Salary Continuation Agreement with Michael G. Carlton



 Exhibit 10(x) 
  
 CRESCENT STATE BANK 
 SALARY CONTINUATION AGREEMENT 
  
 THIS SALARY CONTINUATION AGREEMENT (this
“Agreement”) is made and entered into as of this 1st day of October, 2003, by and between Crescent State
Bank, a North Carolina-chartered commercial bank (the “Bank”), and Michael G. Carlton, its Chief Executive 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, and 
  
 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. 
  
 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 12, as amended by Financial Accounting Standard 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 3%. The initial discount rate is 7.00%. In its sole
discretion, the Plan Administrator may adjust the discount rate to maintain the rate within reasonable standards according to GAAP. 
  
 1.2 ABeneficiary@ 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
ABeneficiary 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 AChange in Control@ shall have the same meaning specified in any
effective severance or employment agreement existing on the date hereof or hereafter entered into between the Executive and the Bank. 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 B 
  
 (a) Merger: Crescent Financial Corp., a North Carolina corporation of which the bank is a wholly owned subsidiary (the ACompany@), merges into or consolidates with another corporation, or merges another corporation into the Company,
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 the Company 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 the Company=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 the Company or any subsidiary(ies)). For purposes of this Agreement, Asubsidiary@ means an entity in
which the Company beneficially owns 50% or more of the outstanding voting securities, whether the Company 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 the Company=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 B for purposes of this paragraph (c) B 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 
  

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 (d) Sale of Assets: The Company sells to a third party all or substantially all of the Company=s
assets. For this purpose, sale of all or substantially all of the Company=s assets includes sale of the shares or assets of the Bank alone. 
  
 1.5 ADisability@ 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 AEarly
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 AEarly Termination Date@ means the date on which Early Termination occurs. 
  
 1.8 AEffective Date@ means October 1, 2003. 
  
 1.9 AIntentional,@ 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 ANormal Retirement Age@ means the Executive=s 65th birthday. 
  
 1.11 ANormal Retirement Date@ means the later of the Normal Retirement Age or Termination of Employment. 

 
 1.12 APlan Administrator@ means the plan administrator described in
Article 8. 
  
 1.13 APlan 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. 
  
 1.14 ATermination for Cause@ and ACause@ shall have the same definition specified in any effective severance or employment agreement
existing on the date hereof or hereafter entered into between the Executive and the Bank. 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 B 
  

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 (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. 
  
 1.15 ATermination of Employment@ means that 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. 
  

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 2.1.1 Amount of Benefit. The annual benefit under this Section 2.1 is $156,100. Beginning with the
year after the year in which the Normal Retirement Date occurs, the amount of the annual benefit under this Section 2.1.1 shall be increased annually at a rate of 3% to offset inflation. 
  
 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 in the month immediately after the Executive=s Normal Retirement Date. The Normal Retirement annual benefit shall be paid to the Executive for the Executive=s lifetime. 
  
 2.2 Early Termination Benefit. Upon 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). Beginning one year after payment of the Early Termination benefit commences, the amount of the annual
benefit under this Section 2.2.1 shall be increased annually at a rate of 3% to offset inflation. 
  
 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 the Executive=s lifetime. 
  
 2.3 Disability Benefit. Upon Termination of Employment due to 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). Beginning one year after payment of the Disability benefit commences, the amount of the annual benefit under this Section 2.3.1 shall be increased
annually at a rate of 3% to offset inflation. 
  
 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 the Executive=s lifetime. 
  

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 2.4 Change-in-Control Benefit. The Bank shall pay to the Executive the benefit described in this
Section 2.4 instead of any other benefit under this Agreement if a Change in Control occurs, except as provided 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 ($1,899,551) required by Section 2.1,
without reduction for the time value of money or other discount. 
  
 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 the Change in Control. 
  
 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 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 Vested Normal Retirement Benefit, Vested Early Termination Benefit or Vested 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 payment of 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. 
  

