Executive Indexed Retirement Agreement shall be of 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 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 have the same meaning specified in any severance or employment agreement existing on the date hereof or
hereafter entered into between the Executive and the Bank or between the Executive and MidCarolina Financial Corporation, a North Carolina corporation of which the Bank is a wholly owned subsidiary. If the Executive is not a party to a severance or
employment agreement containing a definition of Change in Control, Change in Control means any of the following events occur – 
 (a)
Merger: MidCarolina Financial Corporation merges into or consolidates with another corporation, or merges another corporation into MidCarolina Financial Corporation, and as a result less than a majority of the combined voting power of the
resulting corporation immediately after the merger or consolidation is held by persons who were stockholders of MidCarolina Financial Corporation immediately before the merger or consolidation, 
 (b) Acquisition of Significant Share Ownership: after the date of this Agreement a report on Schedule 13D, Schedule TO, or another form or
schedule (other than Schedule 13G) is filed or is required to be filed under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if the schedule discloses that the filing person or persons acting in concert has or have become the
beneficial owner of 25% or more of the combined voting power of MidCarolina Financial Corporation’s voting securities outstanding (but this clause (b) shall not apply to beneficial ownership of voting shares held by a subsidiary in a
fiduciary capacity or beneficial ownership of voting shares held by an employee benefit plan of MidCarolina Financial Corporation or any subsidiary. For purposes of this Agreement, “subsidiary” means an entity in which MidCarolina
Financial Corporation beneficially owns 50% or more of the outstanding voting securities, whether MidCarolina Financial Corporation owns the shares directly or owns the shares indirectly through an intermediate subsidiary, 
 (c) Change in Board Composition. during any period of two consecutive years, individuals who constitute MidCarolina Financial Corporation’s
board of directors at the beginning of the two-year period cease for any reason to constitute at least a majority thereof; provided, however, that – for purposes of this clause (c) – each director who is first elected by the
board (or first nominated by the board for election by stockholders) by a vote of at least two-thirds (b) of the directors who were directors at the beginning of the period shall be deemed to have been a director at the beginning of the
two-year period, or 







 (d) Sale of Assets: MidCarolina Financial Corporation sells to a third party all or substantially
all of MidCarolina Financial Corporation’s assets. For this purpose, sale of all or substantially all of MidCarolina Financial Corporation’s assets includes sale of the shares or assets of the Bank alone. 
 1.5 “Disability” means the Executive suffers a sickness, accident or injury that is determined by the carrier of any individual or group
disability insurance policy covering the Executive, or by the Social Security Administration, to be a disability rendering the Executive totally and permanently disabled. At the Bank’s request, the Executive must submit to the Bank proof of the
carrier’s or 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 “Effective
Date” means October 1, 2004. 
 1.9 “Good Reason” shall have the same meaning specified in any employment or
severance agreement existing on the date hereof or entered into hereafter by the Executive and the Bank or by the Executive and MidCarolina Financial Corporation. If the term “Good Reason” is not defined in an employment agreement or
severance agreement, it means any of the following events occur without the Executive’s written consent – 
 (a)
reduction of the Executive’s base salary, or 
 (b) reduction of the Executive’s bonus, incentive, and other
compensation award opportunities under the Bank’s benefit plans, unless a company-wide reduction of all officers’ award opportunities occurs simultaneously, or termination of the Executive’s participation in any officer or employee
benefit plan maintained by the Bank, unless the plan is terminated because of changes in law or loss of tax deductibility to the Bank for contributions to the plan, or unless the plan is terminated as a matter of policy applied equally to all
participants, or 
 (c) assignment to the Executive of duties or responsibilities that are materially inconsistent with the
Executive’s duties and responsibilities immediately before the Change in Control, or any other action by the Bank or its successor that results in a material reduction or material adverse change in the Executive’s position, authority,
duties or responsibilities, or 
 (d) failure to appoint or reappoint or otherwise to maintain the Executive in the office or
position, or a substantially equivalent office or position, of or with MidCarolina Financial Corporation or the Bank that the Executive held immediately before the Change in Control, or 







