<PAGE>   1

 Exhibit 10.a -- Merger Agreement
================================================================================


                                MERGER AGREEMENT


                                      among


                           BANK OF GRANITE CORPORATION
                                      Buyer


                             GLL & ASSOCIATES, INC.
                                   the Company


                                       and


                               THE SHAREHOLDERS OF
                             GLL & ASSOCIATES, INC.
                                     Sellers








                          Dated as of November 3, 1997

================================================================================


                                     Page 14

<PAGE>   2

                                TABLE OF CONTENTS

                                                                     Page

                                    ARTICLE I

                                  DEFINED TERMS

      1.1.       Definitions . . . . . . . . . . . . . . . . . . . . . .1

                                   ARTICLE II

                                   THE MERGER

      2.1.       The Merger. . . . . . . . . . . . . . . . . . . . . . .5
      2.2.       Articles of Incorporation . . . . . . . . . . . . . . .5
      2.3.       Bylaws. . . . . . . . . . . . . . . . . . . . . . . . .5
      2.4.       Directors and Officers. . . . . . . . . . . . . . . . .5
      2.5.       Approval. . . . . . . . . . . . . . . . . . . . . . . .6
      2.6.       Effective Time. . . . . . . . . . . . . . . . . . . . .6
      2.7.       Filing of Articles of Merger. . . . . . . . . . . . . .6

                                   ARTICLE III

             CONVERSION AND EXCHANGE OF SHARES FOR THE MERGER PRICE

      3.1.       Shares. . . . . . . . . . . . . . . . . . . . . . . . .6
      3.2.       Merger Sub Shares . . . . . . . . . . . . . . . . . . .6
      3.3.       Merger Price. . . . . . . . . . . . . . . . . . . . . .6
      3.4.       Closing Payment . . . . . . . . . . . . . . . . . . . .6

                                   ARTICLE IV

                                   THE CLOSING

      4.1.       Closing . . . . . . . . . . . . . . . . . . . . . . . .7
      4.2.       Deliveries by the Sellers and the Company . . . . . . .7
      4.3.       Deliveries by the Buyer . . . . . . . . . . . . . . . .7

                                    ARTICLE V

          REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND THE COMPANY

      5.1.       The Company . . . . . . . . . . . . . . . . . . . . . .8




                                        i

                                     Page 15


<PAGE>   3

      5.2.       The Sellers . . . . . . . . . . . . . . . . . . . . . .9
      5.3.       Assets. . . . . . . . . . . . . . . . . . . . . . . . .9
      5.4.       Interests in Real Property. . . . . . . . . . . . . . 10
      5.5.       Absence of Undisclosed Liabilities. . . . . . . . . . 10
      5.6.       Contracts . . . . . . . . . . . . . . . . . . . . . . 10
      5.7.       Intellectual Property Rights. . . . . . . . . . . . . 11
      5.8.       Financial Statements. . . . . . . . . . . . . . . . . 11
      5.9.       Loans, Accounts, Notes and Other Receivables. . . . . 11
      5.10.      Securities Portfolio and Investments. . . . . . . . . 12
      5.11.      Legal Compliance. . . . . . . . . . . . . . . . . . . 12
      5.12.      Taxes and Tax Returns . . . . . . . . . . . . . . . . 12
      5.13.      Litigation. . . . . . . . . . . . . . . . . . . . . . 13
      5.14.      Labor and Employment Matters. . . . . . . . . . . . . 13
      5.15.      Employee Benefit Plans; ERISA . . . . . . . . . . . . 14
      5.16.      Insurance . . . . . . . . . . . . . . . . . . . . . . 16
      5.17.      Transactions with Affiliates. . . . . . . . . . . . . 16
      5.18.      Environmental Matters . . . . . . . . . . . . . . . . 16
      5.19.      Absence of Changes or Events. . . . . . . . . . . . . 17
      5.20.      Bank Accounts . . . . . . . . . . . . . . . . . . . . 17
      5.21.      Corporate and Personnel Data. . . . . . . . . . . . . 18
      5.22.      Licenses and Permits. . . . . . . . . . . . . . . . . 18
      5.23.      Investment. . . . . . . . . . . . . . . . . . . . . . 18
      5.24.      Certain Regulated Businesses. . . . . . . . . . . . . 18
      5.25.      Commissions . . . . . . . . . . . . . . . . . . . . . 18
      5.26.      Full Disclosure . . . . . . . . . . . . . . . . . . . 19

                                   ARTICLE VI

                   REPRESENTATIONS AND WARRANTIES OF THE BUYER

      6.1.       Organization. . . . . . . . . . . . . . . . . . . . . 19
      6.2.       Authority Relative to this Agreement. . . . . . . . . 19
      6.3.       Consents and Approvals, No Violations . . . . . . . . 19
      6.4.       Issuance of Shares of the Buyer's Stock . . . . . . . 19
      6.5.       Reports . . . . . . . . . . . . . . . . . . . . . . . 19
      6.6.       Buyer's Financial Statements. . . . . . . . . . . . . 20
      6.7.       Absence of Changes. . . . . . . . . . . . . . . . . . 20
      6.8.       Commissions . . . . . . . . . . . . . . . . . . . . . 20
      6.9.       Full Disclosure . . . . . . . . . . . . . . . . . . . 20

                                   ARTICLE VII

                              AFFIRMATIVE COVENANTS

      7.1.       Ordinary Conduct. . . . . . . . . . . . . . . . . . . 20
      7.2.       Covenants of the Sellers. . . . . . . . . . . . . . . 22
      7.3.       Covenants of the Buyer. . . . . . . . . . . . . . . . 23




                                       ii

                                     Page 16


<PAGE>   4

      7.4.       Monthly Distributions . . . . . . . . . . . . . . . . 23
      7.5.       Reorganization for Tax Purposes . . . . . . . . . . . 24
      7.6.       Accounting Treatment. . . . . . . . . . . . . . . . . 24
      7.7.       Consummation of Agreement . . . . . . . . . . . . . . 24
      7.8.       Schedules to Agreement. . . . . . . . . . . . . . . . 24
      7.9.       Corporate Action. . . . . . . . . . . . . . . . . . . 24
      7.10.      Maintenance of Corporate Existence. . . . . . . . . . 25
      7.11.      No Solicitation . . . . . . . . . . . . . . . . . . . 25

                                  ARTICLE VIII

                      DISCLOSURE OF ADDITIONAL INFORMATION

      8.1.       Access to Information . . . . . . . . . . . . . . . . 25
      8.2.       Access to Premises. . . . . . . . . . . . . . . . . . 25
      8.3.       Confidentiality . . . . . . . . . . . . . . . . . . . 25
      8.4.       Publicity . . . . . . . . . . . . . . . . . . . . . . 25

                                   ARTICLE IX

                              CONDITIONS TO CLOSING

      9.1.       Mutual Conditions . . . . . . . . . . . . . . . . . . 26
      9.2.       Conditions to the Obligations of the Company and
                   the Sellers . . . . . . . . . . . . . . . . . . . . 26
      9.3.       Conditions to the Obligations of the Buyer. . . . . . 27

                                    ARTICLE X

                                   TERMINATION

      10.1.      Termination . . . . . . . . . . . . . . . . . . . . . 28
      10.2.      Procedure and Effect of Termination . . . . . . . . . 29

                                   ARTICLE XI

                                 INDEMNIFICATION

      11.1.      Survival of Representations . . . . . . . . . . . . . 29
      11.2.      Sellers' Agreement to Indemnify . . . . . . . . . . . 29
      11.3.      Buyer's Agreement to Indemnify. . . . . . . . . . . . 31




                                       iii

                                     Page 17

<PAGE>   5

                                   ARTICLE XII

                            MISCELLANEOUS PROVISIONS

      12.1.      Expenses. . . . . . . . . . . . . . . . . . . . . . . 32
      12.2.      Action by Sellers . . . . . . . . . . . . . . . . . . 32
      12.3.      Amendment and Modification. . . . . . . . . . . . . . 32
      12.4.      Waiver of Compliance; Consents. . . . . . . . . . . . 32
      12.5.      Notices . . . . . . . . . . . . . . . . . . . . . . . 32
      12.6.      Assignment; Third Party Beneficiaries . . . . . . . . 34
      12.7.      Separable Provisions. . . . . . . . . . . . . . . . . 34
      12.8.      Governing Law . . . . . . . . . . . . . . . . . . . . 34
      12.9.      Counterparts. . . . . . . . . . . . . . . . . . . . . 34
      12.10.     Interpretation. . . . . . . . . . . . . . . . . . . . 34
      12.11.     Entire Agreement. . . . . . . . . . . . . . . . . . . 34






                                       iv

                                     Page 18


<PAGE>   6

                                    SCHEDULES

 Schedule 5.1(b)     Capitalization
 Schedule 5.1(d)     Subsidiaries and Affiliates
 Schedule 5.1(f)     Consents and Approvals
 Schedule 5.2        Ownership of Shares
 Schedule 5.3        Assets
 Schedule 5.4        Real Property
 Schedule 5.5        Undisclosed Liabilities
 Schedule 5.6        Contracts
 Schedule 5.7        Intellectual Property
 Schedule 5.8        Financial Statements
 Schedule 5.9        Loans, Accounts, Notes and Other Receivables
 Schedule 5.10       Securities Portfolio and Investments
 Schedule 5.11       Legal Compliance
 Schedule 5.12       Taxes
 Schedule 5.14       Labor and Employment Matters
 Schedule 5.15       Employee Benefit Plans; ERISA
 Schedule 5.16       Insurance
 Schedule 5.17       Transactions with Affiliates
 Schedule 5.18       Environmental Matters
 Schedule 5.19       Absence of Changes or Events
 Schedule 5.20       Bank Accounts
 Schedule 5.21       Corporate and Personnel Data
 Schedule 5.22       Licenses and Permits
 Schedule 6.3        Buyer's Consents and Approvals
 Schedule 7.1        Conduct Prior to Closing


                                    EXHIBITS

 Exhibit A           Plan of Merger
 Exhibit B           Employment Agreement of Gary L. Lackey




                                        v

                                     Page 19

<PAGE>   7

                                MERGER AGREEMENT


      THIS MERGER AGREEMENT (this "Agreement"), dated as of November 3,
 1997, is by and among BANK OF GRANITE CORPORATION, a Delaware corporation
 (the "Buyer"), GLL & ASSOCIATES, INC., a North Carolina corporation (the
 "Company"), and GARY L. LACKEY, LEWIS E. HUBBARD, EMMA B. HUBBARD, BRUCE R.
 HUBBARD, LEWIS E. HUBBARD, JR., BEVERLY H. GODFREY, and the EAGAN FAMILY
 TRUST, under irrevocable agreement dated July 16, 1997 (collectively, the
 "Sellers").

                              Background Statement

      The Buyer and the Company desire to effect a merger pursuant to which the
 Merger Sub (as defined below) will merge with and into the Company and the
 Company will be the surviving corporation. The Sellers, who are all of the
 shareholders of the Company, will receive common stock of the Buyer as
 consideration for the merger.

                             Statement of Agreement

      In consideration of the premises and the mutual representations,
 warranties, covenants, agreements and conditions contained herein, the parties
 hereto agree as follows:


                                   ARTICLE I.

                                  DEFINED TERMS

      1.1 Definitions. As used in this Agreement, the following terms have the
 following meanings:

      "Affiliate" means, with respect to any Person, each of the Persons that
 directly or indirectly, through one or more intermediaries, owns or controls,
 or is controlled by or under common control with, such Person. For the purpose
 of this Agreement, "control" means the possession, directly or indirectly, of
 the power to direct or cause the direction of management and policies, whether
 through the ownership of voting securities, by contract or otherwise.

      "Agreement" means this Merger Agreement.

      "Applicable Law" means, as to any Person, all applicable statutes, codes,
 laws, ordinances, rules, orders, decrees and regulations of any Governmental
 Authority.

      "Articles of Merger" has the meaning given to it in Section 2.6.

      "Assets" means all of the assets, rights, interests and properties of the
 Company of any nature whatsoever, whether real, personal, tangible or
 intangible.






                                     Page 20


<PAGE>   8

      "Average Closing Price" means the simple average of the closing price of
 the Buyer's Stock on the Nasdaq National Market System at the close of trading
 on each of the ten trading days immediately preceding the date immediately
 prior to the Closing Date.

      "Business Day" means any day excluding Saturday, Sunday and any day that
 shall be a legal holiday in North Carolina.

      "Buyer" means Bank of Granite Corporation, a Delaware corporation.

      "Buyer Affiliates" has the meaning given to it in Section 11.2.

      "Buyer's Stock" means the common stock of Bank of Granite Corporation, as
 traded on the Nasdaq.

      "Closing" means the closing of the Merger, as identified more
 specifically in Article IV.

      "Closing Date" has the meaning given to it in Section 4.1.

      "Code" means the Internal Revenue Code of 1986, as amended, and any
 successor statute of similar import, together with the regulations thereunder,
 in each case as in effect from time to time. References to sections of the Code
 shall be construed also to refer to any successor sections.

      "Company" means GLL & Associates, Inc., a North Carolina corporation.

      "Contract" means any agreement, warranty, indenture, mortgage, guaranty,
 lease, license or other contract, agreement, arrangement, commitment or
 understanding, written or oral.

      "Eagan Line of Credit" has the meaning given to it in Section 7.1(d).

      "Eagan Trust" means the Eagan Family Trust, under irrevocable agreement
 dated July 16, 1997.

      "Effective Time" has the meaning given to it in Section 2.6.

      "Employment Agreement" means the Employment and Noncompetition
 Agreement between the Surviving Corporation and Gary L. Lackey in the form
 attached hereto as Exhibit B.

