Document:

Salary Continuation Agreement between Bank of North Carolina & David B. Spencer

 Exhibit 10(ii)(c) 
  
 BANK OF NORTH CAROLINA 
 SALARY CONTINUATION AGREEMENT 
  
 THIS SALARY CONTINUATION AGREEMENT (this
“Agreement”) is made and entered into as of this 31st day of December, 2004, by and between Bank of North Carolina, a North Carolina-chartered commercial bank (the “Bank”), and David B. Spencer, its Chief Financial
Officer (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 of the Bank, the Bank is willing to provide salary continuation benefits to the Executive. The Bank will pay the benefits from its 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 
  
 The following words and phrases used in this Agreement have the meanings specified: 
  
 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, by applying Accounting Principles Board Opinion No. 12, as amended by Statement of Financial Accounting Standards No. 106, and the calculation method and discount rate specified hereinafter. The Accrual Balance shall be calculated
assuming a level principal amount and interest as the discount rate is accrued each period. The principal accrual is determined such that when it is credited with interest each month, the Accrual Balance at Normal Retirement Age equals the present
value of the normal retirement benefits. The discount rate 

  

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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%. The initial discount rate is 6.25%. 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 have the same meaning specified in any employment or severance agreement existing on the date hereof or entered into after the date of this Agreement by the Executive and
the Bank or the Company. If the Executive is not a party to a severance or employment agreement containing a definition of Change in Control, Change in Control means any of the following events occur – 
  
 (a) Merger: BNC Bancorp, a North Carolina corporation of which the
bank is a wholly owned subsidiary (the “Company”), merges into or consolidates with another corporation, or merges another corporation into the Company, and as a result less than a majority of the combined voting power of the resulting
corporation immediately after the merger or consolidation is held by persons who were stockholders of the Company immediately before the merger or consolidation, 
  
 (b) Acquisition of Significant Share Ownership: after the date of this Agreement a report on Schedule 13D, Schedule
TO, or another form or schedule (other than Schedule 13G) is filed or is required to be filed under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if the schedule discloses that the filing person or persons acting in concert has or
have become the beneficial owner of 25% or more of the combined voting power of the Company’s voting securities outstanding (but this clause (b) shall not apply to beneficial ownership of voting shares held by a subsidiary in a fiduciary
capacity or beneficial ownership of voting shares held by an employee benefit plan of the Company or any subsidiary(ies)). For purposes of this Agreement, “subsidiary” means an entity in which the Company beneficially owns 50% or more of
the outstanding voting securities, whether the Company owns the shares directly or owns the shares indirectly through an intermediate subsidiary, 
  
 (c) Change in Board Composition. during any period of two consecutive years, individuals who constitute the Company’s board of directors at
the beginning of the two-year period cease for any reason to constitute at least a majority thereof; provided, however, that – for purposes of this clause (c) – each director who is first elected by the board (or first nominated by
the board for election by stockholders) by a vote of at least two-thirds ( 2/3) of the directors who were
directors at the beginning of the period shall be deemed to have been a director at the beginning of the two-year period, or 
  

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 (d) Sale of Assets: The Company sells to a third party all or substantially all of the
Company’s assets. For this purpose, sale of all or substantially all of the Company’s assets includes sale of the shares or assets of the Bank alone. 
  

1.5 “Disability” means the Executive suffers a sickness, accident or injury that is determined by the carrier of any individual or
group disability insurance policy covering the Executive, or by the Social Security Administration, to be a disability rendering the Executive totally and permanently disabled. At the Bank’s request, the Executive must submit to the Bank proof
of the carrier’s or Social Security Administration’s determination. 
  
 1.6 “Early Termination” means Termination of Employment before Normal Retirement Age for reasons other than death, Disability, Termination for Cause or following a Change in Control. 
  
 1.7 “Early Termination Date” means the date on which Early
Termination occurs. 
  
 1.8 “Effective Date”
means January 1, 2003. 
  
 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 “Normal Retirement Date” means
the later of the Normal Retirement Age or Termination of Employment. 
  
 1.12 “Plan Administrator” means the plan administrator described in Article 8. 
  
 1.13 “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. 
  
 1.14
“Termination for Cause” and “Cause” shall have the same meaning specified in any employment or severance agreement existing on the date hereof or entered into after the date of this Agreement by the Executive and
the Bank or the Company. 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 – 
  

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 (a) the Executive’s gross negligence or gross neglect of duties or intentional and material failure
to perform stated duties after written notice thereof, causing material harm to the Bank or affiliates, or 
  
 (b) disloyalty or dishonesty by the Executive in the performance of his duties, or a breach of the Executive’s fiduciary duties for personal profit,
in any case whether in his capacity as a director or officer, or 
  
 (c) intentional wrongful damage by the Executive to the business or property of the Bank or its affiliates, including without limitation the reputation of the Bank, causing material harm to the Bank or affiliates, or 
  
 (d) a willful violation by the Executive of any applicable law or significant
policy of the Bank or an affiliate causing material harm to the Bank or affiliates, regardless of whether the violation leads to criminal prosecution or conviction. For purposes of this Agreement, applicable laws include any statute, rule,
regulatory order, statement of policy, or final cease-and-desist order of any governmental agency or body having regulatory authority over the Bank, or 
  
 (e) the occurrence of any event that results in the Executive being excluded from coverage, or having coverage limited for the Executive as compared to
other executives of the Bank, under the Bank’s blanket bond or other fidelity or insurance policy covering its directors, officers, or employees, or 
  
 (f) the Executive is removed from office or permanently prohibited from participating in the Bank’s affairs by an order issued under section 8(e)(4)
or section 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. 1818(e)(4) or (g)(1), or 
  
 (g) conviction of the Executive for or plea of nolo contendere to a felony or conviction of or plea of nolo contendere to a misdemeanor involving moral turpitude, or the actual incarceration of the
Executive for 45 consecutive days or more. 
  
