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Exhibit 10.3 Bank of Granite Corporation/First Commerce Bank 1997 Incentive
             Stock Option Plan

                       BANK OF GRANITE/FIRST COMMERCE BANK
                        1997 INCENTIVE STOCK OPTION PLAN

         Bank of Granite Corporation, a Delaware corporation (hereinafter
referred to as the "Corporation"), does herein set forth the terms of the Bank
of Granite/First Commerce Bank 1997 Incentive Stock Option Plan (hereinafter
referred to as the "Plan") which was adopted and amended by the Corporation's
Board of Directors (hereinafter referred to as the "Board") subject to approval
by the Corporation's shareholders as provided in Paragraph 21 hereof, and which
was assumed by the Corporation pursuant to that certain Merger Agreement between
Bank of Granite Corporation and First Commerce Corporation dated as of December
18, 2002, as amended, and which is subject to the terms and conditions thereof.

         1.       Purpose of the Plan. The purpose of this Plan is to provide
for the grant of Incentive Stock Options (hereinafter referred to as "Option" or
"Options") qualifying for the tax treatment afforded by Section 422 of the
Internal Revenue Code of 1986, as amended, to eligible officers and employees of
the Corporation (hereinafter referred to as "Eligible Employees") who wish to
invest in the Corporation's common stock (hereinafter referred to as "Common
Stock"). The Corporation believes that participation in the ownership of the
Corporation by Eligible Employees will be to the mutual benefit of the
Corporation and Eligible Employees. The existence of this Plan will make it
possible for the Corporation and its subsidiaries, if any, to attract capable
individuals to employment in key employee positions.

         2.       Administration of the Plan.

         (a)      This Plan shall be administered by a committee of the Board
(hereinafter referred to as the "Committee"). The Committee shall consist of at
least three (3) members of the Board all of whom must satisfy Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The members of the Committee shall be appointed by the Board and shall
serve at the pleasure of the Board, which may remove members from, add members
to, or fill vacancies in the Committee.

         (b)      The Committee shall decide to whom Options shall be granted
under this Plan, the number of shares as to which Options shall be granted, the
Option Price (as hereinafter defined) for such shares and such additional terms
and conditions for such Options as the Committee deems appropriate.

         (c)      A majority of the Committee shall constitute a quorum and the
acts of a majority of the members present at any meeting at which a quorum is
present, or acts approved unanimously in writing by the Committee, shall be
considered as valid actions by the Committee.

         (d)      The Board may designate any officers or employees of the
Corporation to assist in the administration of this Plan. The Board may
authorize such individuals to execute documents on its behalf and may delegate
to them such other ministerial and limited discretionary duties as the Board may
deem fit.

         3.       Shares of Common Stock Subject to the Plan. The number of
shares of Common Stock that shall be available initially for Options under this
Plan is Ninety-Two Thousand

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(92,000) shares, subject to adjustment as provided in Paragraph 14 hereof.
Shares subject to Options which expire or terminate prior to the issuance of the
shares of Common Stock shall again be available for future grants of Options
under this Plan.

         4.       Eligibility. Options under this Plan may be granted to any
Eligible Employee as determined by the Committee. An individual may hold more
than one Option under this or other plans adopted by the Corporation.

         5.       Vesting of Options. Except as otherwise expressly provided for
herein, Options granted under this Plan shall become exercisable as they vest in
accordance with the following schedule:

<TABLE>
<CAPTION>
  YEARS OF CONTINUOUS
EMPLOYMENT FROM DATE OF         PERCENTAGE OF OPTIONS
         GRANT                          VESTED
-----------------------         ---------------------
<S>                             <C>
          One                             20%

          Two                             40%

         Three                            60%

          Four                            80%

          Five                           100%
</TABLE>

         6.       Option Price.

         (a)      The price per share of each Option granted under this Plan
(hereinafter called the "Option Price") shall be determined by the Committee as
of the effective date of grant of such Option, but in no event shall the Option
Price be less than (i) 100% of the fair market value of Common Stock on the date
of grant, or (ii) the par value of Common Stock on the date of grant. If an
Optionee (as hereinafter defined) at the time that an Option is granted owns
stock possessing more than ten (10%) percent of the total combined voting power
of all classes of stock of the Corporation, then the Option Price per share of
each Option granted under this Plan shall be no less than 110% of the fair
market value of Common Stock on the date of grant and such Option shall not be
exercisable more than five (5) years from the date of grant. An Option shall be
considered as granted on the date that the Committee acts to grant such Option
or such later date as the Committee shall specify in an Option Agreement (as
hereinafter defined).

