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Exhibit 10.3

PARAGON COMMERCIAL BANK

SALARY CONTINUATION AGREEMENT

FOR

MATTHEW C. DAVIS

 

This SALARY CONTINUATION
AGREEMENT (this
“Agreement”) is entered into as of this 29th day of
December, 2016, by and between Paragon Commercial Bank, a North
Carolina-chartered bank (the “Bank”), and Matthew C.
Davis, an executive of the Bank (the
“Executive”).

 

WHEREAS, this Agreement is entered into
by the Bank to provide a salary
continuation benefit to the Executive, and

 

WHEREAS, the parties hereto intend that this Agreement 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 I

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. 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           “Accrued
Benefit” means an annual
amount payable for 20 years commencing on the first day of the
month immediately after the Executive’s Normal Retirement Age
that has a value equal to the Accrual Balance at the time of
determination. The calculation of such annual amount shall be made
using the interest rate selected by the Plan Administrator at the
time of determination for purposes of calculating the Accrual
Balance.

 

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

 

 

1

 

 

1.4           “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.

 

1.5           “Change
in Control” shall have
the same meaning as the definition contained in any effective
severance or employment agreement existing on the date hereof or
hereafter entered into between the Executive and the Bank or
Paragon Commercial Corporation. If there is no effective severance
or employment agreement defining the term, “Change in
Control” means any of the following events occur
–

 

1.5.1 

a
“Person” or “Group” (as defined in or
pursuant to sections 13(d) and 14(d) of the Securities Exchange Act
of 1934, but not including Paragon Commercial Corporation, the
Bank, or any “employee benefit plan” (as defined in or
pursuant to ERISA)) becomes the “beneficial owner” (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934) or
otherwise acquires control, directly or indirectly, of securities
of Paragon Commercial Corporation or the Bank representing more
than 50% of the total voting power of such entity’s then
outstanding securities,

 

1.5.2 

the
acquisition by any Person or Group in any manner of the ability to
elect, or to control the election, of a majority of the directors
of Paragon Commercial Corporation or the Bank,

 

1.5.3 

the
merger of Paragon Commercial Corporation or the Bank into another
entity, the merger of any entity into Paragon Commercial
Corporation or the Bank, or the acquisition of assets by Paragon
Commercial Corporation or the Bank, in any such case with the
result that the beneficial owners of Paragon Commercial
Corporation’s or the Bank’s outstanding securities
immediately prior to such transaction do not beneficially own more
than 60% of such entity’s outstanding securities after the
consummation of such transaction,

 

1.5.4 

the
sale or other transfer of more than 50% of the assets of Paragon
Commercial Corporation or the Bank to any entity not controlled by
Paragon Commercial Corporation or the Bank, or

 

1.5.5 

the
consummation of any transaction by Paragon Commercial Corporation
or the Bank resulting in (x) the majority of the Board of Directors
of Paragon Commercial Corporation or the Bank after the
consummation of such transaction not being composed of Incumbent
Directors, or (y) the beneficial owners of Paragon Commercial
Corporation’s or the Bank’s outstanding securities
immediately prior to the consummation of such transaction not
beneficially owning more than 60% of Paragon Commercial
Corporation’s or the Bank’s outstanding securities
after such transaction. The term “Incumbent Director”
shall mean any director who as of the Effective Date was a member
of the Board, or any individual becoming a member of the Board
subsequent to the Effective Date whose election by Paragon
Commercial Corporation’s shareholders was recommended by at
least two-thirds (2/3) of the then Incumbent Directors on the
Board.

 

 

2

 

 

Despite
any contrary provision in this Agreement, however, the term Change
in Control shall not include (x) any transaction to which Executive
consents in a writing specifically noting this provision of this
Agreement, (y) any transaction or series of transactions,
associated with the election by Paragon Commercial Corporation to
be taxed as a Subchapter S corporation under the Code, or (z) any
transaction that does not also constitute a change in control for
purposes of Code section 409A.

 

1.6           “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.

 

1.7           “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 Bank. 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.

 

1.8           “Early
Termination” means
Separation from Service before Normal Retirement Age for reasons
other than death, Disability, or Termination with Cause. Early
Termination excludes a Separation from Service governed by section
2.4.

 

1.9           “Effective
Date” means the date set
forth in Schedule A attached.

 

1.10           “Initial
Vesting Date” means the
date set forth in Schedule A.

 

1.11           “Normal
Retirement Age” means age
65.

 

1.12           “Original
Effective Date” means the
date specified in Schedule A that the Plan was first effective. If
the Original Effective Date is different than the Effective Date,
this is an amendment and restatement of the Plan, with the
Effective Date being the date the amendment and restatement of the
Plan is effective. If the Original Effective Date and the Effective
Date are the same, this is a new (or additional)
agreement.

 

1.13           “Plan
Administrator” or
“Administrator”
means the plan administrator described
in Article 7.

 

1.14           “Schedule
A” means the Schedule A
attached hereto establishing certain terms of the Plan. Schedule A
is incorporated into the Plan by reference.

 

 

3

 

 

1.15           “Separation
from Service” means a
“separation from service” as defined in Code section
409A, including termination of all 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, but
excluding termination 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.

 

1.16           “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 Paragon Commercial Corporation. 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 or Paragon Commercial Corporation terminates the
Executive’s employment for any of the following
reasons –

 

1.16.1 

the
willful and continued failure of Executive to substantially perform
Executive’s duties with the Bank other than any such failure
resulting from Disability, after written demand for substantial
performance is delivered to Executive by the Board which
specifically identifies the manner in which the Board believes that
Executive has not substantially performed his duties,
or

 

1.16.2 

dishonesty
or moral turpitude, willful misconduct, breach of fiduciary duty
involving personal profit, a willful violation of any law, rule or
regulation (other than minor traffic violations or similar minor
offenses) or final cease and desist order, or material breach of
any provision of this Agreement which is materially and
demonstrably injurious to the Bank.