 1.15
“Termination of Employment” means that the Executive ceases to be employed by the Bank for any reason whatsoever, other than because of a leave of absence approved by the Bank. For purposes of this Agreement, if there is a dispute
about the employment status of the Executive or the date of the Executive’s Termination of Employment, the Bank shall have the sole and absolute right to decide the dispute unless a Change in Control shall have occurred. 
  
 Article 2 
 Lifetime Benefits 
  
 2.1 Normal Retirement Benefit. For Termination of Employment on or after the Normal Retirement Age for reasons other than death, the Bank shall pay to the Executive the benefit described in this Section 2.1
instead of any other benefit under this Agreement. 
  

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 2.1.1 Amount of Benefit. The annual benefit under this Section 2.1 is $99,000. Beginning with the
year after the year in which the Normal Retirement Date occurs, the amount of the annual benefit under this Section 2.1.1 shall be increased annually at a rate of 3% to offset inflation. 
  
 2.1.2 Payment of Benefit. The Bank shall pay the annual benefit to the Executive in 12 equal monthly installments
payable on the first day of each month, beginning in the month immediately after the Executive’s Normal Retirement Date. The Normal Retirement annual benefit shall be paid to the Executive for the Executive’s lifetime. 
  
 2.2 Early Termination Benefit. Upon Early Termination, the Bank shall
pay to the Executive the benefit described in this Section 2.2 instead of any other benefit under this Agreement. 
  
 2.2.1 Amount of Benefit. The benefit under this Section 2.2 is the Accrual Balance at the end of the Plan Year preceding the year in which Early
Termination occurred. 
  
 2.2.2 Payment of Benefit. The
Bank shall pay the annual benefit to the Executive in a single lump sum on the first day of the month after the month in which Early Termination occurred. 
  
 2.3 Disability Benefit. Upon Termination of Employment due to 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 benefit under this Section 2.3 is the Disability annual benefit amount set forth on Schedule A for the Plan Year ended immediately before the date on which Termination of Employment
occurs (except during the first Plan Year, the benefit is the amount set forth for Plan Year 1). Beginning one year after payment of the Disability benefit commences, the amount of the annual benefit under this Section 2.3.1 shall be increased
annually at a rate of 3% to offset inflation. 
  
 2.3.2
Payment of Benefit. Beginning with the month immediately after the Executive’s Normal Retirement Age, the Bank shall pay the Disability benefit to the Executive in 12 equal monthly installments on the first day of each month. The annual
benefit shall be paid to the Executive for the Executive’s lifetime. 
  
 2.4 Change-in-Control Benefit. If a Change in Control occurs after the date of this Agreement, the Bank shall pay to the Executive the benefit described in this Section 2.4 instead of any other benefit under
this Agreement. 
  
 2.4.1 Amount of Benefit: The benefit
under this Section 2.4 is the Accrual Balance required by Section 2.1 at the Executive’s Normal Retirement Age, without reduction for the time value of money or other discount. 
  

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 2.4.2 Payment of Benefit: The Bank shall pay the Change-in-Control benefit under Section 2.4 of
this Agreement to the Executive in one lump sum within three days after the Change in Control. 
  
 2.4.3 Preservation of Change-in-Control Benefit if the Executive is Preemptively Terminated Without Cause. If the Executive is involuntarily
terminated without Cause after a Change in Control is announced but before the Change in Control occurs, the Executive shall be entitled to the benefit under this Section 2.4 instead of any other benefit under this Agreement and shall be deemed to
have been terminated after the Change in Control occurred. The Bank shall pay the Change-in-Control benefit to the Executive in one lump sum within three days after the Executive’s Termination of Employment. A Change in Control shall be
considered to have been announced on the date a press release is issued concerning the Change in Control, on the date a Form 8-K Current Report is filed with the Securities and Exchange Commission to report the Change in Control event, on the date
an annual or quarterly report or proxy statement is filed with the Securities and Exchange Commission disclosing the Change in Control event, or on the date when information concerning the Change in Control is publicly disseminated in any other
manner, whichever first occurs. 
  
 2.5 Change-in-Control
Payout of Normal Retirement Benefit or Disability Benefit Being Paid to the Executive at the Time of a Change in Control. If a Change in Control occurs at any time during the salary continuation benefit payment period and if at the time of that
Change in Control the Executive is receiving the benefit provided by Sections 2.1.2 or 2.3.2, the Bank shall pay the remaining salary continuation benefits to the Executive in a single lump sum within three days after the Change in Control. The
lump-sum payment due to the Executive as a result of a Change in Control shall be an amount equal to the Accrual Balance amount corresponding to that particular benefit then being paid. 
  
 2.6 Petition for Payment of Normal Retirement Benefit or Disability Benefit. If the Executive is entitled to the
normal retirement benefit provided by Section 2.1 or the Disability benefit provided by Section 2.3, the Executive may petition the board of directors to have the Accrual Balance amount corresponding to that particular benefit paid to the Executive
in a single lump sum. The board of directors shall have sole and absolute discretion about whether to pay the remaining Accrual Balance in a lump sum. If payment of the remaining Accrual Balance is paid in a single lump sum, the Bank shall have no
further obligations under this Agreement. 
  
 2.7 Contradiction
in Terms of Agreement and Schedule A. If there is a contradiction in the terms of this Agreement and Schedule A attached hereto concerning the actual amount of a particular benefit amount due the Executive under Section 2.2, 2.3, or 2.4 hereof,
then the actual amount of the benefit set forth in the Agreement shall control. 
  

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 Article 3 
 Death Benefits 
  
 3.1
Death During Active Service. Except as provided in Section 5.2, if the Executive dies in active service to the Bank before the Normal Retirement Date, the Bank shall pay to the Executive’s Beneficiary (a) an amount in cash equal to the
Accrual Balance at the end of the Plan Year preceding the year of the Executive’s death, unless the Change-in-Control benefit shall have previously been paid to the Executive under Section 2.4, and (b) the benefit described in the Split Dollar
Agreement attached to this Agreement as Addendum A. 
  