 (e) the failure of the Bank to obtain a satisfactory agreement from any successor or
assign of the Bank to assume and agree to perform this Agreement, as contemplated in Section 7.5 hereof, or 
 (f)
relocation of the Bank’s principal executive offices, or requiring the Executive to change his principal work location, to any location that is more than 15 miles from the location of the Bank’s principal executive offices on the date of
this Agreement. 
 1.10 “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. 
 1.11 “Normal Retirement Age”
means the Executive’s 65th birthday. 
 1.12 “Normal Retirement Date” means the later of the Normal Retirement Age or Termination of Employment. 
 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. The initial Plan
Year shall commence on the effective date of this Agreement. 
 1.15 “Termination for Cause” and “Cause”
shall have the same definition specified in any severance or employment agreement existing on the date hereof or entered into hereafter between the Executive and the Bank or between the Executive and MidCarolina Financial Corporation. If the
Executive is not a party to a severance or employment agreement containing a definition of termination for cause, 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 duties, or a breach of the Executive’s fiduciary
duties for personal profit, in any case whether in his 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 judgement of the Bank causes 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 judgement, results in an adverse effect 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 conduct of 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 for any reason whatsoever, other than because of a leave of absence approved by the Bank. For purposes of this Agreement, if there is a dispute about the employment status of
the Executive or the date of the Executive’s Termination of Employment, the Bank shall have the sole and absolute right to decide the dispute unless a Change in Control shall have occurred. 
 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 payable on the first day of each month, beginning with the month immediately after the Executive’s Normal Retirement Date. The Normal Retirement annual benefit
shall be paid to the Executive for his 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 Early Termination annual benefit amount set forth on Schedule A for the Plan Year ending immediately before the Early Termination Date (except during the first Plan Year, the benefit is the amount set
forth for Plan Year 1). 







 2.2.2 Payment of Benefit. The Bank shall pay the annual benefit to the Executive in 12 equal
monthly installments payable on the first day of each month, beginning with the month after the Normal Retirement Age. The annual benefit shall be paid to the Executive for his lifetime. 
 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 (except during the first Plan Year, the benefit is the
amount set forth for Plan Year 1). 
 2.3.2 Payment of Benefit. Beginning with the month immediately after the Executive’s Normal
Retirement Age, the Bank shall pay the Disability benefit to the Executive in 12 equal monthly installments on the first day of each month. The annual benefit shall be paid to the Executive for his lifetime. 
 2.4 Change-in-Control Benefit. If the Executive’s employment with the Bank terminates involuntarily within 12 months after a Change in
Control, or if the Executive terminates employment voluntarily for Good Reason within 12 months after a Change in Control, the Bank shall pay to the Executive the benefit described in this Section 2.4 instead of any other benefit under this
Agreement. However, 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 within three days after 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 Sections 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.

 2.6 Petition for Payment of Normal Retirement Benefit, Early Termination Benefit or Disability Benefit. If 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 Executive may petition the board of directors to have the
Accrual Balance amount corresponding to 







 that particular benefit paid to the Executive in a single lump sum. The board of directors shall have sole and absolute
discretion about whether to pay the remaining Accrual Balance in a lump sum. If the remaining Accrual Balance is paid in a single lump sum, the Bank shall have no further obligations under this Agreement. 
 2.7 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 amount due the Executive under Section 2.2, 2.3, or 2.4 hereof, then the actual amount of the benefit set forth in the 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) an amount in cash 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) an amount in cash equal to the Accrual Balance remaining 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; provided, however, that no benefits under this Agreement or under the Split Dollar 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 and signing the Beneficiary Designation Form and delivering it to the Plan Administrator or its designated agent. The Executive’s Beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the
Executive or 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, signing, and otherwise complying with the terms of the Beneficiary
Designation Form and the Plan Administrator’s rules and procedures, as in effect from time to time. Upon the acceptance by 







