Document:

CapitalBank Split Dollar Agreement

  
 Exhibit 10.31 
  
 CAPITALBANK 
 SPLIT DOLLAR AGREEMENT 
  
 THIS AGREEMENT is made and entered into this 17th day of October, 2002, by and between CAPITALBANK, a state-chartered commercial bank
located in Greenwood, South Carolina (the “Company”), and WALTER G. STEVENS (the “Executive”). 
  
 This Agreement shall append the Split Dollar Endorsement entered into on October 17, 2002, or as subsequently amended, by and between the aforementioned parties. 
  
 INTRODUCTION 
  
 To encourage the
Executive to remain an employee of the Company, the Company is willing to divide the death proceeds of a life insurance policy on the Executive’s life. The Company will pay life insurance premiums from its general assets. 

 
 Article 1 
 General Definitions

  
 The following terms shall have the meanings specified: 
  
 1.1    “Change of Control” means the first to occur of the following: 
  

	 	a.
	 
	Any person or entity, or any two or more persons or entities acting as a group as defined in Section 13(d)(3) of the Federal Securities and Exchange Act of
1934, shall acquire ownership of fifty(50%) percent or more of the outstanding voting stock of the Company; or 
 

	 	b.
	 
	The acquisition of, or sale of, all or substantially all of the assets of the Company, except to an Affiliate as defined hereinbelow; or 

	 	c.
	 
	The merger of the Company into another entity that is not an Affiliate as defined hereinbelow, and the Company is not the survivor of such merger. 

  
 For purposes hereof, an “Affiliate” is any entity controlling, controlled by, or under common control with the Company.
For this purpose, “control” means legal or beneficial ownership of fifty (50%) percent or more of the equity or voting interests in an entity. 
  
 1.2    “Disability” means the Executive’s suffering a sickness, accident or injury which has been determined by the carrier of any individual or group
disability insurance policy covering the Executive, or by the Social Security Administration, to be a disability rendering the Executive totally and permanently disabled. The Executive must submit proof to the Company of the carrier’s or Social
Security Administration’s determination upon the request of the Company. 
  
 1.3    “Insurer” means Jefferson Pilot Financial. 

 
 1 

 1.4  “Policy” means insurance policy no. AH5254875 issued by the Insurer. 

 
 1.5  “Insured” means the Executive. 
  
 1.6  “Normal Retirement Age” means the earliest of August 31st following the Executive’s 62nd birthday, the date of Termination of Employment on account of Disability or the date of a Change of Control. 
  
 1.7  “Termination of Employment” means that the Executive ceases to be employed by the Company. 
  
 Article 2 
 Policy Ownership/Interests 
  
 2.1  Company Ownership.    The Company is the sole owner of the Policy and shall have the right to
exercise all incidents of ownership. The Company shall be the direct beneficiary of an amount of death proceeds equal to the greater of: a) the cash surrender value of the policy, b) the aggregate premiums paid on the Policy by the Company less any
outstanding indebtedness to the Insurer or c) the total death proceeds less the split dollar amount. The split dollar amount shall be 50% of the difference between the total policy death proceeds and the policy cash surrender value at the date of
the Executive’s death. 
  
 2.2  Executive’s Interest.    The Executive
shall have the right to designate the beneficiary of any remaining death proceeds of the Policy. The Executive shall also have the right to elect and change settlement options that may be permitted. Provided, however, the Executive, the
Executive’s transferee or the Executive’s beneficiary shall have no rights or interests in the Policy with respect to that portion of the death proceeds designated in this section 2.2 upon the Executive’s Termination of Employment
prior to Normal Retirement Age. 
  
 2.3  Option to Purchase.    The Company
shall not sell, surrender or transfer ownership of the Policy while this Agreement is in effect without first giving the Executive or the Executive’s transferee the option to purchase the Policy for a period of sixty (60) days from written
notice of such intention. The purchase price shall be an amount equal to the cash surrender value of the Policy. This provision shall not impair the right of the Company to terminate this Agreement. 
  
 2.4  Comparable Coverage.    Upon Termination of Employment after the Executive’s Normal
Retirement Age, the Company shall maintain the Policy in full force and effect and in no event shall the Company amend, terminate or otherwise abrogate the Executive’s interest in the Policy, unless the Company replaces the Policy with a
comparable insurance policy to cover the benefit provided under this Agreement. The Policy or any comparable policy shall be subject to the claims of the Company’s creditors. 
  