 3.2
Death after Termination of Employment. If the Executive dies after Termination of Employment and the Executive is entitled to the normal retirement benefit provided by Section 2.1 or the Disability benefit provided by Section 2.3, the Bank
shall pay to the Executive’s Beneficiary (a) an amount in cash equal to the Accrual Balance remaining at the time of the Executive’s death, and (b) the benefit described in the Split Dollar Agreement. If the Executive dies after
Termination of Employment and the Executive has previously received payment of the Early Termination benefit under Section 2.2 or the Change-in-Control benefit under Section 2.4, the Bank shall pay to the Executive’s Beneficiary the benefit
described in the Split Dollar Agreement. However, no benefits under this Agreement or under the Split Dollar Agreement shall be paid or payable to the Executive, the Executive’s Beneficiary, or the Executive’s estate if this Agreement is
terminated according to Article 5. 
  
 Article 4 

Beneficiaries 
  
 4.1 Beneficiary Designations. The Executive shall have the right to designate at any time a Beneficiary to receive any benefits payable under this
Agreement upon the death of the Executive. 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. 
  

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 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 such 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. Notwithstanding any provision of this Agreement to the contrary, the Bank shall not pay any benefit under this Agreement and this Agreement shall terminate if Termination of
Employment is a result of Termination for Cause. Likewise, the Bank shall not pay any benefits under the Split Dollar Agreement attached to this Agreement as Addendum A, and the Split Dollar Agreement also shall terminate, if Termination of
Employment is a result of Termination for Cause. 
  
 5.2
Suicide or Misstatement. The Bank shall not pay any benefit under this Agreement or under the Split Dollar Agreement attached as Addendum A 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. 
  
 5.4 Default. Notwithstanding any provision of this Agreement to the
contrary, 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 

  

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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 Bank a written claim for the benefits. 
  
 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 – 
  

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 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. 
  
 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).

  

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 Article 7 
 Miscellaneous 
  
 7.1
Amendments and Termination. Subject to Section 7.15 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 cannot be sold, transferred, assigned, pledged, attached, or encumbered in any manner. 
  
 7.5 Successors; Binding Agreement. The Bank will require any successor (whether direct or indirect, by purchase, merger, consolidation, or
otherwise) to all or substantially all of the business or assets of the Bank, by an assumption agreement in form and substance satisfactory to the Executive, to expressly assume and agree to perform this Agreement in the same manner and to the same
extent that the Bank would be required to perform this Agreement if no such succession had occurred. The Bank’s failure to obtain an assumption agreement before effectiveness of any such succession shall be a breach of this Agreement and shall
entitle the Executive to the Change-in-Control benefit provided in Section 2.4. 
  
 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 in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Executive’s life is a general asset of the
Bank to which the Executive and Beneficiary have no preferred or secured claim. 
  

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 7.9 Entire Agreement. This Agreement and the Split Dollar Agreement attached as Addendum A
constitute the entire agreement between the Bank and the Executive as to the subject matter hereof. No rights are granted to the Executive under this Agreement other than those specifically set forth herein. 
  
 7.10 Severability. If for any reason 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. 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 Bank at the time of the delivery of such notice, and properly addressed to the Bank if
addressed to the Board of Directors, Bank of North Carolina, 831 Julian Avenue, P.O. Box 1148, Thomasville, North Carolina 27361-1148. 
  
 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. It is the intention of the Bank that the Executive not be required to incur the expenses associated with the enforcement
of his 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. It is the intention of the Bank
that the Executive not be forced to negotiate settlement of his rights under this Agreement under threat of incurring expenses. Accordingly, if after a Change in Control occurs it appears to the Executive that (a) the Bank has failed to comply with
any of its obligations under this Agreement, or (b) 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 his choice, at the expense of the Bank as provided in this Section 7.13, to represent
the Executive in connection with the initiation or 

  

 12 

 
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. Notwithstanding 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 such counsel in accordance with such counsel’s customary
practices, up to a maximum aggregate amount of $500,000, 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. 
  
 7.14 Internal Revenue Code Section 280G Gross Up. (a) Additional
Payment to Account for Excise Taxes. If as a result of a Change in Control the Executive becomes entitled to acceleration of benefits under this Agreement or under any other plan or agreement of or with the Bank or its affiliates (together, the
“Total Benefits”), and if any of the Total Benefits will be subject to the Excise Tax as set forth in sections 280G and 4999 of the Internal Revenue Code of 1986 (the “Excise Tax”), the Bank shall pay to the Executive the
following additional amounts, consisting of (1) a payment equal to the Excise Tax payable by the Executive on the Total Benefits under section 4999 of the Internal Revenue Code (the “Excise Tax Payment”), and (2) a payment equal to the
amount necessary to provide the Excise Tax Payment net of all income, payroll and excise taxes. Together, the additional amounts described in clauses (1) and (2) are referred to in this Agreement as the “Gross-Up Payment Amount.”

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

	 	(1)	Determination of “Parachute Payments” Subject to the Excise Tax: any other payments or benefits received or to be received by the Executive in connection with a
Change in Control or the Executive’s Termination of Employment (whether under the terms of this Agreement or any other agreement or any other benefit plan or arrangement with the Bank, any person whose actions result in a Change in Control, or
any person affiliated with the Bank or such person) shall be treated as “parachute payments” within the meaning of section 280G(b)(2) of the Internal Revenue Code, and all “excess parachute payments” within the meaning of section
280G(b)(1) shall be treated as subject to the Excise Tax, unless in the opinion of the certified public accounting firm that is retained by the Bank as of the date immediately before the Change in Control (the “Accounting Firm”) such other
payments or benefits do not constitute (in whole or in part) parachute 

  

 13 

 payments, or such excess parachute payments represent (in whole or in part) reasonable compensation for
services actually rendered within the meaning of section 280G(b)(4) of the Internal Revenue Code in excess of the “base amount” (as defined in section 280G(b)(3) of the Internal Revenue Code), or are otherwise not subject to the Excise
Tax, 
  

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

  

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

  
 Assumed Marginal Income Tax Rate. For purposes of determining the amount of the Gross-Up Payment Amount, the Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income
taxation in the calendar years in which the Gross-Up Payment Amount is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive’s residence on the date of termination of
employment, net of the reduction in federal income taxes that can be obtained from deduction of such state and local taxes (calculated by assuming that any reduction under section 68 of the Internal Revenue Code in the amount of itemized deductions
allowable to the Executive applies first to reduce the amount of such state and local income taxes that would otherwise be deductible by the Executive, and applicable federal FICA and Medicare withholding taxes). 
  
