CAPITAL BANK CORPORATION DEFERRED COMPENSATION PLAN FOR OUTSIDE DIRECTORS

1.15           “Stock Units” means the amounts credited to the Account of a Participant as described in Section 3.2.

Any individual who is a member of the Corporation’s Board or a Subsidiary’s Board of Directors and who is not also an employee of the Corporation or a Subsidiary is eligible to participate in the Plan.

3.1            Deferral Election . The individuals described in Article II shall be eligible to participate in the Plan and may do so by filing a written deferral election with the Corporation in the form attached (or such other form as may be adopted or approved by the Corporation from time to time). Deferral elections shall state the amount of Compensation to be deferred and credited to the Participant’s Account as Stock Units. Except as otherwise specifically provided herein, an election to defer Compensation under the Plan must be made before the beginning of the calendar year for which the Compensation is payable and, once made, shall be irrevocable during such calendar year. In the first year in which a Director joins the Board and becomes eligible to participate in the Plan, the new Director may make a deferral election with respect to Compensation to be earned subsequent to the deferral election but during the remaining calendar year provided the deferral election is submitted to the Corporation within thirty (30) days of the date the Director first becomes eligible to participate in the Plan.

Any election made pursuant to this Section shall remain in effect for all subsequent calendar years unless the Participant amends or revokes the election by delivering a revised written deferral election to the Corporation by December 31 of the calendar year preceding the calendar year to which the revised deferral election applies.

With respect to amounts deferred for years beginning on or after January 1, 2005, any election made pursuant to this Section may also designate a specific date or dates for a Participant to receive a specified portion of such amount then credited to his or her Account in the form of Stock Units. Payments of such amounts on the specified date(s) will be subject to the payment provisions of Article IV. No amounts deferred for years beginning prior to January 1, 2005 may be paid on a date specified pursuant to an election described in this paragraph.

3.2            Crediting of Account .

(a)           The amount of Compensation that is deferred by a Participant under the Plan will be credited to his or her Account in the form of a Stock Unit on the date such Compensation would otherwise have been paid to the Participant in cash. Each whole Stock Unit shall be deemed to be equivalent to one share of Common Stock. The number of Stock Units to be credited to a Participant’s Account shall be the number of whole and fractional shares of Common Stock determined by dividing 125% of the total Compensation amount deferred to the Participant’s Account pursuant to this Section 3.2(a) by the closing price of the Common Stock on the last trading day immediately preceding the date the Compensation would otherwise have been paid to the Participant.

(b)           On any date the Corporation pays a cash dividend or distribution with respect to its outstanding shares of the Common Stock, each Participant’s Account will be credited with additional Stock Units in an amount equal to (x) 125% of the product of (i) the total number of Stock Units then credited to the Participant’s Account multiplied by (ii) the per share cash dividend or distribution amount paid to Common Stockholders divided by (y) the closing price of the Common Stock on the last trading day immediately preceding the date on which the dividend or distribution was paid.

4.1            Right to Benefits .

(a)           Subject to the provisions of Article VI, a Participant (or his or her Beneficiary in the case of the Participant’s death) shall be entitled to payment of benefits hereunder upon the first to occur of the Participant’s death, Disability, complete retirement or other Separation from Service as a Director or, with respect to amounts deferred for years beginning on or after January 1, 2005, the specified date(s) the Participant has elected to receive a distribution pursuant to Section 3.1. A Participant who ceases to be a Director but who continues his or her service as a member of an advisory board of directors of the Corporation or a subsidiary shall not automatically be deemed to have “retired” or separated from the Corporation for purposes of the Plan unless such change constitutes a Separation from Service under Section 409A.

(b)           No date specified by a Participant to receive a distribution pursuant to Section 3.1 may be accelerated. A Participant may elect to postpone a specified payment date provided such postponement satisfies Section 409A or other applicable law. Under current law, any election to postpone a specified payment date (i) may not take effect until at least 12 months after the date such election is made, (ii) may not be for less than 5 years after the original specified payment date and (iii) must be made no later than 12 months prior to the first payment date originally specified.

