Document:

SEPARATION
        AGREEMENT

       

      Agreement
        made this 10th day of March, 2008 (hereinafter referred to as the “Agreement”),
        by and between Leslie Christon (hereinafter referred to as “Christon”), and
        Shells Seafood Restaurants, Inc. (hereinafter referred to as “Shells” or the
“Company”).

       

      W
        I T
        N E S S E T H :

       

      WHEREAS,
        Christon has been the Chief Executive Officer of the Company; and

       

      WHEREAS,
        the Company and Christon now desire to end the employment relationship and
        the
        parties wish to resolve amicably all outstanding issues, rights and obligations
        by and between them and to embody those understandings in this
        Agreement.

       

      NOW,
        THEREFORE, in consideration of the premises and of the representations, promises
        and obligations herein contained, the parties hereto agree as
        follows:

       

      1.  The
        parties agree that Christon’s employment with the Company terminated on February
        29, 2008 (the “Termination Date”) and that Christon has resigned as a director
        and officer of the Company and its subsidiaries, to the extent she held such
        positions. The Company agrees to continue to pay Christon an amount equal
        to her
        salary at the current rate, on the Company’s regular pay days, for a period of
        six months following the Termination Date, or until Christon commences
        employment with another entity or person, whichever occurs earlier. The Company
        will also pay Christon for any accrued but unused vacation to which Christon
        was
        entitled as of the Termination Date. The parties agree that the amended and
        restated employment agreement between Christon and the Company, dated as
        of July
        1, 2007, is terminated and no longer of any force or effect, provided, however
        that Sections 5(a), 5(b), 7, 8, 9, 15, 16, 17 and 18 shall survive the
        termination and continue in effect. Other than as set forth herein, the Company
        has no further obligations to Christon with respect to any other amounts
        allegedly due to Christon, including, but not limited to, salary, bonuses,
        vacations, leave and other benefits.

       

      2.  Christon
        agrees that she has been granted options to purchase (i) 297,374 shares of
        common stock of Shells on July 7, 2003, with an exercise price of $0.62 per
        share, all of which are vested and may be exercised within 90 days from the
        Termination Date, (ii) 450,000 shares of common stock of Shells on March
        21,
        2005, with an exercise price of $1.10 per share, 300,000 of which are vested
        and
        may be exercised within 90 days from the Termination Date; (iii) 450,000
        shares
        of common stock of Shells on June 13, 2005, with an exercise price of $0.76
        per
        share, 300,000 of which are vested and may be exercised within 90 days from
        the
        Termination Date; and (iv) 1,061,535 shares of common stock of Shells on
        November 14, 2005, with an exercise price of $0.85 per share, 707,690 of
        which
        are vested and may be exercised within 90 days from the Termination Date.
        All of
        Christon’s unvested options shall terminate as of the Termination Date. In
        accordance with the terms of the Shells stock option plan and the Stock Option
        Agreement, dated November 14, 2005, Christon is required to exercise her
        vested
        options no later than 90 days following the Termination Date. To the extent
        that
        Christon does not exercise the vested options within 90 days of the Termination
        Date, those options will thereupon terminate. Any exercise by Christon of
        any
        stock options may not be treated for tax purposes or otherwise as an exercise
        of
        an incentive stock option.

       

      3.  Christon
        understands that, as of the Termination Date, she will no longer be an employee
        of the Company, and that she will no longer be entitled to participate in
        any
        employee benefit or incentive plan maintained by the Company, including any
        medical, life or other insurance plan (except as allowed under the Consolidated
        Omnibus Budget Reconciliation Act (“COBRA”) with respect to continuation medical
        coverage). Notwithstanding the foregoing, the Company agrees that, to the
        extent
        that Christon elects continuation coverage under COBRA, the Company will
        pay on
        behalf of Christon the cost of the premiums for the six-month period following
        the Termination Date, or until Christon commences employment with another
        entity
        or person, whichever occurs earlier.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      4.  Christon
        represents that as of the Termination Date, she will have returned all property
        of the Company, including but not limited to, any computers, telephones,
        documents, books, records (whether in electronic format or hard copy), reports,
        files, correspondence, notebooks, manuals, notes, specifications, mailing
        lists,
        credit cards and data in her possession or control.

       

      5.  Christon,
        for herself and for the executors and administrators of her estate, her heirs,
        successors and assigns, hereby releases and forever discharges the Company
        and
        its officers, directors, employees and shareholders and the respective
        executors, administrators, heirs, successors and assigns of the foregoing,
        from
        any and all claims, actions, causes of action, suits, sums of money, debts,
        dues, accounts, reckonings, bonds, bills, covenants, contracts, controversies,
        agreements, promises, demands or damages of any nature whatsoever or by reason
        of any matter, cause or thing regardless of whether known or unknown at present,
        which against the Company or any of its officers, directors, employees or
        shareholders Christon ever had, now has or hereafter can, shall or may have
        for,
        upon, or by reason of, any matter, cause or thing whatsoever from the beginning
        of the world to the date hereof including, but not limited to, any matter
        relating to or arising out of the employment of Christon or termination thereof
        under any contract, tort, federal, state or local fair employment practices
        or
        civil rights law including, but not limited to, Title VII of the Civil Rights
        Act of 1964, as amended, the Americans with Disabilities Act, the Age
        Discrimination in Employment Act, the Older Workers Benefits Protection Act,
        the
        federal Family and Medical Leave Act, the Florida Civil Rights Act, or any
        claim
        for physical or emotional distress or injuries, or any other duty or obligation
        of any kind or description, including any implied covenant of good faith
        and
        fair dealing, implied contract of permanent employment or the tortious or
        willful discharge of employment. The parties also agree that this Agreement
        does
        not either affect the rights and responsibilities of the Equal Employment
        Opportunity Commission to enforce the Age Discrimination in Employment Act,
        or
        justify interfering with the protected right of an employee to file a charge
        or
        participate in an investigation or proceeding conducted by the Equal Employment
        Opportunity Commission under the Age Discrimination in Employment Act. In
        the
        event the Equal Employment Opportunity Commission commences a proceeding
        against
        the Company in which Christon is a named party, Christon agrees to waive
        and
        forego any monetary claims which may be alleged by the Equal Employment
        Opportunity Commission to be owed to Christon. The parties also agree that
        nothing in the provisions of this paragraph 5 is intended to limit their
        rights
        under and concerning enforcement of this Agreement. Christon agrees that
        she
        will not seek reinstatement and/or future employment with the Company or
        any
        present or future affiliated entity.

       

      6.  Christon
        agrees to keep confidential the terms of this Agreement and not to disclose
        any
        term of this Agreement to any other person or entity, except for Christon’s
        family, accountants and attorneys. In the event that Christon is required
        by law
        to disclose any term of this Agreement, Christon agrees to give the Company
        ten
        days’ written notice prior to any such disclosure, or such shorter time period
        as mandated by law or is otherwise practicable. 

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      7.  Christon
        shall not make any statements, either directly or through other persons or
        entities, which are disparaging to the Company or any of its affiliates,
        management, officers, directors, services, products, operations, prospects
        or
        other matters relating to the Company’s businesses. The Company, through its
        officers and directors, shall not make any statements, either directly or
        through other persons or entities, which are disparaging to Christon.

