Document:

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                                                                  EXECUTION COPY
                            SHARE EXCHANGE AGREEMENT

                          DATED AS OF OCTOBER 31, 1996

                                  BY AND AMONG

                          THAXTON INSURANCE GROUP, INC.

                                 SHAREHOLDERS OF
                          THAXTON INSURANCE GROUP, INC.

                                       AND

                             THE THAXTON GROUP, INC.
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                                TABLE OF CONTENTS

                                                                            Page

                                    ARTICLE I
                               EXCHANGE OF SHARES

1.01          Exchange of Shares..............................................1
1.02          Further Assurances..............................................2

                                   ARTICLE II
                               METHOD OF EXCHANGE

2.01          Exchange Value..................................................2
2.02          Manner of Delivery..............................................2

                                   ARTICLE III
                                     CLOSING
 ..............................................................................2

                                   ARTICLE IV
                      DOCUMENTS TO BE DELIVERED AT CLOSING

4.01          Deliveries by Shareholders......................................3
4.02          Deliveries by Thaxton...........................................3

                                    ARTICLE V
                 REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS

5.01          Organization; Good Standing.....................................4
5.02          Corporate Documents; No Conflicts...............................4
5.03          Power; Authority................................................5
5.04          Capitalization; Title...........................................5
5.05          Financial Statements............................................6
5.06          Accounting Matters..............................................6
5.07          Taxes...........................................................7
5.08          Material Adverse Changes........................................8
5.09          Material Events.................................................9
5.10          Condition and Title to Assets................................. 10
5.11          Compliance with Law; Litigation............................... 11
5.12          Employee Plan................................................. 12
5.13          Licenses, Etc................................................. 12
5.14          Investments................................................... 12
5.15          Intellectual Property Rights.................................. 12
5.16          Material Contracts and Obligations............................ 12
5.17          Compliance With Other Instruments............................. 14
5.18          Insurance..................................................... 15
5.19          No Consents Required.......................................... 15
5.20          Customer Lists, Expirations and Renewals;
              Validity of Policies.......................................... 15
5.21          Investment Representations and Warranties..................... 15
5.22          Disclosure.................................................... 16

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                                   ARTICLE VI
                    REPRESENTATIONS AND WARRANTIES OF THAXTON

 6.01          Organization; Good Standing................................... 16
 6.02          Power; Authority.............................................. 17
 6.03          Conflicting Agreements........................................ 17
 6.04          Thaxton Shares................................................ 17
 6.05          Material Adverse Changes...................................... 17
 6.06          Disclosure.................................................... 17
 6.07          Investment Intent............................................. 18

                                   ARTICLE VII
             COVENANTS OF THE ACQUIRED COMPANY AND THE SHAREHOLDERS

 7.01          Conduct of Business........................................... 18
 7.02          No Dividends on Shares; No Share Transfers.................... 18
 7.03          Governmental Filings.......................................... 19
 7.04          Assistance.................................................... 19
 7.05          Access........................................................ 19
 7.06          Material Agreements........................................... 19
 7.07          Employee Benefit Plans........................................ 19
 7.08          Tax Matters................................................... 19

                                  ARTICLE VIII
                       SHAREHOLDERS' CONDITIONS PRECEDENT

 8.01          Thaxton's Representations, Warranties and
               Covenants..................................................... 20
 8.02          No Actions.................................................... 20
 8.03          Consents and Approvals........................................ 20
 8.04          Inquiries; Investigations..................................... 20
 8.05          Deliveries.................................................... 20
 8.06          Material Adverse Change....................................... 20
 8.07          Capitalization of Thaxton..................................... 20

                                   ARTICLE IX
                              COVENANTS OF THAXTON

 9.01          Governmental Filings.......................................... 21
 9.02          Assistance.................................................... 21

                                    ARTICLE X
                         THAXTON'S CONDITIONS PRECEDENT

 10.01         Shareholders' Representations, Warranties and
               Covenants..................................................... 21
 10.02         No Actions.................................................... 21
 10.03         Consents and Approvals........................................ 21
 10.04         Inquiries; Investigations..................................... 22
 10.05         Material Adverse Change....................................... 22
 10.06         Approval of Acquired Company's Board of
               Directors and Shareholders.................................... 22
 10.07         Deliveries.................................................... 22

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                                   ARTICLE XI
                                   TERMINATION

 11.01         Methods of Termination........................................ 22
 11.02         Effect of Termination......................................... 23

                                   ARTICLE XII
                            SURVIVAL; INDEMNIFICATION

 12.01         Survival...................................................... 23
 12.02         Indemnification............................................... 24
 12.03         Consent to Jurisdiction....................................... 24

                                  ARTICLE XIII
                                     GENERAL

 13.01         Entire Agreement; Modifications............................... 25
 13.02         Binding Effect................................................ 25
 13.03         Public Announcements.......................................... 25
 13.04         Counterparts.................................................. 25
 13.05         Costs and Expenses............................................ 25
 13.06         Notices....................................................... 26
 13.07         Governing Law................................................. 26
 13.08         Severability.................................................. 27
 13.09         Knowledge..................................................... 27

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                            SHARE EXCHANGE AGREEMENT

         THIS SHARE EXCHANGE  AGREEMENT (the  "Agreement")  dated as of the 31st
day of October,  1996 is by and among  THAXTON  INSURANCE  GROUP,  INC., a South
Carolina  corporation  (the "Acquired  Company"),  JAMES D. THAXTON,  WILLIAM H.
THAXTON and CALVIN L. THAXTON, JR. (each such person being individually referred
to herein as a "Shareholder"  and  collectively as the  "Shareholders")  and THE
THAXTON GROUP, INC., a South Carolina corporation ("Thaxton").

          WHEREAS, the Shareholders are the owners of 300 shares of issued and
outstanding common shares of the Acquired Company, par value $1.00 per share,
representing 100% of the issued and outstanding common shares of the Acquired
Company (the "Acquired Company Shares").

          WHEREAS, the Shareholders are the owners of 408,332 shares of issued
and outstanding Series A preferred shares of the Acquired Company, no par value,
representing 100% of the issued and outstanding Series A preferred shares of the
Acquired Company (the "Series A Preferred Shares").

          WHEREAS, the Acquired Company is engaged in the business of acting as
agent and broker in the sale of various types of insurance (collectively, the
"Business").

          WHEREAS, Thaxton desires to issue common shares of Thaxton to the
Shareholders in exchange for their common shares of the Acquired Company and
Series A Preferred Shares, and the Shareholders desire to so exchange their
common shares of the Acquired Company for common shares of Thaxton (the
"Transactions") in a transaction intended to qualify as a reorganization within
the meaning of Section 368(a)(1)(B) of the Internal Revenue Code, as amended,
such that following such exchange the Acquired Company shall be a wholly-owned
subsidiary of Thaxton.

          NOW THEREFORE, for and in consideration of the premises and mutual
promises contained herein and intending to be legally bound, the Acquired
Company, the Shareholders and Thaxton hereby agree as follows:

                                    ARTICLE I
                               EXCHANGE OF SHARES

          1.01 Exchange of Shares. Each of the Shareholders hereby agrees to
exchange all of his Acquired Company Shares and Series A Preferred Shares on the
terms and conditions herein set forth. Thaxton, in reliance upon the
representations and warranties of the Shareholders and the covenants of the
Shareholders and the Acquired Company contained herein and subject to the terms
and conditions of this Agreement, hereby agrees to exchange its common shares
for Acquired Company Shares and Series A Preferred Shares in the manner provided
in Article II hereof.

          1.02 Further Assurances. Each party hereto will execute such further
documents and instruments and take such further actions as may reasonably be
requested by one or more of the others to consummate the Transactions.

                                   ARTICLE II
                               METHOD OF EXCHANGE

          2.01 Exchange Value. In exchange for the Acquired Company Shares and
the Series A Preferred Shares, Thaxton shall issue to the Shareholders an
aggregate of Three Hundred Thousand (300,000) common shares of Thaxton, par
value $0.01 per share, (the "Thaxton Shares") and deliver such shares in the
manner provided in Section 2.02. Each of the Shareholders is exchanging 100
Acquired Company Shares and the number of Series A Preferred Shares referenced
on Exhibit A attached hereto, and shall, in accordance with this Article II, be
issued in exchange One Hundred Thousand (100,000) Thaxton Shares.

          2.02  Manner of Delivery.

                  (a) On the Closing Date (as hereinafter defined), Thaxton
          shall cause to be issued to each of the Shareholders One Hundred
          Thousand (100,000) properly issued, authorized, executed and
          countersigned Thaxton Shares.

                  (b) On the Closing Date, each Shareholder shall surrender to
          Thaxton a certificate(s) representing the Acquired Company Shares (the
          "Common Certificate(s)") representing all of such holder's Acquired
          Company Shares and a certificate(s) representing the Series A
          Preferred Shares (the "Preferred Certificate(s)"), together with an
          appropriate letter(s) of transmittal duly executed.

                  (c) All exchanges of Thaxton Shares in respect of Acquired
          Company Shares and the Series A Preferred Shares that are made in
          accordance with the terms of this Article II and Article XII hereof
          shall be deemed to have been made in full satisfaction of all rights
          pertaining to such Acquired Company Shares and the Series A Preferred
          Shares except for such other rights as are specified in this
          Agreement.

                                   ARTICLE III
                                     CLOSING

          The closing (the "Closing") of the Transactions shall occur on October
31, 1996 (the "Closing Date") at the place specified by Thaxton; provided,
however, nothing contained herein shall obligate any party to close hereunder if
any of the conditions to such party's obligation to close (as set forth in
Article VIII or Article X hereof, as appropriate) is not satisfied.

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                                   ARTICLE IV
                      DOCUMENTS TO BE DELIVERED AT CLOSING

          4.01 Deliveries by Shareholders. At the Closing, the Shareholders and
the Acquired Company shall deliver, or cause to be delivered, to Thaxton all of
the following documents and instruments:

                  (a)       Original Common Certificate(s) representing all the
          common stock of the Acquired Company.

                  (b)       Original Preferred Certificate(s) representing all
          the Series A Preferred Stock of the Acquired Company.

                  (c) Original notarized Power of Attorney appointing James D.
          Thaxton as the attorney-in-fact of each Shareholder duly executed by
          each Shareholder, in the form attached hereto as Exhibit B, evidencing
          the irrevocable authority of James D. Thaxton to act for and on behalf
          of each Shareholder for all purposes of this Agreement and the
          Transactions.

                  (d) A noncompetition agreement between the Shareholders and
          Thaxton in the form of the agreement attached hereto as Exhibit C (the
          "Noncompetition Agreement"), duly executed by the Shareholders.

          4.02 Deliveries by Thaxton. At the Closing, Thaxton shall deliver, or
cause to be delivered, to the Shareholders all of the following documents and
instruments:

                  (a) Three original share certificates each representing One
          Hundred Thousand (100,000) shares of Thaxton Shares. One of each such
          certificates shall be in the name of each Shareholder (the "Thaxton
          Certificates").