 

For
purposes of this Section, no act or failure to act on the part of
the Executive shall be considered willful unless it was done or
omitted to be done by Executive in bad faith or without reasonable
belief that Executive’s action or omission was in the best
interests of the Bank. For purposes of this Section, any act or
failure to act based upon authority given pursuant to resolutions
duly adopted by the Board or based upon the advice of counsel for
the Bank shall be conclusively presumed to be done or omitted to be
done by Executive in good faith and in the best interests of the
Bank. For purposes of this Section, the cessation of employment of
Executive shall not be deemed to be for Cause unless and until
there shall have been delivered to Executive copies of resolutions
duly adopted by the affirmative votes of not less than a majority
of the entire membership of the Board at meetings of the Board
called and held for such purpose (after reasonable notice is
provided to Executive and Executive is given an opportunity,
together with counsel, to be heard by the Board), finding that, in
the good faith opinion of the Board, Executive is guilty of the
conduct described in clauses (a) or (b) above, and specifying the
particulars thereof.

 

 

4

 

 

1.17           “Voluntary
Termination with Good Reason” means a voluntary Separation from Service by the
Executive within 24 months after a Change in Control if the
following conditions (x) and (y) are satisfied:

 

(x)           a
voluntary Separation from Service by the Executive will be
considered a Voluntary Termination for Good Reason if any of the
following occur without the Executive’s advance written
consent –

 

(1)           a
material diminution of the Executive’s base
salary,

 

(2)           a
material diminution of the Executive’s authority, duties, or
responsibilities,

 

(3)           a
material diminution in the authority, duties, or responsibilities
of the supervisor to whom the Executive is required to
report,

 

(4)           a
material diminution in the budget over which the Executive retains
authority,

 

(5)           a
material change in the geographic location at which the Executive
must perform services for the Bank, or

 

(6)           any
other action or inaction that constitutes a material breach by the
Bank of the agreement under which the Executive provides services
to the Bank.

 

(y)           the
Executive must give notice to the Bank of the existence of one or
more of the conditions described in clause (x) within 90 days after
the initial existence of the condition, and the Bank shall have 30
days thereafter to remedy the condition. In addition, the
Executive’s voluntary termination because of the existence of
one or more of the conditions described in clause (x) must occur
within 24 months after the earlier of the initial existence of the
condition or the Change in Control.

 

ARTICLE 2

LIFETIME BENEFITS

 

2.1           Normal
Retirement. For Separation from
Service on or after the date 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. However, if the Executive’s Separation from
Service is a Termination with Cause or if this Agreement terminates
under Article 5, no benefits shall be paid.

 

2.1.1

Amount of benefit.
The annual benefit under this section
2.1 is set forth in Schedule A.

 

2.1.2 

Payment of
benefit. Beginning with the
month immediately after the month in which Separation from Service
occurs, the Bank shall pay the annual benefit to the Executive in
monthly installments, each equal to 1/12th
of such annual benefit, on the first
day of each month. The monthly installments shall be paid to the
Executive for 240 months.

 

 

5

 

 

2.2A                      Early
Termination. Unless a Change in
Control shall have occurred, upon the Executive’s Separation
from Service before Normal Retirement Age (“Early
Termination”), the Bank shall pay to the Executive the vested
Accrued Benefit described in this section 2.2A instead of any other
benefit under this Agreement, as follows:

 

2.2A.l 

Vested Accrued Benefit.
If Separation from Service occurs on
or after the Initial Vesting Date, the annual benefit under this
section 2.2A shall be the vested Accrued Benefit determined as of
the end of the month immediately before the month in which
Separation from Service occurs. The vested Accrued Benefit shall be
determined by application of the vesting schedule set forth in
Schedule A. If Separation from Service occurs before the Initial
Vesting Date, the benefit shall be forfeited in its entirety.
However, if Separation from Service occurs after a Change in
Control, Early Termination benefits shall be governed solely by
section 2.2B or Section 2.4, and this section 2.2A shall thereafter
be of no further force or effect.

 

2.2A.2 

Payment of benefit.
Beginning with the month immediately
after the month in which the Executive attains Normal Retirement
Age, the Bank shall pay the benefit to the Executive in monthly
installments, each equal to 1/12th
of such annual benefit, on the first
day of each month. The monthly installments shall be paid to the
Executive for 240 months.

 

2.2B                      Early
Termination that is Voluntary and without Good Reason within 24
months after a Change in Control, or Early Termination that is more
than 24 Months after a Change in Control. If either: (1) the Executive has a voluntary Early
Termination that is not for Good Reason that occurs within the
24-month period after a Change in Control, or (2) the Executive has
an Early Termination that occurs after the 24-month period
following a Change in Control, the Bank shall pay to the Executive
the benefit described in this section 2.2B instead of any other
benefit under this Agreement. However, no benefits shall be payable
under this Agreement if the Executive’s Separation from
Service is a Termination with Cause or if this Agreement terminates
under Article 5.

 

2.2B.l 

Amount of benefit.
The benefit under this section 2.2B is
the Accrued Benefit determined as of the end of the month
immediately before the month in which Separation from Service
occurs.

 

2.2B.2 

Payment of
benefit. Beginning with the
month immediately after the month in which the Executive attains
Normal Retirement Age, the Bank shall pay the benefit to the
Executive in monthly installments, each equal to
1/12th
of such annual benefit, on the first
day of each month. The monthly installments shall be paid to the
Executive for 240 months.

 

 

6

 

 

2.2B.3 

Coordination with Section
2.4. If Early Termination that
is involuntary or voluntary with Good Reason occurs within the
24-month period after a Change in Control, the Bank shall pay the
Executive the benefit under section 2.4 and not the benefit under
this Section 2.2B.

