Document:

EXHIBIT
      10(xviii)

     

    Crescent
      State Bank

    Salary
      Continuation Agreement

    

    This
      Salary
      Continuation Agreement
      (this
“Agreement”) is entered into as of this 24 day of October, 2007, by and between
      Crescent State Bank, a North Carolina chartered commercial bank (the “Bank”),
      and W. Keith Betts, an executive of the Bank (the “Executive”).

    

    Whereas,
      the
      Executive has contributed substantially to the success of the Bank and the
      Bank
      desires that the Executive continue in its employ,

    

    Whereas,
      to
      encourage the Executive to remain an employee, the Bank is willing to provide
      salary continuation benefits to the Executive, payable from the Bank’s general
      assets,

    

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

    

    Whereas,
      the
      parties hereto intend that this Agreement shall be considered an unfunded
      arrangement maintained primarily to provide supplemental retirement benefits
      for
      the Executive, and to be considered a non-qualified benefit plan for purposes
      of
      the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). The
      Executive is fully advised of the Bank’s financial status.

    

    Now
      Therefore,
      in
      consideration of these premises and other good and valuable consideration,
      the
      receipt and sufficiency of which are hereby acknowledged, the Executive and
      the
      Bank hereby agree as follows.

    

    Article
      1

    Definitions

    

    1.1 “Accrual
      Balance”
means
      the liability that should be accrued by the Bank under generally accepted
      accounting principles (“GAAP”) for the Bank’s obligation to the Executive under
      this Agreement, applying Accounting Principles Board Opinion No. 12, as amended
      by Financial Accounting Standard No. 106, and the calculation method and
      discount rate specified hereinafter. The Accrual Balance shall be calculated
      such that when it is credited with interest each month, the Accrual Balance
      at
      Normal Retirement Age (or such later date as the Executive is entitled under
      section 2.1 to receive the normal retirement benefits) equals the present value
      of the normal retirement benefits. The discount rate means the rate used by
      the
      Plan Administrator for determining the Accrual Balance. The rate is based on
      the
      yield on a 20-year corporate bond rated Aa by Moody’s, rounded to the nearest
1⁄4%. In its sole discretion, the Plan Administrator may adjust the discount rate
      to maintain the rate within reasonable standards according to GAAP.

    

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

    

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

    

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

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    (a) Change
      in ownership:
      a
      change in ownership of Crescent Financial Corporation, a North Carolina
      corporation of which the Bank is a wholly owned subsidiary, occurs on the date
      any one person or group accumulates ownership of Crescent Financial Corporation
      stock constituting more than 50% of the total fair market value or total voting
      power of Crescent Financial 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 Crescent Financial Corporation stock possessing 30% or
      more
      of the total voting power of Crescent Financial Corporation stock, or
      (y)
      a
      majority of Crescent Financial 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 Crescent Financial Corporation’s board of
      directors, or

    

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

    

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

    

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

    

    1.7 “Early
      Termination”
means
      Separation from Service before Normal Retirement Age for reasons other than
      death, Disability, or Termination for Cause.

    

    1.8 “Effective
      Date”
means
      January 1, 2007.

    

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

    

    1.10 “Normal
      Retirement Age”
means
      the Executive’s 65th
      birthday.

    

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

    

    1.12 “Plan
      Year”
means
      a
      twelve-month period commencing on January 1 and ending on December 31 of each
      year. The initial Plan Year shall commence on the effective date of this
      Agreement.

    

    1.13 “Separation
      from Service”
means
      the Executive’s service as an executive and independent contractor to the Bank
      and any member of a controlled group, as defined in Code section 414, terminates
      for any reason, other than because of a leave of absence approved by the Bank
      or
      the Executive’s death. For purposes of this Agreement, if there is a dispute
      about the employment status of the Executive or the date of the Executive’s
      Separation from Service, the Bank shall have the sole and absolute right to
      decide the dispute unless a Change in Control shall have
      occurred.

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    

    1.14 “Termination
      for Cause”
and
      “Cause”
shall
      have the same meaning specified in any effective severance or employment
      agreement existing on the date hereof or hereafter entered into between the
      Executive and the Bank. If the Executive is not a party to a severance or
      employment agreement containing a definition of termination for cause,
      Termination for Cause means the Bank terminates the Executive’s employment for
      any of the following reasons –

    

    (a) an
      intentional act of fraud, embezzlement, or theft by the Executive in the course
      of employment. 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 Employer’s best
      interests. 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, or

    

    (b) intentional
      violation by the Executive of any applicable law or significant policy of the
      Bank that, in the Bank’s reasonable judgement, results in an adverse effect on
      the Bank, regardless of whether the violation leads to criminal prosecution
      or
      conviction. For purposes of this Agreement applicable laws include any statute,
      rule, regulatory order, statement of policy, or final cease-and-desist order
      of
      any governmental agency or body having regulatory authority over the Bank,
      or

    

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

    

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

    

    (e) a
      breach
      by the Executive of fiduciary duties or misconduct involving dishonesty, in
      either case whether in the Executive’s capacity as an officer or as a director,
      or

    

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

    

    (g) conviction
      of the Executive for or plea of no contest to a felony or conviction of or
      plea
      of no contest to a misdemeanor involving moral turpitude, or the actual
      incarceration of the Executive for five consecutive days or more,
      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 Bank, under the Bank’s blanket bond or other fidelity or
      liability insurance policy covering its directors, officers, or
      employees.