         (b)      The fair market value of a share of Common Stock shall be
determined as follows: (i) if on the date as of which such determination is
being made, Common Stock being valued is admitted to trading on a securities
exchange or exchanges for which actual sale prices are regularly reported, or
actual sale prices are otherwise regularly published, the fair market value of a
share of Common Stock shall be deemed to be equal to the mean of the closing
sale price as reported on each of the five (5) trading days immediately
preceding the date as of which such determination is made; provided, however,
that, if a closing sale price is not reported for each of the five (5) trading
days immediately preceding the date as of which such determination

                                       96
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is made, then the fair market value shall be equal to the mean of the closing
sale prices on those trading days for which such price is available, or (ii) if
on the date as of which such determination is made, no such closing sale prices
are reported, but quotations for Common Stock being valued are regularly listed
on the National Association of Securities Dealers Automated Quotation System
("NASDAQ") or another comparable system, the fair market value of a share of
Common Stock shall be deemed to be equal to the mean of the average of the
closing bid and asked prices for such Common Stock quoted on such system on each
of the five (5) trading days preceding the date as of which such determination
is made, but if a closing bid and asked price is not available for each of the
five (5) trading days, then the fair market value shall be equal to the mean of
the average of the closing bid and asked prices on those trading days during the
five-day period for which such prices are available, or (iii) if no such
quotations are available, the fair market value of a share of Common Stock shall
be deemed to be the average of the closing bid and asked prices furnished by a
professional securities dealer making a market in such shares, as selected by
the Committee, for the trading date first preceding the date as of which such
determination is made. If the Committee determines that the price as determined
above does not represent the fair market value of a share of Common Stock, the
Committee may then consider such other factors as it deems appropriate and then
fix the fair market value for the purposes of this Plan.

         7.       Payment of Option Price. Payment for shares subject to an
Option must be made in cash.

         8.       Terms and Conditions of Grant of Options. Each Option granted
pursuant to this Plan shall be evidenced by a written Incentive Stock Option
Agreement (hereinafter referred to as "Option Agreement") with each Eligible
Employee (hereinafter referred to as "Optionee") to whom an Option is granted;
such agreement shall be substantially in the form attached hereto as "Exhibit
A," unless the Committee shall adopt a different form and, in each case, may
contain such other, different, or additional terms and conditions as the
Committee may determine.

         9.       Option Period. Each Option Agreement shall set forth a period
during which such Option may be exercised (hereinafter referred to as the
"Option Period"); provided, however, that the Option Period shall not exceed ten
(10) years after the date of grant of such Option as specified in an Option
Agreement.

         10.      Limitation on Grant of Incentive Stock Options.
Notwithstanding any other provision of this Plan, no person shall be granted an
Option under this Plan which would cause such person's "annual vesting amount"
to exceed $100,000.00. With respect to any calendar year, a person's "annual
vesting amount" is the aggregate fair market value of stock subject to incentive
stock options with respect to which such options are first exercisable during
such calendar year. For purposes of the foregoing, the aggregate fair market
value of stock with respect to which incentive stock options are first
exercisable during any calendar year shall be determined by taking into account
all such options granted to such person under all incentive stock option plans
of the Corporation or of any of its parent or subsidiary corporations.

         Notwithstanding any other provision of this Plan, no more than 40% of
the shares of Common Stock available under this Plan shall be allocated to one
individual.

                                       97

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         11.      Exercise of Incentive Stock Options. An Option shall be
exercised by written notice to the Committee signed by an Optionee or by such
other person as may be entitled to exercise such Option. The aggregate Option
Price for the shares being purchased must be paid in cash. The written notice
shall state the number of shares with respect to which an Option is being
exercised and shall either be accompanied by the payment of the aggregate Option
Price for such shares or shall fix a date (not more than ten (10) business days
from the date of such notice) by which the payment of the aggregate Option Price
will be made. An Optionee shall not exercise an Option to purchase less than one
hundred (100) shares, unless the Committee otherwise approves or unless the
partial exercise is for the remaining shares available under such Option. A
certificate or certificates for the shares of Common Stock purchased by the
exercise of an Option shall be issued in the regular course of business
subsequent to the exercise of such Option and the payment therefor. During the
Option Period, no person entitled to exercise any Option granted under this Plan
shall have any of the rights or privileges of a shareholder with respect to any
shares of Common Stock issuable upon exercise of such Option, until certificates
representing such shares shall have been issued and delivered and the
individual's name entered as a shareholder of record on the books of the
Corporation for such shares.

         12.      Effect of Termination of Employment, Retirement, Disability or
Death.

         (a)      In the event of the termination of employment of an Optionee
by reason of being discharged for cause, any Option or Options granted to the
Optionee under this Plan, to the extent not previously exercised by the Optionee
or expired, shall immediately terminate. The phrase "discharged for cause" shall
include termination at the sole discretion of the board because of such
Optionee's personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule or regulation (other than traffic
violations or similar offenses), a final cease and desist order, or material
breach of any provision of any employment agreement that such Optionee may have
with the Corporation.