 Article 3 
 Premiums 
  
 3.1  Premium Payment.    The Company shall pay any premiums due on the Policy. 

 
 2 

 3.2  Imputed Income.    The Company shall impute income to the Executive in an
amount equal to the current term rate for the Executive’s age multiplied by the aggregate death benefit payable to the Executive’s beneficiary. The “current term rate” is the minimum amount required to be imputed under Revenue
Rulings 64-328 and 66-110, or any subsequent applicable authority. 
  
 Article 4 
 Assignment 
  
 The Executive may assign
without consideration all interests in the Policy and in this Agreement to any person, entity or trust. In the event the Executive transfers all of the Executive’s interest in the Policy, then all of the Executive’s interest in the Policy
and in the Agreement shall be vested in the Executive’s transferee, who shall be substituted as a party hereunder and the Executive shall have no further interest in the Policy or in this Agreement. 
  
 Article 5 
 Insurer 
  
 The Insurer shall be bound only by the terms of the Policy. Any payments the Insurer makes or actions it takes in accordance with the
Policy shall fully discharge the Insurer and Company from all claims, suits and demands of all entities or persons. The Insurer shall not be bound by or be deemed to have notice of the provisions of this Agreement. 
  
 Article 6 
 Claims Procedure 

 
 6.1  Claims Procedure.    An Executive 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 Company a written claim for the benefits. 
  
 6.1.2  Timing of Company Response.    The Company shall respond to such claimant
within 90 days after receiving the claim. If the Company determines that special circumstances require additional time for processing the claim, the Company can extend the response period by an additional 90 days by notifying the claimant in
writing, prior to the end of the initial 90-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Company expects to render its decision. 

 
 6.1.3  Notice of Decision.    If the Company denies part or all of the
claim, the Company shall notify the claimant in writing of such denial. The Company shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth: 
  
 (a)    The specific reasons for the denial, 

 
 3 

  

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

  

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

  

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

  

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

  
 6.2  Review Procedure.    If the Company denies part or all of the
claim, the claimant shall have the opportunity for a full and fair review by the Company of the denial, as follows: 
  
 6.2.1  Initiation – Written Request.    To initiate the review, the claimant, within 60 days after receiving the Company’s notice of denial, must file with the Company 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 Company 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 Company shall take into account all materials and
information the claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. 
  
 6.2.4  Timing of Company Response.    The Company shall respond in writing to such claimant within 60 days after
receiving the request for review. If the Company determines that special circumstances require additional time for processing the claim, the Company can extend the response period by an additional 60 days by notifying the claimant in writing, prior
to the end of the initial 60-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Company expects to render its decision. 
  
 6.2.5  Notice of Decision.    The Company shall notify the claimant in writing of its
decision on review. The Company shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth: 
  

	 	(a)
	 
	The specific reasons for the denial, 
 

  

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

 
 4 

  

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

  

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

  
 Article 7 
 Amendments and Termination

  
 This Agreement may be amended or terminated only by a written agreement signed by the Company and the
Executive. However, unless otherwise agreed to by the Company and the Executive, this Agreement will automatically terminate upon the Executive’s Termination of Employment prior to Normal Retirement Age other than following a Change of Control
or on account of Disability. 
  
 Article 8 
 Miscellaneous 
  
 8.1  Binding Effect.    This Agreement
shall bind the Executive and the Company, their beneficiaries, survivors, executors, administrators and transferees, and any Policy beneficiary. 
  
 8.2  No Guarantee of Employment.    This Agreement is not an employment policy or contract. It does not give the Executive the right to remain a Executive or
employee of the Company, nor does it interfere with the Company’s right to discharge the Executive. It also does not require the Executive to remain an Executive nor interfere with the Executive’s right to terminate service at any time.

  
 8.3  Applicable Law.    The Agreement and all rights hereunder shall be
governed by and construed according to the laws of the State of South Carolina, except to the extent preempted by the laws of the United States of America. 
  
 8.4  Reorganization.    The Company shall not merge or consolidate into or with another company, or reorganize, or sell substantially
all of its assets to another company, firm or person unless such succeeding or continuing company, firm or person agrees to assume and discharge the obligations of the Company. 
  
 8.5  Notice.    Any notice, consent or demand required or permitted to be given under the provisions of this Split Dollar Agreement by
one party to another shall be in writing, shall be signed by the party giving or making the same, and may be given either by delivering the same to such other party personally, or by mailing the same, by United States certified mail, postage
prepaid, to such party, addressed to his or her last known address as shown on the records of the Company. The date of such mailing shall be deemed the date of such mailed notice, consent or demand. 
  
