THIS  AGREEMENT,  dated and  effective  this 17th day of August,  1998,
between FIRST BANCORP (a North Carolina  corporation)  (the "Company") and JAMES
H. GARNER (the  "Employee").  References to the "Company" herein shall be deemed
to refer to the  Company  and its  subsidiaries  taken  as a whole,  unless  the
context requires or the Agreement provides otherwise.
         The Company desires to employ the Employee,  and Employee desires to be
employed by the Company, on the terms and subject to the conditions  hereinafter
set forth.  Accordingly,  in consideration  of employment,  the compensation the
Company agrees to pay the Employee,  the mutual covenants  contained herein, and
for  other  good and  valuable  consideration,  the  receipt  of which is hereby
acknowledged, the parties mutually agree as follows:
         1. Employment and Term. The Company (or one of its  subsidiaries)  will
employ  Employee,  and  Employee  will be  employed by the Company for a term of
three (3) years, initially as President and Chief Executive Officer,  commencing
on the date hereof, unless sooner terminated as hereinafter  provided.  The term
of this Agreement shall  automatically  be extended for an additional  period of
one (1) year on each  anniversary  of the date of this  Agreement  unless either
party gives the other written notice on or prior to such  anniversary  date that
such extension will not occur.
         2.  Duties.  Employee  shall at all  times  faithfully  and  diligently
perform  Employee's  obligations  under  this  Agreement  and  act in  the  best
interests  of the  Company  and  its  affiliated  companies.  Employee's  duties
hereunder  shall be to act in such  office or capacity as the Company may direct
or change from time to time, and Employee shall perform all duties  necessary or
advisable in order to carry out such functions in an efficient manner.  Employee
shall,  during the term of Employee's  employment  hereunder,  devote Employee's
full time,  best efforts and ability,  skill,  and attention  exclusively to the
furtherance  of the  business  objectives  and  interests of the Company and its
affiliated  companies  during  such  hours and in such a manner as is  generally
customary for  employees of  Employee's  position in businesses of the Company's
         3. Compensation.
                  (a) Salary. For services rendered by Employee  hereunder,  the
Company shall pay Employee an annual salary of not less than $170,000 payable in
accordance  with the  customary  payroll  practices of the  Company.  Employee's
salary  shall be subject  to  increase  upon  annual  reviews of the  Employee's
performance.  Employee will receive an annual  increase that is at least as much
as any  percentage  increase in the U.S.  Consumer Price Index during the twelve
months preceding the date of Employee's annual review. Any such increase will be
considered in determining the Employee's base salary for all purposes hereunder.
                  (b)  Reimbursement  of  Expenses.  The  Company  shall  pay or
reimburse  Employee for all reasonable  and necessary  travel and other expenses
incurred by Employee in performing Employee's  obligations under this Agreement,
provided  that  Employee  shall  present  to the  Company  from  time to time an
itemized  account of such  expenses  in any form  required by the  Company.  The
Company  further  agrees to  furnish  Employee  with such other  assistance  and
accommodations as shall be suitable to the character of Employee's position with
the Company and adequate for the performance of Employee's duties hereunder.
                  (c)  Employee  shall be entitled to such  insurance,  pension,
profit-sharing  and other benefit plans as are or may be available  generally to
employees  of  the  Company  to the  extent  permitted  by  applicable  laws  or
government regulations.  Employee will also be eligible for participation in the
Company's Supplemental Employee Retirement Plan, Split Dollar Insurance Plan and
Stock Option Plan.
                  (d)  Employee  shall be  entitled to  reasonable  time off for
vacation,  sick leave,  bereavement leave, jury duty and military obligations as
are or may become available to employees of the Company in positions  similar to
those of  Employee,  as  provided  by the  Company's  policies as they may be in
effect from time to time.
         4.  Termination.  In addition to the termination of the terms specified
in Section 1 hereunder,  employment may be terminated under any of the following
                  (a) The employment of the Employee under this Agreement may be
terminated  immediately  by the Company if the Company  finds that the  Employee
shall  have (i)  demonstrated  gross  negligence  or willful  misconduct  in the
execution of  Employee's  duties,  (ii)  committed an act of dishonesty or moral
turpitude,  or (iii) been  convicted  of a felony or other  serious  crime.  All
future compensation and benefits, not then accrued, will automatically terminate
if Employee is terminated under this subparagraph (a).