 

2.3           Disability.
For 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 shall be the Accrued Benefit determined as of the end of the
month immediately before the month in which Separation from Service
occurs.

 

2.3.2

Payment of benefit.
Beginning with the month immediately
after the month in which the Executive attains Normal Retirement
Age, the Bank shall pay the benefit to the Executive in monthly
installments, each equal to 1/12th of such annual benefit, on the
first day of each month. The monthly installments shall be paid to
the Executive for 240 months.

 

2.4           Change
in Control. If Executive has a
Separation from Service that is an involuntary termination without
Cause or a Voluntary Termination with Good Reason, in either case
within the 24-month period after a Change in Control, the Bank
shall pay to the Executive the benefit described in this section
2.4 instead of any other benefit under this Agreement. Except,
however, no benefits shall be payable under this Agreement if the
Executive’s Separation from Service is a Termination with
Cause or if this Agreement terminates under Article 5. Further, if
the Executive shall have attained Normal Retirement Age when
Separation from Service occurs within 24 months after a Change in
Control occurs, whether Separation from Service is voluntary or
involuntary for any reason other than Termination with Cause, the
Executive shall be entitled solely to the benefit provided by
section 2.1, not this section 2.4.

 

2.4.1

Amount of benefit. The benefit under
this section 2.4 is the Normal Retirement Age Accrual Balance
required by section 2.1, discounting the Normal Retirement Age
Accrual Balance to present value at the time of payment using a
discount rate selected by the Plan Administrator, but the discount
rate selected by the Plan Administrator shall not exceed the
discount rate employed at the time of payment for purposes of
calculating the Accrual Balance.

 

2.4.2

Payment of benefit.
The Bank shall pay the benefit under
this section 2.4 to the Executive in a single lump sum within three
days after the Executive’s Separation from
Service.

 

2.4.3

Coordination with Section
2.2B. If the Executive’s
Separation following a Change in Control is voluntary without Good
Reason, or if the Executive’s Separation from Service occurs
after the 24-month period after a Change in Control, the Executive
shall be entitled solely to the benefit provided by section 2.2B,
not this section 2.4.

 

 

7

 

 

2.5           Lump-Sum
Payout of Remaining Normal Retirement Benefit or Disability Benefit
When a Change in Control Occurs. If a Change in Control occurs after Separation
from Service but while the Executive is receiving the Normal
Retirement Age benefit under section 2.1 or is receiving or is
entitled at Normal Retirement Age to receive the Early Termination
benefit under sections 2.2A or 2.2B or the Disability benefit under
section 2.3, the Bank shall pay the remaining salary continuation
benefits to the Executive in a single lump sum within three days
after the Change in Control. The lump-sum payment due to the
Executive as a result of a Change in Control shall be an amount
equal to the Accrual Balance amount corresponding to the particular
benefit when the Change in Control occurs, reduced by any payments
already paid to the Executive for that particular
benefit.

 

2.6           Annual
Benefit Statement. Within 120
days after the end of each calendar 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 2.2A, 2.2B, 2.3, or 2.4 hereof, the amount of the benefit
determined under the 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 would result
in additional tax or interest to the Executive because of section
409A, the Executive shall 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 to the extent possible in order to
avoid the additional tax or interest under section 409A. 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. The Agreement shall be interpreted and
administered to the greatest extent possible to be either exempt
from section 409A, or in compliance with 409A. Further, each
payment made as part of installment payments under this Agreement
shall be considered a separate payment for purposes of section
409A.

 

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.

 

 

8

 

 

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 at the Executive’s death. If a
benefit is payable to the Executive’s Beneficiary, the
benefit shall be paid in a single lump sum within 90 days after the
Executive’s death. However, no benefits will be paid under
this Agreement to the Executive or the Executive’s
Beneficiary if this Agreement is terminated under Article
5.

 

3.2           Death
after Separation from Service. If the Executive dies after Separation from
Service, if Separation from Service was not a Termination with
Cause, and if at death the Executive was receiving the benefit
under section 2.1 or was receiving or was entitled at Normal
Retirement Age to receive the benefit under sections 2.2A, 2.2B, or
2.3, at the Executive’s death the Executive’s
Beneficiary shall be entitled to an amount in cash equal to the
Accrual Balance remaining at the Executive’s death, 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 to the
Beneficiary 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
within 90 days after the Executive’s death. However, no
benefits under this Agreement shall be paid or payable to the
Executive or the Executive’s Beneficiary 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
designation of a particular Beneficiary shall be deemed
automatically revoked if that Beneficiary predeceases the
Executive, and designation of a spouse as Beneficiary shall be
deemed automatically revoked if the marriage to that spouse 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.

 

 

9

 

 

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
there are no surviving designated Beneficiaries and no surviving
spouse, the benefits shall be paid to 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 a Termination with Cause or, unless a
Change in Control shall have occurred, if Separation from Service
is an Early Termination before any vesting under Section 2.2A of
this Agreement.

 

5.2           Suicide
or Misstatement. No benefits
shall be paid under this Agreement if the Executive commits suicide
within two years after the Effective Date or if the Executive makes
any material misstatement of fact on any application for life
insurance purchased by the Bank, on any resume or application
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 the North Carolina Commissioner of Banks or
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.
Despite any contrary provision of this
Agreement, if the Bank is in “default” or “in
danger of default”, as those terms are defined in of 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 section 13(c) of the Federal Deposit Insurance Act. 12
U.S.C. 1823(c). Any rights of the parties that have already vested
shall not be affected by such action, however.