                  (b) A certificate of existence issued by the Secretary of
          State of South Carolina, issued as of the date within three (3)
          business days of the Closing Date, evidencing that Thaxton is a
          corporation in good standing under the laws of the State of South
          Carolina.

                  (c) A certificate executed by the Secretary of Thaxton in the
          form of Exhibit D hereto (i) attaching a copy of the corporate
          resolutions adopted by the Board of Directors of Thaxton authorizing
          the execution, delivery and performance of this Agreement and
          consummation of the Transactions by Thaxton, (ii) confirming the
          incumbency of all officers executing this Agreement or other documents
          and instruments executed by Thaxton at Closing, and (iii) attaching
          copies of the Articles of Incorporation and Bylaws of Thaxton and
          certifying as to the accuracy and completeness of such corporate
          documents.

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                                    ARTICLE V
                         REPRESENTATIONS AND WARRANTIES
                                 OF SHAREHOLDERS

          Each Shareholder represents and warrants to Thaxton as follows, it
being understood and agreed, however, that (a) each Shareholder severally (and
not jointly) makes the representations and warranties hereinafter set forth in
Sections 5.03, 5.04, 5.06 and 5.23 hereof, and (b) each Shareholder, jointly and
severally, with all other Shareholders, makes those other representations and
warranties set forth in this Article V:

          5.01 Organization; Good Standing. Except as disclosed in Schedule 5.01
hereto, the Acquired Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of South Carolina and has full
power and authority to own its properties and to carry on its business as now
conducted, the Acquired Company is in good standing and duly qualified to
conduct business as a foreign corporation in the State of North Carolina and the
Acquired Company is in good standing and duly qualified to do business as a
foreign corporation in each of the other jurisdictions in which the character of
the business conducted by it or the location of the properties owned by it makes
such qualification necessary and in which the failure to be so qualified,
individually or in the aggregate, could reasonably be expected to (a) have a
material adverse effect on the Acquired Company's consolidated financial
condition, results of operation, assets, liabilities, or net worth, or (b)
require the payment by the Acquired Company of a material amount of additional
taxes or associated penalties.

          5.02 Corporate Documents; No Conflicts. True and correct copies of the
Acquired Company's by-laws and the Acquired Company's articles of incorporation,
all as currently in effect, have been made available to Thaxton. Copies of the
minute books and share records of the Acquired Company have been made available
to Thaxton and such copies were complete and accurately reflect in all material
respects all proceedings of the shareholders and directors of the Acquired
Company and ownership of all outstanding shares, options, warrants and other
rights to acquire shares of the Acquired Company. Neither the execution of this
Agreement by the Shareholders and the Acquired Company nor the consummation of
the Transactions by the Shareholders and the Acquired Company will constitute or
cause a breach or violation of (i) the Acquired Company's articles of
incorporation or by-laws, (ii) subject to obtaining those consents and/or
approvals or the giving of any notice referred to in Schedule 5.19 herein, any
law, rule, or order having the force of law applicable to the Acquired Company,
(iii) subject to obtaining those consents and/or approvals or the giving of any
notice referred to in Schedule 5.19 herein, any agreement, contract, or
understanding to which the Acquired Company is a party or by which the Acquired
Company's properties may be bound, or (iv) subject to obtaining those consents
and/or approvals or the giving of any notice of making of any policy referred to
in Schedule 5.19 herein, any other material duties or obligations

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binding upon the Acquired Company or affecting any of its properties, or cause a
lien or other encumbrance to attach to any of its properties.

          5.03  Power; Authority.

                  (a) Each Shareholder has full power, authority and the legal
          capacity to enter into this Agreement and the other agreements,
          documents and instruments contemplated hereby to which such
          Shareholder is a party and to consummate the Transactions, and this
          Agreement and such other agreements, documents and instruments have
          been (or will be) duly executed and delivered by such Shareholder and
          are (or will be) the valid and legally binding obligations of such
          Shareholder enforceable in accordance with their terms. Neither the
          execution of this Agreement or such other documents by such
          Shareholder nor the consummation of the Transactions will constitute
          or cause a breach or violation of any agreements, covenants, or
          obligations binding upon such Shareholder and affecting the Acquired
          Company Shares or the Series A Preferred Shares owned by such
          Shareholder. No consent of any other party is required for the
          Transactions and the documents executed by such Shareholder in
          connection herewith to be valid and legal binding obligations of such
          Shareholder.

                  (b) The Acquired Company has full power, authority and legal
          capacity to enter into this Agreement and the other agreements,
          documents and instruments contemplated hereby to which the Acquired
          Company is a party and to consummate the Transactions. This Agreement
          and such other agreements, documents and instruments have been (or
          will be) duly executed and delivered by the Acquired Company and are
          (or will be) valid and legally binding obligations of the Acquired
          Company enforceable in accordance with the their terms.

          5.04  Capitalization; Title.

                  (a) The Acquired Company's authorized capitalization consists
          of Four Hundred (400) common shares having no par value per share, of
          which Three Hundred (300) shares are issued and outstanding.

                  (b) Each Shareholder is the true and lawful beneficial and
          record owner of One Hundred (100) of the Acquired Company Shares and
          such shares are owned by such shareholder free and clear of all liens,
          security interests, charges, options, agreements, and encumbrances.

                  (c) Each Shareholder is the true and lawful beneficial and
          record owner of that number of Series A Preferred Shares indicated on
          Exhibit A attached hereto.

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                  (d) All of the Acquired Company Shares are validly issued,
          fully paid, and nonassessable and there are, and shall be as of or on
          the Closing Date, no options, calls, warrants, or any other
          securities, rights or common share equivalents outstanding, which are
          convertible into, exercisable for or relate to, any capital shares of
          the Acquired Company. All Acquired Company Shares were issued in
          compliance with all applicable federal and state securities laws,
          rules, and regulations.

          5.05 Financial Statements. True and correct copies of (i) the audited
consolidated balance sheets for the fiscal years of Acquired Company ended
December 31, 1993 and 1994; all of which include the notes and supplementary
information thereto and the reports prepared in connection therewith by Thompson
and Davis, the independent certified public accountant reporting thereon, (ii)
the audited consolidated balance sheet, the related audited consolidated
statement of income and retained earnings and audited consolidated statement of
cash flows for, the fiscal year of the Acquired Company ended December 31, 1995;
all of which include the notes and supplementary information thereto and the
reports prepared in connection therewith by KPMG Peat Marwick LLP ("Peat
Marwick"), the independent certified public accountants reporting thereon (the
December 31, 1995, 1994, and 1993 financial statements listed in (i) and (ii)
above are referred to herein as the "Annual Financial Statements"), and (iii)
the unaudited balance sheet and related statement of income and retained
earnings and cash flows, calculated on an accrual basis as of and for the last
day of each month since December 31, 1995 (the "Stub Financial Statements")
(collectively, the Annual Financial Statements, and the Stub Financial
Statements are referred to as the "Financial Statements") have been made
available to Thaxton. The Financial Statements present accurately and fairly the
Acquired Company's financial position, and, for fiscal 1995 and periods
thereafter, results of operations, and cash flows of the Acquired Company as of
the respective dates and for the respective periods stated therein. The
Financial Statements have been prepared pursuant to and in accordance with
generally accepted accounting principles ("GAAP"), in effect at their respective
dates of preparation, applied on a consistent basis. The Acquired Company does
not have any material liabilities, individually or in the aggregate, which have
not been disclosed in the Schedules attached to this Agreement.

          5.06 Accounting Matters. Except as provided in this Agreement, no
Shareholder is a party to any agreement regarding the sale, assignment or
transfer of any Acquired Company Shares. No Shareholder has traded in Thaxton
Shares during the thirty (30) days period prior to the date hereof and, as of
the Closing, no Shareholder shall have traded in Thaxton Shares during the
thirty (30) day period prior to Closing. The Acquired Company has not engaged in
any transactions with respect to treasury shares during the two (2) years prior
to the date hereof.

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          5.07  Taxes.

                  (a) All federal, state, local and foreign tax and information
          returns, declarations, reports, estimates, information statements, and
          other documentation (including any additional or supporting material)
          filed or maintained, or required to be filed or maintained by the
          Acquired Company, in connection with the calculation, determination,
          assessment or collection of Taxes as defined herein ("Returns") have
          been and will be filed by the Acquired Company within the time and in
          the manner prescribed by law and such Returns reflect, in all material
          respects, the income tax liability, and other tax liability and all
          other information required to be reported thereon.

                  (b) The Acquired Company, its employees, the Shareholders, its
          outside accountants, and any tax advisors utilized by the Acquired
          Company or Shareholders will fully cooperate with Thaxton, in the
          complete, accurate, and timely preparation of any additional Returns
          which are due after the Closing Date and which include taxable periods
          through and including the Closing Date.

                  (c) For purposes of this Agreement, "Taxes" shall mean all
          taxes, charges, levies or other assessments of whatever kind or
          nature, including without limitation, all net income, gross income,
          gross receipts, sales, use, service, ad valorem, value added,
          transfer, franchise, profits, license, withholding, payroll,
          employment, social security, workers' compensation, unemployment
          compensation, excise, estimated, severance, stamp, occupancy or
          property taxes, customs duties, fees, assessments or charges of any
          kind whatsoever (together with any interest and any penalties,
          additions to tax or additional amounts) imposed by any taxing
          authority (domestic or foreign) upon the Acquired Company.

                  (d) No deficiency for any Taxes has been proposed, asserted or
          assessed against the Acquired Company which has not been resolved and
          paid in full. No Returns have been audited or, to the Shareholders'
          knowledge, are the subject of any federal, state, local or foreign
          audits or other administrative proceedings or court proceedings. The
          Acquired Company has not (i) made requests for rulings, requests for
          changes in accounting methods, subpoenas, or request for information
          pending with respect to any taxing authority or (ii) granted any power
          of attorney that is currently in force with respect to any matter
          relating to Taxes. There are not in effect any waivers or comparable
          consents by the Acquired Company regarding the application of statutes
          of limitations or deadlines for assessments of any Taxes.

                  (e)  There are no liens, security interests,
          encumbrances, or other claims on any of the assets or

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          properties of the Acquired Company that arose in connection with any
          failure (or alleged failure) to pay Taxes.

                  (f) The Acquired Company has withheld and paid to the proper
          governmental authorities, within the time and manner prescribed by
          law, all Taxes required to have been withheld under all applicable
          laws and paid in connection with amounts paid or owing to any
          employee, independent contractor, creditor, shareholder, or other
          third party.

                  (g) No Shareholder expects any authority to assess any
          additional Taxes against the Acquired Company for any period for which
          Returns have been filed.