    

    Article
      2

    Lifetime
      Benefits

    

    2.1 Normal
      Retirement.
      Unless
      the benefit is payable or shall have been paid under section 2.4 after a Change
      in Control, for Separation from Service on or after Normal Retirement Age for
      reasons other than death or Termination for Cause the Bank shall pay to the
      Executive the benefit described in this section 2.1 instead of any other benefit
      under this Agreement.

    

    2.1.1 Amount
      of benefit.
      The
      annual benefit under this section 2.1 is $50,000.

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    

    2.1.2 Payment
      of benefit.
      Beginning with the seventh month after the month in which the Executive’s
      Separation from Service occurs, the Bank shall pay the annual benefit to the
      Executive in equal monthly installments on the first day of each month. The
      annual benefit shall be paid to the Executive for the Executive’s
      lifetime.

     

    2.2 Early
      Termination.
      Unless
      the benefit is payable or shall have been paid under section 2.4 after a Change
      in Control, if Early Termination occurs on or after the date the Executive
      attains age 55 the Bank shall pay to the Executive the benefit described in
      this
      section 2.2 instead of any other benefit under this Agreement. If Early
      Termination occurs before the Executive attains age 55, no benefit shall be
      payable under this section 2.2. No benefits shall be payable under this
      Agreement if the Executive’s employment is terminated under circumstances
      described in Article 5 of this Agreement.

    

    2.2.1 Amount
      of benefit.
      The
      annual benefit under this section 2.2 is calculated as the amount that fully
      amortizes the Accrual Balance existing at the end of the month immediately
      before the month in which Separation from Service occurs, amortizing that
      Accrual Balance over the period beginning with the Executive’s Normal Retirement
      Age and taking into account interest at the discount rate or rates established
      by the Plan Administrator.

    

    2.2.2 Payment
      of benefit.
      Beginning with the later of (x)
      the
      seventh month after the month in which the Executive’s Separation from Service
      occurs, or (y)
      the
      month immediately after the month in which the Executive attains Normal
      Retirement Age, the Bank shall pay the benefit under this section 2.2 to the
      Executive in equal monthly installments on the first day of each month. The
      annual benefit shall be paid to the Executive for the Executive’s
      lifetime.

    

    2.3 Disability.
      Unless
      the benefit is payable or shall have been paid under section 2.4 after a Change
      in Control, if Separation from Service occurs because of Disability before
      Normal Retirement Age the Bank shall pay to the Executive the benefit described
      in this section 2.3 instead of any other benefit under this
      Agreement.

    

    2.3.1 Amount
      of benefit.
      The
      annual benefit under this section 2.3 is calculated as the amount that fully
      amortizes the Accrual Balance existing at the end of the month immediately
      before the month in which Separation from Service occurs, amortizing that
      Accrual Balance over the period beginning with the Executive’s Normal Retirement
      Age and taking into account interest at the discount rate or rates established
      by the Plan Administrator.

    

    2.3.2 Payment
      of benefit.
      Beginning with the later of (x)
      the
      seventh month after the month in which the Executive’s Separation from Service
      occurs, or (y)
      the
      month immediately after the month in which the Executive attains Normal
      Retirement Age, the Bank shall pay the benefit under this section 2.3 to the
      Executive in equal monthly installments on the first day of each month. The
      annual benefit shall be paid to the Executive for the Executive’s
      lifetime.

    

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

    2.4.1 Amount
      of benefit.
      The
      benefit under this section 2.4 is the Normal Retirement Age Accrual Balance
      required by section 2.1, without reduction for the time value of money or other
      discount.

    

    2.4.2 Payment
      of benefit.
      The
      Bank shall pay the benefit under this section 2.4 to the Executive in a single
      lump sum within three days after the Change in Control. If the Executive
      receives the benefit under this section 2.4 because of the occurrence of a
      Change in Control, the Executive shall not be entitled to claim additional
      benefits under section 2.4 if an additional Change in Control occurs
      thereafter.

    

    2.5 Change-in-Control
      Payout of Normal Retirement Benefit, Early Termination Benefit, or Disability
      Benefit Being Paid to the Executive at the Time of a Change in
      Control.
      If when
      a Change in Control occurs the Executive is receiving the benefit under section
      2.1, the Bank shall pay the remaining salary continuation benefits to the
      Executive in a single lump sum on the date of the Change in Control. If when
      a
      Change in Control occurs the Executive is receiving or is entitled at Normal
      Retirement Age to receive the benefit under sections 2.2 or 2.3, the Bank shall
      pay the remaining salary continuation benefits to the Executive in a single
      lump
      sum on the later of (x)
      the
      date of the Change in Control or (y)
      the
      first day of the seventh month after the month in which the Executive’s
      Separation from Service occurs. The lump-sum payment due to the Executive as
      a
      result of a Change in Control shall be an amount equal to the Accrual Balance
      amount corresponding to the particular benefit when the Change in Control
      occurs.

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    

    2.6 Contradiction
      Between the Agreement and Schedule A.
      If
      there is a contradiction between this Agreement and Schedule A attached hereto
      concerning the amount of a particular benefit due the Executive under section
      2.2, 2.3, or 2.4 hereof, the amount of the benefit determined under this
      Agreement shall control.