      "Environmental Assessment" means any and all soil and groundwater tests,
 surveys, environmental assessments and other inspections, tests and inquiries
 conducted by the Buyer or any agent of the Buyer and related to the Real
 Property.

      "Environmental Laws" means any federal, state or local law, statute,
 ordinance, rule, regulation, permit, directive, license, approval, guidance,
 interpretation, order or other legal requirement relating to the protection of
 human health or the environment, including, but not limited to, any requirement
 pertaining to the manufacture, processing, distribution, use, treatment,
 storage, disposal, transportation, handling, reporting, licensing, permitting,
 investigation or remediation of materials that are or may constitute a threat
 to human health or the environment. Without limiting the foregoing, each of the
 following is an Environmental Law: the Comprehensive Environmental Response,
 Compensation, and Liability

                                        2

                                     Page 21
<PAGE>   9

 Act (42 U.S.C. ss. 9601 et seq.) ("CERCLA"), the Hazardous Material
 Transportation Act (49 U.S.C. ss. 1801 et seq.), the Resource Conservation
 and Recovery Act (42 U.S.C. ss. 6901 et seq.) ("RCRA"), the Federal Water
 Pollution Control Act (33 U.S.C. ss. 1251 et seq.), the Clean Air Act (42
 U.S.C. ss. 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. ss. 2601
 et seq.), the Safe Drinking Water Act (42 U.S.C. ss. 300 et seq.) and the
 Occupational Safety and Health Act (29 U.S.C. ss. 651 et seq.) ("OSHA"), as
 such laws and regulations have been or are in the future amended or
 supplemented, and each similar federal, state or local statute, and each
 rule and regulation promulgated under such federal, state and local laws.

      "ERISA" means the Employee Retirement Income Security Act of 1974, as
 amended, and any successor statute of similar import, together with the
 regulations thereunder, in each case as in effect from time to time. References
 to sections of ERISA shall be construed also to refer to any successor
 sections.

      "Financial Statements" means, on a consolidated basis, the Company's
 audited statements of income and stockholders' equity for the years ended
 December 31, 1996, 1995 and 1994 and audited balance sheets as of December 31,
 1996, 1995 and 1994, as well as the unaudited interim statements of income and
 stockholders' equity for each of the months subsequent to December 31, 1996
 through October 31, 1997 (or if Closing does not occur in November 1997, such
 other month-end on or immediately prior to Closing) and the unaudited interim
 balance sheet as of the end of each month subsequent to December 31, 1996
 through October 31, 1997 (or if Closing does not occur in November 1997, such
 other month-end on or immediately prior to Closing).

      "Generally Accepted Accounting Principles" means generally accepted
 accounting principles as recognized by the American Institute of Certified
 Public Accountants, as in effect from time to time, consistently applied and
 maintained on a consistent basis for a Person throughout the period indicated
 and consistent with such Person's prior financial practice.

      "Governmental Authority" means any nation, province, state or other
 political subdivision thereof, and any agency, natural person or other entity
 exercising executive, legislative, regulatory or administrative functions of or
 pertaining to government.

      "Hazardous Material" means any substance or material meeting any one or
 more of the following criteria: (a) it is or contains a substance designated as
 a hazardous waste, hazardous substance, hazardous material, pollutant,
 contaminant or toxic substance under any Environmental Law or is otherwise
 regulated under any Environmental Law; or (b) its presence at some quantity
 requires investigation, notification or remediation under any Environmental
 Law.

      "Hubbards" means Lewis E. Hubbard, Emma B. Hubbard, Bruce R. Hubbard,
 Lewis E. Hubbard, Jr. and Beverly H. Godfrey.

      "Intellectual Property" means (a) all inventions and discoveries (whether
 patentable or unpatentable and whether or not reduced to practice), all
 improvements thereto, and all patents, patent applications and patent
 disclosures, together with all reissuances, continuations,
 continuations-in-part, revisions, extensions and reexaminations thereof, (b)
 all trademarks, service marks, trade dress, logos, trade names and corporate
 names, together with all translations, adaptations, derivations and
 combinations thereof and including all goodwill associated therewith, and all
 applications, registrations and renewals in connection therewith, (c) all
 copyrights and all applications, registrations and renewals in

                                        3

                                     Page 22


<PAGE>   10

 connection therewith, (d) all know-how, trade secrets, whether patentable or
 unpatentable and whether or not reduced to practice (including ideas, research
 and development, know-how, formulas, compositions, manufacturing and production
 process and techniques, technical data, designs, drawings, specifications,
 pricing and cost information and business and marketing plans and proposals),
 (e) all computer software (including data and related documentation) and (f)
 all other proprietary rights.

      "Merger" means the merger of the Merger Sub into the Company, as more
 specifically described herein.

      "Merger Price" has the meaning set forth in Section 3.3.

      "Merger Sub" means GLL Acquisition Corp., a North Carolina corporation and
 a wholly owned subsidiary of the Buyer.

      "Permitted Liens" has the meaning given to it in Section 5.3.

      "Person" means a corporation, a company, an association, a joint venture,
 a partnership, an organization, a business, an individual, a trust or a
 government or political subdivision thereof or any government agency or any
 other legal entity.

      "Plan" means, with respect to the Company, any employee pension,
 retirement, profit-sharing, stock bonus, incentive, deferred compensation,
 stock option, employee stock ownership, hospitalization, medical, dental,
 vacation, insurance, sick pay, disability, severance or other plan, fund,
 program, policy, contract or arrangement, whether arrived at through collective
 bargaining or otherwise, providing employee benefits (including but not limited
 to any "employee benefit plan" as that term is defined in Section 3(3) of ERISA
 and any employee benefit plan that is a "cafeteria plan" as described in
 Section 125 of the Code), currently maintained or previously maintained at any
 time in the last five years by, sponsored in whole or in part by, or
 contributed to by the Company, for the benefit of employees, retirees,
 dependents, spouses, directors, independent contractors or other beneficiaries,
 whether created in writing, through an employee manual or similar document, or
 orally.

      "Plan of Merger" means the Plan of Merger between the Buyer, the Merger
 Sub and the Company, substantially in the form attached as Exhibit A.

      "Real Property" means any land, building or premises in which the Company
 has ownership or possessory rights, whether by title, lease or otherwise.

      "Securities Act" means the Securities Act of 1933, as amended.

      "Sellers" means Gary L. Lackey, Lewis E. Hubbard, Emma B. Hubbard,
 Bruce R. Hubbard, Lewis E. Hubbard, Jr., Beverly H. Godfrey and the Eagan
 Trust.

      "Shares" has the meaning given to it Section 3.1.

      "Surviving Corporation" has the meaning given to it in Section 2.1.

      "Taxes" means all taxes, charges, fees, levies or other assessments
 (whether federal, state, local or foreign), including without limitation
 income, gross receipts, excise, property, estate, sales, use, value added,

                                        4

                                     Page 23


<PAGE>   11

 transfer, license, payroll, franchise, ad valorem, withholding, Social Security
 and unemployment taxes, as well as any interest, penalties and other additions
 to such taxes, charges, fees, levies or other assessments.

      "Tax Return" means any report, return or other information required to be
 supplied to a taxing authority in connection with Taxes.

                                   ARTICLE II.

                                   THE MERGER

      2.1 The Merger. On the terms and subject to the conditions of this
 Agreement, the Plan of Merger and North Carolina law, at the Effective Time,
 the Merger Sub shall merge into the Company, the separate existence of the
 Merger Sub shall cease and the Company shall be the surviving corporation (the
 "Surviving Corporation").

      2.2 Articles of Incorporation. The articles of incorporation of the
 Company in effect at the Effective Time shall be the articles of incorporation
 of the Surviving Corporation as may be amended by the Articles of Merger filed
 pursuant to this Agreement until further amended in accordance with applicable
 law.

      2.3 Bylaws. The bylaws of the Company in effect at the Effective Time
 shall be the bylaws of the Surviving Corporation until amended in accordance
 with applicable law.

      2.4 Directors and Officers. From and after the Effective Time, until
 successors are duly elected or appointed in accordance with applicable law, the
 directors of the Merger Sub at the Effective Time shall be the directors of the
 Surviving Corporation and the officers of the Merger Sub at the Effective Time
 shall be the officers of the Surviving Corporation. Promptly after Closing, the
 Buyer shall cause Gary L. Lackey to be duly appointed as President and duly
 elected as a director of the Surviving Corporation.

      2.5 Approval. The Sellers and the Company shall take and cause to be taken
 all action necessary to approve and authorize the Merger and other transactions
 contemplated hereby.

      2.6 Effective Time. The Merger shall become effective on the date and at
 the time of filing of articles of merger, in the form required by and executed
 in accordance with the laws of North Carolina (the "Articles of Merger"), or at
 such other time specified in the Articles of Merger. The date and time when the
 Merger shall become effective is herein referred to as the "Effective Time."

      2.7 Filing of Articles of Merger. At or as soon as practicable after the
 Closing, the Company and the Buyer shall cause the Articles of Merger to be
 executed and filed with the Secretary of State of North Carolina, as required
 by the laws of North Carolina, and shall take any and all other actions and do
 any and all other things to cause the Merger to become effective as
 contemplated hereby.



                                        5

                                     Page 24

<PAGE>   12

                                  ARTICLE III.

             CONVERSION AND EXCHANGE OF SHARES FOR THE MERGER PRICE

      3.1 Shares. (a) All of the shares of capital stock of the Company issued
 and outstanding immediately prior to the Effective Time (the "Shares") shall,
 by virtue of the Merger and without any action on the part of the holder
 thereof, be cancelled and converted at the Effective Time into the right to
 receive the Merger Price (as defined below in Section 3.3).

      (b) All Shares, by virtue of the Merger and without any action on the part
 of the holders thereof, shall at the Effective Time no longer be outstanding,
 shall be cancelled and retired and shall cease to exist, and each holder of
 certificates representing any such Shares shall thereafter cease to have any
 rights with respect to such Shares, except for the right to receive the Merger
 Price for such Shares upon the surrender of such certificates.

      (c) Notwithstanding anything contained in this Section 3.1 to the
 contrary, each Share held in the treasury of the Company immediately prior to
 the Effective Time shall be cancelled without any conversion thereof, and no
 payment shall be made with respect thereto.

      (d) From and after the Effective Time, there shall be no transfers on the
 stock transfer books of the Surviving Corporation of the Shares that were
 outstanding immediately prior to the Effective Time. If, after the Effective
 Time, certificates representing Shares are presented to the Surviving
 Corporation, they shall be cancelled.

      3.2 Merger Sub Shares. Each share of common stock of the Merger Sub issued
 and outstanding immediately prior to the Effective Time shall, by virtue of the
 Merger and without any action on the part of the holder thereof, be converted
 at the Effective Time into one validly issued, fully paid and nonassessable
 share of common stock of the Surviving Corporation.

      3.3 Merger Price. (a) At the Effective Time and upon surrender to the
 Buyer of properly endorsed certificates representing the Shares, the Sellers
 shall be entitled to receive and the Buyer shall pay or issue and deliver to
 the Sellers the number of shares of the Buyer's Stock with a value, based on
 the Average Closing Price, of $3,500,000 (the value of such stock, the "Merger
 Price").

      (b) No fractional shares of the Buyer's Stock shall be issued in
 connection with the Merger. If any Seller otherwise has the right to receive .5
 or more of a share of the Buyer's Stock, such Seller shall receive an
 additional share of the Buyer's Stock; otherwise, such Seller shall not receive
 any shares of the Buyer's Stock or other consideration for such a fractional
 interest in the Merger Price.

      3.4 Closing Payment. At the Effective Time, the Buyer shall issue and
 deliver to each Seller the number of shares of the Buyer's Stock with a value,
 based on the Average Closing Price, of the product of (a) the Merger Price,
 multiplied by (b) the quotient of the number of Shares owned by each Seller (as
 represented in Section 5.2) divided by the total number of Shares issued and
 outstanding immediately prior to the Closing (as represented in Section
 5.1(b)).

                                        6

                                     Page 25

<PAGE>   13

                                   ARTICLE IV.

                                   THE CLOSING

      4.1 Closing. The Closing of the Merger shall take place at the offices of
 Robinson, Bradshaw & Hinson, P.A. in Charlotte, North Carolina on November 5,
 1997, or on such other date or at such other location as the Buyer and the
 Company may mutually agree (such date, the "Closing Date"). The Closing shall
 be effective upon the filing of the Articles of Merger or at such other time as
 may be specified in the Articles of Merger. At the Closing, the parties will
 execute, deliver and file all documents necessary to effect the transactions
 contemplated herein, including the Articles of Merger.

      4.2 Deliveries by the Sellers and the Company. At or by the Closing, the
 Sellers and the Company shall have caused the following documents to be
 executed and delivered to the Buyer:

      (a) the Employment Agreement;

      (b) canceled certificates representing the Shares;

      (c) the opinions, certificates, instruments and other documents
 contemplated in Section 9.3; and

      (d) all other documents, certificates and instruments required hereunder
 to be delivered by the Sellers and the Company, or as may reasonably be
 requested by the Buyer at or prior to the Closing.

      4.3 Deliveries by the Buyer. At or by the Closing (except with respect to
 the stock certificates in subclause (b), which shall be issued and delivered to
 the Sellers as soon as reasonably practicable after the Closing), the Buyer
 shall have caused the following documents to be executed and delivered to the
 Sellers:

      (a) the Employment Agreement;

      (b) stock certificates representing the shares of the Buyer's Stock to be
 issued to the Sellers hereunder;

      (c) the certificates, instruments and other documents contemplated in
 Section 9.2; and

      (d) all other documents, certificates and instruments required hereunder
 to be delivered by the Buyer, or as may reasonably be requested by the Sellers
 or the Company at or prior to the Closing.