 8.6  Entire Agreement.    This Agreement constitutes the entire agreement between the Company and the
Executive as to the subject matter hereof. No rights are granted to the Executive by virtue of this Agreement other than those specifically set forth herein. 

 
 5 

 8.7  Administration.    The Company shall have powers which are necessary to
administer this Agreement, including but not limited to: 
  

	 	(a)
	 
	Interpreting the provisions of the Agreement; 
 

	 	(b)
	 
	Establishing and revising the method of accounting for the Agreement; 
 

	 	(c)
	 
	Maintaining a record of benefit payments; and 
 

	 	(d)
	 
	Establishing rules and prescribing any forms necessary or desirable to administer the Agreement. 
 

  
 8.8  Named Fiduciary.    The Company shall be the named fiduciary and plan administrator under the
Agreement. The named fiduciary may delegate to others certain aspects of the management and operation responsibilities of the plan including the employment of advisors and the delegation of ministerial duties to qualified individuals

  
 IN WITNESS WHEREOF, the parties have executed this Agreement the day and year first above written. 

 
 
	 EXECUTIVE:
 	 	  	 	 COMPANY: 
  
 CAPITALBANK
 
	 
	 /s/ WALTER G. STEVENS    
 
	 	  	 	 By
 	 	 /s/ WILLIAM G. STEVENS
 

	 WALTER G. STEVENS    
 	 	  	 	 Title
 	 	 President and Chief Executive Officer
 

 

 
 6 

  
 SPLIT DOLLAR POLICY ENDORSEMENT 
 CAPITALBANK SPLIT DOLLAR AGREEMENT 
  
 
	 Policy No. AH5254875
 	 	 Insured: WALTER G. STEVENS
 

 
  
 Supplementing and amending the application for insurance to Jefferson Pilot Financial
(“Insurer”) on July 15, 2002, the applicant requests and directs that: 
  
 BENEFICIARIES

  
 1.    CAPITALBANK, a federally-chartered savings association located in Greenwood, South
Carolina (the “Company”), shall be the direct beneficiary of death proceeds equal to the greater of (a) the cash surrender value of the policy, (b) the aggregate premiums paid on the Policy by the Company less any outstanding indebtedness
to the Insurer or (c) the total death proceeds less the split dollar amount. The split dollar amount shall be 50% of the difference between the total policy death proceeds and the policy cash surrender value at the date of the Executive’s
death. 
  
 2.    The beneficiary of any remaining death proceeds shall be designated by the
Insured or the Insured’s transferee, subject to the provisions of paragraph (5) below. 
  
 OWNERSHIP

  
 3.    The Owner of the policy shall be the Company. The Owner shall have all ownership
rights in the Policy except as may be specifically granted to the Insured or the Insured’s transferee in paragraph (4) of this endorsement. 
  
 4.    The Insured or the Insured’s transferee shall have the right to assign his or her rights and interests in the Policy with respect to that portion of the death proceeds
designated in paragraph (2) of this endorsement, and to exercise all settlement options with respect to such death proceeds. 
  
 5.    Notwithstanding the provisions of paragraph (4) above, the Insured or the Insured’s transferee shall have no rights or interests in the Policy with respect to that portion of the death proceeds
designated in paragraph (2) of this endorsement if the Insured ceases to serve as an Executive of the Company prior to the earliest of August 31st following the Insured’s 62nd birthday,
termination of employment on account of Disability as defined in Section 1.2 of the Split Dollar Agreement or a Change of Control as defined in Section 1.1 of the Split Dollar Agreement, unless otherwise agreed to by the Company and the Insured.

 
 7 

  
 MODIFICATION OF ASSIGNMENT PROVISIONS OF THE POLICY 

 
 Upon the death of the Insured, the interest of any collateral assignee of the Owner of the Policy designated in (3) above shall be limited to the
portion of the proceeds described in paragraph (1) above. 
  
 OWNERS AUTHORITY 
  
 The Insurer is hereby authorized to recognize the Owner’s claim to rights hereunder without investigating the reason for any action taken by the Owner,
including its statement of the amount of premiums it has paid on the Policy. The signature of the Owner shall be sufficient for the exercise of any rights under this Endorsement and the receipt of the Owner for any sums received by it shall be a
full discharge and release therefore to the Insurer. 
  