    

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

    

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

    

    

    Article
      3

    Death
      Benefits

    

    3.1 Death
      Before Separation from Service.
      Except
      as provided in section 5.2, if the Executive dies before Separation from
      Service, at the Executive’s death the Executive’s Beneficiary shall be entitled
      to (x)
      an
      amount in cash equal to the Accrual Balance existing at the Executive’s death,
      unless the Change-in-Control benefit shall have been paid to the Executive
      under
      section 2.4 or unless a Change-in-Control payout shall have occurred under
      section 2.5, and (y)
      the
      benefit, if any, payable under the Endorsement Split Dollar Agreement attached
      to this Agreement as Addendum A. No benefit shall be paid under clause
      (x)
      if the
      Change-in-Control benefit shall have been paid to the Executive under section
      2.4 or if a Change-in-Control payout shall have occurred under section 2.5.
      If a
      benefit is payable to the Executive’s Beneficiary under clause (x),
      the
      benefit shall be paid in a single lump sum 90 days after the Executive’s death.
      However, no benefits under this Agreement or under the Endorsement Split Dollar
      Agreement shall be paid or payable to the Executive or the Executive’s
      Beneficiary if this Agreement is terminated under Article 5.

    

    3.2 Death
      after Separation from Service.
      If the
      Executive dies after Separation from Service and if Separation from Service
      was
      not a Termination for Cause, at the Executive’s death the Executive’s
      Beneficiary shall be entitled to an amount in cash equal to the Accrual Balance
      existing at the Executive’s death, unless the Change-in-Control benefit shall
      have been paid to the Executive under section 2.4 or unless a Change-in-Control
      payout shall have occurred under section 2.5. No benefit shall be paid under
      this section 3.2 if the Change-in-Control benefit shall have been paid to the
      Executive under section 2.4 or if a Change-in-Control payout shall have occurred
      under section 2.5. If a benefit is payable to the Executive’s Beneficiary under
      this section 3.2, the benefit shall be paid in a single lump sum 90 days after
      the Executive’s death. However, no benefits under this Agreement shall be paid
      or payable to the Executive or the Executive’s Beneficiary if this Agreement is
      terminated under Article 5.

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    

    Article
      4

    Beneficiaries

    

    4.1 Beneficiary
      Designations.
      The
      Executive shall have the right to designate at any time a Beneficiary to receive
      any benefits payable under this Agreement at the Executive’s death. The
      Beneficiary designated under this Agreement may be the same as or different
      from
      the beneficiary designation under any other benefit plan of the Bank in which
      the Executive participates.

    

    4.2 Beneficiary
      Designation: Change.
      The
      Executive shall designate a Beneficiary by completing and signing the
      Beneficiary Designation Form and delivering it to the Plan Administrator or
      its
      designated agent. The Executive’s Beneficiary designation shall be deemed
      automatically revoked if the Beneficiary predeceases the Executive or if the
      Executive names a spouse as Beneficiary and the marriage is subsequently
      dissolved. The Executive shall have the right to change a Beneficiary by
      completing, signing, and otherwise complying with the terms of the Beneficiary
      Designation Form and the Plan Administrator’s rules and procedures, as in effect
      from time to time. Upon the acceptance by the Plan Administrator of a new
      Beneficiary Designation Form, all Beneficiary designations previously filed
      shall be cancelled. The Plan Administrator shall be entitled to rely on the
      last
      Beneficiary Designation Form filed by the Executive and accepted by the Plan
      Administrator before the Executive’s death.

    

    4.3 Acknowledgment.
      No
      designation or change in designation of a Beneficiary shall be effective until
      received, accepted, and acknowledged in writing by the Plan Administrator or
      its
      designated agent.

    

    4.4 No
      Beneficiary Designation.
      If the
      Executive dies without a valid beneficiary designation, or if all designated
      Beneficiaries predecease the Executive, then the Executive’s spouse shall be the
      designated Beneficiary. If the Executive has no surviving spouse, the benefits
      shall be made to the personal representative of the Executive’s
      estate.

    

    4.5 Facility
      of Payment.
      If a
      benefit is payable to a minor, to a person declared incapacitated, or to a
      person incapable of handling the disposition of his or her property, the Bank
      may pay the benefit to the guardian, legal representative, or person having
      the
      care or custody of the minor, incapacitated person, or incapable person. The
      Bank may require proof of incapacity, minority, or guardianship as it may deem
      appropriate before distribution of the benefit. Distribution shall completely
      discharge the Bank from all liability for the benefit.

    

    Article
      5

    General
      Limitations

    

    5.1 Termination
      for Cause.
      Despite
      any contrary provision of this Agreement, the Bank shall not pay any benefit
      under this Agreement and this Agreement shall terminate if Separation from
      Service is a Termination for Cause. Likewise, the Beneficiary shall be entitled
      to no benefits under the Endorsement Split Dollar Agreement attached to this
      Agreement as Addendum A and the Endorsement Split Dollar Agreement also shall
      terminate if Separation from Service is the result of Termination for
      Cause.

    

    5.2 Suicide
      or Misstatement.
      No
      benefits shall be paid under this Agreement or the Endorsement Split Dollar
      Agreement if the Executive commits suicide within two years after the date
      of
      this Agreement or if the Executive makes any material misstatement of fact
      on
      any application or resume provided to the Bank or on any application for
      benefits provided by the Bank.

    

    5.3 Removal.
      If the
      Executive is removed from office or permanently prohibited from participating
      in
      the Bank’s affairs by an order issued under section 8(e)(4) or (g)(1) of the
      Federal Deposit Insurance Act, 12 U.S.C. 1818(e)(4) or (g)(1), all obligations
      of the Bank under this Agreement shall terminate as of the effective date of
      the
      order and the Endorsement Split Dollar Agreement also shall terminate as of
      the
      effective date of the order.