       

      8.  The
        Company has advised Christon to consult with an attorney prior to executing
        this
        Agreement. By executing this Agreement, Christon acknowledges that (a) she
        has
        been provided an opportunity to consult with an attorney or other advisor
        of her
        choice regarding the terms of this Agreement, (b) this is a final offer and
        Christon has been given twenty-one (21) days in which to consider whether
        she
        wishes to enter into this Agreement, (c) Christon has elected to enter this
        Agreement knowingly and voluntarily and (d) if she does so within fewer than
        twenty-one (21) days from receipt of the final document she has knowingly
        and
        voluntarily waived the remaining time. The Company reserves the right to
        change
        or revoke this Agreement prior to Christon’s execution hereof. This Agreement
        shall be fully effective and binding upon all parties hereto immediately
        upon
        execution of this Agreement except as to rights or claims arising under the
        ADEA, in which case Christon has seven (7) days following execution of this
        Agreement to change her mind (the “Revocation Period”). 

       

      9.  Any
        notice to be given hereunder shall be in writing and shall be deemed given
        when
        mailed by certified mail, return receipt requested, addressed as
        follows:

       

      
        	
              	To Christon at: 	 	 
	 	 	 	 
	 	With a copy to: 	 	 
	 	 	
              	 
	 	To the Company at: 	Shells Seafood Restaurants,
                Inc.
                
                16313
                  N. Dale Mabry Highway, Suite 100

                Tampa,
                  Florida 33618

              
	 	 	 	 
	 	 	Attention: President
	 	 	 	 
	 	With a copy to:	Sheldon G. Nussbaum
                Fulbright
                  & Jaworski L.L.P.

                666
                  Fifth Avenue, 31st Floor

                New
                  York, New York 10103

              

      

       

      or
        at
        such other address as may be indicated in writing by any party to the other
        parties in the manner provided herein for giving notice.

       

      10.  In
        the
        event that any one or more of the provisions of this Agreement is held to
        be
        invalid, illegal or unenforceable, the validity, legality and enforceability
        of
        the remaining provisions will not in any way be affected or impaired thereby.
        This Agreement will survive the termination of any arrangements contained
        herein
        and is binding on and will inure to the benefit of each of the parties and
        their
        respective affiliates, heirs, executors, administrators, successors and
        assigns.

       

      11.  This
        Agreement shall be governed by the substantive laws of the State of Florida,
        without giving effect to any principles of conflicts of law.

       

      12.  Each
        of
        the parties agrees to do and perform or cause to be done and performed all
        further acts and shall execute and deliver all other documents necessary
        on its
        part to carry out the intent and accomplish the purposes of this Agreement
        and
        the transaction contemplated hereby.

       

      13.  This
        Agreement sets forth the entire agreement between the parties hereto concerning
        the subject matter hereof and may not be changed without the written consent
        of
        each of the parties.

       

      [Remainder
        of the page intentionally left blank]

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          
 

      

      IN
        WITNESS WHEREOF, the parties have each executed this Agreement as of the
        date
        first written above.

       

      
        	
                 

                 

                 

                 

                 

              	
                SHELLS
                  SEAFOOD RESTAURANTS, INC.

                 

                 

                By:
                  /s/  Warren R
                  Nelson                                         

                Name:  
                  Warren R Nelson

                Title:     
                  President / CFO

                 

                 

                /s/
                  Leslie
                  Christon                                                    
                  

                Leslie
                  ChristonEXHIBIT
      10(iii)

     

    Employment
      Agreement

    

    This
      Employment
      Agreement
      (this
“Agreement”)
      is
      entered into effective as of this 24 day of October, by and among Michael G.
      Carlton (the “Executive”),
      Crescent Financial Corporation, a North Carolina corporation (the “Corporation”),
      and
      Crescent State Bank, a North Carolina-chartered bank and wholly owned subsidiary
      of Crescent Financial Corporation (the “Bank”).
      The
      Corporation and the Bank are hereinafter sometimes referred to together or
      individually as the “Employer.”

    

    Whereas,
      the
      Executive is the President and Chief Executive Officer of the Corporation and
      the Bank, possessing unique skills, knowledge, and experience relating to their
      business, and the Executive has made and is expected to continue to make major
      contributions to the profitability, growth and financial strength of the
      Corporation and affiliates,

    

    Whereas,
      the
      Executive and the Employer intend that this Agreement shall supersede and
      replace in its entirety the December 31, 2003 Employment Agreement between
      the
      Executive and the Employer, and

    

    Whereas,
      none of
      the conditions or events included in the definition of the term “golden
      parachute payment” that is set forth in Section 18(k)(4)(A)(ii) of the Federal
      Deposit Insurance Act [12 U.S.C. 1828(k)(4)(A)(ii)] and in Federal Deposit
      Insurance Corporation Rule 359.1(f)(1)(ii) [12 CFR 359.1(f)(1)(ii)] exists
      or,
      to the best knowledge of the Employer, is contemplated insofar as the Employer
      or any affiliates are concerned.

    

    Now
      Therefore,
      in
      consideration of these premises, the mutual covenants contained herein, and
      other good and valuable consideration the receipt and sufficiency of which
      are
      hereby acknowledged, the parties hereto agree as follows.

    

    Article
      1

    Employment

    

    1.1 Employment.
      The
      Employer hereby employs the Executive to serve as President and Chief Executive
      Officer according to the terms and conditions of this Agreement and for the
      period stated in section 1.3. The Executive hereby accepts employment according
      to the terms and conditions of this Agreement and for the period stated in
      section 1.3.

    

    1.2 Duties.
      As
      President and Chief Executive Officer, the Executive shall serve under the
      direction of the Employer’s board of directors and in accordance with the
      Employer’s Articles of Incorporation and Bylaws, as each may be amended or
      restated from time to time. The Executive shall report directly to the board
      of
      directors. The Executive shall serve the Employer faithfully, diligently,
      competently, and to the best of the Executive’s ability. The Executive shall
      exclusively devote full time, energy, and attention to the business of the
      Employer and to the promotion of the Employer’s interests throughout the term of
      this Agreement. Without the written consent of the board of directors of each
      of
      the Corporation and the Bank, the Executive shall not render services to or
      for
      any person, firm, corporation, or other entity or organization in exchange
      for
      compensation, regardless of the form in which such compensation is paid and
      regardless of whether it is paid directly or indirectly to the Executive.
      Nothing in this section 1.2 shall prevent the Executive from managing personal
      investments and affairs, provided that doing so does not interfere with the
      proper performance of the Executive’s duties and responsibilities under this
      Agreement.

    

    1.3 Term.
      The
      initial term of this Agreement shall be for a period of three years commencing
      on the effective date of this Agreement. On the first anniversary of the
      effective date of this Agreement and on each anniversary thereafter, this
      Agreement shall be extended automatically for one additional year unless the
      Employer’s board of directors determines that the term shall not be extended. If
      the board of directors determines not to extend the term, it shall promptly
      notify the Executive in writing, and this Agreement shall nevertheless remain
      in
      force until its term expires. The board’s decision not to extend the term of
      this Agreement shall not - by itself - give the Executive any rights under
      this
      Agreement to claim an adverse change in his position, compensation, or
      circumstances or otherwise to claim entitlement to severance benefits under
      Articles 4 or 5. References herein to the term of this Agreement mean the
      initial term, as the same may be extended. Unless sooner terminated, the
      Executive’s employment and the term of this Agreement shall terminate when the
      Executive attains age 65.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    1.4 Service
      on the Board of Directors.
      The
      Executive is currently serving as a director of each of the Corporation and
      the
      Bank. The Corporation shall nominate the Executive for election as a director
      at
      such times as necessary so that the Executive will, if elected by stockholders,
      remain a director of the Corporation throughout the term of this Agreement.
      The
      Executive hereby consents to serving as a director and to being named as a
      director of the Corporation in documents filed with the Securities and Exchange
      Commission. The board of directors of each of the Corporation and the Bank
      shall
      undertake every lawful effort to ensure that the Executive continues throughout
      the term of this Agreement to be elected or reelected as a director of the
      Bank.
      The Executive shall be deemed to have resigned as a director of each of the
      Corporation and the Bank effective immediately after termination of the
      Executive’s employment under Article 3 of this Agreement, regardless of whether
      the Executive submits a formal, written resignation as director.