 the Plan Administrator of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be
cancelled. 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. 
 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 made 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 if Termination of Employment is 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, if Termination of Employment is 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. 
 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 part or all of the claim, 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 part or all 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. 
 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. Subject to Section 7.17 of this Agreement, (a) this Agreement may be amended solely by a written agreement signed by the Bank and by the Executive, and (b) except for termination occurring under Article 5, this
Agreement may be terminated solely by a written agreement signed by the Bank and by the Executive. 
 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. 
 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. By an assumption agreement in form and substance satisfactory to the Executive, the Bank shall 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 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 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 supersedes and replaces in its entirety the
January 25, 2002 Executive Indexed Retirement Agreement, and from and after the Effective Date of this Agreement the January 25, 2002 Executive Indexed Retirement Agreement shall be of no further force or effect. 
 7.10 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. 
 7.11 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. 
 7.12 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 delivery 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. 
 7.13 Payment of Legal Fees. The Bank is aware that after a Change in Control
management of the Bank could cause or attempt to cause the Bank to refuse to comply with its obligations under this Agreement, or could institute or cause or attempt to cause the Bank to institute litigation seeking to have this Agreement declared
unenforceable, or could take or attempt to take other action to deny Executive the benefits intended under this Agreement. In these circumstances, the purpose of this Agreement would be frustrated. It is the intention of the Bank that the Executive
not be required to incur the expenses associated with the enforcement of his rights under this Agreement, whether by litigation or other legal action, because the cost and expense thereof would substantially detract from the benefits intended to be
granted to the Executive hereunder. It is the intention of the Bank that the Executive not be forced to negotiate settlement of his rights under this Agreement under threat of incurring expenses. Accordingly, if after a Change in Control occurs it
appears to the Executive that (a) the Bank has failed 







 to comply with any of its obligations under this Agreement, or (b) the Bank or any other person has taken any action
to declare this Agreement void or unenforceable, or instituted any litigation or other legal action designed to deny, diminish, or to recover from the Executive the benefits intended to be provided to the Executive hereunder, the Bank irrevocably
authorizes the Executive from time to time to retain counsel of his choice, at the expense of the Bank as provided in this Section 7.13, to represent the Executive in connection with the initiation or defense of any litigation or other legal
action, whether by or against the Bank or any director, officer, stockholder, or other person affiliated with the Bank, in any jurisdiction. Notwithstanding any existing or previous attorney-client relationship between the Bank and any counsel
chosen by the Executive under this Section 7.13, the Bank irrevocably consents to the Executive entering into an attorney-client relationship with that counsel, and the Bank and the Executive agree that a confidential relationship shall exist
between the Executive and that counsel. The fees and expenses of counsel selected from time to time by the Executive as provided in this section shall be paid or reimbursed to the Executive by the Bank on a regular, periodic basis upon presentation
by the Executive of a statement or statements prepared by such counsel in accordance with such counsel’s customary practices, up to a maximum aggregate amount of $250,000, whether suit be brought or not, and whether or not incurred in trial,
bankruptcy, or appellate proceedings. The Bank’s obligation to pay the Executive’s legal fees provided by this Section 7.13 operates separately from and in addition to any legal fee reimbursement obligation the Bank may have with the
Executive under any separate employment, severance, or other agreement between the Executive and the Bank. 
 7.14 Internal Revenue Code
Section 280G Gross Up. (a) Additional Payment to Account for Excise Taxes. If as a result of a Change in Control the Executive becomes entitled to acceleration of benefits under this Salary Continuation Agreement or under any
other plan or agreement of or with the Bank or its affiliates (together, the “Total Benefits”), and if any of the Total Benefits will be subject to the Excise Tax as set forth in sections 280G and 4999 of the Internal Revenue Code of 1986
(the “Excise Tax”), the Bank shall pay to the Executive the following additional amounts, consisting of (1) a payment equal to the Excise Tax payable by the Executive on the Total Benefits under section 4999 of the Internal Revenue
Code (the “Excise Tax Payment”), and (2) a payment equal to the amount necessary to provide the Excise Tax Payment net of all income, payroll and excise taxes. Together, the additional amounts described in clauses (1) and
(2) are referred to in this Agreement as the “Gross-Up Payment Amount.” 
 Calculating the Excise Tax. For purposes of
determining whether any of the Total Benefits will be subject to the Excise Tax and for purposes of determining the amount of the Excise Tax, 
 (1) Determination of “Parachute Payments” Subject to the Excise Tax: any other payments or benefits received or to be received by the Executive in connection with a Change in Control or the Executive’s Termination of
Employment (whether under the terms of this Agreement or any other agreement or any other benefit plan or arrangement with the Bank, any person whose actions result in a Change in Control, or any person affiliated with the Bank or such person) shall
be treated as “parachute payments” within the meaning of section 280G(b)(2) of the Internal Revenue Code, and all “excess parachute payments” within the meaning of section 280G(b)(1) shall be treated as subject to the Excise Tax,
unless in the opinion of the certified public accounting firm that is retained by the Bank as of the date immediately before the Change in Control (the “Accounting Firm”) such other payments or benefits do not constitute (in whole or in
part) parachute payments, or such excess parachute payments represent (in whole or in part) reasonable compensation for services actually rendered within the meaning of 







