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1st January 2002 D. MARK STEPHENS Catawba
 Senior
Vice President & Chief Information Officer of Bank of Granite
       1.
    
    Term. The initial term of this Agreement shall be for the period
commencing upon the effective date of this Agreement and ending two (2)
calendar years from the effective date of this Agreement. At each anniversary date of
this Agreement, the term automatically shall be extended for an additional two
(2) calendar years on the same terms and conditions set forth herein, unless the
Company shall give written
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notice to the Officer of its intention not to extend this Agreement for an additional
two (2) calendar years, which notice shall be given at least thirteen (13)
months prior to the next anniversary date.
 2.
    
    Change of Control.(a) In the event of a termination of the Officers employment in connection with, or
within twenty-four (24) months after, a Change of Control (as defined in
Subparagraph (e) below) of the Corporation or the Bank, for reasons other than for
cause (as defined in Subparagraph (b) below), the Officer shall be entitled to receive
the sum set forth in Subparagraph (d) below. Said sum shall be payable as provided in
Subparagraph (f) below, provided, however, that the Officer is employed on a full-time
basis by the Bank at the effective time of the Change of Control, except as provided
in Subparagraph (j) below.(b) For purposes of this Agreement, termination for cause shall mean (a) any
dishonest, illegal or other act of moral turpitude (such as theft, fraud or
embezzlement) by the Officer which is materially detrimental to the interest and
well-being of the Company, (b) the conviction of a felony, (c) the unreasonable failure
or refusal of the Officer to perform to the best of his ability on a reasonable basis
his duties hereunder, or (d) any violation by the Officer of any state or federal law,
rule or regulation relating to banking, financial institutions or securities laws, the
violation of which would be materially detrimental to the interest and well-being of the
Company.(c) The Officer shall have the right to terminate this Agreement upon the occurrence of
any of the following events (the Termination Events) within twenty-four (24)
months following a Change of Control of the Company or the Bank:
 (i)
    
    Officer is assigned any duties and/or responsibilities that are
inconsistent with his duties or responsibilities at the time of the Change of
Control;(ii)
    
    Officers annual base salary is reduced below the amount in
effect as of the effective date of a Change of Control;(iii)
    
    Officers life insurance, medical or hospitalization
insurance, disability insurance, stock option plans, stock purchase plans,
deferred compensation plans, management retention plans, retirement plans, or
similar plans or benefits being provided by the Company to the Officer as of
the effective date of the Change of Control are reduced in their level, scope,
or coverage, or any such insurance, plans, or benefits are eliminated, unless
such reduction or elimination applies proportionately to all salaried employees
of the Company who participated in such benefits prior to such Change of
Control; or(iv)
    
    Officer is required to transfer performance of his day-to-day
services required hereunder to a location which is more than fifty (50) miles
from the Officers current principal work location, without the Officers
express written consent.
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two (2) two (2)
  (i)
    
    After the effective date of this Agreement, any person (as
such term is defined Section 7(j)(8)(A) of the Change in Bank Control Act of
1978), directly or indirectly, acquires beneficial ownership of voting stock,
or acquires irrevocable proxies or any combination of voting stock and
irrevocable proxies, representing fifty percent (50%) or more of any class of
voting securities of the Corporation or the Bank, or acquires control of in any
manner the election of a majority of the directors of the Corporation or the
Bank;(ii)
    
    The Corporation or the Bank consolidates or merges with or into
another corporation, association, or entity, or is otherwise reorganized, where
the Corporation or the Bank is not the surviving corporation in such
transaction and the holders of the voting securities of the Corporation or the
Bank immediately prior to such acquisition own less than a majority of the
voting securities of the surviving entity immediately after the transaction; or(iii)
    
    All or substantially all of the assets of the Corporation or
the Bank are sold or otherwise transferred to or are acquired by any other
corporation, association, or other person, entity, or group.
  (f)
    
    Amounts payable pursuant to this Paragraph 2 shall be paid, at the
option of the Officer, either in one lump sum or in twenty-four (24) equal
monthly payments.(g)
    