    

    Article
      2

    Compensation
      and Benefits

    

    2.1 Base
      Salary.
      In
      consideration of the Executive’s performance of the obligations under this
      Agreement, the Employer shall pay or cause to be paid to the Executive a salary
      at the annual rate of not less than $280,000, payable in semi-monthly
      installments. No less frequently than annually, the Executive’s salary shall be
      reviewed by the Compensation Committee of the Employer’s board of directors or
      by the board committee with jurisdiction over executive compensation. The
      Executive’s salary shall be increased no more frequently than annually to
      account for cost of living increases. The Executive’s salary also may be
      increased beyond the amount necessary to account for cost of living increases
      at
      the discretion of the committee having jurisdiction over executive compensation.
      However, the Executive’s salary shall not be reduced. The Executive’s salary, as
      the same may be increased from time to time, is referred to in this Agreement
      as
      the “Base
      Salary.”

    

    2.2 Benefit
      Plans and Perquisites.
      The
      Executive shall be entitled throughout the term of this Agreement to participate
      in any and all officer or employee compensation, bonus, incentive, and benefit
      plans in effect from time to time, including without limitation stock option
      and
      other stock-based compensation, incentive, bonus, or purchase plans existing
      on
      the date of this Agreement or adopted during the term of this Agreement and
      plans providing pension, medical, dental, disability, and group life benefits,
      including the Employer’s 401(k) plan, and to receive any and all other fringe
      benefits provided from time to time, provided that the Executive satisfies
      the
      eligibility requirements for any such plans or benefits. Without limiting the
      generality of the foregoing -

    

    (a) Club
      dues.
      During
      the term of this Agreement the Employer shall pay or cause to be paid the
      Executive’s membership dues in civic clubs. Without limiting the generality of
      the foregoing, the Executive shall be reimbursed for dues and expenses
      associated with membership in and use of the McGregor Down County
      Club.

    

    (b) Reimbursement
      of business expenses.
      The
      Executive shall be entitled to reimbursement for all reasonable business
      expenses incurred performing the Executive’s obligations under this Agreement,
      including but not limited to all reasonable business travel and entertainment
      expenses incurred while acting at the request of or in the service of the
      Employer and reasonable expenses for attendance at annual and other periodic
      meetings of trade associations.

    

    (c) Use
      of automobile.
      The
      Employer further agrees to provide the Executive, for both business and personal
      use so long as the Executive is actually providing services hereunder, an
      automobile selected by the Executive. The Employer agrees to provide the
      Executive with an automobile every three years, with the next automobile
      anticipated to be provided to the Executive on or about February 1,2008. The
      Bank shall be responsible for all automobile expenses (including adequate
      insurance), repairs and maintenance thereof; provided,
      however,
      the
      Executive shall be responsible for gas and oil expense for automobile travel
      not
      related to the business of the Employer. The Employer shall obtain and maintain
      or cause to be obtained and maintained adequate insurance coverage on such
      automobile, providing at least as much coverage for loss, theft, damage, or
      injury on terms as the Employer generally provides for company-owned vehicles.
      The Executive shall be entitled to retain the automobile provided for the
      Executive’s use at termination of this Agreement.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    2.3 Vacation.
      The
      Executive shall be entitled to paid annual vacation and sick leave in accordance
      with the policies established from time to time by the Employer, but in no
      event
      fewer than three weeks of vacation per year. The Executive shall schedule at
      least five consecutive days of vacation per year. The timing of vacations shall
      be scheduled in a reasonable manner by the Executive. The Executive shall not
      be
      entitled to any additional compensation for failure to use allotted vacation
      or
      sick leave nor shall the Executive be entitled to accumulate unused sick leave
      from one year to the next, unless authorized by the Employer’s board of
      directors to do so.

    

    2.4 Supplemental
      Retirement Plan.
      The
      Employer and the Executive have entered into a Salary Continuation Agreement
      dated as of October 1, 2003. Unless the Salary Continuation Agreement explicitly
      provides otherwise, whether benefits are properly payable to the Executive
      under
      the Salary Continuation Agreement shall be determined solely by reference to
      that agreement, as the same may be amended.

    

    2.5 Indemnification
      and Insurance.
      (a)
Indemnification.
      The
      Employer shall indemnify the Executive or cause the Executive to be indemnified
      for the Executive’s activities as a director, officer, employee, or agent of the
      Employer or as a person who is serving or has served at the request of the
      Employer (a “representative”)
      as a
      director, officer, employee, agent, or trustee of an affiliated corporation,
      joint venture, trust or other enterprise, domestic or foreign, in which the
      Employer has a direct or indirect ownership interest against expenses (including
      without limitation attorneys’ fees, judgments, fines, and amounts paid in
      settlement) actually and reasonably incurred (“Expenses”)
      in
      connection with any claim against the Executive that is the subject of any
      threatened, pending, or completed action, suit, or other type of proceeding,
      whether civil, criminal, administrative, investigative, or otherwise and whether
      formal or informal (a “Proceeding”),
      to
      which the Executive was, is, or is threatened to be made a party by reason
      of
      the Executive being or having been such a director, officer, employee, agent,
      or
      representative.

    

    The
      indemnification provided herein shall not be exclusive of any other
      indemnification or right to which the Executive may be entitled and shall
      continue after the Executive has ceased to occupy a position as an officer,
      director, employee, agent or representative with respect to Proceedings relating
      to or arising out of the Executive’s acts or omissions during the Executive’s
      service in such position. The indemnification provided to the Executive under
      this Agreement for the Executive’s service as a representative shall be payable
      if and only if and only to the extent that reimbursement to the Executive by
      the
      affiliated entity with which the Executive has served as a representative,
      whether pursuant to agreement, applicable law, articles of incorporation or
      association, by-laws or regulations of the entity, or insurance maintained
      by
      such affiliated entity, is insufficient to compensate the Executive for Expenses
      actually incurred and otherwise payable by the Employer under this Agreement.
      Any payments in fact made to or on behalf of the Executive directly or
      indirectly by the affiliated entity with which the Executive served as a
      representative shall reduce the obligation of the Employer
      hereunder.

    

    (b) Exclusions.
      Despite
      anything herein to the contrary however, nothing in this section 2.5 requires
      indemnification, reimbursement, or payment by the Employer, and the Executive
      shall not be entitled to demand indemnification, reimbursement or payment
–

    

       1) if
      and to
      the extent indemnification, reimbursement, or payment constitutes a “prohibited
      indemnification payment” within the meaning of Federal Deposit Insurance
      Corporation Rule 359.1(l)(1) [12 CFR 359.1(l)(1)], or

    

       2) for
      any
      claim or any part thereof for which the Executive shall have been determined
      by
      a court of competent jurisdiction, from which no appeal is or can be taken,
      by
      clear and convincing evidence, to have acted with deliberate intent to cause
      injury to the Employer or with reckless disregard for the best interests of
      the
      Employer, or

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

       3) for
      any
      claim or any part thereof arising under section 16(b) of the Securities Exchange
      Act of 1934 as a result of which the Executive is required to pay any penalty,
      fine, settlement, or judgment, or

    

       4) for
      any
      obligation of the Executive based upon or attributable to the Executive gaining
      in fact any personal gain, profit, or advantage to which the Executive was
      not
      entitled, or

    

       5) any
      proceeding initiated by the Executive without the consent or authorization
      of
      the Employer’s board of directors, but this exclusion shall not apply with
      respect to any claims brought by the Executive (x)
      to
      enforce the Executive’s rights under this Agreement, or (y)
      in any
      Proceeding initiated by another person or entity whether or not such claims
      were
      brought by the Executive against a person or entity who was otherwise a party
      to
      such proceeding.

