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                                                                Exhibit 4(b)-1

                           CERTIFICATE OF DESIGNATIONS
                                       OF
                       SERIES E CUMULATIVE PREFERRED STOCK
                                       OF
                            OXFORD HEALTH PLANS, INC.
                         (PURSUANT TO SECTION 151 OF THE
                        DELAWARE GENERAL CORPORATION LAW)

                  Oxford Health Plans, Inc., a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"Corporation"), hereby certifies that the following resolutions were adopted by
the Board of Directors of the Corporation (the "Board of Directors") pursuant to
authority of the Board of Directors as required by Section 151 of the Delaware
General Corporation Law:

                  RESOLVED, that pursuant to the authority granted to and vested
in the Board of Directors in accordance with the provisions of the Second
Amended and Restated Certificate of Incorporation of the Corporation, as amended
(the "Certificate of Incorporation"), the Board of Directors hereby creates a
series of the Corporation's previously authorized preferred stock, par value
$0.01 per share (the "Preferred Stock"), and hereby states the designation and
number thereof, and fixes the voting powers, preferences and relative,
participating, optional and other special rights, and the qualifications,
limitations and restrictions thereof, as follows:

                  Series E Cumulative Preferred Stock:

                             I. Designation and Amount

                  The designation of this series of shares shall be "Series E
Cumulative Preferred Stock" (the "Series E Preferred Stock"); the stated value
per share shall be $1,000 (the "Stated Value"); and the number of shares
constituting such series shall be 300,000. The number of shares of the Series E
Preferred Stock may be decreased from time to time by a resolution or
resolutions of the Board of Directors; provided, however, that such number shall
not be decreased below the aggregate number of shares of the Series E Preferred
Stock then outstanding.
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                                    II. Rank

                  A. With respect to dividend rights, the Series E Preferred
Stock shall rank (i) junior to each other class or series of Preferred Stock
which by its terms ranks senior to the Series E Preferred Stock as to payment of
dividends, (ii) on a parity with each other class or series of Preferred Stock
which by its terms ranks on a parity with the Series E Preferred Stock as to
payment of dividends, including the Series D Preferred Stock, par value $0.01
per share, of the Corporation (the "Series D Preferred Stock") and (iii) prior
to the Corporation's Common Stock, par value $.01 per share (the "Common
Stock"), and, except as specified above, all other classes and series of capital
stock of the Corporation hereafter issued by the Corporation. With respect to
dividends, all equity securities of the Corporation to which the Series E
Preferred Stock ranks senior, including the Common Stock, are collectively
referred to herein as the "Junior Dividend Securities"; all equity securities of
the Corporation with which the Series E Preferred Stock ranks on a parity,
including the Series D Preferred Stock, are collectively referred to herein as
the "Parity Dividend Securities"; and all equity securities of the Corporation
(other than convertible debt securities) to which the Series E Preferred Stock
ranks junior, with respect to dividends, are collectively referred to herein as
the "Senior Dividend Securities."

                  B. With respect to the distribution of assets upon
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, the Series E Preferred Stock shall rank (i) junior to each other
class or series of Preferred Stock which by its terms ranks senior to the Series
E Preferred Stock as to distribution of assets upon liquidation, dissolution or
winding up, (ii) on a parity with each other class or series of Preferred Stock
which by its terms ranks on a parity with the Series E Preferred Stock as to
distribution of assets upon liquidation, dissolution or winding up of the
Corporation, including the Series D Preferred Stock, and (iii) prior to the
Common Stock and, except as specified above, all other classes and series of
capital stock of the Corporation hereinafter issued by the Corporation. With
respect to the distribution of assets upon liquidation, dissolution or winding
up of the Corporation, whether voluntary or involuntary, all equity securities
of the Corporation to which the Series E Preferred Stock ranks senior, including
the Common Stock, are collectively referred to herein as "Junior Liquidation
Securities"; all equity securities of the Corporation (other than convertible
debt securities) to which the Series E Preferred Stock ranks on parity,
including the Series D Preferred Stock, are collectively referred to herein as
"Parity Liquidation Securities"; and all equity securities of the Corporation to
which the Series E Preferred Stock ranks junior are collectively referred to
herein as "Senior Liquidation Securities."

                  C. The Series E Preferred Stock shall be subject to the
creation of Junior Dividend Securities and Junior Liquidation Securities
(collectively, "Junior Securities") but no Parity Dividend Securities or Parity
Liquidation Securities (collectively, "Parity Securities") (other than the
Series D Preferred Stock), or Senior Dividend Securities or Senior Liquidation
Securities (collectively, "Senior Securities") shall be created except in
accordance with the terms hereof and the Investment Agreement, including,
without limitation, Section F of Article VIII of this Certificate of
Designations.
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                                 III. Dividends

                  A. Dividends. Prior to May 13, 2000, shares of Series E
Preferred Stock shall accumulate dividends at a rate of 14.589214% per annum,
payment of which may be made in cash or by the issuance of additional shares of
Series E Preferred Stock (which, upon issuance, shall be fully paid and
nonassessable), at the option of the Corporation; provided that if any such
dividend is paid after May 13, 2000, such dividend shall be paid in cash. On and
after May 13, 2000, shares of Series E Preferred Stock shall accumulate
dividends at a rate of 14% per annum, which dividends shall be paid in cash. On
and prior to May 13, 2000, dividends shall be paid annually on May 13, 1999 and
May 13, 2000, and thereafter dividends shall be paid in four equal quarterly
installments on the last day of March, June, September and December of each
year, or if any such date is not a Business Day, the Business Day next preceding
such day (each such date, regardless of whether any dividends have been paid or
declared and set aside for payment on such date, a "Dividend Payment Date"), to
holders of record (the "Registered Holders") as they appear on the stock record
books of the Corporation on the fifteenth day prior to the relevant Dividend
Payment Date. Dividends shall be paid only when, as and if declared by the Board
of Directors out of funds at the time legally available for the payment of
dividends. Dividends shall begin to accumulate on outstanding shares of Series E
Preferred Stock from the date of issuance and shall be deemed to accumulate from
day to day whether or not earned or declared until paid. Dividends shall
accumulate on the basis of a 360-day year consisting of twelve 30-day months
(four 90-day quarters) and the actual number of days elapsed in the period for
which payable. Dividends payable at more than one annual rate for any dividend
period or partial dividend period shall be pro rated on the basis of the number
of days in such dividend period or partial dividend period, calculated as
aforesaid, and the actual number of days elapsed for which dividends are payable
at each such annual rate.

                  B. Accumulation. Dividends on the Series E Preferred Stock
shall be cumulative, and from and after any Dividend Payment Date on which any
dividend that has accumulated or been deemed to have accumulated through such
date has not been paid in full or any payment date set for a redemption on which
such redemption payment has not been paid in full, additional dividends shall
accumulate in respect of the amount of such unpaid dividends or unpaid
redemption payment (the "Arrearage") at the annual rate then in effect as
provided in Section A of this Article III (or such lesser rate as may be the
maximum rate that is then permitted by applicable law). Such additional
dividends in respect of any Arrearage shall be deemed to accumulate from day to
day whether or not earned or declared until the Arrearage is paid, shall be
calculated as of such successive Dividend Payment Date and shall constitute an
additional Arrearage from and after any Dividend Payment Date to the extent not
paid on such Dividend Payment Date. References in any Article herein to
dividends that have accumulated or that have been deemed to have accumulated
with respect to the Series E Preferred Stock shall include the amount, if any,
of any Arrearage together with any dividends accumulated or deemed to have
accumulated on such Arrearage pursuant to the immediately preceding two
sentences. Additional dividends in respect of any Arrearage may be declared and
paid at any time, in whole or in part, without reference to any regular Dividend
Payment Date, to Registered Holders as they appear on the stock record books of
the Corporation on such record date as may be fixed by

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the Board of Directors (which record date shall be no less than 10 days prior to
the corresponding payment date). Dividends in respect of any Arrearage shall be
paid in cash.

                  C. Method of Payment. Dividends paid on the shares of Series E
Preferred Stock in an amount less than the total amount of such dividends at the
time accumulated and payable on all outstanding shares of Series E Preferred
Stock shall be allocated pro rata on a share-by-share basis among all such
shares then outstanding. After May 13, 2000, dividends that are declared and
paid in an amount less than the full amount of dividends accumulated on the
Series E Preferred Stock (and on any Arrearage) shall be applied first to the
earliest dividend which has not theretofore been paid. All cash payments of
dividends on the shares of Series E Preferred Stock shall be made in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts.

                           IV. Liquidation Preference

                  In the event of a liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the holders of
then-outstanding shares of Series E Preferred Stock shall be entitled to receive
out of the assets of the Corporation, whether such assets are capital or surplus
of any nature, an amount per share equal to the sum of (i) the dividends, if
any, accumulated or deemed to have accumulated thereon to the date of final
distribution to such holders, whether or not such dividends are declared, and
(ii) the Stated Value thereof, and no more, before any payment shall be made or
any assets distributed to the holders of any Junior Liquidation Securities.
After any such payment in full, the holders of Series E Preferred Stock shall
not, as such, be entitled to any further participation in any distribution of
assets of the Corporation. All the assets of the Corporation available for
distribution to stockholders after the liquidation preferences of any Senior
Liquidation Securities shall be distributed ratably (in proportion to the full
distributable amounts to which holders of Series E Preferred Stock and Parity
Liquidation Securities, if any, are respectively entitled upon such dissolution,
liquidation or winding up) among the holders of the then-outstanding shares of
Series E Preferred Stock and Parity Liquidation Securities, if any, when such
assets are not sufficient to pay in full the aggregate amounts payable thereon.

                  Neither a consolidation or merger of the Corporation with or
into any other Person or Persons, nor a sale, conveyance, lease, exchange or
transfer of all or part of the Corporation's assets for cash, securities or
other property to a Person or Persons shall be deemed to be a liquidation,
dissolution or winding up of the Corporation for purposes of this Article IV,
but the holders of shares of Series E Preferred Stock shall nevertheless be
entitled from and after any such consolidation, merger or sale, conveyance,
lease, exchange or transfer of all or part of the Corporation's assets to the
rights provided by this Article IV following any such transaction. Notice of any
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, stating the payment date or dates when, and the place or places
where, the amounts distributable to each holder of shares of Series E Preferred
Stock in such circumstances shall be payable, shall be given by first-class
mail, postage prepaid, mailed not less than 30 days prior to any payment date
stated therein, to holders of record as they appear on the stock record books of
the Corporation as of the date such notices are first mailed.

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                                  V. Redemption

                  A. Optional Redemption. The Corporation shall not have any
right to redeem any shares of Series E Preferred Stock prior to May 13, 2003. On
and after such date, the Corporation shall have the right, at its option and
election, to redeem all the outstanding shares of Series E Preferred Stock, in
whole but not in part, at any time, in accordance with the provisions of this
Article V. The redemption price for such shares of Series E Preferred Stock
shall be paid in cash out of funds legally available therefor and shall be in an
amount per share equal to the sum of (i) the amount, if any, of all unpaid
dividends accumulated thereon to the date of actual payment of the Redemption
Price, whether or not such dividends have been declared, and (ii) the Stated
Value thereof (the "Redemption Price").

                  B. Mandatory Redemption. On May 13, 2008, the Corporation
shall redeem (the "Mandatory Redemption") all outstanding shares of Series E
Preferred Stock by paying the Redemption Price therefor in cash out of funds
legally available for such purpose.

                  C. Notice and Redemption Procedures. Notice of the redemption
of shares of Series E Preferred Stock pursuant to Section A or B hereof (a
"Notice of Redemption") shall be sent to the holders of record of the shares of
Series E Preferred Stock to be redeemed by first class mail, postage prepaid, at
each such holder's address as it appears on the stock record books of the
Corporation, not more than 120 nor fewer than 90 days prior to the date fixed
for redemption, which date shall be set forth in such notice (the "Redemption
Date"); provided that failure to give such Notice of Redemption to any holder,
or any defect in such Notice of Redemption to any holder shall not affect the
validity of the proceedings for the redemption of any shares of Series E
Preferred Stock held by any other holder. Notwithstanding the foregoing, in the
event that contemporaneously with or prior to the delivery of a Notice of
Redemption, the Corporation irrevocably deposits, in accordance with Section F
of this Article V, funds sufficient to pay the aggregate Redemption Price for
the Series E Preferred Stock, such Notice of Redemption shall be delivered not
more than 120 days nor fewer than 30 days prior to the Redemption Date;
provided, however, that, if such Notice of Redemption is delivered fewer than 60
days prior to the Redemption Date and the Investor or any of its Affiliates
Beneficially Owns shares of Series E Preferred Stock as of the date of the
Notice of Redemption and uses its reasonable best efforts to consummate the sale
of its shares of Series E Preferred Stock prior to the stated Redemption Date
but has not completed the sale of all the Series E Preferred Stock Beneficially
Owned by the Investor and its Affiliates (or such other amount desired to be
sold by the Investor and its Affiliates), the Corporation shall, at the option
of the Investor (or any such Affiliate), delay such Redemption Date for a period
not to exceed 30 days as requested by such Investor (or any such Affiliate) in
order to complete such sale or sales, and shall notify the holders of Series E
Preferred Stock of such delay within five days of receiving the request
therefor. Any delay of the Redemption Date pursuant to the proviso to the
preceding sentence shall be requested by the Investor (or any such Affiliate) in
writing no later than the tenth day preceding the then-scheduled Redemption Date
stated in the Notice of Redemption. The Redemption Date stated in a Notice of
Redemption shall not be delayed more than once in connection with the redemption
of shares of Series E Preferred Stock pursuant to such Notice of Redemption. In
order to facilitate the redemption of shares of Series E Preferred Stock, the

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Board of Directors may fix a record date for the determination of the holders of
shares of Series E Preferred Stock to be redeemed, in each case, not more than
30 days prior to the date the Notice of Redemption is mailed. On or after the
Redemption Date, each holder of the shares called for redemption shall surrender
the certificate evidencing such shares to the Corporation at the place
designated in such notice and shall thereupon be entitled to receive payment of
the Redemption Price. From and after the Redemption Date, all dividends on
shares of Series E Preferred Stock shall cease to accumulate and all rights of
the holders thereof as holders of Series E Preferred Stock shall cease and
terminate, except to the extent the Corporation shall default in payment thereof
on the Redemption Date. Prior to any Redemption Date that has been fixed by the
Corporation, other than in connection with the Mandatory Redemption, the
Corporation shall take all measures reasonably requested by the Investor to
facilitate a sale or other disposition of Series E Preferred Stock by the
Investor or its Affiliates prior to such Redemption Date, including, without
limitation, participation in due diligence sessions and provision of information
about the management, business and financial condition of the Corporation,
preparation of offering memoranda, private placement memoranda and other similar
documents and preparation and delivery of such other certificates or documents
reasonably requested by the Investor. For so long as the Investor or an
Affiliate of the Investor holds any shares of Series E Preferred Stock, no
Notice of Redemption in connection with a redemption pursuant to Section A or B
of this Article V shall be delivered unless (i) the Corporation's preferred
stock is rated Baa or better by Moody's or BBB or better by S&P, or in the event
the Corporation's preferred stock is not rated by Moody's and S&P, the
Corporation's unsecured debt is rated Baa or better by Moody's or BBB or better
by S&P or (ii) the Corporation has sufficient funds reasonably available under
committed lines of credit or other similar sources of financing established with
financially sound financing providers to pay, on the Redemption Date, the
aggregate Redemption Price in connection with such redemption (and shall reserve
such funds or availability for the payment of the aggregate Redemption Price);
provided, that the Corporation may deliver a Notice of Redemption without
complying with the foregoing conditions if prior to, or contemporaneously with,
the delivery of such notice the Corporation irrevocably deposits in accordance
with Section F of this Article V funds sufficient to pay the aggregate
Redemption Price for the Series E Preferred Stock.

                  D. Change of Control. In the event there occurs a Change of
Control, any holder of record of shares of Series E Preferred Stock, in
accordance with the procedures set forth in Section E of this Article V, may
require the Corporation to redeem any or all of the shares of Series E Preferred
Stock held by such holder at the Redemption Price therefor.

                  E. Change of Control Notice and Redemption Procedures. Notice
of any Change of Control shall be sent to the holders of record of the
outstanding shares of Series E Preferred Stock not more than five days following
a Change of Control, which notice (a "Change of Control Notice") shall describe
the transaction or transactions constituting such Change of Control and set
forth each holder's right to require the Corporation to redeem any or all shares
of Series E Preferred Stock held by him or her out of funds legally available
therefor, the Redemption Date (which date shall be not more than 30 days from
the date of such Change of Control Notice) and the procedures to be followed by
such holders in exercising his or her right to cause such redemption; provided,
however, that if shares of

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Series E Preferred Stock are owned by more than 50 holders or groups of
Affiliated holders and if the Series E Preferred Stock is listed on any national
securities exchange or quoted on any national quotation system, the Corporation
shall give such Change of Control Notice by publication in a newspaper of
general circulation in the Borough of Manhattan, The City of New York, within 30
days following such Change of Control and, in any case, a similar notice shall
be mailed concurrently to each holder of shares of Series E Preferred Stock.
Failure by the Corporation to give the Change of Control Notice as prescribed by
the preceding sentence, or the formal insufficiency of any such Change of
Control Notice, shall not prejudice the rights of any holder of shares of Series
E Preferred Stock to cause the Corporation to redeem any such shares held by him
or her. In the event a holder of shares of Series E Preferred Stock shall elect
to require the Corporation to redeem any or all such shares of Series E
Preferred Stock pursuant to Section D of this Article V, such holder shall
deliver, prior to the Redemption Date as set forth in the Change of Control
Notice, or, if the Change of Control Notice is not given as required by this
Section E, at any time following the last day the Corporation was required to
give the Change of Control Notice in accordance with this Section E (in which
case the Redemption Date shall be the date which is the later of (x) 30 days
following the last day the Corporation was required to give the Change of
Control Notice in accordance with this Section E and (y) 15 days following the
delivery of such election by such holder), a written notice, in the form
specified by the Corporation (if the Corporation did in fact give the notice
required by this Section E), to the Corporation so stating, and specifying the
number of shares to be redeemed pursuant to Section D of this Article V;
provided, however, that if all of the shares of the Series E Preferred Stock are
owned by 50 or fewer holders or groups of Affiliated holders, such holders or
groups may deliver a notice or an election to redeem at any time within 90 days
following the occurrence of a Change of Control without awaiting receipt of a
Change of Control Notice or the expiration of the time allowed for the delivery
of a Change of Control Notice hereunder. The Corporation shall redeem the number
of shares so specified on the Redemption Date fixed by the Corporation or as
provided in the preceding sentence. The Corporation shall comply with the
requirements of Rules 13e-4 and 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the shares of
Series E Preferred Stock as a result of a Change of Control. To the extent that
the provisions of any securities laws or regulations conflict with the
provisions of this paragraph, the Corporation shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations hereunder by virtue thereof.