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    

    5.4 Default.
      Despite
      any contrary provision of this Agreement, if the Bank is in “default” or “in
      danger of default,” as those terms are defined in section 3(x) of the Federal
      Deposit Insurance Act, 12 U.S.C. 1813(x), all obligations under this Agreement
      shall terminate.

    

    5.5 FDIC
      Open-Bank Assistance.
      All
      obligations under this Agreement shall terminate, except to the extent
      determined that continuation of the contract is necessary for the continued
      operation of the Bank, when the Federal Deposit Insurance Corporation enters
      into an agreement to provide assistance to or on behalf of the Bank under the
      authority contained in Federal Deposit Insurance Act section 13(c). 12 U.S.C.
      1823(c). Rights of the parties that have already vested shall not be affected
      by
      such action, however.

    

    Article
      6

    Claims
      and Review Procedures

    

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

    

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

    

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

    

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

    

    
      	 	
              6.1.3.1

            	
              the
                specific reasons for the denial,

            

    

    

    
      	 	
              6.1.3.2

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

            

    

    
      	 	
              6.1.3.3

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

            

    

    

    
      	 	
              6.1.3.4

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

            

    

    

    
      	 	
              6.1.3.5

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

            

    

    

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

    

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

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    

    6.2.2 Additional
      submissions – information access.
      The
      claimant shall then have the opportunity to submit written comments, documents,
      records, and other information relating to the claim. Upon request and free
      of
      charge, the Bank shall also provide the claimant reasonable access to and copies
      of all documents, records, and other information relevant (as defined in
      applicable ERISA regulations) to the claimant’s claim for benefits.

    

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

    

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

    

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

    

    
      	 	
              6.2.5.1

            	
              the
                specific reason for the denial,

            

    

    

    
      	 	
              6.2.5.2

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

            

    

    

    
      	 	
              6.2.5.3

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

            

    

    

    
      	 	
              6.2.5.4

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

            

    

    

    Article
      7

    Miscellaneous

    

    7.1 Amendments
      and Termination.
      Subject
      to section 7.14 of this Agreement, this Agreement may be amended solely by
      a
      written agreement signed by the Bank and by the Executive, and except for
      termination occurring under Article 5, this Agreement may be terminated solely
      by a written agreement signed by the Bank and by the Executive.

    

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

    

    7.3 No
      Guarantee of Employment.
      This
      Agreement is not an employment policy or contract. It does not give the
      Executive the right to remain an employee of the Bank nor does it interfere
      with
      the Bank’s right to discharge the Executive. It also does not require the
      Executive to remain an employee or interfere with the Executive’s right to
      terminate employment at any time.

    

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

    

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

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    

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

    

    7.7 Applicable
      Law.
      This
      Agreement and all rights hereunder shall be governed by the laws of the State
      of
      North Carolina, except to the extent preempted by the laws of the United States
      of America.

    

    7.8 Unfunded
      Arrangement.
      The
      Executive and Beneficiary are general unsecured creditors of the Bank for the
      payment of benefits under this Agreement. The benefits represent the mere
      promise by the Bank to pay benefits. Rights to benefits are not subject to
      anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
      attachment, or garnishment by creditors. Any insurance on the Executive’s life
      is a general asset of the Bank to which the Executive and Beneficiary have
      no
      preferred or secured claim.

    

    7.9 Entire
      Agreement.
      This
      Agreement and the Endorsement Split Dollar Agreement attached as Addendum A
      constitute the entire agreement between the Bank and the Executive concerning
      the subject matter. No rights are granted to the Executive under this Agreement
      other than those specifically set forth.

    

    7.10 Severability.
      If any
      provision of this Agreement is held invalid, such invalidity shall not affect
      any other provision of this Agreement not held invalid, and each such other
      provision shall continue in full force and effect to the full extent consistent
      with law. If any provision of this Agreement is held invalid in part, such
      invalidity shall not affect the remainder of the provision not held invalid,
      and
      the remainder of such provision together with all other provisions of this
      Agreement shall continue in full force and effect to the full extent consistent
      with law.

    

    7.11 Headings.
      Caption
      headings and subheadings herein are included solely for convenience of reference
      and shall not affect the meaning or interpretation of any provision of this
      Agreement.

    

    7.12 Notices.
      All
      notices, requests, demands, and other communications hereunder shall be in
      writing and shall be deemed to have been duly given if delivered by hand or
      mailed, certified or registered mail, return receipt requested, with postage
      prepaid, to the following addresses or to such other address as either party
      may
      designate by like notice. If to the Bank, notice shall be given to the board
      of
      directors, Crescent State Bank, 1005 High House Road, P.O. Box 5809, Cary,
      North
      Carolina 27513, or to such other or additional person or persons as the Bank
      shall designate to the Executive in writing. If to the Executive, notice shall
      be given to the Executive at the Executive’s address appearing on the Bank’s
      records or to such other or additional person or persons as the Executive shall
      designate to the Bank in writing.