    

    (c) Insurance.
      The
      Employer shall maintain or cause to be maintained liability insurance covering
      the Executive throughout the term of this Agreement.

    

    Article
      3

    Termination

    

    3.1 Termination
      Because of Death or Disability.
      (a)
Death.
      The
      Executive’s employment shall terminate automatically on the date of the
      Executive’s death. If the Executive’s employment terminates because of the
      Executive’s death, the Executive’s estate shall receive any sums due the
      Executive as Base Salary and reimbursement of expenses through the end of the
      month in which death occurred, plus any bonus earned or accrued through the
      date
      of death, including any unvested amounts awarded for previous years. If the
      Executive dies in active service to the Employer, for 12 months after the
      Executive’s death the Employer shall provide on a cost-free basis the
      Executive’s family with continuing health care coverage under COBRA
      substantially identical to that provided for the Executive before
      death.

    

    (b) Disability.
      By
      delivery of written notice 30 days in advance to the Executive, the Employer
      may
      terminate the Executive’s employment if the Executive is disabled. For purposes
      of this Agreement the Executive shall be deemed to be “disabled”
if
      an
      independent physician selected by the Employer and reasonably acceptable to
      the
      Executive or the Executive’s legal representative determines that, because of
      illness or accident, the Executive is unable to perform the Executive’s duties
      and will be unable to perform the Executive’s duties for a period of 90
      consecutive days. The Executive shall not be deemed to be disabled, however,
      if
      the Executive returns to work on a full-time basis within 30 days after the
      Employer gives notice of termination because of disability. If the Executive
      is
      terminated by either of the Corporation or the Bank because of disability,
      the
      Executive’s employment with the other shall also terminate at the same time.
      During the period of incapacity leading up to the termination of the Executive’s
      employment under this provision, the Employer shall continue to pay the full
      Base Salary at the rate then in effect and all perquisites and other benefits
      (other than bonus) until the Executive becomes eligible for benefits under
      any
      disability plan or insurance program maintained by the Employer, provided that
      the amount of the Employer’s payments under this section 3.1(b) to the Executive
      shall be reduced by the sum of the amounts, if any, payable to the Executive
      for
      the same period under any disability benefit or pension plan covering the
      Executive. Furthermore, the Executive shall receive any bonus earned or accrued
      through the date of incapacity, including any unvested amounts awarded for
      previous years.

    

    3.2 Involuntary
      Termination for Cause.
      The
      Employer may terminate the Executive’s employment for Cause. If the Executive’s
      employment is terminated for Cause by either of the Corporation or the Bank,
      the
      Executive’s employment with the other shall also terminate at the same time. If
      the Executive’s employment terminates for Cause, the Executive shall receive the
      Base Salary through the date on which termination becomes effective and
      reimbursement of expenses to which the Executive is entitled when termination
      becomes effective. The Executive shall not be deemed to have been terminated
      for
      Cause under this Agreement unless and until there is delivered to the Executive
      a copy of a resolution duly adopted at a meeting of the Corporation’s or the
      Bank’s board of directors, which resolution shall (x)
      contain
      findings that, in the good faith opinion of the board, the Executive has
      committed an act constituting Cause, and (y)
      specify
      the particulars thereof. The resolution of the board of directors shall be
      deemed to have been duly adopted if and only if it is adopted by the affirmative
      vote of 75% of the directors then in office, excluding the Executive, at a
      meeting duly called and held for that purpose. Notice of the meeting and the
      proposed termination for Cause shall be given to the Executive at least seven
      calendar days before the board’s meeting. The Executive and the Executive’s
      counsel (if the Executive chooses to have counsel present) shall have a
      reasonable opportunity to be heard by the board at the meeting. Nothing in
      this
      Agreement limits the Executive’s or the Executive’s beneficiaries’ right to
      challenge the validity or propriety of the board’s determination of Cause. For
      purposes of this Agreement “Cause”
means
      any of the following occur -

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    (a) an
      act of
      fraud, embezzlement, or theft by the Executive in the course of employment,
      or
      misconduct involving dishonesty, or

    

    (b) intentional
      violation of any law or significant policy of the Employer or an affiliate,
      which in the Employer’s sole judgement causes material harm to the Employer or
      affiliate, regardless of whether the violation leads to criminal prosecution
      or
      conviction. For purposes of this Agreement applicable laws include any statute,
      rule, regulatory order, statement of policy, or final cease-and-desist order
      of
      any governmental agency or body having regulatory authority over the Employer.
      For purposes of this Agreement no act or failure to act on the part of the
      Executive shall be deemed to have been intentional if it was due primarily
      to an
      error in judgment or negligence. An act or failure to act on the Executive’s
      part shall be considered intentional if it is not in good faith and if it is
      without a reasonable belief that the action or failure to act is in the best
      interests of the Employer, or

    

    (c) the
      Executive’s gross negligence or gross neglect in the performance of duties,
      or

    

    (d) intentional
      wrongful damage by the Executive to the business or property of the Employer
      or
      its affiliates, including without limitation the reputation of the Employer,
      which in the Employer’s sole judgment causes material harm to the Employer,
      or

    

    (e) a
      breach
      by the Executive of fiduciary duties as an officer or director of the Employer,
      or misconduct involving dishonesty, or

    

    (f) a
      breach
      by the Executive of this Agreement that in the sole judgment of the Employer
      is
      a material breach, which breach is not corrected by the Executive within ten
      days after receiving written notice of the breach, or

    

    (g) removal
      of the Executive from office or permanent prohibition of the Executive from
      participating in the Employer’s affairs by an order issued under section 8(e)(4)
      or (g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. 1818(e)(4) or (g)(1),
      or

    

    (h) the
      occurrence of any event that results in the Executive being excluded from
      coverage, or having coverage limited for the Executive as compared to other
      executives of the Employer, under the Employer’s blanket bond or other fidelity
      or insurance policy covering its directors, officers, or employees,
      or

    

    (i) conviction
      of the Executive for or plea of no contest to a felony or conviction of or
      plea
      of no contest to a misdemeanor involving moral turpitude, or the actual
      incarceration of the Executive for 45 consecutive days or more.

    

    3.3 Voluntary
      Termination by the Executive Without Good Reason.
      If the
      Executive terminates employment without Good Reason, the Executive shall receive
      the Base Salary and expense reimbursement to which the Executive is entitled
      through the date on which termination becomes effective.

    

    3.4 Involuntary
      Termination Without Cause and Voluntary Termination for Good
      Reason.
      With
      written notice to the Executive 90 days in advance, the Employer may terminate
      the Executive’s employment without Cause. Termination shall take effect at the
      end of the 90-day period. With advance written notice to the Employer as
      provided in clause (y),
      the
      Executive may terminate employment for Good Reason. If the Executive’s
      employment terminates involuntarily without Cause or voluntarily but with Good
      Reason, the Executive shall be entitled to the benefits specified in Article
      4
      of this Agreement. For purposes of this Agreement a voluntary termination by
      the
      Executive shall be considered a voluntary termination with Good Reason if the
      conditions stated in both clauses (x)
      and
      (y)
      are
      satisfied –

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    (x) a
      voluntary termination by the Executive shall be considered a voluntary
      termination with Good Reason if any of the following occur without the
      Executive’s advance written consent, and the term Good Reason shall mean the
      occurrence of any of the following 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, including a requirement
      that the Executive report to a corporate officer or employee instead of
      reporting directly to the board of directors,

    

    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 Employer, or

    

    6) any
      other
      action or inaction that constitutes a material breach by the Employer of this
      Agreement.