    Following a Termination Event which gives rise to the Officers rights
hereunder, the Officer shall have two (2) years from the date of occurrence
of the
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Termination Event to terminate this Agreement pursuant to this Paragraph 2. Any
such termination shall be deemed to have occurred only upon delivery to the
Corporation or Bank, or any successors thereto, of written notice of termination,
which describes the Change of Control and Termination Event. If the Officer does
not so terminate this Agreement within such two (2) year period, the Officer
shall thereafter have no further rights hereunder with respect to that Termination
Event, but shall retain rights, if any, hereunder with respect to any other
Termination Event as to which such period has not expired.
 (h)
    
    It is the intent of the parties hereto that all payments made pursuant
to this Agreement be deductible by the Corporation or the Bank for federal income
tax purposes and not result in the imposition of an excise tax on the Officer.
Notwithstanding anything contained in this Agreement to the contrary, any payments
to be made to or for the benefit of the Officer which are deemed to be parachute
payments as that term is defined in Section 280G(b)(2) of the Internal Revenue
Code, as amended (the Code), shall be modified or reduced to the extent deemed to
be necessary by the Companys Board of Directors to avoid the imposition of an
excise tax on the Officer under Section 4999 of the Code or the disallowance of a
deduction to the Company under Section 280G(a) of the Code.(i)
    
    In the event any dispute shall arise between the Officer and the
Company as to the terms or interpretation of this Agreement, including this
Paragraph 2, whether instituted by formal legal proceedings or otherwise, including
any action taken by the Officer to enforce the terms of this Paragraph 2 or in
defending against any action taken by the Corporation or the Bank, the Bank shall
reimburse the Officer for all costs and expenses, proceedings or actions, in the
event the Officer prevails in any such action.(j)
    
    It is further agreed that the payment agreed in this Paragraph 2 to be
paid by the Company to the Officer shall be due and paid to the Officer should a
Change of Control (as defined above) be agreed to by the Corporation or the Bank or
be consummated within six (6) months of the Officers involuntary termination of
employment with the Corporation or the Bank for reasons other than for cause as
such term is defined in Subparagraph 2(b) hereof.
 3.
    
    Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon any corporate or other successor of the Corporation or the Bank,
which shall acquire, directly or indirectly, by conversion, merger, consolidation,
purchase, or otherwise, all or substantially all of the assets of the Corporation or
the Bank.4.
    
    Modification; Waiver; Amendments. No provision of this Agreement may
be modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Officer, the Company, except as herein otherwise
provided. No waiver by any party hereto, at any time, of any breach by any party
hereto, or compliance with, any condition or provision of this Agreement to be
performed by such party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No amendments or additions
to this Agreement shall be binding unless in writing and signed by the parties, except
as herein otherwise provided.
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5.
    
    Applicable Law. This Agreement shall be governed in all respects
whether as to validity, construction, capacity, performance, or otherwise, by the laws
of North Carolina, except to the extent that federal law shall be deemed to apply.6.
    
    Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision hereof shall not
affect the validity or enforceability of the other provision hereof.
  (Corporate Seal)
    
    
    
    BANK:ATTEST:
    
    
    
    Bank of GraniteBy:
    
    /s/ Charles M. Snipes

Charles M. Snipes
    
    
    
    By:
    
    /s/ John A. Forlines, Jr.

John A. Forlines, Jr.President and Chief Executive Officer
    
    
    
    
    
    Chairman(Corporate Seal)
    
    
    
    CORPORATION:ATTEST:
    
    
    
    Bank of Granite CorporationBy:
    
    /s/ Charles M. Snipes
    
    
    
    By:
    
    /s/ John A. Forlines, Jr.Charles M. Snipes
    
    
    
    
    
    John A. Forlines, Jr.President
    
    
    
    
    
    Chairman and Chief Executive OfficerOFFICER:By:
    
    /s/ D. Mark StephensD. Mark Stephens
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