    

    7.13 Payment
      of Legal Fees.
      The
      Bank is aware that after a Change in Control management of the Bank could cause
      or attempt to cause the Bank to refuse to comply with its obligations under
      this
      Agreement, or could institute or cause or attempt to cause the Bank to institute
      litigation seeking to have this Agreement declared unenforceable, or could
      take
      or attempt to take other action to deny Executive the benefits intended under
      this Agreement. In these circumstances the purpose of this Agreement would
      be
      frustrated. The Bank desires that the Executive not be required to incur the
      expenses associated with the enforcement of rights under this Agreement, whether
      by litigation or other legal action, because the cost and expense thereof would
      substantially detract from the benefits intended to be granted to the Executive
      hereunder. The Bank desires that the Executive not be forced to negotiate
      settlement of rights under this Agreement under threat of incurring expenses.
      Accordingly, if after a Change in Control occurs it appears to the Executive
      that (x)
      the
      Bank has failed to comply with any of its obligations under this Agreement,
      or
      (y)
      the
      Bank or any other person has taken any action to declare this Agreement void
      or
      unenforceable, or instituted any litigation or other legal action designed
      to
      deny, diminish, or to recover from the Executive the benefits intended to be
      provided to the Executive hereunder, the Bank irrevocably authorizes the
      Executive from time to time to retain counsel of the Executive’s choice, at the
      Bank’s expense as provided in this section 7.13, to represent the Executive in
      the initiation or defense of any litigation or other legal action, whether
      by or
      against the Bank or any director, officer, stockholder, or other person
      affiliated with the Bank, in any jurisdiction. Despite any existing or previous
      attorney-client relationship between the Bank and any counsel chosen by the
      Executive under this section 7.13, the Bank irrevocably consents to the
      Executive entering into an attorney-client relationship with that counsel,
      and
      the Bank and the Executive agree that a confidential relationship shall exist
      between the Executive and that counsel. The fees and expenses of counsel
      selected from time to time by the Executive as provided in this section shall
      be
      paid or reimbursed to the Executive by the Bank on a regular, periodic basis
      upon presentation by the Executive of a statement or statements prepared by
      counsel in accordance with counsel’s customary practices, up to a maximum
      aggregate amount of $50,000, whether suit be brought or not, and whether or
      not
      incurred in trial, bankruptcy, or appellate proceedings. The Bank’s obligation
      to pay the Executive’s legal fees provided by this section 7.13 operates
      separately from and in addition to any legal fee reimbursement obligation the
      Bank may have with the Executive under any separate employment, severance,
      or
      other agreement between the Executive and the Bank. Despite anything in this
      section 7.13 to the contrary however, the Bank shall not be required to pay
      or
      reimburse the Executive’s legal expenses if doing so would violate section 18(k)
      of the Federal Deposit Insurance Act [12 U.S.C. 1828(k)] and Rule 359.3 of
      the
      Federal Deposit Insurance Corporation [12 CFR 359.3].

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    

    7.14 Termination
      or Modification of Agreement Because of Changes in Law, Rules or
      Regulations.
      The
      Bank is entering into this Agreement on the assumption that certain existing
      tax
      laws, rules, and regulations will continue in effect in their current form.
      If
      that assumption materially changes and the change has a material detrimental
      effect on this Agreement, then the Bank reserves the right to terminate or
      modify this Agreement accordingly, subject to the written consent of the
      Executive, which shall not be unreasonably withheld. This section 7.14 shall
      become null and void effective immediately if a Change in Control
      occurs.

    

    7.15 Periodic
      Review.
      The
      Bank will periodically review this Agreement for reasonableness of benefits,
      taking into account benefits provided under this Agreement and other
      Bank-provided benefits. Other Bank-provided benefits include but are not limited
      to (x)
      the
      Bank 401(k) match and (y)
      the
      Bank portion of Social Security benefits.

    

    Article
      8

    Administration
      of Agreement

    

    8.1 Plan
      Administrator Duties.
      This
      Agreement shall be administered by a Plan Administrator consisting of the board
      or such committee or person(s) as the board shall appoint. The Executive may
      not
      be a member of the Plan Administrator. The Plan Administrator shall also have
      the discretion and authority to (x)
      make,
      amend, interpret, and enforce all appropriate rules and regulations for the
      administration of this Agreement and (y)
      decide
      or resolve any and all questions, including interpretations of this Agreement,
      as may arise in connection with the Agreement.

    

    8.2 Agents.
      In the
      administration of this Agreement, the Plan Administrator may employ agents
      and
      delegate to them such administrative duties as it sees fit (including acting
      through a duly appointed representative) and may from time to time consult
      with
      counsel, who may be counsel to the Bank.

    

    8.3 Binding
      Effect of Decisions.
      The
      decision or action of the Plan Administrator concerning any question arising
      out
      of the administration, interpretation, and application of the Agreement and
      the
      rules and regulations promulgated hereunder shall be final and conclusive and
      binding upon all persons having any interest in the Agreement. No Executive
      or
      Beneficiary shall be deemed to have any right, vested or nonvested, regarding
      the continued use of any previously adopted assumptions, including but not
      limited to the discount rate and calculation method described in section
      1.1.

    

    8.4 Indemnity
      of Plan Administrator.
      The
      Bank shall indemnify and hold harmless the members of the Plan Administrator
      against any and all claims, losses, damages, expenses, or liabilities arising
      from any action or failure to act with respect to this Agreement, except in
      the
      case of willful misconduct by the Plan Administrator or any of its
      members.

    

    8.5 Bank
      Information.
      To
      enable the Plan Administrator to perform its functions, the Bank shall supply
      full and timely information to the Plan Administrator on all matters relating
      to
      the date and circumstances of the retirement, Disability, death, or Separation
      from Service of the Executive and such other pertinent information as the Plan
      Administrator may reasonably require.

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    

    In
      Witness Whereof,
      the
      Executive and a duly authorized officer of the Bank have executed this Salary
      Continuation Agreement as of the date first written above.

