<PAGE>   1


                                                                    EXHIBIT 10.5

                              EMPLOYMENT AGREEMENT





         THIS EMPLOYMENT AGREEMENT (sometimes referred to below as the
"Agreement") is made and entered into as of the 31st day of December, 1996, by
and between JAMES E. BURT, III, a resident of Lincolnton, North Carolina
(hereinafter referred to as "Employee") and CAROLINA FIRST BANCSHARES, INC., a
North Carolina corporation, with its principal office in Lincolnton, North
Carolina (hereinafter referred to as the "Company").

         WHEREAS, the Company and the Employee desire to continue the services
of the Employee pursuant to this Employment Agreement with Employee, upon the
terms and conditions herein set forth;


         NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and other good and valuable consideration, the receipt
and sufficiency of which are mutually acknowledged, the parties hereto,
intending legally to be bound, agree as follows:

         Section 1. Agreement of Employment. Company hereby agrees to continue
to employ Employee, and Employee hereby agrees to remain employed by Company for
the term, and upon and subject to the terms and conditions hereafter set forth.

         Section 2. Term. Company and Employee hereby agree that Employee shall
become employed by Company under the terms of this Agreement as of January 1,
1997, and shall remain employed by Company through January 31, 2000, unless
sooner terminated pursuant to the terms hereof (the "Employment Period").

         Section 3. Duties of Employee.

                  (a) Subject to the supervision and pursuant to the direction
         of the Board of Directors of the Company, Employee shall perform his
         assigned duties as President of Company and shall perform such other
         duties as are customarily performed by one holding such positions in
         similar businesses or enterprises as that engaged in by Company.
         Employee shall, at the direction of the Board of Directors of the
         Company, serve in such other executive capacities with various
         subsidiaries of the Company as the Board of Directors may determine.

                  (b) Employee agrees that he will at all times faithfully,
         industriously, and to the best of his ability, experience and talents,
         perform all of the duties that



<PAGE>   2



         may be reasonably required of and from him pursuant to the express and
         implied terms hereof, to the reasonable satisfaction of the Board of
         Directors of Company. Such duties shall be rendered at Company's
         offices in Lincolnton, North Carolina, and at such other place or
         places as the interests, needs, business and opportunities of Company
         shall reasonably require or make advisable.

                  (c) Employee hereby agrees to refrain from engaging in any
         ventures or enterprises which are reasonably likely to materially
         interfere with the performance of his express and implied duties
         hereunder. Employee shall at all times conduct himself in a manner that
         will promote the interests of Company and its affiliates.

         Section 4. Company's Rights to Benefits of Work Performed. Company
shall be entitled to all of the benefits, emoluments, and profits arising from
or incident to any and all work, services, and advice of the Employee performed
or rendered in the course of Employee's employment hereunder.

         Section 5. Compensation, Expenses and Benefits.

                  (a) Company shall pay to Employee, and Employee shall accept
         from Company, during the Employment Period, and in consideration for
         the services to be performed by Employee, a salary at the rate of not
         less than $140,920.00 per annum (the "Annual Salary"), less deductions
         required by law and Employee authorized deductions, payable in such
         equal periodic installments as Company may determine, but not less
         frequently than monthly. Each year the salary of the Employee shall be
         reviewed and a salary amount set for the following year by the Board of
         Directors based upon recommendations of its Compensation and Benefits
         Committee, in accordance with the Company's established salary
         administration plan. In the event that a mutual agreement cannot be
         reached then the salary shall remain at the same level as that of the
         previous year.

                  (b) In addition to the Annual Salary described in Section 5(a)
         above, Company agrees to reimburse Employee promptly (in accordance
         with policies and procedures adopted by the Board of Directors of
         Company) for all reasonable and necessary expenses actually incurred by
         Employee in connection with the Company's business, including, without
         limitation, all reasonable and necessary expenses of travel, lodging,
         entertainment, and meals away from home incurred by Employee in the
         course of his employment hereunder. Employee agrees to keep and
         maintain such records of the aforesaid expenses as Company may require
         and to account to Company therefore prior to any such reimbursement.
         Employee shall comply with all reasonable and lawful policies and
         procedures applied by Company from time to time to its employees
         generally and relating to or regulating the nature and extent of
         reimbursement expenses, and the manner of accounting and reimbursement
         therefor.