 Return of Reduced Excise Tax Payment or Payment of Additional Excise
Tax. If the Excise Tax is later determined to be less than the amount taken into account hereunder when the Executive’s employment terminated, the Executive shall repay to the Bank – when the amount of the reduction in Excise Tax is
finally determined – the portion of the Gross-Up Payment Amount attributable to the reduction (plus that portion of the Gross-Up Payment Amount attributable to the Excise Tax, federal, state and local income taxes and FICA and Medicare
withholding taxes imposed on the Gross-Up Payment Amount being repaid by the Executive to the extent that the repayment results in a reduction in Excise Tax, FICA, and Medicare withholding taxes and/or a federal, state, or local income tax
deduction). 
  
 If the Excise Tax is later determined to be more
than the amount taken into account hereunder when the Executive’s employment terminated (due, for example, to a payment whose existence or amount cannot be determined at the time of the Gross-Up Payment Amount), the Bank shall make an
additional Gross-Up Payment Amount to the Executive for that excess (plus any interest, penalties, or additions payable by the Executive for the excess) when the amount of the excess is finally determined. 
  

 14 

 (b) Responsibilities of the Accounting Firm and the Bank. Determinations Shall Be Made by the
Accounting Firm. Subject to the provisions of Section 7.14(a), all determinations required to be made under this Section 7.14(b) – including whether and when a Gross-Up Payment Amount is required, the amount of the Gross-Up Payment Amount
and the assumptions to be used to arrive at the determination (collectively, the “Determination”) – shall be made by the Accounting Firm, which shall provide detailed supporting calculations both to the Bank and the Executive within
15 business days after receipt of notice from the Bank or the Executive that there has been a Gross-Up Payment Amount, or such earlier time as is requested by the Bank. 
  
 Fees and Expenses of the Accounting Firm and Agreement with the Accounting Firm. All fees and expenses of the
Accounting Firm shall be borne solely by the Bank. The Bank shall enter into any agreement requested by the Accounting Firm in connection with the performance of its services hereunder. 
  
 Accounting Firm’s Opinion. If the Accounting Firm determines that no Excise Tax is payable by the Executive, the
Accounting Firm shall furnish the Executive with a written opinion to that effect, and to the effect that failure to report Excise Tax, if any, on the Executive’s applicable federal income tax return will not result in the imposition of a
negligence or similar penalty. 
  
 Accounting Firm’s
Determination Is Binding; Underpayment and Overpayment. The Determination by the Accounting Firm shall be binding on the Bank and the Executive. Because of the uncertainty in determining whether any of the Total Benefits will be subject to the
Excise Tax at the time of the Determination, it is possible that a Gross-Up Payment Amount that should have been made will not have been made by the Bank (“Underpayment”), or that a Gross-Up Payment Amount will be made that should not have
been made by the Bank (“Overpayment”). If, after a Determination by the Accounting Firm, the Executive is required to make a payment of additional Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has
occurred. The Underpayment (together with interest at the rate provided in section 1274(d)(2)(B) of the Internal Revenue Code) shall be paid promptly by the Bank to or for the benefit of the Executive. If the Gross-Up Payment Amount exceeds the
amount necessary to reimburse the Executive for his Excise Tax according to Section 7.14(a), the Accounting Firm shall determine the amount of the Overpayment that has been made. The Overpayment (together with interest at the rate provided in
section 1274(d)(2)(B) of the Internal Revenue Code) shall be paid promptly by the Executive to or for the benefit of the Bank. Provided that his expenses are reimbursed by the Bank, the Executive shall cooperate with any reasonable requests by the
Bank in any contests or disputes with the Internal Revenue Service relating to the Excise Tax. 
  
 Accounting Firm Conflict of Interest. If the Accounting Firm is serving as accountant or auditor for the individual, entity, or group effecting the Change in Control, the Executive may appoint another
nationally recognized public accounting firm to make the Determinations required hereunder (in which case the term “Accounting Firm” as used in this Agreement shall be deemed to refer to the accounting firm appointed by the Executive under
this paragraph). 
  

 15 

 7.15 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 7.15 shall become null and void effective
immediately upon a Change in Control. 
  
 7.16 Automatic Review
Procedure. On the third year anniversary of the Effective Date and every third year thereafter the Bank will automatically review this Agreement for reasonableness of benefits with the intent that the Executive’s target benefit shall be 64%
of compensation less the Bank-provided benefits. For purposes of this Agreement, Bank-provided benefits include but are not limited to (a) the Bank 401(k) match and (b) the Bank portion of Social Security benefits. The term “compensation”
as used in this Section 7.16 means the base annual salary of the Executive projected at the Executive’s Normal Retirement Age. Base Annual Salary means compensation of the type that would, according to the Securities and Exchange
Commission’s Regulation S-K Item 402(b) (17 CFR 229.402(b) (2003)), be required to be reported as salary in column (c) of that rule’s Summary Compensation Table. The term Base Annual Salary specifically excludes director fees and other
director compensation, bonus, option grants and any other compensation that would be reported in separate columns in the Summary Compensation Table, but it includes salary deferred at the election of the Executive. 
  
 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 be a member of
the Plan Administrator. The Plan Administrator shall also have the discretion and authority to (a) make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Agreement and (b) 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 with respect to any question arising out of or in connection with
the administration, interpretation, and application of the Agreement and the rules and regulations promulgated 

  

 16 

 
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
Termination of Employment of the Executive and such other pertinent information as the Plan Administrator may reasonably require. 
  
 IN WITNESS WHEREOF, the Executive and a duly authorized officer of the Bank have
executed this Salary Continuation Agreement as of the date first written above. 
  

