Exhibit 10.1

STATE OF NORTH CAROLINA

COUNTY OF HENDERSON

EMPLOYMENT CONTRACT

WHEREAS, Employer has been formed in Hendersonville, Henderson County, North Carolina; and

WHEREAS, Employee has agreed to become President and Chief Executive Officer of said bank; and

WHEREAS, Employer wishes to provide for the terms and conditions of Employee's employment;

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements set forth herein, the parties hereby agree as follows:

an officer and director of Employer and will not accept employment with any other individual, corporation, partnership, governmental authority or other entity, or engage in any other venture for profit which Employer may consider to be in conflict with his or its best interest or to be in competition with the Employer's business, or which may interfere in any way with the Employee's performance of his duties hereunder.

Employee, in the execution of his duties under this Agreement, shall comply in all material respects with personnel policies or any code of conduct adopted by the Board of Directors and generally applicable to Employer's officers and employees as the same shall be in effect, amended or supplemented from time to time, and with all applicable federal and state statutes applicable to Employer and all rules, regulations, administrative orders, statements of policy and other pronouncements or standards promulgated thereunder.

(i) the death of Employee;

(ii) the complete disability of Employee. "Complete disability" as used herein shall mean the inability of Employee, due to illness, accident, or any other physical or mental incapacity, to perform the services provided for hereunder for an aggregate of sixty (60) days within any period of one hundred twenty (120) consecutive days during the term hereof;

(iii) the discharge of Employee by Employer for "Cause" which, as used herein, shall mean (A) such negligence or misconduct as shall constitute, as a matter of law, a breach of the covenants and obligations of Employee hereunder, (B) failure or refusal of Employee to comply with or discharge his duties and obligations under this Agreement, (C) Employee being convicted of a crime involving dishonesty, breach of trust or moral turpitude, or the occurrence of any event described in Section 19 of the Federal Deposit Insurance Act or any other event or circumstance which disqualifies Employee from serving as an employee or executive officer of, or a party affiliated with, Employer; (D) if Employee is removed, suspended or prohibited from participating in the conduct of Employer's affairs (or if proceedings for that purpose are commenced), by any banking regulatory authority; or (E) the exclusion of Employee by the carrier or underwriter from coverage under Employer's then current "blanket bond" or other fidelity bond or insurance policy covering its directors, officers or employees, or the occurrence of any event which Employer believes, in good faith, will result in Employee being excluded from such coverage, or having coverage limited as to Employee as compared to other covered officers or employees, pursuant to the terms and conditions of such "blanket bond" or other fidelity bond or insurance policy.

Termination of Employee's employment shall constitute a tender by Employee of his resignation as an officer and director of Employer.

(i) met or exceeded 100% of the performance projections for each respective year as contained in the Employer's charter application filed with the North Carolina State Banking Commission in connection with its organization; and,

(ii) the Employer's regulatory examination overall rating on its most recent regular examination by the FDIC or the Commissioner of Bank is satisfactory or better;

provided, however, that if the Employer does not meet the performance criteria for any year, the shares subject to the option for such year may vest on the following fiscal year, in the sole discretion

of the Employer if the Employer meets or exceeds the performance criteria for such year in the following year.

In the event of a change of control of Employer prior to the expiration of three (3) years from the Effective Date of this Agreement and before the final vesting date of any such incentive award, and provided that at that time the Employee is still employed by Employer, then all previously granted stock incentive awards contemplated above not already vested shall be deemed to become fully vested immediately prior to the date of such change in control in the same manner as if such had been earned by the Employee.

For the purposes of this Paragraph 7, the following terms shall have the meanings set forth below:

Compete. The term "Compete" means: (i) soliciting or securing deposits from any Person residing in the Relevant Market for any Financial Institution; (ii) soliciting any Person residing in the Relevant Market to become a borrower from any Financial Institution, or assisting

(other than through the performance of ministerial or clerical duties) any Financial Institution in making loans to any such Person; (iii) soliciting any Person residing in the Relevant Market to obtain any other service or product from any Financial Institution, (iv) inducing or attempting to induce any Person who was a Customer of Employer on the date of termination of Employee's employment with Employer to change any depository, loan and/or other banking relationship of the Customer from Employer to another Financial Institution; (v) acting as a consultant, officer, director, independent contractor, or employee of any Financial Institution that has its main or principal office in the Relevant Market, or, in acting in any such capacity with any other Financial Institution, to maintain an office or be employed at or assigned to or to have any direct involvement in the management, supervision, business or operation of any office of such Financial Institution located in the Relevant Market; or (vi) communicating to any Financial Institution the names or addresses or any financial information concerning any Person who was a Customer of Employer at the date of termination of this Agreement or Employee's employment with Employer for any reason.

Customer. The term "Customer of Employer" means any Person with whom Employer has or has had a depository or loan relationship and/or to whom Employer has provided any other service or product.

Financial Institution. The term "Financial Institution" means
(i) any federal or state chartered bank, savings bank, savings and loan association or credit union, (ii) any holding company for or corporation that owns or controls any such entity, (iii) any subsidiary or service corporation of any such entity or holding company, or any entity controlled in any way by any such entity or holding company, or (iv) any other Person engaged in the business of making loans of any type, soliciting deposits, or providing any other service or product that is provided by Employer.

Person. The term "Person" means any natural person or any corporation, partnership, proprietorship, joint venture, limited liability company, trust, estate, governmental agency or instrumentality, fiduciary, unincorporated association or other entity.

authorization of Employer, Employee will not: divulge any such Confidential Information to any other Person; remove any such Confidential Information in written or other recorded form from Employer's premises; or make any use of any Confidential Information for his own purposes or for the benefit of any Person other than Employer. However, following the termination of Employee's employment with Employer, this Paragraph 7(c) shall not apply to any Confidential Information which then is in the public domain (provided that Employee was not responsible, directly or indirectly, for permitting such Confidential Information to enter the public domain without Employer's consent), or which is obtained by Employee from a third party which or who is not obligated under an agreement of confidentiality with respect to such information and who did not acquire such Confidential Information in a manner which constituted a violation of the covenants contained in this Paragraph 7(c) or which otherwise breached any duty of confidentiality.

Notwithstanding anything contained herein to the contrary, Employee agrees that the provisions of Paragraph 7(c) above and the remedies provided in this Paragraph 7(e) for a breach by Employee shall be in addition to, and shall not be deemed to supersede or to otherwise restrict, limit or impair the rights of Employer under any state or federal law or regulation dealing with or providing a remedy for the wrongful disclosure, misuse or misappropriation of trade secrets or other proprietary or confidential information.

(a) Employer is declared by any bank regulatory authority to be insolvent, in default or operating in an unsafe or unsound manner; or,

(b) in the opinion of counsel to Employer such payment or action (i) would be prohibited by or would violate any provision of state or federal law applicable to Employer, including without limitation the Federal Deposit Insurance Act as now in effect or hereafter amended, (ii) would be prohibited by or would violate any applicable rules, regulations, orders or statements of policy, whether now existing or hereafter promulgated, of any bank regulatory authority, or (iii) otherwise would be prohibited by any bank regulatory authority.

constitute one and the same instrument. The headings set out herein are for convenience of reference and shall not be deemed a part of this Agreement.

This Agreement shall inure to the benefit of and be binding upon any corporate or other successor of Employer which shall acquire, directly or indirectly, by conversion, merger, consolidation, purchase or otherwise, all or substantially all of the assets of Employer.

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

EMPLOYEE:

/s/ J. W. Davis
-----------------------------------
J. W. Davis

EMPLOYER:

MOUNTAINBANK

                                        By: /s/ Boyd L. Hyder
                                           --------------------------------
ATTEST:                                 Title: Chairman
                                              -----------------------------


/s/ Wm Wilkerson
------------------------------------
Secretary

EXHIBIT 10.2

Addendum and Amendment to Employment Contract

This Addendum and Amendment to Employment Contract is intended to amend that certain Employment contract made and entered into as of the 26th day of June, 1997 (the "Employment Agreement") between MountainBank, a bank organized under North Carolina law ("Employer") and J. W. Davis ("Employee").

In consideration of the premises and the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

Section 2 of the Employment Agreement is hereby deleted and replaced with the following:

(A) to continue to receive his Base Salary and bonuses as provided in this agreement for a period of three (3) years, subsequent to the effective date of such termination; and

(B) to continue to participate in all Benefit Plans and Fringe Benefits, except qualified retirement plans or for the period of three (3) years.

Upon written notice by the Employee to the Employer, in lieu of paying the amount in item (A) above for a period of three (3) years in installments, the Employer shall be paid the Present Value of such Base Salary and bonuses in a lump sum within sixty (60) days of the termination of his employment. The calculation of the amount due shall be made by the independent accounting firm then performing the Employer's independent audit (the "Auditor") at the expense of the Employer. If Employee does not agree with the calculation performed by the Auditor, then Employee may choose an auditor to perform such calculation on his behalf and at his expense. Following such calculation, if the auditor and the auditor appointed by the Employee are unable to agree on the calculation, the Employer and the Employee shall agree on an independent third-party auditor who shall be appointed to determine the calculation of the amount due to Employee pursuant to his paragraph. The determination of such third-party auditor shall be conclusive and binding on all parties hereunder. In the event Employee elects such lump sum payment, the Employee shall continue to participate in the Benefit Plans and Fringe Benefits for the aforesaid four
(4) year period. The Employee shall also be entitled to a cash payment of an amount equal to the amount of any and all excise tax liability incurred by Employee pursuant to the Internal Revenue Code of 1986, as amended, in connection with the payments and benefits compensation made pursuant to this Paragraph 2 (g) (such amount to be determined by the Auditor at the Employer's expense).

Upon such termination, or upon any other termination of this Agreement without Cause by the Employer within one (1) year following an approved Change in control, the Employee shall be entitled to receive the compensation and benefit continuation when and as provided in Paragraph 2(g) above.

(i) Any Person is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of securities of the Employer representing

30% or more of the combined voting power of the Employer's then outstanding securities; or

(ii) During any period of two (2) consecutive years, individuals who at the beginning of the Term constitute the Board cease for any reason to constitute at least a majority thereof unless the election, or the nomination for election by the Employer's shareholders, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the Term.

MOUNTAINBANK:

                              By: /s/ Boyd L. Hyder
                                  -------------------------
                                  Boyd L. Hyder
[CORPORATE SEAL}                  Chairman


ATTEST:


/s/ Jeannette LaFortune
------------------------
Acting Secretary


                              By: /s/ J. W. Davis
                                  -------------------------
                                  J. W. Davis

Exhibit 10.3

MOUNTAINBANK

MOUNTAINBANK (the "Bank") hereby adopts this 1997 EMPLOYEE STOCK OPTION PLAN (the "Plan") as further described herein.

The purpose of the Plan is to encourage the continued service of officers and employees of the Bank or any company which is a subsidiary of the Bank (a "Subsidiary"), and to provide an additional incentive for such officers and employees to expand and improve the profits and prosperity of the Bank and its Subsidiaries, by granting them options to purchase shares of the Bank's common stock. The Plan also will assist the Bank and its subsidiaries in recruiting and retaining persons to serve as officers and employees of the Bank and its Subsidiaries.

Pursuant to and in accordance with the terms of the Plan, options ("Options") may be granted from time to time to purchase shares of the Bank's common stock, $5.00 par value per share ("Common Stock").

The aggregate number of shares of Common Stock which may be sold upon the exercise of Options granted under the Plan is 60,000 shares, which maximum number is subject to adjustment as provided in Paragraph 6.1 hereof. Shares of Common Stock sold by the Bank upon the exercise of Options granted hereunder, at the sole discretion of the Bank, may be issued from the Bank's authorized but unissued shares, or be issued and outstanding shares purchased by the Bank on the open market or in private transactions. In the event an Option granted under the Plan shall expire or terminate for any reason without having been exercised in full, then, to the extent the Plan shall remain in effect, the shares of Option Stock covered by the unexercised portion of such Option shall again be available for the grant of Options under the Plan.

The Plan shall become effective as of December 8, 1997 1997 (the "Effective Date," which is the date of adoption of the Plan by the Bank's Board of Directors); provided, however, that notwithstanding

anything contained herein to the contrary, the Plan shall be subject to approval of the North Carolina Commissioner of Banks and other banking regulators to the extent required by law and to approval of the Bank's shareholders by a vote of the holders of at least two-thirds of the outstanding shares of the Bank's Common Stock at a meeting of the Bank's shareholders held in accordance with North Carolina law. Options may be granted pursuant to the Plan prior to receipt of such approvals, but any such Options granted shall be subject to, and may not become exercisable until, receipt of such approvals.

Optionee. "Extension" refers to the granting to the Optionee of an additional period of time within which to exercise the Option beyond the Expiration Date originally prescribed in the Option Agreement. "Renewal" refers to the granting of an Option to the Optionee with the same rights and privileges and on the same terms and conditions as contained in an original Option after expiration or termination of the original Option.

The Plan shall be administered by the Committee which shall be composed solely of two or more Non-Employee Directors. Members of the Committee shall serve at the pleasure of the Board, and the Board, from time to time and at its discretion, may remove members from (with or without cause) or add members to the Committee or fill any vacancies on the Committee, however created.