                  (h) The Acquired Company is not a party to any tax allocation
          or tax sharing agreement, and the Acquired Company does not owe any
          amount under any tax-sharing or allocation agreement. The Acquired
          Company (i) has not been a member of an affiliated group within the
          meaning of Section 1504 of the Code filing a consolidated federal
          income tax return, and (ii) does not have any liability for Taxes of
          any person under Treasury Regulation 1.1502-6 (or any similar
          provision of state, local, or foreign law), as a transferee or
          successor by contract or otherwise.

                  (i) The Acquired Company has not taken any action that would
          have the effect of deferring any liability for Taxes for the Acquired
          Company from any taxable period ending on or before the Closing Date
          to any taxable period ending thereafter.

                  (k) None of the income recognized for federal, state, local,
          foreign, or other income tax purposes by the Acquired Company during
          the period ending on the Closing Date will (i) be derived other than
          in the ordinary course of business, or (ii) arise from transactions of
          a type not reflected in the relevant Returns for the last taxable
          period.

                  (l) No stock or share transfer tax, real estate transfer tax,
          sales tax or use tax shall become due to any taxing authorities in the
          State of South Carolina as a result of the Transactions.

          5.08 Material Adverse Changes. Since December 31, 1995, there have not
been any material adverse changes in the consolidated financial condition, the
results of operation, assets, liabilities or net worth of the Acquired Company.
Further, there has been no material adverse change in the Acquired Company's
assets or liabilities, in the relationships and agreements between the Acquired
Company, the Shareholders and any insurance carriers or under any contract, or
on or in the Acquired Company's business, financial prospects or condition,
financial or otherwise, since December 31, 1995. Since December 31, 1995, the
business affairs
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of the Acquired Company have been conducted in the usual and
ordinary course.

          5.09  Material Events.  Except as set forth in Schedule 5.09,
since December 31, 1995, there have not been:

                  (a) Any destruction, damage to, or loss of or casualty with
          respect to any of the assets or properties of the Acquired Company,
          whether or not covered by insurance, which could reasonably be
          expected to have a material adverse effect on the Acquired Company;

                  (b)  any material change in the accounting policies,
          methods or practices by the Acquired Company;

                  (c) any actions by the Acquired Company pursuant to which the
          Acquired Company has issued, sold or otherwise disposed of or agreed
          to issue, sell or otherwise dispose of any capital shares or any other
          security of the Acquired Company, or issued, sold, or granted or
          agreed to issue, sell, or grant any option, warrant or other right to
          subscribe for or to purchase any capital shares or other security of
          the Acquired Company;

                  (d) any declaration or payment of any dividends on or any
          distribution (whether in cash or property) in respect of the Acquired
          Company's capital shares, or any purchase, redemption, or other
          acquisition by the Acquired Company of any of the Acquired Company's
          capital shares or agreement or authorization to do any of the
          foregoing;

                  (e)  any sales or transfers of any assets or properties
          of the Acquired Company, except in the ordinary course of
          business;

                  (f) any execution of any new, or any amendments to or
          terminations of any existing material contracts, agreements, or leases
          or any permits or licenses to which the Acquired Company is a party or
          of which the Acquired Company is the beneficiary;

                  (g)  any loans by the Acquired Company to any person or
          entity or any guaranty by the Acquired Company of any loan to
          any person or entity;

                  (h)  any issuance of evidence of indebtedness by the
          Acquired Company, except in the ordinary course of business;

                  (i) any grant or creation of security interests, liens,
          mortgages, pledges, or other encumbrances (other than the liens, if
          any, for taxes and assessments not yet delinquent or being contested
          in good faith by appropriate proceedings) on any assets or properties
          of the Acquired Company;

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                  (j) except in the ordinary course of business and consistent
          with past practice, any changes in benefits provided to, or increase
          in compensation payable to, the directors, officers, employees, or
          agents of the Acquired Company (e.g. salary, bonuses, etc.);

                  (k)  any written waivers or written releases of or
          settlements of any material claims of or against the Acquired
          Company;

                  (l) Any incurrence of any liabilities in excess of $10,000 in
          the aggregate by the Acquired Company, other than liabilities incurred
          in the ordinary course of the Acquired Company's business consistent
          with past practice (none of which results from, arises out of, or was
          caused by any breach of a material contract, breach of warranty, tort,
          infringement, or violation of law); or

                  (m) Any agreements (written or oral) by the Acquired Company
          to do any of the things described in the preceding clauses (a) through
          (l).

          5.10  Condition and Title to Assets.

                  (a) The Financial Statements reflect all of the assets and
          properties owned or used by the Acquired Company in their respective
          businesses, except for (i) property acquired or disposed of in the
          ordinary course of business since the dates thereof, (ii) assets and
          properties leased by the Acquired Company under and pursuant to
          operating leases or similar arrangements, and (iii) items which have
          been purchased and expensed or are not required to be reflected on the
          Financial Statements pursuant to GAAP. The Acquired Company does not
          own, and has never owned, any fee interest in any real property. The
          Acquired Company has good and equitable title to all leasehold estates
          (required to be capitalized under Statement of Financial Accounting
          Standards No. 13) and good and marketable title to all personal
          property in each case that is used in the conduct of the Acquired
          Company's business or reflected on the Financial Statements, free and
          clear from all mortgages, liens, encumbrances, pledges and security
          interests, except for those mortgages, liens, encumbrances, pledges,
          and security interests which have been made available for inspection
          by Thaxton.

                  (b) (i) To the knowledge of the Shareholders, all buildings,
          structures, fixtures, and improvements upon, and all utilities
          serving, the real property used by the Acquired Company are in good
          condition and repair in all material respects, ordinary wear and tear
          excepted, and (ii) all equipment and other personal property owned or
          used by the Acquired Company or any affiliate are in good operating
          condition in all material respects, ordinary wear and tear excepted.
          To the knowledge of the Shareholders, the real

                                       10
<PAGE>

          property, buildings, structures, and fixtures used by the Acquired
          Company are in compliance, in all material respects, with all
          applicable zoning, land use, health and safety or other applicable
          restrictions, and with all restrictions, covenants, and conditions to
          which they are subject. To the knowledge of the Shareholders, there
          are no zoning or land use restrictions presently in effect or proposed
          by any governmental authority, which would materially impair the
          Acquired Company's current and intended use of the real property
          occupied or used by the Acquired Company on the date hereof.

                  (c) All of the inventory of the Acquired Company has been
          reflected in the Financial Statements pursuant to and in accordance
          with GAAP consistently applied.

                  (d) The notes receivable and accounts receivable of the
          Acquired Company reflected on the Financial Statements were, when they
          arose, and all notes receivable and accounts receivable thereafter
          acquired by the Acquired Company prior to the Closing Date shall be,
          the result of bona fide, routine transactions of the Acquired company
          involving the sale of insurance in the ordinary and usual course of
          the Business, bona fide notes receivable and accounts receivable of
          the Acquired Company fully collectable except to the extent reserved
          against in the financial books and records of the Acquired Company in
          accordance with GAAP, consistently applied.

          5.11 Compliance with Law; Litigation. The Acquired Company, with
regard to its business and its assets and business practices, has complied and
is in compliance, in all material respects, with all applicable laws,
regulations (including all South Carolina insurance statutes and regulations),
and other requirements of governmental authorities and (i) no investigation,
governmental or administrative proceeding or other litigation of any kind or
nature to which the Acquired Company is or may be a party is now pending or, to
the knowledge of the Shareholders, threatened, and (ii) no claim which has not
proceeded to litigation or other proceeding has been made or, to the knowledge
of the Shareholders, threatened against the Acquired Company. Specifically, but
without limitation, there are no pending or threatened (i) investigations,
charges, actions or proceedings by the South Carolina Department of Insurance
involving the Acquired Company, or any of their business transactions,
activities, practices or licenses, or (ii) claims, suits, complaints or
proceedings by any insurance customer of the Acquired Company involving any
alleged negligent or wrongful act or omission by or otherwise involving the
Acquired Company or any Shareholder, or any agent or employee of or person
associated with the Acquired Company. There are no judgments, orders,
stipulations, injunctions, decrees, stipulations or awards against the Acquired
Company or any of the above persons which affect the Acquired Company or the
effect of which is or will be to limit, restrict, regulate, enjoin or prohibit
any business practice or activity of the Acquired Company.

                                       11
<PAGE>

          5.12  Employee Plan.  The Acquired Company has no employee or
similar plan other than a 401(k) plan (the "Employee Plan").

          5.13  Licenses, Etc.

          (a) The Acquired Company has in effect those franchises, licenses,
permits, authorizations, and agreements (collectively, "Licenses") which are
necessary for the continued ownership and operation of its business and its
assets in the manner in which they have heretofore been owned and operated.
There are no outstanding or pending (or to the knowledge of the Shareholders
threatened) administrative or judicial proceedings involving the Acquired
Company or its assets related to or arising out of its failure to obtain or
comply with the terms and conditions of any license.

          (b) The Acquired Company is duly licensed by the Commissioner of
Insurance of South Carolina, and the appropriate licensing authorities of any
other states where the nature of the Acquired Company's business activities
requires the issuance of a license to act as an insurance agent and broker; and,
the Acquired Company and each of its officers, employees and agents whose
activities result in the requirement that they be licensed, hold all such
licenses as are required by applicable law for it or them to make applications
for, procure, negotiate for or place for others, any policies for each of the
types of insurance dealt with by the Acquired Company. Each of those licenses
currently is in full force and effect and has not been revoked, and, to the
extent required to be licensed, the Acquired Company and each such individual is
in good standing as a licensed agent and/or broker under the insurance laws and
regulations of South Carolina.

          5.14 Investments. Except as identified on Schedule 5.14 (which
reflects the Acquired Company's ownership percentages) and 138,890 Thaxton
Shares, the Acquired Company has no subsidiaries and does not, directly or
indirectly, possess any interest or have an investment in any corporation,
partnership, joint venture, trust or other business or have any investment in
cash or securities or other investment assets.

          5.15 Intellectual Property Rights. All intellectual property rights
(including, without limitation, patents, trademarks, service marks, trade names,
designs, copyrights, proprietary know-how, trade secrets, and proprietary rights
and processes) used by the Acquired Company (collectively, the "Intellectual
Property Rights") are either owned by the Acquired Company or are used by the
Acquired Company pursuant to valid licenses or other rights granted to the
Acquired Company. No intellectual property rights, other than the Intellectual
Property Rights, are required for the Acquired Company to conduct the Business
as presently conducted.