         (b)      In the event of the termination of employment of an Optionee
either by reason of (1) being discharged for any reason other than cause or (ii)
voluntary separation on the part of such Optionee for a reason other than
retirement or disability, such Optionee shall have the right to exercise any
Option or Options granted to the Optionee under this Plan, to the extent that
they have vested and have not previously been exercised by the Optionee or
expired, for a period of three (3) months after the date of such termination,
but in no event may any Option be exercised later than the end of the Option
Period provided in such Option Agreement in accordance with Paragraph 9 hereof.

         (c)      In the event of the termination of employment of an Optionee
as a result of such Optionee's retirement, such Optionee shall have the right to
exercise any Option or Options granted to the Optionee under this Plan, to the
extent that they have not previously been exercised by the Optionee or expired,
for a period of three (3) months after the date of retirement, but in no event
may any Option be exercised later than the end of the Option Period provided in
such Option Agreement in accordance with Paragraph 9 hereof. Notwithstanding any
other provision contained herein, or in any Option Agreement, upon retirement,
any Option then held by an Optionee shall be exercisable immediately in full.
For purposes of this Plan, the term "retirement" shall mean (i) termination of
an Optionee's employment under conditions

                                       98

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which would constitute retirement under any tax qualified retirement plan
maintained by the Corporation or any of its subsidiaries or (ii) attaining age
65.

         (d)      In the event of the termination of employment of an Optionee
by reason of such Optionee's disability, such Optionee shall have the right to
exercise any Option or Options held by the Optionee, to the extent that they
previously have not been exercised by the Optionee or expired, notwithstanding
any limitations placed on the exercise of such Options by this Plan or an Option
Agreement, including vesting requirements, immediately in full and at any time
within twelve (12) months after the last date on which such Optionee provided
services as an officer or an employee of the Corporation before being disabled,
but in no event may any Option be exercised later than the end of the Option
Period provided in such Option Agreement in accordance with Paragraph 9 hereof.
For purposes of this Plan, the term "disability" shall be defined in the same
manner as such term is defined in Section 22(e)(3) of the Internal Revenue Code
of 1986, as amended.

         (e)      In the event that an Optionee should die while employed by the
Corporation or any of its subsidiaries, or within three (3) months after
retirement, any Option or Options granted to the Optionee under this Plan and
not previously exercised by the Optionee or expired shall vest and shall be
exercisable, according to their respective terms, by the personal representative
of such Optionee or by any person or persons who acquired such Options by
bequest or inheritance from such Optionee, notwithstanding any limitations
placed on the exercise of such Options by this Plan or an Option Agreement,
immediately in full and at any time within twelve (12) months after the date of
death of such Optionee, but in no event may any Option be exercised later than
the end of the Option Period provided in such Option Agreement in accordance
with Paragraph 9 hereof. Any references herein to all Optionee shall be deemed
to include any person entitled to exercise an Option under the terms of this
Plan after the death of such Optionee under the terms of this Plan.

         13.      Effect of Plan on Employment Status. The fact that the
Committee has granted an Option to an Optionee under this Plan shall not confer
on such Optionee any right to employment with the Corporation or to a position
as an officer or an employee of the Corporation, nor shall it limit the right of
the Corporation to remove such Optionee from any position held by the Optionee
or to terminate the Optionee's employment at any time.

         14.      Adjustment Upon Changes in Capitalization; Dissolution or
Liquidation.

         (a)      In the event of a change in the number of shares of Common
Stock outstanding by reason of a stock dividend, stock split, recapitalization,
reorganization, merger, exchange of shares, or other similar capital adjustment,
prior to the termination of an Optionee's rights under this Plan, equitable
proportionate adjustments shall be made by the Committee in (i) the number and
kind of shares which remain available under this Plan and (ii) the number, kind,
and the Option Price of shares subject to unexercised Options under this Plan.
The adjustments to be made shall be determined by the Committee and shall be
consistent with such change or changes in the Corporation's total number of
outstanding shares; provided, however, that no adjustment shall change the
aggregate Option Price for the exercise of Options granted under this Plan.

                                       99

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         (b)      The grant of Options under this Plan shall not affect in any
way the right or power of the Corporation or its shareholders to make or
authorize any adjustment, recapitalization, reorganization, or other change in
the Corporation's capital structure or its business, or any merger or
consolidation of the Corporation, or to issue bonds, debentures, preferred or
other preference stock ahead of or affecting Common Stock or the rights thereof,
or the dissolution or liquidation of the Corporation, or any sale or transfer of
all or any part of the Corporation's assets or business.