    

    
      	
              Executive:

            	 	
              Bank:

            
	 	 	
              Crescent
                State Bank

            
	 	 	 
	
              /s/
                W. Keith Betts

            	 	
              By:
                

            
	
              W.
                Keith Betts

            	 	 
	 	 	
              Its:

            
	 	 	 
	 	 	
              And
                By:

            
	 	 	 
	 	 	
              Its:

            

    

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    Beneficiary
      Designation

    Crescent
      State Bank

    Salary
      Continuation Agreement

    

    I,
      W.
      Keith Betts, designate the following as beneficiary of any death benefits under
      this Salary Continuation Agreement –

    

    Primary:

    _________________________________________________________________________________.

    

    Contingent:

    _________________________________________________________________________________.

    

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

    

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

    

    Signature: 

    W.
      Keith
      Betts

    

    
      	 	
              Date:

            	 	
                                                                                      
                ,
                200

            

    

    

    Accepted
      by the Bank this                     
       day
      of                                                     
      ,
      200

    

    
      	 	
              By:

            	 	
               

            

    

    

    Print
      Name:

    

    
      	 	
              Title:

            	 	
               

            

    

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    Schedule
      A

    Crescent
      State Bank

    Salary
      Continuation Agreement

    

    W.
      Keith Betts

     

    
      
        	
                Plan

                Year

              	 	
                Plan Year

                ending

                December

                31,

              	   	
                Age

                at

                Plan

                Year

                end

              	   	
                Accrual

                Balance @

                6.25% (1)

              	   	
                Early 

                Termination

                annual benefit

                payable at

                Normal

                Retirement Age

                (2)

              	   	
                Disability

                annual benefit

                payable at

                Normal

                Retirement Age

                (2)

              	   	
                Change-in-Control benefit

                payable in a

                lump sum (3)

              	 
	
                1

              	 	 	
                2007

              	 	 	
                51

              	 	
                $

              	
                21,843

              	 	
                $

              	
                0

              	 	
                $

              	
                4,975

              	 	
                $

              	
                525,487

              	 
	
                2

              	 	 	
                2008

              	 	 	
                52

              	 	
                $

              	
                45,092

              	 	
                $

              	
                0

              	 	
                $

              	
                9,648

              	 	
                $

              	
                525,487

              	 
	
                3

              	 	 	
                2009

              	 	 	
                53

              	 	
                $

              	
                69,836

              	 	
                $

              	
                0

              	 	
                $

              	
                14,040

              	 	
                $

              	
                525,487

              	 
	
                4

              	 	 	
                2010

              	 	 	
                54

              	 	
                $

              	
                96,171

              	 	
                $

              	
                0

              	 	
                $

              	
                18,166

              	 	
                $

              	
                525,487

              	 
	
                5

              	 	 	
                2011

              	 	 	
                55

              	 	
                $

              	
                124,201

              	 	
                $

              	
                22,043

              	
                (4)  

              	
                $

              	
                22,043

              	 	
                $

              	
                525,487

              	 
	
                6

              	 	 	
                2012

              	 	 	
                56

              	 	
                $

              	
                154,033

              	 	
                $

              	
                25,685

              	 	
                $

              	
                25,685

              	 	
                $

              	
                525,487

              	 
	
                7

              	 	 	
                2013

              	 	 	
                57

              	 	
                $

              	
                185,784

              	 	
                $

              	
                29,107

              	 	
                $

              	
                29,107

              	 	
                $

              	
                525,487

              	 
	
                8

              	 	 	
                2014

              	 	 	
                58

              	 	
                $

              	
                219,578

              	 	
                $

              	
                32,323

              	 	
                $

              	
                32,323

              	 	
                $

              	
                525,487

              	 
	
                9

              	 	 	
                2015

              	 	 	
                59

              	 	
                $

              	
                255,545

              	 	
                $

              	
                35,344

              	 	
                $

              	
                35,344

              	 	
                $

              	
                525,487

              	 
	
                10

              	 	 	
                2016

              	 	 	
                60

              	 	
                $

              	
                293,825

              	 	
                $

              	
                38,182

              	 	
                $

              	
                38,182

              	 	
                $

              	
                525,487

              	 
	
                11

              	 	 	
                2017

              	 	 	
                61

              	 	
                $

              	
                334,568

              	 	
                $

              	
                40,849

              	 	
                $

              	
                40,849

              	 	
                $

              	
                525,487

              	 
	
                12

              	 	 	
                2018

              	 	 	
                62

              	 	
                $

              	
                377,932

              	 	
                $

              	
                43,355

              	 	
                $

              	
                43,355

              	 	
                $

              	
                525,487

              	 
	
                13

              	 	 	
                2019

              	 	 	
                63

              	 	
                $

              	
                424,084

              	 	
                $

              	
                45,710

              	 	
                $

              	
                45,710

              	 	
                $

              	
                525,487

              	 
	
                14

              	 	 	
                2020

              	 	 	
                64

              	 	
                $

              	
                473,206

              	 	
                $

              	
                47,922

              	 	
                $

              	
                47,922

              	 	
                $

              	
                525,487

              	 
	
                15

              	 	 	
                2021

              	 	 	
                65

              	 	
                $

              	
                525,487

              	
                (5)  

              	
                $

              	
                50,000

              	 	
                $

              	
                50,000

              	 	
                $

              	
                525,487

              	 

      

    

     

    (1)
       Calculations
      are approximations. Benefit calculations are based on prior year-end accrual
      balances for illustrative purposes. The accrual balance reflects payment at
      the
      beginning of each month during retirement. For purposes of this illustration,
      the accrual balance figures do not take account of the six-month delay under
      Internal Revenue Code section 409A and section 2.1 of the Salary Continuation
      Agreement between Separation from Service and the date when benefits under
      section 2.1 commence.