          5.16  Material Contracts and Obligations.  All agreements,
contracts, indebtedness, liabilities, and other obligations to
which the Acquired Company is a party or by which it is bound and
which are material to the conduct and operations of the Acquired

                                       12
<PAGE>

Company's business shall be referenced herein collectively, as the "Material
Agreements" including, without limitation, the following:

                  (a) All contracts with any insurance company, carrier, broker,
          underwriter, producer, insurance agency or agent or other such firms
          or persons,

                  (b) All bank loan and line of credit agreements or other
          agreements including, without limitation, compensating balance
          agreements, with financial institutions, including any amendments,
          renewal letters, notices and waivers in connection therewith,

                  (c)       All other agreements evidencing outstanding loans
          to or by the Acquired Company,

                  (d)       All guarantees by or for the benefit of the
          Acquired Company,

                  (e)       All leases for or of real property and equipment,

                  (f) All contracts with suppliers or customers containing
          exclusivity clauses, containing sole source or requirements
          provisions, extending for a term of longer than twelve (12) months, or
          containing extended warranty agreements,

                  (g)       All sales representative agreements and agency
          agreements,

                  (h)       All insurance policies in force covering property
          of the Acquired Company, director indemnification insurance
          policies, and liability insurance policies,

                  (i)       All partnership, joint venture and investment
          agreements,

                  (j) All agreements or obligations with governments or
          governmental agencies, including military procurement contracts,
          research and development contracts and agreements relating to
          financial assistance or grants in respect of the Business,

                  (k)       All agreements with competitors and agreements
          containing noncompetition clauses,

                  (l)       All agreements pursuant to which the Acquired
          Company provides consulting or other services to any person
          or entity, and

                  (m) All agreements terminable in case of a change in control
          of the Acquired Company or requiring third party consent to a change
          of control of the Acquired Company and any other agreements not in the
          ordinary course of business or particular to the Acquired Company's
          business.

                                       13
<PAGE>

True and correct copies of the Material Agreements, as amended through the date
hereof, have been made available for inspection by Thaxton. Each Material
Agreement has been filed with and approved by the South Carolina Commissioner of
Insurance to the extent necessary under South Carolina law. All of the Material
Agreements are: (i) valid, legal and binding upon the Acquired Company, (ii) to
the knowledge of the Shareholders, legal and binding upon the other parties
thereto, and (iii) in full force and effect. No event has occurred and no state
of facts exists which is likely to result in the termination or limitation of
rights of the Acquired Company under any of the Material Agreements (including
any rights in or to or the unrestricted use and control of any customer lists,
all records concerning insurance accounts or policies obtained or compiled by
the Acquired Company during the course of its insurance business, all
expirations and records thereof (the "Expirations"), and all rights to and under
insurance policies sold by the Acquired Company and in effect on the Closing
Date and all renewals thereof). The Acquired Company has performed all
obligations required to be performed by it to date, is not in default (and would
not by the lapse of time and/or the giving of notice be in default) under the
Material Agreements or any other instrument to which it is a party, or by which
it may be bound. No other party has alleged any claim, dispute or controversy,
and the Acquired Company has not received written notice of nonrenewal,
termination, alleged nonperformance, deficient performance, defective products,
warranty claims, delay in delivery or other noncompliance by the Acquired
Company with respect to its obligations under any Material Agreement. The
Acquired Company is not a party to, or bound by, any agreement, contract or
instrument which: (i) the Acquired Company can reasonably foresee will result in
any material loss upon the performance thereof (including, without limitation,
any liability for penalties or damages, whether liquidated, direct, indirect,
incidental, or consequential, or downtime charges) which is not reflected or
adequately reserved against on the Financial Statements, or (ii) requires the
consent of, or may be terminated by, any third party in connection with or as a
result of the execution of this Agreement or the consummation of the
Transactions. To the Shareholders' and the Acquired Company's knowledge, no
other party with whom the Acquired Company has a contract or agreement, which is
of material importance to the condition (financial or otherwise), business, net
worth, assets, properties or operations of the Acquired Company, is in default
thereunder or has breached any terms thereof. Any party to a Material Agreement
that shall have the right to terminate such agreement as a result of the
Transactions shall have waived such right.

          5.17 Compliance With Other Instruments. The Acquired Company is not in
violation, breach or default of any term of its articles of incorporation or
bylaws, or in any material respect of any term or provision of any Material
Agreement to which the Acquired Company is a party or of any provision of any
foreign or domestic judgment, decree, order, statute, rule, License, permit or
regulation applicable to or binding upon the Acquired Company. The execution,
delivery and performance of and compliance with this

                                       14
<PAGE>

Agreement by the Shareholders and the Acquired Company will not result in any
such violation or be in conflict with or constitute a default under any such
term, or result in the creation of any mortgage, pledge, lien, encumbrance or
charge upon any of the properties or assets of the Acquired Company pursuant to
any such term. No employee of the Acquired Company is in violation, nor is there
any allegation of such violation, of any term of any employment contract, patent
or other proprietary information disclosure agreement or any other contract or
agreement, including, without limitation, any contract or agreement relating to
the right of any such employee to be employed by the Acquired Company because of
the nature of the business conducted or proposed to be conducted by the Acquired
Company or for any other reason, and the continued employment by the Acquired
Company of its present employees will not result in any such violation.

          5.18 Insurance. All policies of fire, liability and other types of
insurance held by the Acquired Company have been made available for inspection
by Thaxton, the premiums for the most recent period with respect to each such
policy and the dates through which the premiums have been paid. No insurance
carrier has threatened to terminate any of the insurance policies held by the
Acquired Company or to increase any premiums in respect thereof.

          5.19 No Consents Required. Except as set forth on Schedule 5.19
hereto, none of the Shareholders or the Acquired Company is required to give any
notice to any third party or to obtain the consent, approval, license or permit
of any person or entity in connection with the execution, delivery and
performance of this Agreement by the Acquired Company and the Shareholders and
the consummation of the Transactions by the Shareholders and the Acquired
Company.

          5.20 Customer Lists, Expirations and Renewals; Validity of Policies.
The Acquired Company is the true and lawful owner outright and absolutely of (i)
all customer lists, business records and other data obtained or compiled during
the course or conduct of its insurance agency and brokerage business, (ii) the
Expirations with respect to all insurance policies sold or placed by it, and
(iii) all records and renewals thereof, and the Acquired Company has the
unrestricted and unencumbered use and control of all the above pursuant to all
contracts and agreements between it and any insurance companies, underwriters,
brokers, producers, insurance agencies, agents or any other person or entity.
Neither this Agreement nor the consummation of the Transactions will affect, or
result in any reversion, incumbrance or loss of, any of the Expirations, the
Acquired company's books and records or any such rights of the Acquired Company
pursuant to any of such contracts or agreements or otherwise.

          5.21  Investment Representations and Warranties.

                  (a)       Each Shareholder has received prior to the date
          hereof copies of the following items:

                                       15
<PAGE>

                            (i) The prospectus filed with the Securities and
                  Exchange Commission ("SEC") which pertains to the registration
                  of 1,400,000 shares of Thaxton's common shares (the
                  "Registration Statement");

                            (ii) Thaxton's 10-KSB report for the fiscal year
                  ended December 31, 1995 as filed with the SEC (the "10- KSB").

                      (iii) Thaxton's 10-QSB reports for the fiscal quarters
                  ended March 31, 1996 and June 30, 1996 as filed with the SEC
                  (the "10-QSBs");

                            (iv) A statement by Thaxton describing any material
                  changes in Thaxton's affairs that are not disclosed in the
                  Registration Statement, the 10-KSB and the 10-QSBs;

                            (v)     Information regarding the limitations on
                  resale of the Thaxton Shares to be issued to the Share-
                  holders; and

                  (b) The Thaxton Shares are being exchanged solely for each
          Shareholder's own account for investment purposes only and not for the
          account of any other person and not for distribution, assignment or
          resale to others and no other person has a direct or indirect
          beneficial interest in such Thaxton Shares.

          5.22 Disclosure. No representation or warranty by the Shareholders set
forth in this Article V or in any of the agreements comprising the Exhibits
hereto contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary to make the statements
contained in this Article V or in any such Exhibit not materially misleading.

                                   ARTICLE VI
                    REPRESENTATIONS AND WARRANTIES OF THAXTON

          Thaxton represents and warrants to the Shareholders as follows:

          6.01 Organization; Good Standing. Thaxton is a corporation duly
organized, validly existing and in good standing under the laws of the State of
South Carolina. Thaxton has full power and authority to own its properties and
carry on its business as now conducted and Thaxton is in good standing and duly
qualified to conduct business as a foreign corporation in each jurisdiction in
which the character of the business conducted by it or the location of the
properties owned by it makes such qualification necessary and in which the
failure to be so qualified, individually or in the aggregate, could reasonably
be expected to (a) have a material adverse effect on Thaxton's consolidated
financial condition, results of operation, assets, liabilities, or net worth, or

                                       16
<PAGE>

(b) require the payment by Thaxton of a material amount of
additional taxes or associated penalties.

          6.02 Power; Authority. Thaxton possesses full power, authority, and
legal right to enter into and to perform under this Agreement and the other
documents contemplated hereby to which Thaxton is a party and to consummate the
Transactions, and this Agreement and such other agreements, documents and
instruments have been (or will be) duly executed and delivered by Thaxton and
are (or will be) the valid and legally binding obligations of Thaxton
enforceable in accordance with their terms. Neither the execution of this
Agreement or such other documents by Thaxton nor the consummation of the
Transactions will constitute or cause a breach or violation of any agreements,
covenants, or obligations binding upon Thaxton. No consent of any other party
which has not been obtained is required for the Transactions and the documents
executed by Thaxton in connection herewith to be valid and legal binding
obligations of Thaxton.

          6.03 Conflicting Agreements. The execution and delivery of this
Agreement by Thaxton, the consummation of the Transactions, and the performance
by Thaxton of its obligations hereunder will not be in conflict with, or result
in, or constitute a breach or default of the terms, conditions or provisions of
Thaxton's articles of incorporation or by-laws or any instrument, agreement,
mortgage, judgment, order, award, decree or other restriction to which Thaxton
is a party or by which Thaxton is bound, or any regulatory provision affecting
Thaxton, subject to obtaining those consents and/or approvals referred to in
Section 9.01 hereof. Thaxton has, on the date hereof, full power and authority
to enter into this Agreement and to do and perform all other acts and things
required to be done by it under this Agreement.

          6.04 Thaxton Shares. The Thaxton Shares for which the Acquired Company
Shares and the Series A Preferred Shares shall be exchanged, shall be duly
authorized by all necessary corporate action of Thaxton, validly issued, fully
paid and nonassessable, free and clear of all liens, encumbrances and other
claims by third parties.

          6.05 Material Adverse Changes. Since December 31, 1995, there has not
been any material adverse change in the consolidated financial condition,
results of operation, assets, liabilities or net worth of Thaxton.