In its administration of the Plan, the Committee shall have the authority, power and duty:

(a) to make any and all determinations regarding persons who are eligible to receive Options under the Plan;

(b) to construe and interpret the terms and provisions of the Plan and any and all Option Agreements entered into pursuant to the Plan;

(c) to make, adopt, amend, rescind, and interpret such rules and regulations not inconsistent with the Plan or law as it from time to time deems reasonable and necessary for the interpretation and administration of the Plan;

(d) to prescribe the form or forms of the instruments evidencing any Options granted under the Plan and of any other instruments required under the Plan and to change such forms from time to time;

(e) to determine:

(i) the Employees to whom Options shall be granted pursuant to the Plan and the timing of such grant or grants, and to cause Options to be granted to Employees it selects;

(ii) the number of shares of Option Stock to be covered by each Option granted;

(iii) the Exercise Price to be paid for Option Stock upon exercise of the Option as set forth in the Option Agreement and as determined in accordance with Paragraph 4.3 hereof;

(iv) the Expiration Date of each Option granted, and the period within which any such Option may be exercised;

(v) any other term and/or condition of each Option (which need not be identical from Option to Option) so long as not inconsistent with the Plan; and,

(f) to make all other determinations and take all other actions provided for herein or deemed by it, in its discretion, to be necessary or advisable to administer the Plan in a proper and effective manner.

The Committee shall select one of its members as Chairman and shall hold meetings at such times and places as it shall deem necessary or desirable. A majority of the members of the Committee shall constitute a quorum for all matters with respect to administration of the Plan, and acts of a majority of the members of the Committee present at meetings at which a quorum is present, or acts reduced to and approved in writing by all of the members of the Committee without a meeting, shall be valid acts of the Committee.

The Committee shall have the discretion to cause any Option granted pursuant to the Plan to be granted with the intent that it qualify for treatment as an "Incentive Stock Option" (an "ISO") as defined in (S)422 of the Internal Revenue Code of 1986, as amended (the "Code"), or with the intent that it be treated as a "Nonqualified Stock Option" (an "NSO"). ISOs and NSOs shall collectively be referred to herein as "Options" unless reference is specifically made only to one or the other, and, in the case of any such reference only to one, such reference shall be deemed to be made to the exclusion of the other.

All actions, decisions and determinations of the Committee in connection with the administration of the Plan, and in connection with the interpretation and construction of, or questions or other matters concerning, the Plan or any Option granted, shall (i) be made consistent and in accordance with the terms of the Plan and, with respect to an ISO, shall be designed to cause the Plan and each such ISO to continue to comply with applicable provisions of the Code, and
(ii) shall be final, conclusive and binding on all persons, including the Bank, its shareholders, Optionees and any other person claiming any interest in any Option; provided, however, that any action, decision, interpretation or determination, other than those respecting the actual grant of Options, shall be subject to review by the Board of Directors either on its own initiative, at the request of the Committee or on application of any aggrieved party. In such a case, the determination of the Board of Directors on such review shall be final and binding on all affected parties.

To the extent permitted by applicable law, and in addition to such other rights of indemnification that members of the Committee may have as Directors of the Bank, the members of the Committee shall be indemnified by the Bank against the reasonable expenses, including attorneys' fees, actually and necessarily incurred in

connection with the defense of any action, suit or proceeding, or in connection with any appeal thereof, to which they or any of them may be made a party by reason of any action taken or omitted in good faith under or in connection with administration of the Plan or any Option granted hereunder and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Bank) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that any such Committee member is liable for gross negligence or misconduct in the performance of his duties; provided, however, that within thirty (30) days after institution of any such action, suit or proceeding, such Committee member(s) shall in writing offer the Bank the opportunity, at its own expense, to handle and defend same.

Pursuant to the Plan, from time to time prior to the Termination Date the Bank may grant Options to Employees to purchase shares of Common Stock. Options may only be granted by action of the Committee, and no person shall have any rights under the Plan or with respect to any Option except pursuant to such action of the Committee.

The number of shares of Option Stock covered by each Option shall be set by the Committee at the time such Option is granted and shall be specified in the Option Agreement evidencing such Option; provided, however, that the number of shares of Option Stock covered by Options granted from time to time to any one Employee under the Plan may not exceed 40% of the aggregate number of shares of Common Stock originally available for the grant of Options under the Plan from time to time. The number of shares of Option Stock covered by each Option shall be subject to adjustment in the manner described in Paragraph 6.1 below.

At the time an Option is granted, the Committee shall set the Exercise Price applicable to such Option. The Exercise Price shall be determined by the Committee in the manner described below and shall be specified in the Option Agreement evidencing the Option. The Exercise Price applicable to each Option shall be subject to adjustment in the manner described in Paragraph 6.1 below.

The Exercise Price for each share of Option Stock covered by an Option shall not be less than one hundred percent (100%) of the fair market value of one share of the Common Stock on the Date of Grant of such Options (the "Fair Market Value"). The Fair Market Value on any particular date shall be, (i) if the Common Stock is not then listed on the Nasdaq Stock Market, the fair market value of a share of the Common Stock as determined by the Committee in its sole discretion in such manner as it shall deem to be reasonable and appropriate, or, (ii) if the Common Stock is listed on the Nasdaq Stock Market, the average of the bid and asked prices for a share of the Common Stock as quoted by Nasdaq on such date.

Each Option granted under the Plan shall be evidenced by an Option Agreement which shall be executed and delivered by the Optionee and by or on behalf of the Bank and which shall (i) specify whether such Option is intended to be an ISO or an NSO, (ii) contain such other information as is provided or permitted herein to be contained in the Option Agreement, and (iii) not contain any provisions inconsistent with the Plan. Following the execution of an Option Agreement evidencing an Option, such Option shall be effective as of the Date of Grant of such Option.

Notwithstanding anything contained herein to the contrary:

(a) in the case of an ISO granted to an Employee who owns, immediately before the ISO is granted, more than ten percent (10%) of the total combined voting power of all classes of Common Stock of the Bank, the Exercise Price per share with respect to such ISO, as determined by the Committee and stated in the Option Agreement, shall not be less than one hundred ten percent (110%) of the Fair Market Value as of the Date of Grant of the ISO; and,

(b) the aggregate Fair Market Value (determined as of the Date of Grant of the Option) of the Option Stock for which an Optionee may be granted ISOs exercisable for the first time in any calendar year (including ISOs granted under all option plans of the Bank or any of its Subsidiaries) shall not exceed $100,000. This $100,000 limitation shall not apply to the grant of NSOs.

No Option may be exercised unless and until the Optionee shall have completed six months (or such other or longer period as shall be determined by the Committee and specified in the Option Agreement evidencing that Option) of continuous, full time service in the employment of the Bank or any of its Subsidiaries following the Date of Grant of the Option, but thereafter, subject to earlier termination as described herein, may be exercised as provided herein and in the Option Agreement evidencing such Option. The waiting period provided herein shall not operate to extend the Expiration Date or other date of termination of an Option set forth or referred to in Article V below.

The Expiration Date of each Option shall be set by the Committee at the time the Option is granted and shall be specified in the Option Agreement evidencing the Option, but in no event shall be more than ten (10) years following the Date of Grant of the Option. However, notwithstanding any thing contained herein to the contrary, in the case of an ISO granted to an Employee who owns, immediately before the ISO is granted, more than ten percent (10%) of the total combined voting power of all classes of Common Stock of the Bank, the Expiration Date shall not be more than 5 years following the Date of Grant of the ISO.

Subject to the other terms and conditions contained in the Plan, each Option may be exercised by the Optionee at such times or intervals and on such other terms and conditions (if any) as are determined by the Committee and specified in the Option Agreement evidencing the Option.

Notwithstanding anything contained herein or in any Option Agreement to the contrary, to the extent that an Option shall not previously have been exercised in the manner required by the Plan, it shall expire and terminate at 5:00 P.M. on its Expiration Date. In addition to the termination provisions set forth above, Options granted pursuant to the Plan shall terminate or may be terminated as provided in Paragraphs 5.7 and 6.1 below. Upon the expiration or termination of all or any portion of an Option, such Option or portion thereof shall, without any further act by the Bank, expire and no longer be exercisable or confer any rights to any person to purchase shares of Common Stock under the Plan.

To exercise an Option in whole or in part, the Optionee or other person then entitled to exercise the Option or portion thereof shall notify the Bank by delivering written notice of such exercise (a "Notice of Exercise") to the President or the Secretary of the Bank. Such written notice shall be substantially in the form attached hereto as Exhibit A and shall specify the number of shares of Option Stock to be purchased. A Notice of Exercise shall not be effective (and the Bank shall have no obligation to sell any Option Stock to the Optionee pursuant to such Notice) unless it satisfies the terms and conditions set forth herein and actually is received by the Bank as provided above prior to the Expiration Date of the Option to be exercised.

In the event an Option or portion thereof is being exercised by a person other than the Optionee (as provided in Paragraph 5.7(c) below), the Notice of Exercise shall be accompanied by appropriate proof of the right of such person(s) to exercise the Option.

The Exercise Price of Option Stock being purchased upon the exercise of an Option (in part or in whole) shall be paid by the Optionee in full at the time of such exercise. Such payment may be made (i) in cash, (ii) by official bank check, bank money order or other certified funds, or (iii) in the discretion of the Committee, by a combination thereof. No Option Stock shall be issued or delivered until full payment of the Exercise Price therefor has been made.

At the time an Option is granted, the Committee shall have the authority, in its sole discretion, to impose restrictions of any nature on the exercise of such Option (including restrictions in the form of a schedule by which an Option become exercisable in increments over a period of time) and on the Option Stock acquired by the Optionee upon such exercise. Without limiting the generality of the foregoing, the Committee may impose conditions restricting absolutely the transferability of Option Stock acquired through exercise of any Options for such periods as the Committee may determine. Any such restrictions imposed by the Committee shall be specified in the Option Agreement.

Options granted hereunder shall not be assignable or transferable except by will or by the laws of descent and distribution, and, during the lifetime of the Optionee, may be exercised only by him. More particularly, but without limiting the generality of the

foregoing, an Option may not be sold, assigned, transferred (except as noted herein), pledged or hypothecated in any way and shall not be subject to execution, attachment or similar process.

(a) In the event an Optionee's employment with the Bank or any Subsidiary shall terminate or be terminated prior to the Expiration Date of his or her Option for any reason other than his or her death, "Disability" (as defined below) or "Retirement" (as defined below), then the Optionee's Option immediately shall terminate at the times specified below. Authorized leaves of absence and transfers of employment by an Optionee between the Bank and a Subsidiary, or between two Subsidiaries, without a break in service, shall not constitute terminations of employment for purposes of the Plan. The Committee shall determine whether any other absence for military or government service or for any other reasons shall constitute a termination of employment for purposes of the Plan, and the Committee's determination shall be final.

(i) If, prior to the Expiration Date of his or her Option, an Optionee voluntarily terminates his or her employment with the Bank or any of its Subsidiaries other than as a result of "Retirement" (as defined below), then, to the extent it shall not previously have been exercised in the manner required by the Plan, any Option previously granted to the Optionee which remains outstanding and in effect immediately shall terminate and be of no further force or effect on the effective date of such termination of employment.

(ii) If, prior to the Expiration Date of his or her Option, an Optionee's employment with the Bank or any of its Subsidiaries is terminated as a result of "Retirement" (as defined below) with the consent of the Bank, the Optionee shall have the right to exercise his rights pursuant to his Option within ninety
(90) days following the date of such Retirement (but not later than the Expiration Date of the Option) in accordance with the terms of the Plan, at the end of which period the Option shall terminate and be of no further force or effect.

The termination of an Optionee's employment with the Bank or any of its Subsidiaries which is treated as a "retirement" under the terms of any qualified retirement plan maintained by the Bank from time to time, or the termination of an Optionee's employment at such earlier time or under

such other circumstances as the Committee shall agree in writing to treat as "Retirement" for purposes of the Plan, shall be deemed to be a "Retirement" with the consent of the Bank.

(iii) If, prior to the Expiration Date of his or her Option, an Optionee's employment is terminated by the Bank or any of its Subsidiaries other than for "Cause" (as defined below), then, to the extent it shall not previously have been exercised in the manner required by the Plan, the Optionee shall have the right to exercise his rights pursuant to his Option within ninety (90) days following the date of such termination (but not later than the Expiration Date of the Option) in accordance with the terms of the Plan, at the end of which period the Option shall terminate and be of no further force or effect.

(iv) If, prior to the Expiration Date of his or her Option, an Optionee's employment is terminated by the Bank or any of its Subsidiaries for Cause, then, to the extent it shall not previously have been exercised in the manner required by the Plan, any Option previously granted to the Optionee which remains outstanding and in effect immediately shall terminate and be of no further force or effect on the earlier of the date such termination of employment is effective or the date on which the determination is made to terminate the Optionee's employment for Cause.