 

 

10

 

 

5.6           No
Violation of Golden Parachute Rules. The Bank and the Executive acknowledge and agree
that any payment or agreement to make any payment to the Executive
or Beneficiary under this Agreement is or may be subject to the
golden parachute limitations of 12 U.S.C. 1828(k) and FDIC rules at
12 C.F.R. Part 359. The Bank and the Executive therefore
acknowledge and agree that if any payment or agreement to make a
payment under this Agreement would be considered a golden parachute
payment under 12 C.F.R. 359.1(f), the Bank shall not have a
contractual or other obligation to make the payment and the
agreement to make the payment shall be void, unless (x) the payment
receives advance approval of the appropriate Federal banking
agency, if required at that time by 12 U.S.C. section 1828(k), 12
C.F,R. Part 359, or other Federal or state laws, rules or
regulations, and (y) the obligation and the payment comply in all
other respects with 12 U.S.C. section 1828(k), 12 C.F.R. Part 359,
and other Federal and state laws, rules or regulations, to the
extent applicable at the time.

 

ARTICLE 6

CLAIMS AND REVIEW PROCEDURES

 

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

 

6.1.1 

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

 

6.1.3 

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

 

6.1.3.1    the specific reasons for the
denial,

6.1.3.2 

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

6.1.3.3 

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

6.1.3.4 

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

6.1.3.5 

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

 

 

11

 

 

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

 

6.2.1 

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

 

6.2.2 

Additional
submissions-information access. The claimant shall then have the opportunity to
submit written comments, documents, records, and other information
relating to the claim. The Bank shall also provide the claimant,
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.

 

6.2.3 

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

 

6.2.4 

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

 

6.2.5 

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

 

6.2.5.1    the specific reason for the
denial,

6.2.5.2 

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

6.2.5.3 

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

6.2.5.4 

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

 

 

12

 

 

ARTICLE 7

ADMINISTRATION OF AGREEMENT

 

7.1           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 not be a member of the Plan
Administrator. The Plan Administrator shall also 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
including interpretations of this Agreement, as may arise in
connection with the Agreement.

 

7.2           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.

 

7.3          
Binding Effect of
Decisions. The decision or
action of the Plan Administrator concerning 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.

 

7.4           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.

 

7.5           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.

 

7.6           ERISA.
The Agreement is subject to ERISA and
shall be construed in accordance with the provisions of ERISA, and,
where not preempted by ERISA or other federal law, with the laws of
the State of North Carolina.

 

 

13

 

 

ARTICLE 8

MISCELLANEOUS

 

8.1           Amendments
and Termination. Subject to
section 8.14 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.

 

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

 

8.3           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 or interfere with the Executive’s right to terminate
employment at any time.

 

8.4           Non-Transferability.
Benefits under this Agreement may not
be sold, transferred, assigned, pledged, attached, or
encumbered.

 

8.5           Successors;
Binding Agreement. By an
assumption agreement in form and substance satisfactory to the
Executive, the Bank shall require any successor (whether direct or
indirect, by purchase, merger, consolidation, or otherwise) to all
or substantially all of the business or assets of the Bank to
expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Bank would be required to
perform this Agreement had no succession
occurred.

 

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

 

8.7           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.

 

8.8           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 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.

 

8.9           Entire
Agreement. This Agreement
constitutes the entire agreement between the Bank and the Executive
concerning the salary continuation benefit initially granted as of
the Effective Date. No rights are granted to the Executive under
this Agreement other than those specifically set
forth.

 

 

14

 

 

8.10           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.

 

8.11           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.

 

8.12           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, Paragon
Commercial Bank, 3535 Glenwood Avenue, Raleigh, North Carolina
27612, 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.

 

8.13           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 desires 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 desires 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
8.13, 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 8.13, 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 $100,000, whether suit be brought or
not, and regardless of whether incurred in trial, bankruptcy, or
appellate proceedings. The Bank’s obligation to pay the
Executive’s legal fees provided by this section 8.13 operates
separately from and in addition to any legal fee reimbursement
obligation the Bank or Paragon Commercial Corporation may have with
the Executive under any separate employment, severance, or other
agreement between the Executive and the Bank or Paragon Commercial
Corporation. Despite anything in this section 8.13 to the contrary
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)1 and
Rule 359.3 of the Federal Deposit Insurance Corporation [12 CFR
359.3].

 

 

15

 

 

8.14           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
8.14 shall become null and void effective immediately upon a Change
in Control.

 

[The next page is the signature page.]

 

16

 

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

 

	

EXECUTIVE: 

	
 

	
 BANK:

	
 

	
  
 

	
 

	
  

	
 

	
/s/ Matthew
C. Davis

	
 

	
Paragon
Commercial Bank

	
 

	Matthew
C. Davis	
 

	
 

	
 

	
 

	
 

	
 

	
By:

	
/s/
Robert
C. Hatley

	
 

	
 

	
 

	
 

	
Robert
C. Hatley

	
 

	
 

	

	
Its:

	
President
and Chief Executive Officer

	
 

 

 

 

17

 

SCHEDULE A

 

VARIABLE PROVISIONS OF THE

PARAGON COMMERCIAL BANK SALARY CONTINUATION PLAN

 

	
 

	
 1.

	
 Name of
Executive:

	
Matthew C. Davis

	
 

	
 

	
 

	
 

	
 

	
 2.

	
 Effective
Date:

	
January 1, 2017

	
 

	
 

	
 

	
 

	
 

	
 3.

	
 Original Effective
Date: 

	
January 1, 2004

	
 

	
 

	
 

	
 

	
 

	
 4.

	
 Initial Vesting
Date: 

	
December 31, 2009

	
 

	
 

	
 

	
 

	
 

	
 5.

	
 Annual
Benefit:

	
$100,000/year

	
 

	
 

	
 

	
 

	
 

	
 6.

	
 Vesting
Schedule:

	
The Executive’s Accrued Benefit is 100%
vested as of May 20, 2014.

 

 

 

18Blueprint

Exhibit 10.4

PARAGON COMMERCIAL BANK

SALARY CONTINUATION AGREEMENT

FOR

MATTHEW C. DAVIS

 

This SALARY CONTINUATION
AGREEMENT (this
“Agreement”) is entered into as of this
29th
day of December, 2016, by and between
Paragon Commercial Bank, a North Carolina-chartered bank (the
“Bank”), and Matthew C. Davis, an executive of
the Bank (the “Executive”).