          6.06 Disclosure. No representation or warranty by Thaxton set forth in
this Article VI or in any of the agreements comprising the Exhibits hereto or
the materials provided to the Shareholders by Thaxton pursuant to Section 5.23
hereof (other than the statements made in such materials with respect to
transferability of Thaxton Shares) contains or will contain any untrue statement
of a material fact, or omits or will omit to state a material fact necessary to
make the statements contained in this Article VI or in any such Exhibit or the
materials provided to the Shareholders by Thaxton pursuant to Section 5.23
hereof (other than the statements

                                       17
<PAGE>

made in the transmittal letter accompanying such materials with respect to
transferability of Thaxton Shares) not materially misleading.

          6.07 Investment Intent. Thaxton is acquiring the Acquired Company
Shares and Series A Preferred Shares to be transferred to it under this
Agreement for investment only and not with a view to the sale or distribution
thereof, and Thaxton has no commitment or present intention to liquidate the
Acquired Company or to sell or otherwise dispose of the Acquired Company Shares
or Series A Preferred Shares.

                                   ARTICLE VII
             COVENANTS OF THE ACQUIRED COMPANY AND THE SHAREHOLDERS

          From the date hereof until the Closing (the "Executory Period")
(except that the covenants set forth in Sections 7.07, 7.08 and 7.09 shall
survive and continue after the expiration of the Executory Period), the Acquired
Company and the Shareholders, jointly and severally, agree as follows:

          7.01 Conduct of Business. The Acquired Company shall and the
Shareholders shall cause the Acquired Company to, (a) carry on its business in
the usual and ordinary course, (b) use reasonable efforts to preserve its
business organization intact and conserve the good will and relationships of its
customers, and others having business relations with it, (c) conduct its
business in a manner which will cause the representations and warranties
contained in Article V to be true and correct on the Closing Date in each case,
as if made on and as of such date, (d) not grant any increases in wages,
bonuses, benefits or other compensation to any director, officer, employee or
agent, other than increases in the normal course of business consistent with
past practices, (e) not enter into any agreement which would be a "Material
Contract" without Thaxton's consent, (f) not waive any right or benefit or (g)
not incur any liability or obligation outside the ordinary course of business or
which involves the receipt or expenditure of more than $10,000 without Thaxton's
consent.

          7.02 No Dividends on Shares; No Share Transfers. Other than with
respect to the Series B Preferred Stock of the Acquired Company, the Acquired
Company shall not, and the Shareholders shall cause the Acquired Company not to,
declare, set aside, or pay any dividend or other distribution of any nature on
or in respect of any of the capital shares of the Acquired Company, and the
Acquired Company shall not, and the Shareholders shall cause the Acquired
Company not to, directly or indirectly issue, redeem, retire, purchase or
otherwise acquire any of its capital shares, or agree to do any of the foregoing
or grant any rights which could result in any of the foregoing. No Shareholder
shall sell, assign, or transfer, or agree to or allow to be created any rights
or obligations for the sale, assignment or transfer of, any of the Acquired
Company Shares of such Shareholder, or any rights or interests therein.

                                       18
<PAGE>

          7.03 Governmental Filings. The Acquired Company shall, and the
Shareholders shall and shall cause the Acquired Company to, take all steps
reasonably necessary in connection with, and diligently pursue any filings or
submissions determined by counsel to Thaxton to be appropriate or required to be
made by or for the Shareholders or the Acquired Company in order for the
Transactions to be consummated.

          7.04 Assistance. The Acquired Company shall, and the Shareholders
shall cause the Acquired Company to, provide, at the cost and expense of the
Acquired Company, such reasonable assistance and cooperation as may be necessary
in connection with the filings of Thaxton pursuant to Section 9.01 hereof.

          7.05 Access. The Acquired Company shall, and the Shareholders shall
cause the Acquired Company to, give to Thaxton and its authorized agents and
representatives (including, but not limited to, accountants, lawyers,
environmental consultants, lenders and appraisers) full and complete access to
the properties, premises, assets, employees, representatives, advisors and
agents of the Acquired Company any and all of the Acquired Company's books,
records and documents. The Acquired Company shall, and the Shareholders shall
cause the Acquired Company to, furnish to Thaxton such information and copies of
such documents and records as Thaxton shall reasonably request in connection
with its examination under and pursuant to this Section 7.05.

          7.06 Material Agreements. The Acquired Company shall not, and the
Shareholders shall cause the Acquired Company not to, amend, terminate or give
any notice with respect to amending, termination or non-renewal of any Material
Agreement without the prior written consent of Thaxton. The Acquired Company
shall not, and the Shareholders shall cause the Acquired Company not to, enter
into or renew the term of any agreement which constitutes or would constitute a
Material Agreement, without the prior written consent of Thaxton.

          7.07 Employee Benefit Plans. Prior to the Closing, the Acquired
Company shall not adopt or become obligated under any new employee benefit plan
and shall not materially change the terms of the Employee Plan.

          7.08 Tax Matters. The Acquired Company shall close its books for tax
purposes as of the Closing Date and Thaxton shall cause such closing of the
Acquired Company's books to occur. The Shareholders shall be solely liable for
Taxes for the period through the Closing Date and arising from the Closing of
the Transactions.

                                       19
<PAGE>

                                  ARTICLE VIII
                       SHAREHOLDERS' CONDITIONS PRECEDENT

          All of the following shall be conditions precedent to Shareholders'
obligations to close the Transactions:

          8.01 Thaxton's Representations, Warranties and Covenants. The
representations and warranties made by Thaxton herein shall be accurate and
correct on and as of the date of Closing as if made on and as of that date and
Thaxton shall have performed and complied, in all material respects, with all of
the terms, provisions and conditions of this Agreement to be performed and
complied with by Thaxton at or before the Closing.

          8.02 No Actions. There shall not be, on the date of Closing, any
action or proceeding, judicial or administrative, federal, state or local,
pending or threatened against any Shareholder or the Acquired Company which, if
adversely determined, would materially impair the ability of any such party to
carry out its obligations under this Agreement or in connection with the
Transactions or which relates to the Transactions and, if successful, would
expose such party to a material amount of damages.

          8.03 Consents and Approvals. All filings and submissions under Section
7.03 hereof shall have been made and the approval or consent of the regulatory
authorities with respect to the filings described in Section 7.03 hereof shall
have been obtained, and evidence thereof shall have been provided to the
Shareholders.

          8.04 Inquiries; Investigations. The Shareholders shall have the right,
in addition to any other right or election provided for herein, at any time
after the date hereof, to terminate this Agreement and all obligations hereunder
in the event any inquiry, investigation, suit or proceeding challenging the
Transactions is threatened or commenced prior to the date of Closing by any
governmental agency.

          8.05 Deliveries. Thaxton shall have made all of the deliveries
required to be made by Thaxton, or for which Thaxton has responsibility, under
Article IV hereof.

          8.06 Material Adverse Change. Since December 31, 1995, there shall not
have been any material adverse change in the financial condition, or the results
of operation, assets, liabilities or net worth of Thaxton.

          8.07 Capitalization of Thaxton. Thaxton shall not have declared any
stock dividends or any stock splits with respect to its common shares.

                                       20
<PAGE>

                                   ARTICLE IX
                              COVENANTS OF THAXTON

          During the Executory Period, Thaxton covenants and agrees as follows:

          9.01 Governmental Filings. Thaxton shall take all steps reasonably
necessary in connection with, and shall diligently pursue, any filings or
submissions required by Thaxton for the Transactions under (a) Federal and
applicable state securities laws in order to obtain exemption for the
registration and prospectus delivery requirements of the Securities Act of 1933,
as amended, and similar state laws, and (b) such other filings and submissions
that Thaxton's counsel deems necessary or prudent in connection with this
Agreement or the consummation of the Transactions.

          9.02 Assistance. Thaxton covenants and agrees to provide such
reasonable assistance and cooperation as may be necessary in connection with the
filings of the Shareholders and/or the Acquired Company pursuant to Section 7.03
hereof.

                                    ARTICLE X
                         THAXTON'S CONDITIONS PRECEDENT

          All of the following shall be conditions precedent to Thaxton's
obligations to close the Transactions:

          10.01 Shareholders' Representations, Warranties and Covenants. The
representations and warranties made by the Shareholders herein shall be accurate
and correct on and as of the date of Closing as if made on and as of that date,
and the Shareholders and the Acquired Company shall have performed and complied,
in all material respects, with all the terms, provisions and conditions of this
Agreement to be performed and complied with by the Shareholders or the Acquired
Company at or before the Closing.

          10.02 No Actions. There shall not be, on the date of Closing, any
action or proceeding, judicial or administrative, federal, state or local,
pending or threatened against Thaxton, any Shareholder, or the Acquired Company
which, if adversely determined, would materially impair the ability of any such
party to carry out such party's obligations under this Agreement or in
connection with the Transactions or which relates to the Transactions and, if
successful, would expose such party to a material amount of damages.

          10.03 Consents and Approvals. All filings and submissions under
Section 9.01 hereof shall have been made and the approval or consent of the
regulatory authorities with respect to the filings described in Sections 7.03
and 9.01 hereof shall have been obtained or the relevant waiting periods with
respect to such filings shall have expired, and evidence thereof shall have been
provided to Thaxton.

                                       21
<PAGE>

          10.04 Inquiries; Investigations. Thaxton shall have the right, in
addition to any other right or election provided for in this Agreement, at any
time after the date hereof, to terminate this Agreement and all obligations
hereunder in the event any inquiry, investigation, suit or proceeding
challenging the Transactions is threatened or commenced prior to the date of the
Closing by any governmental agency.

          10.05 Material Adverse Change. Since December 31, 1995, there shall
not have been any material adverse change in the financial condition, results of
operation, assets, liabilities or net worth of the Acquired Company.

          10.06 Approval of Acquired Company's Board of Directors and
Shareholders. This Agreement shall have been approved in the manner required by
the South Carolina Business Corporation Act, the Articles of Incorporation of
the Acquired Company and the Bylaws of the Acquired Company by the Board of
Directors of the Acquired Company and the shareholders of the Acquired Company.

          10.07 Deliveries. The Shareholders and the Acquired Company shall have
made or cause to have been made all of the deliveries required to be made by the
Shareholders of the Acquired Company, or for which the Shareholders or the
Acquired Company have responsibility, under Article IV hereof.

                                   ARTICLE XI
                                   TERMINATION

          11.01  Methods of Termination.  This Agreement may be
terminated and the Transactions herein contemplated may be
abandoned at any time prior to Closing:

                  (a)  By mutual consent of Thaxton and the Shareholders
          or James D. Thaxton, as attorney-in fact for each of the
          Shareholders;

                  (b)  by Thaxton if all of the conditions specified in
          Article X hereof have not been satisfied on or before
          November 15, 1996;

                  (c)  by the Shareholders or James D. Thaxton, as
          attorney-in fact for each of the Shareholders if all of the
          conditions specified in Article VIII hereof have not been
          satisfied on or before November 15, 1996;

                  (d) by Thaxton if the Shareholders or any Shareholder are in
          default in any material respect under this Agreement and such default
          is not cured within five (5) days after written notice thereby by
          Thaxton to the Shareholders or James D. Thaxton, as attorney-in fact
          for each of the Shareholders;

                                       22
<PAGE>

                  (e) by the Shareholders or James D. Thaxton, as attorney-in
          fact for each of the Shareholders if Thaxton is in default in any
          material respect under this Agreement and such default is not cured
          within five (5) days after written notice thereof by the Shareholders
          or James D. Thaxton, as attorney-in fact for each of the Shareholders
          to Thaxton;

                  (f)  by Thaxton pursuant to Section 10.05 hereof; or

                  (g)  by the Shareholders or James D. Thaxton, as
          attorney-in fact for each of the Shareholders pursuant to
          Section 8.06 hereof.