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<PAGE>   3



                  (c) Company hereby agrees to make available to Employee,
         during the Employment Period, all benefits which are generally
         available to similarly situated employees of the Company, subject to
         and on a basis consistent with the terms and conditions of such
         benefits. In addition, Company agrees to provide Employee, during the
         Employment Period, with the following benefits:

                           (1) An automobile for his use in carrying out his
                  duties to the Company and its affiliates. If necessary, the
                  Employee will be allowed to use the Bank automobile for
                  personal use provided an accounting is kept concerning the
                  dates and mileage for personal use. Such accounting shall be
                  made to the Compensation & Benefits Committee on a quarterly
                  basis. The Employee shall, on a quarterly basis, reimburse the
                  Company for his personal use at the then current Federal rate.

                           (2) A non-contributory qualified employee
                  profit-sharing plan; including participation in the Company's
                  401(k) Plan that provides for the Company to match the
                  Employee's contributions in accordance with Company's match of
                  senior officer's contributions to such plan generally.

                           (3) A non-contributory employee group life insurance
                  plan which will provide life insurance for Employee in the
                  amount equal to two times Employee's annual salary (or a
                  maximum of $250,000.00) during all times that Employee remains
                  an active employee.

                           (4) A non-contributory accident and health insurance
                  plan for the payment of medical care expenses for Employee.

                           (5) A non-contributory deferred compensation plan
                  pursuant to the term of Exhibit "A" attached.

                           (6) A non-contributory disability income plan wherein
                  the Company will provide the Employee with the following
                  disability income payable to age 65 and after a 90 day waiting
                  period: disability income equal to sixty percent (60%) of the
                  Employee's annual salary as it exists from time to time up to
                  a maximum benefit of $5,000.00 per month. The Company, in its
                  sole discretion, may apply for additional insurance in its own
                  name and for its own benefit covering the Employee for life,
                  medical, or disability insurance, in any amount deemed
                  advisable and the Employee shall have no right, title or
                  interest therein. The Employee shall submit to any required
                  examination and shall execute and assign and/or deliver such
                  application and policies necessary to effectuate such
                  insurance coverage.

                           The Company shall require the Employee to have a
                  thorough annual physical examination and will reimburse the
                  Employee for the


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<PAGE>   4



                  expense. The first such examination shall be made no later
                  than December 31, 1997.

                           (7) Club dues to a civic club and a country club
                  which may include any required initiation fees. The payment of
                  all dues are subject to approval by the Board of Directors.

                  (d) Employee shall, in addition to the annual salary, be
         eligible to receive an annual bonus determined as follows: For each and
         every year of this Agreement, beginning with 1997, the Employee shall
         be eligible to earn a bonus based on performance goals, in an amount
         not less than $38,000.00 per year.

                  Each year the Compensation & Benefits Committee shall make
         recommendations to the Board of Directors concerning the setting of the
         performance goals for that year, after consulting with the Employee.

                  The goals shall be specific and a fixed dollar amount for the
         attainment of each goal shall be stated. Each year as a bonus the
         Employee may be paid nothing, or the amount of the maximum possible
         bonus, or any amount in between depending on how many of the goals are
         reached.

                  Nothing herein is intended to or shall prevent the Company
         from providing, in its discretion, additional bonus and/or additional
         compensation to the Employee, and further the Employee, not
         withstanding anything to the contrary contained herein shall
         participate in all stock option, and benefit and welfare plans of the
         Company and its affiliates on the same basis as all other senior
         officers of the Company and its affiliates.

                  The bonus provided for hereunder shall be payable with respect
         to the Fiscal Year immediately preceding the year in which the bonus is
         paid and shall not be payable if the Employee voluntarily terminates
         his employment prior to the end of the Fiscal Year or if the Employee
         is terminated for Cause prior to the end of the Fiscal Year. In the
         event that the Employee dies, is terminated because of illness or
         disability or is terminated by the Company, without Cause, prior to the
         end of the Fiscal Year, a pro rata portion of such bonus, if otherwise
         earned, shall nevertheless be paid to the Employee or his estate, as
         the case may be. The pro rata portion shall be based upon the number of
         days the Employee was employed by the Company during such Fiscal Year
         as compared to 365.