                  (b) The employment of the Employee under this Agreement  shall
be automatically terminated on the date of the Employee's death.
                  (c) Employer may terminate Employee's employment hereunder for
any reason other than as provided in subparagraphs (a) and (b), but in such case
Employer  shall be obligated to pay  Employee's  base salary to Employee for the
remainder of the term specified in Section 1 hereof (the "Remaining Term").
                  (d)  Employment  hereunder  may be terminated  voluntarily  by
Employee  on  forty-five  (45)  days'  written  notice  to the  Company's  Chief
Executive Officer or Chairman of the Company's Board of Directors, in which case
Employee  will receive his  compensation,  vested  rights and employee  benefits
accrued through the date of termination of employment.
         5. Other Obligations.  All payments and benefits to Employee under this
Agreement  shall  be  subject  to  Employee's   compliance  with  the  following
                  (a)  Assistance  in  Litigation.   During  the  term  of  this
Agreement and for three full years after the expiration or  termination  hereof,
Employee shall,  upon  reasonable  notice,  furnish such  information and proper
assistance  to the  Company as may  reasonably  be  required  by the  Company in
connection  with  any  litigation  in  which  it or any of its  subsidiaries  or
affiliates is, or may become,  a party. In connection with such  assistance,  if
substantial  effort or expense is required of Employee after the  termination of
Employee's employment hereunder, the Company will pay reasonable compensation to
Employee and will reimburse him for reasonable out-of-pocket expenses.
                  (b) Long-Term Disability.  If the Employee has become disabled
as determined  under the Company's  long-term  disability plan or policy then in
effect and is terminated from active employment,  any remaining benefits of this
contract  shall be reduced by any benefits  received by the  Employee  under the
Company's  long-term  disability  plan  or  policy.  Additionally,   if  such  a
circumstance  occurs, the Employee is under an affirmative duty to actively seek
and  accept  reasonable  alternative   employment  following  termination.   Any
compensation received by Employee following termination or compensation earnable
with reasonable  diligence will be deducted from any future compensation due the
Employee  under  this  Agreement.  In the  event  the  Employee  fails  to  seek
reasonable  alternative  employment,  the  Company's  obligation  to pay  future
compensation shall cease.
                  (c) Confidential  Information.  Employee  acknowledges that in
the course of  Employee's  employment  he will  acquire  knowledge  of trade and
business secrets and other  confidential  data of the Company,  its subsidiaries
and any  affiliated  companies.  Such  trade  and  business  secrets  and  other
confidential  data may  include,  but are not limited to,  confidential  product
information,  methods by which the Company proposes to compete with its business
competitors,   strategic  plans,   confidential  reports  prepared  by  business
consultant(s)   and  similar   information   relating  to  the  Company's,   its
subsidiaries' or its affiliated companies' products,  customers, and operations.
Employee recognizes that the possible  restrictions on Employee's activities are
required for the reasonable protection of the Company. Employee covenants not to
knowingly  disclose  or  reveal to any  unauthorized  person  such  confidential
business  secrets  or  other  confidential  data  both  during  the term of this
Agreement  and for a  period  of two (2)  years  following  termination  of this
Agreement.  Upon  expiration  or  termination  of  Employee's  employment by the
Company,  Employee agrees to return to the Company all documents (both originals
and copies),  including without  limitation,  customer lists, books and records,
form  agreements,   manuals,  and  other  information  (in  whatever  form  such
information may exist,  whether written,  recorded,  in magnetic media, or other
form) that  comes into  Employee's  possession  during,  by virtue of and in the
course of  Employee's  employment  and which  are in any way  connected  with or
related to the Company's business.
         It is further understood and agreed that the Company's right to require
Employee to keep  confidential  information  secret  shall not be in lieu of the
Company's  right to monetary  damages in the event  Employee is in breach of any
obligation  contained in this Agreement,  and that in the event of any breach or
threatened  breach of any of these  covenants,  the Company may either,  with or
without  pursuing  any action for  damages,  obtain  and  enforce an  injunction
prohibiting Employee from violating said covenants.