                                        7

                                     Page 26


<PAGE>   14

                                   ARTICLE V.

          REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND THE COMPANY

      The Sellers and the Company jointly and severally represent and warrant to
 the Buyer that the statements contained in this Article V are correct and
 complete as of the date of this Agreement.

      5.1 The Company. (a) Organization; Foreign Qualifications; Authority. The
 Company is a corporation duly organized, validly existing and in existence
 under the laws of North Carolina and is duly qualified to transact business as
 a foreign corporation in, and is in good standing under the laws of, those
 jurisdictions wherein the character of the property owned or leased or the
 nature of the activities conducted by the Company makes such qualification
 necessary. The Company has no offices or employees in any state other than
 North Carolina. The Company has full power and authority under applicable
 corporate law to own, lease or otherwise hold its properties and assets and to
 carry on its business as presently conducted.

      (b) Capitalization. There are 20,500 issued and outstanding shares of
 capital stock of the Company, all of which have been duly authorized and
 validly issued and are fully paid and nonassessable, have not been issued in
 violation of the preemptive rights of any shareholder and have been issued
 pursuant to and in compliance with an applicable exemption under the Securities
 Act. Except as set forth on Schedule 5.1(b), there are no shares of capital
 stock or other equity securities of the Company outstanding. Except as
 disclosed on Schedule 5.1(b), there are no outstanding warrants, options,
 agreements, convertible or exchangeable securities, calls, puts or rights with
 respect to any securities of the Company or any other commitments or
 arrangements to issue, sell, purchase, return or redeem any securities of the
 Company. There are no securities of the Company reserved for issuance for any
 purpose.

      (c) Records. Complete and accurate copies of the Company's articles of
 incorporation and its bylaws and its stock book have been delivered to the
 Buyer. The stock book of the Company contains complete and accurate records of
 the record share ownership of the issued and outstanding shares of stock of the
 Company.

      (d) Subsidiaries and Affiliates. Except as disclosed on Schedule 5.1(d),
 the Company does not own, directly or indirectly, any capital stock of or any
 other equity interests in any Person. Schedule 5.1(d) sets forth all Affiliates
 of the Company.

      (e) Authority Relative to this Agreement. The Company has the power and
 authority under applicable corporate law to execute and deliver this Agreement,
 to perform its obligations hereunder and to consummate the transactions
 contemplated hereby. The execution and delivery of this Agreement by the
 Company, the performance of its obligations hereunder and the consummation of
 the transactions contemplated hereby have been duly and validly authorized by
 all necessary corporate action on the part of the Company (including any
 applicable shareholder approval). This Agreement has been duly executed and
 delivered by the Company and constitutes the legal, valid and binding
 obligation of the Company, enforceable against the Company in accordance with
 its terms (except as such enforceability may be limited by applicable
 bankruptcy, insolvency or other laws of general applicability affecting
 creditors' rights and by general principles of equity that may limit the
 specific performance of particular provisions).

                                        8

                                     Page 27


<PAGE>   15

      (f) Consents and Approvals, No Violations. (i) Except as set forth on
 Schedule 5.1(f), there is no requirement (other than the filing of the Articles
 of Merger) applicable to the Company to make any filing with, or to obtain any
 permit, authorization, consent or approval of, any Governmental Authority as a
 condition to the lawful consummation of the transactions contemplated hereby.

           (ii) Except as disclosed on Schedule 5.1(f), the execution, delivery
 and performance of this Agreement by the Company and its compliance with the
 terms hereof will not (A) conflict with any provisions of the articles of
 incorporation or bylaws of the Company, (B) violate or result in a default or
 breach (or, by its terms, give rise to any liens or right of termination,
 cancellation or acceleration), or require the consent of a third party in order
 to continue in full force and effect after Closing, pursuant to the terms of
 any Contract to which the Company is a party, or (C) violate any Applicable
 Law.

      5.2 The Sellers. (a) Ownership of Shares. The Sellers collectively own all
 of the issued and outstanding shares of capital stock of the Company, free and
 clear of any liens, adverse claims, covenants, conditions, restrictions,
 claims, charges, pledges or encumbrances of any kind. Gary L. Lackey owns 5,125
 Shares; Lewis E. Hubbard owns 125 Shares; Emma B. Hubbard owns 3,812.5 Shares;
 Bruce R. Hubbard owns 1,250 Shares; Lewis E. Hubbard, Jr., owns 1,250 Shares;
 Beverly H. Godfrey owns 1,250 Shares and the Eagan Trust owns 7,687.5 Shares.
 Except as disclosed on Schedule 5.2, none of the Sellers owns any other
 securities of the Company.

      (b) Authority Relative to this Agreement and the Employment Agreements.
 Each of the Sellers has the legal right, power and authority to execute and
 deliver this Agreement, to perform his obligations hereunder and to consummate
 the transactions contemplated hereby. This Agreement constitutes the legal,
 valid and binding obligation of each of the Sellers, enforceable against him in
 accordance with its terms (except as such enforceability may be limited by
 applicable bankruptcy, insolvency or other laws of general applicability
 affecting creditors' rights and by general principles of equity that may limit
 the specific performance of particular provisions).

      (c) Consents and Approvals, No Violations. There is no requirement
 applicable to any Seller to make any filing with, or to obtain any permit,
 authorization, consent or approval of, any Governmental Authority as a
 condition to the lawful consummation of the transactions contemplated hereby.

      (d) The execution, delivery and performance of this Agreement by the
 Sellers and their compliance with the terms hereof will not: (i) violate or
 result in a default or breach (or give rise to any liens or right of
 termination, cancellation or acceleration) pursuant to the terms of any
 Contract to which any of them is a party or (ii) violate any Applicable Law.

      5.3 Assets. The Company has good, valid and marketable title to all of its
 owned Assets free and clear of all mortgages, liens, security interests or
 encumbrances of any nature whatsoever except "Permitted Liens," which means (i)
 liens for current taxes not yet due and payable, (ii) liens in favor of
 carriers, warehousemen, mechanics, landlords and materialmen imposed by
 mandatory provisions of law and incurred in the ordinary course of business for
 sums not yet due and payable and (iii) those liens disclosed on Schedule 5.3.
 Schedule 5.3 lists all leases and any amendments thereto pursuant to which the
 Company leases or licenses Assets other than Real Property from any other
 Person providing for rentals of $10,000 per year or greater. Except for such
 leased or licensed Assets and except for the Real Property leased by the
 Company as disclosed on Schedule 5.4, there are no Assets (other than Assets
 that in the aggregate do not have a value in excess of $2,000) used by the
 Company in the operation of its business that are not owned by the Company. The
 Assets

                                        9

                                     Page 28

<PAGE>   16

 owned, licensed and leased by the Company constitute all of the Assets
 sufficient to conduct the business of the Company as presently conducted and
 are in a good state of repair in all material respects, reasonable wear and
 tear excepted, usable by the Company for their intended purposes.

      5.4 Interests in Real Property. (a) The Company's leasehold interest in
 the offices listed on Schedule 5.4 comprise all of the Real Property in which
 the Company has any interest (other than any interest arising out of the
 ordinary course of its mortgage lending activities). None of the Sellers or the
 Company has any knowledge of any type of pending or threatened legal action
 affecting such Real Property, including without limitation any condemnation
 action. Except as disclosed on Schedule 5.4, to the knowledge of the Sellers
 and the Company, the conduct of business by the Company within such Real
 Property complies with all applicable legal requirements relating to such Real
 Property, including without limitation requirements under the applicable zoning
 ordinances, building code requirements and any requirements under applicable
 private restrictions. To the knowledge of the Sellers and the Company, except
 as disclosed on Schedule 5.4, all such Real Property is in good condition.

      5.5 Absence of Undisclosed Liabilities. Except as disclosed on Schedule
 5.5, the Company has no liabilities or obligations (whether accrued, absolute,
 contingent, unliquidated or otherwise, whether due or to become due) other than
 (a) liabilities or obligations reserved against or otherwise disclosed in the
 Financial Statements, (b) liabilities or obligations under Contracts listed on
 the Schedules to this Agreement or under Contracts that are not required to be
 disclosed thereon (but not liabilities for breaches thereof) and (c)
 liabilities and obligations incurred after December 31, 1996 in the ordinary
 course of business consistent (in amount and kind) with past practice. Except
 as disclosed in Schedule 5.5, no facts or circumstances exist that would
 reasonably be expected to serve as the basis for any other liabilities or
 obligations of the Company that would be required to be disclosed on Schedule
 5.5.

      5.6 Contracts. (a) Schedule 5.6 sets forth all Contracts (other than those
 arising directly out of the Company's mortgage lending activities) to which the
 Company is party or by which it or its properties or assets is bound that (i)
 involve obligations to or by the Company in the future exceeding $10,000; (ii)
 have a future term (excluding any portion subject to a cancelable right
 exercisable without penalty) of one year or more; (iii) pursuant to which the
 Company made warranties of its services that continue in effect; (iv) involves
 hedging, options or any similar trading activity, or any interest rate
 exchanges or swaps (with the exception of letters of credit, lines of credit
 and loan commitments extended in the ordinary course of the Company's
 business); (v) involves the purchase or sale of any Assets of the Company in
 excess of $10,000 in the aggregate; or (vi) is otherwise material to the
 Company.

      (b) Complete copies (or, if oral, full written descriptions) of all
 Contracts required to be listed hereby on Schedule 5.6, including all
 amendments thereto, have been delivered to the Buyer. Each of such Contracts is
 legal, valid, binding, enforceable (except as its enforceability may be limited
 by applicable bankruptcy, insolvency or other laws of general applicability
 affecting creditors' rights and by general principles of equity that may limit
 the specific performance of particular provisions) and in full force and effect
 against the Company, and to the knowledge of the Sellers and the Company, the
 other parties thereto.

      (c) (i) The Company has not committed an uncured event of default (unless
 permanently waived) under any Contract, and no facts or circumstances exist
 that with the passage of time or the giving of notice or both would constitute
 any such event of default. Neither the Sellers

                                       10

                                     Page 29

<PAGE>   17

 nor the Company have received notice (whether oral or written) that the Company
 is in default under any Contract or of the termination thereof.

           (ii) To the knowledge of the Company and the Sellers, (A) no other
 party to any Contract has committed an uncured event of default (unless
 permanently waived) under any Contract, and (B) no facts or circumstances exist
 that with the passage of time or the giving of notice or both would constitute
 any such event of default. The Company has not given notice to the other party
 to any such Contract that such other party is in default thereunder or of the
 termination thereof.

      5.7 Intellectual Property Rights. (a) The Company owns or has the right to
 use (pursuant to license, sublicense, agreement or permission) all Intellectual
 Property currently used in its business as currently conducted and all other
 Intellectual Property, individually or in the aggregate, material to the
 operation of its business as currently conducted. All registered trademarks and
 patents owned or used by the Company (together with any application therefor)
 and all trade names, copyrights and processes material to the Company's
 operations are listed on Schedule 5.7. Except as disclosed on Schedule 5.7, the
 Company has not pledged, mortgaged, assigned, licensed, granted permission with
 respect to or otherwise transferred any such Intellectual Property to any third
 party. No such item of Intellectual Property is subject to any outstanding
 injunction, judgment, order, decree, ruling or charge, and no action, suit,
 proceeding, hearing, investigation, charge, complaint, claim or demand is
 pending or, to the knowledge of the Sellers and the Company, is threatened that
 challenges the legality, validity, use or enforceability of any such item of
 Intellectual Property. Except as disclosed on Schedule 5.7, the Company owns
 all right, title and interest in each such item of Intellectual Property, free
 and clear of any encumbrance, lien or other restriction. None of the Company's
 rights with respect to any such Intellectual Property will be terminated,
 limited or otherwise affected by its execution of this Agreement or its
 consummation of the transactions contemplated by this Agreement.

      5.8 Financial Statements. Except as disclosed on Schedule 5.8, the
 Financial Statements have been prepared in accordance with Generally Accepted
 Accounting Principles. The Financial Statements fairly present the results of
 operations and financial position of the Company for the periods and as of the
 dates set forth therein.

      5.9 Loans, Accounts, Notes and Other Receivables. (a) All loans, accounts,
 notes and other receivables reflected as assets on the Company's books and
 records (i) have resulted from bona fide business transactions in the ordinary
 course of the Company's operations, (ii) in all material respects were made in
 accordance with the Company's standard loan policies and procedures, and (iii)
 except as disclosed on Schedule 5.9, are owned by the Company free and clear of
 all liens, encumbrances, assignments, participation or repurchase agreements or
 other exceptions to the title or to the ownership or collection rights of any
 other person or entity.

      (b) All records of the Company regarding all outstanding loans, accounts,
 notes and other receivables, and all other real estate owned, are accurate in
 all material respects, and, with respect to each loan which the Company's loan
 documentation indicates is secured by any real or personal property or property
 rights ("Loan Collateral"), such loan is secured by valid, perfected and
 enforceable liens on all such Loan Collateral having the priority described in
 the Company's records of such loan (except as such enforceability may be
 limited by applicable bankruptcy, insolvency or other laws of general
 applicability affecting creditors' rights and by general principles of equity
 that may limit the specific performance of particular provisions). For purposes
 of making the representation in this Section 5.9(b) regarding loans secured by
 real property, the determination as to rights in and to any such real property
 may be made based solely on

                                       11

                                     Page 30

<PAGE>   18

 title insurance policies issued with respect to such property, which policies
 are in full force and effect, valid and enforceable in accordance with their
 terms (except as such enforceability may be limited by applicable bankruptcy,
 insolvency or other laws of general applicability affecting creditors' rights
 and by general principles of equity that may limit the specific performance of
 particular provisions) and underwritten by an insurer qualified to transact
 business in North Carolina.