    

    (y) the
      Executive must give notice to the Employer 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 Employer 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 initial existence of the
      condition.

    

    Article
      4

    Severance

    

    4.1 Continued
      Salary after Termination Without Cause or Termination for Good
      Reason.
      (a)
      Subject to the possibility that continued Base Salary for the first six months
      after employment termination might be delayed because of section 4.1(b), if
      the
      Executive’s employment terminates involuntarily but without Cause or if the
      Executive voluntarily terminates employment with Good Reason, the Executive
      shall continue to receive in accordance with the Employer’s regular pay
      practices Base Salary for 24 months from the date of termination, but the
      Executive shall not be entitled to continued participation in the Employer’s or
      a subsidiary’s retirement plan(s) or any stock-based plans. The Employer and the
      Executive acknowledge and agree that the compensation and benefits under this
      section 4.1 shall not be payable if compensation and benefits are payable or
      shall have been paid to the Executive under Article 5 of this
      Agreement.

    

    (b) If
      when
      employment termination occurs the Executive is a specified employee within
      the
      meaning of section 409A of the Internal Revenue Code of 1986, and if continued
      Base Salary under section 4.1(a) would be considered deferred compensation
      under
      section 409A, and finally if an exemption from the six-month delay requirement
      of section 409A(a)(2)(B)(i) is not available, the Executive’s continued Base
      Salary under section 4.1(a) for the first six months after employment
      termination shall be paid to the Executive in a single lump sum on the first
      day
      of the seventh month after the month in which the Executive’s employment
      terminates. References in this Agreement to section 409A of the Internal Revenue
      Code of 1986 include rules, regulations, and guidance of general application
      issued by the Department of the Treasury under Internal Revenue Code section
      409A.

    

    4.2 Post-Termination
      Insurance Coverage.
      (a)
      Subject to section 4.2(b), if the Executive’s employment terminates
      involuntarily but without Cause, voluntarily but with Good Reason, or because
      of
      disability, the Employer shall continue or cause to be continued at the
      Employer’s expense and for the Executive’s benefit life and medical insurance
      coverage in effect during and in accordance with the same schedule prevailing
      in
      the two years preceding the date of the Executive’s termination. The benefits
      provided by this section 4.2 shall continue until the first to occur of
      (w)
      the
      Executive’s return to employment with the Employer or another employer,
      (x)
      the
      Executive’s attainment of age 65, (y)
      the
      Executive’s death, or (z)
      the end
      of the term remaining under this Agreement at the time of the Executive’s
      termination.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    (b) If
      (x)
      under
      the terms of the applicable policy or policies for the insurance benefits
      specified in section 4.2(a) it is not possible to continue the Executive’s
      coverage, or (y)
      when
      employment termination occurs the Executive is a specified employee within
      the
      meaning of section 409A of the Internal Revenue Code of 1986, if any of the
      continued insurance coverage benefits specified in section 4.2(a) would be
      considered deferred compensation under section 409A, and finally if an exemption
      from the six-month delay requirement of section 409A(a)(2)(B)(i) is not
      available for that particular insurance benefit, instead of continued insurance
      coverage under section 4.2(a) the Employer shall pay to the Executive in a
      single lump sum an amount in cash equal to the present value of the Employer’s
      projected cost to maintain that particular insurance benefit had the Executive’s
      employment not terminated, assuming continued coverage for the lesser of 36
      months or the number of months until the Executive attains age 65. The lump-sum
      payment shall be made 30 days after employment termination or, if section 4.1(b)
      applies and a six-month payment delay is required by Internal Revenue Code
      section 409A, on the first day of the seventh month after the month in which
      the
      Executive’s employment terminates.

    

    4.3 Additional
      Severance Benefits.
      (a)
Cash-out
      of the value of unvested stock options.
      If the
      Employer terminates the Executive’s employment without Cause or if the Executive
      terminates employment with Good Reason before full vesting of stock options
      then
      held by the Executive, the Executive shall be entitled to receive from the
      Employer an amount in cash equal to the intrinsic value of the unvested stock
      options as of the effective date of termination. For this purpose intrinsic
      value means the per share fair market value of the Corporation common stock
      minus the option exercise price per share, multiplied by the number of shares
      acquirable by the unvested options. If the common stock is traded on an exchange
      or over the counter, fair market value shall mean the closing price on the
      trading day immediately before the date of termination. If the common stock
      is
      not traded on an exchange or over the counter, the per share fair market value
      of the Corporation common stock shall be determined by the Corporation’s board
      of directors in good faith. Amounts payable under this paragraph (a) shall
      be
      paid in a single lump sum 30 days after termination of the Executive’s
      employment or, if section 4.1(b) applies and a six-month payment delay is
      required by Internal Revenue Code section 409A, on the first day of the seventh
      month after the month in which the Executive’s employment
      terminates.

    

    (b) Outplacement
      and support.
      If the
      Employer terminates the Executive’s employment without Cause or if the Executive
      terminates employment with Good Reason, the Employer shall pay or cause to
      be
      paid to the Executive reasonable outplacement expenses in an amount up to
      $25,000 and for one year after termination the Employer shall provide the
      Executive with the use of office space and reasonable office support facilities,
      including secretarial assistance.

    

    Article
      5

    Change
      in Control Benefits

    

    5.1 Change
      in Control Benefits.
      (a) If
      a Change in Control occurs during the term of this Agreement, the Employer
      shall
      make or cause to be made a lump-sum cash payment to the Executive in the amount
      equal to three times the Executive’s annual compensation. For this purpose
      annual compensation means (x)
      the
      Executive’s Base Salary when the Change in Control occurs plus (y)
      any
      cash bonuses or cash incentive compensation awarded for the calendar year ended
      immediately before the year in which the Change in Control occurs, regardless
      of
      when the bonus or incentive compensation earned for the preceding calendar
      year
      is paid and regardless of whether all or part of the bonus or incentive
      compensation is subject to elective deferral or vesting. Annual compensation
      shall be calculated without regard to any deferrals under qualified or
      nonqualified plans, but annual compensation shall not include interest or other
      earnings credited to the Executive under qualified or nonqualified plans. The
      amount payable to the Executive hereunder shall not be reduced to account for
      the time value of money or discounted to present value. The payment required
      under this paragraph (a) is payable within 15 business days after the Change
      in
      Control occurs. If the Executive receives payment under this section 5.1 the
      Executive shall not be entitled to continued Base Salary under section 4.1
      of
      this Agreement. The Executive shall be entitled to benefits under this section
      5.1(a) on no more than one occasion during the term of this
      Agreement.