For purposes of this Paragraph 5.7(a), the Bank or its Subsidiary shall have "Cause" to terminate an Optionee's employment upon:

(i) A determination by the Bank or its Subsidiary, in good faith, that the Optionee (A) has failed in any material respect to perform or discharge his duties or responsibilities of employment in a reasonably competent manner, or (B) is engaging or has engaged in willful misconduct or conduct which is detrimental to the business prospects of the Bank or its Subsidiary or which has had or likely will have a material adverse effect on the Bank's or its Subsidiary's business or reputation;

(ii) The violation by the Optionee of any applicable federal or state law, or any applicable rule, regulation, order or statement of policy promulgated by any Regulatory Authority which

results from the Eligible Employee's gross negligence, willful misconduct or intentional disregard of such law, rule, regulation, order or policy statement and results in any substantial damage, monetary or otherwise, to the Bank or its Subsidiary or to its or its Subsidiary's reputation;

(iii) The commission in the course of the Optionee's employment of an act of fraud, embezzlement, theft or proven personal dishonesty, or the Optionee's being charged with any felony or other crime involving moral turpitude (whether or not such act or charge involves the Bank or its assets or results in criminal indictment, charges, prosecution or conviction);

(iv) The conviction of the Optionee of any felony or any criminal offense involving dishonesty or breach of trust, or the occurrence of any event described in Section 19 of the Federal Deposit Insurance Act or any other event or circumstance which disqualifies the Optionee from serving as an employee or executive officer of, or a party affiliated with, the Bank or its Subsidiary; or, in the event the Optionee becomes unacceptable to, or is removed, suspended or prohibited from participating in the conduct of the Bank's or its Subsidiary's affairs (or if proceedings for that purpose are commenced), by any Regulatory Authority;

(v) The exclusion of the Optionee by the carrier or underwriter from coverage under the Bank's then current "blanket bond" or other fidelity bond or insurance policy covering its or its Subsidiary's directors, officers or employees, or the occurrence of any event which the Bank or its Subsidiary believes, in good faith, will result in the Optionee being excluded from such coverage, or having coverage limited as to the Optionee as compared to other covered officers or employees, pursuant to the terms and conditions of such "blanket bond" or other fidelity bond or insurance policy; or,

(vi) Optionee's excessive use of any addictive drug or use of any

controlled substance, as defined at 21 U.S.C. (S) 802 and
listed on Schedules I through V of 21 U.S.C. (S) 812, as
revised from time to time, and as defined by other federal laws
and regulations, his use of legal drugs that have not been
obtained

legally or are not being taken as prescribed by a licensed physician, or his use of alcohol in a manner that adversely affects the performance of his or her employment duties, prevents him or her from performing his or her employment duties safely or creates a risk to the safety of others at the workplace.

For purposes of this Plan, the determination of whether any termination of an Optionee's employee was for Cause shall be within the sole discretion of the Committee.

(b) Disability of Optionee: If, prior to the Expiration Date of his or her Option, an Optionee becomes "Disabled" (as defined below) and his or her employment with the Bank or any of its Subsidiaries is terminated as a result, then, to the extent it shall not previously have been exercised in the manner required by the Plan, the Optionee shall have the right to exercise his rights pursuant to his Option within ninety (90) days following the effective date of such termination (but not later than the Expiration Date of the Option) in accordance with the terms of the Plan, at the end of which period the Option shall terminate and be of no further force or effect. For purposes of this Paragraph 5.7(b), an Optionee shall be considered "Disabled" at such time as he or she is determined to be permanently disabled such as would qualify the Optionee for benefits under the Bank's long term disability insurance plan which is applicable to the Optionee.

(c) Death of Optionee: If an Optionee shall die while employed by the Bank or a Subsidiary and prior to the Expiration Date of an Option held by him or her, then, to the extent the Option held by the Optionee at the time of his or her death remains in effect and could be exercised by the Optionee under the terms of the Plan and the Option Agreement relating to it, his designated beneficiary (determined either by will or other writing delivered to the Committee in advance), or if no designated beneficiary, the personal representative of his estate, shall have the right to exercise such Optionee's rights pursuant to his Option following the date of his death, but not later than the Expiration Date of the Option, in accordance with the terms of the Plan. Any references herein to an Optionee shall be deemed to include any person entitled to exercise an Option after the death of such Optionee under the terms of this Plan.

Subject to the provisions of Paragraph 6.1 below, any Option may be Modified, Extended or Renewed (as those terms are defined in Article II) only upon the agreement of the Committee and the Optionee. Any such agreement shall be in the form of a written

amendment to the Option Agreement evidencing the Option being Modified, Extended or Renewed and which shall set forth the terms of any such Modification, Extension or Renewal.

In addition to the items required to be in the Option Agreement evidencing an Option, such Option Agreement may contain such other terms, conditions and provisions applicable to such Option or the exercise thereof (including any and all limitations or restrictions as shall be necessary to comply with any applicable federal and state securities laws and regulations) as the Committee shall, at its sole discretion, deem necessary or desirable; provided, however, that the Committee may not impose any such terms, conditions or provisions that are inconsistent with any provisions of the Plan.

A stock certificate representing the number of shares of Option Stock purchased by the Optionee upon the proper exercise of an Option shall be issued and delivered by the Bank as soon as practicable after receipt of a valid and effective Notice of Exercise and full payment of the Exercise Price relating to those shares. Such certificate shall be delivered to or on the written order of the person exercising the Option.

(a) Changes in Capitalization; Stock Splits and Dividends. In the event of (i) any dividend payable by the Bank in shares of Common Stock, or (ii) any recapitalization, reclassification, split-up, consolidation or combination of, or other change in or offering of rights to the holders of, Common Stock, or (iii) an exchange of the outstanding shares of Common Stock for a different number or class of shares of stock or other securities of the Bank in connection with a merger, consolidation or other reorganization of or involving the Bank (provided the Bank shall be the surviving or resulting corporation in any such merger or consolidation), then the Committee shall, in such a manner as it shall determine in its sole discretion, appropriately adjust the number and class or kind of shares which may be issued under the Plan and of the securities which shall be subject to outstanding Options and/or the Exercise Price applicable to any outstanding Option. However, in no event shall any such adjustment change the aggregate Exercise Price for Option Stock to be purchased upon the exercise of any Option.

In the event of an incease in the number of outstanding shares of the Bank's Common Stock as described above, then, at the Committee's option and discretion, the aggregate number of shares of Common Stock authorized to be issued under the Plan may be increased so that such aggregate number will equal 10% of the sum of the aggregate number of outstanding shares of the Common Stock plus the number of shares of Common Stock that remain reserved for issuance under the Plan.

Subject to review by the Board of Directors of the Bank, any such adjustments made by the Committee shall be consistent with changes in the Bank's outstanding Common Stock resulting from the above events and, when made, shall be final, conclusive and binding on all persons, including, without limitation, the Bank, its shareholders and each Optionee or other person having any interest in any Option so adjusted. Any fractional shares resulting from any such adjustment shall be eliminated. However, notwithstanding anything contained herein to the contrary, no Option which is intended to be an ISO shall be adjusted in a manner that causes the Option to fail to continue to qualify as an ISO.

(b) Dissolution; Merger or Consolidation; Sale of Assets. In the event of a dissolution or liquidation of the Bank, the sale of substantially all the Bank's assets, or a merger or consolidation of the Bank with or into any other corporation or entity (or any other such reorganization or similar transaction) in which the Bank is not the surviving or resulting corporation, and if a provision is not made in such transaction for the continuance of this Plan or the assumption of Options by any successor to the Bank or for the substitution for Options of new options covering shares of any successor corporation or a parent or subsidiary thereof, then, in such event, and to the extent such Options have not previously been exercised, all rights of Optionees pursuant to all outstanding Options shall terminate and be of no further effect immediately prior to the effective time of such dissolution, liquidation, sale, merger, consolidation or other reorganization (or at such other time and pursuant to such rules and regulations as the Committee shall determine and promulgate to the Optionees). However, to the extent such Options shall not previously have been exercised, and notwithstanding any provisions of the Plan or any Option Agreement to the contrary, each such Option shall become exercisable, and may be exercised, in full immediately prior to the effective time of any such event. The Committee shall give each Optionee at least ninety (90) days prior written notice of the effective time of an event which gives rise to an immediate purchase right under this Paragraph 6.1.

(c) Miscellaneous. The grant of an Option shall not affect in any way the right or power of the Bank to (i) enter into or effect any adjustment, recapitalization, reclassification, reorganization or any other change in the Bank's capital or business structure or its business, (ii) to merge or consolidate, or to dissolve, liquidate, sell or transfer all or any part of its business or assets, or (iii) to issue bonds, debentures, preferred or other preference stock ahead of or affecting Common Stock or the rights thereof.

Neither an Optionee nor any other person shall have any rights as a stockholder with respect to any shares of Option Stock covered by an Option until such Option shall have been validly exercised in the manner described herein and in the Option Agreement relating to such Option, full payment of the Exercise Price has been made for such shares, and a stock certificate representing the Option Stock purchased upon such exercise shall have been registered on the Bank's stock records in the name of and delivered to such person. Except to the extent of adjustments made pursuant to Paragraph 6.1 above, no adjustment on behalf of the Optionee shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property), distributions or other rights for which the record date for determining the shareholders entitled to receive the same is prior to the date of registration and delivery of the stock certificate(s) representing the Option Stock.

Neither the Plan nor the grant of an Option, nor any Option Agreement evidencing any such Option, is intended or shall be deemed or interpreted to constitute an employment agreement or to confer upon an Optionee any right of employment with the Bank or any of its Subsidiaries, including without limitation any right to continue in the employ of the Bank or any of its Subsidiaries, or to interfere with, restrict or otherwise limit in any way the right of the Bank or any Subsidiary to discharge or terminate the employment of any Optionee at any time for any reason whatsoever, with or without Cause.

If in the opinion of legal counsel for the Bank the issuance or sale of any shares of Option Stock by the Bank pursuant to the exercise of an Option would not be lawful without registration under the Securities Act of 1933 (the "1933 Act") or without some other action being taken, or for any other reason, or would require the Bank to obtain approval from any governmental authority or regulatory body having jurisdiction deemed by such counsel to be necessary to such issuance or sale, then the Bank shall not be obligated to issue or sell any Option Stock pursuant to the

exercise of any Option to any Optionee or to any other authorized person unless a registration statement that complies with the provisions of the 1933 Act in respect of such shares is in effect at the time thereof and all other required or appropriate action has been taken under and pursuant to the terms and provisions of the 1933 Act or other applicable law, or the Bank receives evidence satisfactory to such counsel that the issuance and sale of such shares, in the absence of an effective registration statement or other action, would not constitute a violation of the 1933 Act or other applicable law, or unless any such required approval shall have been obtained. The Bank is in no event obligated to register any such shares, to comply with any exemption from registration requirements or to take any other action which may be required in order to permit, or to remedy or remove any prohibition or limitation on, the issuance or sale of Option Stock to any Optionee or other authorized person.

The Committee, as a condition of the grant of an Option and/or the exercise thereof, may require that the Optionee execute one or more undertakings in such form as the Committee shall prescribe to the effect that such shares are being acquired for investment purposes only and not with a view to the distribution or resale thereof.

Notwithstanding anything contained herein to the contrary, it is understood and agreed that neither the Bank nor any of its Subsidiaries (or any of their successors in interest) shall be required to take any action under this Plan or any Option granted hereunder if:

(a) the Bank is declared by any Regulatory Authority to be insolvent, in default or operating in an unsafe or unsound manner; or,

(b) in the opinion of legal counsel to the Bank, such payment or action:

(i) would be prohibited by or would violate any provision of state or federal law applicable to the Bank or any of its Subsidiaries, including without limitation the Federal Deposit Insurance Act as now in effect or hereafter amended;

(ii) would be prohibited by or would violate any applicable rules, regulations, orders or statements of policy, whether now existing or hereafter promulgated, of any Regulatory Authority; or,

(iii) otherwise would be prohibited by any Regulatory Authority.

The granting of an Option pursuant to the Plan shall impose no obligation on the Optionee to purchase any shares covered by such Option.

Each Optionee shall be responsible for all federal, state, local or other taxes of any nature as shall be imposed pursuant to any law or governmental regulation or ruling on any Option or the exercise thereof or on any income which an Optionee is deemed to recognize in connection with an Option. If the Committee shall determine to its reasonable satisfaction that the Bank or any of its Subsidiaries is required to pay or withhold the whole or any part of any estate, inheritance, income, or other tax with respect to or in connection with any Option or the exercise thereof, then the Bank or such Subsidiary shall have the full power and authority to withhold and pay such tax out of any shares of Common Stock being purchased by the Optionee or from the Optionee's salary or any other funds otherwise payable to the Optionee, or, prior to and as a condition of exercising such Option, the Bank may require that the Optionee pay to it in cash the amount of any such tax which the Bank, in good faith, deems itself required to withhold.

The validity, interpretation and administration of the Plan, any Option Agreement, and of any rules, regulations, determinations or decisions made thereunder, and the rights of any and all persons having or claiming to have any interest therein or thereunder, shall be determined exclusively in accordance with the laws of the State of North Carolina. Without limiting the generality of the foregoing, the period within which any action in connection with the Plan must be commenced shall be governed by the laws of the State of North Carolina, without regard to the place where the act or omission complained of took place, the residence of any party to such action, or the place where the action may be brought or maintained.

The Board, upon recommendation of the Committee, may, from time to time, amend, modify, suspend, terminate or discontinue the Plan at any time without notice, provided, however, that no such action by the Board shall adversely affect any Optionee's rights under any then outstanding Options without such Optionee's prior written consent; and, provided further that, except as shall be required to comport with changes in the Code, any modification or amendment of the Plan that (i) increases the aggregate number of shares of Common Stock which may be issued upon the exercise of Options

(other than as provided in Paragraph 6.1 above), (ii) changes the formula by which the Exercise Price is determined, (iii) changes the provisions of the Plan with respect to the determination of Employees to whom Options may be granted or, (iv) otherwise materially increases the benefits accruing to Optionees under the Plan, shall be subject to the approval of the Bank's shareholders. In the event the Board shall terminate or discontinue the Plan, such action shall not operate to deprive any Optionee of any rights theretofore acquired by him or her under the Plan, and any Options outstanding as of the date of any such termination shall remain in full force and effect according to their terms as though the Plan had not been terminated.

The proceeds received by the Bank from the sale of Common Stock pursuant to Options granted under the Plan will be used for general corporate purposes.