      (c) To the knowledge of the Sellers and the Company, each loan reflected
 as an asset on the Company's books, and each guaranty therefor, is the legal,
 valid and binding obligation of the obligor or guarantor thereon. No defense,
 offset or counterclaim has been asserted with respect to any such loan
 guaranty.

      (d) Neither the Company nor any Seller has reason to believe that any of
 the Company's loans and other extensions of credit is not collectible in the
 ordinary course of the Company's business in an amount that is at least the
 amount at which it is carried on the Company's books and records.

      5.10 Securities Portfolio and Investments. All securities owned by the
 Company (whether owned of record or beneficially) are disclosed on Schedule
 5.10 are held free and clear of all mortgages, liens, pledges, encumbrances or
 any other restriction or rights of any other person or entity, whether
 contractual or statutory, which would impair the ability of the Company to
 dispose freely of any such security or otherwise to realize the benefits of
 ownership thereof at any time (other than in connection with any repurchase
 agreements with customers). There are no voting trusts or other agreements or
 undertakings to which the Company is a party with respect to the voting of any
 such securities. With respect to all "repurchase agreements" to which the
 Company has "repurchased" securities under agreement to resell (if any), the
 Company has a valid, perfected first lien or security interest in the
 government securities or other collateral securing the repurchase agreement,
 and the value of the collateral securing each such repurchase agreement equals
 or exceeds the amount of the debt owed to the Company which is secured by such
 collateral.

      Except for fluctuations in the market values of United States Treasury and
 agency or municipal securities, since June 30, 1997, there has been no
 significant deterioration or material adverse change in the quality, or any
 material decrease in the value, of the Company's securities portfolio.

      5.11 Legal Compliance. Except as disclosed on Schedule 5.11, the Company
 is in compliance in all material respects with all Applicable Laws, and no
 facts or circumstances exist that, with or without the passing of time or the
 giving of notice or both, would reasonably be expected to serve as the basis
 for any claim that the Company is not in compliance in any material respect
 with an Applicable Law. Except as disclosed on Schedule 5.11, the Company has
 not received any written communication from a Governmental Authority that
 remains pending alleging its noncompliance with any Applicable Law.

      5.12 Taxes and Tax Returns. (a) The Company has duly and timely filed
 (including within any applicable extension periods) all Tax Returns required to
 be filed by it prior to the date hereof and has duly paid such taxes that are
 due. All such Tax Returns are true, correct and complete in all material
 respects. Except as set forth in Schedule 5.12, since December 31, 1991, the
 Company has not incurred any liability for Taxes other than in the ordinary
 course of business. Schedule 5.12 sets forth all periods since December 31,
 1991 for which the federal income tax returns of the Company has been examined
 by the Internal Revenue Service, and all deficiencies asserted as a result of
 such examinations (or as a result of any examination of such returns for
 earlier fiscal years) have


                                       12

                                     Page 31


<PAGE>   19

 been paid or finally settled. There are no disputes pending in respect of or
 claims asserted for Taxes, nor are there any pending or, to the knowledge of
 the Sellers and the Company, threatened audits or investigations or outstanding
 matters under discussion with any taxing authorities with respect to the
 payment of Taxes or the Company's Tax Returns, nor has the Company given or
 been requested to give any currently effective waivers extending the statutory
 period of limitation applicable to any Taxes for any period. Except as set
 forth in Schedule 5.12, no issues that have been raised by any taxing authority
 in connection with any Taxes or Tax Returns of the Company are of a recurring
 nature that would apply to Taxes or such Tax Returns after the Closing. All
 required declarations of estimated income taxes related to the operations of
 the Company have been made, and all Taxes required to be shown on such
 declarations have been paid. Copies of all Income Tax Returns relating to the
 operations of the Company for all periods since December 31, 1991 have been
 delivered to the Buyer.

      (b) No facts exist or have existed that would reasonably be expected to
 constitute grounds for the assessment of Taxes against the Company beyond the
 reserves for Taxes shown on the Financial Statements.

      (c) There are no liens with respect to Taxes (except for liens for taxes,
 assessments or other governmental charges not yet delinquent) upon any of the
 Company's Assets.

      (d) Since January 1, 1987, the Company has had in effect a valid election
 under Section 1362(a)(1) of the Code to be taxed as a "Subchapter S"
 corporation under Section 1361(a)(1) of the Code. In no year has the Company
 incurred any tax liability under Section 1374 or 1375 of the Code.

      (e) The Company has not been and will not be liable for the tax of any
 Person relating to conduct or operations prior to the Closing Date under
 Section 1.1502-6 of the Treasury Regulations promulgated pursuant to the Code
 (or any similar provision of state, local or foreign law) as a transferee or
 successor, by contract or otherwise.

      5.13 Litigation. There are no lawsuits, claims, or legal, administrative
 or arbitration proceedings or investigations pending or, to the knowledge of
 the Sellers and the Company, threatened by or against or affecting the Company
 or any of the Company's Assets, operations or business.

      5.14 Labor and Employment Matters. (a) The Company has delivered to the
 Buyer complete and accurate copies of each employment, consulting and similar
 agreement to which the Company is a party, all of which are listed on Schedule
 5.14. Except as disclosed in Schedule 5.14, the Company is not a party to or
 bound by any written agreement, any employment manual, employment handbook,
 employment practice or policy constituting a contractual obligation, or any
 consent decree, court order or statutory obligation: (i) for the employment of
 any individual, or the provision of services by any individual, who is not
 terminable by the Company without penalty upon thirty days notice or less; (ii)
 with any labor union; or (iii) relating to the payment of any severance or
 termination payment, bonus or death benefit to any employee or former employee
 or his or her estate or designated beneficiary.

      (b) The Company is not a party to any collective bargaining agreement, and
 has not recognized or received a demand for recognition of any collective
 bargaining representative with respect thereto; and during the past three years
 there have been no material labor strikes, disputes or work stoppages nor, to
 the knowledge of the Sellers and the Company, are any such actions threatened
 against the Company.

                                       13

                                     Page 32
<PAGE>   20

      (c) Except as set forth in Schedule 5.14, there are no loans or other
 obligations payable or owing to any officers, directors or employees of the
 Company, except salaries, wages, bonuses and salary advances and reimbursement
 of expenses incurred and accrued in the ordinary course of business, nor are
 any loans or debts payable or owing by any such persons or their Affiliates to
 the Company, nor has the Company guaranteed any of their loans or obligations.

      (d) The Company is in compliance in all material respects with all laws
 and other obligations relating to employment, denial of employment or
 employment opportunity and termination of employment.

      (e) There is no material controversy pending or, to the knowledge of the
 Company and the Sellers, threatened between the Company and any of its present
 or former officers, directors, supervisory personnel or any group of its
 employees.

      5.15 Employee Benefit Plans; ERISA. (a) Schedule 5.15 identifies each Plan
 by name and ERISA plan number, if any. The Company does not have a formal plan
 or commitment, and it has not made an announcement of its intentions, whether
 or not legally binding, to create any additional Plan or modify or change any
 existing Plan. A true and complete copy of each of the following has been made
 available to the Buyer with respect to the Company:

           (i)  a copy of each written Plan (including all amendments
 thereto);

           (ii) a copy of the annual returns or reports (including, without
 limitation, reports on the Form 5500 series, including all attachments
 thereto), if required under ERISA or the Code, with respect to each Plan for
 the three most recent plan years with filing deadlines prior to the date of the
 Agreement or for which returns have actually been prepared or filed prior to
 the date of the Agreement and a copy of each summary annual report with respect
 to each such annual report;

           (iii) a copy of the most recent summary plan description, together
 with each subsequent summary of material modifications, required under ERISA
 with respect to each Plan and all other material employee communications
 relating to each Plan;

           (iv) a copy of all written rules, regulations, procedures and
 interpretations for each Plan;

           (v) if a Plan is funded through a trust or other funding arrangement,
 including insurance contracts, a copy of the trust or other funding agreement
 (including all amendments thereto) and the latest financial statements thereof;

           (vi) all contracts relating to the Plans with respect to which it may
 have any liability, including, without limitation, insurance contracts,
 investment management agreements, subscription and participation agreements,
 administration agreements and record keeping agreements;

           (vii) the most recent determination letter received from the Internal
 Revenue Service that covers the entire Plan with respect to each Plan that is
 intended to be qualified under Section 401(a) of the Code, each subsequent
 determination letter with respect to each such Plan, and complete copies of the
 determination letter applications (including attachments and cover letters) for
 each such determination letter; and

                                       14

                                     Page 33


<PAGE>   21

           (viii) all rulings, opinion letters, information letters or advisory
 opinions issued by the Internal Revenue Service or the United States Department
 of Labor with respect to each Plan within the ten-year period prior to the date
 of this Agreement.

      (b) Prohibited Transactions. Except as disclosed on Schedule 5.15, no
 prohibited transaction (as defined in Section 4975 of the Code or Section 406
 of ERISA) or transaction that would violate Section 404 of ERISA has occurred
 with respect to any Plan which is an "employee benefit plan" as defined in
 Section 3(3) of ERISA in connection with which the Company or any of its
 officers, directors or employees would be subject, directly or indirectly, to
 any tax, penalty or liability to any person for prohibited transactions or
 breach of fiduciary responsibility under ERISA or the Code (including, without
 limitation, liability for a breach of fiduciary responsibility by a cofiduciary
 pursuant to Section 405 of ERISA).

      (c) Funding. Except as disclosed on Schedule 5.15, full payment has been
 made on the Closing Date of all amounts that the Company is required to pay
 under the terms of each Plan and applicable law (including any employee salary
 deferral contributions described in Section 125 or 401(k) of the Code). Except
 as disclosed on Schedule 5.15, the Company will make contributions to the Plans
 required to be made before the Closing Date for the current plan year and for
 any prior year through the Closing Date, or if any such contributions are not
 due before the Closing Date, will make adequate provisions for reserves
 therefor.

      (d) Compliance with Applicable Law. (i) Each Plan that is subject to Title
 I of ERISA conforms to, and its administration is in compliance with,
 applicable federal laws, including but not limited to ERISA; (ii) each Plan
 that is intended to be qualified under Section 401(a) of the Code meets all of
 the applicable operational requirements for qualification and meets all of the
 plan document requirements for qualification that are required to be included
 in the plan document as of the Closing Date, and either a favorable
 determination letter has been received or has been applied for, and nothing has
 occurred since the most recent favorable determination letter that would
 adversely affect such qualification; (iii) each Plan that includes a cash or
 deferred arrangement described in Section 401(k) of the Code has been
 administered in accordance with all applicable requirements of Section 401(k)
 and the Treasury Regulations issued thereunder; and (iv) each Plan that
 includes a cafeteria plan described in Section 125 of the Code has been
 administered in accordance with all applicable requirements of Section 125 and
 the Treasury Regulations issued thereunder. There is no pending or threatened
 action, claim or proceeding against or with respect to any Plan by the Internal
 Revenue Service, the Department of Labor, the Equal Employment Opportunity
 Commission, or any participant, beneficiary or any other person or entity
 involving any aspect of the Plans (other than routine benefit claims), nor are
 there any facts that could form the basis for any such action, claim or
 proceeding. The Company has fully complied with the reporting and disclosure
 requirements of the Code and ERISA, the bonding requirements of ERISA, and
 other provisions applicable to the Plans.

      (e) Multiemployer Plans; Pension Plans. The Company does not participate
 in or contribute to, and never has participated in or contributed to, any
 Multiemployer Plan. The Company does not maintain and has never maintained an
 "employee pension benefit plan" as defined in Section 3(2) of ERISA that is
 subject to Title IV of ERISA.

      (f) Effect of Agreement. Except as indicated on Schedule 5.15, the
 execution and performance of this Agreement will not result in any (i) payment
 (whether retirement benefits, severance pay, unemployment compensation or
 otherwise) becoming due from the Company to any employee,

                                       15

                                     Page 34

<PAGE>   22

 former employee or director of the Company, (ii) increase in benefits otherwise
 payable under any Plan, or (iii) acceleration of the time of payment or vesting
 of any such benefits. No amounts payable to any officer, employee or director
 of the Company under any Plan in connection with the transactions contemplated
 hereby will fail to be deductible for federal income tax purposes by virtue of
 Section 280G of the Code.

      (g) Benefits for Former Employees. Except as disclosed on Schedule 5.15,
 no Plan provides benefits, including without limitation death or medical
 benefits (whether or not insured), with respect to current or former employees
 beyond retirement or other termination of service other than (i) coverage
 mandated by Section 4980B of the Code, Part 6 of Subtitle B of Title I of ERISA
 and Title XXII of the Public Health Service Act (collectively, "COBRA"), (ii)
 death benefits or retirement benefits under any Plan qualified under Section
 401(a) of the Code, (iii) disability benefits under any "employee welfare
 benefit plan" (as defined in Section 3(1) of ERISA) that have been fully
 provided for by insurance or otherwise, (iv) deferred compensation benefits
 accrued as liabilities on the books of the Company, or (v) benefits the full
 cost of which is borne by the current or former employee (or his or her
 beneficiary). Each Plan that is subject to the provisions of COBRA has been,
 and as of the Closing Date will have been, maintained in compliance with the
 provisions of COBRA.