                  (d)   Noncompetition   Covenants   and  Other   Covenants  For
Protection of the Company.  During the term of Employee's  employment  hereunder
and during the period  following the  termination of such  employment  specified
below as the "Restricted  Period," Employee separately covenants for the benefit
of the Company as follows:
                           (i)  Employee  shall  not,  directly  or  indirectly,
promote, be employed by, participate or engage in any activity or business which
is in competition  with the business of the Company,  or any of its subsidiaries
and affiliated companies, including acting, either singly or jointly or as agent
for, or as an employee of, any person or persons,  firm or  corporation  whether
directly or indirectly (as a director, shareholder or investor, partner, lessor,
lessee,  proprietor,  principal agent,  independent contractor,  representative,
consultant or otherwise),  in the  "Restricted  Territory"  (as defined  below).
Ownership  by Employee  of 5% or less of the  outstanding  capital  stock of any
corporation  which is actively  publicly  traded will not be a violation of this
                           (ii) Employee covenants that Employee will not employ
or assist others by active  solicitation to recruit and employ  employees of the
Company or any of the Company's subsidiaries or affiliate companies; and
                           (iii)   Employee   agrees  that  Employee  will  not,
directly or indirectly,  on behalf of himself or any third party, make any sales
contacts with, or actively  solicit business from any customer of the Company or
its  subsidiaries  or  affiliate   companies,   for  any  products  or  services
competitive  with those offered by the Company or its subsidiaries or affiliated
companies within the "Restricted Territory" (as defined below).
         The  "Restricted  Period"  following  termination of employment  during
which  Employee will observe the covenants  contained in this Section 5(d) shall
be (A) one year following termination of employment under Section 4(a) hereof or
if Employee  voluntarily  terminates  his  employment  hereunder and (B) for the
Remaining  Term (as defined in Section 4(c) hereof) if  employment is terminated
pursuant to Section 4(c) hereof.
         "Restricted  Territory"  is  defined  as the area  within a fifty  mile
radius of Troy,  North Carolina.  Notwithstanding  the foregoing,  the aforesaid
limitations on Employee contained in this Section 5(d) shall be null and void if
Employee's employment hereunder is terminated within one year following a Change
in Control (as defined in Section 8 hereof).
                  (e) It is further  understood  and agreed  that the  Company's
right to require  Employee  to keep  confidential  information  secret or not to
compete  against the Company for the agreed upon period  shall not be in lieu of
the Company's  right to monetary  damages in the event  Employee is in breach of
any obligation contained in this Agreement,  and that in the event of any breach
or threatened breach of any of these covenants,  the Company may either, with or
without  pursuing  any action for  damages,  obtain  and  enforce an  injunction
prohibiting Employee from violating said covenants.
                  (f) The parties hereby agree that all of the above obligations
in this  Section 5 are  reasonable  in nature  and are  designed  to  reasonably
protect the Company's interests.
         6. Source of Payment. Subject to the terms of any employee benefit plan
established by the Company and except as otherwise provided by law, all payments
provided  under this  Agreement  shall be paid in cash from the general funds of
the Company, and no special or separate fund shall be established,  and no other
segregation  of assets shall be made to assure  payment.  Employee shall have no
right,  title or interest  whatsoever in or to any investments which the Company
may make to aid the  Company  in  meeting  its  obligations  hereunder.  Nothing
contained in this  Agreement,  and no action taken  pursuant to its  provisions,
shall  create or be  construed  to create a trust of any kind for the benefit of
the Employee. To the extent that any person acquires a right to receive payments
from the Company hereunder,  such right shall be no greater than the right of an
unsecured creditor of the Company.