 Any transferee’s rights shall be subject to this Endorsement. 

 
 The owner accepts and agrees to this Split Dollar Endorsement. 
  
 Signed at Greenwood, South Carolina, this 17th day of October, 2002. 
  
 CAPITALBANK 
  
 By    /s/    William G. Stevens         
  
 Its    President and Chief Executive Officer         
  
 The Insured accepts and agrees to the foregoing and, subject to the rights of the Owner as stated above, designates the following beneficiaries of the portion of
the proceeds described in (2) above: 
  
 Primary beneficiary: Margaret M. Stevens
                                        
                                        
     
  
                     Relationship to Insured: Wife 
  
 Secondary Beneficiary: Lucy M. Stevens, Walter G. Stevens, Williams H. Stevens 
  
                                       
      Relationship to Insured: Children 
  
 Signed at Greenwood, South Carolina, this 17th day of Oct., 2002.

  
 THE INSURED: 
  
 
	 
	 /s/ Walter G. Stevens
 

	 WALTER G. STEVENS
 

 

 
 8CapitalBank Salary Continuation Agreement

  
 Exhibit 10.32 
  
 CAPITALBANK 
 SALARY CONTINUATION AGREEMENT 
  
 THIS AGREEMENT is adopted this 17th day of October, 2002, by and between CAPITALBANK, a state-chartered commercial bank located in
Greenwood, South Carolina (the “Company”), and SONJA HAZEL HUGHES (the “Executive”). 
  
 INTRODUCTION

  
 To encourage the Executive to remain an employee of the Company, the Company is willing to provide salary
continuation benefits to the Executive. The Company will pay the benefits from its general assets. 
  
 AGREEMENT

  
 The Company and the Executive agree as follows: 
  
 Article 1 
 Definitions 
  

Whenever used in this Agreement, the following words and phrases shall have the meanings specified: 
  
 1.1  “Benefit Amount” means $55,864 (Fifty-five Thousand Eight Hundred Sixty-four Dollars). Commencing at the end of the first Plan Year, and
each Plan Year thereafter, the Benefit Amount shall be increased four percent (4.0%) from the previous Plan Year. 
  
 1.2  “Change of Control” means the first to occur of the following: 
  

	 	a.    
	 
	Any person or entity, or any two or more persons or entities acting as a group as defined in Section 13(d)(3) of the Federal Securities and Exchange Act of
1934, shall acquire ownership of fifty(50%) percent or more of the outstanding voting stock of the Company; or 
 

  

	 	b.  
	 
	The acquisition of, or sale of, all or substantially all of the assets of the Company, except to an Affiliate as defined hereinbelow; or 

  

	 	c.  
	 
	The merger of the Company into another entity that is not an Affiliate as defined hereinbelow, and the Company is not the survivor of such merger. 

  
 For purposes hereof, an “Affiliate” is any entity controlling, controlled by, or under common
control with the Company. For this purpose, “control” means legal or beneficial ownership of fifty (50%) percent or more of the equity or voting interests in an entity. 
  
 1.3  “Code” means the Internal Revenue Code of 1986, as amended. 
  
 1.4  “Disability” means the Executive’s suffering a sickness, accident or injury which has been determined by the carrier of any individual
or group disability insurance policy covering the Executive, or by the Social Security Administration, to be a disability rendering the Executive totally and permanently disabled. The Executive must submit proof to the Company of the carrier’s
or Social Security Administration’s determination upon the request of the Company. 
  
 1.5  “Early Termination” means the Termination of Employment before Normal Retirement Age for reasons other than death, Disability, Termination for Cause or following a Change in Control. 

 
 1.6  “Early Termination Date” means the month, day and year in which Early Termination occurs.

  
 1.7  “Effective Date” means September 1, 2002. 
  
 1.8  “Normal Retirement Age” means the August 31st immediately following the Executive’s 65th birthday. 
  
 1.9  “Normal Retirement
Date” means the later of the Normal Retirement Age or Termination of Employment. 
  
 1.10  “PlanYear” means a twelve-month period commencing on September 1st and ending on August 31st of the following year. The initial Plan Year shall
commence on the Effective Date of this Agreement. 
  