      5.16 Insurance. Schedule 5.16 lists all of the insurance policies
 ("Policies") maintained by the Company as of the date hereof, and for each
 indicates the insurer's name, policy number, expiration date and amount and
 type of coverage. All such Policies are currently in effect. In addition, the
 coverage of such Policies shall not be restricted as a result of the
 transactions contemplated hereby. These Policies provide coverage in such
 amounts and against such liabilities, casualties, losses or risks as is
 customary or reasonable for entities engaged in the Company's business or as is
 required by applicable law or regulations, and in the reasonable opinion of the
 Sellers and the Company, the insurance coverage provided under these Policies
 is considered reasonable and adequate in all respects for the Company. Each of
 the Policies is in full force and effect and is valid and enforceable in
 accordance with its terms (except as such enforceability may be limited by
 applicable bankruptcy, insolvency or other laws of general applicability
 affecting creditors' rights and by general principles of equity that may limit
 the specific performance of particular provisions) and is underwritten by an
 insurer qualified to transact business in North Carolina. The Company has taken
 all requisite actions (including the giving of required notices) under each
 such policy in order to preserve all rights thereunder with respect to all
 matters. The Company is not in default under the provisions of, has not
 received notice of cancellation or nonrenewal of or any premium increase on, or
 has any knowledge of any failure to pay any premium on or any inaccuracy in any
 application for any Policy. There are no pending claims with respect to any
 policy, and neither the Sellers nor the Company has any knowledge of any state
 of facts or of the occurrence of any event that is reasonably likely to form
 the basis for any such claim.

      5.17 Transactions with Affiliates. Except as set forth on Schedule 5.17,
 none of the Sellers or any other officer or director of the Company, nor any
 Affiliate of such Persons, has any agreement, arrangement or understanding with
 the Company (including employment agreements) or any interest in any property,
 real, personal or mixed, tangible or intangible, used in or pertaining to the
 business of the Company.

      5.18 Environmental Matters.  (a) To the knowledge of the Sellers and
 the Company, without independent investigation, the Real Property listed on
 Schedule 5.4 (including without limitation the improvements thereon and the
 soil and groundwater thereunder): (i) does not contain and is not

                                       16

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<PAGE>   23

 contaminated by any Hazardous Material; and (ii) has never been the subject of
 a remedial action for an environmental problem.

      (b) The Company: (i) has never sent a Hazardous Material to a site that is
 contaminated by any Hazardous Material or that, pursuant to any Environmental
 Law, (1) has been placed on the "National Priorities List", the "CERCLIS" list,
 or any similar state or federal list, or (2) is subject to or the source of a
 claim, an administrative order or other request to take "removal", "remedial",
 "corrective" or any other "response" action, as defined in any Environmental
 Law, or to pay for the costs of any such action at the site; (ii) is in
 compliance in all material respects with all Environmental Laws in all of its
 activities and operations; (iii) has timely filed every report required to be
 filed, acquired all necessary certificates, approvals and permits (all of which
 are listed in Schedule 5.18 and none of which shall be lost or materially
 modified as a result of this transaction), and generated and maintained all
 required data, documentation and records under all Environmental Laws; and (iv)
 will be able to comply with any prospective requirement adopted or promulgated
 prior to the date hereof under any Environmental Law and to be applicable to
 the Company in the future without material cost or change in the operations of
 the Company.

      (c) The Company is not involved in any suit or proceeding and has not
 received any notice or request for information from any Governmental Authority
 or other third party with respect to a release or threatened release of any
 Hazardous Material or a violation or alleged violation of any Environmental
 Law, and has not received notice of any claims from any person or entity
 relating to property damage or to personal injuries from exposure to any
 Hazardous Material.

      5.19 Absence of Changes or Events. Except as disclosed on Schedule 5.19 or
 in the interim financial statements, since December 31, 1996, the Company has
 not: (a) issued any shares of capital stock or declared, set aside or paid any
 dividend or distribution with respect to shares of capital stock; (b) made any
 form of material changes in any Plan; (c) granted or made any commitments with
 respect to any increases in any form of compensation to its employees (other
 than the Sellers) except in the ordinary course of business consistent with
 past practices; (d) granted or made any commitments with respect to any
 increases in any form of compensation to the Sellers; (e) entered into any
 Contract or conducted its business other than in the ordinary course of
 business consistent with past practices; or (f) except as a result of the
 consummation of the transactions contemplated by this Agreement, incurred any
 material adverse change in the business, assets, condition or results of
 operations of the Company, provided, however, that the Company may make or has
 made: (i) the monthly distributions permitted by Section 7.4; (ii) a special
 bonus in an amount not greater than $100,000 in recognition of current and past
 performance to Gary L. Lackey; (iii) the distribution of approximately $115,000
 made as of August 7, 1997 to the shareholders of the Company (which resulted in
 a book value of the Company as of such date of $700,000); (iv) the engagement
 of, and payment of fees up to an aggregate amount of $198,000 to, Orr
 Management; and (v) reasonable fees and expenses, including attorneys' fees,
 incurred in connection with the Merger. Except for changes resulting from
 consummation of the Merger (including those items disclosed herein or the
 schedules hereto) and occurring in the ordinary course of business, the balance
 sheet of the Company upon Closing (including cash balances and other working
 capital items) will not be materially and adversely changed from the most
 recent balance sheet of the Company comprising part of the Financial
 Statements.

      5.20 Bank Accounts. Schedule 5.20 lists all bank accounts and safe deposit
 boxes of the Company, all powers of attorney in connection with such accounts
 and the names of all persons authorized to draw thereon or to have access
 thereto.

                                       17

                                     Page 36


<PAGE>   24

      5.21 Corporate and Personnel Data. Schedule 5.21 lists the names, salary
 rates, and the date of last raise of all the employees of the Company as of a
 date within 5 days prior to the date hereof.

      5.22 Licenses and Permits. Schedule 5.22 lists all of the material
 licenses, permits, authorizations, and registrations issued by any Governmental
 Authority to the Company. No other licenses, permits, authorizations, or
 registrations are materially necessary to enable the Company to own, lease or
 otherwise hold its properties or to enable the Company to carry on its business
 as presently conducted. Except as set forth on Schedule 5.22, no such license,
 permit, authorization or registration will be violated or made void or be
 affected in any way adverse to the Company by the consummation of the
 transactions contemplated by this Agreement.

      5.23 Investment. (a) In connection with the acceptance by the Sellers of
 shares of the Buyer's Stock under this Agreement, each Seller acknowledges that
 he is familiar with the operations of the Buyer to the extent of the
 information furnished by the Buyer in its published reports (including
 documents filed with the Securities and Exchange Commission or other
 information required to be prepared pursuant to federal securities laws); that
 each Seller has had an opportunity to inspect the Buyer's most recent financial
 information (including annual and quarterly reports on Form 10-K and 10-Q,
 respectively and any interim press releases, whether or not contained in a Form
 8-K) and to ask questions of management concerning the Buyer; that each Seller
 has received adequate information to enable him to make an informed decision
 with respect to his ownership of the Buyer's Stock acquired in connection with
 the Merger.

      (b) Each Seller: (i) is an "accredited investor" within the meaning of
 Rule 501 under the Securities Act or (ii) has sufficient knowledge and
 experience in investing in companies similar to the Buyer so as to be able to
 evaluate the risks and merits of an investment in the Buyer and is able
 financially to bear the risks of such investment;

      (c) Each Seller is a resident of, and is domiciled in, the state of North
 Carolina;

      (d) The Buyer's Stock acquired by each Seller in connection with the
 Merger is being acquired for his or its own account, for investment, and not
 with a view to or for sale in connection with any unregistered distribution
 thereof in violation of the Securities Act or any state securities act; and

      (e) Each Seller understands that (i) shares of the Buyer's Stock acquired
 in connection with the Merger must be held for any applicable holding period
 under Rule 144 of the Securities Act, or any successor rule or regulation,
 unless a disposition thereof is registered under the Securities Act or is
 exempt from such registration, (ii) the certificates representing such shares
 of the Buyer's Stock shall bear a legend to such effect, and (iii) the Buyer
 will make or cause to be made a notation on its transfer books to such effect.

      5.24 Certain Regulated Businesses. The Company is neither an "investment
 company" as defined in the Investment Company Act of 1940, as amended, nor a
 "public utility holding company" as defined in the Public Utility Holding
 Company Act of 1935, as amended.

      5.25 Commissions. No broker, finder or other Person is entitled to any
 brokerage fees, commissions or finder's fees in connection with the
 transactions contemplated hereby by reason of any action taken by the Sellers
 or the Company other than the Company's payment of fees to Orr Management in an
 amount not to exceed $198,000.

                                       18

                                     Page 37


<PAGE>   25

      5.26 Full Disclosure. Neither the representations and warranties of the
 Company and the Sellers set forth in this Agreement, nor those stated in a
 certificate or document to be delivered hereunder at or prior to Closing by the
 Sellers or the Company, contains or will contain any untrue statement of a
 material fact or omits or will omit to state any material fact necessary, in
 light of the circumstances under which it was, is or will be made, in order to
 avoid statements herein or therein being misleading.

                                   ARTICLE VI.

                   REPRESENTATIONS AND WARRANTIES OF THE BUYER

      The Buyer represents and warrants to the Company and the Sellers that the
 statements contained in this Article VI are correct and complete as of the date
 of this Agreement and will be correct and complete as of the Closing Date.

      6.1 Organization. Each of the Buyer and the Merger Sub is a corporation
 duly organized, validly existing and in good standing under the laws of the
 state of its incorporation.

      6.2 Authority Relative to this Agreement. Each of the Buyer and the Merger
 Sub has the power and authority under applicable corporate law to execute and
 deliver this Agreement, to perform its obligations hereunder and to consummate
 the transactions contemplated hereby. The execution and delivery of this
 Agreement by each of the Buyer and the Merger Sub, the performance of its
 obligations hereunder and the consummation of the transactions contemplated
 hereby have been duly and validly authorized by all necessary corporate action
 on the part of each of the Buyer and the Merger Sub (including any applicable
 shareholder approval). This Agreement constitutes the legal, valid and binding
 obligation of each of the Buyer and the Merger Sub, enforceable against each of
 them in accordance with its terms (except as such enforceability may be limited
 by applicable bankruptcy, insolvency or other laws of general applicability
 affecting creditors' rights and by general principles of equity that may limit
 the specific performance of particular provisions).

      6.3 Consents and Approvals, No Violations. (a) Except as disclosed on
 Schedule 6.3, there is no requirement applicable to the Buyer or the Merger Sub
 to make any filing with (other than the Articles of Merger), or to obtain any
 permit, authorization, consent or approval of, any Governmental Authority as a
 condition to the lawful consummation of the transactions contemplated hereby.

      (b) The execution, delivery and performance of this Agreement by each of
 the Buyer and the Merger Sub and its compliance with the terms hereof will not:
 (i) conflict with any provisions of its articles of incorporation or bylaws,
 (ii) violate or result in a default or breach (or give rise to any right of
 termination, cancellation or acceleration or liens) pursuant to the terms of
 any Contract to which it is a party, or (iii) violate any Applicable Law.

      6.4 Issuance of Shares of the Buyer's Stock. Shares of the Buyer's Stock
 to be issued to the Sellers hereunder are duly authorized and, when so issued
 to the Sellers, will be validly issued and outstanding and fully paid and
 nonassessable, free and clear of any liens, pledges, encumbrances or preemptive
 rights.

      6.5 Reports. Since December 31, 1994, the Buyer has filed all reports,
 registrations and statements, together with any required amendments thereto,
 that it was required to file with: (i) the Securities

                                       19

                                     Page 38


<PAGE>   26

 and Exchange Commission, including without limitation Forms 10-K, Forms 10-Q
 and proxy statements; (ii) the Federal Reserve Board; and (iii) any applicable
 state securities or banking authorities (collectively, the "Reports"). As of
 their respective dates, the Reports comply in all material respects with all of
 the rules and regulations promulgated by the Securities and Exchange
 Commission, the Federal Reserve Board and any applicable state securities or
 banking authorities, as the case may be, and did not contain any untrue
 statement of a material fact or omit to state a material fact required to be
 stated therein or necessary in order to make the statements therein, in light
 of the circumstances under which they were made, not materially misleading.

      6.6 Buyer's Financial Statements. On a consolidated basis, the Buyer's
 audited statements of income and stockholders' equity for the years ended
 December 31, 1996, 1995 and 1994 and audited balance sheets as of December 31,
 1996, 1995 and 1994, together with the notes thereto, (as included in the
 Buyer's Annual Report on Form 10-K for the fiscal year ended December 31, 1996
 filed with the Securities and Exchange Commission) have been prepared in
 accordance with Generally Accepted Accounting Principles and fairly present the
 results of operations and financial position of the Buyer for the periods and
 as of the dates set forth therein.

      6.7 Absence of Changes. Since December 31, 1996, except as a result of the
 consummation of the transactions contemplated by this Agreement, the Buyer, on
 a consolidated basis with its subsidiaries and taken as a whole, has not
 incurred a material adverse change in its business, financial condition or
 results of operations.

      6.8 Commissions. No broker, finder or other Person is entitled to any
 brokerage fees, commissions or finder's fees in connection with the
 transactions contemplated hereby by reason of any action taken by the Buyer or
 the Merger Sub.

      6.9 Full Disclosure. Neither the representations and warranties of the
 Buyer set forth in this Agreement, nor those stated in a certificate or
 document to be delivered hereunder at or prior to Closing by the Buyer,
 contains or will contain any untrue statement of a material fact or omits or
 will omit to state any material fact necessary, in light of the circumstances
 under which it was, is or will be made, in order to avoid statements herein or
 therein being misleading.

                                  ARTICLE VII.