                  F. Deposit of Funds. The Corporation shall, on or prior to any
Redemption Date pursuant to this Article V, deposit with its transfer agent or
other redemption agent in the Borough of Manhattan, The City of New York having
a capital and surplus of at least $500,000,000 selected by the Board of
Directors, as a trust fund for the benefit of the holders of the shares of
Series E Preferred Stock to be redeemed, cash that is sufficient in amount to
redeem the shares to be redeemed in accordance with the Notice of Redemption or
Change of Control Notice, with irrevocable instructions and authority to such
transfer agent or other redemption agent to pay to the respective holders of
such shares, as evidenced by a list of such holders certified by an officer of
the Corporation, the Redemption Price upon surrender of their

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respective share certificates. Such deposit shall be deemed to constitute full
payment of such shares to the holders, and from and after the date of such
deposit, all rights of the holders of the shares of Series E Preferred Stock
that are to be redeemed as stockholders of the Corporation with respect to such
shares, except the right to receive the Redemption Price upon the surrender of
their respective certificates, shall cease and terminate. No dividends shall
accumulate on any shares of Series E Preferred Stock after the Redemption Date
for such shares (unless the Corporation shall fail to deposit cash sufficient to
redeem all such shares). In case holders of any shares of Series E Preferred
Stock called for redemption shall not, within two years after such deposit,
claim the cash deposited for redemption thereof, such transfer agent or other
redemption agent shall, upon demand, pay over to the Corporation the balance so
deposited. Thereupon, such transfer agent or other redemption agent shall be
relieved of all responsibility to the holders thereof and the sole right of such
holders, with respect to shares to be redeemed, shall be to receive the
Redemption Price as general creditors of the Corporation. Any interest accrued
on any funds so deposited shall belong to the Corporation, and shall be paid to
it from time to time on demand.

                    VI. Exchange of Series E Preferred Stock

                  A. The Series E Preferred Stock shall be exchangeable, at any
time, at the option of the Corporation and to the extent permitted by applicable
law, in whole but not in part, on any Dividend Payment Date for Junior
Subordinated Debentures (issued pursuant to an indenture (the "Indenture")
prepared in accordance with the Investment Agreement) in principal amount of
$1,000 per share of Series E Preferred Stock (a "Debenture" and, collectively,
the "Debentures"), in accordance with this Article VI:

                  (i) Each share of Series E Preferred Stock shall be
         exchangeable at the offices of the Corporation and at such other place
         or places, if any, as the Board of Directors may designate. Except with
         the prior written consent of the holders of all outstanding shares of
         Series E Preferred Stock, the Corporation may not exchange any shares
         of Series E Preferred Stock if (a) full cumulative dividends, to the
         extent payable or deemed payable through the date of exchange, have not
         been paid or set aside for payment on all outstanding shares of the
         Series E Preferred Stock, (b) the Corporation has failed to amend its
         Certificate of Incorporation pursuant to Delaware law to confer the
         power to vote upon holders of the Debentures as shall be contemplated
         by the Indenture or (c) such exchange could result in any tax
         consequence to the Investor or any of its Affiliates which is
         materially adverse.

                  (ii) Prior to giving notice of its intention to exchange, the
         Corporation shall execute and deliver to a bank or trust company
         selected by the Board of Directors and, if required by applicable law,
         qualify under the Trust Indenture Act of 1939, as amended, the
         Indenture.

                  (iii) The Corporation shall mail written notice of its
         intention to exchange Series E Preferred Stock for Debentures (the
         "Exchange Notice") to each holder of record

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         of shares of Series E Preferred Stock not less than 90 nor more than
         120 days prior to the date fixed for exchange.

                  (iv) Prior to effecting any exchange provided above, the
         Corporation shall deliver to each holder of shares of Series E
         Preferred Stock an opinion of nationally recognized legal counsel to
         the effect that: (i) each of the Indenture and the Debentures have been
         duly authorized and executed by the Corporation and, when delivered by
         the Corporation in exchange for shares of Series E Preferred Stock,
         will constitute valid and legally binding obligations of the
         Corporation enforceable against the Corporation in accordance with
         their terms, subject to applicable bankruptcy, insolvency and similar
         laws affecting creditors' rights generally and to general principles of
         equity; (ii) the exchange of the Debentures for the shares of Series E
         Preferred Stock shall not violate the provisions of this Article VI or
         of the Delaware General Corporation Law, including Section 221 thereof;
         and (iii) the exchange of the Debentures for the shares of Series E
         Preferred Stock is exempt from the registration requirements of the
         Securities Act or, if no such exemption is available, that the
         Debentures have been duly registered for such exchange under such Act.

                  (v) Upon the exchange of shares of Series E Preferred Stock
         for Debentures, the rights of the holders of shares of Series E
         Preferred Stock as stockholders of the Corporation shall terminate and
         such shares shall no longer be deemed outstanding.

                  (vi) Before any holder of shares of Series E Preferred Stock
         shall be entitled to receive Debentures, such holder shall surrender
         the certificate or certificates therefor, at the office of the
         Corporation or at such other place or places, if any, as the Board of
         Directors shall have designated, and shall state in writing the name or
         names (with addresses) in which he or she wishes the certificate or
         certificates for the Debentures to be issued. The Corporation will, as
         soon as practicable thereafter, issue and deliver at said office or
         place to such holder of shares of Series E Preferred Stock, or to his
         or her nominee or nominees, certificates for the Debentures to which he
         or she shall be entitled as aforesaid. Shares of Series E Preferred
         Stock shall be deemed to have been exchanged as of the close of
         business on the date fixed for exchange as provided above, and the
         Person or Persons entitled to receive the Debentures issuable upon such
         exchange shall be treated for all purposes (including the accrual and
         payment of interest) as the record holder or holders of such Debentures
         as of the close of business on such date.

                  B. For purposes of clause (c) of paragraph (i) of Section A of
this Article VI, an exchange of shares of Series E Preferred Stock shall be
deemed to be an exchange that could result in a tax consequence to the Investor
or any of its Affiliates which is materially adverse only if the Investor or its
Affiliate shall have delivered to the Corporation a written notice to such
effect on or before the fifteenth day after its receipt of the Exchange Notice
(an "Objection Notice"), which Objection Notice shall be prepared in good faith
and shall specify in reasonable detail the nature of such tax consequences which
could result from the exchange (other than the difference between the tax
treatment of distributions on the Series E Preferred Stock and interest payments
on the Debentures); provided, that the Investor or its Affiliates shall not
deliver an

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Objection Notice unless the Investor and its Affiliates Beneficially
Own, in the aggregate, at least 1,000 shares of Series E Preferred Stock at the
time of delivery of such Objection Notice to the Corporation. If the Corporation
receives an Objection Notice, then the Corporation shall not exchange the shares
of Series E Preferred Stock of the Investor and its Affiliates and the
Corporation shall, within 15 days after its receipt of the Objection Notice mail
written notice to the effect that it is canceling the proposed exchange of
shares of Series E Preferred Stock to each holder of record of shares of Series
E Preferred Stock to which it mailed the Exchange Notice.

                  C. Shares of the Series E Preferred Stock may be exchanged for
Warrant Shares pursuant to Section 4 of the Warrants.

                         VII. Restrictions on Dividends

                  So long as any shares of the Series E Preferred Stock are
outstanding, the Board of Directors shall not declare, and the Corporation shall
not pay or set apart for payment any dividend on any Junior Securities or make
any payment on account of, or set apart for payment money for a sinking or other
similar fund for, the repurchase, redemption or other retirement of, any Junior
Securities or Parity Securities or any warrants, rights or options exercisable
for or convertible into any Junior Securities or Parity Securities (other than
the repurchase, redemption or other retirement of debentures or other debt
securities that are convertible into or exchangeable for any Junior Securities
or Parity Securities), or make any distribution in respect of the Junior
Securities, either directly or indirectly, and whether in cash, obligations or
shares of the Corporation or other property (other than distributions or
dividends in Junior Securities to the holders of Junior Securities), and shall
not permit any corporation or other entity directly or indirectly controlled by
the Corporation to purchase or redeem any Junior Securities or Parity Securities
or any warrants, rights, calls or options exercisable for or convertible into
any Junior Securities or Parity Securities (other than the repurchase,
redemption or other retirement of debentures or other debt securities that are
convertible into or exchangeable for any Junior Securities or Parity Securities)
unless prior to or concurrently with such declaration, payment, setting apart
for payment, repurchase, redemption or other retirement or distribution, as the
case may be, all accumulated and unpaid dividends on shares of the Series E
Preferred Stock not paid on the dates provided for in Section A of Article III
(including Arrearages and accumulated dividends thereon) shall have been paid,
except that when dividends are not paid in full as aforesaid upon the shares of
Series E Preferred Stock, all dividends declared on the Series E Preferred Stock
and any series of Parity Dividend Securities shall be declared and paid pro rata
so that the amount of dividends so declared and paid on Series E Preferred Stock
and such series of Parity Dividend Securities shall in all cases bear to each
other the same ratio that accumulated dividends (including interest accrued on
or additional dividends accumulated in respect of such accumulated dividends) on
the shares of Series E Preferred Stock and such Parity Dividend Securities bear
to each other. Notwithstanding the foregoing, this paragraph shall not prohibit
(i) the acquisition, repurchase, exchange, conversion, redemption or other
retirement for value of shares of Series E Preferred Stock or any Parity
Dividend Security by the Corporation in accordance with the terms of such
securities or of any shares of Trust Preferred Stock (as defined in Section F of
Article VIII) or (ii) the acquisition, repurchase, exchange, conversion,
redemption or other retirement for value by the Corporation of any Junior
Dividend Securities by the

                                       10
<PAGE>   11
Corporation in accordance with obligations in existence at the time of original
issuance of the Series E Preferred Stock.

                               VIII. Voting Rights

                  A. The holders of shares of Series E Preferred Stock shall
have no voting rights except as set forth below or as otherwise from time to
time required by law.

                  B. So long as any shares of the Series E Preferred Stock are
outstanding, each share of Series E Preferred Stock shall entitle the holder
thereof to vote on all matters voted on by holders of Common Stock, and the
shares of Series E Preferred Stock shall vote together with shares of Common
Stock (and any shares of Series D Preferred Stock entitled to vote) as a single
class; provided, however, that upon register or transfer on the stock records of
the Corporation of a share of Series E Preferred Stock to any Person other than
the Investor or an Affiliate of the Investor, such Person, and any subsequent
transferee, shall not be entitled to such voting rights. With respect to any
such vote, the Investor (together with its Affiliates) shall be entitled to a
number of votes per share of Series E Preferred Stock equal to the quotient of
the Investor Aggregate Vote Number, divided by the number of shares of Series E
Preferred Stock held by such Investor and its Affiliates as of the record date
for such vote. The "Investor Aggregate Vote Number" shall equal the number of
Warrant Shares that would be issuable upon the exercise of Original Warrants (as
defined below) by the holders thereof (assuming all conditions precedent to such
exercise have been satisfied and that such exercise occurs as of the record date
for such vote), multiplied by the lesser of (x) the quotient of the number of
Original Warrants that are Beneficially Owned by members of the Investor Group,
in the aggregate, as of the record date for such vote (excluding for purposes of
this calculation, however, any Original Warrants that have been transferred on
the books of the Corporation by any member of the Investor Group to any Person
other than a member of the Investor Group, regardless of whether any such
Original Warrants are subsequently acquired by any member of the Investor
Group), divided by the number of Original Warrants, and (y) the quotient of the
number of Original Series E Preferred Shares (as defined below) that are
Beneficially Owned by members of the Investor Group, in the aggregate, as of the
record date for such vote (excluding for purposes of this calculation, however,
any Original Series E Preferred Shares transferred on the stock records of the
Corporation by any member of the Investor Group to any Person other than a
member of the Investor Group, regardless of whether any such Original Series E
Preferred Shares are subsequently acquired by any member of the Investor Group),
divided by the number of Original Series E Preferred Shares. The term "Original
Warrants" means those Warrants Beneficially Owned by members of the Investor
Group, in the aggregate, as of the Closing. The term "Original Series E
Preferred Shares" means those shares of Series E Preferred Stock Beneficially
Owned by members of the Investor Group, in the aggregate, on the date of
original issuance of the Series E Preferred Stock.

                  C. If on any date (i) dividends payable on either the Series E
Preferred Stock or the Series D Preferred Stock shall have been in arrears and
not paid in full for four consecutive quarterly periods or if dividends shall
have been in arrears and not paid in full on May 13, 1999 or May 13, 2000 for
the Series E Preferred Stock or Series D Preferred Stock, as the case may be,

                                       11
<PAGE>   12
or (ii) the Corporation shall have failed to satisfy its obligation to redeem
either shares of Series E Preferred Stock or shares of Series D Preferred Stock
pursuant to the relevant Certificate of Designations, then the number of
directors constituting the Board of Directors shall, without further action, be
increased by two, and the holders of a majority of the outstanding shares of
Series E Preferred Stock and Series D Preferred Stock shall have, in addition to
the other voting rights set forth herein, the exclusive right, voting together
as a single class without regard to series, to elect the two directors (the
"Additional Directors") of the Corporation to fill such newly-created
directorships. Notwithstanding the foregoing, the Investor and its Affiliates
shall not be permitted to elect, pursuant to the preceding sentence, more than
the number of directors that would result in four directors designated for
nomination or elected by the Investor and its Affiliates then being on the Board
of Directors (including directors that the Investor has a right to designate for
nomination to the Board of Directors pursuant to the Investment Agreement);
provided, that if at the time holders of Series D Preferred Stock and Series E
Preferred Stock have the right to elect Additional Directors and (i) the
Investor and its Affiliates Beneficially Own, in the aggregate, a majority of
the outstanding shares of Series E Preferred Stock and Series D Preferred Stock,
taken together as a single class, and (ii) the Investor and its Affiliates are
not permitted to elect one or both of the Additional Directors as aforesaid,
then the holders of Series E Preferred Stock and Series D Preferred Stock (other
than the Investor and its Affiliates) shall have the right to elect, voting
together as a single class, one Additional Director pursuant to this Section C.
Additional Directors shall continue as directors and such additional voting
right shall continue until such time as (a) all dividends accumulated on the
Series E Preferred Stock and/or Series D Preferred Stock, as the case may be,
shall have been paid in full or (b) any redemption obligation with respect to
the Series E Preferred Stock and/or Series D Preferred Stock, as the case may
be, that has become due shall have been satisfied or all necessary funds shall
have been set aside for payment, as the case may be, at which time such
Additional Directors shall cease to be directors and such additional voting
right of the holders of shares of Series E Preferred Stock shall terminate
subject to revesting in the event of each and every subsequent event of the
character indicated above and subject to any rights as to the election of
directors provided for the holders of any other series of Preferred Stock of the
Corporation.

                  D.  [Reserved]

                  E. (a) The foregoing rights of holders of shares of Series E
Preferred Stock to take any action as provided in this Article VIII may be
exercised at any annual meeting of stockholders or at a special meeting of
stockholders held for such purpose as hereinafter provided or at any adjournment
thereof, or by the written consent, delivered to the Secretary of the
Corporation, of the holders of the minimum number of shares required to take
such action. So long as such right to vote continues (and unless such right has
been exercised by written consent of the minimum number of shares required to
take such action), the Chairman of the Board of Directors may call, and upon the
written request of holders of record of 20% of the outstanding shares of Series
E Preferred Stock, addressed to the Secretary of the Corporation at the
principal office of the Corporation, shall call, a special meeting of the
holders of shares entitled to vote as provided herein. Such meeting shall be
held within 60 days after delivery of such request to the Secretary, at the
place and upon the notice provided by law and in the By-laws for the holding of
meetings of stockholders.

                                       12
<PAGE>   13
                  (b) Each director elected pursuant to Section C of this
Article VIII shall serve until the next annual meeting or until his or her
successor shall be elected and shall qualify, unless the director's term of
office shall have terminated pursuant to the provisions of Section C of this
Article VIII, as the case may be. In case any vacancy shall occur among the
directors elected pursuant to Section C of this Article VIII, such vacancy may
be filled for the unexpired portion of the term by vote of the remaining
director or directors theretofore elected by such holders (or such director's or
directors' successor in office), if any. If any such vacancy is not so filled
within 20 days after the creation thereof or if all of the directors so elected
shall cease to serve as directors before their term shall expire, the holders of
the shares then outstanding and entitled to vote for such director pursuant to
the provisions of Section C of this Article VIII, as the case may be, may elect
successors to hold office for the unexpired terms of any vacant directorships,
by written consent as herein provided, or at a special meeting of such holders
called as provided herein. The holders of a majority of the shares entitled to
vote for directors pursuant to Section C of this Article VIII, as the case may
be, shall have the right to remove with or without cause at any time and replace
any directors such holders have elected pursuant to such section, by written
consent as herein provided, or at a special meeting of such holders called as
provided herein.

