First
Reliance Bank


Amended
Salary Continuation Agreement


 


This Amended
Salary Continuation Agreement (this “Agreement”) is entered into as of July 25, 2013, by and between First
Reliance Bank, a South Carolina-chartered bank (the “Bank”), and Jeffrey A. Paolucci, Executive Vice President and
Chief Financial Officer (the “Executive”).


 


Whereas,
recognizing the Executive’s substantial contribution to the Bank’s success and intending to encourage the Executive
to remain an employee, the Bank entered into a Salary Continuation Agreement dated as of November 24, 2006 with the Executive,
amended on December 3, 2008 by the First Amendment of the Salary Continuation Agreement,


 


Whereas,
as amended the Salary Continuation Agreement promises specified benefits to the Executive after retirement, which benefits are
payable from the Bank’s general assets,


 


Whereas,
the Bank and the Executive intend that this Agreement shall amend and restate in its entirety the November 24, 2006 Salary Continuation
Agreement, as amended,


 


Whereas,
as of the date of this Agreement 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


 


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, 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 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. In its sole discretion the Plan Administrator may adjust the discount rate to maintain the
rate within reasonable standards according to GAAP.


 




    	 



    	 



    

 


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


 


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


 


1.4           “Change
in Control” shall mean a change in control as defined in Internal Revenue Code section 409A and rules, regulations, and
guidance of general application thereunder issued by the Department of the Treasury, including –


 


(a)            Change
in ownership: a change in ownership of First Reliance Bancshares, Inc., a South Carolina corporation of which the Bank is a
wholly owned subsidiary, occurs on the date any one person or group accumulates ownership of First Reliance Bancshares, Inc. stock
constituting more than 50% of the total fair market value or total voting power of First Reliance Bancshares, Inc. stock, or


 


(b)            Change
in effective control: (x) any one person or more than one person acting as a group acquires within a 12-month period
ownership of First Reliance Bancshares, Inc. stock possessing 30% or more of the total voting power of First Reliance Bancshares,
Inc., or (y) a majority of First Reliance Bancshares, Inc.’s board of directors is replaced during any 12-month period
by directors whose appointment or election is not endorsed in advance by a majority of First Reliance Bancshares, Inc.’s
board of directors, or


 


(c)            Change
in ownership of a substantial portion of assets: a change in ownership of a substantial portion of First Reliance Bancshares,
Inc.’s assets occurs if in a 12-month period any one person or more than one person acting as a group acquires from First
Reliance Bancshares, Inc. assets having a total gross fair market value equal to or exceeding 40% of the total gross fair market
value of all of First Reliance Bancshares, Inc.’s assets immediately before the acquisition or acquisitions. For this purpose,
gross fair market value means the value of First Reliance Bancshares, Inc.’s assets, or the value of the assets being disposed
of, determined without regard to any liabilities associated with the assets.


 


1.5           “Code”
means the Internal Revenue Code of 1986, as amended, and rules, regulations, and guidance of general application issued by the
Department of the Treasury under the Internal Revenue Code of 1986, as amended.


 


1.6           “Disability”
means, because of a medically determinable physical or mental impairment that can be expected to result in death or that can be
expected to last for a continuous period of at least 12 months, (x) the Executive is unable to engage in any substantial
gainful activity, or (y) the Executive is receiving income replacement benefits for a period of at least three months under
an accident and health plan of the employer. Medical determination of disability may be made either by the Social Security Administration
or by the provider of an accident or health plan covering employees of the Bank. Upon request of the Plan Administrator, the Executive
must submit proof to the Plan Administrator of the Social Security Administration’s or provider’s determination.


 




    	 



    	 



    

 


1.7           “Early
Termination” means Separation from Service before Normal Retirement Age for reasons other than death, Disability, Termination
with Cause, or after a Change in Control.


 


1.8           “Effective
Date” means January 1, 2006.


 


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


 


1.10         “Normal
Retirement Age” means age 65.


 


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


 


1.12         “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.


 


1.13         “Separation
from Service” means separation from service as defined in Internal Revenue Code section 409A and rules, regulations,
and guidance of general application thereunder issued by the Department of the Treasury, including termination for any reason of
the Executive’s service as an executive and independent contractor to the Bank and any member of a controlled group, as defined
in Code section 414, other than because of a leave of absence approved by the Bank or the Executive’s death. For purposes
of this Agreement, if there is a dispute about the employment status of the Executive or the date of the Executive’s Separation
from Service, the Bank shall have the sole and absolute right to decide the dispute unless a Change in Control shall have occurred.