         (c)      Upon the effective date of the dissolution or liquidation of
the Corporation, or of a reorganization, merger, or consolidation of the
Corporation with one or more other corporations in which the Corporation is not
the surviving corporation, or the transfer of all or substantially all of the
assets or shares of the Corporation to another person or entity (any such
transaction being hereinafter referred to as a "Terminating Event"), this Plan
and any Options granted hereunder shall terminate unless provision is made in
writing in connection with such Terminating Event for the continuance of this
Plan and for the assumption of Options granted hereunder, or the substitution
for such Options of new options for the shares of the successor corporation, or
a parent or a subsidiary thereof, with such appropriate adjustments, as may be
determined or approved by the Committee or the successor to the Corporation, to
the number and kind of shares subject to such substituted options in which event
this Plan and Options granted hereunder, or the new options substituted
therefor, shall continue in the manner and under the terms so provided. Upon the
occurrence of any Terminating Event, all Options granted to an Optionee
hereunder shall immediately vest in full, notwithstanding the provisions of
Paragraph 5 hereof. Further, upon the occurrence of any Terminating Event in
which provision is not made for the continuance of this Plan and for the
assumption of Options granted hereunder, or the substitution for such Options of
new options for the shares of a successor corporation or a parent or a
subsidiary thereof, each Optionee to whom an Option has been granted under this
Plan (or such person's personal representative, the executor or administrator of
such person's estate, or any person who acquired the right to exercise such
Option from such person by bequest or inheritance) shall be entitled, prior to
the effective date of any such Terminating Event, to exercise, in whole or in
part, the Optionee's rights under any Option granted to the Optionee without any
regard to any restrictions on exercise that would otherwise apply. To the extent
that a person, pursuant to this Subparagraph 14(c), has a right to exercise any
Option on account of a Terminating Event which such person otherwise would not
have had at that time, such right shall be contingent upon the consummating of
such Terminating Event.

         15.      Non-Transferability. Any Option granted under this Plan shall
not be assignable or transferable except, in the case of the death of an
Optionee, by will or by the laws of descent and distribution. In the event of
the death of an Optionee, the personal representative, the executor or the
administrator of such Optionee's estate, or the person or persons who acquired
by bequest or inheritance the rights to exercise such Option, may exercise any
Option or portion thereof to the extent not previously exercised by an Optionee
or expired, in accordance with its terms, prior to the expiration of the
exercise period as specified in Subparagraph 12(e) hereof.

         16.      Tax Withholding. The employer of a person granted an Option
under this Plan shall have the right to deduct or otherwise effect a withholding
of any amount required by federal or State laws to be withheld with respect to
the grant, exercise for cash of any Option or the sale of stock acquired upon
the exercise of an Option in order for the employer to obtain a tax

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deduction otherwise available as a consequence of such grant, exercise, or sale,
as the case may be.

         17.      Listing and Registration of Option Shares. Any Option granted
under the Plan shall be subject to the requirement that if at any time the
Committee shall determine, in its discretion, that the listing, registration, or
qualification of the shares covered thereby upon any securities exchange or
under any state or federal law or the consent or approval of any governmental
regulatory body is necessary or desirable as a condition of, or in connection
with, the granting of such Option or the issuance or purchase of shares
thereunder, such Option may not be exercised in whole or in part unless and
until such listing, registration, qualification, consent, or approval shall have
been effected or obtained free of any conditions not acceptable to the
Committee.

         18.      Exculpation and Indemnification. In connection with this Plan,
no member of the Committee shall be personally liable for any act or omission to
act in such person's capacity as a member of the Committee, nor for any mistake
in judgment made in good faith, unless arising out of, or resulting from, such
person's own bad faith, gross negligence, willful misconduct, or criminal acts.
To the extent permitted by applicable law and regulation, the Corporation shall
indemnify and hold harmless the members of the Committee, and each other officer
or employee of the Corporation or of any subsidiary thereof to whom any duty or
power relating to the administration or interpretation of this Plan may be
assigned or delegated, from and against any and all liabilities (including any
amount paid in settlement of a claim with the approval of the Board) and any
costs or expenses (including counsel fees) incurred by such persons arising out
of, or as a result of, any act or omission to act in connection with the
performance of such person's duties, responsibilities, and obligations under
this Plan, other than such liabilities, costs, and expenses as may arise out of,
or result from, the bad faith, gross negligence, willful misconduct, or criminal
acts of such persons.

         19.      Amendment and Modification of the Plan. The Board may at any
time and from time to time amend or modify this Plan (including the form of
Option Agreement) in any respect; provided, however, that no amendment or
modification shall be made that increases the total number of shares covered by
this Plan or effects any change in the categories of persons who may receive
Options under this Plan or materially increases the benefits accruing to
Optionees under this Plan unless such change is approved by the holders of a
majority of shares of Common Stock present or represented at a shareholders'
meeting at which a quorum is present. Any amendment or modification of this Plan
shall not materially reduce the benefits under any Option theretofore granted to
an Optionee under this Plan without the consent of such Optionee or the
transferee thereof in the event of the death of such Optionee. Notwithstanding
the above, no amendment may be effective, without the approval of the
shareholders of the Corporation, if approval of such amendment is required in
order that transactions in the Common Stock under the Plan be exempt from the
operation of Section 16(b) of the Exchange Act.