    

    (b) In
      addition to insurance benefits under section 4.2 to which the Executive may
      be
      entitled after employment termination, the outplacement and other benefits
      specified in section 4.3, and any benefits to which the Executive may be
      entitled under the Salary Continuation Agreement referred to in section 2.4,
      if
      after a Change in Control the Executive’s employment terminates involuntarily
      without Cause or voluntarily but for Good Reason the Employer shall cause the
      Executive to become fully vested in any non-qualified plans, programs, or
      arrangements in which the Executive participated if the plan, program, or
      arrangement does not address the effect of a change in control or termination
      after a change in control.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    5.2 Change
      in Control Defined.
      For
      purposes of this Agreement “Change
      in Control”
means
      a
      change in control as defined in Internal Revenue Code section 409A and rules,
      regulations, and guidance of general application thereunder issued by the
      Department of the Treasury, including -

    

    (a) Change
      in ownership:
      a
      change in ownership of the Corporation occurs on the date any one person or
      group accumulates ownership of Corporation stock constituting more than 50%
      of
      the total fair market value or total voting power of Corporation
      stock,

    

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

    

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

    

    5.3 Gross-Up
      for Taxes.
      (a)
Additional
      payment to account for Excise Taxes.
      If the
      Executive receives the lump sum payment under section 5.1 of this Agreement
      and
      acceleration of benefits under any other benefit, compensation, or incentive
      plan or arrangement with the Employer (collectively, the “Total
      Benefits”),
      and
      if any part of the Total Benefits is subject to the Excise Tax under section
      280G and section 4999 of the Internal Revenue Code (the “Excise
      Tax”),
      the
      Employer shall pay to the Executive the following additional amounts, consisting
      of (x)
      a
      payment equal to the Excise Tax payable by the Executive under section 4999
      on
      the Total Benefits (the “Excise
      Tax Payment”)
      and
      (y)
      a
      payment equal to the amount necessary to provide the Excise Tax Payment net
      of
      all income, payroll, and excise taxes. Together, the additional amounts
      described in clauses (x)
      and
      (y)
      are
      referred to in this Agreement as the “Gross-Up
      Payment Amount.”
      Payment of the Gross-Up Payment Amount shall be made in addition to the amount
      set forth in section 5.1.

    

    Calculating
      the Excise Tax.
      For
      purposes of determining whether any of the Total Benefits will be subject to
      the
      Excise Tax and for purposes of determining the amount of the Excise
      Tax,

    

    
      	 	
              1)

            	
              Determination
                of “parachute payments” subject to the Excise Tax:
                any other payments or benefits received or to be received by the
                Executive
                in connection with a Change in Control or the Executive’s termination of
                employment (whether under the terms of this Agreement or any other
                agreement or any other benefit plan or arrangement with the Employer,
                any
                person whose actions result in a Change in Control, or any person
                affiliated with the Employer or such person) shall be treated as
                “parachute
                payments”
                within the meaning of section 280G(b)(2) of the Internal Revenue
                Code, and
                all “excess
                parachute payments”
                within the meaning of section 280G(b)(1) shall be treated as subject
                to
                the Excise Tax, unless in the opinion of the certified public accounting
                firm that is retained by the Employer as of the date immediately
                before
                the Change in Control (the “Accounting
                Firm”)
                such other payments or benefits do not constitute (in whole or in
                part)
                parachute payments, or such excess parachute payments represent (in
                whole
                or in part) reasonable compensation for services actually rendered
                within
                the meaning of section 280G(b)(4) of the Internal Revenue Code in
                excess
                of the base amount (as defined in section 280G(b)(3) of the Internal
                Revenue Code), or are otherwise not subject to the Excise
                Tax,

            

    

    

    
      	 	
              2)

            	
              Calculation
                of benefits subject to the Excise Tax:
                the amount of the Total Benefits that shall be treated as subject
                to the
                Excise Tax shall be equal to the lesser of (x)
                the total amount of the Total Benefits reduced by the amount of such
                Total
                Benefits that in the opinion of the Accounting Firm are not parachute
                payments, or (y)
                the amount of excess parachute payments within the meaning of section
                280G(b)(1) (after applying clause (1), above),
                and

            

    

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    
      	 	
              3)

            	
              Value
                of noncash benefits and deferred payments:
                the value of any noncash benefits or any deferred payment or benefit
                shall
                be determined by the Accounting Firm in accordance with the principles
                of
                sections 280G(d)(3) and (4) of the Internal Revenue
                Code.

            

      	 	 	 

    

    Assumed
      Marginal Income Tax Rate.
      For
      purposes of determining the Gross-Up Payment Amount, the Executive shall be
      deemed to pay federal income taxes at the highest marginal rate of federal
      income taxation in the calendar years in which the Gross-Up Payment Amount
      is to
      be made and state and local income taxes at the highest marginal rate of
      taxation in the state and locality of the Executive’s residence on the date of
      termination of employment, net of the reduction in federal income taxes that
      can
      be obtained from deduction of state and local taxes (calculated by assuming
      that
      any reduction under section 68 of the Internal Revenue Code in the amount of
      itemized deductions allowable to the Executive applies first to reduce the
      amount of state and local income taxes that would otherwise be deductible by
      the
      Executive, and applicable federal FICA and Medicare withholding
      taxes).

    

    Return
      of Reduced Excise Tax Payment or Payment of Additional Excise
      Tax.
      If the
      Excise Tax is later determined to be less than the amount taken into account
      hereunder when the Executive’s employment terminated, the Executive shall repay
      to the Employer - when the amount of the reduction in Excise Tax is finally
      determined - the portion of the Gross-Up Payment Amount attributable to the
      reduction (plus that portion of the Gross-Up Payment Amount attributable to
      the
      Excise Tax, federal, state and local income taxes and FICA and Medicare
      withholding taxes imposed on the Gross-Up Payment Amount being repaid by the
      Executive to the extent that the repayment results in a reduction in Excise
      Tax,
      FICA and Medicare withholding taxes and/or a federal, state or local income
      tax
      deduction).

    

    If
      the
      Excise Tax is later determined to be more than the amount taken into account
      hereunder when the Executive’s employment terminated (due, for example, to a
      payment whose existence or amount cannot be determined at the time of the
      Gross-Up Payment Amount), the Employer shall make an additional payment to
      the
      Executive for that excess (plus any interest, penalties or additions payable
      by
      the Executive for the excess) when the amount of the excess is finally
      determined.

    

    (b) Responsibilities
      of the Accounting Firm and the Employer.
      Determinations
      Shall Be Made by the Accounting Firm.
      Subject
      to the provisions of section 5.3(a), all determinations required to be made
      under this section 5.3(b) – including whether and when a Gross-Up Payment
      Amount is required, the amount of the Gross-Up Payment Amount and the
      assumptions to be used to arrive at the determination (collectively, the
“Determination”)
–
      shall be made by the Accounting Firm, which shall provide detailed supporting
      calculations both to the Employer and the Executive within 15 business days
      after receipt of notice from the Employer or the Executive that there has been
      a
      Gross-Up Payment Amount, or such earlier time as is requested by the
      Employer.

    

    Fees
      and Expenses of the Accounting Firm and Agreement with the Accounting
      Firm.
      All
      fees and expenses of the Accounting Firm shall be borne solely by the Employer.
      The Employer shall enter into any agreement requested by the Accounting Firm
      in
      connection with the performance of its services hereunder.

    

    Accounting
      Firm’s Opinion.
      If the
      Accounting Firm determines that no Excise Tax is payable by the Executive,
      the
      Accounting Firm shall furnish the Executive with a written opinion to that
      effect and to the effect that failure to report Excise Tax, if any, on the
      Executive’s applicable federal income tax return will not result in the
      imposition of a negligence or similar penalty.

    

    Accounting
      Firm’s Determination Is Binding; Underpayment and Overpayment.
      The
      Determination by the Accounting Firm shall be binding on the Employer and the
      Executive. Because of the uncertainty when the Determination is made whether
      any
      of the Total Benefits will be subject to the Excise Tax, it is possible that
      a
      Gross-Up Payment Amount that should have been made will not have been made
      by
      the Employer (“Underpayment”)
      or
      that a Gross-Up Payment Amount will be made that should not have been made
      by
      the Employer (“Overpayment”).
      If
      after a Determination by the Accounting Firm the Executive is required to make
      a
      payment of additional Excise Tax, the Accounting Firm shall determine the amount
      of the Underpayment. The Underpayment (together with interest at the rate
      provided in section 1274(d)(2)(B) of the Internal Revenue Code) shall be paid
      promptly by the Employer to or for the benefit of the Executive. If the Gross-Up
      Payment Amount exceeds the amount necessary to reimburse the Executive for
      the
      Excise Tax according to section 5.3(a), the Accounting Firm shall determine
      the
      amount of the Overpayment. The Overpayment (together with interest at the rate
      provided in section 1274(d)(2)(B) of the Internal Revenue Code) shall be paid
      promptly by the Executive to or for the benefit of the Employer. Provided that
      the Executive’s expenses are reimbursed by the Employer, the Executive shall
      cooperate with any reasonable requests by the Employer in any contests or
      disputes with the Internal Revenue Service relating to the Excise
      Tax.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    Accounting
      Firm Conflict of Interest.
      If the
      Accounting Firm is serving as accountant or auditor for the individual, entity,
      or group effecting the Change in Control, the Executive may appoint another
      nationally recognized public accounting firm to make the Determinations required
      hereunder (in which case the term “Accounting Firm” as used in this Agreement
      shall be deemed to refer to the accounting firm appointed by the
      Executive).