 


1.14         “Termination
with Cause” and “Cause” 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 or between the Executive and
First Reliance Bancshares, Inc. If the Executive is not a party to a severance or employment agreement containing a definition
of termination with cause, Termination with 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 the Executive’s duties, or a breach of the Executive’s fiduciary
duties for personal profit, in any case whether in the Executive’s 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 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 no contest to a felony or conviction of or plea of no contest to a misdemeanor involving moral
turpitude, or the actual incarceration of the Executive for 45 consecutive days or more.


 


Article
2


Lifetime
Benefits


 


2.1           Normal
Retirement Age. Unless Separation from Service or a Change in Control occurs before Normal Retirement Age, when the Executive
attains Normal Retirement Age the Bank shall pay to the Executive the benefit described in this section 2.1 instead of any other
benefit under this Agreement. If the Executive’s Separation from Service thereafter is a Termination with Cause or if this
Agreement terminates under Article 5, no further benefits shall be paid.


 


		2.1.1	Amount of benefit. The annual benefit under this section 2.1 is $100,000.



 


		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 month in which the Executive attains Normal Retirement
Age. The annual benefit shall be paid to the Executive for 15 years.



 


2.2           Early
Termination. Unless a Change in Control shall have previously occurred, 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 annual benefit under this section 2.2 is calculated as the amount that fully amortizes the Accrual
Balance existing at the end of the month immediately before the month in which Separation from Service occurs, amortizing that
Accrual Balance over 15 years and taking into account interest at the discount rate or rates established by the Plan Administrator.



 




    	 



    	 



    

 


		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 later of (x) the seventh month after the Executive’s Separation
from Service, or (y) the month immediately after the month in which the Executive attains Normal Retirement Age. The annual
benefit shall be paid to the Executive for 15 years.



 


2.3           Disability.
Unless a Change in Control shall have previously occurred, upon Separation from Service 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 annual benefit under this section 2.3 is calculated as the amount that fully amortizes the Accrual
Balance existing at the end of the month immediately before the month in which Separation from Service occurs, amortizing that
Accrual Balance over 15 years and taking into account interest at the discount rate or rates established by the Plan Administrator.



 


		2.3.2	Payment of benefit. Beginning with the later of (x) the seventh month after the Executive’s Separation
from Service, or (y) the month immediately after the month in which the Executive attains 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 15 years.



 


2.4           Change
in Control. If a Change in Control occurs after the date of this Agreement but before Normal Retirement Age and before Separation
from Service, the Bank shall pay to the Executive the benefit described in this section 2.4 instead of any other benefit under
this Agreement.


 


		2.4.1	Amount of benefit. The benefit under this section 2.4 is the Accrual Balance that would exist on the date that is the
earlier to occur of (x) the date on which the executive attains the Normal Retirement Age and (y) the date that is
60 months after the date on which the Change in Control occurs, with the Accrual Balance calculated in accordance with this Agreement
to account for the Bank’s obligation to the Executive under section 2.1 at the Executive’s Normal Retirement Age, disregarding
the Change in Control occurring before the Executive’s Normal Retirement Age. For example, if the Change in Control occurs
when fewer than 60 months remain before the Executive attains Normal Retirement Age, for example at age 61 or 63, the benefit under
this section 2.4 is the Accrual Balance required by section 2.1 at the Executive’s Normal Retirement Age. If instead the
Change in Control occurs when more than 60 months remain before the Executive attains Normal Retirement Age, for example at age
57 or 59, the benefit under this section 2.4 is the Accrual Balance required by section 2.1 as of the date that is 60 months after
the date of the Change in Control.



 


		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, without discount for the time value of money. If the Executive receives
the benefit under this section 2.4 because of the occurrence of a Change in Control, the Executive shall not be entitled to claim
additional benefits under section 2.4 if an additional Change in Control occurs thereafter.





    	 



    	 



    

 


2.5           Lump-sum
Payment of Normal Retirement Benefit, Early Termination Benefit, or Disability Benefit Being Paid to the Executive when a Change
in Control Occurs. If when a Change in Control occurs the Executive is receiving the benefit under section 2.1, 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.
If when a Change in Control occurs the Executive is receiving or is entitled at Normal Retirement Age to receive the benefit under
sections 2.2 or 2.3, the Bank shall pay the remaining salary continuation benefits to the Executive in a single lump sum on the
later of (x) the third day after the Change in Control or (y) the first day of the seventh month after the month
in which the Executive’s Separation from Service occurs. 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 the particular benefit when the Change in Control
occurs.