 

WHEREAS, this Agreement is entered into
by the Bank to provide a salary
continuation benefit to the Executive, and

 

WHEREAS, the parties hereto intend that this Agreement 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 I

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. 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           “Accrued
Benefit” means an annual
amount payable for 20 years commencing on the first day of the
month immediately after the Executive’s Normal Retirement Age
that has a value equal to the Accrual Balance at the time of
determination. The calculation of such annual amount shall be made
using the interest rate selected by the Plan Administrator at the
time of determination for purposes of calculating the Accrual
Balance.

 

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

 

 

1

 

 

1.4           “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.

 

1.5           “Change
in Control” shall have
the same meaning as the definition contained in any effective
severance or employment agreement existing on the date hereof or
hereafter entered into between the Executive and the Bank or
Paragon Commercial Corporation. If there is no effective severance
or employment agreement defining the term, “Change in
Control” means any of the following events occur
–

 

1.5.1 

a
“Person” or “Group” (as defined in or
pursuant to sections 13(d) and 14(d) of the Securities Exchange Act
of 1934, but not including Paragon Commercial Corporation, the
Bank, or any “employee benefit plan” (as defined in or
pursuant to ERISA)) becomes the “beneficial owner” (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934) or
otherwise acquires control, directly or indirectly, of securities
of Paragon Commercial Corporation or the Bank representing more
than 50% of the total voting power of such entity’s then
outstanding securities,

 

1.5.2 

the
acquisition by any Person or Group in any manner of the ability to
elect, or to control the election, of a majority of the directors
of Paragon Commercial Corporation or the Bank,

 

1.5.3 

the
merger of Paragon Commercial Corporation or the Bank into another
entity, the merger of any entity into Paragon Commercial
Corporation or the Bank, or the acquisition of assets by Paragon
Commercial Corporation or the Bank, in any such case with the
result that the beneficial owners of Paragon Commercial
Corporation’s or the Bank’s outstanding securities
immediately prior to such transaction do not beneficially own more
than 60% of such entity’s outstanding securities after the
consummation of such transaction,

 

1.5.4 

the
sale or other transfer of more than 50% of the assets of Paragon
Commercial Corporation or the Bank to any entity not controlled by
Paragon Commercial Corporation or the Bank, or

 

1.5.5 

the
consummation of any transaction by Paragon Commercial Corporation
or the Bank resulting in (x) the majority of the Board of Directors
of Paragon Commercial Corporation or the Bank after the
consummation of such transaction not being composed of Incumbent
Directors, or (y) the beneficial owners of Paragon Commercial
Corporation’s or the Bank’s outstanding securities
immediately prior to the consummation of such transaction not
beneficially owning more than 60% of Paragon Commercial
Corporation’s or the Bank’s outstanding securities
after such transaction. The term “Incumbent Director”
shall mean any director who as of the Effective Date was a member
of the Board, or any individual becoming a member of the Board
subsequent to the Effective Date whose election by Paragon
Commercial Corporation’s shareholders was recommended by at
least two-thirds (2/3) of the then Incumbent Directors on the
Board.

 

 

2

 

 

Despite
any contrary provision in this Agreement, however, the term Change
in Control shall not include (x) any transaction to which Executive
consents in a writing specifically noting this provision of this
Agreement, (y) any transaction or series of transactions,
associated with the election by Paragon Commercial Corporation to
be taxed as a Subchapter S corporation under the Code, or (z) any
transaction that does not also constitute a change in control for
purposes of Code section 409A.

 

1.6           “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.

 

1.7           “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 Bank. 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.

 

1.8           “Early
Termination” means
Separation from Service before Normal Retirement Age for reasons
other than death, Disability, or Termination with Cause. Early
Termination excludes a Separation from Service governed by section
2.4.

 

1.9           “Effective
Date” means the date set
forth in Schedule A attached.

 

1.10           “Initial
Vesting Date” means the
date set forth in Schedule A.

 

1.11           “Normal
Retirement Age” means age
65.

 

1.12           “Original
Effective Date” means the
date specified in Schedule A that the Plan was first effective. If
the Original Effective Date is different than the Effective Date,
this is an amendment and restatement of the Plan, with the
Effective Date being the date the amendment and restatement of the
Plan is effective. If the Original Effective Date and the Effective
Date are the same, this is a new (or additional)
agreement.

 

1.13           “Plan
Administrator” or
“Administrator”
means the plan administrator described
in Article 7.

 

1.14           “Schedule
A” means the Schedule A
attached hereto establishing certain terms of the Plan. Schedule A
is incorporated into the Plan by reference.

 

 

3

 

 

1.15           “Separation
from Service” means a
“separation from service” as defined in Code section
409A, including termination of all 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, but
excluding termination 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.

 

1.16           “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 Paragon Commercial Corporation. 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 or Paragon Commercial Corporation terminates the
Executive’s employment for any of the following
reasons –

 

1.16.1 

the
willful and continued failure of Executive to substantially perform
Executive’s duties with the Bank other than any such failure
resulting from Disability, after written demand for substantial
performance is delivered to Executive by the Board which
specifically identifies the manner in which the Board believes that
Executive has not substantially performed his duties,
or

 

1.16.2 

dishonesty
or moral turpitude, willful misconduct, breach of fiduciary duty
involving personal profit, a willful violation of any law, rule or
regulation (other than minor traffic violations or similar minor
offenses) or final cease and desist order, or material breach of
any provision of this Agreement which is materially and
demonstrably injurious to the Bank.