Thaxton may exercise its right to terminate this Agreement by giving written
notice thereof to the Shareholders or James D. Thaxton, as attorney-in fact for
each of the Shareholders. The Shareholders or James D. Thaxton, as attorney-in
fact for each of the Shareholders may exercise its right to terminate this
Agreement by giving written notice thereof to Thaxton.

          11.02 Effect of Termination. If this Agreement is terminated pursuant
to Section 11.01 hereof, this Agreement shall forthwith become void (other than
Sections 7.08 and 9.03, which shall remain in full force and effect), and there
shall be no further liability on the part of Thaxton (on the one hand) or the
Shareholders and the Acquired Company (on the other hand) to the other, except
for any liability of Thaxton or the Shareholders under Sections 7.08 and 9.03 or
any liability arising out of any uncured willful breach of any covenant or other
agreement contained in this Agreement or any fraudulent breach of a
representation or warranty contained in this Agreement.

                                   ARTICLE XII
                            SURVIVAL; INDEMNIFICATION

          12.01  Survival.

          (a) Representations and Warranties. The representations and warranties
of the Shareholders (or any Shareholder) and Thaxton contained in this Agreement
or in any Schedule or Exhibit hereto shall survive the Closing until the date of
the first audit of financial statements containing the combined operations of
the Acquired Company and Thaxton for those items that would be expected to be
encountered in the audit process and until the first anniversary of the Closing
for all other items.

          (b) Covenants. The covenants (including, without limitation, Section
13.05 thereof) of the Shareholders (or any Shareholder), the Acquired Company
and Thaxton made in this Agreement or in any Exhibit hereto shall survive the
Closing until one (1) year following the expiration of such covenant in
accordance with its terms.

                                       23
<PAGE>

          (c) Indemnity Claim. Notwithstanding the foregoing, any claim arising
out of any representation, warranty or covenant that would otherwise terminate
in accordance with subsections (a) or (b) above will continue to survive, if
notice for indemnity (as detailed below) based in whole or in part thereon shall
have been timely given under this Article XII on or prior to such termination
date, until such claim for indemnification has been satisfied or otherwise
finally resolved.

          12.02 Indemnification. The Shareholders each hereby agree, jointly and
severally, to indemnity and hold harmless Thaxton and its officers, directors,
employees and agents from, against and in respect of any and all claims, suits,
actions, proceedings (formal or informal), investigations, arbitrations,
judgments, deficiencies, damages, settlements, losses, obligations, liabilities,
and legal and other expenses (including reasonable legal fees and expenses of
counsel chosen by an indemnified person) as and when incurred (hereinafter
referred individually and in the aggregate as "Damages") arising out of,
resulting from or based upon:

                            (i) any breach by the Acquired Company or the
                  Shareholders of a representation or warranty contained herein,
                  or any misrepresentation or warranty contained herein, or any
                  misrepresentation or inaccuracy in, or any material omission
                  from, any certificate, schedule, statement, document or
                  instrument furnished to Thaxton by the Acquired Company or the
                  Shareholders pursuant hereto;

                            (ii)  the failure by the Acquired Company or the
                  Shareholders to fully perform any of their obligations
                  or agreements contained herein;

                            (iii) any and all obligations or liabilities of the
                  Acquired Company or the Shareholders of any nature whatsoever,
                  whether accrued or contingent, and whether or not in existence
                  at the date hereof, which are not expressly assumed by
                  Thaxton;

                            (iv) the operation or conduct of the business of the
                  Acquired Company prior to the date hereof, or any action or
                  inaction by the Acquired Company or the Shareholders or any
                  officer, director, employee, agent or representative of the
                  Acquired Company prior to the Effective Date; and

          12.03 Consent to Jurisdiction. Each Shareholder and Thaxton hereby
consents to the nonexclusive jurisdiction of any local, state or federal court
located in or having authority over Lancaster County in the State of South
Carolina. Each Shareholder further hereby consents to venue in Lancaster County,
South Carolina. Each Shareholder hereby consents and agrees that all service of
process may be made on the James D. Thaxton (as the

                                       24
<PAGE>

attorney-in-fact of such Shareholder) by personal delivery or by registered or
certified mail addressed to the James D. Thaxton at the address therefor set
forth in Section 13.07 hereof. Each Shareholder hereby consents and agrees that
service of process made on James D. Thaxton in the foregoing manner shall be
deemed to be made on such Shareholder for all purposes. Thaxton hereby consents
and agrees that all service of process may be made on Thaxton by personal
delivery or by registered or certified mail addressed to Thaxton set forth in
Section 13.07 hereof.

                                  ARTICLE XIII
                                     GENERAL

          13.01 Entire Agreement; Modifications. This Agreement (including the
Exhibits and Schedules referred to herein) constitutes the entire agreement
among the parties pertaining to the subject matter hereof and supersedes all
prior agreements relating thereto, whether oral or written. No amendment,
supplement, modification, waiver or termination of this Agreement shall be
implied or be binding (including, without limitation, any alleged waiver based
on a party's knowledge of any inaccuracy in any representation or warranty
contained herein) unless in writing and signed by the party against which such
amendment, supplement, modification, waiver or termination is asserted. No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provision hereof (whether or not similar), nor
shall such waiver constitute a continuing waiver unless otherwise expressly
therein provided.

          13.02 Binding Effect. All of the terms and provisions of this
Agreement by or for the benefit of the parties shall be binding upon and inure
to the benefit of their successors, permitted assigns, heirs and personal
representatives. Except as expressly provided herein, nothing herein is intended
to confer upon any person other than the parties, their successors, permitted
assigns, heirs and personal representatives, any rights or remedies under or by
reason of this Agreement.

          13.03 Public Announcements. Except as may be required by law (so long
as advance written notice thereof is given by the party making the required
release or announcement), any and all public announcements or releases related
to the Transactions shall be approved by Thaxton and the Shareholders in advance
of dissemination.

          13.04 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement. The parties hereto may
execute this Agreement on separate signature pages, and there is no requirement
that all parties sign the same signature pages.

          13.05  Costs and Expenses.  Each party hereto assumes the
payment of its own costs and expenses (including any legal and/or

                                       25
<PAGE>

accounting fees) in connection with the negotiation and execution of this
Agreement and the consummation of the Transactions.

          13.06 Notices. All notices, requests, instructions, documents and
other communications provided for herein or given hereunder shall be in writing
and shall be deemed to have been given if sent to the parties at the following
addresses in the manner set forth below:

                  (a)  If to Thaxton to:

                           The Thaxton Group, Inc.
                           1524 Pageland Highway
                           Lancaster, South Carolina 29721
                           Attention: James D. Thaxton

                           with a copy to:

                           Moore & Van Allen, PLLC
                           NationsBank Corporate Center
                           100 N. Tryon Street, Floor 47
                           Charlotte, North Carolina  28202-4003
                           Attention:  Barney Stewart III

                  (b)  If to Shareholders or any Shareholder:

                           To the Shareholders' attorney-in-fact
                           at the address set forth below

                           James D. Thaxton
                           407 Pigg Street
                           Pageland, SC 29728

                                           or

                           In the event any successor attorney-in-fact is
                           appointed, at the address provided by such successor
                           attorney-in-fact, in the manner provided herein, at
                           the time of such appointment

All such notices, requests, instructions, documents and other communications
shall be sent either by registered or certified mail, postage prepaid, or by a
nationally recognized overnight courier service providing receipt of delivery
and shall be deemed to have been given three (3) days after being deposited in
the mails or one (1) day after being delivered to such a courier service. Any
party from time to time may change its address, or other information for the
purpose of notices to that party, by giving notice specifying such change to the
other parties hereto in the manner provided hereby.

          13.07  Governing Law.  This Agreement shall be construed and
governed under the domestic, internal law (but not the conflicts of
law principles) of the State of South Carolina.

                                       26
<PAGE>

          13.08 Severability. Should any clause, section or part of this
Agreement be held or declared to be void or illegal for any reason, all other
clauses, sections or parts of this Agreement which can be effective without such
void or illegal clause section or part shall, nevertheless, remain in full force
and effect.

          13.09 Knowledge. As used in this Agreement, the phrase "to the
knowledge" and any substantially similar words and phrases shall mean the actual
knowledge of a person (or, in the case of a person that is a corporation or
other entity, the actual knowledge of the officers of the corporation or persons
holding similar positions in an unincorporated entity) and the knowledge such
person could be expected to have after making due inquiry with respect to the
matter involved.

                                       27
<PAGE>

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

                                    THAXTON:

                                    The Thaxton Group, Inc.
ATTEST:

- ---------------------             By    /s/ Robert L. Wilson
            Secretary               ---------------------------------
- ------------                      Printed Name:  Robert L. Wilson
                                    Title:  Executive Vice-President
   [Corporate Seal]

                                    ACQUIRED COMPANY:

                                    Thaxton Insurance Group, Inc.
ATTEST:

                                    By    /s/ James D. Thaxton
- ---------------------                 ------------------------------------
            Secretary               Printed Name:  James D. Thaxton
- ------------                      Title:  President

   [Corporate Seal]

                     [SHAREHOLDER SIGNATURE PAGES ATTACHED]

                                       28
<PAGE>

                                             /s/ James D. Thaxton         (SEAL)
                                             ---------------------------------
                                             James D. Thaxton
                                             Address:

                                             SS#:
                                             or Tax. I.D. #
                                             Phone no:

WITNESS:

- -----------------------
          [signature]

- -----------------------
          [print name]

                                       29
<PAGE>

                                             /s/ William H. Thaxton       (SEAL)
                                             ----------------------------------
                                             William H. Thaxton
                                             Address:

                                             SS#:
                                             or Tax. I.D. #
                                             Phone no:

WITNESS:

- -----------------------
          [signature]

- -----------------------
          [print name]

                                       30
<PAGE>

                                             /s/ Calvin L. Thaxton, Jr.   (SEAL)
                                             ----------------------------------
                                             Calvin L. Thaxton, Jr.
                                             Address:

                                             SS#:
                                             or Tax. I.D. #
                                             Phone no:

WITNESS:

- -----------------------
          [signature]

- -----------------------
          [print name]

                                       31
<PAGE>

                                    Schedules

          5.01    Good Standing
          5.09    Material Events
          5.14    Investments
          5.19    Required Consents

                                       32
<PAGE>

                                    Exhibits

          A                 Series A Preferred Shareholder Interests
          B                 Form of Power of Attorney
          C                 Form of Employee Noncompete Agreement
          D                 Thaxton Secretary's Certificate

                                       33ARROW CAPITAL GROUP, INC.