                  F. Without the consent or affirmative vote of the holders of
at least a majority of the outstanding shares of Series E Preferred Stock,
voting separately as a class, the Corporation shall not authorize, create or
issue, or increase the authorized amount of, (i) any Senior Securities or Parity
Securities or (ii) any class or series of capital stock or any security
convertible into or exercisable for any class or series of capital stock,
redeemable mandatorily or redeemable at the option of the holder thereof at any
time on or prior to May 13, 2008 (whether or not only upon the occurrence of a
specified event); provided, however, that no consent or vote of the holders of
the outstanding shares of the Series E Preferred Stock shall be required for the
creation or issuance by a trust formed at the direction of the Corporation of
any series of preferred securities of such trust for financing purposes in an
aggregate amount not to exceed $250,000,000 ("Trust Preferred Stock"). No
consent or vote of the holders of the outstanding shares of Series E Preferred
Stock shall be required to authorize, create or issue, or increase the
authorized amount of, any class or series of Junior Securities, or any security
convertible into a stock of any class or series of Junior Securities, except to
the extent such action would violate Section H of this Article VIII.

                  G. Without the consent or affirmative vote of the holders of
at least a majority of the outstanding shares of Series E Preferred Stock,
voting separately as a class, the Corporation shall not (i) amend, alter or
repeal any provision of the Certificate of Incorporation or the By-laws, if the
amendment, alteration or repeal alters or changes the powers, preferences or
special rights of the Series E Preferred Stock so as to affect them materially
and adversely, or (ii) authorize or take any other action if such action alters
or changes any of the rights of the Series E Preferred Stock in any respect or
otherwise would be inconsistent with the provisions of this Certificate of
Designations and the holders of any class or series of the capital stock of the
Corporation are entitled to vote thereon.

                                       13
<PAGE>   14
                  H. Other Securities. The Corporation shall not enter into any
agreement or issue any security that prohibits, conflicts or is inconsistent
with, or would be breached by, the Corporation's performance of its obligations
hereunder.

                           IX. Additional Definitions

                  For the purposes of this Certificate of Designations of Series
E Preferred Stock, the following terms shall have the meanings indicated:

                  "Affiliate" has the meaning set forth in Rule 12b-2 under the
Exchange Act. The term "Affiliated" has a correlative meaning. Notwithstanding
the foregoing, for all purposes hereof, TPG, and each Person controlled by,
controlling or under common control with TPG (each, a "TPG Person"), shall not
be deemed an "Affiliate" of any Designated Purchaser Person (as defined below),
and no Designated Purchaser, and no Person controlled by, controlling or under
common control with such Designated Purchaser (each, a "Designated Purchaser
Person"), shall be deemed an "Affiliate" of any TPG Person or any other
Designated Purchaser Person, in any such case solely as a consequence of the
Investment Agreement and the transactions contemplated thereby.

                  "Beneficially Own" with respect to any securities means having
"beneficial ownership" of such securities (as determined pursuant to Rule 13d-3
under the Exchange Act as in effect on the date hereof, except that a Person
shall be deemed to Beneficially Own all such securities that such Person has the
right to acquire whether such right is exercisable immediately or after the
passage of time). The terms "Beneficial Ownership" and "Beneficial Owner" have
correlative meanings. Notwithstanding the foregoing, for all purposes hereof, no
TPG Person shall be deemed to Beneficially Own any securities that are held by
any Designated Purchaser Person, and no Designated Purchaser Person shall be
deemed to Beneficially Own any securities that are held by any TPG Person or
other Designated Purchaser Person, in any such case solely as a consequence of
the Investment Agreement or the transactions contemplated thereby.

                  "Business Day" means any day, other than a Saturday, Sunday or
a day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.

                  "By-laws" means the By-laws of the Corporation, as amended.

                  "Change of Control" means such time as:

                  (i) any Person or Group (other than the Investor, its
         Affiliates, the Corporation or any Subsidiaries of the Corporation, or
         any Group composed of such Persons) has become, directly or indirectly,
         the Beneficial Owner, by way of merger, consolidation or otherwise, of
         a majority of the voting power of the then-outstanding Voting
         Securities of the Corporation on a fully-diluted basis, after giving
         effect to the conversion and exercise of all outstanding warrants,
         options and other securities of the Corporation convertible into or
         exercisable for Voting Securities of the Corporation (whether or not
         such securities are then currently convertible or exercisable); or

                                       14
<PAGE>   15

                  (ii) the sale, lease, transfer or other disposition of all or
         substantially all of the consolidated assets of the Corporation and its
         Subsidiaries to any Person or Group; or

                  (iii) during any period of two consecutive calendar years,
         individuals who at the beginning of such period constituted the Board
         of Directors, together with any new members of such Board of Directors
         whose election by such Board of Directors or whose nomination for
         election by the stockholders of the Corporation was approved by a vote
         of at least a majority of the members of such Board of Directors then
         still in office who either were directors at the beginning of such
         period or whose election or nomination for election was previously so
         approved or who were approved pursuant to Section 5.02 of the
         Investment Agreement or Section C, D or E of Article VIII of this
         Certificate of Designations, cease for any reason to constitute a
         majority of the directors of the Corporation then in office; or

                  (iv) the Corporation consolidates with or merges with or into
         another Person or any Person consolidates with, or merges with or into,
         the Corporation, in any such event pursuant to a transaction in which
         immediately after the consummation thereof the Persons owning the
         then-outstanding Voting Securities of the Corporation immediately prior
         to such consummation shall not own a majority in the aggregate (by
         reason of such prior ownership) of the then-outstanding Voting
         Securities of the Corporation or the surviving entity if other than the
         Corporation; or

                  (v) the adoption of a plan relating to the liquidation or
         dissolution of the Corporation, whether or not otherwise in compliance
         with the provisions of this Certificate of Designations.

                  "Closing" has the meaning assigned to such term in the
Investment Agreement.

                  "Designated Purchaser" has the meaning assigned to such term
in the Investment Agreement.

                  "Designated Purchaser Person" has the meaning set forth in the
definition of "Affiliate."

                  "Exchange Act" means the U.S. Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder, from time to
time.

                  "Group" has the meaning set forth in Rule 13d-5 under the
Exchange Act.

                  "Investment Agreement" means the Investment Agreement, dated
as of February 23, 1998, by and between the Investor and the Corporation, as
amended, supplemented or otherwise modified from time to time.

                  "Investor" means TPG.

                                       15
<PAGE>   16

                  "Investor Group" means, collectively, the Investor, the
Designated Purchasers, if any, and the respective Affiliates of such Persons.

                  "Investor Nominee" means a person designated for election to
the Board of Directors by an Investor pursuant to the Investment Agreement.

                  "Moody's" means Moody's Investors Service and its successors.

                  "Person" means any individual, corporation, company,
association, partnership, joint venture, trust or unincorporated organization,
or a government or any agency or political subdivision thereof.

                  "Securities Act" means the U.S. Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder, from time to
time.

                  "S&P" means Standard and Poor's Ratings Group, a division of
the McGraw-Hill Companies, and its successors.

                  "Subsidiary" means, with respect to any Person, (i) any
corporation, association or other business entity of which more than 50% of the
total voting power of shares of voting stock is at the time owned or controlled,
directly or indirectly, by such Person or one or more of the other Subsidiaries
of that Person (or combination thereof) and (ii) any partnership (A) the sole
general partner of the managing general partner of which is such Person or a
Subsidiary of such Person or (B) the only general partners of which are such
Person or of one or more Subsidiaries of such Person (or any combination
thereof).

                  "TPG" means TPG Partners II, L.P., a Delaware limited
partnership.

                  "TPG Person" has the meaning set forth in the definition of
"Affiliate."

                  "Voting Securities" means the shares of Common Stock and any
other securities of the Corporation entitled to vote generally for the election
of directors.

                  "Warrants" means the Series B Warrants issued by the
Corporation on pursuant to the Investment Agreement.

                  "Warrant Shares" has the meaning assigned to such term in the
Warrants.

                                X. Miscellaneous

                  A. Notices. Any notice referred to herein shall be in writing
and, unless first-class mail shall be specifically permitted for such notices
under the terms hereof, shall be deemed to have been given upon personal
delivery thereof, upon transmittal of such notice by telecopy (with confirmation
of receipt by telecopy or telex) or five days after transmittal by registered or
certified mail, postage prepaid, addressed as follows:
                                       16
<PAGE>   17
                  (i) if to the Corporation, to its office at 800 Connecticut
         Avenue Norwalk, Connecticut 06854 (Attention: General Counsel) or to
         the transfer agent for the Series E Preferred Stock;

                  (ii) if to a holder of the Series E Preferred Stock, to such
         holder at the address of such holder as listed in the stock record
         books of the Corporation (which may include the records of any transfer
         agent for the Series E Preferred Stock); or

                  (iii) to such other address as the Corporation or such holder,
         as the case may be, shall have designated by notice similarly given.

                  B. Reacquired Shares. Any shares of Series E Preferred Stock
redeemed, purchased or otherwise acquired by the Corporation, directly or
indirectly, in any manner whatsoever shall be retired and canceled promptly
after the acquisition thereof (and shall not be deemed to be outstanding for any
purpose) and, if necessary to provide for the lawful redemption or purchase of
such shares, the capital represented by such shares shall be reduced in
accordance with the Delaware General Corporation Law. All such shares of Series
E Preferred Stock shall upon their cancellation and upon the filing of an
appropriate certificate with the Secretary of State of the State of Delaware,
become authorized but unissued shares of Preferred Stock, par value $0.01 per
share, of the Corporation and may be reissued as part of another series of
Preferred Stock, par value $0.01 per share, of the Corporation subject to the
conditions or restrictions on issuance set forth herein.

                  C. Enforcement. Any registered holder of shares of Series E
Preferred Stock may proceed to protect and enforce its rights and the rights of
such holders by any available remedy by proceeding at law or in equity to
protect and enforce any such rights, whether for the specific enforcement of any
provision in this Certificate of Designations or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.

                  D. Transfer Taxes. Except as otherwise agreed upon pursuant to
the terms of this Certificate of Designations, the Corporation shall pay any and
all documentary, stamp or similar issue or transfer taxes and other governmental
charges that may be imposed under the laws of the United States of America or
any political subdivision or taxing authority thereof or therein in respect of
any issue or delivery of Debentures on exchange of, or other securities or
property issued on account of, shares of Series E Preferred Stock pursuant
hereto or certificates representing such shares or securities. The Corporation
shall not, however, be required to pay any such tax or other charge that may be
imposed in connection with any transfer involved in the issue or transfer and
delivery of any certificate for Debentures or other securities or property in a
name other than that in which the shares of Series E Preferred Stock so
exchanged, or on account of which such securities were issued, were registered
and no such issue or delivery shall be made unless and until the Person
requesting such issue has paid to the Corporation the amount of any such tax or
has established to the satisfaction of the Corporation that such tax has been
paid or is not payable.

                  E. Transfer Agent. The Corporation may appoint, and from time
to time discharge and change, a transfer agent for the Series E Preferred Stock.
Upon any such

                                       17
<PAGE>   18
appointment or discharge of a transfer agent, the Corporation shall send notice
thereof by first-class mail, postage prepaid, to each holder of record of shares
of Series E Preferred Stock.

                  F. Record Dates. In the event that the Series E Preferred
Stock shall be registered under either the Securities Act or the Exchange Act,
the Corporation shall establish appropriate record dates with respect to
payments and other actions to be made with respect to the Series E Preferred
Stock.

                                       18
<PAGE>   19
                  IN WITNESS WHEREOF, this Certificate of Designations is
executed on behalf of the Corporation by its Executive Vice President and
General Counsel and attested by its Vice President this 12th day of February,
1999.

                                                 OXFORD HEALTH PLANS, INC.

                                                 By: /s/ JEFFERY H. BOYD
                                                    ---------------------
                                                 Name: Jeffery H. Boyd
                                                 Title: Executive Vice President
                                                        and General Counsel
[Corporate Seal]

ATTEST:

/s/ ROBERT J. MOSES
---------------------
Name:  Robert J. Moses
Title: Vice President

                                       19
<PAGE>   20

                                                                Exhibit 4(b) - 2

                     AMENDED CERTIFICATE OF DESIGNATIONS OF
                     SERIES E CUMULATIVE PREFERRED STOCK OF
                            OXFORD HEALTH PLANS, INC.

                     (Pursuant to Section 151 of the General
                    Corporation Law of the State of Delaware)

                  OXFORD HEALTH PLANS, INC., a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"Corporation"), hereby certifies that the following resolution was adopted by
the Board of Directors of the Corporation (the "Board of Directors") pursuant to
the authority of the Board of Directors as required by Section 151 of the
General Corporation Law of the State of Delaware:

                  RESOLVED, that pursuant to the authority granted to and vested
in the Board of Directors in accordance with the provisions of the Second
Amended and Restated Certificate of Incorporation of the Corporation, as
amended, the Board of Directors hereby reduces the number of shares constituting
Series E Cumulative Preferred Stock of the Corporation to 26,284 and amends the
Certificate of Designations of Series E Cumulative Preferred Stock of the
Corporation so as to reflect this reduction.

                  IN WITNESS WHEREOF, this certificate is executed on behalf of
the Corporation by its Executive Vice President, General Counsel and Secretary
and attested by its Vice President this 10th day of August 2000.

                                               OXFORD HEALTH PLANS, INC.

                                           By: /s/ JON S. RICHARDSON
                                           -------------------------------------
                                           Name:   Jon S. Richardson
                                           Title:  Executive Vice President,
                                                   General Counsel and Secretary

[Corporate Seal]

ATTEST:

By: /s/ SCOTT M. SCHWARTZ
  ------------------------
Name: Scott M. Schwartz
Title:   Vice PresidentExhibit 10.v

                        PURCHASE AND ASSUMPTION AGREEMENT

               This Agreement, dated as of September 13, 2000, is by and between
First  Bancorp,  a  corporation  organized  under the laws of the State of North
Carolina   ("Buyer"),   and  First  Union  National  Bank,  a  national  banking
association organized under the laws of the United States of America ("Seller").

                                    RECITALS

     WHEREAS, Seller desires to sell certain of its Branches,  together with the
Assets, the Deposits and the other Liabilities (each as hereinafter defined) set
forth herein; and

     WHEREAS, Buyer desires to purchase the Branches,  including the Assets, and
to assume the Deposits and the other Liabilities set forth herein;

     NOW,  THEREFORE,  in  consideration of the foregoing and for other good and
valuable consideration, the parties hereto hereby agree as follows:

I.             DEFINITIONS

     1.1       Certain Defined Terms.
               ---------------------

                             Some of the  capitalized  terms  appearing  in this
Agreement are defined below.  The definition of a term expressed in the singular
also  applies  to that  term as used in the  plural  and  vice  versa.  The word
"including" as used herein shall mean "including without limitation."

                             "Adjusted  Closing  Statement"  has the meaning set
forth in Section 3.2(b) of this Agreement.

                             "Affiliate"   means  a  Person  that   directly  or
indirectly,  through one or more intermediaries,  controls, is controlled by, or
is under common  control with, a specified  Person,  except in those cases where
the controlling Person exercises control solely in a fiduciary capacity.

                             "Amount of  Premium"  has the  meaning set forth in
Section 3.1 of this Agreement.

                                        4
<PAGE>

                             "Assets"  has the  meaning set forth in Section 2.1
of this Agreement.

                             "Benefit  Plan" means any pension,  profit-sharing,
or other employee benefit, fringe benefit,  severance or welfare plan maintained
by or with respect to which contributions
are made by, Seller or any of its Affiliates with respect to Seller's Employees.

                             "Branches"   means  those  branch   offices  and/or
financial centers of Seller listed on Schedule 1.1(a),  indicating  whether such
Branch is Owned Real Property or subject to a
Real Property Lease.

                             "Business   Day"   means   any   Monday,   Tuesday,
Wednesday, Thursday or Friday on which Seller is open for business.

                             "Buyer  Material  Adverse  Effect"  means an event,
occurrence  or  circumstance  which has a  material  adverse  effect on  Buyer's
ability to timely perform its obligations under
this Agreement or consummate  the  transactions  contemplated  by this Agreement
provided,  that a Buyer Material  Adverse Effect shall not include (i) events or
conditions  generally  affecting  the  financial  services  industry  or effects
resulting  from  general  economic  conditions  (including  changes in  interest
rates),  changes in accounting practices or changes to statutes,  regulations or
regulatory policies,  that do not have a materially more adverse effect on Buyer
than that experienced by similarly  situated financial  services  companies,  or
(ii) events,  impacts or conditions  caused by the public  announcement  of, and
response or reaction of customers,  vendors, licensors or employees of Buyer to,
this Agreement or any of the transactions contemplated by this Agreement.

                     "Cash Reserve Lines of Credit" means those  consumer  lines
of credit made  available to  customers of the Branches as a protection  against
overdrafts on the Deposit Accounts.

                             "Cash Reserve Loans" means those loans  outstanding
on the Closing Date pursuant to Cash Reserve Lines of Credit.

                             "Closing" means the purchase of the Assets by Buyer
and the assumption of the Liabilities by Buyer on the Closing Date.

                             "Closing Date" has the meaning set forth in Section
9.1 of this Agreement.

                                       5
<PAGE>

                             "Closing  Statement"  has the  meaning set forth in
Section 3.2(a) of this Agreement.

                             "Consumer   Loans"   means  the   consumer   direct
installment  loans and certain other consumer lines of credit and loans relating
to the Branches, as of the Closing Date. A listing of all such loans, as of July
31, 2000, is set forth on Schedule 1.1(b), and such schedule shall be updated by
Seller in  connection  with the  preparation  of the Closing  Statement  and the
Adjusted Closing Statement as set forth in Sections 3.1 and 3.2, respectively.

                             "Conversion  Fee"  has the  meaning  set  forth  in
Section 2.6 of this Agreement.