 section 280G(b)(4) of the Internal Revenue Code in excess of the “base amount” (as defined in
section 280G(b)(3) of the Internal Revenue Code), or are otherwise not subject to the Excise Tax, 
 (2) Calculation of Benefits Subject to
Excise Tax: the amount of the Total Benefits that shall be treated as subject to the Excise Tax shall be equal to the lesser of (a) the total amount of the Total Benefits reduced by the amount of such Total Benefits that in the opinion of
the Accounting Firm are not parachute payments, or (b) the amount of excess parachute payments within the meaning of section 280G(b)(1) (after applying clause (1), above), and 
 (3) Value of Noncash Benefits and Deferred Payments: the value of any noncash benefits or any deferred payment or benefit shall be determined by
the Accounting Firm in accordance with the principles of sections 280G(d)(3) and (4) of the Internal Revenue Code. 
 Assumed
Marginal Income Tax Rate. For purposes of determining the amount of the Gross-Up Payment Amount, the Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar years in which the
Gross-Up Payment Amount is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive’s residence on the date of termination of employment, net of the reduction in federal
income taxes that can be obtained from deduction of such state and local taxes (calculated by assuming that any reduction under section 68 of the Internal Revenue Code in the amount of itemized deductions allowable to the Executive applies first to
reduce the amount of such state and local income taxes that would otherwise be deductible by the Executive, and applicable federal FICA and Medicare withholding taxes). 
 Return of Reduced Excise Tax Payment or Payment of Additional Excise Tax. If the Excise Tax is later determined to be less than the amount taken into account hereunder when the Executive’s employment
terminated, the Executive shall repay to the Bank – when the amount of the reduction in Excise Tax is finally determined – the portion of the Gross-Up Payment Amount attributable to the reduction (plus that portion of the Gross-Up Payment
Amount attributable to the Excise Tax, federal, state and local income taxes and FICA and Medicare withholding taxes imposed on the Gross-Up Payment Amount being repaid by the Executive to the extent that the repayment results in a reduction in
Excise Tax, FICA, and Medicare withholding taxes and/or a federal, state, or local income tax deduction). 
 If the Excise Tax is later
determined to be more than the amount taken into account hereunder when the Executive’s employment terminated (due, for example, to a payment whose existence or amount cannot be determined at the time of the Gross-Up Payment Amount), the Bank
shall make an additional Gross-Up Payment Amount to the Executive for that excess (plus any interest, penalties, or additions payable by the Executive for the excess) when the amount of the excess is finally determined. 
 (b) Responsibilities of the Accounting Firm and the Bank. Determinations Shall Be Made by the Accounting Firm. Subject to the provisions of
Section 7.14(a), all determinations required to be made under this Section 7.14(b) – including whether and when a Gross-Up Payment Amount is required, the amount of the Gross-Up Payment Amount and the assumptions to be used to arrive
at the determination (collectively, the “Determination”) – shall be made by the Accounting Firm, which shall provide detailed 