                  (e) Following the Employee's termination and prior to him
         reaching age 65, or such longer period as may be provided by the terms
         of the appropriate plan, program, practice or policy, the Company shall
         continue, at employee's expense, health insurance and other benefits to
         the Employee and/or the Employee's family at least equal to those which
         would have been provided to them in accordance with the Company and its
         affiliates plans, programs, practices and policies generally,


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<PAGE>   5


         and as otherwise described in this Agreement if the Employee's
         employment had not been terminated or, if more favorable to the
         Employee, as in effect generally at any time thereafter with respect
         to other peer employees of the Company and its affiliated companies
         and their families, provided, however, that if the Employee becomes
         re-employed with another employer and is eligible to receive medical
         or other welfare benefits under another employer provided plan, the
         medical and other welfare benefits described herein shall be secondary
         to those provided under such other plan during such applicable period
         of eligibility. For purposes of determining eligibility (but not the
         time or commencement of benefits) of the Employee for retiree benefits
         pursuant to such plans, practices, programs and policies, the Employee
         shall be considered to have remained employed until three years after
         the Date of Termination and to have retired on the last day of such
         period.


         Section 6. Nondisclosure of Confidential Information and
Nonsolicitation.

                  (a) Employee covenants and agrees to treat as confidential and
         not to disclose and to use only for the advancement of the interests of
         Company all information, plans, records, trade secrets, business
         secrets, and confidential or other data of Company, or its
         subsidiaries, submitted to Employee or compiled, received, or otherwise
         discovered by Employee from time to time in the course of his
         employment by Company for use in Company's business, which Employee
         knows to have been acquired by him in confidence or which he knows
         would not otherwise be available to competitors of Company or to
         members of the public and which would not otherwise become known to
         said competitors or members of the public.

                  (b) Employee agrees that upon termination of his employment
         with Company, for any reason, voluntary or involuntary, with or without
         cause, he will immediately return to the Company any property, customer
         lists, shareholder lists (of the Company or its affiliates including
         its parent company and subsidiaries), information, forms, formulae,
         plans, documents or other written or computer material or data,
         software or firmware, or copies of the same, belonging to Company or
         its affiliates, or any of their customers, within his possession, and
         will not at any time thereafter copy, reproduce or otherwise facilitate
         the future disclosure of the same. Employee further agrees that he will
         not retain or use for his account at any time any trade names,
         trademark, service mark, or other proprietary business designation used
         or owned in connection with the business of the Company or its
         affiliates.

                  (c) Following termination of employment, and for two (2) years
         thereafter, Employee shall not (i) use any information obtained as a
         result of his employment with Company to solicit any business of any
         customers, (ii) solicit the employment of any employees of Company or
         its affiliates, or (iii) become an executive officer,


                                      - 5 -


<PAGE>   6



         director or 10% or greater shareholder of any depository
         institution or its affiliates that is located in any county where the
         Company or its affiliates has an office on the date of termination.

                  (d) For purposes of this Section 6, the term "Company" shall
         also include the Company's subsidiaries and other affiliates.

         Section 7. Termination. If the term of this Agreement has not sooner
automatically expired by lapse of time on January 31, 2000, the term of
Employee's employment hereunder shall terminate upon the occurrence of any of
the following:

                  (a) Upon the death of the Employee.

                  (b) As a result of the permanent disability of Employee. If it
         is determined that Employee is disabled and that such disability is
         likely to be permanent (herein referred to as a "Determination of
         Permanent Disability"), Company may terminate this Agreement. Said
         termination shall not be effective until such time as Company has given
         written notice to Employee, at the address specified in Section 11, of
         its intent to terminate this Agreement. For the purposes of this
         Section 8(b), the term "Disability" shall mean the Employee's inability
         to perform functions normally performed for Company of the Employee.
         Permanent Disability shall mean the present disability of the Employee
         coupled with the probability that such disability will continue for an
         indefinite period but no less than six (6) months. A "Determination of
         Permanent Disability" may be made at the request of either the Company
         or Employee; provided, however, that in the event Employee is unable,
         due to his disability, to make such a request, his spouse or other
         designee may make a request in his stead. In the event of a request by
         either Employee or Company for a "Determination of Permanent
         Disability," each of Employee and Company shall designate one doctor to
         participate in the determination; provided, however, that if Employee
         is unable, due to his disability, to make such designation, his spouse
         or other designee shall make the designation in his stead. If the two
         doctors so designated agree on a determination required by this Section
         8(b), such determination shall be final. If the two doctors fail to
         agree, they shall by agreement designate a third doctor to make the
         determination required by this Section 8(b), which determination shall
         be final.