					
	EXECUTIVE:	  	BANK:
	 	  	 Bank of North Carolina

			
	 /s/ David B. Spencer

	  	 By:
	  	 /s/ W. Groome Fulton, Jr.

	 David B. Spencer
	  	 	  	 
	 	  	 Its:
	  	 Chairman

			
	 	  	 And By:
	  	 /s/ W. Swope Montgomery, Jr.

	 	  	 	  	 
	 	  	 Its:
	  	 President and CEO

  

 17 

 BENEFICIARY DESIGNATION 
 BANK OF NORTH CAROLINA 
 SALARY CONTINUATION AGREEMENT 
  
 I, David B. Spencer, designate the following as beneficiary of any death benefits under this Salary Continuation Agreement – 
  

	
	 Primary: Personal Confidential Information.
  

	_________________________________________________________________________________________________________.
	
	 Contingent: Personal Confidential Information
  

	_________________________________________________________________________________________________________.

  
 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:	 	 /s/ David B. Spencer

	 	 	 	 	 David B. Spencer

			
	 	 	Date:	 	December 31, 2004

  
 Accepted by the Bank
this 31st day of December, 2004. 
  

					
	 	 	By:	 	 /s/ W. Groome Fulton, Jr.

	 	 	 	 	 
	 	 	Print Name:	 	W. Groome Fulton, Jr.
			
	 	 	Title:	 	Chairman

  

 18 

 SCHEDULE A 
 BANK OF NORTH CAROLINA 
 SALARY CONTINUATION AGREEMENT 
  
 David B. Spencer 
  

																		
	 Plan
 Year

	 	 Plan Year
 ending
 December 31,

	 	Age at Plan
Year end

	 	 Accrual Balance
 @ 6.25% (1)

	 	 	Disability annual
benefit payable at
Normal
Retirement Age (2)

	 	Change-in-
Control benefit
payable in a
lump sum

	 	Normal Retirement
benefit payable at
Normal Retirement
Age (3)

	2	 	2004	 	42	 	$	24,478	 	 	$	7,769	 	$	1,274,808	 	$	0
	3	 	2005	 	43	 	$	50,531	 	 	$	15,069	 	$	1,274,808	 	$	0
	4	 	2006	 	44	 	$	78,260	 	 	$	21,927	 	$	1,274,808	 	$	0
	5	 	2007	 	45	 	$	107,772	 	 	$	28,371	 	$	1,274,808	 	$	0
	6	 	2008	 	46	 	$	139,182	 	 	$	34,426	 	$	1,274,808	 	$	0
	7	 	2009	 	47	 	$	172,613	 	 	$	40,114	 	$	1,274,808	 	$	0
	8	 	2010	 	48	 	$	208,194	 	 	$	45,459	 	$	1,274,808	 	$	0
	9	 	2011	 	49	 	$	246,064	 	 	$	50,481	 	$	1,274,808	 	$	0
	10	 	2012	 	50	 	$	286,370	 	 	$	55,199	 	$	1,274,808	 	$	0
	11	 	2013	 	51	 	$	329,268	 	 	$	59,632	 	$	1,274,808	 	$	0
	12	 	2014	 	52	 	$	374,926	 	 	$	63,797	 	$	1,274,808	 	$	0
	13	 	2015	 	53	 	$	423,520	 	 	$	67,711	 	$	1,274,808	 	$	0
	14	 	2016	 	54	 	$	475,240	 	 	$	71,388	 	$	1,274,808	 	$	0
	15	 	2017	 	55	 	$	530,286	 	 	$	74,843	 	$	1,274,808	 	$	0
	16	 	2018	 	56	 	$	588,874	 	 	$	78,089	 	$	1,274,808	 	$	0
	17	 	2019	 	57	 	$	651,229	 	 	$	81,139	 	$	1,274,808	 	$	0
	18	 	2020	 	58	 	$	717,596	 	 	$	84,004	 	$	1,274,808	 	$	0
	19	 	2021	 	59	 	$	788,232	 	 	$	86,697	 	$	1,274,808	 	$	0
	20	 	2022	 	60	 	$	863,410	 	 	$	89,226	 	$	1,274,808	 	$	0
	21	 	2023	 	61	 	$	943,425	 	 	$	91,603	 	$	1,274,808	 	$	0
	22	 	2024	 	62	 	$	1,028,586	 	 	$	93,836	 	$	1,274,808	 	$	0
	23	 	2025	 	63	 	$	1,119,225	 	 	$	95,934	 	$	1,274,808	 	$	0
	24	 	2026	 	64	 	$	1,215,694	 	 	$	97,906	 	$	1,274,808	 	$	0
	 	 	July 2027	 	65	 	$	1,274,808	(4)	 	$	99,000	 	$	1,274,808	 	$	0
	25	 	2027	 	65	 	$	1,266,455	 	 	 	 	 	 	 	 	$	41,250
	26	 	2028	 	66	 	$	1,244,241	 	 	 	 	 	 	 	 	$	100,238
	27	 	2029	 	67	 	$	1,217,490	 	 	 	 	 	 	 	 	$	103,245

  

 19 

															
	Plan
Year

	 	 Plan Year
 ending
 December 31,

	 	Age at Plan
Year end

	 	 Accrual Balance
 @ 6.25% (1)

	 	Disability annual
benefit payable at
Normal
Retirement Age (2)

	 	Change-in-
Control benefit
payable in a
lump sum

	 	Normal Retirement
benefit payable at
Normal Retirement
Age (3)

	28	 	2030	 	68	 	$	1,185,814	 	 	 	 	 	$	106,342
	29	 	2031	 	69	 	$	1,148,802	 	 	 	 	 	$	109,532
	30	 	2032	 	70	 	$	1,106,008	 	 	 	 	 	$	112,818
	31	 	2033	 	71	 	$	1,056,964	 	 	 	 	 	$	116,203
	32	 	2034	 	72	 	$	1,001,158	 	 	 	 	 	$	119,689
	33	 	2035	 	73	 	$	938,049	 	 	 	 	 	$	123,279
	34	 	2036	 	74	 	$	867,056	 	 	 	 	 	$	126,978
	35	 	2037	 	75	 	$	787,556	 	 	 	 	 	$	130,787
	36	 	2038	 	76	 	$	698,885	 	 	 	 	 	$	134,711
	37	 	2039	 	77	 	$	600,330	 	 	 	 	 	$	138,752
	38	 	2040	 	78	 	$	491,131	 	 	 	 	 	$	142,915
	39	 	2041	 	79	 	$	370,474	 	 	 	 	 	$	147,202
	40	 	2042	 	80	 	$	237,487	 	 	 	 	 	$	151,618
	41	 	2043	 	81	 	$	91,244	 	 	 	 	 	$	156,167
	42	 	July 2044	 	82	 	$	0	 	 	 	 	 	$	92,672

	(1)	Calculations are approximations. Benefit calculations are based on prior year-end accrual balances. The accrual balance reflects payment at the beginning of each month during
retirement, beginning August 1, 2027. 