 supporting calculations both to the Bank and the Executive within 15 business days after receipt of notice from the Bank
or the Executive that there has been a Gross-Up Payment Amount, or such earlier time as is requested by the Bank. 
 Fees and Expenses of
the Accounting Firm and Agreement with the Accounting Firm. All fees and expenses of the Accounting Firm shall be borne solely by the Bank. The Bank shall enter into any agreement requested by the Accounting Firm in connection with the
performance of its services hereunder. 
 Accounting Firm’s Opinion. If the Accounting Firm determines that no Excise Tax is
payable by the Executive, the Accounting Firm shall furnish the Executive with a written opinion to that effect, and to the effect that failure to report Excise Tax, if any, on the Executive’s applicable federal income tax return will not
result in the imposition of a negligence or similar penalty. 
 Accounting Firm’s Determination Is Binding; Underpayment and
Overpayment. The Determination by the Accounting Firm shall be binding on the Bank and the Executive. Because of the uncertainty in determining whether any of the Total Benefits will be subject to the Excise Tax at the time of the Determination,
it is possible that a Gross-Up Payment Amount that should have been made will not have been made by the Bank (“Underpayment”), or that a Gross-Up Payment Amount will be made that should not have been made by the Bank
(“Overpayment”). If, after a Determination by the Accounting Firm, the Executive is required to make a payment of additional Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred. The Underpayment
(together with interest at the rate provided in section 1274(d)(2)(B) of the Internal Revenue Code) shall be paid promptly by the Bank to or for the benefit of the Executive. If the Gross-Up Payment Amount exceeds the amount necessary to reimburse
the Executive for his Excise Tax according to Section 7.14(a), the Accounting Firm shall determine the amount of the Overpayment that has been made. The Overpayment (together with interest at the rate provided in section 1274(d)(2)(B) of the
Internal Revenue Code) shall be paid promptly by the Executive to or for the benefit of the Bank. Provided that his expenses are reimbursed by the Bank, the Executive shall cooperate with any reasonable requests by the Bank in any contests or
disputes with the Internal Revenue Service relating to the Excise Tax. 
 Accounting Firm Conflict of Interest. If the Accounting Firm
is serving as accountant or auditor for the individual, entity, or group effecting the Change in Control, the Executive may appoint another nationally recognized public accounting firm to make the Determinations required hereunder (in which case the
term “Accounting Firm” as used in this Agreement shall be deemed to refer to the accounting firm appointed by the Executive under this paragraph). 
 7.15 Covenant Not to Compete. (a) The Executive covenants and agrees that he will not, directly or indirectly, Compete with the Bank for two years after Termination of Employment. For purposes of this
section, the following terms shall have the meanings set forth below – 
 (1) The term “Compete” means – 
 (a) providing Financial Products or Service on behalf of any Financial Institution for any Person residing in the Territory, 







 (b) assisting (other than through the performance of ministerial or clerical duties) any
Financial Institution in providing Financial Products or Services to any Person residing in the Territory, or 
 (c) inducing
or attempting to induce any Person who was a Customer of the Bank at the date of the Executive’s Termination of Employment to seek Financial Products or Services from another Financial Institution. 
 (2) The words “directly or indirectly” means – 
 (a) acting as a consultant, officer, director, independent contractor, or employee of any Financial Institution in competition with the
Bank in the Territory, or 
 (b) communicating to such Financial Institution the names or addresses or any financial
information concerning any Person who was a Customer of the Bank at the Executive’s Termination of Employment. 
 (3) The term
“Customer” means any Person to whom the Bank is providing Financial Products or Services on the date of the Executive’s Termination of Employment. 
 (4) The term “Financial Institution” means any bank, savings association, or bank or savings association holding company, or any other institution, the business of which is engaging in activities that are
financial in nature or incidental to such financial activities as described in section 4(k) of the Bank Holding Company Act of 1956, other than the Bank or one of its affiliated corporations. 
 (5) “Financial Product or Service” means any product or service that a Financial Institution or a financial holding company could offer by
engaging in any activity that is financial in nature or incidental to such a financial activity under section 4(k) of the Bank Holding Company Act of 1956 and that is offered by the Bank or MidCarolina Financial Corporation on the date of the
Executive’s Termination of Employment, including but not limited to banking activities and activities that are closely related and a proper incident to banking. 
 (6) The term “Person” means any individual or individuals, corporation, partnership, fiduciary or association. 
 (7) The term “Territory” means: (1) that area consisting of Alamance County, North Carolina as such area is constituted as of the date of this Agreement, (2) that area consisting of all counties
contiguous with Alamance County, North Carolina, and (3) the area within a 15-mile radius of any full-service banking office of the Bank at the date of the Executive’s Termination of Employment. 
 (b) If any provision of this section or any word, phrase, clause, sentence or other portion thereof (including, without limitation, the geographical and
temporal restrictions contained therein) is 