(c)           Notwithstanding any provision of this Plan to the contrary, in accordance with the transition guidance provided under Section 409A of the Code, each Participant in the Plan as of January 1, 2005 shall have the right to make a one-time irrevocable election to terminate his or her participation in the Plan or cancel all or a portion of his or her prior deferral elections pursuant to the Plan. In order to effect such termination or cancellation, the Participant must file a written election with the Corporation no later than June 15, 2005. In the event of such election, all deferral amounts subject to such termination or cancellation election will be paid out to the Participant in accordance with this Article IV.

4.2            Payment of Stock Units . Benefits represented by Stock Units shall be paid by the Corporation by issuing authorized and unissued shares of the Corporation’s Common Stock equal to the total number of applicable Stock Units in the Participant’s Account, rounded up to the next whole share. All such distributions shall be made to the Participant on the specified date in the case of a fixed distribution date election or as soon as administratively practicable but in no event later than ninety (90) days following the date the Participant became eligible to receive benefits in the case of a Participant’s Separation from Service, death, or Disability.

4.3            Required Six-Month Delay Applicable To Certain Participants . Notwithstanding Section 4.2 above or any other provisions of the Plan to the contrary, in the event a Participant is a “specified employee” within the meaning of Code Section 409A(a)(2)(B)(i) and the Participant’s benefit under this Plan (or any portion thereof) becomes payable on account of his or her Separation from Service, distributions shall not be made before the date which is six (6) months following the Participant’s Separation from Service.

5.1            Designation of Beneficiary . A Participant may designate a Beneficiary to receive benefits under the Plan upon the Participant’s death by filing a written designation with the Corporation in the form attached or other form approved by the Corporation. If more than one Beneficiary is named, the share and precedence of each Beneficiary shall be indicated. A Participant shall have the right to change the Beneficiary by submitting a revised written designation to the Corporation but no such change shall be effective until such change is received and formally acknowledged by the Corporation.

If no Beneficiary is named pursuant to this Section 5.1, the Participant’s Beneficiary will be the Participant’s spouse, if any, or the Participant’s estate, if the Participant has no spouse at the time of the Participant’s death.

5.2            Payment to Beneficiary . Benefits to be paid to a Beneficiary under the Plan shall be paid as soon as administratively practicable following the Participant’s death but in no event more than ninety (90) days following the Participant’s death unless otherwise provided herein. Notwithstanding the foregoing, in the event the Corporation has any doubt or a bona fide dispute or concern exists as to the proper Beneficiary to receive payments under the Plan, the Corporation shall have the right to withhold those payments until the matter is finally determined to the satisfaction of the Corporation. Any payment made by the Corporation in good faith and in accordance with this Plan shall fully discharge the Corporation from all further obligations with respect to such payment.

In making any payment to or for the benefit of any minor or incompetent Beneficiary, the Board, in its sole and absolute discretion, may make a distribution to a legal or natural guardian or other relative of a minor or a court appointed committee of such incompetent. The Board may also, in its sole and absolute discretion, make a payment to any adult with whom the minor or incompetent temporarily or permanently resides. The receipt by a guardian, committee, relative or other person shall be a complete discharge to the Corporation and each Subsidiary. Neither the Board nor the Corporation nor any Subsidiary shall have any responsibility to see to the proper application of any payments so made.

6.1            Recapitalization or Stock Dividend . The number of Stock Units credited to a Participant’s Account shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock of the Corporation resulting from a subdivision or consolidation of shares or the payment of a stock dividend (but only on the Common Stock) or any other increase or decrease in the number of such shares effected without receipt of consideration by the Corporation.

6.2            Change in Control .

(a)            In the event of a “Change in Control” as such term is defined below, all amounts deferred pursuant to this Plan will be payable in full in accordance with Article IV above upon the consummation of such event or transaction constituting a Change in Control.

(b)           For purposes of this Plan, the term “Change in Control” shall mean any of the following:

(i)           Any “person” (as such term is used in Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Act”) acquiring “beneficial ownership”) (as such term is used in Rule 13d-3 under the Act), directly or indirectly, of securities of the Corporation, t