                       2000 COMPENSATORY STOCK OPTION PLAN

         1.       Purpose of this Plan.
                  ---------------------
     This 2000  Compensatory  Stock  Option  Plan  ("Plan")  is  intended  as an
employment  incentive,  to aid in  attracting  and  retaining  in the  employ or
service of ARROW CAPITAL GROUP, INC. ("Company"), a Nevada corporation,  and any
Affiliated Corporation, persons of experience and ability and whose services are
considered  valuable,  to encourage the sense of proprietorship in such persons,
and to  stimulate  the active  interest of such persons in the  development  and
success of the Company.  This Plan  provides  for the issuance of  non-statutory
stock  options  ("CSOs"  or  "options")  which are not  intended  to  qualify as
"incentive  stock  options"  within the meaning of Section  422 of the  Internal
Revenue Code of 1986, as amended ("Code").  Certain other terms also are defined
in Paragraph 17 and elsewhere of this Plan.

         2.       Administration of this Plan.
                  ---------------------------
     The  Company's  Board of  Directors  ("Board")  may appoint and maintain as
administrator of this Plan the Compensation Committee ("Committee") of the Board
which shall  consist of at least two members of the Board.  At any time that the
Committee is not duly  constituted,  the Board itself shall have and fulfill the
duties herein  allocated to the Committee.  The Committee  shall have full power
and authority to designate  Plan  participants,  to determine the provisions and
terms of  respective  CSOs (which need not be  identical  as to number of shares
covered by any CSO, the method of exercise as related to exercise in whole or in
installments,  or  otherwise),  including  the CSO price,  and to interpret  the
provisions and supervise the  administration  of this Plan. The Committee may in
its discretion provide that certain CSOs not vest (that is, become  exercisable)
until  expiration of a certain period after  issuance or until other  conditions
are satisfied, so long as not contrary to this Plan.

     A majority of the members of the Committee shall  constitute a quorum.  All
decisions  and  selections  made  by  the  Committee  pursuant  to  this  Plan's
provisions  shall be made by a majority of its members.  Any decision reduced to
writing and signed by all of the members  shall be fully  effective as if it had
been made by a majority at a meeting duly held.  The Committee  shall select one
of its  members as its  chairman  and shall hold its  meetings at such times and
places as it deems advisable. If at any time the Board shall consist of seven or
more  members,  then the Board may amend this Plan to provide that the Committee
shall  consist  only of Board  members  who  shall  not have  been  eligible  to
participate  in this Plan (or similar stock or stock option plan) of the Company
or its  affiliates  at any time  within  one year  prior to  appointment  to the
Committee.  Shareholder  approval of this Plan shall be  required,  and all CSOs
granted under this Plan will be subject to, and may not be exercised before, the
approval  of this Plan by the  shareholders.  Each CSO shall be  evidenced  by a
written agreement  containing terms and conditions  established by the Committee
consistent with the provisions of this Plan.

                                       -1-

<PAGE>

         3.       Designation of Participants.
                  ---------------------------
     Only  Employees  shall be  eligible  for  participation  in this Plan.  The
Committee shall have full power to designate,  from among eligible  individuals,
the  persons to whom CSOs may be  granted.  A person who has been  granted a CSO
hereunder  may be granted an additional  CSO or CSOs, if the Committee  shall so
determine.  The  granting  of a CSO  shall not be  construed  as a  contract  of
employment  or as  entitling  the  recipient  thereof to any rights of continued
employment or engagement  by the Company or an Affiliated  Corporation.  Persons
eligible under this Plan  additionally  may be granted one or more options under
any other  compensation  or stock option plan or awarded  shares under any other
benefit plan of the Company.

         4.       Stock Reserved for this Plan.
                  ----------------------------
     Subject  to  adjustment  as  provided  in  Paragraph  9  below,  a total of
2,000,000  shares of Common Stock of the Company ("Plan Stock" or "Plan Shares")
shall be subject to this Plan. The Plan Stock subject to this Plan shall consist
of unissued  shares of Common Stock or previously  issued shares of Common Stock
reacquired  and held by the  Company  or any  Affiliated  Corporation,  and such
number of Plan Shares shall be and is hereby reserved for sale for such purpose.
Any Plan Shares which may remain unsold and which are not subject to outstanding
CSOs at the  termination of this Plan shall cease to be reserved for the purpose
of this Plan, but until  termination of this Plan the Company shall at all times
reserve a  sufficient  number of shares to meet the  requirements  of this Plan.
Should  any CSO  expire  or be  canceled  prior to its  exercise  in  full,  the
unexercised Plan Shares  theretofore  subject to such CSO may again be subjected
to a CSO under this Plan.

         5.       Option Exercise Price.
                  ---------------------
     The purchase  price of each share of Plan Stock made subject to a CSO shall
not be less than one hundred  percent (100%) of the fair market value of a share
of Common Stock on the date the CSO is granted. The fair market value of a share
of Plan Stock on a  particular  date shall be deemed to be the average of either
(i) the highest and lowest  prices at which  shares of Common Stock were sold on
the date of grant, if traded on a national  securities  exchange,  (ii) the high
and low sale prices reported on the date of grant, if traded on the Nasdaq Small
Cap Market or National Market System, or (iii) the high bid and low asked price,
or if  unavailable,  the closing  high bid and low asked  price,  on the date of
grant, if quoted on the OTC Electronic Bulletin Board. If no transactions in the
Common  Stock  occur  on the  date of  grant,  the fair  market  value  shall be
determined  as of the next  earliest  day for which  reports or  quotations  are
available.  If the  Common  Stock  not then  quoted  on any  exchange  or in any
quotation medium at the time the option is granted,  then the Board of Directors
or Committee will use its discretion in selecting a good faith value believed to
represent  fair  market  value  based on factors  then  known to them.  The cash
proceeds from the sale of Plan Stock are to be added to the general funds of the
Company.

         6.       Exercise Period; Vesting.
                  ------------------------
         (a) The CSO  exercise  period shall be a term of not more than five (5)
years from the date of granting of each CSO and shall automatically terminate:

                                      -2-

<PAGE>

                  (i)      Upon  termination of the optionee's  employment  with
                           the Company for cause  (defined  as  termination  for
                           reasons  other  than  layoff  due to  lack  of  work,
                           injury,  illness,  disability,  or  due  to  economic
                           reasons  unrelated to the optionee's job performance,
                           or for a reason stated in  subparagraph  6(b) of this
                           Plan);

                  (ii)     At the  expiration of six (6) months from the date of
                           termination   without   cause   of   the   optionee's
                           employment with the Company for any reason other than
                           death;  provided,  that if the  optionee  dies within
                           such six-month  period,  sub-clause (iii) below shall
                           apply; or

                  (iii)    At the  expiration  of fifteen  (15) months after the
                           date of death of the optionee.

         (b)  "Employment  with the Company" as used in this Plan shall  include
employment  with (or in the case of a consultant,  adviser or agent,  engagement
by) any Affiliated Corporation in any capacity, even if employment or engagement
in  another  capacity  ceases,  and CSOs  granted  under  this Plan shall not be
affected  by an  employee's  transfer  of  employment  among the Company and any
Parent or Subsidiary  thereof.  An optionee's  employment with the Company shall
not be deemed interrupted or terminated by a bona fide leave of absence (such as
sabbatical leave or employment by the Government) duly approved,  military leave
or sick leave.

         (c) The Board or  Committee  may  determine at the time of grant that a
CSO granted  hereunder shall not vest  immediately but over a specified time, in
specified  amounts  per  time  period,  or  subject  to  other  restrictions  or
limitations.  Unless otherwise set forth in the granting resolution, a CSO shall
vest  immediately upon grant. If employment with the Company ceases before a CSO
vests, then vesting shall never take place, and unvested CSOs shall then be lost
forever.

         7.       Exercise of Options.
                  --------------------
         (a) The Committee, in granting CSOs, shall have discretion to determine
the terms upon which CSOs shall be exercisable, subject to applicable provisions
of this Plan. Once available for purchase,  unpurchased Plan Shares shall remain
subject to  purchase  until the CSO expires or  terminates  in  accordance  with
Paragraph 6 above.  Unless otherwise provided in the CSO, a CSO may be exercised
in  whole or in  part,  one or more  times,  but no CSO may be  exercised  for a
fractional  share.   Resulting  fractions  shall  be  rounded  up  or  down,  as
appropriate.

         (b)  CSOs  may be  exercised  solely  by the  optionee  or a  permitted
transferee  during his  lifetime or by a spouse or former  spouse  pursuant to a
qualified  domestic  relations  order,  or after his death (with  respect to the
number of shares which the optionee  could have  purchased at the time of death)
by the person or persons  entitled thereto under the decedent's will or the laws
of descent and distribution.

                                       -3-

<PAGE>

         (c)  The  purchase  price  of the  Plan  Shares  as to  which  a CSO is
exercised shall be paid in full at the time of exercise and no Plan Shares shall
be issued until full payment is made therefor.  Payment shall be made either (i)
in cash, represented by bank or cashier's check, certified check or money order,
or made by bank wire transfer; (ii) by delivering shares of the Company's Common
Stock which have been beneficially owned by the optionee, the optionee's spouse,
or both of them for a period  of at least  six (6)  months  prior to the time of
exercise (the "Delivered Stock"), in a number equal to the number of Plan Shares
being  purchased  upon  exercise  of the CSO;  (iii) a  combination  of cash and
Delivered Stock;  (iv) by delivery of shares of corporate stock which are freely
tradeable without  restriction and which are part of a class of securities which
has been  listed  for  trading on the  NASDAQ  system or a  national  securities
exchange,  with an  aggregate  fair market  value  equal to or greater  than the
exercise  price  of the  Plan  Shares  being  purchased  under  the CSO  ("Other
Shares"),  or (v) a combination of cash, Delivered Stock and Other Shares. A CSO
shall be deemed  exercised  when  written  notice  thereof,  accompanied  by the
appropriate  payment in full,  is  received by the  Company.  No holder of a CSO
shall be, or have any of the  rights and  privileges  of, a  shareholder  of the
Company in respect of any Plan Shares  purchasable upon exercise of a CSO unless
and until  certificates  representing  such shares shall have been issued by the
Company to him or her. The Committee shall have absolute  discretion  whether to
accept Other Shares offered and in valuing such shares.