    

    Article
      6

    Confidentiality
      and Creative Work

    

    6.1 Non-disclosure.
      The
      Executive covenants and agrees not to reveal to any person, firm, or corporation
      any confidential information of any nature concerning the Employer or its
      business. As used in this Article 6, the term “confidential
      information”
means
      all of the Employer’s and its affiliates’ confidential and proprietary
      information and trade secrets in existence on the date hereof or existing at
      any
      time during the term of this Agreement, including but not limited to
–

    

    (a) the
      whole
      or any portion or phase of any business plans, financial information, purchasing
      data, supplier data, accounting data, or other financial
      information,

     

    (b) the
      whole
      or any portion or phase of any research and development information, design
      procedures, algorithms or processes, or other technical
      information,

    

    (c) the
      whole
      or any portion or phase of any marketing or sales information, sales records,
      customer lists, prices, sales projections, or other sales information,
      and

    

    (d) trade
      secrets, as defined from time to time by the laws of the State of North
      Carolina.

    

    Despite
      the foregoing, confidential information excludes information that - as of the
      date hereof or at any time after the date hereof - is published or disseminated
      without obligation of confidence or that becomes a part of the public domain
      (x)
      by or
      through action of the Employer or (y)
      otherwise than by or at the Executive’s direction. This section 6.1 does not
      prohibit disclosure required by an order of a court having jurisdiction or
      a
      subpoena from an appropriate governmental agency or disclosure made by the
      Executive in the ordinary course of business and within the scope of the
      Executive’s authority.

    

    6.2 Return
      of Materials.
      The
      Executive agrees to deliver or return to the Employer upon employment
      termination, upon expiration of this Agreement, or as soon thereafter as
      possible, all written information and any other similar items furnished by
      the
      Employer or prepared by the Executive in connection with the Executive’s
      services hereunder. The Executive will retain no copies thereof after
      termination of this Agreement or termination of the Executive’s
      employment.

    

    6.3 Injunctive
      Relief.
      The
      Executive acknowledges that it is impossible to measure in money the damages
      that will accrue to the Employer if the Executive fails to observe the
      obligations imposed by this Article 6. Accordingly, if the Employer institutes
      an action to enforce the provisions hereof, the Executive hereby waives the
      claim or defense that an adequate remedy at law is available to the Employer,
      and the Executive agrees not to urge in any such action the claim or defense
      that an adequate remedy at law exists.

    

    6.4 Affiliates’
      Confidential Information is Covered; Confidentiality Obligation Survives
      Termination.
      For
      purposes of this Article 6, the term “affiliate”
of
      the
      Employer includes the Bank and any entity that directly, or indirectly through
      one or more intermediaries, controls, is controlled by, or is under common
      control with the Corporation. The rights and obligations set forth in this
      Article 6 shall survive termination of this Agreement.

     

    
      
        
        

      

      
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    6.5 Creative
      Work.
      The
      Executive agrees that all creative work and work product, including but not
      limited to all technology, business management tools, processes, software,
      patents, trademarks, and copyrights developed by the Executive during the term
      of this Agreement, regardless of when or where such work or work product was
      produced, constitutes work made for hire, all rights of which are owned by
      the
      Employer. The Executive hereby assigns to the Employer all rights, title, and
      interest, whether by way of copyrights, trade secret, trademark, patent, or
      otherwise, in all such work or work product, regardless of whether the same
      is
      subject to protection by patent, trademark, or copyright laws.

    

    Article
      7

    Miscellaneous

    

    7.1 Successors
      and Assigns.
      (a)
This
      Agreement is binding on the Employer’s successors.
      This
      Agreement shall be binding upon the Employer and any successor to the Employer,
      including any persons acquiring directly or indirectly all or substantially
      all
      of the business or assets of the Employer by purchase, merger, consolidation,
      reorganization, or otherwise. But this Agreement and the Employer’s obligations
      under this Agreement are not otherwise assignable, transferable, or delegable
      by
      the Employer. By agreement in form and substance satisfactory to the Executive,
      the Employer shall require any successor to all or substantially all of its
      business or assets expressly to assume and agree to perform this Agreement
      in
      the same manner and to the same extent the Employer would be required to perform
      had no succession occurred.

    

    (b) This
      Agreement is enforceable by the Executive’s heirs.
      This
      Agreement shall inure to the benefit of and be enforceable by the Executive’s
      personal or legal representatives, executors, administrators, successors, heirs,
      distributees, and legatees.

    

    (c) This
      Agreement is personal in nature and is not assignable.
      This
      Agreement is personal in nature. Without written consent of the other parties,
      no party shall assign, transfer, or delegate this Agreement or any rights or
      obligations under this Agreement except as expressly permitted. Without limiting
      the generality or effect of the foregoing, the Executive’s right to receive
      payments hereunder is not assignable or transferable, whether by pledge,
      creation of a security interest, or otherwise, except for a transfer by the
      Executive’s will or by the laws of descent and distribution. If the Executive
      attempts an assignment or transfer that is contrary to this section 7.1, the
      Employer shall have no liability to pay any amount to the assignee or
      transferee.

    

    7.2 Governing
      Law, Jurisdiction and Forum.
      This
      Agreement shall be construed under and governed by the internal laws of the
      State of North Carolina, without giving effect to any conflict of laws provision
      or rule (whether of the State of North Carolina or any other jurisdiction)
      that
      would cause the application of the laws of any jurisdiction other than North
      Carolina. By entering into this Agreement, the Executive acknowledges that
      the
      Executive is subject to the jurisdiction of both the federal and state courts
      in
      North Carolina. Any actions or proceedings instituted under this Agreement
      shall
      be brought and tried solely in courts located in the Wake County, North
      Carolina, or in the federal court having jurisdiction in Cary, North Carolina.
      The Executive expressly waives the right to have any such actions or proceedings
      brought or tried elsewhere.

    

    7.3 Entire
      Agreement.
      This
      Agreement sets forth the entire agreement of the parties concerning the
      employment of the Executive. Any oral or written statements, representations,
      agreements, or understandings made or entered into before or contemporaneously
      with the execution of this Agreement are hereby rescinded, revoked, and rendered
      null and void by the parties. Benefits payable under this Agreement shall not
      be
      reduced by any benefits payable under the Salary Continuation Agreement between
      the Executive and the Bank, as that agreement may be amended, and benefits
      payable under the Salary Continuation Agreement likewise shall not be reduced
      by
      any benefits payable under this Agreement. This Agreement supersedes and
      replaces in its entirety the December 31, 2003 Employment Agreement entered
      into
      by the Executive, the Bank, and the Corporation.