                  (c) At the election of Company, for Cause. "Cause" shall mean
         just and reasonable cause, including without limitation (i) persistent
         incompetency or inefficiency, failure to follow reasonable instructions
         received from the Board of Directors of the Company or its delegate,
         willful misconduct, dishonesty, excessive alcohol use or alcoholism,
         use of illegal drugs or convictions of a felony or any other offense
         involving moral turpitude, (ii) material breach of any covenant
         contained in this Agreement, including without limitation, failure to
         devote substantially all business time to the business of the Company.
         If Employee desires to sell any shares of Company capital stock within
         [6] months after termination for



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         cause hereunder, the Employee shall notify the Company in writing and
         provide the Company a right of first refusal with respect to the
         purchase of such shares to match any bona fide offer by a third-party
         to purchase such shares.

                  (d) Upon either party to this Agreement giving written notice
         of termination to the other at least sixty (60) days prior to the
         effective date of such termination.

         Upon termination under this Section 7, Employee's right to further
compensation and benefits under this Agreement shall cease; provided, however,
that Employee shall remain entitled to any unpaid compensation and benefits
accrued prior to such termination (including, without limitation, any deferred
compensation, all of which shall be deemed vested as provided in Annex A) and to
any expense reimbursements to which he was entitled at the date of such
termination and if Employee's employment is terminated by Company without cause
Section 7(d) or due to his death or disability, such termination shall not
affect Employee's or Employee's personal representative's right to receive
additional payments pursuant to and according to the terms contained in Section
5(d) of this Agreement. Notwithstanding anything herein to the contrary, in the
event that the employment of the Employee is terminated by the Company, without
Cause under Section 8(d) prior to January 31, 2000, the Company shall (i)
continue to pay the Employee the Annual Salary and provide the benefits set
forth in Section 5 of this Agreement except for the annual bonus, the payment of
which is controlled by Section 5(d) until January 31, 2000, or (ii) pay the
Employee twelve (12) months pay, whichever is greater, as severance pay.
Notwithstanding anything contained herein to the contrary, the obligations of
Employee under Section 6 (except as limited in Section 9 below) shall survive
the termination (for any reason) of this Agreement.

         Section 8. Change of Control. In the event that the Company experiences
a "Change in Control" as defined herein, the Company shall immediately pay to
the Employee a lump-sum of money equal to his annual salary and maximum bonus
potential for the year in which the change in control occurs; said lump sum
payment shall be in addition to and not in lieu of the Employee's regular
compensation should he remain in the employ of the Company or its successor
after a Change in Control. If, following a Change in Control, Employee is
terminated by Company or any successor(s), the Company or such successors shall
continue to pay to Employee, for the balance of the terms hereof and in addition
to any other required payments, the Annual Salary then in effect for Employee on
the date of Employee's termination. Said Annual Salary shall be paid
periodically and on the same schedule as that prior to Employee's termination.
Furthermore, all deferred compensation shall be immediately vested 100%, and
shall be paid by the Company or its successor when due.

         A Change in Control shall be deemed to have occurred if and when any
"person" (as such term is used in Sections 13(d) and 14(d)(2) of the Securities
and Exchange Act of 1934 and including a "group" thereunder) is or becomes a
beneficial owner, directly or indirectly, of securities of the Company or its
parent company representing greater than



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twenty-five percent (25%) of the combined voting power of the Company's or its
parent company's then outstanding securities. Notwithstanding the foregoing, no
"change in control" shall be deemed to have occurred by virtue of any
transaction which results in the Employee and/or a member or members of the
Company's present Board of Directors (i.e. existing on December 31, 1996), or a
group of persons including the Employee and/or a member or members of the
Company's present Board of Directors, acquiring, directly or indirectly, more
than twenty-five percent (25%) of the combined voting power of the Company's
outstanding securities. For purposes of the immediately preceding sentence a
"change in control" shall be deemed to have occurred if the member or members of
the Company's present Board of Directors do not own, control twenty percent
(20%) or more of the acquiring person or resulting entity. Furthermore, a
"change in control" shall not be deemed to have occurred solely as a result of
merger, consolidation or other business combination, where the Company is the
surviving entity, even though the former shareholders of the other party to such
transaction hold, in total, more than 25% of the combined voting power of the
Company's or its parent company's then outstanding securities, provided such
persons are not acting collectively and would not be deemed to be a single
"person" or part of a "group" hereunder solely as a result of their status as
former shareholders of such other entity.