 1.11  “Termination for Cause” means
Termination of Employment by the Company for reasons that shall include, but not be limited to, the commission of any of the following by the Executive: dishonesty; theft; unethical business conduct; indictment for a felony; indictment for a
misdemeanor involving moral turpitude; drug or alcohol addiction; lack of competence in the performance of any duty on behalf of the Company; violation of the terms and provisions of this Agreement; insubordination or failure to comply with
reasonable instructions of the Company; material violation by Executive of any federal or state banking law, rule or regulation; causing or permitting, whether intentionally or negligently, the Company to materially violate and federal or state
banking law, rule or regulation; if Executive is suspended and/or temporarily prohibited from participating in the conduct of the Company’s affairs by notice served under Section 8(e) of the Federal Deposit Insurance Act (12 U.S.C., Section
1818(e)); or failure of Executive to relocate his residence in accordance with Section 5 of the Executive’s employment agreement in effect on the Effective Date or as subsequently amended. 

 
 1 

 1.12  “Termination of Employment” means that the Executive ceases to be employed by the
Company for any reason, voluntary or involuntary, other than by reason of a leave of absence approved by the Company. 
  
 1.13  “Vesting Percentage” means a cumulative ten percent (10%) for each Year of Service until a maximum of one hundred percent (100%) after ten (10) Years of Service. 
  
 1.14  “Year(s) of Service” means a full 12-month period of continuous employment (including an approved leave
of absence) beginning with the Executive’s date of hire by the Company. 
  
 Article 2 
 Lifetime Benefits 
  
 2.1  Normal Retirement Benefit.    Upon Termination of Employment on or after the Normal Retirement Age for reasons other than death, the Company shall pay to the Executive the benefit described
in this Section 2.1 in lieu of any other benefit under this Agreement. 
  
 2.1.1  Amount
of Benefit.    The annual benefit under this Section 2.1 is the Benefit Amount. 
  
 2.1.2  Payment of Benefit.    The Company shall pay the annual benefit to the Executive in 12 equal monthly installments commencing with the month following the Executive’s Normal Retirement
Date, paying the annual benefit to the Executive for a period of eighteen years. 
  
 2.2  Early
Termination Benefit.    Upon Early Termination, the Company shall pay to the Executive the benefit described in this Section 2.2 in lieu of any other benefit under this Agreement. 
  
 2.2.1  Amount of Benefit.    The benefit under this Section 2.2 is the Early
Termination Annual Benefit set forth in Schedule A for the Plan Year ending immediately prior to the Early Termination Date (except during the first Plan Year, the benefit is the amount set forth for Plan Year 1), determined by multiplying the
Accrual Balance set forth in Schedule A for the Plan Year ending immediately prior to the Early Termination Date by the Vesting Percentage achieved at the Early Termination Date . Any increase in the annual benefit under Section 2.1.1 shall require
the recalculation of Schedule A. This benefit is determined by calculating a two-hundred sixteen month fixed annuity from the vested Accrual Balance, crediting interest on the unpaid balance at an annual rate of eight percent, compounded monthly.

  
 2.2.2  Payment of Benefit.    The Company shall pay the
annual benefit to the Executive in 12 equal monthly installments commencing with the month following the Normal Retirement Age, paying the annual benefit to the Executive for a period of eighteen years. 

 
 2 

 2.3  Disability Benefit.    If the Executive terminates employment due to Disability
prior to Normal Retirement Age, the Company shall pay to the Executive the benefit described in this Section 2.3 in lieu of any other benefit under this Agreement. 
  
 2.3.1  Amount of Benefit.    The benefit under this Section 2.3 is the Disability Lump-sum Benefit set forth in
Schedule A for the Plan Year ending immediately prior to the date in which the Termination of Employment occurs (except during the first Plan Year, the benefit is the amount set forth for Plan Year 1), determined by vesting the Executive in 100
percent of the Accrual Balance. Any increase in the annual benefit under Section 2.1.1 shall require the recalculation of Schedule A. 
  
 2.3.2  Payment of Benefit.    The Company shall pay the Accrual Balance to the Executive in a lump sum within 90 days following Termination of Employment. 

  
 2.4  Change of Control Benefit.    Upon Termination of Employment following
a Change of Control, the Company shall pay to the Executive the benefit described in this Section 2.4 in lieu of any other benefit under this Agreement. 
  
 2.4.1  Amount of Benefit.    The benefit under this Section 2.4 is the Change in Control Annual Benefit set forth in
Schedule A for the Plan Year ending immediately prior to the date in which Termination of Employment occurs (except during the first Plan Year, the benefit is the amount set forth for Plan Year 1), determined by vesting the Executive in the Normal
Retirement Benefit described in Section 2.1.1 calculated as if the Executive had remained employed by the Company until the Normal Retirement Age. 
  