                             "Deposit  Accounts"  means the deposit  accounts at
the Branches,  the balances of which are included in the Deposits or would be so
included if the Deposit Account had a
positive balance.

                     "Deposits"  means all  deposits  (as  defined  in 12 U.S.C.
Section  1813(l))  which are booked at each of the Branches on the Closing Date,
including, without limitation, consumer and
business and commercial (i) demand deposits,  (ii) interest  checking  accounts,
(iii) money market  accounts,  (iv) savings  deposits,  (v) time deposits,  (vi)
jumbo time  deposits,  (vii)  deposits held pursuant to  Retirement  Plans,  and
(viii)  deposits  relating to debit cards and ATM cards,  including in each case
accrued but unpaid  interest  and both  collected  and  uncollected  funds,  but
excluding  (v) deposits  which  secure VISA or  mastercard  loans;  (w) brokered
deposits,  (x)  deposits  held in accounts  for which  Seller acts as  fiduciary
(other than deposits held by  Retirement  Plans);  (y) deposits held pursuant to
Seller's CAP asset management accounts;  and (z) deposits  constituting official
checks, travelers checks, money orders or certified checks.

                    "Employees"  means the  employees of Seller  employed at the
Branches on the Closing  Date,  and listed on Schedule 8.1, as such schedule may
be adjusted on the Closing Date.

                             "ERISA"  means  the  Employee   Retirement   Income
Security Act of 1974, as amended.

                             "ERISA   Affiliate"   means  any  entity   that  is
considered  one employer  with Seller under Section 4001 of ERISA or Section 414
of the Internal Revenue Code of 1986, as amended.

                                       6
<PAGE>

                             "Excluded  Loan" has the  meaning set forth in this
Section 1.1 in the definition of Loans.

                             "Federal  Funds Rate" means,  for any day, the rate
per annum  (expressed on a basis of  calculation of actual days in a year) equal
to the "near  closing  bid"  federal  funds rate  published  in The Wall  Street
Journal on the Business Day following the Closing Date.

                             "Fixed   Assets"  means  all  fixtures   (including
signage poles), leasehold improvements,  furnishings (excluding artwork owned by
Seller), vaults, safe deposit boxes, equipment
(including,  for  example,  all ATM  machines,  but  excluding  any  proprietary
software),  communications  equipment,  supplies  (other  than  forms  and other
supplies which bear Seller's name or logo), and other personal  property,  which
are located at the Owned Real Property and the Leased  Facilities on the Closing
Date, and which are set forth on Schedule 1.1(c) (it being understood and agreed
that fixed  assets that are being  leased by Seller shall not be included in the
Fixed Assets).

                             "Governmental  Entity" means any  government or any
agency,  bureau,  board,  commission,  court,  department,  official,  political
subdivision,   tribunal  or  other  instrumentality  of  any  government  having
authority in the United States, whether federal, state or local.

                             "Hazardous  Material" means any substance presently
listed, defined,  designated or classified as hazardous,  toxic,  radioactive or
dangerous or otherwise regulated, under
any applicable state or federal law relating to the protection,  preservation or
restoration  of the  environment,  including,  but not limited to, the following
federal   environmental   laws:  the   Comprehensive   Environmental   Response,
Compensation   and   Liability  Act  of  1980,   the  Superfund   Amendment  and
Reauthorization Act, the Water Pollution Control Act of 1972, the Clean Air Act,
the Clean Water Act, the  Resource  Conservation  and Recovery Act of 1976,  the
Solid Waste Disposal Act, the Toxic Substances  Control Act and the Insecticide,
Fungicide and Rodenticide Act, each as amended.

                             "Leased  Facilities"  means  all  Branches  and the
Other Leased  Facilities  (including,  without  limitation,  any construction in
progress) that are leased under the Real
Property Leases.

                             "Liabilities"  has the meaning set forth in Section
2.2 of this Agreement.

                                       7
<PAGE>

                             "Loan   Instruments"  means  the  loan  agreements,
promissory  notes,  mortgages,  deeds  of  trust,  security  agreements,  pledge
agreements,  guaranty agreements,  insurance policies, financing statements, and
any other such contract documents relating to the Loans.

                             "Loans" means the Consumer  Loans to be transferred
to Buyer on the Closing  Date;  provided,  however,  Loans shall not include (i)
non-accrual loans (which term shall include
loans in which the  collateral  securing the same has been  repossessed or as to
which  collection  efforts  have  been  instituted  or  claim  and  delivery  or
foreclosure proceedings have been filed); (ii) loans 90 days or more past due as
to principal or interest;  or (iii) loans in  connection  with which the obligor
has filed a petition  for relief under the United  States  Bankruptcy  Code,  or
otherwise  has  indicated  an inability or refusal to pay the Loan as it becomes
due, prior to the Closing  (Loans that satisfy any of such  conditions set forth
in (i), (ii) or (iii) shall be referred to as "Excluded Loans").

                             "Mediator" means a firm of independent  accountants
of nationally recognized standing (other than a firm that has performed services
for Seller or Buyer or any of their
Affiliates during the past three years) mutually agreeable to Seller and Buyer.

                             "Other Leased Facilities" means the land (including
the  improvements  thereon) and any building or other  improvements  relating to
real estate that are listed on Schedule
1.1(a).

                             "Overdrafts"  means  those  overdrafts  of the book
balance of any Deposit Accounts,  which are not subject to Cash Reserve Lines of
Credit.

                             "Owned Real Property" means (i) the land (including
the  improvements  thereon) on which are located any Branches that are listed as
"Owned Real Property" on Schedule 1.1(a)
and (ii) any building or other improvements  located upon such owned real estate
(including,  without limitation, any construction in progress) that are owned by
Seller pursuant to which a Branch is operated.

                             "Person" means an  association,  a corporation,  an
individual,  a  partnership,  a  trust  or any  other  entity  or  organization,
including a Governmental Entity.

                                       8
<PAGE>

                             "Real Property  Leases" means the lease  agreements
pursuant to which any Branches listed as leased real property in Schedule 1.1(a)
or Other Leased Facilities are leased by
Seller.

                             "Retirement  Plans"  means those  non-discretionary
individual  retirement accounts and qualified  retirement plan accounts relating
to the Deposits for which Seller acts as
custodian or trustee.

                   "Seller   Material  Adverse  Effect"  shall  mean  an  event,
occurrence or  circumstance  which has a material  adverse effect on the Assets,
taken as a whole, or Seller's  ability to timely perform its  obligations  under
this Agreement or consummate the  transactions  contemplated  by this Agreement;
provided,  that a Seller Material Adverse Effect shall not include (i) events or
conditions  generally  affecting  the  financial  services  industry  or effects
resulting  from  general  economic  conditions  (including  changes in  interest
rates),  changes in accounting practices or changes to statutes,  regulations or
regulatory policies, that do not have a materially more adverse effect on Seller
than that experienced by similarly  situated financial  services  companies,  or
(ii) events,  impacts or conditions  caused by the public  announcement  of, and
response or reaction of customers, vendors, licensors or employees of Seller to,
this Agreement or any of the transactions contemplated by this Agreement.

                             "Welfare  Benefit  Plans" means those Benefit Plans
which are "welfare benefit plans" as defined by ERISA.

                             "Working  Agreement"  has the  meaning set forth in
Section 2.7 of the Agreement.

II.            PURCHASE OF ASSETS AND ASSUMPTION OF LIABILITIES

               2.1           Purchase of Assets.
                             ------------------

          Subject  to the  terms and  conditions  of this  Agreement,  including
Section 6.5 and 7.3,  Seller agrees to sell,  assign and transfer  possession of
and all right,  title and interest of the Seller in and to the following  assets
to Buyer (the "Assets") and Buyer agrees to purchase the same from Seller, as of
the close of business on the Closing Date:

(a)            the Owned Real Property;

                              (b)  Seller's   rights  under  the  Real  Property
               Leases;

                              (c) the Fixed Assets;

                                       9
<PAGE>

                              (d) the Loans,  including the  collateral  for the
               Loans, and the Loan Instruments;

                              (e) cash on hand in the Branches;

                              (f) the Cash Reserve Loans;

                              (g) the Overdrafts; and

                              (h) Seller's  rights under the Cash Reserve  Lines
               of Credit and any safe deposit box rental agreements  relating to
               safe deposit boxes located at the Branches.

               2.2           Assumption of Liabilities.
                             -------------------------

                             Subject  to  the  terms  and   conditions  of  this
Agreement,  including Section 6.5 and Section 7.3, Buyer agrees to assume,  pay,
perform and discharge the following liabilities
of Seller (the "Liabilities") as of the close of business on the Closing Date:

                              (a) the  Deposits  and all  terms  and  agreements
               relating to the Deposit Accounts;

                              (b) Seller's duties and responsibilities  relating
               to the Deposits with respect to: (i) the abandoned  property laws
               of any state, (ii) any legal process which is served on Seller on
               or before the Closing Date with respect to claims  against or for
               the  Deposits  that is not  over  and  above  the  amount  of the
               Deposits; or (iii) any other applicable law;

                              (c)  Seller's  duties  and  responsibilities  with
               respect to the Real Property Leases;

                              (d)  Seller's  duties  and  responsibilities  with
               respect to the Loans, including the collateral for the Loans, and
               the Loan Instruments;

                              (e)  Seller's  duties  and  responsibilities  with
               respect to the Cash Reserve Lines of Credit;

                              (f)  Seller's  duties  and  responsibilities  with
               respect to the Cash Reserve Loans;

                              (g)  Seller's  duties  and  responsibilities  with
               respect to the Overdrafts;

                                       10
<PAGE>

                              (h)  Seller's  duties  and  responsibilities  with
               respect to the safe deposit boxes located at the Branches; and

                              (i)  Seller's  duties  and  responsibilities  with
               respect to the Retirement Plans.

                             Buyer  shall not  assume any other  liabilities  of
Seller which relate to or arise out of the operation of the Branches  before the
Closing Date or relate to or arise out of
any item excluded pursuant to Section 6.5 or 7.3.

               2.3           Transfer and Availability of Books and Records.
                             ----------------------------------------------

                    On  the  Closing   Date,   or  as  soon   thereafter  as  is
practicable,  Seller will  transfer  and deliver to Buyer such books and records
relating  to the Assets and the  Liabilities  (other than such books and records
relating to the Loans,  which are provided  pursuant to the Loan Instruments) as
exist and are in the  possession or control of Seller  (except that,  subject to
the same  exceptions set forth in the next to last sentence of this Section 2.3,
Seller  shall be  permitted  to retain  such  books  and  records  that  contain
information  primarily relating to other assets and liabilities not constituting
Assets and  Liabilities;  provided that in any such case Seller shall provide to
Buyer  such  portions  or copies of such  books and  records  as are  reasonably
necessary to service the Deposits and the Loans on an ongoing basis).  All books
and records  relating to the Assets and the Liabilities  held by Seller or Buyer
after the  Closing  Date shall be  maintained  in  accordance  with (and for the
period provided in) that party's standard recordkeeping policies and procedures.
Throughout  such period,  the party  holding such books and records shall comply
with the  reasonable  request of the other party to provide  copies of specified
documents,  at the  expense of the  requesting  party;  provided,  however,  the
parties shall not be required to provide  access to, or copies of, any documents
or information to the other party to the extent that such access or copies would
violate  or  prejudice   the  legal  rights  of  any  customer  or  employee  or
attorney-client  privilege or would be contrary to law, rule,  regulation or any
legal or regulatory order or process. The requesting party shall give reasonable
notice of any such request.

               2.4           Tax Matters.
                             -----------

                             (a) Notwithstanding Section 2.5, Buyer shall pay to
               Seller or the relevant taxing  jurisdiction (as appropriate under
               the  circumstances),  or  reimburse  Seller if Seller  shall have
               paid,  any sales and use taxes  and any  interest  and  penalties

                                       11
<PAGE>

               thereon which are payable or arise as a result of this  Agreement
               or the  consummation of any of the  transactions  contemplated by
               this Agreement.

                             (b)  Notwithstanding  Section 2.5, Seller shall pay
               to Buyer or the  relevant  taxing  jurisdiction  (as  appropriate
               under the circumstances),  or reimburse Buyer if Buyer shall have
               paid,  one  half of all real  property  transfer,  recording  and
               similar  documentary  taxes  arising  out of the  transfer of the
               Owned Real  Property,  the Leased  Facilities,  the Real Property
               Leases, the Loans and the Fixed Assets.

               2.5           Proration of Certain Expenses.
                             -----------------------------

                             Subject  to the  provisions  of  Section  2.4,  all
rentals,  real estate taxes,  personal  property taxes (tangible or intangible),
and ongoing and periodic expenses arising from
the utility,  water and sewer  charges and  assessments,  as well as  semiannual
assessments paid to the Bank Insurance Fund or the Savings Association Insurance
Fund with respect to the Deposits, shall be prorated between Buyer and Seller as
of the close of business on the Closing Date.

               2.6           Back Office Conversion and Expenses.
                             -----------------------------------

                             Seller and Buyer  shall  cooperate  with each other
and shall use their  reasonable  best efforts  (consistent  with their  internal
day-to-day operations) in order to cause the
timely transfer of information  concerning the Assets and the Liabilities  which
is maintained on Seller's data processing  systems so that Buyer can incorporate
such information into Buyer's data processing  systems no later than the opening
of business on the Business Day following the Closing Date.  Buyer hereby agrees
to pay Seller a  nonrefundable  conversion fee in the amount of $150,000 for the
Assets and Liabilities to be acquired and assumed  hereunder in consideration of
Seller's  expenses  relating  to the  Conversion  (the  "Conversion  Fee").  The
Conversion  Fee shall be  payable,  by wire  transfer of  immediately  available
funds, by the close of business on the Friday following the fourteenth  calendar
day after the Closing Date; provided,  however, if such Friday is not a Business
Day, then such payment shall be due on the next Business Day.  Buyer also agrees
to pay a per item fee of $1.00  for each ACH or paper  item  after  ninety  (90)
days.  In addition to the  foregoing,  Buyer  hereby  agrees to pay all fees and
expenses relating to the assignment of the Loans from Seller to Buyer.

                                       12
<PAGE>

               2.7           Processing of Certain Items Pre and Post Closing.
                             ------------------------------------------------

                    A draft of the written  practices and procedures under which
Buyer and Seller  shall,  among other  things,  complete the  conversion  of the
Branches and handle certain post closing matters, including, without limitation,
all items (including, for example, automated clearing house and electronic funds
transfer items) relating to the Assets and the Liabilities,  which are presented
or returned  following the Closing Date, and any claims  relating to such items,
is  attached  to this  Agreement  as  Exhibit A (the  "Working  Agreement").  As
promptly as practicable  following the execution of this Agreement,  the parties
agree to finalize the Working  Agreement,  which shall be  substantially  in the
form of Exhibit A.  Notwithstanding  the foregoing,  it is understood and agreed
that the  post-Closing  exchange  of ACH and paper items  (checks and  deposits)
between  Seller  and Buyer  shall  continue  for a period  of 90 days  after the
Closing Date, and any items submitted to Seller following the expiration of such
90 day period shall be returned by Seller.

               2.8           Information Returns.
                             -------------------

                             Unless  otherwise  agreed  by Buyer  and  Seller in
writing,  (i) Seller will report to the applicable tax authorities and customers
of the Branches all reportable  payments made or received in connection with the
Branches  (including  without  limitation amounts reportable on Internal Revenue
Service  Form 1099) from  January 1 of the year of the Closing  Date through and
including  the Closing Date and, in  connection  with any such  payments,  shall
withhold and pay over to the applicable tax authorities any amounts  required to
be so withheld  and paid over and (ii) Buyer will report to the  applicable  tax
authorities  and  customers  of the  Branches all  reportable  payments  made or
received in connection with the Branches  (including  without limitation amounts
reportable on Internal Revenue Service Form 1099) from the day after the Closing
Date through and  including  December 31 of the year of the Closing Date and, in
connection with any such payments, shall withhold and pay over to the applicable
tax  authorities  any  amounts  required to be so  withheld  and paid over.  For
purposes of the foregoing,  the term reportable payments as used in this Section
2.8 shall include,  but shall not be limited to,  interest paid on the Deposits,
interest  received  on the  Loans  and the Cash  Reserve  Loans,  and any  other
information returns required with respect to the Assets and the Liabilities.

                                       13
<PAGE>

III. CONSIDERATION

               3.1           Calculation.
                             -----------

                             In  consideration of Buyer's purchase of the Assets
and its  assumption of the  Liabilities,  Seller agree to pay to Buyer an amount
equal to the Deposits, plus accrued
interest thereon,  less the sum of the following (the "Purchase Price"), in each
case calculated as of the close of business on the Closing Date:

                              (a) the net book  value of the Fixed  Assets as of
               the Closing Date;

                              (b)  the  Fair  Market  Value  of the  Owned  Real
               Property as  determined  in  accordance  with Section 3.3 of this
               Agreement;

                              (c) the principal amount of the Loans and the Cash
               Reserve Loans, plus accrued interest thereon;

                              (d) the amount of cash on hand at the Branches;

                              (e) the principal amount of the Overdrafts;

                              (f)  the  net  amount  (which  may  be a  negative
               amount) of taxes  payable by Buyer and Seller  under  Section 2.4
               (i.e.,  the amount  payable  by Buyer less the amount  payable by
               Seller);

                              (g)  the  net  amount  (which  may  be a  negative
               amount) of any  adjustments  under Section 2.5 (i.e.,  the amount
               payable by Buyer less the amount payable by Seller); and

                             (h) an amount  equal to 14.35  percent of the daily
               Deposit average for the calendar month preceding the month during
               which  the  Closing  Date  occurs;  provided,  however,  that  in
               calculating the average  pursuant to this Section  3.1(h),  there
               shall be excluded from the Deposits the aggregate amount by which
               the time deposits  greater than $100,000  exceed  $15,000,000 (it
               being  understood  and  agreed  that  such  $15,000,000  shall be
               reduced by the amount of any time deposits  greater than $100,000
               at a Branch that is excluded pursuant to Section 6.5 or 7.3) (the
               "Amount of Premium").