         Any dispute or controversy arising under or in connection with this
Section 8 shall be settled exclusively by arbitration in the State of North
Carolina in accordance with the rules of the American Arbitration Association
then in effect.

         Section 9. Enforcement of Employee Restrictions. Employee acknowledges
that he has carefully read and considered the provisions of this Agreement and,
having done so, agrees that the restrictions set forth in this Agreement in
Sections 6 and 7 (including, but not limited to, the period of restriction and
the geographical area of restriction set forth therein) are fair and reasonable
and are necessarily required for the protection of the interests of the Company,
and its affiliates. Employee further acknowledges that due to the nature of
Company's business, more limited restrictions than those found herein would not
be reasonable or appropriate. The Employee covenants and agrees with Company
that if he shall violate any of the covenants or agreements contained in this
Agreement, then Company shall be entitled to damages in addition to and not in
limitation of any injunctive relief or other rights or remedies to which Company
and/or its affiliates is or may be entitled to at law or in equity. In the event
that any provisions of this Agreement relating to the time period or
geographical restriction shall be declared by a court of competent jurisdiction
to exceed the maximum time periods or geographical areas which such court deems
reasonable and enforceable, such time periods or geographical areas of
restriction shall be deemed to become and thereafter be the maximum time period
or geographical areas which such court deems reasonable and enforceable.

         Section 10. Notices. All notices required or permitted hereunder shall
be deemed to be duly given if in writing and delivered personally or sent by
United States registered or certified mail, postage pre-paid, addressed to
Company at:



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                  D. Mark Boyd, III, Chairman
                  Carolina First BancShares, Inc.
                  402 East Main Street
                  Post Office Box 657
                  Lincolnton, North Carolina  28092

and addressed to Employee at:

                  James E . Burt, III
                  208 Mockingbird Lane
                  Lincolnton, North Carolina  28092

or at such changed addresses as the parties may designate in writing.

         Section 11.  Miscellaneous.

                  (a) Headings. Headings, titles and captions contained in this
         Employment Agreement are inserted only as a matter of convenience and
         reference and in no way define, limit, extend, or describe the scope of
         this Agreement or the intent of any provisions hereof.

                  (b) Gender. The use in this Agreement of gender-specific words
         or phrases shall be deemed to include the masculine, feminine or neuter
         genders, as the context may require.

                  (c) Entire Agreement. This writing including the attachments,
         exhibits and appendices hereto constitutes, the entire agreement
         between the parties hereto and supersedes any prior understanding or
         agreements among them respecting the subject matter. There are no
         extraneous representations, arrangements, understandings, or
         agreements, oral or written, in respect of the subject matter of this
         Agreement, among the parties hereto, except those fully expressed
         herein.

                  (d) Amendments. No amendments, changes, alterations,
         modifications, additions, extensions and qualifications to the terms of
         this Agreement shall be made or binding, unless made in writing and
         signed by all the parties hereto.

                  (e) Waiver. The failure of either party to enforce at any time
         any of the provisions of this Agreement shall not be construed as a
         waiver of such provisions or of the right of such party thereafter to
         enforce any such provisions.

                  (f) Invalidity and Severability. The invalidity or
         unenforceability of any particular provision of this Agreement shall
         not affect the enforceability of other provisions hereof, and this
         Agreement shall be construed in all respects as if such invalid or
         unenforceable provisions were omitted. Employee agrees and acknowledges
         that nothing contained in this Agreement, nor the enforcement of



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         any provision herein including Section 6, shall alter Employee's
         ability to obtain a livelihood. Employee agrees and acknowledges that
         all of the provisions of this Agreement, including Section 6, are
         reasonable. Employee acknowledges that he has carefully read and
         considered all the provisions of this Agreement.

                  (g) Governing Law. This Agreement shall be construed and
         governed in accordance with the laws of the State of North Carolina.
         Employee hereby consents to the jurisdiction of any local, state or
         federal court located in the State of North Carolina.

                  (h) Burden and Benefit. This Agreement shall be binding upon
         and inure to the benefit of the parties hereto and their respective
         heirs, successors and assigns.