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 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 Date, the Bank shall pay to the Executive=s beneficiary(ies) (a) an amount in cash equal to the
Accrual Balance at the end of the Plan Year preceding the year 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(ies) (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, the Executive=s beneficiary(ies), or the Executive=s estate 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(ies) 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. 
  

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 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, the Bank shall not pay any benefits 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
Suicide or Misstatement. The Bank shall not pay any benefit under this Agreement or under the Split Dollar Agreement attached as Addendum A if the Executive commits suicide within two years after the date of this Agreement, or 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 Adefault@ or Ain 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 (Aclaimant@) 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 B 
  
 6.1.1 Initiation B 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 B

  

	 	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 B 
  
 6.2.1 Initiation B 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 B Information Access. The claimant shall then have the opportunity to submit written comments, documents, records, and other information 
  

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 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 B 
  

	 	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 7.15 of this Agreement, this Agreement may be amended solely by a written agreement signed by the Bank and by the Executive, and 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. 
  

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 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. 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(ies) 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(ies) 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 as to the subject matter hereof. No rights are granted to the Executive under this Agreement other than those specifically set forth herein. 
  
 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. 
  

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 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, to the following addresses or to such other address as either party may designate by like notice. 
  

	 	(a)	If to the Bank, to: 

 Board of Directors 
 Crescent State Bank 
 1005 High House Road

 P.O. Box 5809 
 Cary, North
Carolina 27513 
  

	 	(b)	If to the Executive, to: 

 Michael G. Carlton 

Crescent State Bank 
 1005 High House Road

 P.O. Box 5809 
 Cary, North
Carolina 27513 
  
 and to such other or additional person or persons as either
party shall have designated to the other party in writing by like notice. 
  
 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 
  

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 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. 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 ATotal 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 AExcise 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 AExcise 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 AGross-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 AParachute 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 

  

 13 








 as Aparachute payments@ within the meaning of section 280G(b)(2) of the Internal Revenue Code, and all
Aexcess 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 AAccounting 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 (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 B when the amount of the reduction in Excise Tax is finally
determined B 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). 
  

 14 








 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) 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 ADetermination@) B 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 (AUnderpayment@), or that a Gross-Up Payment Amount will be made that should not have been made by the Bank
(AOverpayment@). 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. 
  

 15 








 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 AAccounting Firm@ as used in
this Agreement shall be deemed to refer to the accounting firm appointed by the Executive under this paragraph). 
  
 7.15 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 7.15 shall become null and void effective immediately upon a Change in Control.

  
 7.16 Automatic Review Procedure. On the third year
anniversary of the Effective Date and every third year thereafter the Bank will automatically review this Agreement for reasonableness of benefits with the intent that the Executive=s target benefit shall be 75% of compensation less the
Bank-provided benefits. For purposes of this Agreement, Bank-provided benefits include but are not limited to (a) the Bank 401(k) match and (b) the Bank portion of Social Security benefits. The term Acompensation@ as used in this Section 7.16 means
the base annual salary of the Executive projected at the Executive=s Normal Retirement Age. Base Annual Salary means compensation of the type that would, according to the Securities and Exchange Commission=s Regulation S-K Item 402(b) (17 CFR
229.402(b) (2003)), be required to be reported as salary in column (c) of that rule=s Summary Compensation Table. The term Base Annual Salary specifically excludes director fees and other director compensation, bonus, option grants and any other
compensation that would be reported in separate columns in the Summary Compensation Table, but it includes salary deferred at the election of the Executive. 
  
 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. 
  