 2.4.2  Payment of Benefit.    The Company shall pay the annual benefit to the Executive in 12
equal monthly installments commencing with the month following the Normal Retirement Age, paying the annual benefit to the Executive for a period of eighteen years. 
  
 Article 3 
 Death Benefits 
  
 3.1  Death During Active Service.    If the Executive dies while in the active service of the Company, the Company shall pay to the
Executive’s beneficiary the benefit described in this Section 3.1. This benefit shall be paid in lieu of the benefits under Article 2. 
  
 3.1.1  Amount of Benefit.    The benefit under this Section 3.1 is the Accrual Balance set forth in Schedule A for the Plan Year ending immediately prior to the
Early Termination Date. 
  
 3.1.2  Payment of Benefit.    The
Company shall pay the benefit to the Executive’s beneficiary in a lump sum within 90 days following the Executive’s death. 
  
 3.2  Death During Payment of a Lifetime Benefit.    If the Executive dies after any Lifetime Benefit payments have commenced under this Agreement but before receiving all such payments,

 
 3 

 the Company shall pay the remaining Accrual Balance at the time of the Executive’s death to the Executive’s beneficiary in a lump sum
within 90 days of the Executive’s death. 
  
 3.3  Death After Termination of Employment But Before
Payment of a Lifetime Benefit Commences.    If the Executive is entitled to a Lifetime Benefit under this Agreement, but dies prior to the commencement of said benefit payments, the Company shall pay the Accrual
Balance at the time of the Executive’s death to the Executive’s beneficiary in a lump sum within 90 days of the Executive’s death. 
  
 Article 4 
 Beneficiaries 
  
 4.1  Beneficiary Designations.    The Executive shall designate a beneficiary by filing a written designation with the Company. The Executive may revoke or modify
the designation at any time by filing a new designation. However, designations will only be effective if signed by the Executive and received by the Company during the Executive’s lifetime. The Executive’s beneficiary designation shall be
deemed automatically revoked if the beneficiary predeceases the Executive, or if the Executive names a spouse as beneficiary and the marriage is subsequently dissolved. If the Executive dies without a valid beneficiary designation, all payments
shall be made to the Executive’s estate. 
  
 4.2  Facility of
Payment.    If a benefit is payable to a minor, to a person declared incompetent, or to a person incapable of handling the disposition of his or her property, the Company may pay such benefit to the guardian, legal
representative or person having the care or custody of such minor, incompetent person or incapable person. The Company may require proof of incompetence, minority or guardianship as it may deem appropriate prior to distribution of the benefit. Such
distribution shall completely discharge the Company from all liability with respect to such benefit. 
  
 Article 5

 General Limitations 
  
 5.1  Termination for Cause.    Notwithstanding any provision of this Agreement to the contrary, the Company shall not pay any benefit under this Agreement if the Executive is subject to a
Termination for Cause. 
  
 5.2  Suicide or Misstatement.    The Company shall
not pay any benefit under this Agreement if the Executive commits suicide within three years after the date of this Agreement. In addition, the Company shall not pay any benefit under this Agreement if the Executive has made any material
misstatement of fact on an employment application or resume provided to the Company, or on any application for any benefits provided by the Company to the Executive. 
  
 5.3  Competition After Termination of Employment.    The Company shall not pay any benefit under this Agreement if the Executive,
without the prior written consent of the Company and within 2 years from the Executive’s Termination of Employment, engages in, becomes interested in, 

 
 4 

 directly or indirectly, as a sole proprietor, as a partner in a partnership, or as a substantial shareholder in a corporation, or becomes
associated with, in the capacity of employee, director, officer, principal, agent, trustee or in any other capacity whatsoever, any enterprise conducted in the trading area (a 50 mile radius) of the business of the Company, which enterprise is, or
may deemed to be, competitive with any business carried on by the Company as of the date of termination of the Executive’s employment or retirement. This section shall not apply following a Change in Control. 
  
 5.4  Solicitation After Termination of Employment.    The Company shall not pay any benefit under
this Agreement if the Executive, without the prior written consent of the Company and within 2 years from the Executive’s Termination of Employment, solicits any employee of the Company for the purpose of hiring such employee away from the
Company or solicits any customer of the Company that was a customer of the Company at or prior to the Executive’s Termination of Employment for the purpose of obtaining such customer’s business relationship in any manner that could be
deemed to be competitive to the Company. This section shall not apply following a Change in Control. 
  