         7.  Payments by Company.  If the Company  shall find that any person to
whom any amount is or was  payable  hereunder  is unable to care for  Employee's
affairs  because of illness or accident,  or is a minor,  or has died,  then the
Company,  if it so elects,  may direct that any  payment  due him or  Employee's
estate (unless a prior claim  therefor has been made by a duly  appointed  legal
representative)  or any part  thereof be paid or applied for the benefit of such
person or to or for the  benefit  of such  person's  spouse,  children  or other
dependents,  an institution  maintaining  or having custody of such person,  any
other  person  deemed by the Company to be a proper  recipient on behalf of such
person  otherwise  entitled  to  payment,  or any of  them in  such  manner  and
proportion as the Company may deem proper. Any such payment shall be in complete
discharge of the liability of the Company therefor.
         8.       Change in Control.
                  (a) If a "Change in Control" occurs while Employee is employed
by the  Company,  and  Employee's  employment  is  terminated  by the Company or
Employee,  for any reason or no reason,  other than a  termination  pursuant  to
Section 4(a) by the Company  herein,  within  twelve  months after the Change in
Control, the Company shall pay the Severance Payment provided in Section 8(b) to
Employee  within  ten days of  Employee's  date of  termination  of  employment,
provide benefits  pursuant to Section 8(c) and cause the acceleration of vesting
of benefits described in Section 8(d) to occur.  Notwithstanding  the foregoing,
Employee's  termination  of  employment  shall not be deemed  due to a Change in
Control if such termination is due to Employee's death pursuant to Section 4(b),
Employee's  disability  pursuant  to  Section  5(b),  Employee's  retirement  in
accordance with the Company's retirement policy, or pursuant to Section 4(a).
         In the event of successive  Changes of Control,  the provisions of this
Agreement shall apply with respect to each Change of Control.
                  (b) Employee's  Severance  Payment shall be an amount equal to
the lesser of (i) 2.9 times the amount of  Employee's  base  salary in effect on
the date of the  Change in  Control  and (ii) the  product of 2.99 and the "base
amount" as defined in Section  280G(b)(3) of the Internal  Revenue Code of 1986,
as amended, and applicable rules and regulations thereunder.
                  (c) The  Company  shall  provide to  Employee  and  Employee's
spouse or other qualified dependents,  at a cost to Employee no greater than the
cost of such  benefits to  Employee  at the time of the Change in Control,  such
hospitalization, health, medical and dental insurance benefits as were available
to Employee (and Employee's spouse or qualified dependents) immediately prior to
the Change in Control until the earlier to occur of (i) two years  following the
date of the Change in Control or (ii) Employee accepting  employment pursuant to
which he is eligible for comparable health insurance benefits.
                  (d)  Any  non-vested  option  to  purchase  securities  of the
Company will vest and become immediately exercisable upon a Change in Control.
                  (e)  "Control"  means the power,  directly or  indirectly,  to
direct the  management or policies of the Company or to vote forty percent (40%)
or more of any class of voting  securities  of the Company.  "Change in Control"
shall  mean a  change  in  Control  of the  Company,  except  that  any  merger,
consolidation  or  corporate  reorganization  in which the owners of the capital
stock  entitled to vote  ("Voting  Stock") in the  election of  directors of the
Company prior to said  combination  own  sixty-one  percent (61%) or more of the
resulting  entity's Voting Stock shall not be considered a change in control for
the purpose of this Agreement;  provided,  that, without limitation, a Change in
Control  shall be deemed to have  occurred if (i) any  "person" (as that term is
used in Sections  13(d) and  14(d)(2) of the  Securities  Exchange Act of 1934),
other than a trustee or other  fiduciary  holding  securities  under an employee
benefit plan of the Company, is or becomes the beneficial owner (as that term is
used in Section  13(d) of the  Securities  Exchange  Act of 1934),  directly  or
indirectly,  of  thirty-three  percent  (33%) or more of the Voting Stock of the
Company or its  successors;  (ii)  during any period of two  consecutive  years,
individuals  who at the  beginning  of such  period  constituted  the  Board  of
Directors of the Company or its successors (the "Incumbent Board") cease for any
reason to constitute at least a majority thereof;  provided, that any person who
becomes a director  of the Company  after the  beginning  of such  period  whose
election  was  approved by a vote of at least  three-quarters  of the  directors
comprising  the  Incumbent  Board shall be  considered a member of the Incumbent
Board; or (iii) there occurs the sale of all or substantially  all of the assets
of the Company.  Notwithstanding  the  foregoing,  no Change in Control shall be
deemed to occur by virtue of any  transaction  which  results in Employee,  or a
group  of  persons  including  Employee,   acquiring,  directly  or  indirectly,
thirty-three percent (33%) or more of the combined voting power of the Company's
outstanding securities. For purposes of this subparagraph (e), references to the
"Company"  shall  be  deemed  to refer to  First  Bancorp  only,  and not to its
         9. Modification and Waiver.
                  (a) Amendment of Agreement. This Agreement may not be modified
or amended except by an instrument in writing signed by the parties hereto.