 


2.6           Annual
Benefit Statement. Within 120 days after the end of each Plan Year the Plan Administrator shall provide or cause to be provided
to the Executive an annual benefit statement showing benefits payable or potentially payable to the Executive under this Agreement.
Each annual benefit statement shall supersede the previous year’s annual benefit statement. If there is a contradiction between
this Agreement and the annual benefit statement concerning the amount of a particular benefit payable or potentially payable to
the Executive under sections 2.2, 2.3, or 2.4 hereof, the amount of the benefit determined under this Agreement shall control.


 


2.7           Savings
Clause Relating to Compliance with Code Section 409A. Despite any contrary provision of this Agreement, if when the Executive’s
employment terminates the Executive is a specified employee, as defined in Code section 409A, and if any payments under Article
2 of this Agreement will result in additional tax or interest to the Executive because of section 409A, the Executive will not
be entitled to the payments under Article 2 until the earliest of (x) the date that is at least six months after termination
of the Executive’s employment for reasons other than the Executive’s death, (y) the date of the Executive’s
death, or (z) any earlier date that does not result in additional tax or interest to the Executive under section 409A. If
any provision of this Agreement would subject the Executive to additional tax or interest under section 409A, the Bank shall reform
the provision. However, the Bank shall maintain to the maximum extent practicable the original intent of the applicable provision
without subjecting the Executive to additional tax or interest, and the Bank shall not be required to incur any additional compensation
expense as a result of the reformed provision.


 


2.8           One
Benefit Only. Despite anything to the contrary in this Agreement, the Executive and Beneficiary are entitled to one benefit
only under this Agreement, which shall be determined by the first event to occur that is dealt with by this Agreement. Except as
provided in section 2.5 or Article 3, subsequent occurrence of events dealt with by this Agreement shall not entitle the Executive
or Beneficiary to other or additional benefits under this Agreement.


 




    	 



    	 



    

 


Article
3


Death
Benefits


 


3.1           Death
Before Separation from Service. If the Executive dies before Separation from Service, at the Executive’s death the Executive’s
Beneficiary shall be entitled to an amount in cash equal to the Accrual Balance existing when the Executive’s death occurs,
unless the Change-in-Control benefit shall have been paid to the Executive under section 2.4 or unless a Change-in-Control payout
shall have occurred under section 2.5. No benefit shall be paid under this section 3.1 if the Change-in-Control benefit shall have
been paid to the Executive under section 2.4 or if a Change-in-Control payout shall have occurred under section 2.5. If a benefit
is payable to the Executive’s Beneficiary under this section 3.1, the benefit shall be paid in a single lump sum 90 days
after the Executive’s death. However, no benefits shall be paid or payable under this Agreement to the Executive, the Executive’s
Beneficiary, or the Executive’s estate if this Agreement is terminated under Article 5.


 


3.2           Death
after Separation from Service. If the Executive dies after Separation from Service and if Separation from Service was not a
Termination with Cause, at the Executive’s death the Executive’s Beneficiary shall be entitled to an amount in cash
equal to the Accrual Balance remaining when the Executive’s death occurs, unless the Change-in-Control benefit shall have
been paid to the Executive under section 2.4 or unless a Change-in-Control payout shall have occurred under section 2.5. No benefit
shall be paid under this section 3.2 if the Change-in-Control benefit shall have been paid to the Executive under section 2.4 or
if a Change-in-Control payout shall have occurred under section 2.5. If a benefit is payable to the Executive’s Beneficiary
under this section 3.2, the benefit shall be paid in a single lump sum 90 days after the Executive’s death. However, no benefits
shall be paid or payable under this Agreement to the Executive, the Executive’s Beneficiary, or the Executive’s estate
if this Agreement is terminated under 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 after the Executive’s
death. 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 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, 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 the 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
with Cause. Despite any contrary provision of this Agreement, the Bank shall not pay any benefit under this Agreement and this
Agreement shall terminate if Separation from Service is the result of Termination with Cause.


 


5.2           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.


 


5.3           Default.
Despite any contrary provision of this Agreement, 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.


 


5.4           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. Any person who has not received benefits under this Agreement that he or she believes should be paid (the “claimant”)
shall make a claim for benefits as follows.


 




    	 



    	 



    

 


		6.1.1	Initiation – written claim. The claimant
initiates a claim by submitting to the Administrator a written claim for the benefits. If the claim relates to the contents of
a notice received by the claimant, the claim must be made within 60 days after the notice was received by the claimant. All other
claims must be made within 180 days after the date of the event that caused the claim to arise. The claim must state with particularity
the determination desired by the claimant.



 


		6.1.2	Timing of Administrator response. The Administrator
shall respond to the claimant within 90 days after receiving the claim. If the Administrator determines that special circumstances
require additional time for processing the claim, the Administrator can 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 set forth the special circumstances and the date by which the Administrator expects to render its decision.