         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.

                                    COMPANY:

ATTEST:                             CAROLINA FIRST BANCSHARES, INC.

By:_______________________          By: ____________________________
         Secretary                               Chairman


                                    EMPLOYEE:



                                    ________________________________




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                       EXHIBIT "A" TO EMPLOYMENT AGREEMENT

                         CAROLINA FIRST BANCSHARES, INC.
                      DEFERRED COMPENSATION AGREEMENT WITH
                               JAMES E. BURT, III



         THIS PLAN AND AGREEMENT, dated as of the 31st day of December 1996, by
and between Carolina First BancShares, Inc., a North Carolina corporation
(hereinafter referred to as the "Company"), and JAMES E. BURT, III (hereinafter
referred to as the "Employee"):

                              W I T N E S S E T H :

         WHEREAS, the Company believes it is in the best interest of the Company
and the Employee to establish a plan for the purpose of providing certain
benefits for the Employee pursuant to his Employment Agreement:

         NOW, THEREFORE, it is mutually agreed as follows:

                                    ARTICLE I
                                   EMPLOYMENT

         The Company has employed the Employee as provided in the Employment
Agreement with the Employee, to which this is an exhibit.

                                   ARTICLE II
                                    BENEFITS

         The Company is obligated to provide benefits to the Employee as
follows:

         A. Except as expressly provided herein, no benefit shall be paid
hereunder, except to the extent then vested, upon the discharge of the Employee
by the Company for cause. The definition of "cause" shall be the same as given
in the Employee's Employment Agreement.

         B. Upon retirement from the Company, the Employee shall receive the
monthly amount then vested for 120 consecutive months beginning on the first
business day of the calendar month next succeeding the Employee's retirement
date. In the event the Employee dies after such monthly payments begin but prior
to receiving all 120 monthly payments, then his beneficiary(s) shall be entitled
to receive all remaining payments.




<PAGE>   12



         C. If the Employee shall die before his retirement while in the employ
of the Company, the Company will make monthly payments of $4,166.67 for 120
months to the beneficiary(s) of the Employee beginning in the month of the
Employee's death.

         D. Upon permanent disability before retirement at age 65, the Employee
shall receive no benefits under this Deferred Compensation Plan until the
earlier of (i) age 65 or (ii) such time as his disability benefits cease, at
which time the Company shall pay the Employee, and after death, his
beneficiaries, monthly payments of $4,166.67 per month for 120 months beginning
in the month of the Employee's death. If the Employee shall die after becoming
permanently disabled but before the age of 65, then the monthly payments shall
begin at death and shall be made to his beneficiary(s) in the amount of
$4,166.67 per month for 120 months. "Permanent disability" shall have the
meaning given it in the Employee's Employment Agreement and shall be determined
accordingly.

         E. Should the Employee leave the employ of the Company for any reason
within twelve (12) months after a "Change of Control" (as defined in his
Employment Agreement) then the Company or its successor shall, upon Employee's
request within 30 days of such separation of employment, transfer to the
Employee the ownership of the Insurance policy, if any, that funds this Deferred
Compensation Agreement in lieu of all future monthly payments, but if such
transfer is not requested by the Employee prior to the payment of benefits
hereunder, then the Company shall pay such benefits when due.

         F. Should the Employee leave the employment of the Company for any
other reason prior to retirement, then no benefits shall be paid under this
plan, except and to the extent such benefits are vested.

         G. Notwithstanding anything to the contrary contained herein or in the
Employment Agreement, as of the date hereof, Employee shall be fully vested in
monthly payments of $2,500.00 through May 30, 1997, at which point his vested
benefits shall be $2,916.67 per month through May 30, 1998, at which time his
vested benefit becomes $3,333.33 through May 30, 1999 when the benefit becomes
$3,750.00 per month through January 31, 2000, at which time his vested benefit
becomes $4,166.67, regardless of any other provisions hereof and regardless of
any reasons for any termination or cessation of the Employee's employment. All
such amounts shall be vested, and shall be paid to the Employee or to the
Employee's named beneficiaries.