         8.       Assignability.
                  --------------
         No CSO shall be assignable or otherwise  transferable except by will or
by  operation  of law,  pursuant to a  qualified  domestic  relations  order (as
defined  in  Rule  16b-3  of the  Securities  and  Exchange  Commission,  or any
successor  rule),  or  pursuant  to Title I of the  Employee  Retirement  Income
Security Act of 1974, as amended (ERISA),  or rules thereunder.  No CSO shall be
pledged or hypothecated in any manner, whether by operation of law or otherwise,
nor be subject to execution, attachment or similar process.

         9.       Reorganizations and Recapitalizations of the Company.
                  -----------------------------------------------------
         (a) The  existence  of this Plan and CSOs granted  hereunder  shall not
affect in any way the right or power of the Company or its  shareholders to make
or authorize  any and all  adjustments,  recapitalizations,  reorganizations  or
other changes in the Company's capital structure or its business,  or any merger
or  consolidation  of the Company,  or any issue of bonds,  debentures  or other
indebtedness, or any preferred or prior preference stocks senior to or affecting
the  Company's  Common  Stock  or the  rights  thereof,  or the  dissolution  or
liquidation of the Company, or any sale, exchange or transfer of all or any part
of its assets or business, or any other corporate act or proceeding,  whether of
a similar character or otherwise.

        (b) The Plan Shares with respect to which CSOs may be granted hereunder
are shares of the Common Stock of the Company as currently constituted.  If, and
whenever,  prior to delivery by the Company of all of the Plan Shares  which are
subject  to CSOs  granted  hereunder,  the  Company  shall  effect  a  split  or
combination of the Common Stock or other capital readjustment,  the payment of a
Common Stock dividend, or recapitalization or other increase or reduction of the
number of shares of the Common Stock outstanding without receiving  compensation
therefor  in  money,  services  or  property,  then the  number  of Plan  Shares
available  under this Plan and the number of Plan Shares  with  respect to which
CSOs granted  hereunder may thereafter be exercised shall (i) in the event of an
increase in the number of outstanding shares of Common Stock, be proportionately
increased, and the cash consideration payable per share shall be proportionately
reduced;  and (ii) in the event of a  reduction  in the  number  of  outstanding
shares of Common Stock, be proportionately  reduced,  and the cash consideration
payable per share shall be proportionately increased.

                                      -4-
<PAGE>

         (c) If the Company is reorganized,  merged,  consolidated or party to a
plan of exchange with another corporation  pursuant to which shareholders of the
Company  receive any shares of stock or other  securities  in  exchange  for the
Common  Stock,  there shall be  substituted  for the Plan Shares  subject to the
unexercised portions of outstanding CSOs an appropriate number of shares of each
class of stock or other securities which were distributed to the shareholders of
the  Company in respect  of the  Common  Stock in the case of a  reorganization,
merger,   consolidation  or  plan  of  exchange;  provided,  however,  that  all
outstanding  CSOs may be canceled by the Company as of the  effective  date of a
reorganization,  merger, consolidation,  plan of exchange, or any dissolution or
liquidation  of the Company,  by giving  notice to each optionee or his personal
representative  of its intention to do so and by permitting  the purchase of all
the Plan Shares subject to such  outstanding  CSOs for a period of not less than
thirty (30) days during the sixty (60) days immediately preceding such effective
date.

         (d) Except as  expressly  provided  above,  the  Company's  issuance of
shares of its capital stock of any class, or securities  convertible into shares
of its  capital  stock of any  class,  for  cash or  property,  or for  labor or
services,  either upon direct sale or upon the exercise of rights or warrants to
subscribe  therefor,  or upon conversion of shares or obligations of the Company
convertible into or exchangeable for shares of capital stock or other securities
of the Company,  shall not affect,  and no adjustment by reason thereof shall be
made  with  respect  to,  the  number of Plan  Shares  subject  to CSOs  granted
hereunder or the purchase price of such shares.

         10.      Purchase for Investment.
                  -----------------------
         Unless the Plan Shares covered by this Plan have been registered  under
the Act prior to issuance,  each person  exercising a CSO under this Plan may be
required by the Company to give a representation in writing that he is acquiring
such shares for his or her own account for investment and not with a view to, or
for sale in connection with, the distribution of any part thereof.

         11.      Effective Date and Expiration of this Plan.
                  -------------------------------------------
         This Plan shall be  effective  as of  October 6, 2000,  the date of its
adoption by the Board,  and no CSO shall be granted  pursuant to this Plan after
its expiration. This Plan shall expire on October 6, 2010 except as to CSOs then
outstanding,  which  shall  remain in effect  until  they have  expired  or been
exercised.

                                      -5-
<PAGE>

         12.      Amendments or Termination.
                  -------------------------
         The Committee or Board may amend, alter or discontinue this Plan at any
time in such  respects  as it shall  deem  advisable  in order to conform to any
change in any other applicable law, or in order to comply with the provisions of
any rule or regulation of the  Securities  and Exchange  Commission  required to
exempt this Plan or any CSOs granted  thereunder  from the  operation of Section
16(b) of the Securities Exchange Act of 1934, as amended ("Exchange Act"), or in
any other  respect not  inconsistent  with Section  16(b) of the  Exchange  Act;
provided,  that no amendment or alteration  shall be made which would impair the
rights of any participant under any CSO theretofore granted, without his consent
(unless made solely to conform such CSO to, and necessary because of, changes in
the  foregoing  laws,  rules or  regulations),  and except that no  amendment or
alteration  shall be made  without  the  approval  of  shareholders  which would
increase  the total  number of shares  reserved  for the  purposes  of this Plan
(except as provided in Paragraph 9) or extend the  expiration  date of this Plan
as set forth in Paragraph 11.

         13.      Government Regulations.
                  ----------------------
     This  Plan,  and the  granting  and  exercise  of CSOs  hereunder,  and the
obligation of the Company to sell and deliver Plan Shares under such CSOs, shall
be subject to all applicable laws, rules and regulations,  and to such approvals
by  any  governmental  agencies  or  national  securities  exchanges  as  may be
required.

         14.      Liability.
                  ----------
     No member of the Board of Directors  or the  Committee,  nor any  officers,
employees  or agents  of the  Company  or any  Affiliated  Corporation  shall be
personally liable for any action,  omission or determination  made in good faith
in connection with this Plan.

         15.      Options in Substitution for Other Options.
                  -----------------------------------------
         The Committee may, in its sole discretion,  at any time during the term
of this  Plan,  grant new  options to an  employee  under this Plan or any other
stock  option  plan of the Company on the  condition  that such  employee  shall
surrender for cancellation  one or more outstanding  options which represent the
right to purchase (after giving effect to any previous partial exercise thereof)
a number of shares, in relation to the number of shares to be covered by the new
conditional grant hereunder, determined by the Committee. If the Committee shall
have so determined  to grant such new options on such a conditional  basis ("New
Conditional  Options"),  no such New Conditional Option shall become exercisable
in the  absence  of such  employee's  consent  to the  condition  and  surrender
andcancellation as appropriate.  New Conditional Options shall be treated in all
respects under this Plan as newly granted options.  Options may be granted under
this Plan from time to time in substitution for similar rights held by employees
of other  corporations  who are about to become  employees  of the Company or an
Affiliated Corporation as a result of a merger or consolidation of the employing
corporation with the Company or an Affiliated Corporation, or the acquisition by
the  Company  or an  Affiliated  Corporation  of the  assets  of  the  employing
corporation,  or the acquisition by the Company or an Affiliated  Corporation of
stock of the employing corporation as the result of which such other corporation
becomes an Affiliated Corporation.

                                      -6-
<PAGE>

         16.      Withholding Taxes.
                  ----------------
     Pursuant to applicable  federal and state laws, the Company may be required
to collect  withholding  taxes  upon the  exercise  of a CSO.  The  Company  may
require, as a condition to the exercise of a CSO, that the optionee concurrently
pay to the Company the entire amount or a portion of any taxes which the Company
is  required  to  withhold  by reason of such  exercise,  in such  amount as the
Committee or the Company in its discretion may determine. In lieu of part or all
of any such  payment,  the optionee may elect to have the Company  withhold from
the shares to be issued upon exercise of the option that number of shares having
a Fair  Market  Value  equal to the  amount  which the  Company is  required  to
withhold.

         17.      Definitions.
                  -----------
     Whenever used in this Plan, except where the context might clearly indicate
otherwise, the following terms shall have the meanings set forth below:

     (a) "Act" means the U.S. Securities Act of 1933, as amended.

     (b) "Affiliated Corporation" means any Parent or Subsidiary of the Company.

     (c) "Award" or "grant"  means any grant of a CSO  (option)  made under this
Plan.

     (d) "Board of Directors"  means the Board of Directors of the Company.  The
term "Committee" is defined in Section 2 of this Plan.

     (e) "Common  Stock" or "Common  Shares" means the common  stock,  $.001 par
value per share,  of the Company,  or in the event that the  outstanding  Common
Shares  are  hereafter  changed  into  or  exchanged  for  different  shares  or
securities of the Company or any other issuer, such other shares or securities.

     (f) "Date of Grant" means the day the Committee  authorizes  the grant of a
CSO or such  later  date as may be  specified  by the  committee  as the  date a
particular grant will become effective.

     (g)  "Employee"  means and includes the  following  persons:  (i) executive
officers,   officers  and  directors   (including  advisory  and  other  special
directors)  of the Company or an  Affiliated  Corporation;  (ii)  full-time  and
part-time employees of the Company or an Affiliated  Corporation;  (iii) natural
persons  engaged by the  Company or an  Affiliated  Corporation  as  consultant,
advisor or agent; and (iv) a lawyer, law firm, accountant or accounting firm, or
other  professional or professional firm engaged by the Company or an Affiliated
Corporation.

                                      -7-
<PAGE>

     (h) "Optionee" means an Employee to whom a CSO is granted.

     (i) "Parent" means any corporation owning 50% or more of the total combined
voting stock of all classes of the Company or of another corporation  qualifying
as a parent within this definition.

     (j) "Subsidiary"  means a corporation more than 50% of whose total combined
capital  stock of all  classes  held by the  Company or by  another  corporation
qualifying as a Subsidiary within this definition.

     By signature below, the undersigned  officers of the Company hereby certify
that the  foregoing  is a true and correct copy of the 2000  Compensatory  Stock
Option Plan of the Company.

DATED:   October 6, 2000

                                                     ARROW CAPITAL GROUP, INC.

(SEAL)                                               ---------------------------
                                                     James Season, President

---------------------------------------
Juan P. Martin, Secretary

                                      -8-
<PAGE>

                         CERTIFICATION OF PLAN ADOPTION

     I, the undersigned  Secretary of this corporation,  hereby certify that the
foregoing  2000  Compensatory  Stock  Option Plan of this  corporation  was duly
approved by the requisite number of holders of the issued and outstanding common
stock of this corporation as of the below date.

Date of Approval:   October 6, 2000

                                                     --------------------------
                                                     Juan P. Martin, Secretary

                                      -9-

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