    (2)
       The
      Early
      Termination and Disability benefits are calculated as the annual amount that
      fully amortizes the Accrual Balance existing at the end of the month immediately
      before the month in which Separation from Service occurs, amortizing that
      Accrual Balance over the period beginning with the Executive’s Normal Retirement
      Age and taking into account interest at the discount rate or rates established
      by the Plan Administrator. Using a standard discount rate (6.25%), Early
      Termination and Disability benefits are shown for illustrative purposes only.
      The Early Termination and Disability benefits shown assume the Executive’s
      Separation from Service occurs more than six months before the Executive’s
      Normal Retirement Age and that the Early Termination benefit and the Disability
      benefit therefore become payable beginning in the month after the Executive
      attains the Normal Retirement Age.

    (3) The
      change-in-control benefit under section 2.4 of the Salary Continuation Agreement
      is the Normal Retirement Age Accrual Balance required by section 2.1 of the
      Salary Continuation Agreement, plus interest through the end of the sixth month
      after Separation from Service, without reduction for the time value of money
      or
      other discount.

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    

    (4) The
      Executive becomes vested in the Early Termination benefit at age 55 on December
      2, 2011.

    (5) Projected
      retirement occurs in December 2021, with the first monthly normal retirement
      benefit payment on the first day of the seventh month after retirement, or
      July
      1, 2022. For purposes of this illustration, the accrual balance figure as of
      December 2021 does not take account of the six-month delay under Internal
      Revenue Code section 409A and section 2.1 of the Salary Continuation Agreement
      between Separation from Service and the date when benefits under section 2.1
      commence.

    

    If
      there
      is a contradiction between the terms of the Agreement and Schedule A concerning
      the amount of a particular benefit due the Executive under sections 2.2, 2.3,
      or
      2.4 of the Agreement, the amount of the benefit determined under the Agreement
      shall control.

    
      
        
        

      

      
        14EXHIBIT
      10(xix)

    

    Employment
      Agreement

    

    This
      Employment
      Agreement
      (this
“Agreement”)
      is
      entered into effective as of this 24 day of October, 2007, by and among Ray
      D.
      Vaughn (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 Senior Vice President of the Bank, possessing unique skills,
      knowledge, and experience relating to the business of banking, 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 February 28, 2006 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 Senior Vice President
      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.
      The
      Executive shall serve under the direction of the Employer’s President and Chief
      Executive Officer and in accordance with the Employer’s Articles of
      Incorporation and Bylaws, as the Articles of Incorporation and Bylaws may be
      amended or restated from time to time. The Executive shall report directly
      to
      the President and Chief Executive Officer. 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 Article 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
      of Employment.
      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 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.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    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 $160,000, 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, 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, country club dues 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.

    

    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 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.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    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 2.4 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 Employer’s best
      interests, or

    

    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 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 without cost to the Executive’s
      family continuing health care coverage under COBRA substantially identical
      to
      that provided for the Executive before death.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    (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 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 with Cause.
      The
      Employer may terminate the Executive’s employment with Cause. If the Executive’s
      employment is terminated with 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 with 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. For purposes of this Agreement “Cause”
means
      any of the following occur -

    

    (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 Executive’s part
      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 Employer’s best
      interests, 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

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    (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.
      If the
      Executive terminates employment voluntarily, 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.
      With
      written notice to the Executive 60 days in advance, the Employer may terminate
      the Executive’s employment without Cause. Termination shall take effect at the
      end of the 60-day period. If the Executive’s employment terminates involuntarily
      without Cause, the Executive shall be entitled to the benefits specified in
      Article 4 of this Agreement.

    

    3.5 Notice.
      Any
      purported termination by the Employer or by the Executive shall be communicated
      by written notice of termination to the other. The notice must state the
      specific termination provision of this Agreement relied upon. The notice must
      also state the date on which termination shall become effective, which shall
      be
      a date not earlier than the date of the termination notice. If termination
      is an
      involuntary termination with Cause, the notice must state in reasonable detail
      the facts and circumstances forming the basis for termination of the Executive’s
      employment.

    

    Article
      4

    Severance

    

    4.1 Termination
      Without Cause.
      Subject
      to the possibility that continued Base Salary for the first six months after
      employment termination might be delayed because of section 4.2, if the
      Executive’s employment terminates involuntarily but without Cause the Executive
      shall be entitled to receive from the Employer continued Base Salary for 12
      months from the date of termination. The severance benefit provided by this
      section 4.1 shall not be payable, however, if the Executive’s employment is
      terminated within 24 months after a change in control of the Corporation. In
      addition, if the Executive becomes employed elsewhere during the 12-month period
      in which severance benefits are payable under this section 4.1, the severance
      benefit provided by this section 4.1 shall be reduced by the amount of any
      other
      compensation earned by the Executive during the 12-month period. A change in
      control of the Corporation 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 the Corporation’s
      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 the Corporation’s 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 the 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

        
          

        

      

      
        
        

      

    

     

    4.2 Possible
      Delay Because of 409A.
      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 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 severance benefit
      under section 4.1 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.

    

    Article
      5

    Confidentiality
      and Creative Work

    

    5.1 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 5, 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 5.1 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.

    

    5.2 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.

    

    5.3 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 5. 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.