Except as otherwise provided herein, any notice which the Bank or an Optionee may be required or permitted to give to the other under this Plan shall be in writing and shall be deemed duly given when delivered personally or deposited in the United States mail, first class postage prepaid, and properly addressed. Notice, if to the Bank, shall be sent to its President at the address of the Bank's then current corporate office. Any notice sent by mail by the Bank to an Optionee shall be sent to the most current address of the Optionee as reflected on the records of the Bank or its Subsidiaries as of the time said notice is required. In the case of a deceased Optionee, any notice shall be given to the Optionee's personal representative if such representative has delivered to the Bank evidence satisfactory to the Bank of such representative's status as such and has informed the Bank of the address of such representative by notice pursuant to this Paragraph 6.10.

With respect to persons who are subject to Section 16 of the 1934 Act, the Plan and each Option granted and transaction under it are intended to, and shall be interpreted so as to, be consistent with the requirements, and satisfy applicable conditions, of Rule 16b-3 of the Securities and Exchange Commission (as such Rule may be modified, amended or superseded from time to time). To the extent any provision of the Plan or any Option Agreement, or any action by the Committee or the Board, shall fail to so comply, then, to the extent permitted by law and deemed advisable by the Committee, such provision or action shall be deemed null and void.

Subject to Paragraph 5.6 above, this Plan shall bind and inure to the benefit of the Bank, any Optionee, and their respective successors, assigns, personal or legal representatives and heirs.

It is intended that each provision of this Plan shall be viewed as separate and divisible, and in the event that any provision hereof shall be held to be invalid or unenforceable, the remaining provisions shall continue to be in full force and effect.

Titles of Articles and Paragraphs are provided herein for convenience only, do not modify or affect the meaning of any provision herein, and shall not serve as a basis for interpretation or construction of this Plan.

As used herein, the masculine gender shall include the feminine and neuter, the singular number the plural, and vice versa, whenever such meanings are appropriate.

MOUNTAINBANK

AMENDMENT N0. 1 TO
1997 EMPLOYEE STOCK OPTION PLAN

WHEREAS, the Board of Directors of the Bank heretofore adopted the Bank's 1997 Employee Stock Option Plan (the "Employee Plan" or the "Plan") which provides for the grant of options to employees of the Bank to purchase newly issued shares of the Bank's common stock; and, the Employee Plan was approved during 1998 by the Bank's shareholders and by the North Carolina Commissioner of Banks in the manner required by North Carolina law; and,

WHEREAS, under North Carolina law applicable to banks, the Employee Plan may provide for the grant of options for an aggregate number of shares equal to not more than 10% of the Bank's total outstanding shares, and, the Employee Plan, as originally adopted, provides for the grant of options to purchase an aggregate of 86,400 shares of common stock (as such number has been adjusted in accordance with the terms of the Plan as a result of the six-for-five stock splits effected in the form of 20% stock dividends which became effective on January 20, 1999, and January 15, 2000); and,

WHEREAS, by resolution during April 2000, and as a result of increases in the number of outstanding shares of the Bank's common stock resulting from the Bank's sale of additional shares pursuant to stock offerings conducted during 1999 and proposed to be conducted during 2000, the Bank's Board of Directors proposed to amend the Employee Plan to increase the aggregate number of shares available for the grant of options to 10% of the increased number of the Bank's outstanding shares following the offerings; and, the Board of Directors approved an amendment to the Employee Plan to effect such an increase and authorized the submission of the proposed amendment for approval by the Bank's shareholders; and,

WHEREAS, at the Annual Meeting of the Bank's shareholders held on June 15, 2000, the shareholders approved the proposed amendment by the affirmative vote of more than two-thirds of the Bank's then outstanding shares; and,

WHEREAS, by letter dated July 17, 2000, the North Carolina Commissioner of Banks approved the proposed amendment; and,

WHEREAS, by resolution dated October 16, 2000, the Board of Directors formally approved the proposed amendment to increase the number of shares authorized to be issued under the Employee Plan to 149,688 shares and, in approving the amendment, authorized management of the Bank to take such actions as they deemed to be reasonable, appropriate, necessary or advisable to effect and carry out the Board's resolutions and to effect the proposed amendment, including the execution for and in the name of the Bank of a formal written Amendment; and,

WHEREAS, pursuant to the above authority, this Amendment No. 1 is made for the purpose of effecting the amendment to the Employee Plan previously approved by the Bank's Board of Directors and shareholders.

NOW THEREFORE, in consideration of the premises and pursuant to authority duly given by the Bank's Board of Directors and shareholders, the Employee Plan hereby is amended as follows:

1. In Paragraph 1.2 of the Employee Plan, the first full sentence of the second paragraph is deleted in its entirety and the following new sentence is inserted in its entirety:

"The aggregate number of shares of Common Stock which may be sold upon the exercise of Options granted under the Plan is 149,688 shares, which maximum number is subject to adjustment as provided in Paragraph 6.1 hereof."

2. Except as expressly modified and amended as described above, the Employee Plan shall remain in full force and effect in accordance with its terms.

IN WITNESS WHEREOF, the Bank has executed this Amendment, by and through the undersigned thereunto duly authorized, on this the day and year first above written.

MOUNTAINBANK

                                   By:   /s/ J. W. Davis
                                         ----------------------------------
                                         J. W. Davis
                                         President and Chief Executive Officer
               (SEAL)

                                   By:   /s/ Boyd L. Hyder
                                         ----------------------------------
                                         Boyd L. Hyder
                                         Chairman of the Board of Directors

ATTEST:

/s/ Sherrie B. Rogers
----------------------------
Assistant Secretary

Exhibit 10.4

STATE OF NORTH CAROLINA
COUNTY OF HENDERSON

EMPLOYEE STOCK OPTION AGREEMENT

THIS EMPLOYEE STOCK OPTION AGREEMENT (the "Agreement") is made as of this ______ day of _______________, 19_____ (the "Date of Grant"), by and between MOUNTAINBANK, a North Carolina banking corporation (the "Bank"), and ___________________________________, a resident of ____________ County, North Carolina (the "Optionee").

WHEREAS, on December 8, 1997, the Bank's Board of Directors adopted the 1997 EMPLOYEE STOCK OPTION PLAN (the "Plan"), subject to the approval of the Bank's shareholders and the North Carolina Commissioner of Banks; and

WHEREAS, the Plan provides that the Stock Option Committee (the "Committee") of the Bank's Board of Directors from time to time may grant to officers and employees of the Bank and its subsidiaries the right or option to purchase shares of the Bank's $5.00 par value common stock ("Common Stock") on the terms and conditions set forth in the Plan; and

WHEREAS, the Optionee currently is a full-time employee of the Bank and the Committee has selected the Optionee as an employee to whom it will grant an option to purchase Common Stock under the Plan;

NOW, THEREFORE, in consideration of the premises and the agreements of the parties set forth herein, the Bank and the Optionee hereby agree as follow:

[_] an Incentive Stock Option (an "ISO")
[_] a Nonqualified Stock Option

as those terms are defined in the Plan.

The Option is granted under and pursuant to the Plan, a copy of which is attached hereto and the terms and conditions of which are incorporated herein by reference. Capitalized terms used in this Agreement which are defined in the Plan shall have the same meanings herein as are assigned to them in the Plan. In the event any provision of this Agreement conflicts

or is inconsistent with a term or condition of the Plan, then the Plan provision shall be controlling and shall supersede the provision of this Agreement.

[_] six months
[_] __________________________________________________

of service in the employment of the Bank following the Date of Grant (the "Waiting Period") and, following expiration of the Waiting Period, if any, the Option will become exercisable on the following dates as to the indicated percentage of the shares of the Option Stock:

                                            Option Stock Available
       Date                                       For Exercise
-------------------                         ----------------------

Notwithstanding anything contained herein to the contrary, the Option may not be exercised at any time as to a fractional share and, in the event application of the above percentages results in fractional shares, the number of shares as to which the Option may be exercised at any particular time shall be rounded down to the next lower whole share.

Notwithstanding anything contained herein to the contrary, the Optionee may not exercise the Option to purchase less than one hundred (100) shares, unless the Committee otherwise approves or unless the partial exercise is for all remaining shares of Option Stock available under the Option. Following receipt from the Optionee of a valid and effective Notice of Exercise and full payment of the Exercise Price relating to a number of the shares of Option Stock being purchased, a stock certificate representing that number of shares shall be issued and delivered by the Bank to the Optionee as soon as practicable; provided however that, if the Option is an ISO, then the Bank shall have the right and discretion to hold any shares purchased upon exercise of the Option in escrow for a period ending on the later of (i) two years from the Date of Grant of the Option, or (ii) one year after issuance of the stock upon exercise of the Option, for the sole purpose of informing the Bank of a disqualifying disposition within the meaning of Section 422 of the Internal Revenue Code of 1986. During any such escrow period, the Optionee shall have all rights of a shareholder with respect to the Option Stock purchased, including but not limited to the right to vote, receive dividends on and to sell such stock.

(a) Expiration Date. Notwithstanding anything contained herein to the contrary, to the extent the Option shall not previously have been exercised in the manner required by or otherwise terminated as provided in the Plan or this Agreement, it shall expire and terminate at 5:00 P.M. on the "Expiration Date" which, for purposes of this Agreement, shall be (check one):

[_] the date ten years following the Date of Grant
[_] _____________________, 19______

(b) Other Termination. The Option otherwise shall terminate prior to the Expiration Date in the events and upon the occurrences described in the Plan.

(c) Effect of Termination or Expiration of Option. Upon the expiration or termination of all or any portion of the Option, it shall, without any further act by the Bank or the Optionee, no longer be exercisable or of any force or effect and shall no longer confer any rights to any person to purchase shares of Common Stock under the Plan or this Agreement.

As a condition of the exercise of the Option, the Bank may require that the Optionee execute one or more undertakings in such form as it shall prescribe to the effect that such shares are being acquired for investment purposes only and not with a view to the distribution or resale thereof.

Notwithstanding anything contained herein to the contrary, it is understood and agreed that the Bank (or any successor in interest to the Bank) shall not be required to take any action under the Plan or this Agreement if:

(a) the Bank is declared by any Regulatory Authority to be insolvent, in default or operating in an unsafe or unsound manner; or,

(b) in the opinion of counsel to the Bank, such payment or action: (i) would be prohibited by or would violate any provision of state or federal law applicable to the Bank or any of its subsidiaries, including without limitation the Federal Deposit Insurance Act as now in effect or hereafter amended; (ii) would be prohibited by or would violate any applicable rules, regulations, orders or statements of policy, whether now existing or hereafter promulgated, of any regulatory authority; or, (iii) otherwise would be prohibited by any regulatory authority.

shall be given to the Optionee's personal representative if such representative has delivered to the Bank evidence satisfactory to the Bank of such representative's status as such and has informed the Bank of the address of such representative by notice pursuant to this Paragraph 15.

Notwithstanding anything contained herein to the contrary, a Notice of Exercise shall be effective only upon actual receipt thereof by the Bank as provided in Paragraph 6 above.

IN WITNESS WHEREOF, the Bank has caused this instrument to be executed in its corporate name by its President, or one of its Vice Presidents, and attested by its Secretary or one of its Assistant Secretaries, and its corporate seal to be hereto affixed, all by authority of its Board of Directors first duly given, and the Optionee has hereunto set his or her hand and adopted as his or her seal the typewritten word "SEAL" appearing beside his or her name, all done this the day and year first above written.

     [CORPORATE SEAL]                 By:  _______________________________

                                      Title: _____________________________
ATTEST:


__________________________________
_________ Secretary


                                     _______________________________(SEAL)
                                     _____________________, Optionee

EXHIBIT A

NOTICE OF EXERCISE OF
EMPLOYEE STOCK OPTION

To: The Stock Option Committee of the
Board of Directors of MountainBank

The undersigned hereby elects to purchase shares of Common Stock of MountainBank (the "Bank") pursuant to the Option granted to the undersigned pursuant to the 1997 Employee Stock Option Plan (the "Plan") and that certain Stock Option Agreement between the Bank and the undersigned dated ________________, 19____.

The undersigned elects to purchase _______ whole shares of Common Stock having an aggregate Exercise Price of $______________ which is tendered herewith:

[_] in cash in the amount of $_______;

[_] by bank check or money order in the amount of $______;

[_] ________________________________________________________.

This the _____ day of ______________, 199___.

Exhibit 10.5

STATE OF NORTH CAROLINA
COUNTY OF HENDERSON

EMPLOYEE STOCK OPTION AGREEMENT

THIS EMPLOYEE STOCK OPTION AGREEMENT (the "Agreement") is made as of this _______ day of ________________, 2000 (the "Date of Grant"), by and between MOUNTAINBANK, a North Carolina banking corporation (the "Bank"), and ______________________, a resident of _______________________________ County, North Carolina (the "Optionee").

WHEREAS, on December 8, 1997, the Bank's Board of Directors adopted the 1997 EMPLOYEE STOCK OPTION PLAN (the "Plan"), subject to the approval of the Bank's shareholders and the North Carolina Commissioner of Banks; and,

WHEREAS, the Plan provides that the Stock Option Committee (the "Committee") of the Bank's Board of Directors from time to time may grant to officers and employees of the Bank and its subsidiaries the right or option to purchase shares of the Bank's $5.00 par value common stock ("Common Stock") on the terms and conditions set forth in the Plan; and,

WHEREAS, the Optionee currently is a full-time employee of the Bank and the Committee has selected the Optionee as an employee to whom it will grant an option to purchase Common Stock under the Plan;

NOW, THEREFORE, in consideration of the premises and the agreements of the parties set forth herein, the Bank and the Optionee hereby agree as follow:

The Option is granted under and pursuant to the Plan, a copy of which is attached hereto and the terms and conditions of which are incorporated herein by reference. Capitalized terms used in this Agreement which are defined in the Plan shall have the same meanings herein as are assigned to them in the Plan. In the event any provision of this Agreement conflicts or is inconsistent with a term or condition of the Plan, then the Plan provision shall be controlling and shall supersede the provision of this Agreement.