                              AFFIRMATIVE COVENANTS

      7.1 Ordinary Conduct. Except as otherwise contemplated by this Agreement,
 the Company will, and the Sellers will cause the Company to, from the date of
 this Agreement to the Closing, conduct its business in the ordinary course in
 substantially the same manner as presently conducted and will make reasonable
 commercial efforts consistent with past practices to preserve its relationships
 with their respective clients, suppliers and others with whom the Company has
 dealt and to keep available the services of each of its officers. Additionally,
 except as otherwise contemplated by this Agreement or as set forth on Schedule
 7.1, the Company will not do any of the following without the prior written
 consent of the Buyer:

      (a)  amend its articles of incorporation or bylaws;

                                       20

                                     Page 39

<PAGE>   27

      (b) authorize for issuance, issue, sell, deliver or agree or commit to
 issue, sell or deliver any stock or equity equivalents of any class or any
 other of its securities, or amend any of the terms of any securities
 outstanding as of the date hereof;

      (c) except as permitted by Section 5.19 or disclosed on Schedule 5.19, (i)
 split, combine or reclassify any shares of its capital stock, (ii) declare, set
 aside or pay any dividend or other distribution (whether in cash, stock or
 property or any combination thereof) in respect of its capital stock or (iii)
 redeem or otherwise acquire any of its securities;

      (d) (i) incur or assume any long-term debt or issue any debt securities
 or, except under existing lines of credit (including the existing line of
 credit made by John T. Eagan, Jr. or any affiliate of his to the Company, as
 more specifically described on Schedule 5.9 (the "Eagan Line of Credit")) and
 in amounts not material to it, incur or assume any short-term debt other than
 in the ordinary course of business, (ii) assume, guarantee, endorse or
 otherwise become liable or responsible (whether directly, contingently or
 otherwise) for the obligations of any other Person, (iii) make any loans,
 advances or capital contributions to, or investments in, any other Person, (iv)
 pledge or otherwise encumber shares of its capital stock or (v) mortgage or
 pledge any of its assets, tangible or intangible, or create or suffer to exist
 any lien thereupon, other than Permitted Liens;

      (e) adopt or amend any Plan;

      (f) except as permitted by Section 5.19 or disclosed on Schedule 5.19,
 grant to any director, executive officer or employee any increase in his or her
 compensation or pay or agree to pay to any such person other than in the
 ordinary course of business any bonus, severance or termination payment,
 specifically including any such payment that becomes payable upon the
 termination of such person by it after the Closing;

      (g) (i) acquire, sell, lease or dispose of any assets outside the ordinary
 course of business, or any other assets that in the aggregate are material to
 it, or (ii) enter into any Contract or transaction outside the ordinary course
 of business consistent with past practice;

      (h) (i) change or modify any of the accounting principles or practices
 used by it or (ii) revalue in any material respect any of its assets, including
 without limitation writing down the value of inventory or writing off notes or
 accounts receivable other than in the ordinary course of business;

      (i) (i) acquire any Person (or division thereof), any equity interest
 therein or the assets thereof; (ii) enter into, cancel or modify any Contract
 other than in the ordinary course of business consistent with past practices;
 (iii) enter into, cancel or modify any Contract involving an amount in excess
 of $10,000; (iv) authorize any new capital expenditure or expenditures that,
 individually or in the aggregate, are in excess of $10,000; or (v) enter into
 or amend any Contract with respect to any of the foregoing;

      (j) except as permitted by Section 5.19 or disclosed on Schedule 5.19,
 pay, discharge or satisfy, cancel, waive or modify any claims, liabilities or
 obligations (absolute, accrued, asserted or unasserted, contingent or
 otherwise), other than the payment, discharge or satisfaction in the ordinary
 course of business of liabilities reflected or reserved against in, or
 contemplated by, the Financial Statements or on Schedule 5.5 or incurred in the
 ordinary course of business consistent with past practices;

                                       21

                                     Page 40

<PAGE>   28

      (k) settle or compromise any pending or threatened suit, action or claim
 relating to the transactions contemplated hereby;

      (l) take, or agree in writing or otherwise to take, any action that would
 make any of the representations or warranties of it or the Sellers contained in
 this Agreement untrue or incorrect or would result in any of the conditions set
 forth in this Agreement not being satisfied; or

      (m) agree, whether in writing or otherwise, to do any of the foregoing.

      7.2  Covenants of the Sellers.

      (a) Transfer of Shares. Each Seller agrees that between the date hereof
 and the earlier of the Closing or the date on which this Agreement is
 terminated, he shall not transfer, pledge, hypothecate or otherwise encumber
 any of the Shares owned by him or grant to any Person any right to purchase any
 of the Shares other than the rights granted to the Buyer hereunder.

      (b) Restricted Stock. The shares of the Buyer's Stock issued in connection
 with the Merger have not been registered under the Securities Act, and each
 Seller agrees that he will not offer, sell, pledge or otherwise transfer any of
 such shares of the Buyer's stock except pursuant to an effective registration
 statement or in accordance with an applicable exemption from the registration
 requirements of the Securities Act accompanied by a legal opinion as to such
 exemption in form reasonably satisfactory to the Company and its counsel and in
 accordance with any applicable securities laws of any state of the United
 States or any other jurisdiction.

      (c) Release. Each Seller (in his capacity as employee, shareholder,
 officer or director, or otherwise) hereby releases and forever discharges the
 Company, the Surviving Corporation, the Buyer and their Affiliates, and each of
 their stockholders, directors, officers, employees, agents and successors and
 assigns, (all of such parties, collectively, the "Released Parties") from any
 and all claims, demands, proceedings, causes of action, orders, obligations,
 contracts, agreements, debts and liabilities whatsoever, whether known or
 unknown, fixed or contingent, both at law and in equity, other than as may
 arise under and are brought in connection with this Agreement, that such Seller
 has, ever had or may hereafter have against any of the Released Parties based
 on facts, circumstances, events or omissions occurring prior to Closing,
 whether or not relating to claims pending on or asserted after the Closing;
 provided, however, that this Section 7.2(c) shall become effective only upon
 Closing. Each Seller hereby covenants to refrain from, directly or indirectly,
 asserting any claim or demand, or commencing, instituting or causing to be
 commenced, any proceeding of any kind against any Released Party based upon any
 matters purported to be released hereby. Notwithstanding the foregoing, the
 release set forth in this Section 7.2(c) shall not (i) apply to any claims or
 rights that any Seller may have against a Released Party with respect to which
 proceeds have been paid under an insurance policy held by or on behalf of the
 Surviving Corporation, (ii) affect employment-related benefits to which the
 Company has committed prior to Closing or is required by law to provide, (iii)
 affect director and officer indemnity and advancement rights to which any
 Seller would otherwise have a right under applicable corporate law or the
 Company's governing charter documents, (iv) apply to John T. Eagan, Jr. or any
 affiliate of his with respect to the collection of loans or advances made under
 the Eagan Line of Credit, or (v) apply to claims solely among the Sellers and
 John T. Eagan, Jr. as to rights of contribution or similar claims for
 liabilities incurred under this Agreement.

                                       22

                                     Page 41


<PAGE>   29

      (d) Gary L. Lackey agrees, subject to the conditions stated in Sections
 9.1 and 9.2, to execute and deliver, and cause to be executed and delivered, to
 the Buyer at or by the Closing the Employment Agreement.

      7.3  Covenants of the Buyer.

      (a) Employment Agreement. The Buyer will, subject to the conditions stated
 in Sections 9.1 and 9.3, cause the Surviving Corporation to execute and deliver
 the Employment Agreement at or prior to Closing.

      (b) Merger Sub. The Buyer will cause the Merger Sub to be a direct, wholly
 owned subsidiary of the Buyer and shall cause the Surviving Corporation to be a
 first-tier subsidiary of the Buyer except to the extent applicable federal tax
 law permits the Surviving Corporation to be contributed to a direct or indirect
 subsidiary of the Buyer without violating the Merger's compliance with Code
 Section 368(a). The Buyer will cause the Surviving Corporation to continue the
 historic business of the Company or use a significant portion of the Company's
 business assets in a business so long as it is required for the Merger to
 comply with Code Section 368(a).

      (c) Listing of Additional Shares. The Buyer will notify the Nasdaq Stock
 Market of the listing of the shares of the Buyer's Stock to be issued in
 connection with the Merger within 30 days after the Closing Date.

      (d) Compliance with Rule 144. For a period of two years after the Closing
 Date, the Buyer will use its reasonable best efforts to comply with the
 requirements of Rule 144, promulgated by the Securities and Exchange Commission
 pursuant to the Securities Act, necessary for the Sellers to sell the shares of
 Buyer's stock received hereunder under Rule 144 after the expiration of any
 applicable holding period thereunder.

      (e) Guaranties. The Buyer shall execute any guaranties in substitution of
 and releasing any Seller's personal guaranties of any obligations of the
 Company.

      (f) Registration Rights. In connection with any underwritten public
 offering of the Buyer's Stock in respect of which a registration statement has
 been filed under the Securities Act on Form S-1 or S-3, at the option of such
 underwriter(s), the sale of the shares of Buyer's Stock received by the Sellers
 hereunder shall be covered by such registration statement.

      7.4 Monthly Distributions. The Company (or upon Closing, the Surviving
 Corporation) will make monthly distributions to the Sellers of 70% of the
 Company's income from operations, if any, for the period from August 1, 1997
 through October 31, 1997 (or if Closing does not occur in November 1997, such
 other month-end on or immediately prior to Closing); provided, however, that
 the aggregate amount of such monthly distributions will not exceed 70% of the
 Company's income from operations for that entire period. Computation of the
 Company's income from operations will be based on monthly financial statements
 prepared by or on behalf of the Company in accordance with Generally Accepted
 Accounting Principles, except as modified: (a) in accordance with Schedule 5.8,
 (b) to reflect any downward adjustment to income required by the above proviso
 relating to the aggregate amount of distributions permitted under this Section,
 (c) to exclude as an expense (and thus from the computation of income) the
 amounts of any payments or distributions permitted to be made by subclauses
 (ii) through (iv) of Section 5.19, and (d) to include as an expense (offsetting

                                       23

                                     Page 42
<PAGE>   30

 income) all fees, costs and expenses incurred or to be incurred by the Company
 in connection with this Agreement and the Merger, as required by Section 12.1.
 Such financial statements will be subject to the approval of the Buyer. The
 Company shall deliver these financial statements to the Buyer within 30 days
 after the end of each applicable calendar month. If the Buyer does not accept
 any of such monthly financial statements, it will give written notice to the
 Sellers within 30 days after receipt thereof, which notice shall set forth in
 reasonable detail the basis for the Buyer's objections. The Buyer will be
 deemed to have accepted such financial statements at 5:00 p.m. Charlotte, North
 Carolina time on the 30th day after receipt thereof if the Buyer has not by
 then given the Sellers timely written notice of objection. If the Buyer and the
 Sellers are unable to resolve the disagreement within 30 days after the
 delivery of the Buyer's objections, the parties shall engage a mutually
 agreeable independent certified public accounting firm to resolve the issues.
 With respect to any such dispute, the accounting firm shall apply Generally
 Accepted Accounting Principles to the issues at hand and will not have the
 power to alter, modify, amend, add to or subtract from any term or provision of
 this Agreement. The decision of the accounting firm shall be rendered within 30
 days after its engagement and shall be binding on the parties. The Buyer and
 the Company each shall pay one-half of the cost of the accounting firm.

      7.5 Reorganization for Tax Purposes. Each of the parties hereto undertakes
 and agrees to use its reasonable best efforts to cause the Merger to qualify as
 a "reorganization" within the meaning of Section 368(a)(1)(A) of the Code and
 that it will not intentionally take any action that would cause the Merger to
 fail to so qualify.

      7.6 Accounting Treatment. Each of the parties hereto undertakes and agrees
 to use its reasonable best efforts to cause the Merger to qualify to be treated
 as a "pooling-of-interests" under Generally Accepted Accounting Principles and
 that it will not intentionally take any action that would cause the Merger to
 fail to so qualify.

      7.7 Consummation of Agreement. The Company, the Sellers and the Buyer (on
 behalf of itself and the Merger Sub) each agree to use their reasonable efforts
 to perform or fulfill all conditions and obligations to be performed or
 fulfilled by them under this Agreement so that the transactions contemplated
 hereby shall be consummated. Except for events that are the subject of specific
 provisions of this Agreement, if any event should occur, either within or
 outside the control of the Company, the Sellers, the Buyer or the Merger Sub
 that would materially delay or prevent fulfillment of the conditions upon the
 obligations of any party hereto to consummate the transactions contemplated by
 this Agreement, each party will notify the others of any such event and the
 parties will use their reasonable, diligent and good faith efforts to cure or
 minimize the same as expeditiously as possible.

      7.8 Schedules to Agreement. The Company and the Sellers will promptly
 notify the Buyer of any event, fact or other circumstance arising after the
 date hereof that would have caused the disclosure schedules delivered under
 this Agreement to be untrue or misleading had such event, fact or circumstance
 arisen prior to the delivery of such schedules.

      7.9 Corporate Action. The Company and the Buyer will, and the Buyer shall
 cause the Merger Sub to, take all corporate action necessary to consummate this
 Agreement and the Merger. The Sellers as shareholders of the Company shall take
 all action necessary for the Company to consummate and give effect to the
 Merger.

                                       24

                                     Page 43

<PAGE>   31

      7.10 Maintenance of Corporate Existence. The Company and the Buyer shall,
 and the Buyer shall cause the Merger Sub through Closing to, maintain in full
 force and effect their respective corporate existences.