         20.      Termination and Expiration of the Plan. This Plan may be
abandoned, suspended, or terminated at any time by the Board; provided, however,
that abandonment, suspension, or termination of this Plan shall not affect any
Options then outstanding under this Plan. No Option shall be granted pursuant to
this Plan after ten (10) years from the effective date of this plan as provided
in Paragraph 21 hereof.

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         21.      Effective Date; Shareholder Approval. This Plan shall not be
effective until approved by the holders of two-thirds of the outstanding shares
of Common Stock; which shareholder vote shall be taken at the next meeting of
the shareholders of the Corporation to occur following Board approval of the
Plan.

         22.      Captions and Headings; Gender and Number. Captions and
paragraph headings used herein are for convenience only, do not modify or affect
the meaning of any provision herein, are not a part hereof, and shall not serve
as a basis for interpretation or in construction of this Plan. As used herein,
the masculine gender shall include the feminine and neuter, the singular number
the plural, and vice versa, whenever such meanings are appropriate.

         23.      Expenses of Administration of Plan. All costs and expenses
incurred in the operation and administration of this Plan shall be borne by the
Corporation or one or more of its subsidiaries.

         24.      Governing Law. Without regard to the principles of conflicts
of laws, the laws of the State of North Carolina shall govern and control the
validity, interpretation, performance, and enforcement of this Plan.

         25.      Inspection of Plan. A copy of this Plan, and any amendments
thereto or modification thereof, shall be maintained by the Secretary of the
Corporation and shall be shown to any proper person making inquiry about it.

         26.      Compliance with Section 16 of the Securities Exchange Act of
1934. It is the intention of the Corporation that the Plan and Options hereunder
satisfy and be interpreted in a manner, that, in the case of Optionees,
satisfies the applicable requirements of Rule 16b-3 promulgated under Section
16(b) of the Exchange Act, so that such persons will be entitled to the benefits
of Rule 16b-3 or other exemptive rules under Section 16 of the Exchange Act and
will not be subjected to avoidable liability thereunder. If any provision of the
Plan or of any Option Agreement would otherwise frustrate or conflict with the
intent expressed in this Paragraph 26, that provision to the extent possible
shall be interpreted and deemed amended so as to avoid such conflict. To the
extent of any remaining irreconcilable conflict with such intent, the provision
shall be deemed void as applicable to any person who is subject to Section 16 of
the Exchange Act.

                                      102

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STATE OF NORTH CAROLINA

                                                                       EXHIBIT A

COUNTY OF MECKLENBURG

                        INCENTIVE STOCK OPTION AGREEMENT

         THIS INCENTIVE STOCK OPTION AGREEMENT (hereinafter referred to as this
"Agreement") is made and entered into as of this ____ day of _____________,
20___, between BANK OF GRANITE CORPORATION, a Delaware corporation (hereinafter
referred to as the "Corporation"), and __________________________, a resident
of, ___________ County, North Carolina (hereinafter referred to as the
"Optionee").

         WHEREAS, the Board of Directors of the Corporation (hereinafter
referred to as the "Board") has approved the assumption of the Bank of
Granite/First Commerce Bank 1997 Incentive Stock Option Plan (hereinafter
referred to as the "Plan") which Plan was approved by the Corporation's
shareholders on _____________________, 1997 and amended on May 27, 1999; and

         WHEREAS, the Plan provides that a committee (hereinafter referred to as
the "Committee") of the Board will make available to certain officers and
employees of the Corporation and its subsidiaries (any one of which, as may be
appropriate, is hereinafter referred to as the "Employer") the right to purchase
shares of the Corporation's common stock (hereinafter referred to as "Common
Stock"); and

         WHEREAS, the Committee has determined that the Optionee should be
granted an option to purchase shares of Common Stock under the Plan;

         NOW, THEREFORE, the Corporation and the Optionee agree as follows:

         1.       Date of Grant of Option. The date of grant of the option
granted under this Agreement is the ____th day of ________________, 20__.

         2.       Grant of Option. Pursuant to the Plan, the Corporation grants
to the Optionee the right (hereinafter referred to as the "Option") to purchase
from the Corporation all or any part of an aggregate of _______________ (_____)
shares of Common Stock (hereinafter referred to as the "Option Shares") which
shall be authorized but unissued shares.

         3.       Option Price. The price to be paid for the Option Shares shall
be __________________________ Dollars ($________) per share (hereinafter
referred to as the "Option Price") which is the fair market value of the Option
Shares as determined by the Committee as of the date of grant of this Option.