 held to be unenforceable or invalid for any reason, the unenforceable or invalid provision or portion shall be modified
or deleted so that the provisions hereof, as modified, are legal and enforceable to the fullest extent permitted under applicable law. 
 (c)
If the Executive’s employment with the Bank terminates involuntarily within 12 months after a Change in Control (excepting termination governed by Article 5 of this Agreement), or if the Executive terminates employment voluntarily for Good
Reason within 12 months after a Change in Control, the provisions of this Section 7.15 shall be null and void. 
 7.16 Injunctive
Relief. If there is a breach or threatened breach of the provisions of Section 7.15 of this Agreement, the Bank shall be entitled to an injunction restraining the Executive from such breach. Nothing herein shall be construed as prohibiting
the Bank from pursuing any other remedies for such breach or threatened breach. 
 7.17 Termination or Modification of Agreement Because
of Changes in Law, Rules or Regulations. The Bank is entering into this Agreement on the assumption that certain existing tax laws, rules, and regulations will continue in effect in their current form. If that assumption materially changes and
the change has a material detrimental effect on this Agreement, then the Bank reserves the right to terminate or modify this Agreement accordingly, subject to the written consent of the Executive, which shall not be unreasonably withheld. This
Section 7.17 shall become null and void effective immediately if a Change in Control occurs. 
 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. 
 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/ Charles T. Canaday
	 	By:	 	 /s/ Randolph J. Cary, Jr.

	Charles T. Canaday	 	Its:	 	Chief Executive Officer
			
		 	And By:	 	 /s/ Trudi Isakson

		 	Its:	 	Corporate Secretary








 BENEFICIARY DESIGNATION 
 MIDCAROLINA BANK 
 SALARY CONTINUATION AGREEMENT 
 I, Charles T. Canaday,
designate the following as beneficiary of any death benefits under this Salary Continuation Agreement – 
 Primary:
_______________________________________________________________________________________________ 
 ___________________________________________________________________________________________________________. 
 Contingent:
_____________________________________________________________________________________________ 
 ___________________________________________________________________________________________________________. 
 Note: 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:	 	  

		 	Charles T. Canaday
	
	Date:                     , 2004


 Accepted by the Bank this      day of
                    , 2004. 
  

			
	By:	 	  

	Print Name:	 	  

	Title:	 	  










 SCHEDULE A 
 MIDCAROLINA BANK 
 SALARY CONTINUATION AGREEMENT 
 Charles T. Canaday

  

																		
	 Plan
 Year
	  	 Plan Year
 ending
 December 31,
	  	 Age at
 Plan
 Year
 end
	  	 Accrual
 Balance @
 6.50%
(1)
	 	 	 Early
 Termination
 annual benefit
 payable at
 Normal
 Retirement Age
 (2)
	  	 Disability annual
 benefit payable
 at
Normal
 Retirement Age
 (2)
	  	 Change-in-
 Control benefit
 payable in
a
 lump sum