 

For
purposes of this Section, no act or failure to act on the part of
the Executive shall be considered willful unless it was done or
omitted to be done by Executive in bad faith or without reasonable
belief that Executive’s action or omission was in the best
interests of the Bank. For purposes of this Section, any act or
failure to act based upon authority given pursuant to resolutions
duly adopted by the Board or based upon the advice of counsel for
the Bank shall be conclusively presumed to be done or omitted to be
done by Executive in good faith and in the best interests of the
Bank. For purposes of this Section, the cessation of employment of
Executive shall not be deemed to be for Cause unless and until
there shall have been delivered to Executive copies of resolutions
duly adopted by the affirmative votes of not less than a majority
of the entire membership of the Board at meetings of the Board
called and held for such purpose (after reasonable notice is
provided to Executive and Executive is given an opportunity,
together with counsel, to be heard by the Board), finding that, in
the good faith opinion of the Board, Executive is guilty of the
conduct described in clauses (a) or (b) above, and specifying the
particulars thereof.

 

 

4

 

 

1.17           “Voluntary
Termination with Good Reason” means a voluntary Separation from Service by the
Executive within 24 months after a Change in Control if the
following conditions (x) and (y) are satisfied:

 

(x)           a
voluntary Separation from Service by the Executive will be
considered a Voluntary Termination for Good Reason if any of the
following occur without the Executive’s advance written
consent –

 

(1)           a
material diminution of the Executive’s base
salary,

 

(2)           a
material diminution of the Executive’s authority, duties, or
responsibilities,

 

(3)           a
material diminution in the authority, duties, or responsibilities
of the supervisor to whom the Executive is required to
report,

 

(4)           a
material diminution in the budget over which the Executive retains
authority,

 

(5)           a
material change in the geographic location at which the Executive
must perform services for the Bank, or

 

(6)           any
other action or inaction that constitutes a material breach by the
Bank of the agreement under which the Executive provides services
to the Bank.

 

(y)           the
Executive must give notice to the Bank of the existence of one or
more of the conditions described in clause (x) within 90 days after
the initial existence of the condition, and the Bank shall have 30
days thereafter to remedy the condition. In addition, the
Executive’s voluntary termination because of the existence of
one or more of the conditions described in clause (x) must occur
within 24 months after the earlier of the initial existence of the
condition or the Change in Control.

 

ARTICLE 2

LIFETIME BENEFITS

 

2.1           Normal
Retirement. For Separation from
Service on or after the date 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. However, if the Executive’s Separation from
Service is a Termination with Cause or if this Agreement terminates
under Article 5, no benefits shall be paid.

 

2.1.1

Amount of benefit.
The annual benefit under this section
2.1 is set forth in Schedule A.

 

2.1.2 

Payment of
benefit. Beginning with the
month immediately after the month in which Separation from Service
occurs, the Bank shall pay the annual benefit to the Executive in
monthly installments, each equal to 1/12th
of such annual benefit, on the first
day of each month. The monthly installments shall be paid to the
Executive for 240 months.

 

 

5

 

 

2.2A                      Early
Termination. Unless a Change in
Control shall have occurred, upon the Executive’s Separation
from Service before Normal Retirement Age (“Early
Termination”), the Bank shall pay to the Executive the vested
Accrued Benefit described in this section 2.2A instead of any other
benefit under this Agreement, as follows:

 

2.2A.l 

Vested Accrued Benefit.
If Separation from Service occurs on
or after the Initial Vesting Date, the annual benefit under this
section 2.2A shall be the vested Accrued Benefit determined as of
the end of the month immediately before the month in which
Separation from Service occurs. The vested Accrued Benefit shall be
determined by application of the vesting schedule set forth in
Schedule A. If Separation from Service occurs before the Initial
Vesting Date, the benefit shall be forfeited in its entirety.
However, if Separation from Service occurs after a Change in
Control, Early Termination benefits shall be governed solely by
section 2.2B or Section 2.4, and this section 2.2A shall thereafter
be of no further force or effect.

 

2.2A.2 

Payment of benefit.
Beginning with the month immediately
after the month in which the Executive attains Normal Retirement
Age, the Bank shall pay the benefit to the Executive in monthly
installments, each equal to 1/12th
of such annual benefit, on the first
day of each month. The monthly installments shall be paid to the
Executive for 240 months.

 

2.2B                      Early
Termination that is Voluntary and without Good Reason within 24
months after a Change in Control, or Early Termination that is more
than 24 Months after a Change in Control. If either: (1) the Executive has a voluntary Early
Termination that is not for Good Reason that occurs within the
24-month period after a Change in Control, or (2) the Executive has
an Early Termination that occurs after the 24-month period
following a Change in Control, the Bank shall pay to the Executive
the benefit described in this section 2.2B instead of any other
benefit under this Agreement. However, no benefits shall be payable
under this Agreement if the Executive’s Separation from
Service is a Termination with Cause or if this Agreement terminates
under Article 5.

 

2.2B.l 

Amount of benefit.
The benefit under this section 2.2B is
the Accrued Benefit determined as of the end of the month
immediately before the month in which Separation from Service
occurs.

 

2.2B.2 

Payment of
benefit. Beginning with the
month immediately after the month in which the Executive attains
Normal Retirement Age, the Bank shall pay the benefit to the
Executive in monthly installments, each equal to
1/12th
of such annual benefit, on the first
day of each month. The monthly installments shall be paid to the
Executive for 240 months.

 

 

6

 

 

2.2B.3 

Coordination with Section
2.4. If Early Termination that
is involuntary or voluntary with Good Reason occurs within the
24-month period after a Change in Control, the Bank shall pay the
Executive the benefit under section 2.4 and not the benefit under
this Section 2.2B.

 

2.3           Disability.
For 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 shall be the Accrued Benefit determined as of the end of the
month immediately before the month in which Separation from Service
occurs.

 

2.3.2

Payment of benefit.
Beginning with the month immediately
after the month in which the Executive attains Normal Retirement
Age, the Bank shall pay the benefit to the Executive in monthly
installments, each equal to 1/12th of such annual benefit, on the
first day of each month. The monthly installments shall be paid to
the Executive for 240 months.