               3.2           Settlement.
                             ----------

                             (a) Not  later  than  the  Saturday  following  the
               Closing Date, Seller shall deliver to Buyer the closing statement
               prepared in  accordance  with  Seller's  customary  practices and
               procedures  used  in  preparing   financial   statements  and  in

                                       14
<PAGE>

               accordance with the terms of this Agreement, substantially in the
               form of Exhibit B to this  Agreement  (the "Closing  Statement"),
               which  shall be  completed  as of the  close of  business  on the
               Closing  Date  and be the  basis  of the  payment  to be  made to
               Buyer's  account on the Monday  following  the Closing  Date (the
               "Settlement Payment").

                             (b) The parties shall  cooperate in the preparation
               of the  adjusted  closing  statement  within  30 days  after  the
               Closing Date which shall be prepared in accordance  with Seller's
               customary  practices and procedures  used in preparing  financial
               statements  and in accordance  with the terms of this  Agreement,
               substantially  in the form of  Exhibit C to this  Agreement  (the
               "Adjusted Closing Statement"), which shall be completed as of the
               close of business on the Closing  Date. On the Business Day after
               Buyer and Seller  agree to the  Adjusted  Closing  Statement,  or
               Buyer  and  Seller  receive  notice of any  determination  of the
               Adjusted  Closing  Statement under  subsection (c) below,  Seller
               shall pay to Buyer (or Buyer shall pay to Seller, as the case may
               be) an amount (the "Adjustment  Payment") equal to the amount due
               stated on the Adjusted Closing Statement,  plus interest from the
               day after the  Closing  Date  until the  calendar  day before the
               Adjustment  Payment is made at a rate per annum (calculated daily
               based on a 360-day year) equal to the Federal Funds Rate.

                             (c) If the  parties  are  unable  to  agree  on the
               Adjusted Closing Statement within 30 days after the Closing Date,
               either party may submit the matter to the  Mediator,  which shall
               determine all disputed portions of the Adjusted Closing Statement
               in accordance  with the terms and  conditions  of this  Agreement
               within 30 days after the  submission.  The parties shall each pay
               half of the fees and  expenses of the  Mediator,  except that the
               Mediator  may  assess  the full  amount of its fees and  expenses
               against either party if it determines  that party  negotiated the
               Adjusted  Closing  Statement in bad faith.  The Adjusted  Closing
               Statement,  as agreed upon by the parties and/or determined under
               this subsection, shall be final and binding upon the parties.

                             (d)  The  Settlement  Payment  and  the  Adjustment
               Payment  shall  each  be made by  wire  transfer  of  immediately
               available  funds  to the  account  of  the  party  receiving  the
               payment, which account shall be identified by the party receiving
               the funds to the other  party  not less  than two  Business  Days
               prior to such payment.

                                       15
<PAGE>

               3.3           Fair Market Value.
                             -----------------

                             The fair  market  value of the Owned Real  Property
for purposes of Section  3.1(b) (the "Fair Market Value") shall be determined in
accordance with this Section 3.3 no later
than sixty (60) days after the date hereof.  After the date hereof,  the parties
shall work together and cooperate in good faith in an effort to reach  agreement
as to the Fair Market Value of each of the Owned Real  Property.  If the parties
are unable to reach such agreement as to each of the Owned Real Property  within
10 days after the date  hereof,  then the Fair Market  Value of all of the Owned
Real  Property  shall be  determined by an appraisal of the fair market value of
such Owned Real  Property  for its  current  use  prepared  in  accordance  with
customary practices and procedures by an M.A.I.  appraiser selected by agreement
between  Seller  and Buyer;  provided,  however,  that in the event the  parties
cannot agree on the  selection of an appraiser  within five (5) days,  then such
appraiser  shall be selected  as follows:  Seller and Buyer shall each select an
appraiser  within five (5) days and the two selected  appraisers  shall select a
third  appraiser,  who shall be the appraiser who shall conduct the appraisal of
the Fair Market Value. If either party does not select an appraiser  within five
(5)  days,  then the  appraiser  chosen  by the  other  party  shall  be  solely
responsible  for  determining  the Fair  Market  Value,  and if the two  initial
appraisers shall fail to agree on the third appraiser within five (5) days, then
the parties shall request that the Mediator select such appraiser, failing which
the  parties  shall  request  that a court of  competent  jurisdiction  in North
Carolina shall select the appraiser. Notwithstanding the foregoing, the ultimate
selection of an appraiser  shall be completed  within twenty (20) days after the
date  hereof.  For all  purposes  hereunder,  the Fair Market Value shall be the
amount of cash which the appraiser or appraisers  determine would be realized by
Seller if Seller sold the Owned Real Property, as a willing seller, to a willing
buyer on the  Closing  Date,  in vacant  condition  to be used  solely for their
current uses, subject to all liabilities,  liens and other encumbrances to which
the Owned Real Property is subject.  The costs of any such  appraisals  shall be
paid by Buyer.

               3.4           Overdraft Repurchases.
                             ---------------------

                    Subject to the  provisions  set forth in this  Section  3.4,
Seller  agrees to  repurchase  from  Buyer,  on  demand,  Overdrafts  which have
remained  Overdrafts  for 30 calendar  days  following  the Closing  Date.  Such
repurchase  shall occur within five Business Days  following the 30-day  period.
The amount of such repurchase shall be equal to the lesser of the balance of the

                                       16
<PAGE>

Overdraft as of the Closing Date or the lowest  balance of the Overdraft  during
such  30-day   period.   Notwithstanding   Seller's   obligation  to  repurchase
Overdrafts,  Buyer  shall  use its  reasonable  best  efforts  to  collect  such
Overdrafts  prior to the  expiration of such 30-day period;  provided,  however,
that Buyer's  reasonable  best efforts to collect  Overdrafts  shall not require
that it initiate or pursue any legal action against any person. It is understood
that Seller shall have no obligation to repurchase  Overdrafts with respect to a
Deposit  Account  except  to the  extent  that the  repurchase  amount  for such
Overdraft with respect to such Deposit Account exceeds $10,000.

IV.            SELLER'S REPRESENTATIONS AND WARRANTIES

     Seller makes the following representations and warranties to Buyer.

               4.1           Organization, Power and Authority.
                             ---------------------------------

                             (a) Seller is a national  banking  association duly
               organized under the laws of the United States,  validly  existing
               and  in  good  standing.  Seller  has  the  corporate  power  and
               authority to enter into and perform this Agreement. The execution
               and delivery of this  Agreement  has been duly  authorized by all
               necessary corporate action by Seller. Upon execution and delivery
               by the  parties,  this  Agreement  will  constitute  a valid  and
               binding obligation of Seller,  enforceable in accordance with its
               terms,  subject to conservatorship,  receivership,  and a court's
               right  under  general  principles  of  equity to refuse to direct
               specific performance.

                             (b) The  performance  of this  Agreement  by Seller
               will not violate any provision of the Articles of  Association or
               charter  or  Bylaws  of  Seller,  or any  applicable  law,  rule,
               regulation,  or  order or any  contract  or  instrument  by which
               Seller is bound, except for such violations which alone, or taken
               in the  aggregate,  would not  reasonably  be  expected to have a
               Seller Material Adverse Effect.

                                       17
<PAGE>

               4.2           Litigation and Regulatory Proceedings.
                             -------------------------------------

                             There are no actions, complaints,  petitions, suits
or other  proceedings,  or any decree,  injunction,  judgment,  order or ruling,
entered, promulgated or pending or (to
Seller's  knowledge)  threatened  against  Seller  or any of the  Assets  or the
Liabilities,  which  alone,  or  taken  in the  aggregate,  reasonably  would be
expected to have a Seller Material  Adverse Effect.  No governmental  agency has
notified  Seller  that  it  would  oppose  or  not  approve  or  consent  to the
transactions  contemplated  by this  Agreement and Seller knows of no reason for
any such opposition, disapproval or nonconsent.

               4.3           Consents and Approvals.
                             ----------------------

        Except for required  regulatory  approvals and third party  consents set
        forth on Schedule 4.3, no consents,  approvals, filings or registrations
        with any  third  party or any  public  body,  agency  or  authority  are
        required in connection with Seller's  consummation  of the  transactions
        contemplated  by this  Agreement,  other  than  any  consents  as may be
        required as a result of any facts or  circumstances  relating  solely to
        Buyer.

               4.4           Owned Real Property.
                             -------------------

                             (a) Seller will convey good and  marketable  title,
               such as is insurable by any reputable title insurance company, to
               the Owned  Real  Property,  free and  clear of all  encumbrances,
               except for easements,  restrictions,  and other  encumbrances  of
               record  or  visible  from the  ground,  applicable  zoning  laws,
               building  restrictions  and all  other  laws of duly  constituted
               public  authorities,  grants  of public  rights of way,  standard
               exceptions  in the  title  insurance  policy,  the  rights of any
               tenants or landlords  pursuant to any ground  leases  relating to
               the Owned  Real  Property,  none of which  shall  interfere  with
               Buyer's  ability  to  operate a bank  branch on such  Owned  Real
               Property as currently operated by Seller, and liens for taxes and
               assessments not delinquent.  Seller shall maintain in effect from
               the date of this Agreement  until the Closing Date, all property,
               liability,  fire and casualty  insurance in effect as of the date
               hereof  with  regard to the Owned Real  Property,  including  the
               structures,  leasehold  improvements and Fixed Assets relating to
               the Branches.

                                       18
<PAGE>

                             (b) To the  knowledge  of  Seller,  Seller  has not
               received any written notice of violation,  citations,  summonses,
               subpoenas,  compliance  orders,  directives,  suits,  other legal
               process,  or other written  notice of potential  liability  under
               applicable  environmental,   zoning,  building,  fire  and  other
               applicable  laws  and  regulations  relating  to the  Owned  Real
               Property.

                              (c) To the  knowledge  of  Seller,  Seller has not
               received any written notice of a condemnation proceeding relating
               to the Branches.

               4.5           Fixed Assets.
                             ------------

                             Seller has good and  marketable  title to the Fixed
Assets, free and clear of all encumbrances, claims, charges, security interests,
or liens, except for those, if any,
which do not  materially  detract from the value of or interfere with the use of
the Fixed  Assets.  Other than any  proprietary  software and the property  that
would  constitute  Fixed  Assets  but for the fact that such  property  has been
leased by third parties to Seller (which software and property are excluded from
Fixed Assets),  the Fixed Assets to be transferred to Buyer hereunder  represent
all of the fixed  assets used by Seller at the  Branches to operate the business
of the Branches on the date hereof.

               4.6           Ownership of Cash Reserve Loans.
                             -------------------------------

                             Seller  has full power and  authority  to hold each
Cash Reserve  Loan,  and has good title to the Cash Reserve Loans free and clear
of all liens and encumbrances. Seller is
authorized  to sell and assign the Cash  Reserve  Loans to Buyer and,  upon such
assignment,  Buyer  will  have the  rights of Seller  with  respect  to the Cash
Reserve Loans in accordance with the terms and conditions thereof.

               4.7          Loans.
                            -----

                    (a) Seller has full power and  authority  to hold each Loan,
               and has good and marketable  title to the Loans free and clear of
               all liens and  encumbrances.  Seller  is  authorized  to sell and
               assign the Loans to Buyer and, upon  assignment,  Buyer will have
               the rights of Seller with respect to the Loans in accordance with
               the terms and conditions thereof.

                                       19
<PAGE>

                    (b) Each Loan was  originated  in conformity in all material
               respects with applicable laws and regulations;  and its principal
               balance  as shown  on  Seller's  books  and  records  is true and
               correct as of the last day shown  thereon.  None of the Loans set
               forth on Schedule 1.1(b) is an Excluded Loan. Seller has complied
               in all material  respects with all of their obligations under the
               Loan Instruments.

                    (c) Other than the representations and warranties in Section
               4.7(a) and (b),  all Loans and Loan  Instruments  transferred  to
               Buyer on the Closing  Date  pursuant to Section  2.1(d)  shall be
               transferred  on an "AS IS" basis and  without  recourse to Seller
               and  without  any   representations   or  warranties  as  to  the
               collectibility  of any such Loan or the  creditworthiness  of any
               such obligor.

               4.8         Validity of and Compliance with Real Property Leases.
                           ----------------------------------------------------

                             The Real  Property  Leases  are valid and  existing
leases under which  Seller,  as lessee,  is entitled to possession of the leased
premises and use thereof as a bank branch.
To  Seller's  knowledge,  no  event  has  occurred  and  is  continuing,   which
constitutes a default under any of the Real Property  Leases.  The assignment of
such  leases  will  transfer  to Buyer  all of  Seller's  rights  under the Real
Property Leases.

               4.9          Compliance with Certain Laws.
                            ----------------------------

                             The Deposit  Accounts and the Cash Reserve Lines of
Credit were opened,  extended or made, and have been  maintained,  in accordance
with all applicable federal and state
laws,  regulations,  rules and orders,  and the Branches  have been  operated in
compliance with Seller's policies and procedures and all applicable  federal and
state  laws,  regulations,  rules  and  orders,  except  for such  instances  of
noncompliance which do not have, and are not reasonably likely to have, a Seller
Material Adverse Effect.

               4.10          FDIC Insurance.
                             --------------

                             The  Deposits  are insured by the  Federal  Deposit
Insurance Corporation through the Bank Insurance Fund to the extent permitted by
law,  and all  premiums  and  assessments  required  to be  paid  in  connection
therewith have been paid when due by Seller.

                                       20
<PAGE>

V.             BUYER'S REPRESENTATIONS AND WARRANTIES

<PAGE>

     Buyer makes the following representations and warranties to Seller.

               5.1           Organization, Power and Authority.
                             ---------------------------------

                             (a) Buyer is a corporation duly organized under the
               laws of the State of North Carolina, validly existing and in good
               standing.  Buyer has the  corporate  power and authority to enter
               into and perform this  Agreement.  The  execution and delivery of
               this  Agreement  has  been  duly   authorized  by  all  necessary
               corporate  action by Buyer.  Upon  execution and delivery by both
               parties,  this  Agreement  will  constitute  a valid and  binding
               obligation of Buyer,  enforceable  in  accordance  with its terms
               subject to  conservatorship,  receivership,  and a court's  right
               under general  principles of equity to refuse to direct  specific
               performance.

                             (b) The performance of this Agreement by Buyer will
               not  violate  any  provision  of  the  Articles  of  Association,
               charter,  Bylaws or similar governing  documents of Buyer, or any
               applicable  law,  rule,  regulation,  or order or any contract or
               instrument  by which  Buyer is bound  except for such  violations
               which alone,  or taken in the aggregate,  would not reasonably be
               expected to have a Buyer Material Adverse Effect.

               5.2           Litigation and Regulatory Proceedings.
                             -------------------------------------

                             There are no actions, complaints,  petitions, suits
or other  proceedings,  or any decree,  injunction,  judgment,  order or ruling,
entered, promulgated or pending or (to
Buyer's  knowledge)  threatened against Buyer or any of its properties or assets
which alone, or taken in the aggregate,  reasonably  would be expected to have a
Buyer Material Adverse Effect. No governmental agency has notified Buyer that it
would oppose or not approve or consent to the transactions  contemplated by this
Agreement, and Buyer knows of no reason for any such opposition,  disapproval or
nonconsent.

               5.3           Consents and Approvals.
                             ----------------------

        Except for required  regulatory  approvals set forth on Schedule 5.3, no
        consents,  approvals,  filings or registrations  with any third party or
        any public body,  agency or authority  are required in  connection  with
        Buyer's consummation of the transactions  contemplated by this Agreement
        other  than  what  may  be   required  as  a  result  of  any  facts  or
        circumstances relating solely to Seller.

                                       21
<PAGE>

               5.4           Regulatory Capital and Condition.
                             --------------------------------

                    Buyer is in compliance with all capital  standards as of the
date  hereof,  and has no reason to believe that it will be unable to obtain the
required  regulatory  approvals  for  the  transactions   contemplated  by  this
Agreement solely as a result of its current level of regulatory capital (subject
to the  completion of the Buyer's  pending  merger with First  Savings  Bancorp,
Inc.,  which Buyer expects to occur on or before  September 30, 2000,  and Buyer
has no reason to believe  that such merger  will not occur by such date).  As of
the  date  of this  Agreement,  there  is no  pending  or  threatened  legal  or
governmental  proceedings  against  Buyer or any  Affiliate  that  would  affect
Buyer's  ability to obtain the required  regulatory  approvals or satisfy any of
the other conditions  required to be satisfied in order to consummate any of the
transactions contemplated by this Agreement.

VI.            ADDITIONAL AGREEMENTS OF SELLER

               6.1           Access to Seller's Premises, Records and Personnel.
                             --------------------------------------------------

<PAGE>

                             (a) Upon execution of this Agreement,  Seller shall
               give Buyer and its representatives such access to the Branches as
               Buyer  may  reasonably  request,  provided  that  Buyer  does not
               unreasonably  interfere  with  the  business  operations  of  the
               Branches. Seller shall not be required to provide access to or to
               disclose  information  where  such  access  or  disclosure  would
               violate or prejudice the legal rights of any customer or employee
               or  attorney-client  privilege or would be contrary to law, rule,
               regulation  or any legal or  regulatory  order or  process or any
               fiduciary  duty or binding  agreement  entered  into prior to the
               date of this Agreement.