	(2)	The Disability benefit is calculated as an annual payment stream of the Accrual Balance, using a standard discount rate (6.25%). The Disability benefit amounts are included for
illustrative purposes only. Under section 2.3.1 of the Salary Continuation Agreement, the Disability benefit amount increases annually by 3% to offset inflation, beginning in the year after payment of the Disability benefit commences.

	(3)	The Normal Retirement annual benefit under section 2.1 of the Salary Continuation Agreement continues for the Executive’s lifetime. This illustration merely shows the Normal
Retirement annual benefit until the Executive attains age 82. The Normal Retirement annual benefit in 2027 consists of five monthly payments. The Normal Retirement annual benefit in 2044 consists of seven monthly payments. The illustrated Normal
Retirement annual benefit figures reflect the annual 3% increase to offset inflation. Consistent with section 2.1.1 of the Salary Continuation Agreement, this illustration assumes that the 3% annual increase occurs in August of each year, beginning
in August 2028. 

	(4)	Projected retirement occurs July 14, 2027, with the first normal monthly retirement benefit payment being made on August 1, 2027. 

  

 20Endorsement Split Dollar Agreement between Bank of North Carolina &W. Swope

 Exhibit 10(vi)(a) 
  
 BANK OF NORTH CAROLINA 
 ENDORSEMENT SPLIT DOLLAR AGREEMENT 
  
 THIS ENDORSEMENT SPLIT
DOLLAR AGREEMENT (this “Agreement”) is entered into as of this 31st day of December, 2004 by and between Bank of North Carolina, a North Carolina-chartered commercial bank (the
“Bank”), and W. Swope Montgomery, Jr., its President and Chief Executive Officer (the “Executive”). This Agreement shall append the Split Dollar Policy Endorsement entered into on even date herewith or as subsequently amended, by
and between the aforementioned parties. 
  
 To encourage the
Executive to remain an employee of the Bank, the Bank is willing to divide the death proceeds of a life insurance policy on the Executive’s life. The Bank will pay life insurance premiums from its general assets. 
  
 The Bank and the Executive agree as set forth herein. 
  
 Article 1 
 General Definitions 
  
 Capitalized terms not otherwise defined in this Agreement are used herein as defined in the Salary Continuation Agreement dated as of the date of this Agreement between the Bank and the Executive. The following terms
shall have the meanings specified: 
  
 1.1 Administrator
means the administrator described in Article 7. 
  
 1.2
Executive’s Interest means the benefit set forth in Section 2.2(a). 
  
 1.3 Insured means the Executive. 
  
 1.4 Insurer means each life insurance carrier in which there is a Split Dollar Policy Endorsement attached to this Agreement. 
  
 1.5 Net Death Proceeds means the total death proceeds of the Policy minus the cash surrender value. 
  
 1.6 Policy means the specific life insurance policy or policies issued
by the Insurers. 
  
 1.7 Split Dollar Policy Endorsement
means the form required by the Administrator or the Insurer to indicate the Executive’s interest, if any, in a Policy on such Executive’s life. 
  
 Article 2 
 Policy Ownership/Interests

  
 2.1 Bank Ownership. The Bank is the sole owner of
the Policy and shall have the right to exercise all incidents of ownership. The Bank shall be the beneficiary of the remaining death proceeds of the Policy after the Executive’s Interest has been paid according to Section 2.2 below. 

 2.2 Death Benefit. (a) Executive’s Interest If the Policy Is Not Cancelled. Provided
the Policy is not cancelled, surrendered, terminated, or allowed to lapse, the Executive’s beneficiary designated in accordance with the Split Dollar Policy Endorsement shall be entitled to 100% of the Net Death Proceeds (the
“Executive’s Interest”). The Executive shall have the right to designate the beneficiary of the Executive’s Interest. The Executive or the Executive’s transferee shall also have the right to elect and change settlement
options that may be permitted for the Executive’s Interest. 
  
 (b) If the Policy Is Cancelled. If the Policy is cancelled, surrendered, terminated, or allowed to lapse, in any such case without replacement, the Executive’s beneficiary designated in accordance with the Split Dollar Policy
Endorsement shall be entitled to death proceeds payable by the Bank in an amount in cash equal to the sum of (1) the amount specified in paragraph (a) of this Section 2.2, measured at the time the Policy is cancelled, surrendered, terminated, or
allowed to lapse, plus (2) a tax gross-up payment to compensate for federal and state taxes imposed on the benefit specified in clause (1) of this Section 2.2(b). The tax gross-up payment required under this clause (2) of Section 2.2(b) shall be
calculated in two steps, first by dividing the total death benefit specified in clause (1) of this Section 2.2(b) by one minus the sum of (x) the highest marginal individual federal income tax rate under the Internal Revenue Code at the time
of the Executive’s death (offset or reduced to account for the deductibility at the federal level of state income taxes), plus (y) the highest marginal individual state income tax rate under North Carolina law at the time of the
Executive’s death. Second, the death benefit specified in clause (1) of this Section 2.2(b) shall then be subtracted from the amount calculated in that first step. The difference shall be the additional tax gross-up payment to be made to
compensate for taxes, regardless of whether it exceeds or is less than taxes imposed on the Executive’s estate for “income in respect of a decedent.” To illustrate with a simple hypothetical based on an assumed death benefit amount of
$100,000 paid directly by the Bank under clause (1) of this Section 2.2(b), the additional tax gross-up payment would be calculated as follows if the highest marginal individual income tax rates are 34% (federal) and 7.5% (North Carolina), taking
into account the deductibility at the federal level of state income taxes: 
  