      7.11 No Solicitation. In recognition of the time that will be expended and
 the expense which will be incurred by the Buyer in connection with the
 transactions contemplated hereby, the Company and the Sellers will not, and the
 Company will use its best efforts so that its officers, employees and agents
 will not, directly or indirectly or through agents, brokers or otherwise, until
 this Agreement is closed or is terminated as provided in this Agreement,
 encourage, solicit, engage in negotiations or discussions with or provide
 information with respect to any inquiries or proposals relating to (a) the
 possible direct or indirect acquisition of all or a portion of the Company's
 capital stock or its assets or (b) any business combination with the Company.
 Additionally, the Sellers and the Company agree to promptly notify the Buyer
 upon any inquiries by a third Person relating to the foregoing subclauses (a)
 and (b).

                                  ARTICLE VIII.

                      DISCLOSURE OF ADDITIONAL INFORMATION

      8.1 Access to Information. Prior to the Closing Date, the Company and the
 Sellers shall: (a) give the Buyer and its authorized representatives reasonable
 access, during normal business hours and upon reasonable notice, to the books,
 records, offices and other facilities and properties of the Company; and (b)
 furnish the Buyer with such financial and operating data and other information
 with respect to the business operations of the Company including, but not
 limited to, information relating to Taxes as the Buyer may from time to time
 reasonably request.

      8.2 Access to Premises. Prior to Closing, the Company and the Sellers
 shall give the Buyer and its authorized representatives reasonable access,
 during normal business hours and upon reasonable notice, to all property leased
 by the Company for the purpose of inspecting such property.

      8.3 Confidentiality. Prior to Closing, except as otherwise provided in
 Section 8.4, the parties hereto shall not discuss or disclose, and each will
 use its best efforts to cause its employees, lenders, accountants,
 representatives, agents, consultants and advisors not to discuss or disclose,
 or use for any purpose other than the transactions contemplated hereby, the
 subject matter or transactions contemplated by this Agreement or information
 pertaining to the Company, with any other Person without the prior consent of
 the other parties hereto, unless (a) such information is public other than as a
 result of a violation of this Agreement or (b) the use of such information is
 necessary or appropriate in making any filing or obtaining any consent or
 approval required for the consummation of the transactions contemplated hereby.

      8.4 Publicity. Without the prior consent of the other parties, no party
 hereto shall issue any news release or other public announcement or disclosure,
 or any general public announcement to its employees, suppliers or customers,
 regarding this Agreement or the transactions contemplated hereby, except as may
 be required by law, but in which case the disclosing party shall provide the
 other parties hereto with reasonable advance notice of the timing and substance
 of any such disclosure.

                                       25



                                     Page 44
<PAGE>   32

                                   ARTICLE IX.

                              CONDITIONS TO CLOSING

      9.1 Mutual Conditions. The obligations of all the parties hereto to effect
 the transaction contemplated hereby shall be subject to the fulfillment of the
 following conditions, any of which may be waived by all of the parties hereto:

      (a) Adverse Proceedings. The Company, any Seller, the Buyer or the Merger
 Sub shall not be subject to any order, decree or injunction of a court of
 competent jurisdiction that enjoins or prohibits the consummation of this
 Agreement and no Governmental Authority shall have instituted a suit or
 proceeding that is then pending and seeks to enjoin or prohibit the
 transactions contemplated hereby. Any party who is subject to any such order,
 decree or injunction or the subject of any such suit or proceeding shall take
 any steps within that party's control to cause any such order, decree or
 injunction to be modified so as to permit the Closing and to cause any such
 suit or proceeding to be dismissed.

      (b) Consents. All permits, authorizations, consents and approvals of
 Governmental Authorities necessary for the consummation of the transactions
 contemplated hereby have been obtained.

      (c) Accounting Treatment. The Buyer shall have received assurances from
 Deloitte and Touche, in form and substance satisfactory to it, to the effect
 that the Merger will qualify to be treated as a "pooling-of-interests" for
 accounting purposes. The Buyer also shall have received a letter from Deloitte
 and Touche in form and substance satisfactory to it to the effect that such
 accountants are not aware of any fact or circumstance that might cause the
 Merger not to qualify for such treatment. Nothing shall have come to the
 attention of the Buyer that any event has occurred or that any condition or
 circumstance exists that makes it likely that the Merger may not so qualify.

      9.2 Conditions to the Obligations of the Company and the Sellers. The
 obligation of the Company and the Sellers to effect the transactions
 contemplated hereby shall be further subject to the fulfillment of the
 following conditions, any one or more of which may be waived by the Sellers:

      (a) All representations and warranties of the Buyer contained in this
 Agreement shall be true and correct in all material respects as of the Closing
 Date as though made as of such date (except for representations and warranties
 that are made as of a specific date). The Buyer shall have performed and
 complied in all material respects with all covenants and agreements contained
 in this Agreement required to be performed and complied with by it at or prior
 to the Closing. The Sellers shall have received a certificate to the matters
 set forth in this Section 9.2 signed by the Buyer.

      (b) All documents required to have been executed and delivered by the
 Buyer, on behalf of itself or the Merger Sub, to the Company or the Sellers at
 or prior to the Closing shall have been so executed and delivered, whether or
 not such documents have been or will be executed and delivered by the other
 parties contemplated thereby.

      (c) The Sellers shall have received a legal opinion from Robinson,
 Bradshaw & Hinson, P.A., counsel to the Buyer, dated as of the Closing Date,
 containing opinions in form and substance reasonably acceptable to the Sellers.

                                       26

                                     Page 45

<PAGE>   33

      (d) As of the Closing Date, the Sellers shall have received the following
 documents with respect to the Merger Sub:

           (i) a true and complete copy of its articles of incorporation and all
 amendments thereto, certified by the jurisdiction of its incorporation as of a
 recent date;

           (ii) a true and complete copy of its bylaws, certified by its
 Secretary or an Assistant Secretary;

           (iii) a certificate from its Secretary or an Assistant Secretary
 certifying that its articles of incorporation have not been amended since the
 date of the certificate described in subsection (ii) above, and that nothing
 has occurred since the date of issuance of the certificate of existence
 specified in subsection (i) above that would adversely affect its existence;

           (iv) a true and complete copy of the resolutions of its Board of
 Directors and shareholders authorizing the execution, delivery and performance
 of this Agreement, and all instruments and documents to be delivered in
 connection herewith, and the transactions contemplated hereby, certified by its
 Secretary or an Assistant Secretary; and

           (v) a certificate from its Secretary or an Assistant Secretary
 certifying the incumbency and signatures of its officers who will execute
 documents at the Closing or who have executed this Agreement.

      9.3 Conditions to the Obligations of the Buyer. The obligations of the
 Buyer to effect the transactions contemplated hereby shall be further subject
 to the fulfillment of the following conditions, any one or more of which may be
 waived by the Buyer:

      (a) The Buyer will have completed its financial, operations, legal and
 other due diligence review of the Company and will be satisfied in its sole
 discretion with the results of such review.

      (b) The Company shall have obtained all consents of third parties
 contemplated by Section 5.1(f) and its corresponding schedule.

      (c) All representations and warranties of the Company and the Sellers
 contained in this Agreement shall be true and correct in all material respects
 as of the Closing Date as though made as of such date (except for
 representations and warranties that are made as of a specific date). The
 Company and the Sellers shall have performed and complied in all material
 respects with all covenants and agreements contained in this Agreement required
 to be performed and complied with by them at or prior to the Closing. The Buyer
 shall have received certificates to the matters set forth in this Section 9.3
 signed by an authorized officer of the Company and by the Sellers.

      (d) All documents required to have been executed and delivered by the
 Sellers, the Company or any third party to the Buyer at or prior to the Closing
 shall have been so executed and delivered, whether or not such documents have
 been or will be executed and delivered by the Buyer or the Merger Sub if so
 contemplated thereby.

                                       27

                                     Page 46

<PAGE>   34

      (e) The Buyer shall have received a legal opinion from Blanco Tackabery
 Combs Matamoros P.A., counsel to the Company and the Sellers, dated as of the
 Closing Date, containing opinions in form and substance reasonably acceptable
 to the Buyer.

      (f) As of the Closing Date, the Buyer shall have received the following
 documents with respect to the Company:

           (i)  a long-form certificate of its corporate existence issued by
 the jurisdiction of its incorporation as of a recent date;

           (ii) a true and complete copy of its articles of incorporation and
 all amendments thereto, certified by the jurisdiction of its incorporation as
 of a recent date;

           (iii) a true and complete copy of its bylaws, certified by its
 Secretary or an Assistant Secretary;

           (iv) a certificate from its Secretary or an Assistant Secretary
 certifying that its articles of incorporation have not been amended since the
 date of the certificate described in subsection (ii) above, and that nothing
 has occurred since the date of issuance of the certificate of existence
 specified in subsection (i) above that would adversely affect its existence;

           (v) a true and complete copy of the resolutions of its Board of
 Directors and shareholders authorizing the execution, delivery and performance
 of this Agreement, and all instruments and documents to be delivered in
 connection herewith, and the transactions contemplated hereby, certified by its
 Secretary or an Assistant Secretary;

           (vi) a certificate from its Secretary or an Assistant Secretary
 certifying the incumbency and signatures of its officers who will execute
 documents at the Closing or who have executed this Agreement; and

           (vii) the results of a search of the appropriate state offices as of
 a recent date reflecting the filing of Uniform Commercial Code financing
 statements against it and any pending litigation involving and outstanding
 judgments against it.

                                   ARTICLE X.

                                   TERMINATION

      10.1 Termination. The obligations of the parties hereunder may be
 terminated and the transactions contemplated hereby abandoned at any time prior
 to the Closing Date:

      (a)  By mutual written consent of the Company and the Buyer;

      (b) By either the Buyer or the Company, if there shall be any law or
 regulation that makes consummation of this Agreement illegal or otherwise
 prohibited or if any judgment, injunction, order or decree enjoining the
 Company, the Sellers, the Buyer or the Merger Sub from consummating this



                                       28

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<PAGE>   35

 Agreement is entered and such judgment, injunction, order or decree shall
 become final and non-appealable;

      (c) By either the Buyer or the Company, if the conditions to the
 obligation to effect the transactions contemplated hereby of the party seeking
 termination shall not have been fulfilled or waived by January 31, 1998, and if
 the party seeking termination is in material compliance with all of its
 obligations under this Agreement; and

      (d) By either the Buyer or the Company, if a condition to the obligation
 to effect the transactions contemplated hereby of the party seeking termination
 shall have become incapable of fulfillment (notwithstanding the efforts of the
 party seeking to terminate as set forth in Section 7.7) and has not been
 waived.

      10.2 Procedure and Effect of Termination. In the event of a termination
 contemplated hereby by any party pursuant to Section 10.1, the party seeking to
 terminate this Agreement shall give prompt written notice thereof to the other
 party, and the transactions contemplated hereby shall be abandoned, without
 further action by any party hereto. In such event:

      (a) The parties hereto shall continue to be bound by their obligations of
 confidentiality set forth in Section 8.3, and all copies of the information
 provided by the Company hereunder will be returned to the Company or destroyed
 immediately upon its request therefor.

      (b) All filings, applications and other submissions relating to the
 transactions contemplated hereby shall, to the extent practicable, be withdrawn
 from the Person to which made.

      (c) The terminating party shall be entitled to seek any remedy to which
 such party may be entitled at law or in equity for the violation or breach of
 any agreement, covenant, representation or warranty contained in this
 Agreement.

                                   ARTICLE XI.

                                 INDEMNIFICATION

      11.1 Survival of Representations. The representations, warranties,
 covenants and agreements made by the Company will not survive the Closing. All
 representations, warranties, covenants and agreements made by the Sellers and
 the Buyer will survive the Closing. No warranty or representation shall be
 deemed to be waived or otherwise diminished as a result of any due diligence
 investigation by the party to whom the warranty or representation was made or
 as a result of any actual or constructive knowledge by such party with respect
 to any facts, circumstances or claims or by the actual or constructive
 knowledge of such person that any warranty or representation is false at the
 time of signing or Closing. All claims made by virtue of such representations,
 warranties and agreements shall be made under, and subject to the limitations
 set forth in, this Article.

      11.2 Sellers' Agreement to Indemnify. (a) Subject to the limitations set
 forth in this Section 11.2, the Sellers hereby agree jointly and severally to
 indemnify, defend and hold harmless the Buyer, the Surviving Corporation and
 any of their Affiliates, and all officers, directors, equity holders, employees
 and agents thereof (all of such parties, collectively, the "Buyer Affiliates"),
 from and against all demands,

                                       29

                                     Page 48

<PAGE>   36

 claims, actions, losses, damages, liabilities, costs and expenses (including,
 without limitation, settlement costs, arbitration costs and any reasonable
 legal and other expenses for investigating or defending any action or
 threatened action) incurred by any of the Buyer Affiliates arising out of or in
 connection with or resulting from (i) a breach of any covenant, agreement,
 representation or warranty of the Company or any Seller contained in this
 Agreement or in any agreement or instrument executed and delivered pursuant to
 this Agreement on or prior to Closing or (ii) Taxes that are assessed on or
 incurred by the Surviving Corporation or the Sellers (or any successor thereof)
 on the basis of action, facts, circumstances, events or omissions occurring
 prior to Closing (collectively, "Buyer's Damages").