                             (b)  Anything  contained  in this  Agreement to the
               contrary  notwithstanding,   Seller  shall  not  be  required  to
               disclose,   or  to  cause   the   disclosure   to  Buyer  or  its
               representatives  (or provide  access to any offices,  properties,
               books or records of Seller,  that could result in the  disclosure
               to such  Persons or others),  of any tax returns  and/or any work
               papers  relating  thereto or any other  confidential  information
               relating to income or  franchise  taxes or other taxes of Seller,
               or trade secrets,  patent or trademark  applications,  or product
               research  and  development  belonging  to or  performed by or for

                                       22
<PAGE>

               Seller, nor shall Seller be required to permit or to cause others
               to permit Buyer or its representatives to copy or remove from the
               offices or properties of Seller any documents,  drawings or other
               materials  that might reveal any such  confidential  information;
               provided,  however, Buyer shall have access to tax returns to the
               extent that  liability for the taxes at issue could be imposed on
               Buyer.

                             (c) At  Buyer's  request  and  subject  to  Section
               11.11,  Seller shall authorize and permit certain of its officers
               and members of management to engage in discussions with Buyer for
               the purposes of  discussing  the  operations  of the Branches and
               negotiating  and  concluding   management  employment  contracts,
               employee  benefit plans,  and new incentive plans and Buyer shall
               maintain the confidentiality of any information furnished by such
               officers  or members of  management  of Seller  pursuant  to such
               discussions with Buyer.

               6.2           Regulatory Approvals.
                             --------------------

                             Seller agrees to use its reasonable best efforts to
obtain  promptly  any  regulatory  approval  on which  its  consummation  of the
transactions contemplated by this Agreement is
conditioned.  Seller  also  agrees to  cooperate  with  Buyer in  obtaining  any
regulatory  approval  which Buyer must obtain  before the Closing.  Seller shall
notify  Buyer  promptly  of any  significant  development  with  respect  to any
application it files under this Section.  Seller also shall provide Buyer with a
copy of any regulatory  approval it receives under this Section,  promptly after
Seller's receipt of the same.

               6.3           Conduct of Business.
                             -------------------

                             Except  as  provided  in this  Agreement  or as may
otherwise  be  agreed  upon by  Buyer,  Seller  will  continue  to  carry on its
operations at the Branches until the Closing in the
ordinary course of business,  consistent with prudent business practices. Seller
shall  maintain  the Owned  Real  Property  and the Leased  Facilities  in their
current  condition,  ordinary wear and tear excepted and shall not terminate the
operation of any Branch,  unless  those  operations  cease due to events  beyond
Seller's  control or as required by law.  Without the prior  written  consent of
Buyer,  which consent shall not be  unreasonably  withheld or delayed,  from the
date of this  Agreement  until the Closing  Date,  Seller will not  transfer any
Employee  at the  Branches  as of the  date  hereof  to  any of  Seller's  other
branches,  nor will Seller  grant any  increase in the salary or wages of any of
its  Employees  at the  Branches  other than  normal  increases  at times and in
amounts consistent with Seller's past practices.

                                       23
<PAGE>

Seller will notify Buyer of any event of which  Seller  obtain  knowledge  which
would make any of Seller's  representations  under Article IV of this  Agreement
false in any material respect.

               6.4           Covenant of Seller's Not to Solicit.
                             -----------------------------------

                    Seller  hereby agrees that for a period of one (1) year from
the Closing Date, Seller shall not specifically  target and solicit customers of
the Branches  whose  Deposits or Loans are being  assumed or purchased by Buyer;
provided,  however,  that nothing in this Section 6.4 shall (i) restrict general
mass mailings, telemarketing calls, statement stuffers,  advertisements or other
similar communications whether in print, on radio, television,  the Internet, or
by  other  means  that  are  directed  to the  general  public  or to a group of
customers who may include customers of the Branches, provided that such group is
defined by criteria  other than  primarily  as  customers  of the  Branches,(ii)
otherwise  prevent  Seller from taking such actions as may be required to comply
with applicable federal or state laws, rules or regulations or from servicing or
communicating  with the then-current  customers of Seller,  or (iii) restrict or
prevent  Seller or its  Affiliates  from  soliciting  or providing  any deposit,
lending,  brokerage,  capital markets,  trust,  investment advisory or any other
financial  services to any customer whose Deposits are assumed by, or whose Loan
is  assigned  to,  Buyer  pursuant to this  Agreement  and who  maintains  other
customer  relationships  with Seller or its  Affiliates  after the Closing  Date
which  solicitations  or provision arise from such other  relationships,  except
that  neither  Seller  nor any of its  Affiliates  may  specifically  target and
solicit  any  deposit  or  lending  business  that has the  purpose or effect of
replacing in whole or in part any Deposit assumed by, or Loan assigned to, Buyer
pursuant to this Agreement.

               6.5  Consents.

                    Seller agrees to use its  reasonable  best efforts to obtain
from  lessors and any other  parties to any Real  Property  Leases any  required
consents to the  assignment of such leases and  agreements  that will occur as a
result of this Agreement or the transactions  contemplated  hereby.  If any such
required consent cannot be obtained, notwithstanding any other provision hereof,
all Assets and  Liabilities  associated  with any relevant Branch or other Owned
Real Property or Leased  Facility,  other than any such lease or agreement as to
which consent cannot be obtained,  shall nevertheless be transferred to Buyer at
the Closing and the parties  shall  negotiate in good faith and Seller shall use

                                       24
<PAGE>

reasonable efforts to make alternative  arrangements  reasonably satisfactory to
Buyer and Seller that provide Buyer, to the maximum extent reasonably  possible,
the benefits of such Branch or other Owned Real Property or Leased Facility in a
manner that does not violate the underlying lease or agreement.  Notwithstanding
the foregoing or any other provision  hereof, in the event that Seller is unable
to obtain any  required  consent of the lessor or  sub-lessor  of any Owned Real
Property or Leased Facility  subject to a Real Property Lease for the assignment
thereof to Buyer  hereunder  and Seller and Buyer are unable to reach a mutually
satisfactory  alternative  arrangement  pursuant  to the  immediately  preceding
sentence,  then Buyer shall have the option,  exercisable upon written notice to
Seller,  to terminate  this  Agreement  with respect to the Branch for which any
required consent cannot be obtained, in which event neither party shall have any
further liability to the other under this Agreement with respect to such Branch,
including the Fixed  Assets,  Loans and Deposits of such Branch and the Purchase
Price shall be adjusted accordingly.

               6.6           Buyer's Right to Reject Loans.
                             -----------------------------

                   (a) During the  period  beginning  on a date no later than 60
calendar  days after the  execution  of this  Agreement  and ending on the fifth
Business Day after such date (the "Review  Period"),  Seller shall afford to the
officers and authorized  representatives  of Buyer,  subject to Seller's  normal
security requirements,  access to all necessary Loan Instruments relating to the
Loans existing on the date hereof in order that Buyer may have full  opportunity
to make reasonable  investigations  of the Loans,  the Loan  Instruments and the
Loan collateral.  Notwithstanding the foregoing, Seller shall not be required to
provide  access to or to disclose  information  where such access or  disclosure
would  violate or  prejudice  the legal  rights of any  customer  or employee or
attorney-client  privilege or would be contrary to law, rule,  regulation or any
legal or regulatory order or process or any fiduciary duty or binding  agreement
entered into prior to the date of this Agreement.

                   (b)  No  later  than  three   Business  Days   following  the
expiration  of the Review  Period,  Buyer shall notify  Seller in writing of the
existence of any of the following  defects  relating to the Loans (any such Loan
being called an "Identified Loan"):

                             (i) Loan  Instruments,  which are  material  to the
               enforceability of a Loan, have been lost or are missing;

                                       25
<PAGE>

                             (ii) a Loan is an Excluded Loan;

                             (iii) a Loan  was not  originated  or has not  been
               administered   in  compliance  in  all  material   respects  with
               applicable laws or the Loan  Instruments  pertaining to such Loan
               are not  legal,  valid and  binding  or do not  contain  the true
               signature of an obligor; or

                             (iv)  Seller's  rights  in any  collateral  are not
               perfected or enforceable,  or the priority of such rights are not
               as reflected in the records.

                   (c)  Following  receipt of any such  notice,  and at any time
prior to the date of  notification  to the  customers of the  assignment  of the
Loans pursuant to applicable law,  Seller may in its sole discretion  attempt to
cure any such defect to Buyer's reasonable satisfaction.  If Seller is unable or
unwilling to cure such defect to Buyer's  reasonable  satisfaction,  Buyer shall
have the right to reject such Identified Loan in which case such Identified Loan
will be excluded from this Agreement.

VII.  ADDITIONAL AGREEMENTS OF BUYER

               7.1           Regulatory Approvals.
                             --------------------

                             Buyer shall prepare and file,  with the  assistance
of Seller,  as soon as  practicable,  but not later than ten (10)  Business Days
following the date of this Agreement, all
applications,  as required  by law,  to the  appropriate  federal  and/or  state
regulatory  authorities for approval to effect the transactions  contemplated by
this  Agreement and shall use its good faith  efforts to obtain such  approvals.
Buyer also agrees to cooperate with Seller in obtaining any regulatory  approval
which Seller must obtain before the Closing.  Buyer shall notify Seller promptly
of any  significant  development  with respect to any application it files under
this  Section.  Buyer also shall  provide  Seller with a copy of any  regulatory
approval it receives under this Section,  promptly after Buyer's  receipt of the
same.

               7.2           Change of Name, Etc.
                             -------------------

               Immediately after the Closing, Buyer will (a) change the name and
logo on all documents and facilities  relating to the Assets and the Liabilities
to Buyer's  name and logo,  (b) notify all  persons  whose Cash  Reserve  Loans,
Loans, or Deposits are transferred  under this Agreement of the  consummation of
the transactions contemplated by this Agreement, and (c) provide all appropriate
notices to the Federal Deposit  Insurance  Corporation and any other  regulatory

                                       26
<PAGE>

authorities  required  as a result  of the  consummation  of such  transactions.
Seller  shall  cooperate  with  any  commercially  reasonable  request  of Buyer
directed  to  accomplish  the  removal  of  Seller's  signage  by Buyer  and the
installation of Buyer signage by Buyer at the Branches;  provided, however, that
(i) all such  removals  and all such  installations  shall be at the  expense of
Buyer, (ii) such removals and installations  shall be performed in such a manner
that does not  unreasonably  interfere with the normal  business  activities and
operations of the Branches,  (iii) such installed  signage shall comply with the
applicable Real Property Lease relating to such Branch and all applicable zoning
and permitting laws and regulations, and (iv) such installed signage shall have,
if  necessary,  received  the prior  approval  of the owner or  landlord  of the
facility,  and such installed  signage shall be covered in such a way as to make
the Buyer signage  unreadable at all times prior to the Closing,  but such cover
shall display the name and/or logo of Seller in a manner  reasonably  acceptable
to Seller. Buyer agrees not to use any forms or other documents bearing Seller's
or any  Affiliates'  name or logo after the Closing  without  the prior  written
consent of Seller,  and, if such  consent is given,  Buyer  agrees that all such
forms or other  documents  to which  such  consent  relates  will be  stamped or
otherwise marked in such a way that identifies Buyer as the party using the form
or other document.  As soon as practicable and, in any event, not more than five
(5) nor less than two (2) calendar  days prior to the Closing  Date,  Buyer will
mail new checks  reflecting  its transit and routing  number to customers of the
Branches  with  check  writing  privileges.  Buyer  shall  use its  commercially
reasonable  best efforts to encourage these customers to begin using such checks
and cease using checks bearing Seller's name.

               7.3           Owned Real Property and Leased Facilities.
                             -----------------------------------------

                             (a) Except as  expressly  set forth  herein,  Buyer
               hereby  acknowledges  and  agrees  that:  (i) Buyer is  expressly
               purchasing  the Owned Real Property and is taking  assignments of
               and assuming the Leased Facilities in its existing  condition "AS
               IS,  WHERE IS, AND WITH ALL  FAULTS"  with  respect to any facts,
               circumstances,   conditions  and  defects;  (ii)  Seller  has  no
               obligation  to repair or correct any such  facts,  circumstances,
               conditions  or defects  or to  compensate  Buyer for same;  (iii)
               Seller has specifically  bargained for the assumption by Buyer of
               all  responsibility  to inspect  and  investigate  the Owned Real
               Property  and the  Leased  Facilities  and of all risk of adverse
               conditions;  and (iv) Buyer has or will have prior to the Closing
               undertaken all such physical  inspections and examinations of the
               Owned Real  Property  and the Leased  Facilities  as Buyer  deems

                                       27
<PAGE>

               necessary or  appropriate  as to the  condition of the Owned Real
               Property and the Leased Facilities. Except as expressly set forth
               herein,    Buyer   acknowledges   that   Seller   has   made   no
               representations  or  warranties  and shall have no  liability  to
               Buyer (and Buyer  hereby  waives  any right to  recourse  against
               Seller) with respect to the conditions of the soil, the existence
               or  nonexistence  of  hazardous  substances,  any past use of the
               Owned Real Property,  the economic  feasibility of the Owned Real
               Property and the Leased Facilities,  or the Owned Real Property's
               and Leased Facilities' compliance or noncompliance with all laws,
               rules or  regulations  affecting  the Owned Real Property and the
               Leased Facilities.

                             (b) Seller  agrees to deliver to Buyer,  as soon as
               reasonably  possible after the execution of this Agreement and at
               Buyer's  expense,   copies  of  all  (i)  title   information  in
               possession  of  Seller,  including,  but not  limited  to,  title
               insurance  policies,   attorneys'  opinions  on  title,  surveys,
               covenants,  deeds,  notes and mortgages and easements relating to
               the Owned Real  Property,  and (ii) copies of  reports,  surveys,
               notices,  correspondence or other information available to Seller
               and  relating to the  environmental  condition  of the Owned Real
               Property or  violations  of laws or  regulations  relating to the
               environment. Such delivery shall constitute no warranty by Seller
               as to the  accuracy  or  completeness  thereof  or that  Buyer is
               entitled to rely thereon.  Notwithstanding  the foregoing,  Buyer
               may, at Buyer's option, within forty-five (45) days from the date
               of  this  Agreement,  undertake  such  physical  inspections  and
               examinations of the Owned Real Property and the Leased Facilities
               (subject  to  any  landlord's  approval  or  consent  as  may  be
               required),   and  the  legal  title   thereto,   including   such
               inspections of the buildings thereon, as Buyer deems necessary or
               appropriate.  The cost of any such  inspections and  examinations
               shall be responsibility of Buyer.

(i) If Buyer shall discover a Material Defect, as defined herein, as a result of
Buyer's inspections and examinations,  Buyer shall give Seller written notice as
soon as  possible  (but in no  event  later  than the  expiration  of the 45 day
period) describing the facts or conditions constituting such Material Defect and
the  measures  which Buyer  reasonably  believes  are  necessary to correct such
Material  Defect.  "Material  Defect"  shall mean the existence of (x) a lien or
encumbrance on the legal title to the Owned Real Property,  except as previously

                                       28
<PAGE>

disclosed  in writing to Buyer by Seller,  which  materially  detracts  from the
value of the Owned  Real  Property  or  Buyer's  ability  to use such Owned Real
Property  as a bank  branch  and  Seller  cannot  clear  title by  providing  an
indemnification  to the title insurance company or using reasonable  efforts and
expending no more than $25,000 with respect to one Owned Real Property,  (y) any
discharge, disposal, release or emission of any Hazardous Material in the ground
or the structure of the Owned Real Property or the existence of any  underground
storage  tank for  which  the Buyer has been  advised  in  writing  by its legal
counsel that the tank is not in compliance with Federal, state or local laws and
in which Buyer reasonably believes, based on the advice of its legal counsel and
documented findings of its environmental consultant/contractor,  that the amount
of expense or liability which Buyer could reasonably incur or for which it could
reasonably   become   responsible  or  liable  following   consummation  of  the
transactions  contemplated  by this  Agreement at any time or over any period of
time  could  equal or exceed  $25,000  in the case of each  affected  Owned Real
Property or Leased  Facility,  or (z) with  respect to the  buildings,  material
deficiencies in the plumbing, electrical, HVAC, drive thru air transport system,
roof,  walls, or foundations as to which Buyer  reasonably  believes the cost of
repairs  or  corrections  would  equal  or  exceed  $25,000  in the case of each
affected Owned Real Property or Leased Facility.  It being understood and agreed
that Buyer shall bear the risk and  responsibility (in each case with respect to
clauses (x), (y) and (z) above) of the first $25,000 in expense  relating to the
remediation  of a Material  Defect at each of the Owned Real Property and Leased
Facilities,  as  applicable,  and  that the  provisions  set  forth  in  Section
7.3(b)(ii)  shall  govern  the risk and  responsibility  of any such  expense in
excess of such  amounts  with  respect to each Owned  Real  Property  and Leased
Facilities.