 

2.4           Change
in Control. If Executive has a
Separation from Service that is an involuntary termination without
Cause or a Voluntary Termination with Good Reason, in either case
within the 24-month period after a Change in Control, the Bank
shall pay to the Executive the benefit described in this section
2.4 instead of any other benefit under this Agreement. Except,
however, no benefits shall be payable under this Agreement if the
Executive’s Separation from Service is a Termination with
Cause or if this Agreement terminates under Article 5. Further, if
the Executive shall have attained Normal Retirement Age when
Separation from Service occurs within 24 months after a Change in
Control occurs, whether Separation from Service is voluntary or
involuntary for any reason other than Termination with Cause, the
Executive shall be entitled solely to the benefit provided by
section 2.1, not this section 2.4.

 

2.4.1

Amount of benefit. The benefit under
this section 2.4 is the Normal Retirement Age Accrual Balance
required by section 2.1, discounting the Normal Retirement Age
Accrual Balance to present value at the time of payment using a
discount rate selected by the Plan Administrator, but the discount
rate selected by the Plan Administrator shall not exceed the
discount rate employed at the time of payment for purposes of
calculating the Accrual Balance.

 

2.4.2

Payment of benefit.
The Bank shall pay the benefit under
this section 2.4 to the Executive in a single lump sum within three
days after the Executive’s Separation from
Service.

 

2.4.3

Coordination with Section
2.2B. If the Executive’s
Separation following a Change in Control is voluntary without Good
Reason, or if the Executive’s Separation from Service occurs
after the 24-month period after a Change in Control, the Executive
shall be entitled solely to the benefit provided by section 2.2B,
not this section 2.4.

 

 

7

 

 

2.5           Lump-Sum
Payout of Remaining Normal Retirement Benefit or Disability Benefit
When a Change in Control Occurs. If a Change in Control occurs after Separation
from Service but while the Executive is receiving the Normal
Retirement Age benefit under section 2.1 or is receiving or is
entitled at Normal Retirement Age to receive the Early Termination
benefit under sections 2.2A or 2.2B or the Disability benefit under
section 2.3, the Bank shall pay the remaining salary continuation
benefits to the Executive in a single lump sum within three days
after the Change in Control. The lump-sum payment due to the
Executive as a result of a Change in Control shall be an amount
equal to the Accrual Balance amount corresponding to the particular
benefit when the Change in Control occurs, reduced by any payments
already paid to the Executive for that particular
benefit.

 

2.6           Annual
Benefit Statement. Within 120
days after the end of each calendar 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 2.2A, 2.2B, 2.3, or 2.4 hereof, the amount of the benefit
determined under the 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 would result
in additional tax or interest to the Executive because of section
409A, the Executive shall 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 to the extent possible in order to
avoid the additional tax or interest under section 409A. 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. The Agreement shall be interpreted and
administered to the greatest extent possible to be either exempt
from section 409A, or in compliance with 409A. Further, each
payment made as part of installment payments under this Agreement
shall be considered a separate payment for purposes of section
409A.

 

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.

 

 

8

 

 

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 at the Executive’s death. If a
benefit is payable to the Executive’s Beneficiary, the
benefit shall be paid in a single lump sum within 90 days after the
Executive’s death. However, no benefits will be paid under
this Agreement to the Executive or the Executive’s
Beneficiary if this Agreement is terminated under Article
5.

 

3.2           Death
after Separation from Service. If the Executive dies after Separation from
Service, if Separation from Service was not a Termination with
Cause, and if at death the Executive was receiving the benefit
under section 2.1 or was receiving or was entitled at Normal
Retirement Age to receive the benefit under sections 2.2A, 2.2B, or
2.3, at the Executive’s death the Executive’s
Beneficiary shall be entitled to an amount in cash equal to the
Accrual Balance remaining at the Executive’s death, 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 to the
Beneficiary 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
within 90 days after the Executive’s death. However, no
benefits under this Agreement shall be paid or payable to the
Executive or the Executive’s Beneficiary 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
designation of a particular Beneficiary shall be deemed
automatically revoked if that Beneficiary predeceases the
Executive, and designation of a spouse as Beneficiary shall be
deemed automatically revoked if the marriage to that spouse 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.

 

 

9

 

 

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
there are no surviving designated Beneficiaries and no surviving
spouse, the benefits shall be paid to 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 a Termination with Cause or, unless a
Change in Control shall have occurred, if Separation from Service
is an Early Termination before any vesting under Section 2.2A of
this Agreement.

 

5.2           Suicide
or Misstatement. No benefits
shall be paid under this Agreement if the Executive commits suicide
within two years after the Effective Date or if the Executive makes
any material misstatement of fact on any application for life
insurance purchased by the Bank, on any resume or application
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 the North Carolina Commissioner of Banks or
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.
Despite any contrary provision of this
Agreement, if the Bank is in “default” or “in
danger of default”, as those terms are defined in of 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 section 13(c) of the Federal Deposit Insurance Act. 12
U.S.C. 1823(c). Any rights of the parties that have already vested
shall not be affected by such action, however.

 

 

10

 

 

5.6           No
Violation of Golden Parachute Rules. The Bank and the Executive acknowledge and agree
that any payment or agreement to make any payment to the Executive
or Beneficiary under this Agreement is or may be subject to the
golden parachute limitations of 12 U.S.C. 1828(k) and FDIC rules at
12 C.F.R. Part 359. The Bank and the Executive therefore
acknowledge and agree that if any payment or agreement to make a
payment under this Agreement would be considered a golden parachute
payment under 12 C.F.R. 359.1(f), the Bank shall not have a
contractual or other obligation to make the payment and the
agreement to make the payment shall be void, unless (x) the payment
receives advance approval of the appropriate Federal banking
agency, if required at that time by 12 U.S.C. section 1828(k), 12
C.F,R. Part 359, or other Federal or state laws, rules or
regulations, and (y) the obligation and the payment comply in all
other respects with 12 U.S.C. section 1828(k), 12 C.F.R. Part 359,
and other Federal and state laws, rules or regulations, to the
extent applicable at the time.