                                   ARTICLE III
                               SOURCE OF PAYMENTS

         Notwithstanding any references to life insurance contracts contained
herein, nothing herein shall require the Company to purchase such contract or
any other properties to secure its obligation under this Agreement, or if the
Company should purchase such contract or other property, to exercise any option,
election or right under such contract or other property, or if the Company
wishes to exercise any option, election


                                      - 2 -


<PAGE>   13



or right under such contract or other property, to exercise such option,
election or right in any particular manner.

         The Employee, beneficiary and any other person or persons having or
claiming a right to payments hereunder or to any interest in this Agreement
shall rely solely on the unsecured promise of the Company set forth herein, and
nothing in this Agreement (other than the provisions of Article II, B. and F.)
shall be construed to give the Employee, beneficiary or any other person or
persons any rights, title, interest or claim in or to any specific asset, fund,
reserve, account or property of any kind whatsoever owned by the Company or in
which it might have any right, title or interest now or in the future, but
Employee shall have the right to enforce his claim against the Company in the
same manner as any unsecured creditor.

                                   ARTICLE IV
                                  BENEFICIARIES

         The death beneficiary of the Employee shall be the person, persons,
trust or charitable entity, living or in existence at the time for any
distribution hereunder, which the Employee shall have most recently designated
as highest in priority on a form, provided for that purpose by the Company,
signed by the Employee, filed with the Company, and attached to the Company's
original copy of this document as "Annex A". The death or non-existence of any
such beneficiary either before or after receipt of any distribution hereunder,
shall terminate the entire interest of such beneficiary in any to the then
undistributed portion of such Employee's account and such undistributed portion
shall thereafter be distributed to or for the benefit of the beneficiary or
beneficiaries designated as next highest in priority by such Employee. If no
such beneficiary be thus designated, or if all of the thus designated
beneficiaries do not survive or are no longer in existence at any time prior to
the complete distribution of such account, such account, or the then
undistributed balance thereof, shall be distributed by the corporation directly
to the person or persons who are heirs as named in the Employee's last will and
testament, except to the extent to which the specific bequests of such document
are paid by the Employee's other resources; or if there is no such document then
in existence under the laws of descent and distribution, to those persons who
would be entitled to the Employee's personal property, and in the proportions to
which they would be so entitled, had such Employee died, at the time for such
distribution, intestate and a resident of the State of North Carolina.


                                    ARTICLE V
                                  MISCELLANEOUS

         This Agreement supersedes all deferred compensation agreements
previously entered into by the parties hereto, none of which shall have any
further force and effect upon an after the execution and delivery hereof. This
Agreement shall be subject to, and governed by, the laws of the State of North
Carolina irrespective of the fact that one or more of the parties is or may
become a resident of a different state.



                                      - 3 -


<PAGE>   14




         In the event any parts of this Agreement are found to be void, the
remaining provisions of this Agreement shall nevertheless be binding with the
same effect as though the void parts were deleted.

         Whenever in this Agreement, words, including pronouns, are used in the
masculine, they shall be read and construed in the feminine or neuter whenever
they will so apply, and whenever in this Agreement, words, including pronouns,
are used in the singular or plural, they shall be read and construed in the
plural or singular, respectively, wherever they would so apply.

         This Agreement shall be binding upon the parties hereto, their heirs,
executors, administrators, successors and assigns. The Company agrees that it
will not be a party to any merger, consolidation, reorganization or transaction
which results in a "Change in Control" (as defined in the Employment Agreement),
unless and until its obligations hereunder shall be expressly assumed by its
successor or successors.

         This Agreement may be amended or revoked at any time or times, in whole
or in part, solely by the mutual written consent of the Employee and the
Company.

                                   ARTICLE VI
                                    FIDUCIARY

         The Company is hereby designated as the named fiduciary hereunder, and
shall be responsible for the management and control of the operation and
administration of this plan including any and all decisions pertaining to the
granting or denial of benefit claims and any and all decisions pertaining to the
review of denials of benefit claims.

                                   ARTICLE VII
                                 FUNDING POLICY

         The Company shall establish a funding policy and method for this Plan,
and shall annually review such funding policy and method to make any necessary
adjustments thereto in order to ensure that such funding policy and method at
all times shall remain consistent with the objectives of this Plan, and to the
extent applicable, the requirements of Title I of the Employee Retirement Income
Security Act of 1974, as amended.


                                  ARTICLE VIII
                                 ADMINISTRATION

         The Secretary of the Company shall maintain a copy of this Agreement
and any amendments thereto continuously as official records of the Company.


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