         4.       When and Extent to which Option may be Exercised. Subject to
any further restrictions in this Agreement, the right of the Optionee to
exercise the Option to purchase the Option Shares, either in whole or in part,
shall be conditioned upon the completion by the Optionee of one (1) full year of
service in the employment of the Employer following the date of grant of the
Option set forth in paragraph 1 hereof. At such time as the Option shall become
exercisable in accordance with this Agreement, the Optionee, in his discretion,
may exercise all

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<PAGE>

or any portion of the Option, subject to paragraph 5 hereof. The Option shall
terminate as provided in paragraph 6 hereof. Notwithstanding any other provision
of this Agreement, the Option shall not become exercisable for the first time
during the course of any calendar year to purchase Option Shares having an
aggregate fair market value on the date of grant of the Option in excess of One
Hundred Thousand and No/100 Dollars ($100,000.00) (the "Value Limitation"). The
Value Limitation shall be reduced, dollar for dollar, by the value of any shares
of Common Stock subject to "incentive stock options" obtained by the Optionee by
means other than this Agreement which also are exercisable for the first time in
such calendar year. For purposes of this paragraph 4, the term "incentive stock
options" means options qualifying for the tax treatment afforded by Section 422
of the Internal Revenue Code of 1986, as amended (the "Code").

         Except as otherwise expressly provided for in the Plan and in this
Agreement, Options granted hereunder shall become exercisable as they vest in
accordance with the following schedule:

<TABLE>
<CAPTION>
      YEARS OF
CONTINUOUS EMPLOYMENT
 FROM DATE OF GRANT        PFRCENTAGE OF OPTIONS VESTED
---------------------      ----------------------------
<S>                        <C>
         One                            20%

         Two                            40%

        Three                           60%

        Four                            80%

        Five                           100%
</TABLE>

         5.       Method of Exercise. The Option shall be exercised by written
notice to the Committee signed by the Optionee or by such other person as may be
entitled to exercise. The aggregate Option Price for the shares being purchased
must be paid in cash. The written notice shall state the number of shares with
respect to which the Option is being exercised and shall either be accompanied
by the payment of the aggregate Option Price for such shares or shall fix a date
(not more than ten (10) business days from the date of such notice) by which the
payment of the aggregate Option Price will be made. The Optionee shall not
exercise the Option to purchase less than one hundred (100) shares, unless the
Committee otherwise approves or unless the partial exercise is for the remaining
shares available under the Option. A certificate or certificates for the shares
of Common Stock purchased by the exercise of the Option shall be issued in the
regular course of business subsequent to the exercise of the Option and the
payment therefor. During the Option Period, no person entitled to exercise the
Option granted under this Agreement shall have any of the rights or privileges
of a shareholder with respect to any shares of Common Stock issuable upon
exercise of the Option, until certificates representing such shares shall have
been issued and delivered and the individual's name entered as a shareholder of
record on the books of the Corporation for such shares.

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         6.       Termination of Option. The Option shall terminate as follows:

         (a)      Except as provided in subparagraphs (b), (c), (d) and (e)
below, the Option granted under this Agreement, to the extent that it has not
been exercised or expired, shall terminate on (i) the date that the Optionee is
discharged for cause, or (ii) the date which is ten (10) years from the date of
grant of the Option set forth in paragraph l hereof. The phrase "discharged for
cause" shall include termination at the sole discretion of the Board of
Directors of the Employer of the Optionee because of the Optionee's personal
dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving
personal profit, intentional failure to perform stated duties, willful violation
of any law, rule or regulation (other than traffic violations or similar
offenses) or final cease and desist order, or material breach of any provision
of any employment agreement that the Optionee may have with the Employer.

         (b)      In the event the Optionee is involuntarily terminated for any
reason other than cause or voluntarily terminates employment for reasons other
than retirement or disability, and such termination is prior to the date which
is ten (10) years after the date of grant of the Option, the Optionee shall have
the right to exercise the Option, to the extent that it has vested and has not
been exercised by the Optionee or expired, at any time within three (3) months
after the date of such termination, but in no event may the Option be exercised
later than ten (10) years after the date of grant of the Options set forth in
(b) of paragraph 1 hereof.

         (c)      In the event the Optionee retires prior to the date which is
ten (10) years after the date of grant of the Option, the Optionee shall have
the right to exercise the Option, to the extent that it has not been exercised
by the Optionee or expired, notwithstanding any limitation placed on the
exercise of the Option by the Plan or by this Agreement, immediately in full and
at any time within three (3) months after the date of retirement, but in no
event may the Option be exercised later than ten (10) years after the date of
grant of the Option set forth in paragraph 1 hereof. Notwithstanding any other
provision contained herein or in the Plan, upon retirement, any Option then held
by an Optionee shall be exercisable immediately in full. For purposes of this
Agreement, the term "retirement" shall mean (i) termination of the Optionee's
employment under conditions which would constitute retirement under any tax
qualified retirement plan maintained by the Employer or (ii) attaining age 65.