                             (ii) If  Seller  does  not  elect  to cure any such
               Material  Defect or is unable  to cure  such  Material  Defect to
               Buyer's  reasonable  satisfaction at least ten (10) days prior to
               the  Closing,  and Buyer  does not elect to waive  such  Material
               Defect, or if Buyer is denied the ability to make  investigations
               or  inspections  by a landlord or other party,  the parties shall
               negotiate  in  good  faith  with a  view  towards  arriving  at a
               mutually acceptable  resolution of the issue. The parties further
               intend  that  the  effort  to  identify  a  mutually   acceptable
               resolution  shall  generally be approached in the following order
               of priority: (i) subject to Seller's ability to do so pursuant to
               the  terms of its Real  Property  Lease  relating  to any  Leased
               Facilities,  Buyer  shall  purchase  the  assets  related  to the
               subject  Owned Real  Property or Leased  Facility  other than the

                                       29
<PAGE>

               Owned Real  Property (in which case the  Purchase  Price shall be
               adjusted  accordingly) and assume the liabilities (other than the
               Real Property  Lease)  associated with the Owned Real Property or
               Leased Facility  affected by the Material  Defect,  and lease (or
               sublet in the case of any Leased  Facilities) the real estate and
               improvements  associated therewith from Seller for a period of 12
               months at their fair  market  rental  value (or, in the case of a
               sublease, Seller's then current rental payments), but without any
               liability to Buyer for environmental  matters,  and on such other
               terms as shall be  mutually  agreeable  to  Seller  and Buyer and
               during  which time Buyer may  construct  or arrange  for  another
               facility in which to operate the business of the  affected  Owned
               Real Property or Leased Facility;  (ii)  indemnification of Buyer
               by  Seller;   provided,   however,  with  regard  to  the  Leased
               Facilities, Seller shall only indemnify and defend Buyer from any
               expenses  arising  out of a Material  Defect set forth in Section
               7.3(b)(i)(z),  identified  by Buyer during the review  period set
               forth in  Section  7.3(b)  and for which  timely  notice has been
               given to Seller, existing on the Leased Facilities on the date of
               assignment  of the Real  Property  Leases  to Buyer  which is the
               responsibility  of  Seller  as lessee  under  such Real  Property
               Lease, it being  understood that this covenant shall be effective
               only  during  the  initial  term of  Buyer's  leasehold  interest
               (excluding  renewals,  extensions,  and new leases) and shall not
               extend to liability arising out of Buyer's acts or omissions, and
               provided,  further,  that Seller's  obligation to indemnify Buyer
               shall not exceed $200,000 in the aggregate;  (iii)  adjustment of
               the Purchase Price;  provided,  however,  any such Purchase Price
               adjustment  shall not exceed  $200,000 in the aggregate;  or (iv)
               terminate this  Agreement with respect to the Branch  affected by
               such Material Defect, in which event neither party shall have any
               further  liability to the other under this Agreement with respect
               to such Branch, including the Fixed Assets, Loans and Deposits of
               such Branch and the Purchase Price shall be adjusted accordingly.

                             (iii) With regard to the Leased  Facilities,  Buyer
               and  Seller   understand  that  conducting  the  inspections  and
               affecting the cure of a Material Defect,  if any, may require the
               action or the consent of the lessor.

                                       30
<PAGE>

                             (c)  Buyer   shall  be   entitled   to  update  its
               inspections  and  examinations of the Owned Real Property and the
               Leased Facilities to a date immediately prior to the Closing Date
               in  accordance  with the  provisions  set  forth in this  Section
               7.3(c).  If in the  course of  updating  any such  inspection  or
               examination Buyer discovers a Material Defect that occurred after
               the Buyer's review  performed  pursuant to Section 7.3(b),  Buyer
               may provide  written notice to Seller no later than five Business
               Days following Buyer's discovery thereof  describing the facts or
               conditions  constituting  the  Material  Defect and the  measures
               which Buyer  reasonably  believes  are  necessary to correct such
               Material  Defect.  Seller and Buyer shall  discuss and agree upon
               what  measures  are  necessary  to remedy  such defect and Seller
               shall respond to Buyer's  notice no later than the tenth Business
               Day after its receipt of notice from Buyer advising Buyer whether
               Seller  elects to cure the Material  Defect.  If Seller elects to
               cure, then Seller shall proceed with such cure and shall complete
               such cure within 45 days  thereafter  or within  such  additional
               period as shall have been agreed upon Seller and Buyer,  provided
               that  completion of the cure of such  Material  Defect shall be a
               condition to Buyer's obligation to close. If Seller elects not to
               cure or is not able to cure,  or if Buyer and Seller are not able
               to agree on the steps necessary to cure a Material  Defect,  then
               the matter  shall be handled as  provided  in Section  7.3(b)(ii)
               above.

                             (d)  No   information   or  the   contents  of  any
               environmental audits, nor the results of any investigation of the
               Owned Real Property or the Leased Facilities  conducted  pursuant
               to this section,  including,  but not limited to, the contents of
               the report issued in connection therewith,  shall be disclosed by
               Buyer or its agents,  consultants or employees to any third party
               without Seller's prior written  approval,  unless and until Buyer
               is legally  compelled to make such  disclosure  under  applicable
               laws or until  Buyer  completes  its  purchase  of the Owned Real
               Property  or assumes  the Real  Property  Lease  pursuant to this
               Agreement. Notwithstanding the foregoing, Buyer may disclose such
               matters to its directors,  executive officers,  legal counsel and
               such  employees  who are  reasonably  required  to  receive  such
               disclosure  (such  parties  being  referred  to  as  "Buyer"  for
               purposes of this section),  the specific identities of whom shall
               be supplied to Seller prior to any  permitted  disclosure to such
               party by Buyer.

                                       31
<PAGE>

If this Agreement is terminated for any reason,  Buyer shall immediately deliver
and/or return to Seller any and all documents,  plans and other items  furnished
to Buyer pursuant to this section.

               7.4           Closing of Branches.
                             -------------------

                    Prior to the  Closing  Date,  Buyer  shall not  provide  any
notification  to  customers,  regulatory  agencies  or any other party as to its
intention to close any of the Branches.

VIII. SELLER'S EMPLOYEES

               8.1           Transferred Employees.
                             ---------------------

                             (a) Buyer will offer to employ all of the Employees
               effective as of the Closing Date. Buyer will  communicate  offers
               of employment in accordance with legal requirements and in a form
               mutually acceptable to Seller and Buyer. All such Employees shall
               be offered  employment  with Buyer in all cases (i) in a position
               requiring  comparable  skills and  abilities  as such  Employee's
               position with Seller on the Closing  Date,  (ii) with annual base
               salary,  or weekly  or hourly  rate of pay which is equal to such
               Employee's  pay with Seller on the Closing Date,  (iii) at a work
               location  not  more  than 30  miles  from  such  Employee's  work
               location  with Seller on the Closing  Date,  and (iv) with a work
               schedule  that  is  not  changed  by  more  than  10%  from  such
               Employee's  work  schedule  with  Seller on the  Closing  Date (a
               "Comparable  Job Offer").  Buyer hereby  agrees to pay  severance
               benefits  to any  Employee  who is not offered a  Comparable  Job
               Offer and does not  otherwise  accept  employment  with  Buyer in
               accordance  with the payment terms set forth on Schedule  8.1(a).
               Each  Employee  who  accepts  Buyer's  offer  of  employment  and
               commences employment with Buyer hereunder shall be referred to as
               a "Transferred  Employee" for purposes of this  Agreement.  Buyer
               hereby  agrees  to  cooperate   with  Seller  in  obtaining,   in
               connection  with any  acceptance of an offer of  employment  with
               Buyer,  an  executed  release  from  such  Transferred   Employee
               providing that Seller and its Affiliates shall not be responsible
               for any  severance  claims or  obligations  for such  Transferred
               Employee with respect to any severance plan,  policy or practices
               of Seller or any of its Affiliates or predecessors.  With respect
               to any Employee who accepts an offer of employment from Buyer who
               on the Closing Date is on military leave,  sick leave,  maternity
               leave,  short-term  disability or other leave of absence approved
               by  Seller  (but  excluding  any  Employee  absent  by  reason of
               long-term disability, for whom Seller will retain all liability),

                                       32
<PAGE>

               except as required by applicable law, Buyer need only employ such
               Employee  for the period  beginning  after  such  absence if such
               Employee  returns to employment  in accordance  with the terms of
               such Employee's  leave.  Any such Employee will cease  employment
               with Seller at the end of such leave of absence.

                             (b) Seller is  responsible  for the filing of Forms
               W-2 with the Internal  Revenue  Service and any  required  filing
               with state tax  authorities,  with  respect to wages and benefits
               paid to each Transferred  Employee for periods ending on or prior
               to the Closing Date.

               8.2           Certain Other Obligations of Buyer.
                             ----------------------------------

                             (a) (i)  Buyer  shall  not  have any  liability  or
               obligation  under  any  Benefit  Plans or any  other  program  or
               arrangement of Seller or an ERISA  Affiliate  thereof under which
               any current or former employee of Seller or any of its Affiliates
               has any right to any benefits;

                              (ii)  Upon  the  Closing,   the  participation  of
Transferred  Employees in the Benefit Plans shall cease in  accordance  with the
terms of such plans; and

                              (iii) With respect to the  Transferred  Employees,
               Seller shall be  responsible  for any welfare  benefits or claims
               which,  by reason of events  which  take place on or prior to the
               Closing  Date,  become  payable  under the  terms of any  Welfare
               Benefit Plan. With respect to Transferred Employees,  Buyer shall
               be  responsible  for any welfare  benefits or claims which become
               payable   under  any  benefit  plan  offered  by  Buyer  to  such
               Transferred  Employees  by reason of events that take place after
               the Closing Date.

                             (b) (i) From and  after  the  Closing  Date,  Buyer
               shall provide the  Transferred  Employees  with employee  benefit
               plans,  programs,  and  arrangements  (including a "group  health
               plan" within the meaning of Section  5000(b)(1) of the Code) that
               are no less favorable in the aggregate than the employee  benefit
               plans,  programs,  and  arrangements  generally  provided  on the
               Closing  Date to other  similarly  situated  employees  of Buyer.
               Subject to the terms and  conditions of such  arrangements,  such
               Transferred  Employees  will be fully  eligible to participate in
               Buyer's  bonus  and  other   incentive   arrangements   from  the
               commencement of such Transferred  Employees employment with Buyer
               to the same extent as Buyer's similarly situated employees;

                                       33
<PAGE>

                              (ii)  Buyer will grant for  purposes  of  vacation
               benefits, severance pay and all welfare benefit plans (as defined
               in ERISA) past service  credit to all  Transferred  Employees for
               periods of time credited to such Transferred  Employees under the
               Welfare  Benefit  Plans.  To  the  extent  that  any  Transferred
               Employee has satisfied in whole or in part any annual  deductible
               under a  Welfare  Benefit  Plan,  or has paid  any  out-of-pocket
               expenses  pursuant  to  any  Welfare  Benefit  Plan  co-insurance
               provision,  such amount shall be counted toward the  satisfaction
               of any applicable  deductible or  out-of-pocket  expense maximum,
               respectively,  under the benefit  plans and programs  provided to
               Transferred Employees by Buyer, and such plans and programs shall
               be  applied  without  regard  to  any  limitations   relating  to
               preexisting  conditions or required  physical  examinations  that
               would not otherwise  apply under the respective  Welfare  Benefit
               Plans to the extent that such  Transferred  Employees are covered
               by the Welfare Benefit Plans on the Closing Date;

                             (iii)   Buyer   shall  take   whatever   action  is
               necessary,   including  amendment  of  its  defined  contribution
               pension plan, to grant to each Transferred  Employee past service
               credit for all  purposes  (including  any waiting  period)  under
               Buyer's  defined  contribution  pension  plan for all  periods of
               service  credited  to each such  Transferred  Employee  under the
               Seller's defined contribution pension plan. As soon as reasonably
               practicable after the Closing Date, Seller shall provide to Buyer
               such  information as Buyer  reasonably  requires to establish the
               service for the Transferred Employees credited under the Seller's
               defined contribution pension plan;

                             (iv) As of the  Closing  Date,  Seller  will permit
               participants in Seller's  defined  contribution  pension plan who
               become  Transferred  Employees  to initiate a  distribution  from
               Seller's 401(k) plan;

                             (v) Buyer shall take whatever  action is necessary,
               including amendment of its defined benefit pension plan, to grant
               to each  Transferred  Employee  past  service  credit for service
               which has been granted under  Seller's  defined  benefit  pension
               plan, for all purposes, other than benefit accrual, under Buyer's
               defined benefit pension plan; and

                             (vi) Buyer shall  provide  coverage  under  Buyer's
               severance  plan,  policies  and  practices  for each  Transferred
               Employee  as of the Closing  Date,  and for a period of 12 months
               following the Closing Date any Transferred  Employee  entitled to

                                       34
<PAGE>

               any such  severance  shall  receive from Buyer the greater of the
               benefits  under  either  Buyer'  severance  plan,   policies  and
               practices  or  Seller's  current  severance  plan,  policies  and
               practices.

               8.3           Training.
                             --------

                             Seller shall permit Buyer to train the  Transferred
Employees  before  Closing  with  regard to  Buyer's  operations,  policies  and
procedures at Buyer's sole cost and expense.
This training  shall take place  outside of business  hours and may, as mutually
agreed upon by Seller and Buyer, take place at the Branches;  provided, however,
that any training  that occurs shall be conducted in a manner not  disruptive to
operations of the Branches.

IX.            CLOSING AND CONDITIONS TO CLOSING

               9.1           Time and Place of Closing.
                             -------------------------

                             The date of the Closing (the "Closing Date"), which
shall be after the last regulatory approval (and the expiration of any statutory
waiting periods following such
approval) necessary for the Closing has been obtained, shall be on a Friday and,
unless  otherwise  mutually agreed upon by the parties,  shall be on February 9,
2001, and in no event later than March 30, 2001. The Closing shall take place at
Seller's  offices located at One First Union Center,  Charlotte,  North Carolina
28288,  at 10:00 a.m.  on the  Closing  Date,  or at a time and place  otherwise
determined by mutual agreement of the parties.

               9.2           Exchange of Closing Documents.
                             -----------------------------

                             The parties shall exchange  drafts of all documents
to be delivered at the Closing  (other than the Closing  Statement) at least ten
Business Days prior to the Closing Date.

               9.3           Buyer's Conditions to Closing.
                             -----------------------------

                             Buyer's  obligations  to  purchase  the  Assets and
assume the  Liabilities is contingent upon and subject to the fulfillment of the
following conditions:

                             (a) the parties obtaining all regulatory  approvals
               which  are  required  in  order  for  them to  proceed  with  the
               transactions contemplated by this Agreement and the expiration of
               any required  waiting period without the  commencement of adverse
               proceedings by any governmental  authority with jurisdiction over
               the transactions contemplated by this Agreement;

                                       35
<PAGE>

                             (b) the representations and warranties of Seller in
               this  Agreement  being true and  correct as of the  Closing  Date
               (except that  representations  and  warranties  as of a specified
               date need be true and correct  only as of such date);  (provided,
               however, that for purposes of determining the satisfaction of the
               condition contained in this Section 9.3(b), such  representations
               and  warranties  shall be  deemed to be true and  correct  if the
               failure or failures of such  representations and warranties to be
               so true and correct  (excluding  the effect of any  qualification
               set forth therein  relating to  "materiality" or "Seller Material
               Adverse  Effect") do not  constitute or give rise to, and are not
               reasonably likely to constitute or give rise to,  individually or
               in the aggregate,  a Seller  Material  Adverse  Effect),  and all
               covenants  and  conditions  of Seller to be  performed  or met by
               Seller on or before the Closing Date having been performed or met
               in all material respects;

                             (c)  Seller's  delivery  to Buyer of the  following
               documents in form and substance reasonably satisfactory to Buyer:

                                 (i) subject to Section  7.3,  special  warranty
                        deeds conveying the Owned Real Property;

                                 (ii)  bills  of  sale,  assignments  and  other
                        instruments  of transfer  sufficient  to convey to Buyer
                        all of Seller's right, title, and interest in and to the
                        remaining Assets;

                                 (iii) a certificate  executed by an appropriate
                        officer  of  Seller  attesting,  to the  officer's  best
                        knowledge,  to Seller's  compliance  with the conditions
                        set forth in Section 9.3(b); and

                                 (iv)  subject  to  Section   6.5,   appropriate
                        estoppel  certificates  executed  by the  lessors of the
                        Leased Facilities,  to the extent Seller can obtain such
                        certificates  using its  reasonable  efforts and without
                        the payment of any fees to such lessors; and

                             (d)  All  consents  of  third  parties   listed  on
               Schedule  4.3 or  required  pursuant  to the  terms  of the  Real
               Property Leases shall have been obtained; and

                                       36
<PAGE>

                             (e)  Buyer's   agreement  to  receive  the  Closing
               Statement and the Settlement Payment as provided in Section 3.2.

               9.4           Seller's Conditions to Closing.
                             ------------------------------

                             Seller's obligation to sell the Assets and transfer
the  Liabilities to Buyer is contingent  upon and subject to the  fulfillment of
the following conditions:

                             (a) the parties obtaining all regulatory  approvals
               which  are  required  in  order  for  them to  proceed  with  the
               transactions contemplated by this Agreement and the expiration of
               any required  waiting period without the  commencement of adverse
               proceedings by any governmental  authority with jurisdiction over
               the transactions contemplated by this Agreement;

                             (b) the  representations and warranties of Buyer in
               this  Agreement  being true and  correct as of the  Closing  Date
               (except that  representations  and  warranties  as of a specified
               date need be true and correct  only as of such date);  (provided,
               however, that for purposes of determining the satisfaction of the
               condition contained in this Section 9.4(b), such  representations
               and  warranties  shall be  deemed to be true and  correct  if the
               failure or failures of such  representations and warranties to be
               so true and correct  (excluding  the effect of any  qualification
               set forth therein  relating to  "materiality"  or "Buyer Material
               Adverse  Effect") do not  constitute or give rise to, and are not
               reasonably likely to constitute or give rise to,  individually or
               in the  aggregate,  a Buyer  Material  Adverse  Effect),  and all
               covenants and conditions of Buyer to be performed or met by Buyer
               on or before the Closing Date having been performed or met in all
               material respects;

                             (c)  Buyer's  delivery  to Seller of the  following
               documents  in  form  and  substance  reasonably  satisfactory  to
               Seller:

                                  (i) one or more  executed  assumptions  of the
                        Real Property Leases;

                                  (ii) one or more executed instruments assuming
                        the remaining Liabilities; and

                                       37
<PAGE>

                                  (iii) a certificate executed by an appropriate
                        officer  of  Buyer  attesting,  to  the  officer's  best
                        knowledge, to Buyer's compliance with the conditions set
                        forth in Section 9.4(b).

               9.5        Survival of Representations, Warranties and Covenants.
                          -----------------------------------------------------

                             Unless   provided   otherwise  in  this  Agreement,
Buyer's and Seller's  representations  and  warranties  under this  Agreement or
contained in any certificate or instrument
delivered by either party at the Closing  shall survive for a period of one year
following  the Closing Date.  The  agreements  and  covenants  contained in this
Agreement shall not survive the Closing except to the extent expressly set forth
herein;  provided that the  agreements  and covenants set forth in Section 11.12
shall survive the Closing or any termination of this Agreement.