                              Option Stock Available
    Date                           For Exercise
------------                  ----------------------

                               ________shares

                               ________shares

                               ________shares

                               ________shares

                               ________shares

Notwithstanding anything contained herein to the contrary, the Option may not be exercised at any time as to a fractional share and, in the event application of the above percentages results in fractional shares, the number of shares as to which the Option may be exercised at any particular time shall be rounded down to the next lower whole share.

Notwithstanding anything contained herein to the contrary, the Optionee may not exercise the Option to purchase less than one hundred (100) shares, unless the Committee otherwise approves or unless the partial exercise is for all remaining shares of Option Stock available under the Option. Following receipt from the Optionee of a valid and effective Notice of Exercise and full payment of the Exercise Price relating to a number of the shares of Option Stock being purchased, a stock certificate representing that number of shares shall be issued and delivered by the Bank to the Optionee as soon as practicable; provided however that, if the Option is an ISO, then the Bank shall have the right and discretion to hold any shares purchased upon exercise of the Option in escrow for a period ending on the later of (i) two years from the Date of Grant of the Option, or (ii) one year after issuance of the stock upon exercise of the Option, for the sole purpose of informing the Bank of a disqualifying disposition within the meaning of Section 422 of the Internal Revenue Code of 1986. During any such escrow period, the Optionee shall have all rights of a shareholder with respect to the Option Stock purchased, including but not limited to the right to vote, receive dividends on and to sell such stock.

(a) Expiration Date. Notwithstanding anything contained herein to the contrary, to the extent the Option shall not previously have been exercised in the manner required by or

otherwise terminated as provided in the Plan or this Agreement, it shall expire and terminate at 5:00 P.M. on the "Expiration Date" which, for purposes of this Agreement, shall be _____________________, 20___.

(b) Other Termination. The Option otherwise shall terminate prior to the Expiration Date in the events and upon the occurrences described in the Plan.

(c) Effect of Termination or Expiration of Option. Upon the expiration or termination of all or any portion of the Option, it shall, without any further act by the Bank or the Optionee, no longer be exercisable or of any force or effect and shall no longer confer any rights to any person to purchase shares of Common Stock under the Plan or this Agreement.

As a condition of the exercise of the Option, the Bank may require that the Optionee execute one or more undertakings in such form as it shall prescribe to the effect that such shares are being acquired for investment purposes only and not with a view to the distribution or resale thereof.

Notwithstanding anything contained herein to the contrary, it is understood and agreed that the Bank (or any successor in interest to the Bank) shall not be required to take any action under the Plan or this Agreement if:

(a) the Bank is declared by any Regulatory Authority to be insolvent, in default or operating in an unsafe or unsound manner; or,

(b) in the opinion of counsel to the Bank, such payment or action:
(i) would be prohibited by or would violate any provision of state or federal law applicable to the Bank or any of its subsidiaries, including without limitation the Federal Deposit Insurance Act as now in effect or hereafter amended; (ii) would be prohibited by or would violate any applicable rules, regulations, orders or statements of policy, whether now existing or hereafter promulgated, of any regulatory authority; or, (iii) otherwise would be prohibited by any regulatory authority.

Notwithstanding anything contained herein to the contrary, a Notice of Exercise shall be effective only upon actual receipt thereof by the Bank as provided in Paragraph 5 above.

IN WITNESS WHEREOF, the Bank has caused this instrument to be executed in its corporate name by its President, or one of its Vice Presidents, and attested by its Secretary or one of its Assistant Secretaries, and its corporate seal to be hereto affixed, all by authority of its Board of Directors first duly given, and the Optionee has hereunto set his or her hand and adopted as his or her seal the typewritten word "SEAL" appearing beside his or her name, all done this the day and year first above written.

[CORPORATE SEAL]                  By:___________________________
                                      J. W. Davis
                                      President and Chief Executive Officer

ATTEST:

EXHIBIT A

NOTICE OF EXERCISE OF
EMPLOYEE STOCK OPTION

To: The Stock Option Committee of the
Board of Directors of MountainBank

The undersigned hereby elects to purchase shares of Common Stock of MountainBank (the "Bank") pursuant to the Option granted to the undersigned pursuant to the 1997 Employee Stock Option Plan (the "Plan") and that certain Stock Option Agreement between the Bank and the undersigned dated _____________, 20__.

The undersigned elects to purchase ______ whole shares of Common Stock having an aggregate Exercise Price of $_______ which is tendered herewith:

[_] in cash in the amount of $____;

[_] by bank check or money order in the amount of $____;

[_] _____________________.

This the __________ day of ___________, 200___.

Exhibit 10.6

MOUNTAINBANK

MOUNTAINBANK (the "Bank") hereby adopts this 1997 DIRECTOR STOCK OPTION PLAN (the "Plan") as further described herein.

The purpose of the Plan is to encourage the continued service of Directors of the Bank or any company which is a subsidiary of the Bank (a "Subsidiary"), and to provide an additional incentive for such Directors to expand and improve the profits and prosperity of the Bank and its Subsidiaries, by granting them options to purchase shares of the Bank's common stock. The Plan also will assist the Bank and its subsidiaries in recruiting and retaining persons to serve as Directors of the Bank and its Subsidiaries.

Pursuant to and in accordance with the terms of the Plan, options ("Options") may be granted from time to time to purchase shares of the Bank's common stock, $5.00 par value per share ("Common Stock").

The aggregate number of shares of Common Stock which may be sold upon the exercise of Options granted under the Plan is 60,000 shares, which maximum number is subject to adjustment as provided in Paragraph 6.1 hereof. Shares of Common Stock sold by the Bank upon the exercise of Options granted hereunder, at the sole discretion of the Bank, may be issued from the Bank's authorized but unissued shares, or be issued and outstanding shares purchased by the Bank on the open market or in private transactions. In the event an Option granted under the Plan shall expire or terminate for any reason without having been exercised in full, then, to the extent the Plan shall remain in effect, the shares of Option Stock covered by the unexercised portion of such Option shall again be available for the grant of Options under the Plan.

The Plan shall become effective as of December 8, 1997 (the "Effective Date," which is the date of adoption of the Plan by the Bank's Board of Directors); provided, however, that notwithstanding anything contained herein to the contrary, the Plan shall be

subject to approval of the North Carolina Commissioner of Banks and other banking regulators to the extent required by law and to approval of the Bank's shareholders by a vote of the holders of two-thirds of the outstanding shares of the Bank's Common Stock at a meeting of the Bank's shareholders held in accordance with North Carolina law. Options may be granted pursuant to the Plan prior to receipt of such approvals, but any such Options granted shall be subject to, and may not become exercisable until, receipt of such approvals.

additional period of time within which to exercise the Option beyond the Expiration Date originally prescribed in the Option Agreement. "Renewal" refers to the granting of an Option to the Optionee with the same rights and privileges and on the same terms and conditions as contained in an original Option after expiration or termination of the original Option.

The Plan shall be administered by the Committee which shall be composed solely of two or more Non-Employee Directors. Members of the Committee shall serve at the pleasure of the Board, and the Board, from time to time and at its discretion, may remove members from (with or without cause) or add members to the Committee or fill any vacancies on the Committee, however created.

In its administration of the Plan, the Committee shall have the authority, power and duty:

(a) to make any and all determinations regarding persons who are eligible to receive Options under the Plan;

(b) to construe and interpret the terms and provisions of the Plan and any and all Option Agreements entered into pursuant to the Plan;

(c) to make, adopt, amend, rescind, and interpret such rules and regulations not inconsistent with the Plan or law as it from time to time deems reasonable and necessary for the interpretation and administration of the Plan;

(d) to prescribe the form or forms of the instruments evidencing any Options granted under the Plan and of any other instruments required under the Plan and to change such forms from time to time;

(e) to determine:

(i) the Directors to whom Options shall be granted pursuant to the Plan and the timing of such grant or grants, and to cause Options to be granted to Directors it selects;

(ii) the number of shares of Option Stock to be covered by each Option granted;

(iii) the Exercise Price to be paid for Option Stock upon exercise of the Option as set forth in the Option Agreement and as determined in accordance with Paragraph 4.3 hereof;

(iv) the Expiration Date of each Option granted, and the period within which any such Option may be exercised;

(v) any other term and/or condition of each Option (which need not be identical from Option to Option) so long as not inconsistent with the Plan; and,

(f) to make all other determinations and take all other actions provided for herein or deemed by it, in its discretion, to be necessary or advisable to administer the Plan in a proper and effective manner.

The Committee shall select one of its members as Chairman and shall hold meetings at such times and places as it shall deem necessary or desirable. A majority of the members of the Committee shall constitute a quorum for all matters with respect to administration of the Plan, and acts of a majority of the members of the Committee present at meetings at which a quorum is present, or acts reduced to and approved in writing by all of the members of the Committee without a meeting, shall be valid acts of the Committee.

All actions, decisions and determinations of the Committee in connection with the administration of the Plan, and in connection with the interpretation and construction of, or questions or other matters concerning, the Plan or any Option granted, shall (i) be made consistent and in accordance with the terms of the Plan, and (ii) shall be final, conclusive and binding on all persons, including the Bank, its shareholders, Optionees and any other person claiming any interest in any Option; provided, however, that any action, decision, interpretation or determination, other than those respecting the actual grant of Options, shall be subject to review by the Board of Directors either on its own initiative, at the request of the Committee or on application of any aggrieved party. In such a case, the determination of the Board of Directors on such review shall be final and binding on all affected parties.

To the extent permitted by applicable law, and in addition to such other rights of indemnification that members of the Committee may have as Directors of the Bank, the members of the Committee shall be indemnified by the Bank against the reasonable expenses, including attorneys' fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal thereof, to which they or any of them may be made a party by reason of any action taken or omitted in good faith under or in connection with administration of the Plan or any Option granted hereunder and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Bank) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that any such Committee member is liable for gross negligence or misconduct in the performance of his duties; provided, however, that within thirty (30) days after institution of any such action, suit or proceeding, such Committee member(s) shall in writing offer the Bank the opportunity, at its own expense, to handle and defend same.

Pursuant to the Plan, from time to time prior to the Termination Date the Bank may grant Options to Directors to purchase shares of Common Stock. Options may only be granted by action of the Committee, and no person shall have any rights under the Plan or with respect to any Option except pursuant to such action of the Committee.

The number of shares of Option Stock covered by each Option shall be set by the Committee at the time such Option is granted and shall be specified in the Option Agreement evidencing such Option; provided, however, that the number of shares of Option Stock covered by Options granted from time to time to any one Director under the Plan may not exceed 40% of the aggregate number of shares of Common Stock originally available for the grant of Options under the Plan from time to time. The number of shares of Option Stock covered by each Option shall be subject to adjustment in the manner described in Paragraph 6.1 below.

At the time an Option is granted, the Committee shall set the Exercise Price applicable to such Option. The Exercise Price shall be determined by the Committee in the manner described below and shall be specified in the Option Agreement evidencing the Option. The Exercise Price applicable to each Option shall be subject to adjustment in the manner described in Paragraph 6.1 below.

The Exercise Price for each share of Option Stock covered by an Option shall not be less than one hundred percent (100%) of the fair market value of one share of the Common Stock on the Date of Grant of such Options (the "Fair Market Value"). The Fair Market Value on any particular date shall be, (i) if the Common Stock is not then listed on the Nasdaq Stock Market, the fair market value of a share of the Common Stock as determined by the Committee in its sole discretion in such manner as it shall deem to be reasonable and appropriate, or, (ii) if the Common Stock is listed on the Nasdaq Stock Market, the average of the bid and asked prices for a share of the Common Stock as quoted by Nasdaq on such date.

Each Option granted under the Plan shall be evidenced by an Option Agreement which shall be executed and delivered by the Optionee and by or on behalf of the Bank and which shall (i) contain such

information as is provided or permitted herein to be contained in the Option Agreement, and (ii) not contain any provisions inconsistent with the Plan. Following the execution of an Option Agreement evidencing an Option, such Option shall be effective as of the Date of Grant of such Option.

No Option may be exercised unless and until the Optionee shall have completed six months (or such other or longer period as shall be determined by the Committee and specified in the Option Agreement evidencing that Option) of continuous, full time service as a Director following the Date of Grant of the Option, but thereafter, subject to earlier termination, may be exercised as provided herein and in the Option Agreement evidencing such Option. The waiting period provided herein shall not operate to extend the Expiration Date or other date of termination of an Option set forth or referred to in Article V below.

The Expiration Date of each Option shall be set by the Committee at the time the Option is granted and shall be specified in the Option Agreement evidencing the Option, but in no event shall be more than ten (10) years following the Date of Grant of the Option.

Subject to the other terms and conditions contained in the Plan, each Option may be exercised by the Optionee at such times or intervals and on such other terms and conditions (if any) as are determined by the Committee and specified in the Option Agreement evidencing the Option.

Notwithstanding anything contained herein or in any Option Agreement to the contrary, to the extent that an Option shall not previously have been exercised in the manner required by the Plan, it shall expire and terminate at 5:00 P.M. on its Expiration Date. In addition to the termination provisions set forth above, Options granted pursuant to the Plan shall terminate or may be terminated as provided in Paragraphs 5.7 and 6.1 below. Upon the expiration or termination of all or any portion of an Option, such Option or portion thereof shall, without any further act by the Bank, expire and no longer be exercisable or confer any rights to any person to purchase shares of Common Stock under the Plan.