         (d)      In the event the Optionee becomes disabled prior to the date
which is ten (10) years after the date of grant of the Option, the Optionee
shall have the right to exercise the Option, to the extent that it has not been
exercised by the Optionee or expired, notwithstanding any limitation placed on
the exercise of the Option by the Plan or by this Agreement, including vesting
requirements, immediately in full and at any time within twelve (12) months
after the last date on which the Optionee provided services as an officer or an
employee of the Employer before being disabled, but in no event may the Option
be exercised later than ten (10) years after the date of grant of the Option set
forth in paragraph 1 hereof. For purposes of this Agreement, the term
"disability" shall be defined in the same manner as such term is defined in
Section 22(e)(3) of the Internal Revenue Code of 1986, as amended.

         (e)      In the event the Optionee should die while employed by the
Employer or within three (3) months after retirement but prior to the date which
is ten (10) years after the date of grant of the Option, the Option, to the
extent it has not been exercised by the Optionee or

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expired, shall be exercisable, according to its terms, by the personal
representative, the executor or administrator of the Optionee's estate, or any
person or persons who acquired the Option by bequest or inheritance from the
Optionee, notwithstanding any limitation placed on the exercise of the Option by
the Plan or by this Agreement, immediately in full and at any time within twelve
(12) months after the date of death of the Optionee, but in no event may the
Option be exercised later than ten (10) years from the date of grant of the
Option as set forth in paragraph 1 hereof.

         7.       Effect of Agreement on Employment Status of Optionee. The fact
that the Committee has granted the Option to the Optionee under this Agreement
shall not confer on the Optionee any right to employment with the Employer or to
a position as an officer or an employee of the Employer, nor shall it limit the
right of the Employer to remove the Optionee from any position held by the
Optionee or to terminate his or her employment at any time.

         8.       Listing and Registration of Option Shares.

         (a)      The Corporation's obligation to issue shares of Common Stock
upon exercise of the Option is expressly conditioned upon (i) the completion by
the Corporation of any registration or other qualification of such shares under
any state or federal law or regulations or rulings of any government regulatory
body or (ii) the making of such investment representations or other
representations and agreements by the Optionee or any person entitled to
exercise the Option in order to comply with the requirements of any exemption
from any such registration or other qualification of the Option Shares which the
Committee shall, in its sole discretion, deem necessary or advisable.
Notwithstanding the foregoing, the Corporation shall be under no obligation to
register or qualify the Option Shares under any state or federal law. The
required representations and agreements referenced above may include
representations and agreements that the Optionee, or any other person entitled
to exercise the Option, (i) is purchasing such shares on his or her own behalf
as an investment and not with a present intention of distribution or resale and
(ii) agrees to have placed upon any certificates representing the Option Shares
a legend setting forth any representations and agreements which have been given
to the Committee or a reference thereto and stating that such shares may not be
transferred except in accordance with all applicable state and federal
securities laws and regulations, and further representing that, prior to making
any sale or other disposition of the Option Shares, the Optionee, or any other
person entitled to exercise the Option, will give the Corporation notice of the
intention to sell or dispose of such shares not less than three (3) business
days prior to such sale or disposition.

         9.       Adjustment Upon Change in Capitalization; Dissolution or
Liquidation.

         (a)      In the event of a change in the number of shares of Common
Stock outstanding by reason of a stock dividend, stock split, recapitalization,
reorganization, merger, exchange of shares, or other similar capital adjustment,
prior to the termination of the Optionee's rights under this Agreement,
equitable proportionate adjustments shall be made by the Committee in the
number, kind, and the Option Price of shares subject to the unexercised portion
of the Option granted udder this Agreement. The adjustments to be made shall be
determined by the Committee and shall be consistent with such change or changes
in the Corporation's total number of outstanding shares; provided, however, that
no adjustment shall change the aggregate Option Price for the exercise of the
Option granted under this Agreement.

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         (b)      The grant of the Option under this Agreement shall not affect
in any way the right or power of the Corporation or its shareholders to make or
authorize any adjustment, recapitalization, reorganization, or other change in
the Corporation's capital structure or its business, or any merger or
consolidation of the Corporation, or to issue bonds, debentures, preferred or
other preference stock ahead of or affecting Common Stock or the rights thereof,
or the dissolution or liquidation of the Corporation, or any sale or transfer of
all or any part of the Corporation's assets or business.

         (c)      Upon the effective date of the dissolution or liquidation of
the Corporation, or of a reorganization, merger, or consolidation of the
Corporation with one or more other corporations in which the Corporation is not
the surviving corporation, or the transfer of all or substantially all of the
assets or shares of the Corporation to another person or entity, the Option
granted under this Agreement shall terminate, except as may be provided in the
Plan.

         10.      Nontransferability. The Option granted under this Agreement
shall not he assignable or transferable except, in the event of the death of the
Optionee, by will or by the laws of descent and distribution. In the event of
the death of the Optionee, the personal representative, the executor or the
administrator of the Optionee's estate, or the person or persons who acquired by
bequest or inheritance the right to exercise the Option may exercise the
unexercised Option or a portion thereof, in accordance with the terms hereof,
prior to the date which is ten (10) years after the date of grant of Option as
set forth in paragraph 1 hereof.

