MIDCAROLINA BANK

SALARY CONTINUATION AGREEMENT

THIS SALARY CONTINUATION AGREEMENT (this Agreement) is made and entered into as of this 1^st day of October, 2004, by and between MidCarolina Bank, a bank chartered under North Carolina law (the Bank), and Robert C. Patterson, an officer of the Bank (the Officer).

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

WHEREAS, to encourage the Officer to remain an employee of the Bank, the Bank is willing to provide salary continuation benefits to the Officer. 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,

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

WHEREAS, the Bank and the Officer are parties to an Executive Indexed Retirement Agreement dated as of January 25, 2002, and

WHEREAS, the Bank and the Officer intend that this Agreement shall amend and restate in its entirety the January 25, 2002 Executive Indexed Retirement Agreement, and from and after the Effective Date (as hereinafter defined) of this Agreement the January 25, 2002 Executive Indexed Retirement Agreement shall be of no further force or effect.

NOW THEREFORE, in consideration of these premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Officer 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 Banks obligation to the Officer 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 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 Moodys, rounded to the nearest  ¹/4%. The initial discount rate is 6.50%. 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 Officer, entitled to benefits, if any, upon the death of the Officer, determined according to Article 4.

1.3 Beneficiary Designation Form means the form established from time to time by the Plan Administrator that the Officer 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 severance or employment agreement existing on the date hereof or hereafter entered into between the Officer and the Bank or between the Officer and MidCarolina Financial Corporation, a North Carolina corporation of which the Bank is a wholly owned subsidiary. If the Officer 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: MidCarolina Financial Corporation merges into or consolidates with another corporation, or merges another corporation into MidCarolina Financial Corporation, 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 MidCarolina Financial Corporation 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 MidCarolina Financial Corporations 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 MidCarolina Financial Corporation or any subsidiary. For purposes of this Agreement, subsidiary means an entity in which MidCarolina Financial Corporation beneficially owns 50% or more of the outstanding voting securities, whether MidCarolina Financial Corporation owns the shares directly or owns the shares indirectly through an intermediate subsidiary,

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