      (b) In the event there is a claim for Buyer's Damages resulting from the
 assertion of liability by a third party, the Buyer will, or will cause the
 Surviving Corporation to, give the Sellers notice of any such third-party claim
 within thirty days after receiving notice thereof, and the Sellers may
 undertake the lead defense thereof by counsel of its own choosing if (i) the
 Sellers provide written notice to the Buyer that the Sellers intend to
 undertake such defense and agree that (A) any damages or liabilities resulting
 from such third-party claim are Buyer's Damages and (B) the Sellers will be
 jointly and severally responsible for and indemnify the Buyer Affiliates
 against such damages and liabilities in accordance with this Section 11.2, (ii)
 the Sellers provide the Buyer with evidence reasonably acceptable to the Buyer
 that the Sellers will have the financial resources to defend against the
 third-party claim and fulfill its indemnification obligations hereunder, (iii)
 the third-party claim involves only money damages and does not seek an
 injunction or other equitable relief, (iv) settlement of, or an adverse
 judgment with respect to, the third-party claim is not, in the good faith
 judgment of the Buyer likely to establish a precedent adverse to the continuing
 business interests of the Surviving Corporation (or any successor thereof) and
 (v) the Sellers conduct the defense of the third-party claim actively and
 diligently. Any Buyer Affiliate may by counsel participate in such proceedings,
 negotiations or defense at its own expense.

      In the event that within ten days after notice of any such third-party
 claim, the Sellers have not notified the Buyer of their intention to defend the
 third-party claim or in the event that, in the good faith judgment of the
 Buyer, the Sellers have not satisfied the conditions in the above subclauses
 (i) through (v), any Buyer Affiliate will have the right to undertake the
 defense, compromise or settlement of such claim. The Sellers may by counsel
 participate in such proceedings, negotiations or defense at any time at their
 own expense. None of the Buyer Affiliates shall settle any such third-party
 claim without the consent of the Sellers, which consent shall not be
 unreasonably withheld. The Buyer Affiliates and the Sellers will furnish to
 each other in reasonable detail such information as they may have with respect
 to any claim for Buyer's Damages.

      (c) Notwithstanding the foregoing, with respect to Buyer's Damages arising
 from breaches of representations and warranties (except those in Section 5.2 to
 which this Section 11.2(c) is inapplicable): (i) the Sellers, jointly and
 severally, shall be obligated to indemnify the Buyer Affiliates in the
 aggregate only up to the amount of the Merger Price, provided that none of Gary
 L. Lackey, the Hubbards (as a group) or the Eagan Trust shall be obligated to
 indemnify the Buyer Affiliates in excess of 50% of Buyer's Damages; (ii) a
 Buyer Affiliate must have given the Sellers notice of any such breaches within
 two years after the Closing Date and with respect to the representations in
 Sections 5.12 (relating to Taxes), 5.14 (relating to Labor and Employment
 Matters) and 5.18 (Environmental Matters), the applicable statutes of
 limitation; and (iii) the Sellers will not be liable for any such Buyer's
 Damages unless and until the aggregate amount of such Buyer's Damages exceeds
 $20,000 (at which time the Sellers will be liable for such initial $20,000).
 Further notwithstanding the foregoing, the Sellers will have no liability with
 respect to Buyer's Damages to the extent of any insurance proceeds received by
 the Surviving Corporation in connection therewith; provided, however,

                                       30

                                     Page 49

<PAGE>   37

 that any such insurance proceeds received shall not be taken into account and
 shall not reduce Buyer's Damages for the purpose of determining whether the
 threshold of $20,000 (as described above) has been met.

      (d) Notwithstanding the foregoing, the Sellers shall have no
 indemnification obligations under this Section 11.2 until Closing has occurred,
 but upon Closing, the Sellers' indemnification obligations under this Section
 11.2 shall exist without regard to this Section 11.2(d) and without regard to
 whether the basis for any claim arises prior to or after Closing.

      (e) After the Closing, this Section 11.2 shall provide the exclusive
 remedy for the breach of any covenant, agreement, representation or warranty
 made in this Agreement by the Sellers or the Company.

      11.3 Buyer's Agreement to Indemnify. (a) Subject to the limitations set
 forth in this Section 11.3, the Buyer hereby agrees to indemnify, defend and
 hold harmless the Sellers from and against all demands, claims, actions,
 losses, damages, liabilities, costs and expenses (including, without
 limitation, settlement costs, arbitration costs and any reasonable legal and
 other expenses for investigating or defending any action or threatened action)
 incurred by the Sellers arising out of or in connection with or resulting from
 a breach of any covenant, agreement, representation or warranty of the Buyer
 contained in this Agreement or in any agreement or instrument executed and
 delivered pursuant to this Agreement on or prior to the Closing (collectively,
 "Sellers' Damages").

      (b) In the event there is a claim for Sellers' Damages resulting from the
 assertion of liability by a third party, the Sellers will give the Buyer notice
 of any such third-party claim within thirty days after receiving notice
 thereof, and a Buyer Affiliate may undertake the defense thereof by counsel of
 its own choosing if (i) the Buyer provides written notice to the Sellers that a
 Buyer Affiliate intends to undertake such defense and agrees that (A) any
 damages or liabilities resulting from such third-party claim are Sellers'
 Damages and (B) the Buyer Affiliates will be responsible for and indemnify the
 Sellers against such damages and liabilities in accordance with this Section
 11.3, (ii) the third-party claim involves only money damages and does not seek
 an injunction or other equitable relief, and (iii) the Buyer Affiliates conduct
 the defense of the third-party claim actively and diligently. The Sellers may
 by counsel participate in such proceedings, negotiations or defense at their
 own expense.

      In the event that within ten days after notice of any such third-party
 claim, no Buyer Affiliate has notified the Sellers of its intention to defend
 the third-party claim or in the event that, in the good faith judgment of the
 Sellers, the Buyer Affiliates have not satisfied the conditions in the above
 subclauses (i) through (iii), the Sellers will have the right to undertake the
 defense, compromise or settlement of such claim.
  The Buyer Affiliates may by counsel participate in such proceedings,
 negotiations or defense at any time at their own expense. The Sellers shall not
 settle any such third-party claim without the consent of the Buyer, which
 consent shall not be unreasonably withheld. The Buyer Affiliates and the
 Sellers will furnish to each other in reasonable detail such information as
 they may have with respect to any claim for Sellers' Damages.

      (c) Notwithstanding the foregoing, with respect to Sellers' Damages
 arising from breaches of representations and warranties, (i) the Buyer shall be
 obligated to indemnify the Seller Affiliates in the aggregate only up to the
 amount of the Merger Price, (ii) a Seller Affiliate must have given the Buyer
 notice of any such breaches within two years after the Closing Date, and (iii)
 the Buyer shall not be liable for any such Sellers' Damages unless and until
 the aggregate amount of such Sellers' Damages exceeds $20,000 (at which time
 the Buyer shall be liable for such initial $20,000).

                                       31

                                     Page 50

<PAGE>   38

      (d) After the Closing, this Section 11.3 shall provide the exclusive
 remedy for the breach of any covenant, agreement, representation or warranty
 made in this Agreement by the Buyer.

                                  ARTICLE XII.

                            MISCELLANEOUS PROVISIONS

      12.1 Expenses. Whether or not the transactions contemplated hereby are
 consummated, () the Buyer shall pay all fees, costs and expenses incurred by it
 and the Merger Sub in connection with this Agreement and the transactions
 contemplated hereby and () the Company shall pay all fees, costs and expenses
 incurred by it in connection with this Agreement and the Merger.

      12.2 Action by Sellers. Except as otherwise expressly provided in this
 Agreement, any act or decision of the Sellers hereunder (including without
 limitation any decision relating to termination, waiver of conditions and
 indemnification) shall require the consent or approval of the Sellers who then
 hold a majority of the Shares (if prior to Closing) or who held a majority of
 the Shares immediately prior to Closing (if at or subsequent to Closing), and
 any act or decision approved or consented to by such Sellers shall be binding
 upon all of the Sellers.

      12.3 Amendment and Modification. This Agreement may be amended, modified
 or supplemented only by written agreement of the Company, the Sellers and the
 Buyer.

      12.4 Waiver of Compliance; Consents. Except as otherwise provided in this
 Agreement, any failure of the Buyer, on one hand, and the Company or the
 Sellers, on the other, to comply with any obligation, representation, warranty,
 covenant, agreement or condition herein may be waived by the other party or
 parties only by a written instrument signed by the party or parties granting
 such waiver, but such waiver or failure to insist upon strict compliance with
 such obligation, representation, warranty, covenant, agreement or condition
 shall not operate as a waiver of, or estoppel with respect to, any subsequent
 or other failure. Whenever this Agreement requires or permits consent by or on
 behalf of any party hereto, such consent shall be given in writing in a manner
 consistent with the requirements for a waiver of compliance as set forth in
 this Section 12.4.

      12.5 Notices. All notices and other communications hereunder shall be in
 writing and shall be deemed given when delivered by hand or by facsimile
 transmission, one Business Day after sending by a reputable national over-night
 courier service or three Business Days after mailing when mailed by registered
 or certified mail (return receipt requested), postage prepaid, to the parties
 in the manner provided below:









                                       32

                                     Page 51

<PAGE>   39

      (a) Any notice to the Company or the Sellers shall be delivered to the
 following addresses:

                     Gary L. Lackey
                     GLL & Associates, Inc.
                     Post Office Box 25027  (27114-5027)
                     154 Charlois Boulevard
                     Winston-Salem, North Carolina  27103

                     Telephone:  910/760-4911
                     Facsimile:  910/659-4045

                     Eagan Family Trust
                     c/o John T. Eagan, Jr.
                     Post Office Box 25168
                     Winston-Salem, North Carolina  27114-5168

                     Lewis E. Hubbard
                     285 S. Stratford Road
                     Winston-Salem, North Carolina  27103


                     with a copy to:

                     Blanco Tackabery Combs Matamoros P.A.
                     P.O. Drawer 25008  (27114-5008)
                     110 S. Stratford Road, Suite 500
                     Winston-Salem, North Carolina  27104
                     Attention:  Brian L. Herndon

                     Telephone:  910/761-1250
                     Facsimile:  910/761-1530

      (b) Any notice to the Buyer shall be delivered to the following addresses:

                     Bank of Granite
                     23 North Main Street (P.O. Box 128)
                     Granite Falls, North Carolina  28630
                     Attention:     John A. Forlines, Jr.

                     Telephone:     704/496-2000
                     Facsimile:     704/496-2116




                                       33

                                     Page 52

<PAGE>   40

                     with a copy to:

                     Robinson, Bradshaw & Hinson, P.A.
                     1900 Independence Center
                     101 North Tryon Street
                     Charlotte, North Carolina  28246
                     Attention:  Henry H. Ralston

                     Telephone:     704/377-2536
                     Facsimile:     704/378-4000

 Any party may change the address to which notice is to be given by notice given
 in the manner set forth above.

      12.6 Assignment; Third Party Beneficiaries. This Agreement and all of the
 provisions hereof shall be binding upon and inure to the benefit of the parties
 hereto and their respective heirs, legal representatives, successors and
 permitted assigns. Neither this Agreement nor any of the rights, interests or
 obligations hereunder shall be assigned by any party hereto without the prior
 written consent of the other parties, except that the Buyer may assign its
 rights and obligations under this Agreement to any Affiliate of the Buyer. If
 such assignment is made, the assignee shall be entitled to all of the rights
 and shall assume all the obligations of the Buyer hereunder, but the Buyer
 shall not be released from liability for the performance of the obligations of
 such assignee under this Agreement. This Agreement shall not be deemed to
 confer upon any third party beneficiaries or other Persons, including any
 employees of the Company, any rights or remedies hereunder.

      12.7 Separable Provisions. If any provision of this Agreement shall be
 held invalid or unenforceable, the remainder nevertheless shall remain in full
 force and effect.

      12.8 Governing Law. The execution, interpretation and performance of this
 Agreement shall be governed by the internal laws and judicial decisions of the
 State of North Carolina.

      12.9 Counterparts. This Agreement may be executed in one or more
 counterparts, each of which shall be deemed an original, but all of which
 together shall constitute one and the same instrument.

      12.10 Interpretation. The article and section headings contained in this
 Agreement are solely for the purpose of reference, are not part of the
 agreement of the parties and shall not in any way affect the meaning or
 interpretation of this Agreement.

      12.11 Entire Agreement. This Agreement, including the Schedules and any
 exhibits hereto, embodies the entire agreement and understanding of the parties
 with respect of the subject matter of this Agreement. This Agreement supersedes
 all prior agreements and understandings between the parties with respect to the
 transactions contemplated hereby, including the letter of intent dated as of
 August 11, 1997 between the Buyer and the Company.



                                       34

                                     Page 53

<PAGE>   41

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



                          COMPANY:

                          GLL & ASSOCIATES, INC.


                          By:  /s/ Gary L. Lackey
                               Gary L. Lackey, President


                          SELLERS:


                          /s/ Gary L. Lackey
                          GARY L. LACKEY


                          /s/ Lewis E. Hubbard
                          LEWIS E. HUBBARD


                          /s/ Emma B. Hubbard
                          EMMA B. HUBBARD


                          /s/ Bruce R. Hubbard
                          BRUCE R. HUBBARD


                          /s/ Lewis E. Hubbard, Jr.
                          LEWIS E. HUBBARD, JR.


                          /s/ Beverly H. Godfrey
                          BEVERLY H. GODFREY





                                     Page 54
<PAGE>   42


                          EAGAN FAMILY TRUST, under irrevocable
                          agreement dated July 16, 1997


                          By:  /s/ John T. Eagan, Jr.
                               John T. Eagan, Jr., Trustee




                                     Page 55
<PAGE>   43


                          BUYER:

                          BANK OF GRANITE CORPORATION


                          By:  /s/ John A. Forlines, Jr.
                               John A. Forlines, Jr.
                               Chief Executive Officer








                                     Page 56