To exercise an Option in whole or in part, the Optionee or other person then entitled to exercise the Option or portion thereof

shall notify the Bank by delivering written notice of such exercise (a "Notice of Exercise") to the President or the Secretary of the Bank. Such written notice shall be substantially in the form attached hereto as Exhibit A and shall specify the number of shares of Option Stock to be purchased. A Notice of Exercise shall not be effective (and the Bank shall have no obligation to sell any Option Stock to the Optionee pursuant to such Notice) unless it satisfies the terms and conditions set forth herein and actually is received by the Bank as provided above prior to the Expiration Date of the Option to be exercised.

In the event an Option or portion thereof is being exercised by a person other than the Optionee (as provided in Paragraph 5.7(c) below), the Notice of Exercise shall be accompanied by appropriate proof of the right of such person(s) to exercise the Option.

The Exercise Price of Option Stock being purchased upon the exercise of an Option (in part or in whole) shall be paid by the Optionee in full at the time of such exercise. Such payment may be made (i) in cash, (ii) by official bank check, bank money order or other certified funds, or (iii) in the discretion of the Committee, by a combination thereof. No Option Stock shall be issued or delivered until full payment of the Exercise Price therefor has been made.

At the time an Option is granted, the Committee shall have the authority, in its sole discretion, to impose restrictions of any nature on the exercise of such Option (including restrictions in the form of a schedule by which an Option become exercisable in increments over a period of time) and on the Option Stock acquired by the Optionee upon such exercise. Without limiting the generality of the foregoing, the Committee may impose conditions restricting absolutely the transferability of Option Stock acquired through exercise of any Options for such periods as the Committee may determine. Any such restrictions imposed by the Committee shall be specified in the Option Agreement.

Options granted hereunder shall not be assignable or transferable except by will or by the laws of descent and distribution, and, during the lifetime of the Director, be exercised only by him. More particularly, but without limiting the generality of the foregoing, an Option may not be sold, assigned, transferred (except as noted herein), pledged or hypothecated in any way and shall not be subject to execution, attachment or similar process.

(a) In the event an Optionee's service as a Director shall terminate or be terminated prior to the Expiration Date of his or her Option for any reason other than his or her death, "Disability" (as defined below) or "Retirement" (as defined below), then the Optionee's Option immediately shall terminate at the times specified below.

(i) If, prior to the Expiration Date of his or her Option, an Optionee voluntarily terminates his or her service as a Director other than as a result of "Retirement" (as defined below) or declines to stand for reelection as a Director at the expiration of any term of office, then, to the extent it shall not previously have been exercised in the manner required by the Plan, any Option previously granted to the Optionee which remains outstanding and in effect immediately shall terminate and be of no further force or effect on the effective date of such termination of service.

(ii) If, prior to the Expiration Date of his or her Option, an Optionee's service as a Director is terminated as a result of "Retirement" (as defined below) with the consent of the Bank, the Optionee shall have the right to exercise his rights pursuant to his Option within ninety (90) days following the date of such Retirement (but not later than the Expiration Date of the Option) in accordance with the terms of the Plan, at the end of which period the Option shall terminate and be of no further force or effect.

The termination of an Optionee's service as a Director under circumstances as the Committee shall agree in writing to treat as "Retirement" for purposes of the Plan shall be deemed to be a "Retirement" with the consent of the Bank.

(iii) If, prior to the Expiration Date of his or her Option, an Optionee's service as a Director is terminated as a result of his or her removal by shareholders, or as a result of his failure to be nominated for reelection or to be reelected by shareholders as a Director, then, to the extent it shall not previously have been exercised in the manner required by the Plan, any Option previously granted to the Optionee which remains outstanding and in effect immediately shall terminate and be of

no further force or effect on the effective date of such termination of service.

(b) Disability of Optionee: If, prior to the Expiration Date of his or her Option, an Optionee becomes "Disabled" (as defined below) and his or her service as a Director is terminated as a result, then, to the extent it shall not previously have been exercised in the manner required by the Plan, the Optionee shall have the right to exercise his rights pursuant to his Option within ninety (90) days following the effective date of such termination (but not later than the Expiration Date of the Option) in accordance with the terms of the Plan, at the end of which period the Option shall terminate and be of no further force or effect. For purposes of this Paragraph 5.7(b), the determination of whether an Optionee shall be considered "Disabled" shall be within the sole discretion of the Committee.

(c) Death of Optionee: If an Optionee shall die while serving as a Director and prior to the Expiration Date of an Option held by him or her, then, to the extent the Option held by the Optionee at the time of his or her death remains in effect and could be exercised by the Optionee under the terms of the Plan and the Option Agreement relating to it, his designated beneficiary (determined either by will or other writing delivered to the Committee in advance), or if no designated beneficiary, the personal representative of his estate, shall have the right to exercise such Optionee's rights pursuant to his Option following the date of his death, but not later than the Expiration Date of the Option, in accordance with the terms of the Plan. Any references herein to an Optionee shall be deemed to include any person entitled to exercise an Option after the death of such Optionee under the terms of this Plan.

Subject to the provisions of Paragraph 6.1 below, any Option may be Modified, Extended or Renewed (as those terms are defined in Article II) only upon the agreement of the Committee and the Optionee. Any such agreement shall be in the form of a written amendment to the Option Agreement evidencing the Option being Modified, Extended or Renewed and which shall set forth the terms of any such Modification, Extension or Renewal.

In addition to the items required to be in the Option Agreement evidencing an Option, such Option Agreement may contain such other terms, conditions and provisions applicable to such Option or the exercise thereof (including any and all limitations or restrictions as shall be necessary to comply with any applicable federal and

state securities laws and regulations) as the Committee shall, at its sole discretion, deem necessary or desirable; provided, however, that the Committee may not impose any such terms, conditions or provisions that are inconsistent with any provisions of the Plan.

A stock certificate representing the number of shares of Option Stock purchased by the Optionee upon the proper exercise of an Option shall be issued and delivered by the Bank as soon as practicable after receipt of a valid and effective Notice of Exercise and full payment of the Exercise Price relating to those shares. Such certificate shall be delivered to or on the written order of the person exercising the Option.

(a) Changes in Capitalization; Stock Splits and Dividends. In the event of (i) any dividend payable by the Bank in shares of Common Stock, or (ii) any recapitalization, reclassification, split-up, consolidation or combination of, or other change in or offering of rights to the holders of, Common Stock, or (iii) an exchange of the outstanding shares of Common Stock for a different number or class of shares of stock or other securities of the Bank in connection with a merger, consolidation or other reorganization of or involving the Bank (provided the Bank shall be the surviving or resulting corporation in any such merger or consolidation), then the Committee shall, in such a manner as it shall determine in its sole discretion, appropriately adjust the number and class or kind of shares which may be issued under the Plan and of the securities which shall be subject to outstanding Options and/or the Exercise Price applicable to any outstanding Option. However, in no event shall any such adjustment change the aggregate Exercise Price for Option Stock to be purchased upon the exercise of any Option.

In the event of an incease in the number of outstanding shares of the Bank's Common Stock as described above, then, at the Committee's option and discretion, the aggregate number of shares of Common Stock authorized to be issued under the Plan may be increased so that such aggregate number will equal 10% of the sum of the aggregate number of outstanding shares of the Common Stock plus the number of shares of Common Stock that remain reserved for issuance under the Plan.

Subject to review by the Board of Directors of the Bank, any such adjustments made by the Committee shall be consistent

with changes in the Bank's outstanding Common Stock resulting from the above events and, when made, shall be final, conclusive and binding on all persons, including, without limitation, the Bank, its shareholders and each Optionee or other person having any interest in any Option so adjusted. Any fractional shares resulting from any such adjustment shall be eliminated. However, notwithstanding anything contained herein to the contrary, no Option which is intended to be an ISO shall be adjusted in a manner that causes the Option to fail to continue to qualify as an ISO.

(b) Dissolution; Merger or Consolidation; Sale of Assets. In the event of a dissolution or liquidation of the Bank, the sale of substantially all the Bank's assets, or a merger or consolidation of the Bank with or into any other corporation or entity (or any other such reorganization or similar transaction) in which the Bank is not the surviving or resulting corporation, and if a provision is not made in such transaction for the continuance of this Plan or the assumption of Options by any successor to the Bank or for the substitution for Options of new options covering shares of any successor corporation or a parent or subsidiary thereof, then, in such event, and to the extent such Options have not previously been exercised, all rights of Optionees pursuant to all outstanding Options shall terminate and be of no further effect immediately prior to the effective time of such dissolution, liquidation, sale, merger, consolidation or other reorganization (or at such other time and pursuant to such rules and regulations as the Committee shall determine and promulgate to the Optionees). However, to the extent such Options shall not previously have been exercised, and notwithstanding any provisions of the Plan or any Option Agreement to the contrary, each such Option shall become exercisable, and may be exercised, in full immediately prior to the effective time of any such event. The Committee shall give each Optionee at least ninety (90) days prior written notice of the effective time of an event which gives rise to an immediate purchase right under this Paragraph 6.1.

(c) Miscellaneous. The grant of an Option shall not affect in any way the right or power of the Bank to (i) enter into or effect any adjustment, recapitalization, reclassification, reorganization or any other change in the Bank's capital or business structure or its business, (ii) to merge or consolidate, or to dissolve, liquidate, sell or transfer all or any part of its business or assets, or (iii) to issue bonds, debentures, preferred or other preference stock ahead of or affecting Common Stock or the rights thereof.

Neither an Optionee nor any other person shall have any rights as a stockholder with respect to any shares of Option Stock covered by an Option until such Option shall have been validly exercised in the manner described herein and in the Option Agreement relating to such Option, full payment of the Exercise Price has been made for such shares, and a stock certificate representing the Option Stock purchased upon such exercise shall have been registered on the Bank's stock records in the name of and delivered to such person. Except to the extent of adjustments made pursuant to Paragraph 6.1 above, no adjustment on behalf of the Optionee shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property), distributions or other rights for which the record date for determining the shareholders entitled to receive the same is prior to the date of registration and delivery of the stock certificate(s) representing the Option Stock.

Neither the Plan nor the grant of an Option, nor any Option Agreement evidencing any such Option, is intended or shall be deemed or interpreted to confer upon an Optionee any right of continued service as a Director or to interfere with, restrict or otherwise limit in any way the right of the Bank or any Subsidiary or their shareholders to decline to nominate such person for reelection as a Director, to reelect such person as a Director, or to remove such person from office in accordance with applicable law.

If in the opinion of legal counsel for the Bank the issuance or sale of any shares of Option Stock by the Bank pursuant to the exercise of an Option would not be lawful without registration under the Securities Act of 1933 (the "1933 Act") or without some other action being taken, or for any other reason, or would require the Bank to obtain approval from any governmental authority or regulatory body having jurisdiction deemed by such counsel to be necessary to such issuance or sale, then the Bank shall not be obligated to issue or sell any Option Stock pursuant to the exercise of any Option to any Optionee or to any other authorized person unless a registration statement that complies with the provisions of the 1933 Act in respect of such shares is in effect at the time thereof and all other required or appropriate action has been taken under and pursuant to the terms and provisions of the 1933 Act or other applicable law, or the Bank receives evidence satisfactory to such counsel that the issuance and sale of such shares, in the absence of an effective registration statement or other action, would not constitute a violation of the 1933 Act or other applicable law, or unless any such required approval shall have been obtained. The Bank is in no event obligated to register

any such shares, to comply with any exemption from registration requirements or to take any other action which may be required in order to permit, or to remedy or remove any prohibition or limitation on, the issuance or sale of Option Stock to any Optionee or other authorized person.

The Committee, as a condition of the grant of an Option and/or the exercise thereof, may require that the Optionee execute one or more undertakings in such form as the Committee shall prescribe to the effect that such shares are being acquired for investment purposes only and not with a view to the distribution or resale thereof.

Notwithstanding anything contained herein to the contrary, it is understood and agreed that neither the Bank nor any of its Subsidiaries (or any of their successors in interest) shall be required to take any action under this Plan or any Option granted hereunder if:

(a) the Bank is declared by any Regulatory Authority to be insolvent, in default or operating in an unsafe or unsound manner; or,

(b) in the opinion of legal counsel to the Bank, such payment or action:

(i) would be prohibited by or would violate any provision of state or federal law applicable to the Bank or any of its Subsidiaries, including without limitation the Federal Deposit Insurance Act as now in effect or hereafter amended;

(ii) would be prohibited by or would violate any applicable rules, regulations, orders or statements of policy, whether now existing or hereafter promulgated, of any Regulatory Authority; or,

(iii) otherwise would be prohibited by any Regulatory Authority.

The granting of an Option pursuant to the Plan shall impose no obligation on the Optionee to purchase any shares covered by such Option.

Each Optionee shall be responsible for all federal, state, local or other taxes of any nature as shall be imposed pursuant to any law or governmental regulation or ruling on any Option or the exercise thereof or on any income which an Optionee is deemed to recognize

in connection with an Option. If the Committee shall determine to its reasonable satisfaction that the Bank or any of its Subsidiaries is required to pay or withhold the whole or any part of any estate, inheritance, income, or other tax with respect to or in connection with any Option or the exercise thereof, then the Bank or such Subsidiary shall have the full power and authority to withhold and pay such tax out of any shares of Common Stock being purchased by the Optionee or from the Optionee's salary or any other funds otherwise payable to the Optionee, or, prior to and as a condition of exercising such Option, the Bank may require that the Optionee pay to it in cash the amount of any such tax which the Bank, in good faith, deems itself required to withhold.

The validity, interpretation and administration of the Plan, any Option Agreement, and of any rules, regulations, determinations or decisions made thereunder, and the rights of any and all persons having or claiming to have any interest therein or thereunder, shall be determined exclusively in accordance with the laws of the State of North Carolina. Without limiting the generality of the foregoing, the period within which any action in connection with the Plan must be commenced shall be governed by the laws of the State of North Carolina, without regard to the place where the act or omission complained of took place, the residence of any party to such action, or the place where the action may be brought or maintained.

The Board, upon recommendation of the Committee, may, from time to time, amend, modify, suspend, terminate or discontinue the Plan at any time without notice, provided, however, that no such action by the Board shall adversely affect any Optionee's rights under any then outstanding Options without such Optionee's prior written consent; and, provided further that, except as shall be required to comport with changes in the Code, any modification or amendment of the Plan that (a) increases the aggregate number of shares of Common Stock which may be issued upon the exercise of Options (other than as provided in Paragraph 6.1 above), (b) changes the formula by which the Exercise Price is determined, (c) changes the provisions of the Plan with respect to the determination of Directors to whom Options may be granted or, (d) otherwise materially increases the benefits accruing to Optionees under the Plan, shall be subject to the approval of the Bank's shareholders. In the event the Board shall terminate or discontinue the Plan, such action shall not operate to deprive any Optionee of any rights theretofore acquired by him or her under the Plan, and any Options outstanding as of the date of any such termination shall remain in full force and effect according to their terms as though the Plan had not been terminated.

The proceeds received by the Bank from the sale of Common Stock pursuant to Options granted under the Plan will be used for general corporate purposes.

Except as otherwise provided herein, any notice which the Bank or an Optionee may be required or permitted to give to the other under this Plan shall be in writing and shall be deemed duly given when delivered personally or deposited in the United States mail, first class postage prepaid, and properly addressed. Notice, if to the Bank, shall be sent to its President at the address of the Bank's then current corporate office. Any notice sent by mail by the Bank to an Optionee shall be sent to the most current address of the Optionee as reflected on the records of the Bank or its Subsidiaries as of the time said notice is required. In the case of a deceased Optionee, any notice shall be given to the Optionee's personal representative if such representative has delivered to the Bank evidence satisfactory to the Bank of such representative's status as such and has informed the Bank of the address of such representative by notice pursuant to this Paragraph 6.10.

With respect to persons who are subject to Section 16 of the 1934 Act, the Plan and each Option granted and transaction under it are intended to, and shall be interpreted so as to, be consistent with the requirements, and satisfy applicable conditions, of Rule 16b-3 of the Securities and Exchange Commission (as such Rule may be modified, amended or superseded from time to time). To the extent any provision of the Plan or any Option Agreement, or any action by the Committee or the Board, shall fail to so comply, then, to the extent permitted by law and deemed advisable by the Committee, such provision or action shall be deemed null and void.

Subject to Paragraph 5.6 above, this Plan shall bind and inure to the benefit of the Bank, any Optionee, and their respective successors, assigns, personal or legal representatives and heirs.

It is intended that each provision of this Plan shall be viewed as separate and divisible, and in the event that any provision hereof shall be held to be invalid or unenforceable, the remaining provisions shall continue to be in full force and effect.

Titles of Articles and Paragraphs are provided herein for convenience only, do not modify or affect the meaning of any provision herein, and shall not serve as a basis for interpretation or construction of this Plan.

As used herein, the masculine gender shall include the feminine and neuter, the singular number the plural, and vice versa, whenever such meanings are appropriate.

MOUNTAINBANK

AMENDMENT N0. 1 TO
1997 DIRECTOR STOCK OPTION PLAN

WHEREAS, the Board of Directors of the Bank heretofore adopted the Bank's 1997 Director Stock Option Plan (the "Director Plan" or the "Plan") which provides for the grant of options to directors of the Bank to purchase newly issued shares of the Bank's common stock; and, the Director Plan was approved during 1998 by the Bank's shareholders and by the North Carolina Commissioner of Banks in the manner required by North Carolina law; and,

WHEREAS, under North Carolina law applicable to banks, the Director Plan may provide for the grant of options for an aggregate number of shares equal to not more than 10% of the Bank's total outstanding shares, and, the Director Plan, as originally adopted, provides for the grant of options to purchase an aggregate of 86,400 shares of common stock (as such number has been adjusted in accordance with the terms of the Plan as a result of the six-for-five stock splits effected in the form of 20% stock dividends which became effective on January 20, 1999, and January 15, 2000); and,

WHEREAS, by resolution during April 2000, and as a result of increases in the number of outstanding shares of the Bank's common stock resulting from the Bank's sale of additional shares pursuant to stock offerings conducted during 1999 and proposed to be conducted during 2000, the Bank's Board of Directors proposed to amend the Director Plan to increase the aggregate number of shares available for the grant of options to 10% of the increased number of the Bank's outstanding shares following the offerings; and, the Board of Directors approved an amendment to the Director Plan to effect such an increase and authorized the submission of the proposed amendment for approval by the Bank's shareholders; and,

WHEREAS, at the Annual Meeting of the Bank's shareholders held on June 15, 2000, the shareholders approved the proposed amendment by the affirmative vote of more than two-thirds of the Bank's then outstanding shares; and,

WHEREAS, by letter dated July 17, 2000, the North Carolina Commissioner of Banks approved the proposed amendment; and,

WHEREAS, by resolution dated October 16, 2000, the Board of Directors formally approved the proposed amendment to increase the number of shares authorized to be issued under the Director Plan to 149,688 shares and, in approving the amendment, authorized management of the Bank to take such actions as they deemed to be reasonable, appropriate, necessary or advisable to effect and carry out the Board's resolutions and to effect the proposed amendment, including the execution for and in the name of the Bank of a formal written Amendment; and,

WHEREAS, pursuant to the above authority, this Amendment No. 1 is made for the purpose of effecting the amendment to the Director Plan previously approved by the Bank's Board of Directors and shareholders.

NOW THEREFORE, in consideration of the premises and pursuant to authority duly given by the Bank's Board of Directors and shareholders, the Director Plan hereby is amended as follows:

1. In Paragraph 1.2 of the Director Plan, the first full sentence of the second paragraph is deleted in its entirety and the following new sentence is inserted in its entirety:

"The aggregate number of shares of Common Stock which may be sold upon the exercise of Options granted under the Plan is 149,688 shares, which maximum number is subject to adjustment as provided in Paragraph 6.1 hereof."

2. Except as expressly modified and amended as described above, the Director Plan shall remain in full force and effect in accordance with its terms.

IN WITNESS WHEREOF, the Bank has executed this Amendment, by and through the undersigned thereunto duly authorized, on this the day and year first above written.

MOUNTAINBANK

                                   By:  /s/ J. W. Davis
                                        -----------------------------------
                                        J. W. Davis
                                        President and Chief Executive Officer
          (SEAL)

                                   By:  /s/ Boyd L. Hyder
                                        -----------------------------------
                                        Boyd L. Hyder
                                        Chairman of the Board of Directors

ATTEST:

/s/ Sherrie B. Rogers
---------------------------
Assistant Secretary

Exhibit 10.7

STATE OF NORTH CAROLINA
COUNTY OF HENDERSON

DIRECTOR STOCK OPTION AGREEMENT

THIS DIRECTOR STOCK OPTION AGREEMENT (the "Agreement") is made as of this ______ day of _______________, 19_____ (the "Date of Grant"), by and between MOUNTAINBANK, a North Carolina banking corporation (the "Bank"), and ___________________________________, a resident of ____________ County, North Carolina (the "Optionee").

WHEREAS, on December ___, 1997, the Bank's Board of Directors adopted the 1997 DIRECTOR STOCK OPTION PLAN (the "Plan"), subject to the approval of the Bank's shareholders and the North Carolina Commissioner of Banks; and

WHEREAS, the Plan provides that the Stock Option Committee (the "Committee") of the Bank's Board of Directors from time to time may grant to directors of the Bank and its subsidiaries the right or option to purchase shares of the Bank's $5.00 par value common stock ("Common Stock") on the terms and conditions set forth in the Plan; and

WHEREAS, the Optionee currently is a director of the Bank;

NOW, THEREFORE, in consideration of the premises and the agreements of the parties set forth herein, the Bank and the Optionee hereby agree as follow:

The Option is granted under and pursuant to the Plan, a copy of which is attached hereto and the terms and conditions of which are incorporated herein by reference. Capitalized terms used in this Agreement which are defined in the Plan shall have the same meanings herein as are assigned to them in the Plan. In the event any provision of this Agreement conflicts or is inconsistent with a term or condition of the Plan, then the Plan provision shall be controlling and shall supersede the provision of this Agreement.

by the Bank. Notwithstanding anything contained herein to the contrary, the Option may not be exercised prior to receipt of both such approvals. In the event either such approval is not obtained, then this Agreement and the Option shall, without any action by the Bank or the Optionee, become void and unenforceable and of no further force or effect.

[_] six months
[_] __________________________________________________

                                            Option Stock Available
              Date                               For Exercise
       --------------------                    ----------------
================================================================================
         June 30, 1998 ..........                  33 1/3%
--------------------------------------------------------------------------------
         June 30, 1999 ..........                  33 1/2%
--------------------------------------------------------------------------------
         June 30, 2000 ..........                  33 1/2%
================================================================================

Notwithstanding anything contained herein to the contrary, the Option may not be exercised at any time as to a fractional share and, in the event application of the above percentages results in a fractional shares, the number of shares as to which the Option may be exercised at any particular time shall be rounded down to the next lower whole share.

effective (and the Bank shall have no obligation to sell any Option Stock to the Optionee pursuant to such Notice) unless it satisfies the terms and conditions contained in the Plan and this Agreement and actually is received by the Bank prior to the Expiration Date or any earlier termination of the Option.

Notwithstanding anything contained herein to the contrary, the Optionee may not exercise the Option to purchase less than one hundred (100) shares, unless the Committee otherwise approves or unless the partial exercise is for all remaining shares of Option Stock available under the Option. Following receipt from the Optionee of a valid and effective Notice of Exercise and full payment of the Exercise Price relating to a number the shares of Option Stock being purchased, a stock certificate representing that number of shares shall be issued and delivered by the Bank to the Optionee as soon as practicable.

(a) Expiration Date. Notwithstanding anything contained herein to the contrary, to the extent the Option shall not previously have been exercised in the manner required by or otherwise terminated as provided in the Plan or this Agreement, it shall expire and terminate at 5:00 P.M. on the "Expiration Date" which, for purposes of this Agreement, shall be (check one):

[_] the date ten years following the Date of Grant
[_] _____________________, 19______

(b) Other Termination. The Option otherwise shall terminate prior to the Expiration Date in the events and upon the occurrences described in the Plan.

(c) Effect of Termination or Expiration of Option. Upon the expiration or termination of all or any portion of the Option, it shall, without any further act by the Bank or the Optionee, no longer be exercisable or of any force or effect and shall no longer confer any rights to any person to purchase shares of Common Stock under the Plan or this Agreement.

Optionee any right to continued service as a director of the Bank or to interfere with, restrict or otherwise limit in any way the right of the Bank or its shareholders to decline to nominate any such person for reelection as a direct, to reelect such person as a director, or to remove such person from office in accordance with applicable law.

As a condition of the exercise of the Option, the Bank may require that the Optionee execute one or more undertakings in such form as it shall prescribe to the effect that such shares

are being acquired for investment purposes only and not with a view to the distribution or resale thereof.

Notwithstanding anything contained herein to the contrary, it is understood and agreed that the Bank (or any successor in interest to the Bank) shall not be required to take any action under the Plan or this Agreement if:

(a) the Bank is declared by any Regulatory Authority to be insolvent, in default or operating in an unsafe or unsound manner; or,

(b) in the opinion of counsel to the Bank, such payment or action:
(i) would be prohibited by or would violate any provision of state or federal law applicable to the Bank or any of its subsidiaries, including without limitation the Federal Deposit Insurance Act as now in effect or hereafter amended; (ii) would be prohibited by or would violate any applicable rules, regulations, orders or statements of policy, whether now existing or hereafter promulgated, of any regulatory authority; or, (iii) otherwise would be prohibited by any regulatory authority.

deposited in the United States mail, first class postage prepaid, and properly addressed. Notice, if to the Bank, shall be sent to its President at the address of the Bank's then current corporate office. Any notice sent by mail by the Bank to the Optionee shall be sent to the most current address of the Optionee as reflected on the records of the Bank or its Subsidiaries as of the time said notice is required. If the Optionee has died, any such notice shall be given to the Optionee's personal representative if such representative has delivered to the Bank evidence satisfactory to the Bank of such representative's status as such and has informed the Bank of the address of such representative by notice pursuant to this Paragraph 14.

Notwithstanding anything contained herein to the contrary, a Notice of Exercise shall be effective only upon actual receipt thereof by the Bank as provided in Paragraph 5 above.

action may be brought or maintained. The parties hereto agree that any suit or action relating to this Agreement shall be instituted and prosecuted in the courts of Henderson County, North Carolina, and each party hereby does waive any right or defense relating to such jurisdiction and venue.

IN WITNESS WHEREOF, the Bank, has caused this instrument to be executed in its corporate name by its President, or one of its Vice Presidents, and attested by its Secretary or one of its Assistant Secretaries, and its corporate seal to be hereto affixed, all by authority of its Board of Directors first duly given, and the Optionee has hereunto set his or her hand and adopted as his or her seal the typewritten word "SEAL" appearing beside his or her name, all done this the day and year first above written.

     [CORPORATE SEAL]                  By:  _______________________________

                                       Title: _________________________
ATTEST:


__________________________________
_____________, Secretary

EXHIBIT A

NOTICE OF EXERCISE OF
DIRECTOR STOCK OPTION

To: The Stock Option Committee of
the Board of Directors of MountainBank

The undersigned hereby elects to purchase shares of Common Stock of MountainBank (the "Bank") pursuant to the Option granted to the undersigned pursuant to the 1997 Director Stock Option Plan (the "Plan") and that certain Stock Option Agreement between the Bank and the undersigned dated ________________, 19____.

The undersigned elects to purchase ___________ whole shares of Common Stock having an aggregate Exercise Price of $_____________ which is tendered herewith:

[_] in cash in the amount of $____________;

[_] by bank check or money order in the amount of $_______;

[_] ________________________________________________________.

This the _________ day of ___________, 199.

EXHIBIT 10.8

STATE OF NORTH CAROLINA
COUNTY OF HENDERSON

W I T N E S S E T H:

THAT, subject to the terms and conditions hereinafter set forth, the Lessor does hereby let and lease unto the Lessee those certain premises in the County of Henderson and State of North Carolina situated at Hendersonville, North Carolina and being more particularly described as located off U.S. Highway 64 East, Four Seasons Boulevard, Hendersonville, North Carolina, and as is shown more particularly by metes and bounds on "Exhibit A" attached hereto and incorporated herein.

TO HAVE AND TO HOLD the said demised premises and appurtenances upon the terms and conditions hereinafter set forth.

Year Six   =   Base Rent ($6,700.00 per month)
Through        Adjusted @ 100% of the accumulated
Year Ten       CPI for year one through year five,

The "accumulated CPI" shall be defined and determined as follows: the annual increases or decreases in the consumer price index for each year. The annual rental payment at the end of year five (5) shall be determined by taking 100% of the "accumulated CPI", treating that number as a percentage, multiplying the annual rental payment from the previous five (5) year period by that percentage, and

adding the resulting figure to the last annual rent figure to arrive at the new annual rent payment figure (to apply for the upcoming five year term).

The same method for calculating rental increases shall be utilized for each five year increment to determine the increases for (a) years six (6) through ten
(10), (b) eleven (11) through fifteen (15), and (c) years sixteen (16) through twenty (20) of the initial lease term. Should Lessee exercise its options to renew the lease, the renewal rent shall increase one hundred percent (100%) of the accumulated CPI during the prior lease term as is set out above.

(a) Lessee shall carry a liability policy in the minimum sum of $1,000,000.00 naming the Lessee, Lessor, and any mortgagee of the premises as an insured party. Certification of such general liability insurance with a combined single limit of One Million Dollars ($1,000,000.00) protecting Lessor, Lessee, or any mortgagee from any occurrence resulting in bodily injury or property damage shall be provided to the Lessor at least annually.

(b) Lessee shall assume the complete risk of loss for Lessee's personal property and fixtures located in the demised premises, and Lessor shall have no interest in the proceeds of insurance upon that personal property, if any insurance exists.

(c) Lessee shall maintain a fire and casualty policy insuring Lessee and Lessor from loss upon terms and conditions satisfactory to Lessor.

ventilation, air conditioning, plumbing, electrical and other utility systems servicing the premises and for maintaining the exterior landscaping and parking lots (as applicable).

(a) Except as provided in subparagraphs (b) and (c) of this paragraph 9, in the event of damage to or destruction of the demised premises by fire or other insured casualty, the Lessor, from the proceeds of the fire and casualty policy set out in 6(c) above will promptly restore the demised premises as nearly as possible to its condition prior to such damage or destruction.

(b) If the demised premises are destroyed or so damaged by fire or other casualty such that repair of such damage shall require 120 days or more, the Lessee may terminate this lease on notice of at least ten (10) days and no more than thirty (30) days.

Such notice shall be given within sixty (60) days after the date of such damage or destruction. If the lease shall so terminate, all rent shall be apportioned to the date of termination and all insurance proceeds shall belong to the Lessor.

(c) Rent shall abate during the time the demised premises are being restored. Lessor shall be free to insure against loss of rent due to casualty or other cause, and in the event of such loss proceeds of that insurance shall be for the sole benefit of Lessor.

business on the demised premises impractical, then Lessee shall have the right to terminate this lease by giving Lessor written notice of such termination within thirty (30) days after such taking; and if Lessee does not so elect to terminate this lease, the rental to be paid by Lessee hereunder shall be equitably modified. An appraisal shall then be conducted of the fair market rental value of the property by a professional real estate appraiser possessing the MAI designation of the Appraisal Institute. That value shall become the new rent, but in no event shall that rent be more than the previous rent. If the new rent is less than the original base rent, less ten percent (10%), Lessor may terminate this lease. All proceeds and awards from any such taking shall be the sole property of Lessor except that Lessee shall have the right to make a separate claim for compensation for moving expenses and any of its personal property.

Lessor:   Mr. Boyd L. Hyder
          ________________________________
          ________________________________
          Telephone: (704) _______________

Lessee:   MountainBank, Inc.
          PO Box 2809
          Hendersonville, NC  28793-2809
          Telephone: (704) _______________

Either party may, from time to time by notice as herein provided, designate a different address to which notices to it shall be sent.

petroleum product, waste products, radioactive waste, poly-chlorinated biphenyl, asbestos, hazardous materials of any kind, or any substance which is regulated by any law, statute, ordinance, rule or regulation ("Hazardous Substance"), by Lessee or any other person or entity in, on, or around the Leased Premises. In any event any such substances shall be at all times handled and disposed of by Lessee in accordance with existing law. If said substances are not disposed of in accordance with existing law, Lessee shall be strictly liable to Lessor for any loss or damage Lessor suffers as a result of such failure.

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

LESSOR:

                                /s/ Boyd L. Hyder                       (SEAL)
                                ----------------------------------------
                                BOYD L. HYDER


                                LESSEE:


ATTEST:                         MOUNTAINBANK, INC.


BY: /s/ Wm Wilkerson            BY: /s/ J. W. Davis
    -----------------------         ------------------------------------------
    (Assistant) SECRETARY           PRESIDENT

STATE OF NORTH CAROLINA

COUNTY OF HENDERSON

My Commission Expires:                 /s/ Darlene E. Hartzog
                                       -----------------------------------------
    April 28, 2002                     NOTARY PUBLIC
-------------------------

(AFFIX NOTARY SEAL/STAMP)

STATE OF NORTH CAROLINA

COUNTY OF HENDERSON

     WITNESS my hand and official stamp or seal, this   25th   day of   June  ,
                                                      --------        --------
1997.

My Commission Expires:                     /s/ Darlene E. Hartzog
                                           -------------------------------------
 April 25, 1997                            NOTARY PUBLIC
-----------------------

EXHIBIT A

BEGINNING at a point in the center of Wren Street (S.R. 1520), said point being the point where the City of Hendersonville City Limits line crosses Wren Street, and moving thence from said beginning point along and with the City of Hendersonville City Limits line, South 48 deg. 01 min. 04 sec. West 13.62 feet to a point; thence South 31 deg. 16 min. 02 sec. East 57.81 feet to a point; thence turning and running, South 46 deg. 47 min. 58 sec. West 202.17 feet to a point in the center of Hyder Street (S.R. 1521), also known as Linda Vista Drive; thence along and with the centerline of Hyder Street (S.R. 1521), also known as Linda Vista Drive, North 41 deg. 54 min. 41 sec. West 89.10 feet to a point; thence North 40 deg. 09 min. 30 sec. West 100.76 feet to a point; thence turning and leaving the center of Hyder Street (S.R. 1521) and traveling North 46 deg. 47 min. 58 sec. East 249.67 feet to a point in the center of Wren Street (S.R. 1520); thence along and with the center of Wren Street (S.R. 1520), South 30 deg. 49 min. 09 sec. East 136.61 feet to the point and place of BEGINNING, and containing 43,489 square feet according to a survey by Stacy Kent Rhodes, RLS #L2959, under date of November 21, 1996, and being Job No. 96-263SU, and said survey being entitled "Site Plan for MountainBank - Owner/Developer: Boyd L. Hyder".

There is RESERVED by Boyd L. Hyder for the purpose of allowing and providing ingress, egress, and regress to other remaining property of Boyd L. Hyder a right of way along the northwestern boundary of the tract hereinabove described between Hyder Street (S.R. 1521) and Wren Street (S.R. 1520).

In the event the Lessor develops the property lying to the North of the Northern boundary of the tract being leased, Lessor grants to Lessee a right of way between Hyder Street and Wren Street for ingress, egress, and regress.

EXHIBIT 10.9

LEASE

STATE OF NORTH CAROLINA

COUNTY OF HENDERSON

hereinafter referred to as the Lessee;

Subject to the terms and conditions hereinafter set forth, the Lessor does hereby let and lease to the Party of the second part, and the said Lessee does hereby accept as tenant of the parties of the first part, the following described premises:

              -----------                            -----
possession, and a like amount on the   1   day of each succeeding month
                                     -----

thereafter. The Lessee shall also pay, upon the execution of the Lease, the first and last months rent as specified above.

All articles of personal property, including but not limited to fixtures, carpeting, signs, introduced by the Lessee into the building, shall remain the property of the Lessee and be removable by him.

The Lessee agrees to return said premises at the end of this Lease in as good a condition as when they took possession, reasonable wear and tear accepted.
Any signs which the Lessee may wish to erect on the subject premises must be approved by the Lessor prior to erection of same.

The Lessee shall pay for any and all utilities, including but not limited to, heat, air-conditioning, electric power, water, etc.

In the event that the premises shall become destroyed or damaged by fire, or other acts of God, then this Lease shall terminate and become null and void.

The failure of the Lessee to pay the rent money as herein provided, shall after ten (10) days notice by the Lessor, render this Lease terminated and the Lessee, after having received such notice, shall vacate said premises immediately. The full balance of the rent due the Lessor under the terms of this Lease shall become due and payable in its entirety at once.

The Lessee shall not assign, or sub-let the premises, or any portion thereof, without written approval of the Lessor and the Lessee shall make no offensive use of said premises.

IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals the day and year first above written.

Mountain Bank

By:  /s/ J. W. Davis, Pres.                /s/ Boyd L. Hyder
     -------------------------------       -------------------------------------
     J. W. Davis, Lessee                   Boyd L. Hyder, Lessor

LEASE

NORTH CAROLINA

HENDERSON COUNTY

Subject to the terms and conditions hereinafter set forth, the Lessor does hereby let and lease to the party of the second part, and the said Lessee does hereby accept as tenant of the parties of the first part, the following described premises:

              ------------                            -----
possession, and a like amount on the   1   day of each succeeding month
                                     -----

thereafter. The Lessee shall also pay, upon the execution of the Lease, the first and last months rent as specified above.

All articles of personal property, including but not limited to fixtures, carpeting, signs, introduced by the Lessee into the building, shall remain the property of the Lessee and be removable by him.

The Lessee agrees to return said premises at the end of this Lease in as good a condition as when they took possession, reasonable wear and tear accepted.
Any sign which the Lessee may wish to erect on the subject premises must be approved by the Lessor prior to erection of same.

The Lessee shall pay for any and all utilities, including but not limited to, heat, air-conditioning, electric power, water, etc.

In the event that the premises shall become destroyed or damaged by fire, or other acts of God, then this Lease shall terminate and become null and void.

The failure of the Lessee to pay the rent money as herein provided, shall after ten (10) days notice by the Lessor, render this Lease terminated and the Lessee, after having received such notice, shall vacate said premises immediately. The full balance of the rent due the Lessor under the terms of this Lease shall become due and payable in its entirety at once.

The Lessee shall not assign, or sub-let the premises, or any portion thereof, without written approval of the Lessor and the Lessee shall make no offensive use of said premises.

IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals the day and year first above written.

MOUNTAINBANK

By: /s/ J. W. Davis                        /s/ Boyd L. Hyder
    -------------------------              -------------------------------------
    President                              Boyd L. Hyder, Lessor

                                           _____________________________________
                                           Purdy

LEASE

NORTH CAROLINA

HENDERSON COUNTY

Subject to the terms and conditions hereinafter set forth, the Lessor does hereby let and lease to the party of the second part, and the said Lessee does hereby accept as tenant of the parties of the first part, the following described premises:

          ----------                            ---
and a like amount on the  1  day of each succeeding month thereafter. The
                         ---

Lessee shall also pay, upon the execution of the Lease, the first and last months rent as specified above.

All articles of personal property, including but not limited to fixtures, carpeting, signs, introduced by the Lessee into the building, shall remain the property of the Lessee and be removable by him.

The Lessee agrees to return said premises at the end of this Lease in as good a condition as when they took possession, reasonable wear and tear accepted.
Any signs which the Lessee may wish to erect on the subject premises must be approved by the Lessor prior to erection of same.

The Lessee shall pay for any and all utilities, including but not limited to, heat, air-conditioning, electric power, water, etc.

In the event that the premises shall become destroyed or damaged by fire, or other acts of God, then this Lease shall terminate and become null and void.

The failure of the Lessee to pay the rent money as herein provided, shall after ten (10) days notice by the Lessor, render this Lease terminated and the Lessee, after having received such notice, shall vacate said premises immediately. The full balance of the rent due the Lessor under the terms of this Lease shall become due and payable in its entirety at once.

The Lessee shall not assign, or sub-let the premises, or any portion thereof, without written approval of the Lessor and the Lessee shall make no offensive use of said premises.

IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals the day and year first above written.

MOUNTAINBANK

By: /s/ J. W. Davis                     /s/ Boyd L. Hyder
    ------------------------------      ----------------------------------------
    President                           Boyd L. Hyder, Lessor

                                        Location: Old Movie Stop
                                        ----------------------------------------