			
	First Step:	  	$ 100,000 / divided by (1 - ((34% + 7.5%) - (34% x 7.5%))
	 	  	=         $ 100,000 / divided by (1 minus 38.95%)
	 =
	  	$ 100,000 / divided by 61.05%, or .6105
	 	  	=         $ 163,800
		
	Second Step:	  	$ 163,800 minus $ 100,000
	 =
	  	$ 63,800, the amount of the additional tax gross-up payment

  
 2.3 Comparable
Coverage. The Bank may replace the Policy with a comparable insurance policy to cover the benefit provided under this Agreement, in which case the Bank and the Executive shall execute a new Split Dollar Policy Endorsement for the comparable
insurance policy. 

 2.4 Internal Revenue Code Section 1035 Exchanges. The Executive recognizes and agrees that the
Bank may after this Split Dollar Agreement is adopted wish to exchange the Policy of life insurance on the Executive’s life for another contract of life insurance insuring the Executive’s life. Provided that the Policy is replaced (or
intended to be replaced) with a comparable policy of life insurance, the Executive agrees to provide medical information and cooperate with medical insurance-related testing required by a prospective insurer for implementing the Policy or, if
necessary, for modifying or updating to a comparable insurer. 
  
 Article 3 
 Premiums 
  
 3.1 Premium Payment. The Bank shall pay any premiums due on the Policy. 
  
 3.2 Economic Benefit. The Administrator shall annually determine the economic benefit attributable to the Executive
based on the amount of the current term rate for the Executive’s age multiplied by the aggregate death benefit payable to the Executive’s beneficiary. The “current term rate” is the minimum amount required to be imputed under
applicable Internal Revenue Service authority. 
  
 3.3 Imputed
Income. The Bank shall impute the economic benefit to the Executive on an annual basis. 
  
 Article 4 
 Assignment 
  
 The Executive may irrevocably assign without consideration all of the Executive’s rights and interest in this Agreement
to any person, entity, or trust established by the Executive or the Executive’s spouse. If the Executive transfers all of the Executive’s rights and interest in this Agreement, then all of the Executive’s rights and interest in the
Agreement shall be vested in the Executive’s transferee, who shall be substituted as a party hereunder and the Executive shall have no further interest in this Agreement. 
  
 Article 5 
 Insurer 
  
 The Insurer shall be bound only by the
terms of the Policy. Any payments the Insurer makes or actions it takes in accordance with the Policy shall fully discharge it from all claims, suits and demands of all entities or persons. The Insurer shall not be bound by or be deemed to have
notice of the provisions of this Agreement. 

 Article 6 
 Claims and Review Procedures 
  
 6.1 Claims Procedure. Any person or entity who has not received benefits under this Agreement that he or she believes should be paid (the “claimant”) 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. 
  
 6.1.2 Timing of Administrator Response. The Administrator shall respond to such claimant within 90 days after receiving the claim.
If the Administrator determines that special circumstances require additional time for processing the claim, the Administrator can extend the response period by an additional 90 days by notifying the claimant in writing, prior to the end of the
initial 90-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Administrator expects to render its decision. 
  
 6.1.3 Notice of Decision. If the Administrator denies
part or all of the claim, the Administrator shall notify the claimant in writing of such denial. The Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth –

  

	 	(a)	The specific reasons for the denial, 

  

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

  

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

  

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

  

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

  
 6.2 Review Procedure. If the Administrator denies part or all of the
claim, the claimant shall have the opportunity for a full and fair review by the Administrator of the denial, as follows – 
  
 6.2.1 Initiation – Written Request. To initiate the review, within 60 days after receiving the Administrator’s notice of
denial the claimant must file with the Administrator a written request for review. 
  
 6.2.2 Additional Submissions – Information Access. The claimant shall then have the opportunity to submit written comments,
documents, records and other information relating to the claim. Upon request and free of charge, the Administrator 

 
shall also provide the claimant reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA
regulations) to the claimant’s claim for benefits. 
  
 6.2.3 Considerations on Review. In considering the review, the Administrator shall take into account all materials and information the claimant submits relating to the claim, without regard to whether such
information was submitted or considered in the initial benefit determination. 
  
 6.2.4 Timing of Administrator Response. The Administrator shall respond in writing to such claimant within 60 days after receiving the request for review. If the Administrator determines that special
circumstances require additional time for processing the claim, the Administrator can extend the response period by an additional 60 days by notifying the claimant in writing, prior to the end of the initial 60-day period, that an additional period
is required. The notice of extension must set forth the special circumstances and the date by which the Administrator expects to render its decision. 
  
 6.2.5 Notice of Decision. The Administrator shall notify the claimant in writing of its decision on review. The Administrator shall
write the notification in a manner calculated to be understood by the claimant. The notification shall set forth – 
  

	 	(a)	The specific reasons for the denial, 

  

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

  

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

  

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

  
 Article 7 
 Administration of Agreement 
  
 7.1
Administrator Duties. This Agreement shall be administered by an Administrator, which shall consist of the board or such committee as the board shall appoint. The Executive may be a member of the Administrator. The Administrator shall also
have the discretion and authority to (a) make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Agreement and (b) decide or resolve any and all questions, including interpretations of this Agreement,
as may arise in connection with the Agreement. 
  
 7.2
Agents. In the administration of this Agreement, the Administrator may employ agents and delegate to them such administrative duties as it sees fit (including acting through a duly appointed representative) and may from time to time consult
with counsel, who may be counsel to the Bank. 

 7.3 Binding Effect of Decisions. The decision or action of the Administrator with respect to any
question arising out of or in connection with the administration, interpretation, and application of this Agreement and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in
the Agreement. 
  