 Article 6

 Claims and Review Procedures 
  
 6.1  Claims Procedure.    The Executive or beneficiary (“claimant”) who has not received benefits under the Plan 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 Company a written claim for the benefits. 
  
 6.1.2  Timing of Company Response.    The Company shall respond to such claimant within 90 days after receiving the claim. If the Company determines that special
circumstances require additional time for processing the claim, the Company can extend the response period by an additional 90 days by notifying the claimant in writing, prior to the end of the initial 90-day period, that an additional period is
required. The notice of extension must set forth the special circumstances and the date by which the Company expects to render its decision. 
  
 6.1.3  Notice of Decision.    If the Company denies part or all of the claim, the Company shall notify the claimant in writing of such denial. The Company shall
write the notification in a manner calculated to be understood by the claimant. The notification shall set forth: 
  
 (a) The specific reasons for the denial, 
 (b) A reference to the specific provisions of the Plan on which the denial is
based, 
 (c) A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of
why it is needed, 

 
 5 

 (d)  An explanation of the Plan’s review procedures and the time limits applicable to such
procedures, and 
 (e) A statement of the claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse
benefit determination on review. 
  
 6.2  Review Procedure.    If the Company
denies part or all of the claim, the claimant shall have the opportunity for a full and fair review by the Company of the denial, as follows: 
  
 6.2.1  Initiation – Written Request.    To initiate the review, the claimant, within 60 days after receiving the Company’s notice of denial, must file
with the Company 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 Company 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 Company shall take into account all materials and
information the claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. 
  
 6.2.4  Timing of Company Response.    The Company shall respond in writing to such claimant within 60 days after
receiving the request for review. If the Company determines that special circumstances require additional time for processing the claim, the Company can extend the response period by an additional 60 days by notifying the claimant in writing, prior
to the end of the initial 60-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Company expects to render its decision. 
  
 6.2.5  Notice of Decision.    The Company shall notify the claimant in writing of its
decision on review. The Company shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth: 
  
 (a)  The specific reasons for the denial, 
 (b)  A reference to the specific provisions of the Plan on which the denial is based, 
 (c)  A
statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim
for benefits, and 
 (d)  A statement of the claimant’s right to bring a civil action under ERISA Section 502(a).

 
 6 

  
 Article 7 
 Amendments and Termination 
  
 This Agreement may be amended only by a written agreement
signed by the Company and the Executive. 
  
 Notwithstanding the previous paragraph in this Article 7, the Company
may terminate this Agreement at any time. However, in no event shall this Agreement be terminated under this Article 7 without payment to the Executive of 100% of the Accrual Balance set forth on Schedule A (recalculated as set forth in Section
2.2.1) for the end of the Plan Year in which termination of the Agreement occurs. 
  
 Article 8 
 Miscellaneous 
  
 8.1  Binding Effect.    This Agreement shall bind the Executive and the Company, and their beneficiaries, survivors, executors, successors, administrators and transferees. 
  
 8.2  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 Company, nor does it interfere with the Company’s right to discharge the Executive. It also does not require the Executive to remain an employee nor interfere with the
Executive’s right to terminate employment at any time. 
  
 8.3  Non-Transferability.    Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner. 
  
 7.4  Reorganization.    The Company shall not merge or consolidate into or with another company, or
reorganize, or sell substantially all of its assets to another company, firm, or person unless such succeeding or continuing company, firm, or person agrees to assume and discharge the obligations of the Company under this Agreement. Upon the
occurrence of such event, the term “Company” as used in this Agreement shall be deemed to refer to the successor or survivor company. 
  
 8.5  Tax Withholding.    The Company shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement. 

 
 8.6  Applicable Law.    The Agreement and all rights hereunder shall be governed by the
laws of the State of South Carolina, except to the extent preempted by the laws of the United States of America. 
  
 8.7  Unfunded Arrangement.    The Executive and beneficiary are general unsecured creditors of the Company for the payment of benefits under this Agreement. The benefits represent the mere promise
by the Company to pay such benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or 

 
 7 

 garnishment by creditors. Any insurance on the Executive’s life is a general asset of the Company to which the Executive and beneficiary
have no preferred or secured claim. 
  
 8.8  Entire Agreement.    This
Agreement constitutes the entire agreement between the Company and the Executive as to the subject matter hereof. No rights are granted to the Executive by virtue of this Agreement other than those specifically set forth herein. 