 16 








 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:
	 	 	 Crescent State Bank

		
	 /s/    Michael G. Carlton

	 	 By:/s/    Bruce I. Howell


	 Michael G. Carlton
	 	 
	 	 	 Its: Chairman

		
	 	 	 And By:/s/    Bruce W. Elder


		
	 	 	 Its: Senior Vice President


  

 17 








 BENEFICIARY DESIGNATION 
 CRESCENT STATE BANK 
 SALARY CONTINUATION AGREEMENT 
  
 I, Michael G. Carlton, designate the following as beneficiary of any death benefits under this Salary Continuation Agreement B 
  

	
	 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: ____________________ 
 Michael G. Carlton 
  
 Date:             , 200     
  
 Accepted by the Bank this
             day of
                                        
        , 200         . 
  

	
	 By:______________________

	
	 Print Name:

	
	 Title:


  

 18 








 SCHEDULE A 
 CRESCENT STATE BANK 
 SALARY CONTINUATION AGREEMENT 
  
 Michael G. Carlton 
  

																					
	 Plan
Year

	  	Plan
Year ending
December 31,

	  	Age at
Plan Year
end

	  	Accrual
Balance @
7.00% (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

	  	Normal
Retirement
benefit
payable at
Normal
Retirement
Age (3)


	 1
	  	2003	  	42	  	$	8,526	 	 	$	3,321	  	$	3,321	  	$	1,899,551	  	$	0
	 2
	  	2004	  	43	  	$	44,155	 	 	$	16,076	  	$	16,076	  	$	1,899,551	  	$	0
	 3
	  	2005	  	44	  	$	82,361	 	 	$	28,025	  	$	28,025	  	$	1,899,551	  	$	0
	 4
	  	2006	  	45	  	$	123,328	 	 	$	39,219	  	$	39,219	  	$	1,899,551	  	$	0
	 5
	  	2007	  	46	  	$	167,257	 	 	$	49,709	  	$	49,709	  	$	1,899,551	  	$	0
	 6
	  	2008	  	47	  	$	214,362	 	 	$	59,540	  	$	59,540	  	$	1,899,551	  	$	0
	 7
	  	2009	  	48	  	$	264,872	 	 	$	68,757	  	$	68,757	  	$	1,899,551	  	$	0
	 8
	  	2010	  	49	  	$	319,033	 	 	$	77,398	  	$	77,398	  	$	1,899,551	  	$	0
	 9
	  	2011	  	50	  	$	377,109	 	 	$	85,502	  	$	85,502	  	$	1,899,551	  	$	0
	 10
	  	2012	  	51	  	$	439,384	 	 	$	93,105	  	$	93,105	  	$	1,899,551	  	$	0
	 11
	  	2013	  	52	  	$	506,161	 	 	$	100,238	  	$	100,238	  	$	1,899,551	  	$	0
	 12
	  	2014	  	53	  	$	577,765	 	 	$	106,933	  	$	106,933	  	$	1,899,551	  	$	0
	 13
	  	2015	  	54	  	$	654,545	 	 	$	113,218	  	$	113,218	  	$	1,899,551	  	$	0
	 14
	  	2016	  	55	  	$	736,875	 	 	$	119,120	  	$	119,120	  	$	1,899,551	  	$	0
	 15
	  	2017	  	56	  	$	825,158	 	 	$	124,665	  	$	124,665	  	$	1,899,551	  	$	0
	 16
	  	2018	  	57	  	$	919,822	 	 	$	129,875	  	$	129,875	  	$	1,899,551	  	$	0
	 17
	  	2019	  	58	  	$	1,021,329	 	 	$	134,774	  	$	134,774	  	$	1,899,551	  	$	0
	 18
	  	2020	  	59	  	$	1,130,175	 	 	$	139,380	  	$	139,380	  	$	1,899,551	  	$	0
	 19
	  	2021	  	60	  	$	1,246,889	 	 	$	143,714	  	$	143,714	  	$	1,899,551	  	$	0
	 20
	  	2022	  	61	  	$	1,372,040	 	 	$	147,793	  	$	147,793	  	$	1,899,551	  	$	0
	 21
	  	2023	  	62	  	$	1,506,238	 	 	$	151,635	  	$	151,635	  	$	1,899,551	  	$	0
	 22
	  	2024	  	63	  	$	1,650,138	 	 	$	153,789	  	$	153,789	  	$	1,899,551	  	$	0
	 23
	  	2025	  	64	  	$	1,804,440	 	 	$	155,253	  	$	155,253	  	$	1,899,551	  	$	0
	 24
	  	2026	  	65	  	$	1,899,415	(4)	 	$	156,100	  	$	156,100	  	$	1,899,551	  	$	65,042
	 25
	  	2027	  	66	  	$	1,861,868	 	 	 	 	  	 	 	  	 	 	  	$	158,051
	 26
	  	2028	  	67	  	$	1,827,406	 	 	 	 	  	 	 	  	 	 	  	$	162,793