	1	  	2004	  	43	  	$	62,296	 	 	$	24,173	  	$	24,173	  	$	723,065
	2	  	2005	  	44	  	$	77,007	 	 	$	28,005	  	$	28,005	  	$	723,065
	3	  	2006	  	45	  	$	92,703	 	 	$	31,598	  	$	31,598	  	$	723,065
	4	  	2007	  	46	  	$	109,451	 	 	$	34,964	  	$	34,964	  	$	723,065
	5	  	2008	  	47	  	$	127,320	 	 	$	38,120	  	$	38,120	  	$	723,065
	6	  	2009	  	48	  	$	146,386	 	 	$	41,077	  	$	41,077	  	$	723,065
	7	  	2010	  	49	  	$	166,729	 	 	$	43,849	  	$	43,849	  	$	723,065
	8	  	2011	  	50	  	$	188,434	 	 	$	46,446	  	$	46,446	  	$	723,065
	9	  	2012	  	51	  	$	211,592	 	 	$	48,881	  	$	48,881	  	$	723,065
	10	  	2013	  	52	  	$	236,302	 	 	$	51,163	  	$	51,163	  	$	723,065
	11	  	2014	  	53	  	$	262,667	 	 	$	53,301	  	$	53,301	  	$	723,065
	12	  	2015	  	54	  	$	290,797	 	 	$	55,306	  	$	55,306	  	$	723,065
	13	  	2016	  	55	  	$	320,811	 	 	$	57,184	  	$	57,184	  	$	723,065
	14	  	2017	  	56	  	$	352,835	 	 	$	58,945	  	$	58,945	  	$	723,065
	15	  	2018	  	57	  	$	387,004	 	 	$	60,595	  	$	60,595	  	$	723,065
	16	  	2019	  	58	  	$	423,462	 	 	$	62,142	  	$	62,142	  	$	723,065
	17	  	2020	  	59	  	$	462,361	 	 	$	63,591	  	$	63,591	  	$	723,065
	18	  	2021	  	60	  	$	503,865	 	 	$	64,950	  	$	64,950	  	$	723,065
	19	  	2022	  	61	  	$	548,149	 	 	$	66,223	  	$	66,223	  	$	723,065
	20	  	2023	  	62	  	$	595,398	 	 	$	67,416	  	$	67,416	  	$	723,065
	21	  	2024	  	63	  	$	645,812	 	 	$	68,535	  	$	68,535	  	$	723,065
	22	  	2025	  	64	  	$	699,602	 	 	$	69,583	  	$	69,583	  	$	723,065
		  	May 2026	  	65	  	$	723,065	(3)	 	$	70,000	  	$	70,000	  	$	723,065
	23	  	2026	  	65	  	$	709,203	 	 			  			  		
	24	  	2027	  	66	  	$	684,186	 	 			  			  		









														
	Plan
Year	  	 Plan Year
 ending
 December 31,
	  	 Age at
 Plan
 Year
 end
	  	 Accrual
 Balance @
 6.50%
(1)
	  	 Early
 Termination
 annual benefit
 payable at
 Normal
 Retirement Age
 (2)
	  	 Disability annual
 benefit payable
 at
Normal
 Retirement Age
 (2)
	  	 Change-in-
 Control benefit
 payable in
a
 lump sum

	25	  	2028	  	67	  	$	657,492	  		  		  	
	26	  	2029	  	68	  	$	629,012	  		  		  	
	27	  	2030	  	69	  	$	598,624	  		  		  	
	28	  	2031	  	70	  	$	566,200	  		  		  	
	29	  	2032	  	71	  	$	531,606	  		  		  	
	30	  	2033	  	72	  	$	494,694	  		  		  	
	31	  	2034	  	73	  	$	455,310	  		  		  	
	32	  	2035	  	74	  	$	413,289	  		  		  	
	33	  	2036	  	75	  	$	368,454	  		  		  	
	34	  	2037	  	76	  	$	320,615	  		  		  	
	35	  	2038	  	77	  	$	269,573	  		  		  	
	36	  	2039	  	78	  	$	215,113	  		  		  	
	37	  	2040	  	79	  	$	157,005	  		  		  	
	38	  	2041	  	80	  	$	95,006	  		  		  	
	39	  	2042	  	81	  	$	28,854	  		  		  	
	40	  	May 2043	  	82	  	$	0	  		  		  	



	(1)	Calculations are approximations. Benefit calculations are based on prior year-end accrual balances. The accrual balance reflects payment at the beginning of each month during
retirement, beginning June 1, 2026. 


	(2)	The Early Termination benefit and the Disability benefit are calculated as an annual payment stream of the Accrual Balance that exists at the end of the year preceding the year in
which Early Termination or Disability occurs, using a standard discount rate (6.50%). The Early Termination and Disability benefits continue for the Executive’s lifetime and are included for illustrative purposes only. 



	(3)	Projected retirement occurs on May 31, 2026, with the first normal monthly retirement benefit being paid on June 1, 2026.