 
 8.9  Administration.    The Company shall have powers which are necessary to administer
this Agreement, including but not limited to: 
  
 (a)  Establishing and revising the method
of accounting for the Agreement; 
  
 (b)  Maintaining a record of benefit payments;

  
 (c)  Establishing rules and prescribing any forms necessary or desirable to administer
the Agreement; and 
  
 (d)  Interpreting the provisions of the Agreement. 

 
 8.10  Named Fiduciary.    The Company shall be the named fiduciary and plan administrator
under this Agreement. It may delegate to others certain aspects of the management and operational responsibilities including the employment of advisors and the delegation of ministerial duties to qualified individuals. 
  
 IN WITNESS WHEREOF, the Executive and the Company have signed this Agreement. 
  
 
	 EXECUTIVE:
 	 	  	 	 COMPANY: 
 CAPITALBANK
  
 
	 
	 /s/ SONJA HAZEL HUGHES
 
	 	  	 	 By
 	 	 /s/    WILLIAM G. STEVENS       
 

	 Sonja Hazel Hughes
 	 	  	 	 Title
 	 	 President andChief Executive Officer
 

 

 
 8 

  
 BENEFICIARY DESIGNATION 
  
 CAPITALBANK 
 SALARY CONTINUATION AGREEMENT 
  
 SONJA HAZEL HUGHES 
  
 I
designate the following as beneficiary of any death benefits under this Agreement: 
  
 Primary: Estate of Sonja Hazel Hughes 

 
 Contingent:
                                        
                                        
                                        
                                        
                                  
  
                                      
                                        
                                        
                                        
                                        
                     
  

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

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

 
  
 Date 10/17/02 
  
 Received by the Company this 17th day of October, 2002. 
  
 By W. G.
Stevens 
  
 Title President and Chief Executive Officer 

 
 9 

  
 CAPITALBANK 
 SONJA HAZEL HUGHES 
 Salary Continuation Agreement 
 Schedule A 
  
 
	 Plan
 Year

Ending
 
	  	 Benefit
 Level
 
	  	 Accrual
 Balance
 
	  	 Early Term.
 Vesting
 Schedule
 
	  	 Vested
 Accrual
 Balance
 
	  	 Early
 Termination
 Annual Benefit
 Payable at 65
 
	    	 Change of
 ControlAnnual
Benefit Payable at 65
 
	  	 Disability
 Lump-sum
 Benefit
 Payable
 Immediately
 

	 Aug-03
 	  	 58,099
 	  	 32,933
 	  	 100%
 	  	 32,933
 	  	 7,624
 	    	 86,000
 	  	 32,933
 
	 Aug-04
 	  	 60,423
 	  	 70,115
 	  	 100%
 	  	 70,115
 	  	 14,988
 	    	 86,000
 	  	 70,115
 
	 Aug-05
 	  	 62,839
 	  	 112,217
 	  	 100%
 	  	 112,217
 	  	 22,150
 	    	 86,000
 	  	 112,217
 
	 Aug-06
 	  	 65,353
 	  	 160,053
 	  	 100%
 	  	 160,053
 	  	 29,171
 	    	 86,000
 	  	 160,053
 
	 Aug-07
 	  	 67,967
 	  	 214,644
 	  	 100%
 	  	 214,644
 	  	 36,122
 	    	 86,000
 	  	 214,644
 
	 Aug-08
 	  	 70,686
 	  	 277,292
 	  	 100%
 	  	 277,292
 	  	 43,089
 	    	 86,000
 	  	 277,292
 
	 Aug-09
 	  	 73,513
 	  	 349,733
 	  	 100%
 	  	 349,733
 	  	 50,180
 	    	 86,000
 	  	 349,733
 
	 Aug-10
 	  	 76,454
 	  	 434,415
 	  	 100%
 	  	 434,415
 	  	 57,554
 	    	 86,000
 	  	 434,415
 
	 Aug-11
 	  	 79,512
 	  	 535,132
 	  	 100%
 	  	 535,132
 	  	 65,464
 	    	 86,000
 	  	 535,132
 
	 Aug-12
 	  	 82,692
 	  	 658,847
 	  	 100%
 	  	 658,847
 	  	 74,421
 	    	 86,000
 	  	 658,847
 
	 Aug-13
 	  	 86,000
 	  	 824,544
 	  	 100%
 	  	 824,544
 	  	 86,000
 	    	 86,000
 	  	 824,544
 

 

 
 10

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