  

 19 









																	
	 Plan
Year

	  	Plan Year
ending
December 31,

	  	Age at Plan
Year end

	  	Accrual
Balance @
7.00% (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

	  	Normal Retirement
benefit payable at
Normal Retirement
Age (3)


	 27
	  	2029	  	68	  	$	1,785,381	  	 	  	 	  	 	  	$	167,677
	 28
	  	2030	  	69	  	$	1,735,094	  	 	  	 	  	 	  	$	172,707
	 29
	  	2031	  	70	  	$	1,675,791	  	 	  	 	  	 	  	$	177,888
	 30
	  	2032	  	71	  	$	1,606,659	  	 	  	 	  	 	  	$	183,225
	 31
	  	2033	  	72	  	$	1,526,822	  	 	  	 	  	 	  	$	188,721
	 32
	  	2034	  	73	  	$	1,435,333	  	 	  	 	  	 	  	$	194,383
	 33
	  	2035	  	74	  	$	1,331,174	  	 	  	 	  	 	  	$	200,215
	 34
	  	2036	  	75	  	$	1,213,249	  	 	  	 	  	 	  	$	206,221
	 35
	  	2037	  	76	  	$	1,080,373	  	 	  	 	  	 	  	$	212,408
	 36
	  	2038	  	77	  	$	931,275	  	 	  	 	  	 	  	$	218,780
	 37
	  	2039	  	78	  	$	764,583	  	 	  	 	  	 	  	$	225,343
	 38
	  	2040	  	79	  	$	578,820	  	 	  	 	  	 	  	$	232,104
	 39
	  	2041	  	80	  	$	372,397	  	 	  	 	  	 	  	$	239,067
	 40
	  	2042	  	81	  	$	143,604	  	 	  	 	  	 	  	$	246,239
	 41
	  	2043	  	82	  	$	0	  	 	  	 	  	 	  	$	146,122



	(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 August 1, 2026. 


	(2)	Benefit is based on the present value of the current payment stream of the vested accrual balance using a standard discount rate (7.00%). The Early Termination and Disability
benefit amounts are included for illustrative purposes only. Under sections 2.2.1 and 2.3.1 of the Salary Continuation Agreement, the Early Termination and Disability benefit amounts increase annually by 3% to offset inflation, beginning in the year
after payment of the Early Termination or Disability benefit commences. 


	(3)	The Normal Retirement annual benefit under section 2.1 of the Salary Continuation Agreement continues for the Executive=s lifetime. This illustration merely shows the Normal
Retirement annual benefit until the Executive attains age 82. The Normal Retirement annual benefit in 2026 consists of five monthly payments, and the Normal Retirement annual benefit in 2043 consists of seven monthly payments. The illustrated Normal
Retirement annual benefit figures reflect the annual 3% increase to offset inflation. Consistent with section 2.1.1 of the Salary Continuation Agreement, this illustration assumes that the 3% annual increase occurs in August of each year, beginning
in August 2027. 


	(4)	Projected retirement occurs July 31, 2026, with the first normal monthly retirement benefit commencing August 2026. The accrual balance at the end of July 2026 will be $1,899,551.


  

 20