 7.4 Indemnity of Administrator. The Bank
shall indemnify and hold harmless the members of the 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 Administrator or any of its members. 
  
 7.5
Information. To enable the Administrator to perform its functions, the Bank shall supply full and timely information to the Administrator on all matters relating to the date and circumstances of the retirement, death, or Termination of
Employment of the Executive and such other pertinent information as the Administrator may reasonably require. 
  
 Article 8 
 Miscellaneous 
  
 8.1 Binding Effect. This Agreement shall bind the Executive and the
Bank and their beneficiaries, survivors, executors, administrators, and transferees, and any Policy beneficiary. 
  
 8.2 Amendment and Termination of Agreement. This Agreement may be amended solely by a written agreement signed by the Bank and the Executive. This
Agreement shall automatically terminate and the Executive’s rights and interest in this Agreement shall be forfeited if benefits under the Salary Continuation Agreement are neither paid nor payable because of termination under Article 5 of the
Salary Continuation Agreement. This Agreement shall also terminate upon distribution of death benefits in accordance with Section 2.2 above. 
  
 8.3 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 if no succession had occurred. 
  
 8.4 No Guarantee of Employment. This Agreement is not an employment policy or contract. It does not give the Executive the right to remain an
employee of the Bank, nor does it interfere with the Bank’s right to discharge the Executive. It also does not require the Executive to remain an employee or interfere with the Executive’s right to terminate employment at any time.

 8.5 Applicable Law. This Agreement and all rights hereunder shall be governed by and construed
according to the laws of the State of North Carolina, except to the extent preempted by the laws of the United States of America. 
  
 8.6 Entire Agreement. This Agreement and the Salary Continuation Agreement constitute the entire agreement between the Bank and the Executive as to
the subject matter hereof. No rights are granted to the Executive by this Agreement other than those specifically set forth herein. 
  
 8.7 Severability. If for any reason 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 the provision together with all other provisions of this Agreement shall continue in full force and effect to the full extent consistent with law. 
  
 8.8 Headings. Caption headings and subheadings herein are included
solely for convenience of reference and shall not affect the meaning or interpretation of any provision of this Agreement. 
  
 8.9 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. 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 Bank at the time of the delivery of such notice, and properly addressed to the Bank if addressed to the Board of Directors,
Bank of North Carolina, 831 Julian Avenue, P.O. Box 1148, Thomasville, North Carolina 27361-1148. 
  
 IN WITNESS WHEREOF, the Executive and a duly authorized representative of the Bank have
executed this Agreement as of the date first written above. 
  

					
	EXECUTIVE:	 	BANK:
	 	 	Bank of North Carolina
			
	 /s/ W. Swope Montgomery, Jr.

	 	By:	 	 /s/ W. Groome Fulton, Jr.

	W. Swope Montgomery, Jr.	 	Its:	 	Chairman
			
	 	 	And By:	 	 /s/ David B. Spencer

	 	 	Its:	 	EVP and CFO

 AGREEMENT TO COOPERATE WITH
INSURANCE UNDERWRITING INCIDENT TO INTERNAL REVENUE CODE SECTION 1035 EXCHANGE 
  
 I acknowledge that I have read the Endorsement Split Dollar Agreement and
agree to be bound by its terms, particularly the covenant on my part set forth in section 2.4 of the Endorsement Split Dollar Agreement to provide medical information and cooperate with medical insurance-related testing required by an insurer to
issue a comparable insurance policy to cover the benefit provided under this Endorsement Split Dollar Agreement. 
  

			
	 /s/ David B. Spencer

	 	 /s/ W. Swope Montgomery, Jr.

	Witness	 	Executive

 SPLIT DOLLAR POLICY ENDORSEMENT

  

					
	Insured: W. Swope Montgomery, Jr.	  	Insurers:	  	Life Investors, John Hancock,
	 	  	 	  	and Mass Mutual

  
 Policy No. Confidential

  
 Pursuant to the terms of the Bank of North Carolina
Endorsement Split Dollar Agreement dated as of December 31, 2004, the undersigned Owner requests that the above-referenced policy issued by the Insurer provides for the following beneficiary designation and limited contract ownership rights
to the Insured: 
  
 1. Upon the death of the Insured, proceeds
shall be paid in one sum to the Owner, its successors or assigns, to the extent of its interest in the policy. It is hereby provided that the Insurer may rely solely upon a statement from the Owner as to the amount of proceeds it is entitled to
receive under this paragraph. 
  
 2. Any proceeds at the death of
the Insured in excess of the amount paid under the provisions of the preceding paragraph shall be paid in one sum to: 
  
 Confidential Personal Information 
  
 PRIMARY BENEFICIARY, RELATIONSHIP/SOCIAL SECURITY NUMBER 
  
 Confidential Personal Information 
  
 CONTINGENT BENEFICIARY,
RELATIONSHIP/SOCIAL SECURITY NUMBER 
  
 The exclusive right to change the beneficiary for the proceeds payable under this paragraph, to elect any optional method of settlement for the proceeds paid under this paragraph which are available under the terms of
the policy and to assign all rights and interests granted under this paragraph are hereby granted to the Insured. The sole signature of the Insured shall be sufficient to exercise said rights. The Owner retains all contract rights not granted to the
Insured under this paragraph. 
  
 3. It is agreed by the
undersigned that this designation and limited assignment of rights shall be subject in all respects to the contractual terms of the policy. 
  
 4. Any payment directed by the Owner under this endorsement shall be a full discharge of the Insurer, and such discharge shall be binding on all parties
claiming any interest under the policy. 
  
 The undersigned for
the Owner is signing in a representative capacity and warrants that he or she has the authority to bind the entity on whose behalf this document is being executed. 
  
 Signed at Thomasville, North Carolina, this 31st day of December, 2004. 
  

					
	INSURED:	 	OWNER:
	 	 	Bank of North Carolina
			
	 /s/ W. Swope Montgomery, Jr.

	 	By:	 	 /s/ David B. Spencer

	W. Swope Montgomery, Jr.	 	Its:	 	EVP and CFO

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