    

    5.4 Affiliates’
      Confidential Information is Covered; Confidentiality Obligation Survives
      Termination.
      For
      purposes of this Agreement 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 5 shall survive termination of this Agreement.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    5.5 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
      6

    Competition
      After Employment Termination

    

    6.1 Covenant
      Not to Solicit Employees.
      The
      Executive agrees not to solicit the services of any officer or employee of
      the
      Employer for one year after the Executive’s employment termination.

    

    6.2 Covenant
      Not to Compete.
      (a) The
      Executive agrees not to compete directly or indirectly with the Employer for
      one
      year after the Executive’s employment termination, plus any period during which
      the Executive is in violation of this covenant not to compete and any period
      during which the Employer seeks by litigation to enforce this covenant not
      to
      compete. For purposes of this section -

    

    (1) the
      term
“compete” means

    

    (a) providing
      financial products or services on behalf of any financial institution for any
      person residing in the territory,

    

    (b) assisting
      (other than through the performance of ministerial or clerical duties) any
      financial institution in providing financial products or services to any person
      residing in the territory, or

    

    (c) inducing
      or attempting to induce any person who was a customer of the Employer at the
      date of the Executive’s employment termination to seek financial products or
      services from another financial institution.

    

    (2) the
      words
“directly or indirectly” means -

    

    (a) acting
      as
      a consultant, officer, director, independent contractor, or employee of any
      financial institution, de
      novo
      institution in organization, or organizational group in competition or intending
      to be in competition with the Employer in the territory, or

    

    (b) communicating
      to such financial institution the names or addresses or any financial
      information concerning any person who was a customer of the Employer at the
      Executive’s employment termination.

    

    (3) the
      term
“customer” means any person to whom the Employer is providing financial products
      or services on the date of the Executive’s employment termination.

    

    (4) the
      term
“financial institution” means any bank, savings association, or bank or savings
      association holding company, or any other institution, the business of which
      is
      engaging in activities that are financial in nature or incidental to such
      financial activities as described in section 4(k) of the Bank Holding Company
      Act of 1956, other than the Employer or one of its affiliated
      corporations.

    

    (5) “financial
      product or service” means any product or service that a financial institution or
      a financial holding company could offer by engaging in any activity that is
      financial in nature or incidental to such a financial activity under section
      4(k) of the Bank Holding Company Act of 1956 and that is offered by the Employer
      or an affiliate on the date of the Executive’s employment termination, including
      but not limited to banking activities and activities that are closely related
      and a proper incident to banking.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    (6) the
      term
“person” means any individual or individuals, corporation, partnership,
      fiduciary, or association.

    

    (7) the
      term
“territory” means Wake County, any counties contiguous to Wake County, and any
      county in which the Bank has a full service office or loan production office
      on
      the date of this Agreement or establishes a full service office or loan
      production office during the term of this Agreement.

    

    (b) If
      any
      provision of this section or any word, phrase, clause, sentence, or other
      portion thereof (including, without limitation, the geographical and temporal
      restrictions contained therein) is held to be unenforceable or invalid for
      any
      reason, the unenforceable or invalid provision or portion shall be modified
      or
      deleted so that the provisions hereof, as modified, are legal and enforceable
      to
      the fullest extent permitted under applicable law.

    

    6.3 Specific
      Performance.
      The
      Executive’s covenants contained in Article 6 shall survive termination of the
      Executive’s employment for any reason, and shall be enforceable after such
      termination. Without intending to limit the remedies available to the
      Corporation and the Bank, the Executive agrees that damages at law are an
      insufficient remedy for violation by the Executive of the covenants contained
      in
      this Agreement. Accordingly, the Executive hereby agrees that either of the
      Corporation or the Bank may apply for and is entitled to injunctive relief
      in
      any court of competent jurisdiction to restrain the breach or threatened breach
      of, or otherwise to specifically enforce, any of the covenants of this Article
      6, in each case without proof of actual damages, in addition to any other
      remedies that may be available under applicable law. The Executive hereby waives
      the claim or defense that an adequate remedy at law is available to the
      Corporation or the Bank, and the Executive agrees not to urge in any action
      or
      proceeding the claim or defense that an adequate remedy at law
      exists.

    

    Without
      limiting the generality of the foregoing, without limiting the remedies
      available to the Corporation or the Bank for violation of this Agreement, and
      without constituting an election of remedies, if the Executive violates any
      of
      the terms of Article 6 he shall forfeit on the Executive’s own behalf and that
      of beneficiary(ies) any rights to and interest in any severance or other
      benefits under this Agreement.

    

    6.4 Article
      6 Survives Termination.
      The
      rights and obligations set forth in this Article 6 shall survive termination of
      this Agreement.

    

    Article
      7

    Miscellaneous

    

    7.1 Successors
      and Assigns.
      (a)
This
      Agreement is binding on 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.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (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 or restated, 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 February 8, 2006 Employment Agreement entered
      into by the Executive and the Employer.

    

    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.

    

    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 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.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    7.8 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/
                  Ray D. Vaughn

              
	 	 	
                Ray
                  D. Vaughn

              

      

    

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    

      
        	
                County
                  of Wake 

              	
                )

              
	 	
                                  )
                  ss:

              
	
                State
                  of North Carolina

              	
                )

              

      

    

     

    Before
      me
      this                     
      day
      of                                                    ,
      2007,
      personally appeared the above named and
      Ray
      D. Vaughn, 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:

              

      

    

    

    
      
        
        

      

      
        11

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