X.             TERMINATION

               10.1       Termination by Either Party.
                          ---------------------------

                             Either  party may  terminate  this  Agreement  upon
written notice to the other if:

                             (a) as a  result  of  any  material  breach  of any
               representation,  warranty or covenant of Seller (in the case of a
               termination  by Buyer) or of Buyer (in the case of termination by
               Seller), the party terminating this Agreement has given the other
               party written  notice of such breach and such breach is not cured
               within 30 days thereafter;

                             (b) the Closing  does not occur  within two hundred
               seventy  (270) days after the date of this  Agreement;  provided,
               however, that Seller may not terminate this Agreement pursuant to
               this  paragraph (b) to the extent that the failure of the Closing
               to occur  within  such period  arises out of or results  from the
               actions or omissions of Seller,  and that Buyer may not terminate
               this Agreement  pursuant to this paragraph (b) to the extent that
               the failure of the Closing to occur within such period arises out
               of or results from the actions or omissions of Buyer; or

                             (c) the other party so agrees in writing.

                             The termination of this Agreement under  subsection
(a) shall not absolve the breaching  party from any liability to the other party
arising out of its breach of this Agreement.

                                       38
<PAGE>

XI.            MISCELLANEOUS

               11.1          Continuing Cooperation.
                             ----------------------

                             (a) On and after the Closing Date, Seller agrees to
               execute,  acknowledge  and deliver such documents and instruments
               as Buyer may  reasonably  request to vest in Buyer the full legal
               and equitable title to the Assets and Liabilities.

                             (b) On and  after the  Closing  Date,  Buyer  shall
               execute,  acknowledge  and deliver such documents and instruments
               as Seller may reasonably  request to relieve and discharge Seller
               from its obligations with respect to the Liabilities.

                             (c)  Seller  and Buyer  shall  cooperate  with each
               other in  connection  with any  examination  conducted by any tax
               authority  subsequent  to the Closing Date by promptly  providing
               upon  request  information  relating to the tax  liability of any
               business operated by Seller or Buyer with respect to the Branches
               and  promptly  informing  the other of the  institution  of,  any
               material developments concerning, and the outcome of, the same.

                             (d) Except as provided in Section  7.2, no interest
               in or right to use First Union  National  Bank's logo or the name
               "First Union" or any other similar word,  name,  symbol or device
               in which Seller has any interest by itself or in combination with
               any other word, name,  symbol or device, or any similar variation
               of any of the foregoing  (collectively,  the "Retained  Names and
               Marks")  is  being   transferred   to  Buyer   pursuant   to  the
               transactions  contemplated  hereby.  Unless permitted pursuant to
               Section  7.2,  Buyer shall not after the Closing  Date in any way
               knowingly  use  any  materials  or  property,  whether  or not in
               existence on the Closing  Date,  that bear any  Retained  Name or
               Mark. Buyer agrees that Seller shall have no  responsibility  for
               claims by third  parties  arising out of, or relating to, the use
               by the Buyer of any Retained Name or Mark after the Closing Date,
               and Buyer agrees to indemnify and hold  harmless  Seller from any
               and all claims (and all expenses, including reasonable attorneys'
               fees  and  disbursements  incurred  in  connection  with any such
               claim) that may arise out of the use thereof by Buyer.

                             (e) Buyer agrees to provide  reasonable  assistance
               and  cooperation  to  Seller  and its  Affiliates  in  activities
               related to the  prosecution  or defense of any  pending or future

                                       39
<PAGE>

               lawsuits, arbitrations, other proceedings or claims involving the
               Seller's  or  its   Affiliates   and  the   Branches   ("Seller's
               Litigation").  In  addition,  Buyer  shall  facilitate,   without
               expense to Seller,  the reasonable  availability to Seller of the
               Transferred  Employees,  without  the  need for  issuance  of any
               subpoena or similar  process,  to testify or assist Seller in the
               Seller's Litigation.

               11.2          Merger and Amendment.
                             --------------------

                             This Agreement  sets out the complete  agreement of
the parties with  respect to the matters  discussed  in this  Agreement,  and it
supersedes all prior agreements between the
parties,  whether written or oral, which apply to these matters. No provision of
this Agreement may be changed or waived except as expressly stated in a document
executed by both parties.

               11.3          Dispute Resolution.
                             ------------------

                             (a) Neither Seller nor Buyer shall assert any claim
               arising out of or relating to this Agreement (except with respect
               to claims to be handled under the Working  Agreement or submitted
               to the Mediator under Section 3.2(c)), unless:

                                            (i)  except  for  claims  arising in
                             respect  of  Sections  2.4,  2.5  or  11.1(d),  the
                             aggregate  amount of all  claims by Buyer or Seller
                             (as the case may be) which  satisfy  the  preceding
                             clause exceeds  $50,000,  in which case a claim may
                             be asserted only to the extent that such  threshold
                             has been exceeded;

                                            (ii) except for claims arising under
                             Sections 2.4, 2.5, or 11.1(d), the aggregate amount
                             of all  claims by Buyer or Seller  (as the case may
                             be) shall not exceed $2,000,000; and

                                            (iii)  except  for  claims   arising
                             under   Sections   2.4,   2.5   or   11.1(d),   the
                             notification  required by Section  11.3(b) (if any)
                             is given on or before the first  anniversary of the
                             Closing Date.

                             (b) The  parties  shall  attempt  in good  faith to
               resolve any dispute  arising out of or relating to this Agreement
               promptly by  negotiations,  as provided in this  subsection  (b).
               Either  party  shall give the other party  written  notice of any
               dispute not resolved in the normal course of business. Executives
               of both parties at comparable  levels at least one step above the

                                       40
<PAGE>

               personnel who have  previously been involved in the dispute shall
               meet at a  mutually  acceptable  time and place  within  ten days
               after  delivery of such notice,  and  thereafter as often as they
               reasonably deem necessary,  to exchange relevant  information and
               to  attempt to resolve  the  dispute.  If the matter has not been
               resolved by these persons within 30 days of the disputing party's
               notice,  or if the  parties  fail to meet  within  ten days,  the
               dispute  shall be  referred  to more  senior  executives  of both
               parties  who have  authority  to settle the dispute and who shall
               likewise meet to attempt to resolve the dispute. All negotiations
               under this subsection (b) are  confidential  and shall be treated
               as compromise  and  settlement  negotiations  for purposes of the
               Federal  Rules of Evidence,  applicable  state rules of evidence,
               and common law. The  procedures  set forth above will be followed
               in advance of  litigation  of any dispute  between  the  parties;
               nevertheless,  either party may seek a preliminary  injunction or
               other  provisional  judicial  relief if in its  judgment  such an
               action is  necessary to avoid  irreparable  damage or to preserve
               the  status  quo.  Despite  any such  action,  the  parties  will
               continue to participate in good faith in the procedures set forth
               in this subsection (b).

                             (c) Neither party shall have any liability for lost
               profits or punitive damages with respect to any claim arising out
               of or relating to this Agreement. The sole recourse and remedy of
               a party  hereto for breach of this  Agreement  by the other party
               hereto shall be against  such other party and its assets,  and no
               officer,  director,  employee,  stockholder  or  affiliate of any
               party  shall be liable at law or in equity for the breach by such
               party of any of its obligations under this Agreement.

               11.4          Indemnification.
                             ---------------

                             After  the  Closing  Date,  and  unless   otherwise
provided in the Agreement:

                             (a) Buyer shall  indemnify and hold Seller harmless
               from  and  against  all  claims,   lawsuits,   costs   (including
               reasonable  counsel fees) and  liabilities  which arise out of or
               relate to  transactions  or operations at the Branches  after the

                                       41
<PAGE>

               Closing  Date,  and from any loss or  damage  resulting  from any
               breach by Buyer of any  representation,  warranty  or covenant of
               Buyer  contained  in this  Agreement.  If any claim or lawsuit is
               made or  commenced  as to which  Seller  proposes  to demand such
               indemnification,   it  shall   notify   Buyer   with   reasonable
               promptness;  provided,  however,  that any  failure  by Seller to
               notify  Buyer  shall  not  relieve  Buyer  from  its  obligations
               hereunder, except to the extent that Buyer is actually prejudiced
               by such  failure to give  notice.  Buyer shall have the option of
               defending  such claim or lawsuit with counsel of its own choosing
               at its own cost and expense and such counsel shall, to the extent
               consistent with its professional responsibilities, cooperate with
               Seller  and any  counsel  designated  by Seller.  Buyer  shall be
               liable for any settlement of any claim or lawsuit  against Seller
               made with Buyer's  written  consent,  which  consent shall not be
               unreasonably withheld.

                             (b) Seller shall  indemnify and hold Buyer harmless
               from  and  against  all  claims,   lawsuits,   costs   (including
               reasonable  counsel fees) and  liabilities  which arise out of or
               relate to transactions or operations at the Branches on or before
               the Closing Date, and from any loss or damage  resulting from any
               breach by Seller of any  representation,  warranty or covenant of
               Seller  contained in this  Agreement.  If any claim or lawsuit is
               made or  commenced  as to which  Buyer  proposes  to demand  such
               indemnification,   it  shall   notify   Seller  with   reasonable
               promptness;  provided,  however,  that  any  failure  by Buyer to
               notify  Seller  shall not  relieve  Seller  from its  obligations
               hereunder, except to the extent the Seller is actually prejudiced
               by such failure to give  notice.  Seller shall have the option of
               defending  such claim or lawsuit with counsel of its own choosing
               at its own cost and expense and such counsel shall, to the extent
               consistent with its professional responsibilities, cooperate with
               Buyer and any counsel designated by Buyer. Seller shall be liable
               for any  settlement  of any claim or lawsuit  against  Buyer made
               with  Seller's  written  consent,  which  consent  shall  not  be
               unreasonably withheld.

                             (c) Any claims for  indemnification  brought  under
               this Section shall be subject to the provisions of Section 11.3.

               11.5          Counterparts.
                             ------------

                             This  Agreement  may be  executed  in any number of
counterparts,  each of which will constitute an original, but all of which taken

                                       42
<PAGE>

together shall constitute one and the same instrument.

               11.6          Exhibits and Schedules.
                             ----------------------

                             All  exhibits  and  schedules  referred  to in this
Agreement shall constitute a part of this Agreement.

               11.7          Assignment.
                             ----------

                             This  Agreement is not  assignable  by either party
without the written consent of the other party,  which shall not be unreasonably
withheld; provided, however, Buyer may
assign this Agreement to First Bank, its wholly-owned subsidiary,  provided that
Buyer shall nonetheless remain liable and responsible for the performance of all
of its obligations hereunder.

               11.8          Headings.
                             --------

                             The  headings   contained  in  this  Agreement  are
inserted for convenience only and shall not affect the meaning of this Agreement
or any of its provisions.

               11.9 Notices.
                    -------

                             Any notice  under this  Agreement  shall be made in
writing and shall be deemed given when  delivered in person,  when  delivered by
first class mail postage prepaid (in which
case the notice shall be deemed given on the third  Business Day  following  the
date on  which  the  notice  is  postmarked),  or when  delivered  by  facsimile
transmission, which transmission also shall be sent by first class mail, postage
prepaid before the second Business Day following the transmission (in which case
the notice shall be deemed given on the day transmitted if transmitted before or
during normal business hours or, otherwise, on the next succeeding Business Day)
to the  parties at the  respective  addresses  set forth  below or at such other
addresses as each party shall inform the other in writing.

 If to Seller to:               Janet J. Hemming
                                Senior Vice president
                                First Union National Bank
                                1525 West W.T. Harris Boulevard
                                Charlotte, North Carolina  28288-0909
                                Facsimile:  (704) 590-0997

 with a copy to:                Mark C. Treanor, Esq.
                                Executive Vice President

                                       43
<PAGE>

                                 and General Counsel
                                First Union Corporation
                                One First Union Center
                                Charlotte, North Carolina 28288-0013
                                Facsimile: (704) 374-3425

 If to Buyer to:                James H. Garner
                                First Bancorp
                                Post Office Box 508
                                Troy, North Carolina  27371-0508
                                Facsimile: (910) 576-0662

 with a copy to:                Henry H. Ralston
                                Robinson, Bradshaw & Hinson, P.A.
                                101 North Tryon Street
                                        Suite 1900
                                Charlotte, North Carolina  28246
                                 Facsimile:  (704) 373-3913

   11.10       Expenses.
               --------

                             Unless  specifically stated to the contrary in this
Agreement,  each  party  will  assume and pay for the  expenses  it incurs  with
respect to the purchase and sale of the Assets
and assumption of the Liabilities  under this Agreement,  including any expenses
relating to the regulatory  application process. Each party shall be responsible
for any fee payable to any agent,  broker or finder acting on its behalf in this
transaction.

               11.11 Communications.
                     --------------

                             During the period  from the date of this  Agreement
to the Closing Date,  Buyer and Seller shall not communicate with the Employees,
depositors, or customers of the Branches,
except as specifically  required by the relevant  regulatory agencies as part of
the approval process, or as specifically provided for herein:

                              (a) As soon as  practicable  following the date of
this  Agreement,  Seller and Buyer  shall  jointly  communicate,  at Buyer's and
Seller's  equal  expense,  with the  Employees,  depositors  or customers of the
Branches advising them of the transactions  contemplated by this Agreement. Such
communication  shall  be in form  and  substance  mutually  satisfactory  to the
parties  hereto  and to  any  regulatory  authorities  as  may  be  required  by
applicable law or regulation. Any and all public announcements or press releases
by either party must comply with Section 11.12 of this Agreement.

                                       44
<PAGE>

                              (b)  With  the  exception  of  the  communications
provided for in paragraph (a) above, and in Section 8.1 (to the extent necessary
to convey an offer of employment)  and Section 8.3 (regarding  training),  Buyer
may not  communicate  with the Employees,  depositors and other customers of the
Branches prior to the Closing Date without the prior written  consent of Seller.
Any such permitted communications may not interrupt or interfere with the normal
operations of the Branches, and shall be at Buyer's sole cost and expense.

                              (c) In addition to the communications provided for
in paragraph (a) above,  Seller at its own cost and expense may communicate with
the Employees,  depositors and other customers of the Branches at such times and
in  such  form  as  deemed  appropriate  by  Seller;   provided,  that  no  such
communication  shall  recommend  any  actions  by any  person  that  shall be in
contravention with the terms of this Agreement or reflect adversely upon Buyer.

               11.12 Public Announcements.
                     --------------------

                             Each  party  shall  consult  with the other  before
making  any  announcement  or other  public  communication  with  respect to the
transactions contemplated by this Agreement and,
prior to such announcement or other public  communication,  shall mutually agree
upon the substance and timing thereof.

               11.13 Governing Law; Jurisdiction.
                     ---------------------------

                     This Agreement and the legal relations  between the parties
shall be governed by and construed in  accordance  with the laws of the State of
North Carolina applicable to contracts
made and to be performed entirely within the State of North Carolina.

               11.14 No Third Party Beneficiaries.
                     ----------------------------

                                       45
<PAGE>

                             The parties  intend that this  Agreement  shall not
benefit  or create  any  right or cause of action in or on behalf of any  Person
other than Seller and Buyer.

<PAGE>

               IN WITNESS  WHEREOF,  each of the parties to this  Agreement  has
caused this Agreement to be executed by a duly authorized officer as of the date
written on page one of this Agreement.

                                                FIRST BANCORP

                                                By: /s/ James H. Garner
                                                    ---------------------
                                                    James H. Garner
                                                Its: Pres. CEO

                                                FIRST UNION NATIONAL BANK

                                                By: /s/ Janet J. Hemming
                                                    --------------------
                                                    Janet J. Hemming
                                                Its: Sr. Vice President

<PAGE>
                                                                      EXHIBIT B

                            FORM OF CLOSING STATEMENT

Amount of Liabilities                Settlement Amount
---------------------                -----------------

Principal Amount of Deposits         _______________

Accrued Interest                     _______________

(Less) Value of Assets
and Amount of Premium

Owned Real Property                  (_______________)

Fixed Assets                         (_______________)

Cash on Hand                         (_______________)

Cash Reserve Loans                   (_______________)

Loans                                (_______________)

Overdrafts                           (_______________)

Amount of Premium                    (_______________)

(Less) Plus Taxes                    (_______________)

(Less) Plus Prorated Tax and Expense
                        Items        (_______________)

                                     =======================================
Payment Amount
                                     _______________

                                       B-1
<PAGE>

                                                                       EXHIBIT C
                       FORM OF ADJUSTED CLOSING STATEMENT

                                                   Settlement        Adjusted
Amount of Liabilities                                Amount           Amount

Principal Amount of Deposits
                                                   ------------     ------------

Accrued Interest
                                                   ------------     ------------
(Less) Value of Assets
and Amount of Premium

Owned Real Property                                 (_________)      (________)

Fixed Assets                                        (__________)     (________)

Cash on Hand                                        (__________)     (________)

Cash Reserve Loans                                  (__________)     (________)

Loans                                               (          )     (        )

Overdrafts                                          (__________)     (________)

Amount of Premium                                   (__________)     (________)

(Less) Plus Taxes                                   (__________)     (________)

(Less) Plus Prorated Tax and Expense
                        Items                       (__________)     (________)

                               Adjustment Payment

Settlement Payment Amount
                                         ----------------    ----------------

Increase (Decrease) from
Settlement Payment Amount
                                         ----------------    ----------------

Payment of Training Expenses
                                         ----------------    ----------------

Total Increase (Decrease)
and Reimbursement
                                         ----------------   -----------------

Interest
                                         ----------------    ----------------

Amount Due from Seller
(Buyer)
                                         ----------------    ----------------

(Total Adjustment Payment)
                                         ----------------    ----------------

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