    

    7.4 Notices.
      Any
      notice under this Agreement shall be deemed to have been effectively made or
      given if in writing and personally delivered, delivered by mail properly
      addressed in a sealed envelope, postage prepaid by certified or registered
      mail,
      delivered by a reputable overnight delivery service, or sent by facsimile.
      Unless otherwise changed by notice, notice shall be properly addressed to the
      Executive if addressed to the address of the Executive on the books and records
      of the Employer at the time of the delivery of such notice, and properly
      addressed to the Employer if addressed to Crescent Financial Corporation, 1005
      High House Road, Cary, North Carolina 27513, Attention: Corporate
      Secretary.

     

    
      
        
        

      

      
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    7.5 Severability.
      In the
      case of conflict between any provision of this Agreement and any statute,
      regulation, or judicial precedent, the latter shall prevail, but the affected
      provisions of this Agreement shall be curtailed and limited solely to the extent
      necessary to bring them within the requirements of law. If any provision of
      this
      Agreement is held by a court of competent jurisdiction to be indefinite,
      invalid, void or voidable, or otherwise unenforceable, the balance of this
      Agreement shall continue in full force and effect unless such construction
      would
      clearly be contrary to the intentions of the parties or would result in an
      injustice.

    

    7.6 Captions
      and Counterparts.
      The
      captions in this Agreement are solely for convenience. The captions do not
      define, limit, or describe the scope or intent of this Agreement. This Agreement
      may be executed in several counterparts, each of which shall be deemed to be
      an
      original but all of which together shall constitute one and the same
      instrument.

    

    7.7 No
      Duty to Mitigate.
      The
      Employer hereby acknowledges that it will be difficult and could be impossible
      (x)
      for the
      Executive to find reasonably comparable employment after employment termination
      and (y)
      to
      measure the amount of damages the Executive may suffer as a result of
      termination. Additionally, the Employer acknowledges that its general severance
      pay plans do not provide for mitigation, offset, or reduction of any severance
      payment received thereunder. The Employer further acknowledges that the payment
      of severance benefits under this Agreement is reasonable and shall be liquidated
      damages. The Executive shall not be required to mitigate the amount of any
      payment provided for in this Agreement by seeking other employment. Moreover,
      the amount of any payment provided for in this Agreement shall not be reduced
      by
      any compensation earned or benefits provided as the result of employment of
      the
      Executive or as a result of the Executive being self-employed after employment
      termination.

    

    7.8 Amendment
      and Waiver.
      This
      Agreement may not be amended, released, discharged, abandoned, changed, or
      modified except by an instrument in writing signed by each of the parties
      hereto. The failure of any party hereto to enforce at any time any of the
      provisions of this Agreement shall not be construed to be a waiver of any such
      provision nor in any way to affect the validity of this Agreement or any part
      thereof or the right of any party thereafter to enforce each and every
      provision. No waiver or any breach of this Agreement shall be held to be a
      waiver of any other or subsequent breach.

    

    7.9 Payment
      of Legal Fees.
      The
      Employer is aware that after a Change in Control management of the Employer
      could cause or attempt to cause the Employer to refuse to comply with its
      obligations under this Agreement, or could institute or cause or attempt to
      cause the Employer 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 Employer 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 Employer 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
      Employer has failed to comply with any of its obligations under this Agreement,
      or (y)
      the
      Employer 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 Employer irrevocably authorizes the
      Executive from time to time to retain counsel of the Executive’s choice, at the
      Employer’s expense as provided in this section 7.9, to represent the Executive
      in the initiation or defense of any litigation or other legal action, whether
      by
      or against the Employer or any director, officer, stockholder, or other person
      affiliated with the Employer, in any jurisdiction. Despite any existing or
      previous attorney-client relationship between the Employer and any counsel
      chosen by the Executive under this section 7.9, the Employer irrevocably
      consents to the Executive entering into an attorney-client relationship with
      that counsel, and the Employer 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 Employer on
      a
      regular, periodic basis upon presentation by the Executive of a statement or
      statements prepared by such counsel in accordance with such counsel’s customary
      practices, up to a maximum aggregate amount of $250,000, whether suit be brought
      or not, and whether or not incurred in trial, bankruptcy, or appellate
      proceedings. The Employer’s obligation to pay the Executive’s legal fees
      provided by this section 7.9 operates separately from and in addition to any
      legal fee reimbursement obligation the Employer may have with the Executive
      under any separate employment, severance, or other agreement between the
      Executive and the Employer. Despite anything in this section 7.9 to the contrary
      however, the Employer shall not be required to pay or reimburse the Executive’s
      legal expenses if doing so would violate section 18(k) of the Federal Deposit
      Insurance Act [12 U.S.C. 1828(k)] and Rule 359.3 of the Federal Deposit
      Insurance Corporation [12 CFR 359.3].

     

    
      
        
        

      

      
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    7.10 Consultation
      with Counsel and Interpretation of this Agreement.
      The
      Executive acknowledges and agrees that the Executive has had the assistance
      of
      counsel of the Executive’s choosing in the negotiation of this Agreement, or the
      Executive has chosen not to have the assistance of counsel. Both parties hereto
      having participated in the negotiation and drafting of this Agreement, they
      hereby agree that there shall not be strict interpretation against either party
      in any review of this Agreement in which interpretation thereof is an
      issue.

    

    7.11 Compliance
      with Internal Revenue Code Section 409A.
      The
      Employer and the Executive intend that their exercise of authority or discretion
      under this Agreement shall comply with section 409A of the Internal Revenue
      Code
      of 1986. If when the Executive’s employment terminates the Executive is a
      specified employee, as defined in section 409A of the Internal Revenue Code
      of
      1986, and if any payments under this Agreement, including Articles 4 or 5,
      will
      result in additional tax or interest to the Executive because of section 409A,
      then despite any contrary provision of this Agreement the Executive shall not
      be
      entitled to the payments 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. As promptly as possible after the end of the period during
      which payments are delayed under this provision, the entire amount of the
      delayed payments shall be paid to the Executive in a single lump sum. If any
      provision of this Agreement does not satisfy the requirements of section 409A,
      such provision shall nevertheless be applied in a manner consistent with those
      requirements. If any provision of this Agreement would subject the Executive
      to
      additional tax or interest under section 409A, the Employer shall reform the
      provision. However, the Employer 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 Employer shall not be
      required to incur any additional compensation expense as a result of the
      reformed provision.

    

    In
      Witness Whereof,
      the
      parties have executed this Employment Agreement as of the date first written
      above.

    
      

        
          	
                  WITNESSES

                	 	
                  CRESCENT
                    FINANCIAL CORPORATION

                
	 	 	 
	 	 	
                  By:

                	 
	 	 	 	 
	 	 	
                  Its:

                	 
	 	 	 	 
	 	 	 	 
	
                  WITNESSES

                	 	
                  CRESCENT
                    STATE BANK

                
	 	 	 	 
	 	 	
                  By:

                	 
	 	 	 	 
	 	 	
                  Its:

                	 
	 	 	 	 
	 	 	 	 
	
                  WITNESSES

                	 	
                  EXECUTIVE

                
	 	 	 
	 	 	 
	 	 	
                       /s/
                    Michael G. Carlton

                
	 	 	
                  Michael
                    G. Carlton

                

        

      

      
         

      

    

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    

      
        	
                County
                  of Wake 

              	
                )

              
	 	
                                  )
                  ss:

              
	
                State
                  of North Carolina

              	
                )

              

      

    

     

    Before
      me
      this                    
      day
      of                                                               ,
      2007,
      personally appeared the above named and
      Michael G. Carlton, who acknowledged that they did sign the foregoing instrument
      and that the same was their free act and deed.

    

      
        	
                (Notary
                  Seal)

              	
                Notary
                  Public

              
	 	 
	 	
                My
                  Commission Expires:

              

      

    

    

    
      
        
        

      

      
        14

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