 

ARTICLE 6

CLAIMS AND REVIEW PROCEDURES

 

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

 

6.1.1 

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

 

6.1.3 

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

 

6.1.3.1    the specific reasons for the
denial,

6.1.3.2 

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

6.1.3.3 

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

6.1.3.4 

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

6.1.3.5 

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

 

 

11

 

 

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

 

6.2.1 

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

 

6.2.2 

Additional
submissions-information access. The claimant shall then have the opportunity to
submit written comments, documents, records, and other information
relating to the claim. The Bank shall also provide the claimant,
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.

 

6.2.3 

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

 

6.2.4 

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

 

6.2.5 

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

 

6.2.5.1    the specific reason for the
denial,

6.2.5.2 

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

6.2.5.3 

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

6.2.5.4 

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

 

 

12

 

 

ARTICLE 7

ADMINISTRATION OF AGREEMENT

 

7.1           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 not be a member of the Plan
Administrator. The Plan Administrator shall also 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
including interpretations of this Agreement, as may arise in
connection with the Agreement.

 

7.2           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.

 

7.3          
Binding Effect of
Decisions. The decision or
action of the Plan Administrator concerning 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.

 

7.4           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.

 

7.5           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.

 

7.6           ERISA.
The Agreement is subject to ERISA and
shall be construed in accordance with the provisions of ERISA, and,
where not preempted by ERISA or other federal law, with the laws of
the State of North Carolina.

 

 

13

 

 

ARTICLE 8

MISCELLANEOUS

 

8.1           Amendments
and Termination. Subject to
section 8.14 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.

 

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

 

8.3           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 or interfere with the Executive’s right to terminate
employment at any time.

 

8.4           Non-Transferability.
Benefits under this Agreement may not
be sold, transferred, assigned, pledged, attached, or
encumbered.

 

8.5           Successors;
Binding Agreement. By an
assumption agreement in form and substance satisfactory to the
Executive, the Bank shall require any successor (whether direct or
indirect, by purchase, merger, consolidation, or otherwise) to all
or substantially all of the business or assets of the Bank to
expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Bank would be required to
perform this Agreement had no succession
occurred.

 

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

 

8.7           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.

 

8.8           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 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.

 

8.9           Entire
Agreement. This Agreement
constitutes the entire agreement between the Bank and the Executive
concerning the salary continuation benefit initially granted as of
the Effective Date. No rights are granted to the Executive under
this Agreement other than those specifically set
forth.

 

 

14

 

 

8.10           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.

 

8.11           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.

 

8.12           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, Paragon
Commercial Bank, 3535 Glenwood Avenue, Raleigh, North Carolina
27612, 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.

 

8.13           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 desires 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 desires 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
8.13, 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 8.13, 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 $100,000, whether suit be brought or
not, and regardless of whether incurred in trial, bankruptcy, or
appellate proceedings. The Bank’s obligation to pay the
Executive’s legal fees provided by this section 8.13 operates
separately from and in addition to any legal fee reimbursement
obligation the Bank or Paragon Commercial Corporation may have with
the Executive under any separate employment, severance, or other
agreement between the Executive and the Bank or Paragon Commercial
Corporation. Despite anything in this section 8.13 to the contrary
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)1 and
Rule 359.3 of the Federal Deposit Insurance Corporation [12 CFR
359.3].

 

 

15

 

 

8.14           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
8.14 shall become null and void effective immediately upon a Change
in Control.

 

[The next page is the signature page.]

 

16

 

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

 

	

EXECUTIVE: 

	
 

	
 BANK:

	
 

	
  
 

	
 

	
  

	
 

	
/s/ Matthew
C. Davis

	
 

	
Paragon
Commercial Bank

	
 

	Matthew
C. Davis	
 

	
 

	
 

	
 

	
 

	
 

	
By:

	
/s/
Robert
C. Hatley

	
 

	
 

	
 

	
 

	
Robert
C. Hatley

	
 

	
 

	

	
Its:

	
President
and Chief Executive Officer

	
 

 

 

 

17

 

SCHEDULE A

 

VARIABLE PROVISIONS OF THE

PARAGON COMMERCIAL BANK SALARY CONTINUATION PLAN

 

 

	
 

	
 1.

	
 Name of
Executive:

	
Matthew C. Davis

	
 

	
 

	
 

	
 

	
 

	
 2.

	
 Effective
Date:

	
January 1, 2017

	
 

	
 

	
 

	
 

	
 

	
 3.

	
 Original Effective
Date: 

	
January 1, 2017

	
 

	
 

	
 

	
 

	
 

	
 4.

	
 Initial Vesting
Date: 

	
December 31, 2022

	
 

	
 

	
 

	
 

	
 

	
 5.

	
 Annual
Benefit:

	
$32,000/year

	
 

	
 

	
 

	
 

	
 

	
 6.

	
 Vesting
Schedule:

	
The Executive will be vested in a percentage of
the Accrued Benefit according to the following
schedule:

	
 

	
 

	
  

	
 

	
 

	
 

	
 

	

●
0% if Separation from Service occurs before the Initial Vesting
Date

●
20% vested if Separation from Service occurs on or after the
Initial Vesting Date and before December 31, 2023

●
40% vested if Separation from Service occurs on or after December
31, 2023 and before December 31, 2024

●
60% vested if Separation from Service occurs on or after December
31, 2024 and before December 31, 2025

●
80% vested if Separation from Service occurs on or after December
31, 2025 and before December 31, 2026

●
100% vested if Separation from Service occurs on or after December
31, 2026

 

 

 

18

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