         11.      Notices. Any notice or other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been sufficiently given when delivered personally or when
deposited in the United States mail as Certified Mail, return receipt requested,
properly addressed with postage prepaid, if to the Corporation at its principal
office at _______________________________, Charlotte, North Carolina
___________; and if to the Optionee to his or her last address appearing on the
books of the Employer. The Employer and the Optionee may change their address or
addresses by giving written notice of such change as provided herein. Any notice
or other communication hereunder shall be deemed to have been given on the date
actually delivered or as of the third (3rd) business day following the date
mailed, as the case may be.

         12.      Construction Controlled by Plan. This Agreement shall be
construed so as to be consistent with the Plan; and the provisions of the Plan
shall be deemed to be controlling in the event that any provision hereof should
appear to be inconsistent therewith. The Optionee hereby acknowledges receipt of
a copy of the Plan from the Corporation.

         13.      Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be valid and enforceable
under applicable law, but if any provision of this Agreement is determined to be
unenforceable, invalid or illegal, the validity of any other provisions or part
thereof, shall not be affected thereby and this Agreement shall continue to be
binding on the parties hereto as if such unenforceable, invalid or illegal
provision or part thereof had not been included herein.

         14.      Modification of Agreement; Waiver. This Agreement may be
modified, amended, suspended, or terminated, and any terms, representations or
conditions may be waived,

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but only by written instrument signed by each of the parties hereto. No waiver
hereunder shall constitute a waiver with respect to any subsequent occurrence or
other transaction hereunder or of any other provision hereof.

         15.      Captions and Headings; Gender and Number. Captions and
paragraph headings used herein are for convenience only, do not modify or affect
the meaning of any provision herein, are not a part hereof, and shall not serve
as a basis for interpretation or in construction of this Agreement. As used
herein, the masculine gender shall include the feminine and neuter, the singular
number the plural, and vice versa, whenever such meanings are appropriate.

         16.      Governing Law; Venue and Jurisdiction. Without regard to the
principles of conflicts of laws, the laws of the State of North Carolina shall
govern and control the validity, interpretation, performance, and enforcement of
this Agreement. The parties hereto agree that any suit or action relating to
this Agreement shall be instituted and prosecuted in the courts of the County of
Mecklenburg, State of North Carolina, and each party hereby does waive any right
or defense relating to such jurisdiction and venue.

         17.      Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of the Corporation, its successors and assigns, and shall
be binding upon and inure to the benefit of the Optionee, his or her heirs,
legatees, personal representatives, executors, and administrators.

         18.      Entire Agreement. This Agreement constitutes and embodies the
entire understanding and agreement of the parties hereto and, except as
otherwise provided hereunder, there are no other agreements or understandings,
written or oral, in effect between the parties hereto relating to the matters
addressed herein.

         19.      Counterparts. This Agreement may be executed in any number of
counterparts, each of which when executed and delivered shall be deemed an
original, but all of which taken together shall constitute one and the same
instrument.

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         IN WITNESS WHEREOF, the Corporation has caused this instrument to be
executed in its corporate name by its President or one of its Vice Presidents
and attested by its Secretary or one of its Assistant Secretaries and its
corporate seal to be hereto affixed, all by authority of its Board of Directors
first duly given, and the Optionee has hereunto set his or her hand and adopted
as his or her seal the typewritten word "SEAL" appearing beside his or her name,
all done this the day and year first above written.

                                             BANK OF GRANITE CORPORATION

                                             By: _______________________________
                                                 __________________, President
ATTEST:

________________________________
__________________, Secretary

[CORPORATE SEAL]

                                             _____________________________(SEAL)
                                             ________________________, Optionee

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                                    EXHIBIT A

                              NOTICE OF EXERCISE OF
                             INCENTIVE STOCK OPTION

         To: The Stock Option Committee of the Board of Directors of Bank of
Granite Corporation.

         The undersigned hereby elects to purchase ______________ whole shares
of Common Stock of Bank of Granite Corporation (the "Corporation") pursuant to
the Incentive Stock Option granted to the undersigned in that certain Incentive
Stock Option Agreement between the Corporation and the undersigned dated the
_____ day of __________, 20__. The aggregate purchase price for such Shares is
$________, which amount is (i) being tendered herewith, (ii) will be tendered on
or before _____________, 20__ (cross out provision which does not apply) in
cash. The effective date of this election shall be _______________, 20__, or the
date of receipt of this Notice by the Corporation if later.

         Executed this ____ day of ____________, 20__, at _____________________.

                                    Signature of Optionee: _____________________
                                    Name of Optionee: __________________________

                                        ________________________________________
                                        (Social Security Number)

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