                  (b) Waiver.  No term or condition of this  Agreement  shall be
deemed  to have  been  waived,  nor  shall  there be any  estoppel  against  the
enforcement of any provision of this Agreement,  except by written instrument of
the party charged with such waiver or estoppel.  No such written waiver shall be
deemed a continuing  waiver unless  specifically  stated therein,  and each such
waiver shall operate only as to the specific term and condition waived and shall
not  constitute a waiver of such term or  condition  for the future or as to any
act other than that specifically waived.
         10.  Severability.  If, for any reason, any provision of this Agreement
is held invalid,  such  invalidity  shall not affect any other provision of this
Agreement not held so invalid,  and each such other  provision shall to the full
extent  consistent with law continue in full force and effect.  If any provision
of this Agreement shall be held invalid in part, such invalidity shall in no way
affect  the rest of such  provision  not held so  invalid,  and the rest of such
provision,  together with all other  provisions of this Agreement,  shall to the
full extent consistent with law continue in full force and effect.
         11. General Provisions.
                  (a) Nonassignability.  Neither this Agreement nor any right or
interest hereunder shall be assignable by Employee, Employee's beneficiaries, or
legal  representatives  without the Company's prior written  consent;  provided,
that nothing in this paragraph shall preclude the executors,  administrators, or
other legal  representative  of Employee or Employee's estate from assigning any
rights hereunder to the person or persons entitled thereto.
                  (b) No  Attachment.  Except as  required  by law,  no right to
receive  payments  under  this  Agreement  shall  be  subject  to  anticipation,
commutation,  alienation,  sale,  assignment,  encumbrance,  charge,  pledge  of
hypothecation or to execution, attachment, levy or similar process or assignment
by operation of law, and any attempt,  voluntary or  involuntary,  to effect any
such action shall be null, void and of no effect.
                  (c) Binding Effect.  This Agreement shall be binding upon, and
inure  to the  benefit  of,  Employee  and  the  Company  and  their  respective
successors and assigns.
                  (d) Headings.  Headings in this Agreement are for  convenience
only and shall not be used to interpret or construe its provisions.
                  (e) Notice.  For purposes of this  Agreement,  written  notice
shall be effective if personally  delivered or if sent by certified mail, return
receipt  requested,  to the  following  addresses or to such other  addresses as
either may designate in writing to the other party:
                           Employee:        James H. Garner
                           Company: 341 North Main Street
                                            Post Office Box 508
                                            Troy, North Carolina  27371
                                            Attention:  Chief Executive Officer
For purpose of computing time, all time  requirements  under this Agreement will
start on the date mailed or if personally delivered, when delivered.
         12.  Governing  Law. This  Agreement has been executed and delivered in
the State of North Carolina, and its validity,  interpretation,  performance and
enforcement shall be governed by the laws of such State.
         13.  Effect of Prior  Agreements.  This  Agreement  contains the entire
understanding  between the  parties  with  reference  to the  employment  of the
Employee,  and  supersedes  any prior  employment  agreement,  understanding  or
arrangement   between  the  Employee  and  the  Company,   its  subsidiaries  or
                       [signatures contained on next page]
         IN WITNESS  WHEREOF,  the parties  hereto have executed this  Agreement
under seal as of the day and year first above stated.
                                                     FIRST BANCORP
[CORPORATE SEAL]                    By:     /s/   Jack D. Briggs
                                            Jack D. Briggs
                                    Title:  Chairman of the Board of Directors
Attest:  /s/ Anna G. Hollers
         Anna G. Hollers
                                            /s/   James H. Garner   (SEAL)