 


		6.1.3	Notice of decision. If the Administrator denies
part or all of the claim, the Administrator shall notify the claimant in writing of the denial. The Administrator shall write
the notification in a manner calculated to be understood by the claimant. The notification shall set forth –



 


		(a)	The specific reasons for the denial,



		(b)	A reference to the specific provisions of this Agreement on which the denial is based,



		(c)	A description of any additional information or material necessary for the claimant to perfect the claim and an explanation
of why it is needed,



		(d)	An explanation of the Agreement’s review procedures and the time limits applicable to such procedures, and



		(e)	A statement of the claimant’s right to bring a civil action under ERISA section 502(a) after an adverse benefit determination
on review.



 


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


 


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



 


		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 Administrator 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 Administrator 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 Administrator response. The Administrator
shall respond in writing to the claimant within 60 days after receiving the request for review. If the Administrator determines
that special circumstances require additional time for processing the claim, the Administrator can 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 set forth the special circumstances and the date by which the Administrator expects
to render its decision.



 


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



 


		(a)	The specific reasons for the denial,



		(b)	A reference to the specific provisions of the Agreement on which the denial is based,



		(c)	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



		(d)	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 7.14 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.


 


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.


 




    	 



    	 



    

 


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 South 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 constitutes the entire agreement between the Bank and the Executive concerning the subject matter.
No rights are granted to the Executive under this Agreement other than those specifically set forth. This Agreement amends and
restates in its entirety the Salary Continuation Agreement dated as of November 24, 2006 between the Bank and the Executive, as
amended on December 3, 2008 by the First Amendment of the Salary Continuation Agreement. From and after the date of this Agreement
the November 24, 2006 Salary Continuation Agreement, as amended by the December 3, 2008 First Amendment of the Salary Continuation
Agreement, shall be void and of no further force or effect.


 


7.10         Severability.
If 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, to the following
addresses or to such other address as either party may designate by like notice. If to the Bank, notice shall be given to the board
of directors, First Reliance Bank, 2170 West Palmetto Street, Florence, South Carolina 29501, or to such other or additional person
or persons as the Bank shall have designated to the Executive in writing. If to the Executive, notice shall be given to the Executive
at the Executive’s address appearing on the Bank’s records, or to such other or additional person or persons as the
Executive shall have designated to the Bank in writing.


 




    	 



    	 



    

 


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.
The Bank intends that the Executive not be required to incur the expenses associated with the enforcement of 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. The Bank intends that the Executive not be forced to negotiate settlement
of rights under this Agreement under threat of incurring expenses. Accordingly, if after a Change in Control occurs it appears
to the Executive that (x) the Bank has failed to comply with any of its obligations under this Agreement, or (y)
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 the Executive’s
choice, at the Bank’s expense as provided in this section 7.13, to represent the Executive in 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. Despite 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 counsel in accordance with 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. Despite any contrary provision within this Agreement however, the Bank shall not be required to pay
or reimburse the Executive’s legal expenses if doing so would violate section 18(k) of the Federal Deposit Insurance Act
[12 U.S.C. 1828(k)] and Rule 359.3 of the Federal Deposit Insurance Corporation [12 CFR 359.3].


 


7.14         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 7.14 shall become null and void effective immediately upon a Change in Control.


 


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 as the Board shall appoint. The Executive may not be a member of the Plan Administrator. The Plan Administrator shall
have the discretion and authority to (x) make, amend, interpret, and enforce all appropriate rules and regulations for the
administration of this Agreement and (y) decide or resolve any and all questions that may arise, including interpretations
of this 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 about any question arising out of 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 employed in the determination of the Accrual Balance.


 


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 Separation
from Service 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 Amended Salary Continuation
Agreement as of the date first written above.


 


	Executive:	Bank:
	 	First Reliance Bank


 


	 	 	By:	 
	Jeffrey A. Paolucci	 	 	F.R. Saunders Jr.
	 	 	Its:	President and Chief Executive Officer


 


	 	And By:	 
	 	 	Leonard A. Hoogenboom
	 	Its:	Chairman of the Board


 




    	 



    	 



    

 


Beneficiary
Designation


First
Reliance Bank


Amended
Salary Continuation Agreement


 


I, Jeffrey A. Paolucci, designate the following
as beneficiary of any death benefits under this Amended 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:	 
	 	Jeffrey A. Paolucci
	 	 
	Date:	July 29, 2013 


 


Accepted by the Bank this                 day
of                                       
, 2013            .


 


By:


 


Print Name:


 


Title: