No consents, approvals or waivers are required to be obtained from any person or entity in connection with Western's execution and delivery of this Agreement, or the performance of its obligations or agreements or the consummation of the transactions described herein, except for required approvals of Western's shareholders and of Regulatory Authorities.

Western's items of income and expense and all of its assets, liabilities and stockholders' equity. The minute books of Western are complete and accurately reflect in all material respects all corporate actions which its shareholders and board of directors, and all committees thereof, have taken during the time periods covered by such minute books, and, all such minute books have been or will be made available to MFC and its representatives.

the statute of limitations (or been asked to execute a waiver or extend a statute of limitations) with respect to any tax year, the audit of any such tax return or report, or the assessment or collection of any tax.

(a) Since June 30, 2001, Western has conducted its businesses only in the ordinary course, and there has been no material adverse change, and there has occurred no event or development, and there currently exists no condition or circumstance, which, with the lapse of time or otherwise, may or could cause, create or result in a material adverse change in or affecting the financial condition of Western or its results of operations, prospects, business, assets, loan portfolio, investments, properties or operations.

(b) Since June 30, 2001, and except as described in Paragraph 2.13 below, Western has not incurred any material liability, engaged in any material transaction, entered into any material agreement, increased the salaries, compensation or general benefits payable or provided to its employees (with the exception of routine increases in the salaries of certain employees effected by Western at such times and in such amounts as is consistent with its past practices and its salary administration and review policies and procedures in effect prior to June 30, 2001), suffered any material loss, destruction or damage to any of its properties or assets, or made a material acquisition or disposition of any assets or entered into any material contract or lease.

(a) There are no actions, suits, arbitrations, controversies or other proceedings or investigations (or, to the Best Knowledge of management of Western, any facts or circumstances which reasonably could result in such), including without limitation any such action by any Regulatory Authority, which currently exist or are ongoing, pending or, to the Best Knowledge of management of Western, are threatened, contemplated or probable of assertion, against, relating to or otherwise affecting Western or any of its properties, assets or employees.

(b) Western has all licenses, permits, orders, authorizations or approvals ("Permits") of all federal, state, local or foreign governmental or regulatory agencies that are material to or necessary for the conduct of its business or to own, lease and operate its properties; all such Permits are in full force and effect; no violations have occurred with respect to any such Permits; and no proceeding is pending or, to the Best Knowledge of management of Western, threatened or probable of assertion to suspend, cancel, revoke or limit any Permit.

(c) Western is not subject to any supervisory agreement, enforcement order, writ, injunction, capital directive, supervisory directive, memorandum of understanding or other similar agreement, order, directive, memorandum or consent of, with or issued by any Regulatory Authority (including without limitation the Commissioner or the FDIC) relating to its financial condition, directors or officers, employees, operations, capital, regulatory compliance or any other matter; there are no judgments, orders, stipulations, injunctions, decrees or awards against Western which limit, restrict, regulate, enjoin or prohibit in any material respect any present or past business or practice of Western; and, Western has not been advised nor has any reason to believe that any Regulatory Authority or any court is contemplating, threatening or requesting the issuance of any such agreement, order, writ, injunction, directive, memorandum, judgment, stipulation, decree or award.

(d) To the Best Knowledge of management of Western, Western is not in violation or default in any material respect under, and it has complied in all material respects with, all laws, statutes, ordinances, rules, regulations, orders, writs, injunctions or decrees of any court or federal, state, municipal or other Regulatory Authority having jurisdiction or authority over it or its business operations, properties or assets (including without limitation all provisions of North Carolina law relating to usury, the Consumer Credit Protection Act, and all other federal and state laws and regulations applicable to extensions of credit by Western). To the Best Knowledge of management of Western, there is no basis for any claim by any person or authority for compensation, reimbursement, damages or other penalties or relief for any violations described in this subparagraph (d).

The Real Property complies in all material respects with all applicable federal, state and local laws, regulations, ordinances or orders of any governmental or regulatory authority, including those relating to zoning, building and use permits, and the parcels of Real Property upon which Western's banking or other offices are situated, or which are used by Western in conjunction with its banking or other offices or for other purposes, may, under applicable zoning ordinances, be used for the purposes for which they currently are used as a matter of right rather than as a conditional or nonconforming use.

With respect to each parcel of Real Property that currently is used by Western as a banking office, all improvements and fixtures included in or on that Real Property are in good condition and repair, ordinary wear and tear excepted, and there does not exist any condition which in any material respect interferes with Western's use (or will interfere with MountainBank's use after the Merger) of that Real Property or those improvements and fixtures as a banking office, or that affects the economic value of that Real Property or those improvements and fixtures.

Western leases space for its banking offices which are located at 2514 Halltown Road, Spruce Pine, North Carolina, and 11995 South 226 Highway, Spruce Pine, North Carolina. Otherwise, Western is not a party (whether as lessee or lessor) to any lease or rental agreement with respect to any real property.

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

(b) All records of Western regarding all outstanding loans, accounts, notes and other receivables, and all other real estate owned, are accurate in all material respects, and, each loan which Western's loan documentation indicates is secured by any real or personal property or property rights ("Loan Collateral") is secured by valid, perfected and enforceable liens on all such Loan Collateral having the priority described in Western's records of such loan.

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

(d) Western has Previously Disclosed to MFC a written listing of (i) each loan, extension of credit or other asset of Western which, as of August 31, 2001, was classified by the Commissioner, the FDIC or Western as "Loss," "Doubtful," "Substandard" or "Special Mention" (or otherwise by words of similar import), or which Western otherwise has designated as a special asset, a "potential problem loan," or for special handling, or placed on any "watch list" because of concerns regarding the ultimate collectibility or deteriorating condition of such asset or any obligor or Loan Collateral therefor, (ii) each loan or extension of credit of Western which, as of August 31, 2001, was past due more than 30 days as to the payment of principal and/or interest, and (iii) each loan as to which any obligor thereon (including the borrower or any guarantor) was in default (other than as a result of nonpayment of principal or interest), was the subject of a proceeding in bankruptcy, or has indicated any inability or intention not to repay such loan or extension of credit in accordance with its terms.

(e) To the Best Knowledge of management of Western, each of the loans and other extensions of credit of Western (with the exception of those loans and extensions of credit specified in the written listings described in Paragraph 2.17(d) above) is collectible in the ordinary course of Western's business in an amount which is not less than the amount at which it is carried on Western's books and records.

(f) Western's reserve for possible loan losses (the "Loan Loss Reserve") has been established in conformity with GAAP, sound banking practices and all applicable requirements, rules and policies of the Commissioner and the FDIC and, in the best judgment of management of Western, is reasonable in view of the size and character of Western's loan portfolio, current economic conditions and other relevant factors, and is adequate to provide for losses relating to or the risk of loss inherent in Western's loan portfolios and other real estate owned.

securities under agreement to resell, Western has a valid, perfected first lien or security interest in the government securities or other collateral securing the repurchase agreement, and the value of the collateral securing each such repurchase agreement equals or exceeds the amount of the debt owed to Western which is secured by such collateral.

Since June 30, 2001, there has been no material deterioration or adverse change in the quality, or any material decrease in the value, of Western's securities portfolio as a whole.

(a) As used in this Agreement, "Environmental Laws" shall mean:

(i) all federal, state and local statutes, regulations, ordinances, orders, decrees, and similar provisions having the force or effect of law (including without limitation the Comprehensive Environmental Response, Compensation and Liability Act; the Superfund Amendment and Reauthorization Act; the Federal Insecticide, Fungicide and Rodenticide Act; the Hazardous Materials Transportation Act; the Resource Conservation and Recovery Act; the Clean Water Act; the Clean Air Act; the Toxic Substances Control Act; the Oil Pollution Act; the Coastal Zone Management Act; any "Superfund" or "Superlien" law; the North Carolina Oil Pollution and Hazardous Substances Control Act; the North Carolina Water and Air Resources Act; and the North Carolina Occupational Safety and Health Act; and any amendments to any of the same from time to time), and,

(ii) all common law concerning public health and safety, worker health and safety, and pollution or protection of the environment, including without limitation all standards of conduct and bases of obligations relating to the presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, reporting, testing, processing, discharge, release, threatened release, control, or clean-up of any "Hazardous Substances" (as defined below).

"Hazardous Substance" shall mean any materials, substances, wastes, chemical substances, or mixtures presently listed, defined, designated, or classified as hazardous, toxic, or dangerous, or otherwise regulated, under any Environmental Laws, whether by type or quantity, including without limitation pesticides, pollutants, contaminants, toxic chemicals, oil, or other petroleum products or byproducts, asbestos or materials containing (or presumed to contain) asbestos, polychlorinated biphenyls, urea formaldehyde foam insulation, lead, radon, methyl tertiary butyl ether, or radioactive material.

(b) Western has Previously Disclosed to MFC copies of all written reports, correspondence, notices or other information or materials, if any, in its possession pertaining to environmental surveys or assessments of the Real Property and any improvements thereon, the presence

of any Hazardous Substance on any of the Real Property, or any violation or alleged violation of Environmental Laws on, affecting or otherwise involving the Real Property or involving Western.

(c) There has been no presence, use, production, generation, handling, transportation, treatment, storage, disposal, emission, discharge, release, or threatened release of any Hazardous Substances by any person on, from or relating to the Real Property which constitutes a violation of any Environmental Laws, or any removal, clean-up or remediation of any Hazardous Substances from, on or relating to the Real Property.

(d) Western has not violated any Environmental Laws relating to any of the Real Property, and there has been no violation of any Environmental Laws relating to any of the Real Property by any other person or entity for whose liability or obligation with respect to any particular matter or violation Western is or may be responsible or liable.

(e) Western is not subject to any claims, demands, causes of action, suits, proceedings, losses, damages, penalties, liabilities, obligations, costs or expenses of any kind and nature which arise out of, under or in connection with, or which result from or are based upon the presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, reporting, testing, processing, emission, discharge, release, threatened release, control, removal, clean-up or remediation of any Hazardous Substances on, from or relating to the Real Property or by any person or entity.

(f) No facts, events or conditions relating to the Real Property, or the operations of Western at any of its office locations, will prevent, hinder or limit continued compliance with Environmental Laws or give rise to any investigatory, emergency removal, remedial or corrective actions, obligations or liabilities (whether accrued, absolute, contingent, unliquidated or otherwise) pursuant to Environmental Laws.

(g) To the Best Knowledge of management of Western (it being understood by MFC and MountainBank that, for purposes of this representation, management of Western has not undertaken a review of each of Western's loan files with respect to all Loan Collateral), (i) there has been no violation of any Environmental Laws with respect to any Loan Collateral by any person or entity for whose liability or obligation with respect to any particular matter or violation Western is or may be responsible or liable, (ii) Western is not subject to any claims, demands, causes of action, suits, proceedings, losses, damages, penalties, liabilities, obligations, costs or expenses of any kind and nature which arise out of, under or in connection with, or which result from or are based upon, the presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, reporting, testing, processing, emission, discharge, release, threatened release, control, removal, clean-up or remediation of any Hazardous Substances on, from or relating to any Loan Collateral, by any person or entity, and (iii) there are no facts, events or conditions relating to any Loan Collateral that will give rise to any investigatory, emergency removal, remedial or corrective actions, obligations or liabilities pursuant to Environmental Laws.

Western is not in default in any material respect, and there has not occurred any event which with the lapse of time or giving of notice or both would constitute such a default, under any contract, lease, insurance policy, commitment or arrangement to which it is a party or by which it or its property is or may be bound or affected or under which it or its property receives benefits, where the consequences of such default would have a material adverse effect on the financial condition, results of operations, prospects, business, assets, loan portfolio, investments, properties or operations of Western.

There is no action, suit or proceeding by any person pending or, to the Best Knowledge of management of Western, threatened, against Western (or any of its employees), involving employment discrimination, sexual harassment, wrongful discharge or similar claims.

Western is not a party to or bound by any collective bargaining agreement with any of its employees, any labor union or any other collective bargaining unit or organization. There is no pending or threatened labor dispute, work stoppage or strike involving Western and any of its employees, or any pending or threatened proceeding in which it is asserted that Western has committed an unfair labor practice; and, to the Best Knowledge of management of Western, there is no activity involving it or any of its employees seeking to certify a collective bargaining unit or engaging in any other labor organization activity.

(a) Western has Previously Disclosed to MFC a true and complete list of all bonus, deferred compensation, pension, retirement, profit-sharing, thrift, savings, employee stock ownership, stock bonus, stock purchase, restricted stock and stock option plans; all employment and severance contracts; all medical, dental, health, and life insurance plans; all vacation, sickness and other leave plans, disability and death benefit plans; and all other employee benefit plans, contracts, or arrangements maintained or contributed to by Western for the benefit of any employees, former employees, directors, former directors or any of their beneficiaries (collectively, the "Plans"). True and complete copies of all Plans, including, but not limited to, any trust instruments and/or insurance contracts, if any, forming a part thereof or applicable to the administration of any such Plans or the assets thereof, and all amendments thereto, previously have been supplied to MFC Except as Previously Disclosed, Western does not maintain, sponsor, contribute to or otherwise participate in any "Employee Benefit Plan" within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), any "Multi-employer Plan" within the meaning of Section 3(37) of ERISA, or any "Multiple Employer Welfare Arrangement" within the meaning of
Section 3(40) of ERISA. Each Plan which is an "employee pension benefit plan" within the meaning of Section 3(2) of ERISA and which is intended to be qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code") has received or applied for a favorable determination letter from the IRS to the effect that they are so qualified, and Western is not aware of any circumstances reasonably likely to result in the revocation or denial of any such favorable determination letter. All reports and returns with respect to the Plans (and any Plans previously maintained by Western) required to be filed with any governmental department, agency, service or other authority, including without limitation Internal Revenue Service Form 5500 (Annual Report), have been properly and timely filed.

(b) All "Employee Benefit Plans" maintained by or otherwise covering employees or former employees of Western, to the extent subject to ERISA, currently are, and at all times have been, in compliance with all material provisions and requirements of ERISA. There is no pending or threatened litigation relating to any Plan or any employee benefit plan, contract or arrangement previously maintained by Western. Western has not engaged in a transaction with respect to any Plan that could subject Western to a tax or penalty imposed by either Section 4975 of the Code or Section 502(i) of ERISA.

(c) Western has delivered to MFC a true, correct and complete copy (including copies of all amendments thereto) of each retirement Plan maintained by it which is intended to be a plan qualified under Section 401(a) of the Code (collectively, the "Retirement Plans"), together with true, correct and complete copies of the summary plan descriptions relating to the Retirement Plans, the most recent determination letters received from the IRS regarding the Retirement Plans, and the most recent Annual Reports (Form 5500 series) and related schedules, if any, for the Retirement Plans.

The Retirement Plans are qualified under the provisions of
Section 401(a) of the Code, the trusts under the Retirement Plans are exempt trusts under Section 501(a) of the Code, and determination letters have been issued or applied for with respect to the Retirement Plans to said effect, including determination letters covering the current terms and provisions of the Retirement Plans. There are no issues relating to said qualification or exemption of the Retirement Plans currently pending before the IRS, the United States Department of Labor, the Pension Benefit Guaranty Corporation or any court. The Retirement Plans and the administration thereof meet (and have met since the establishment of the Retirement Plans) in all material respects all of the applicable requirements of ERISA, the Code and all other laws, rules and regulations applicable to the Retirement Plans and do not violate (and since the establishment of the Retirement Plans have not violated) in any material respect any of the applicable provisions of ERISA, the Code and such other laws, rules and regulations. Without limiting the generality of the foregoing, all reports and returns with respect to the Retirement Plans required to be filed with any governmental department, agency, service or other authority have been properly and timely filed. There are no issues or disputes with respect to the Retirement Plans or the administration thereof

currently existing between Western, or any trustee or other fiduciary thereunder, and any governmental agency, any current or former employee of Western or beneficiary of any such employee, or any other person or entity. No "reportable event" within the meaning of Section 4043 of ERISA has occurred at any time with respect to the Retirement Plans.

(d) No liability under subtitle C or D of Title IV of ERISA has been or is expected to be incurred by Western with respect to the Retirement Plans or with respect to any other ongoing, frozen or terminated defined benefit pension plan currently or formerly maintained by Western. Western does not presently contribute to a "Multiemployer Plan" and has not contributed to such a plan since December 31, 1995. All contributions required to be made pursuant to the terms of each of the Plans (including without limitation the Retirement Plans and any other "pension plan" (as defined in Section 3(2) of ERISA, provided such plan is intended to qualify under the provisions of Section 401(a) of the Code) maintained by Western have been timely made. Neither the Retirement Plans nor any other "pension plan" maintained by Western have an "accumulated funding deficiency" (whether or not waived) within the meaning of Section 412 of the Code or Section 302 of ERISA. Western has not provided, and is not required to provide, security to any "pension plan" or to any "Single Employer Plan" pursuant to Section 401(a)(29) of the Code. Under the Retirement Plans and any other "pension plan" maintained by Western as of the last day of the most recent plan year ended prior to the date hereof, the actuarially determined present value of all "benefit liabilities," within the meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the actuarial assumptions contained in the plan's most recent actuarial valuation) did not exceed the then current value of the assets of such plan, and there has been no material change in the financial condition of any such plan since the last day of the most recent plan year.

(e) Except as provided in the terms of the Retirement Plans themselves, there are no restrictions on the rights of Western to amend or terminate any Retirement Plan without incurring any liability thereunder. Neither the execution and delivery of this Agreement nor the consummation of the transactions described herein will, except as otherwise specifically provided in this Agreement, (i) result in any payment to any person (including without limitation any severance compensation or payment, unemployment compensation, "golden parachute" or "change in control" payment, or otherwise) becoming due under any plan or agreement to any director, officer, employee or consultant,
(ii) increase any benefits otherwise payable under any plan or agreement, or
(iii) result in any acceleration of the time of payment or vesting of any such benefit.

ARTICLE III. REPRESENTATIONS AND WARRANTIES OF
MFC AND MOUNTAINBANK

Except as otherwise specifically described in this Agreement or as Previously Disclosed to Western, MFC and MountainBank hereby make the following representations and warranties to Western.

principles of equity and applicable laws or court decisions limiting the enforceability of indemnification provisions).

No consents, approvals or waivers are required to be obtained from any person or entity in connection with MFC's or MountainBank's execution and delivery of this Agreement, or the performance of their respective obligations or agreements or the consummation of the transactions described herein, except for required approvals of Regulatory Authorities described in Paragraph 6.02.

or any of their properties, assets or employees which, if determined adversely, could have a material adverse effect on the ability of MFC or MountainBank to consummate the Merger.

ARTICLE IV. COVENANTS OF WESTERN

Western will solicit appointments of proxies from its shareholders for use at the Western Shareholders' Meeting and, in connection with that solicitation, it will distribute to its shareholders proxy solicitation materials (a "Proxy Statement") in the form of the "Proxy Statement/Prospectus" described in Paragraph 6.01 below.

Unless, due to a material change in circumstances after the date hereof, Western's Board of Directors reasonably believes in good faith, based on the written opinion of its legal counsel, that such a recommendation would violate the directors' duties or obligations as such to Western or to its shareholders, Western covenants that its Board of Directors will recommend to and actively encourage Western's shareholders that they vote their shares of Western Stock at the Western Shareholders' Meeting in favor of ratification and approval of this Agreement and the Merger, and the Proxy Statement distributed to Western's shareholders in connection with the Western Shareholders' Meeting will so indicate and state that Western's Board of Directors considers the Merger to be advisable and in the best interests of Western and its shareholders.

reasonably shall be necessary, to cause the FDIC to approve the Proxy Statement; provided, however, that Western shall not be required to file any such amendment, or take any such other action, which it shall, in good faith, reasonably consider to be excessively burdensome or to involve excessive expense in relation to the benefits expected to be derived by it from the Merger, or which it, in good faith, reasonably believes would have a material adverse affect on its business.

(i) preserve intact its present business organization, keep available its present officers and employees, and preserve its relationships with customers, depositors, creditors, correspondents, suppliers, and others having business relationships with it;

(ii) maintain all of its properties and equipment in customary repair, order and condition, ordinary wear and tear excepted;

(iii) maintain its books of account and records in the usual, regular and ordinary manner in accordance with sound business practices applied on a consistent basis;

(iv) comply in all material respects with all laws, rules and regulations applicable to it, its properties, assets or employees and to the conduct of its business;

(v) not change its existing loan underwriting guidelines, policies or procedures in any material respect except as may be required by law;

(vi) continue to maintain in force insurance such as is described in Paragraph 2.26; not modify any bonds or policies of insurance in effect as of the date hereof unless the same, as modified, provides substantially equivalent coverage; and, not cancel, allow to be terminated or, to the extent available, fail to renew, any such bond or policy of insurance unless the same is replaced with a bond or policy providing substantially equivalent coverage; and,

(vii) promptly provide to MFC such information about its financial condition, results of operations, prospects, businesses, assets, loan portfolio, investments, properties, employees or operations, as MFC reasonably shall request.

(i) an income statement and a statement of condition within five days after each month end;

(ii) a copy of all interim financial statements within 15 days after each quarter end;

(iii) a copy of each report, registration, statement, or other communication or regulatory filing made with or to any Regulatory Authority at the time it is filed or made;

(iv) an analysis of the Loan Loss Reserve and management's assessment of the adequacy of the Loan Loss Reserve, which analysis and assessment shall include a list of all classified or "watch list" loans, along with the outstanding balance and amount specifically allocated to the Loan Loss Reserve for each such classified or "watch list" Loan, all within five days after each calendar month end; and,

(v) the following information with respect to loans and other extensions of credit (such assets being referred to in this Agreement as "Loans") as of, and within five days following each calendar month end:

(A) a list of Loans in nonaccrual status;

(B) a list of all Loans without principal reduction for a period of longer than one year;

(C) a list of all foreclosed real property or other real estate owned and all repossessed personal property;

(D) a list of each reworked or restructured Loan still outstanding, including original terms, restructured terms and status; and

(E) a list of any actual or threatened litigation by or against Western pertaining to any Loan or credit, which list shall contain a description of circumstances surrounding such litigation, its present status and management's evaluation of such litigation.

(vi) the following information by the close of Western's business each Wednesday:

(A) a listing of each new Loan made during the prior calendar week;

(B) a listing of each renewal, extension or modification of the terms of an existing Loan effected during the prior calendar week;

(C) a listing of each commitment to extend credit issued during the prior calendar week;

(D) a then current listing of all Loans past due as to principal or interest; and,

(E) a then current listing of all documentation or compliance exceptions relating to Western's Loans.

actual or prospective existence or occurrence of any condition or event which, with the lapse of time or otherwise, has caused or may or could cause any statement, representation or warranty of Western herein to be or become inaccurate, misleading or incomplete in any material respect, or which has resulted or may or could cause, create or result in the breach or violation in any material respect of any of Western's covenants or agreements contained herein or in the failure of any of the conditions described in Paragraphs 7.01 or 7.03.

accountants, legal counsel, environmental consultants or other representatives access to all its books, records, files (including credit files and loan documentation and records) and other information (whether maintained electronically or otherwise), to all its properties and facilities, and to all its employees, accountants, legal counsel and consultants, as MFC or MountainBank shall, in their respective sole discretion, consider to be necessary or appropriate for the purpose of conducting ongoing reviews and investigations of the assets and business affairs of Western, preparing for consummation of the Merger and the consolidation of Western's operations into those of MountainBank, determining the accuracy of Western's representations and warranties in this Agreement or its compliance with its covenants in this Agreement, or for any other reason; provided, however, that any investigation or reviews conducted by or on behalf of MFC or MountainBank shall be performed in such a manner as will not interfere unreasonably with Western's normal operations or with its relationship with its customers or employees, and shall be conducted in accordance with procedures established by the parties.

(i) Sell or lease (as lessor), or enter into or become bound by any contract, agreement, option or commitment relating to the sale, lease (as lessor) or other disposition of, any real estate in any amount;

(ii) Sell or lease (as lessor), or enter into or become bound by any contract, agreement, option or commitment relating to the sale, lease (as lessor) or other disposition of, any equipment or any other fixed or capital asset (other than real estate) having a book value or a fair market value, whichever is greater, of more than $5,000 for any individual item or asset or in the aggregate for all such items or assets;

(iii) Purchase or lease (as lessee), or enter into or become bound by any contract, agreement, option or commitment relating to the purchase, lease (as lessee) or other acquisition of, any real property in any amount;

(iv) Purchase or lease (as lessee), or enter into or become bound by any contract, agreement, option or commitment relating to the purchase, lease (as lessee) or other acquisition of, any equipment or any other fixed asset (other than real estate) having a purchase price, or involving aggregate lease payments, in excess of $5,000 for any individual item or asset or in the aggregate for all such items or assets;

(v) Enter into any purchase or other commitment or contract for supplies or services which obligates Western for a period longer than 30 days;

(vi) Except in the ordinary course of its business consistent with its past practices, sell, purchase or repurchase, or enter into or become bound by any contract, agreement, option or commitment to sell, purchase or repurchase, any loan or other receivable or any participation in any loan or other receivable; or

(v) Sell or dispose of, or enter into or become bound by any contract, agreement, option or commitment relating to the sale or other disposition of, any other asset (whether tangible or intangible, and including without limitation any trade name, trademark, copyright, service mark or intellectual property right or license); or assign its right to or otherwise give any other person its permission or consent to use or do business under the corporate name of Western or any name similar thereto; or release, transfer or waive any license or right granted to it by any other person to use any trademark, trade name, copyright, service mark or intellectual property right.

ARTICLE V. COVENANTS OF MFC AND MOUNTAINBANK

MFC and MountainBank hereby covenant and agree as follows with Western:

Any Western employee who is not offered employment by MountainBank at the Effective Time may obtain continued health insurance coverage through the exercise of his or her COBRA rights.

For the calendar year during which the Effective Time occurs, MountainBank will grant to each New Employee a number of days of sick leave and vacation leave, respectively, equal, in each case, to (i) the full number of such days to which the New Employee would be entitled for that year, based on his or her credited years of service and in accordance with MountainBank's standard leave policies, less (ii) the number of days of sick leave and vacation leave used by the New Employee as an employee of Western during that calendar year.

service of those individuals as directors and/or advisory board members of MFC and/or MountainBank will be subject to the normal nomination and election processes.

ARTICLE VI. ADDITIONAL AGREEMENTS

Western and MFC will mail the Proxy Statement/Prospectus, to Western's shareholders on a date mutually agreed upon by Western and MFC, but in no event less than 20 days prior to the scheduled date of the Western Shareholders' Meeting; provided, however, that no such materials shall be mailed to Western's shareholders unless and until the SEC shall have declared the MFC Registration Statement to be effective and the FDIC shall have approved Western's Proxy Statement, and until MFC and Western shall have mutually agreed on the form and content of such materials. The Proxy Statement/Prospectus mailed to Western's shareholders shall be in the form of the final Prospectus contained in the MFC Registration Statement as it is declared effective by the SEC and the Proxy Statement approved by the FDIC.

approvals of Regulatory Authorities, and it will promptly respond to requests by the other parties and their legal counsel for information, and will provide all information, documents, financial statements or other material, that is required for, or that may be reasonably requested by any other party for inclusion in, any such document; (ii) none of the information provided by it for inclusion in any of such documents will contain any untrue statement of a material fact, or omit any material fact required to be stated therein or necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading, at the time (A) MFC's Registration Statement is filed with and/or declared effective by the SEC, (B) Western's Proxy Statement is filed with the FDIC and/or is approved by the FDIC, (C) the Proxy Statement/Prospectus is mailed to Western's shareholders, or (D) the applications for required approvals of Regulatory Authorities are filed and/or such approvals are granted.

If, in the course of the Property Examination or Environmental Survey, MountainBank discovers a "Material Defect" (as defined below) with respect to the Real Property, MountainBank will give prompt written notice thereof to Western describing the facts or conditions constituting the Material Defect, and MountainBank shall have the option exercisable upon written notice to Western to (i) waive the Material Defect, or (ii) terminate this Agreement.

For purposes of this Agreement, a "Material Defect" shall include:

(i) the existence of any lien (other than the lien of real property taxes not yet due and payable), encumbrance, zoning restriction, easement, covenant, or other restriction, title imperfection or title irregularity, or the existence of any facts or conditions that constitute a breach of Western's representations and warranties contained in Paragraph 2.16 or 2.21, in either such case that MountainBank reasonably believes will affect its use of any parcel of the Real Property for the purpose for which it currently is used or the value or marketability of any parcel of the Real Property, or as to which MountainBank otherwise objects; or

(ii) the existence of any structural defects or conditions of disrepair in the improvements on the Real Property (including any equipment, fixtures or other components related thereto) that MountainBank reasonably believes would cost an aggregate of $50,000 or more to repair, remove or correct as to all such Real Property;

(iii) the existence of facts or circumstances relating to any of the Real Property reflecting that (A) there likely has been a discharge, disposal, release, threatened release, or emission by any person of any Hazardous Substance on, from, under, at, or relating to the Real Property, or (B) any action has been taken or not taken, or a condition or event likely has occurred or exists, with respect to the Real Property which constitutes or would constitute a violation of any Environmental Laws or any contract or other agreement between Western and any other person or entity, as to which, in either such case,

MountainBank reasonably believes, based on the advice of legal counsel or other consultants, that Western could become responsible or liable, or that MountainBank or MFC could become responsible or liable following the Effective Time, for assessment, removal, remediation, monetary damages, or civil, criminal or administrative penalties or other corrective action and in connection with which the amount of expense or liability which MountainBank could incur, or for which MountainBank could become responsible or liable, following consummation of the Merger at any time or over any period of time could equal or exceed an aggregate of $50,000 or more as to all such Real Property.

It is contemplated that MountainBank will conduct the Property Examination and the Environmental Survey following the date of this Agreement and prior to the Effective Time. It is the intent of this Agreement, and Western understands and agrees, that, upon completion of the Property Examination and Environmental Survey, any of the above facts, conditions, circumstances or other matters may be deemed by MountainBank to constitute a "Material Defect," with the result that it may exercise its right to terminate this Agreement, without regard to any knowledge on the part of MFC or MountainBank or their officers or advisors of that Material Defect or the facts, conditions, circumstances or other matters pertaining thereto on the date of this Agreement and without regard to the fact that any such Material Defect or the facts, conditions, circumstances or other matters relating thereto have been disclosed by Western to MountainBank, MFC, or any of their officers or advisors prior to the date of this Agreement (whether pursuant to Paragraph 10.12 below or otherwise).

(i) terminated, in which case each participant in Western's plan on the termination date may elect, upon completion of the termination and the final liquidation of the plan, to receive a distribution of the assets credited to his or her plan account at that time or, if the participant has become a participant in MountainBanks's Section 401(k) plan, to have those assets credited as a "roll-over" to the participant's plan account under MountainBank's plan; or,

(ii) merged into MountainBank's Section 401(k) plan.

Western agrees that, prior to the Effective Time, it will take or cause to be taken such actions as MFC and MountainBank shall reasonably consider to be necessary or desirable in connection with or to effect or facilitate any such plan termination or merger. MountainBank agrees that it will assume, as of the Effective Time, any and all administrative and fiduciary duties of Western with respect to the day-to-day operation of Western's plan, including duties relating to filings with the Internal Revenue Service relating to the plan.

limitation all accounting fees, legal fees, consulting or advisory fees, filing fees, printing and mailing costs, and travel expenses). For purposes of this Agreement, expenses associated with the printing and mailing of the Proxy Statement/Prospectus and amounts payable with respect to the Tax Opinion will be deemed to have been incurred by Western and MFC equally. All amounts owed by Western to The Carson Medlin Company, including its consulting fees and fees for rendering the "Western Fairness Opinion" described in Paragraph 7.01(d)(i), will be deemed to have been incurred solely by Western. All amounts owed by MFC to Scott & Stringfellow, including its consulting fees and fees for rendering the "MFC Fairness Opinion" described in Paragraph 7.01(d)(ii), will be deemed to have been incurred solely by MFC.

ARTICLE VII. CONDITIONS PRECEDENT TO MERGER

(i) Western shall have received from its financial advisor, The Carson Medlin Company, a written opinion, in a form satisfactory to it (the "Western Fairness Opinion"), to the effect that

the consideration to be received by Western's shareholders in the Merger is fair, from a financial point of view, to Western and its shareholders; and, The Carson Medlin Company shall have delivered a letter to Western, dated as of a date within five business days preceding the Closing Date, to the effect that it remains its opinion that the terms of the Merger are fair, from a financial point of view, to Western and its shareholders.

(ii) MFC shall have received from its financial advisor, Scott & Stringfellow, a written opinion, in a form satisfactory to it (the "MFC Fairness Opinion"), to the effect that the terms of the Merger are fair, from a financial point of view, to MFC and its shareholders; and, Scott & Stringfellow shall have delivered a letter to MFC, dated as of a date within five business days preceding the Closing Date, to the effect that it remains its opinion that the terms of the Merger are fair, from a financial point of view, to MFC and its shareholders.

Western shall have received a certificate dated as of the Closing Date and executed by each of MFC and MountainBank and their respective Presidents and Chief Financial Officers to the effect that the conditions of this subparagraph have been met and as to such other matters as may be reasonably requested by Western.

MFC shall have received a certificate dated as of the Closing Date and executed by Western and its Chairman and President to the effect that the conditions of this subparagraph have been met and as to such other matters as may be reasonably requested by MFC.

ARTICLE VIII. TERMINATION; BREACH; REMEDIES

(i) if any of the conditions to the obligations of MFC or MountainBank set forth in Paragraph 7.01 and 7.03 shall not have been satisfied in all material respects or effectively waived in writing by MFC by February 28, 2002 (except to the extent that the failure of such condition to be satisfied has been caused by the failure of MFC or MountainBank to satisfy any of its obligations, covenants or agreements contained herein);

(ii) if Western shall have violated or failed to fully perform any of its obligations, covenants or agreements contained in Article IV or VI herein in any material respect;

(iii) if MFC or MountainBank determines at any time that any of Western's representations or warranties contained in Article II above or in any other certificate or writing delivered pursuant to this Agreement shall have been false or misleading in any material respect when made or would

have been false or misleading in any material respect except for the fact that the representation or warranty was limited to or qualified based on the Best Knowledge of any person, or that there has occurred any event or development or that there exists any condition or circumstance which has caused or, with the lapse of time or otherwise, may or could cause any such representations or warranties to become false or misleading in any material respect or that would cause any such representation or warranty to become false or misleading in any material respect except for the fact that the representation or warranty was limited to or qualified based on the Best Knowledge of any person;

(iv) if, notwithstanding MFC's and MountainBank's satisfaction of their respective obligations under Paragraphs 6.01 and 6.03, Western's shareholders do not ratify and approve this Agreement and the Merger at the Western Shareholders' Meeting, or if the Western Shareholders' Meeting is not held by December 28 , 2001;

(v) if the Merger shall not have become effective on or before February 28, 2002, or such later date as shall be mutually agreed upon in writing by MFC and Western; or,

(vi) under the circumstances described in Paragraph 6.06.

However, before MFC and MountainBank may terminate this Agreement for any of the reasons specified above in (i), (ii) or (iii) of this Paragraph 8.02(a), they shall give written notice to Western in the manner provided herein stating their intent to terminate and a description of the specific breach, default, violation or other condition giving rise to their right to so terminate, and, such termination by MFC and MountainBank shall not become effective if, within 30 days following the giving of such notice, Western shall cure such breach, default or violation or satisfy such condition to the reasonable satisfaction of MFC and MountainBank. In the event Western cannot or does not cure such breach, default or violation or satisfy such condition to the reasonable satisfaction of MFC and MountainBank within such notice period, termination of this Agreement by MFC and MountainBank thereafter shall be effective upon their giving of written notice thereof to Western in the manner provided herein.

(i) if any of the conditions to the obligations of Western set forth in Paragraph 7.01 and 7.02 shall not have been satisfied in all material respects or effectively waived in writing by Western by February 28, 2002 (except to the extent that the failure of such condition to be satisfied has been caused by the failure of Western to satisfy any of its obligations, covenants or agreements contained herein);

(ii) if MFC or MountainBank shall have violated or failed to fully perform any of their respective obligations, covenants or agreements contained in Article V or VI herein in any material respect;

(iii) if Western determines that any of MFC's or MountainBank's respective representations and warranties contained in Article III herein or in any other certificate or writing delivered pursuant to this Agreement shall have been false or misleading in any material respect when made or would have been false or misleading in any material respect except for the fact that the representation or warranty was limited to or qualified based on the Best Knowledge of any person, or that there has occurred any event or development or that there exists any condition or circumstance which has caused or, with the lapse of time or otherwise, may or could cause any such representations or warranties to become false or misleading in any material respect or that would cause any such representation or warranty to become false or misleading in any material respect except for the fact that the representation or warranty was limited to or qualified based on the Best Knowledge of any person;

(iv) if, notwithstanding Western's satisfaction of its obligations contained in Paragraphs 6.01 and 6.03, its shareholders do not ratify and approve this Agreement and approve the Merger at the Western Shareholders' Meeting; or

(v) if the Merger shall not have become effective on or before February 28, 2002, unless such date is extended as evidenced by the written mutual agreement of the parties hereto.

However, before Western may terminate this Agreement for any of the reasons specified above in clause (i), (ii) or (iii) of this Paragraph 8.02(b), it shall give written notice to MFC in the manner provided herein stating its intent to terminate and a description of the specific breach, default, violation or other condition giving rise to its right to so terminate, and, such termination by Western shall not become effective if, within 30 days following the giving of such notice, MFC or MountainBank shall cure such breach, default or violation or satisfy such condition to the reasonable satisfaction of Western. In the event MFC or MountainBank cannot or does not cure such breach, default or violation or satisfy such condition to the reasonable satisfaction of Western within such notice period, termination of this Agreement by Western thereafter shall be effective upon its giving of written notice thereof to MFC in the manner provided herein.

Likewise, and except as otherwise provided below, (i) in the event of a breach by MFC or MountainBank of any of its representations or warranties contained in Article III of this Agreement, or in the event of its failure to perform or violation of any of its obligations, agreements or covenants contained in Articles V or VI of this Agreement, then Western's sole right and remedy shall be to terminate this Agreement prior to the Effective Time as provided in Paragraph 8.02(b), or, in the case of a failure to perform or violation of any obligations, agreements or covenants, to seek specific performance thereof; and (ii) in the event of any such termination of this Agreement by Western due to a failure by MFC or MountainBank to perform or of any of its obligations, agreements or covenants contained in Articles V or VI of this Agreement, then MFC or MountainBank shall be obligated to reimburse Western for up to (but not more than) $250,000 in expenses described in Paragraph 6.13 which actually have been incurred by Western.

Notwithstanding any provision of this Agreement to the contrary, if any party to this Agreement breaches this Agreement by willfully or intentionally failing to perform or violating any of its obligations, agreements or covenants contained in Articles IV, V or VI of this Agreement, such party shall be obligated to pay all expenses of the other parties described in Paragraph 6.13, together with other damages recoverable at law or in equity.

ARTICLE IX. INDEMNIFICATION

hereafter arising, which may be threatened against, incurred, undertaken, received or paid by MFC or MountainBank:

(i) in connection with or which arise out of, result from, or are based upon (A) Western's operations or business transactions or its relationship with any of its employees, or (B) Western's failure to comply with any statute or regulation of any federal, state or local government or agency (or any political subdivision thereof) in connection with the transactions described in this Agreement;

(ii) in connection with or which arise out of, result from, or are based upon any fact, condition or circumstance that constitutes a breach by Western of, or any inaccuracy, incompleteness or inadequacy in, any of its representations or warranties under or in connection with this Agreement, or any failure of Western to perform any of its covenants, agreements or obligations under or in connection with this Agreement; or,

(iii) in connection with or which arise out of, result from, or are based upon any information provided by Western which is included in the Proxy Statement and which information causes the Proxy Statement at the time of its mailing to Western's shareholders to contain any untrue statement of a material fact or to omit any material fact required to be stated therein or necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not false or misleading; and,

(i) in connection with or which arise out of, result from, or are based upon (A) MFC's or MountainBank's operations or business transactions or its relationship with any of its employees, or (B) MFC's or MountainBank's failure to comply with any statute or regulation of any federal, state or local government or agency (or any political subdivision thereof) in connection with the transactions described in this Agreement;

(ii) in connection with or which arise out of, result from, or are based upon any fact, condition or circumstance that constitutes a breach by MFC or MountainBank of, or any inaccuracy, incompleteness or inadequacy in, any of its representations or warranties under or in connection with this Agreement, or any failure of MFC or MountainBank to perform any of its covenants, agreements or obligations under or in connection with this Agreement; or,

(iii) in connection with or which arise out of, result from, or are based upon any information provided by MFC or MountainBank which is included in the Proxy Statement and which information causes the Proxy Statement at the time of its mailing to Western's shareholders to contain any untrue statement of a material fact or to omit any material fact required to be stated therein or necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not false or misleading.

notify the applicable Indemnitee that the Indemnitor disputes the Third Party Claim and intends to defend against it, and thereafter shall so defend and pay any adverse final judgment or award in regard thereto. Such defense shall be controlled by the Indemnitor and the cost of such defense shall be borne by it, except that the Indemnitee shall have the right to participate in such defense at its own expense and provided that the Indemnitor shall have no right in connection with any such defense or the resolution of any such Third Party Claim to impose any cost, restriction, limitation or condition of any kind that compromises the Indemnitee hereunder. In the case of an Indemnitee that is an officer, director or attorney of a party to this Agreement, then that party agrees that it shall cooperate in all reasonable respects in the defense of any such Third Party Claim, including making personnel, books and records relevant to the Third Party Claim available to the Indemnitor without charge therefor except for out-of-pocket expenses. If the Indemnitor fails to take action within 15 days as hereinabove provided or, having taken such action, thereafter fails diligently to defend and resolve the Third Party Claim, the Indemnitee shall have the right to pay, compromise or defend the Third Party Claim and to assert the indemnification provisions hereof. The Indemnitee also shall have the right, exercisable in good faith, to take such action as may be necessary to avoid a default prior to the assumption of the defense of the Third Party Claim by the Indemnitor.

ARTICLE X. MISCELLANEOUS PROVISIONS

If to Western, to:                                 With copy to:

 First Western Bank                                Ronald D. Raxter
 600 West By-Pass                                  Maupin Taylor & Ellis, P.A.
 Burnsville, NC 28714                              3200 Beechleaf Court
 Att: Ronnie E. Deyton, President                  Raleigh, NC 27604

If to MFC or MountainBank, to:                     With copy to:

 MountainBank Financial Corporation                William R. Lathan, Jr.
 201 Wren Drive                                    Ward and Smith, P.A.
 Hendersonville, NC 28792                          1001 College Court
 Att: Gregory L. Gibson, Chief Financial Officer   New Bern, NC 28562

consciously aware or of which they should have become consciously aware in the ordinary course of business and the performance of their management duties.

IN WITNESS WHEREOF, Western, MountainBank and MFC each has caused this Agreement to be executed in its name by its duly authorized officers and its corporate seal to be affixed hereto as of the date first above written.

[Signatures Omitted.]

EXHIBIT A

PLAN OF MERGER
By and Between
FIRST WESTERN BANK and MOUNTAINBANK

At the Effective Time, and without any action by Western, MountainBank, MFC or any Western shareholder, Western's stock transfer books shall be closed and there shall be no further transfers of Western Stock on its stock transfer books or the registration of any transfer of a certificate evidencing Western Stock (a "Western Certificate") by any holder thereof, and the holders of Western Certificates shall cease to be, and shall have no further rights as, stockholders of Western other than as provided in this Plan of Merger. Following the Effective Time, Western Certificates shall evidence only the right of the registered holders thereof to receive a certificate evidencing the number of shares of MFC Stock into which their Western Stock was converted at the Effective Time or, in the case of Western Stock held by shareholders who properly shall have exercised their right of dissent and appraisal under Article 13 of the North Carolina Business Corporation Act ("Dissenters' Rights"), cash as provided in that statute.

Subject to Paragraph 1.05(f), no certificate evidencing MFC Stock shall be issued or delivered to any former Western shareholder unless and until that shareholder shall have properly surrendered to MFC or its agent the Western Certificate(s) formerly representing his or her shares of Western Stock, together with a properly completed Transmittal Letter. Further, until a former Western shareholder's Western Certificates are so surrendered and certificates evidencing the MFC Stock into which his or her Western Stock was converted at the Effective Time actually are issued to him or her, no dividend or other distribution payable by MFC with respect to that MFC Stock as of any date subsequent to the Effective Time shall be paid or delivered to the former Western shareholder. However, upon the proper surrender of the shareholder's Western Certificate, MFC shall pay to the shareholder the amount of any such dividends or other distributions which have accrued but remain unpaid with respect to that MFC Stock.

continue to hold such offices until removed as provided by law or until the election or appointment of their respective successors.

Subject to the terms and conditions set forth in this Plan of Merger, the Merger shall become effective on the date and at the time (the "Effective Time") specified in Articles of Merger executed by MountainBank and filed by it with the North Carolina Secretary of State in accordance with applicable law; provided, however, that the Effective Time shall in no event be more than ten
(10) days following the Closing Date.

EXHIBIT B

FORM OF AFFILIATES AGREEMENT

____________________________, 2001

MountainBank Financial Corporation
201 Wren Drive
Hendersonville, North Carolina 28792

Dear Sirs and Madams:

Pursuant to the terms of that certain Agreement and Plan of Reorganization and Merger dated as of September 17, 2001 (the "Agreement"), by and among MountainBank Financial Corporation ("MFC"), MountainBank, and First Western Bank ("First Western"), it is proposed that (i) First Western merge into and with MountainBank which is a wholly-owned subsidiary of MFC (the "Merger"), (ii) at the effective time of the Merger, each share of First Western's outstanding common stock ("First Western Stock") held of record by its shareholders automatically will be converted into 0.50 shares of MFC's common stock ("MFC Stock"), and (iii) subject to certain limitations described in the Agreement, First Western's shareholders will have the right to elect the form of consideration into which their First Western Stock will be converted.

For purposes of this letter, the following terms shall have the meanings indicated below:

A. "Commission" - The Securities and Exchange Commission.

B. "Act" - The Securities Act of 1933, as amended.

C. "Rule 144" and "Rule 145" - Rules 144 and 145 promulgated by the Commission under the Act.

D. "Person" - A "Person" as such term is defined in Rule 144.

E. "Affiliate" - An "Affiliate," as such term is defined in Rule 144, of First Western or MFC.

F. "Related Person" - A Person related to an Affiliate.

The undersigned understands and agrees that he or she is considered to be an Affiliate or a Related Person of MFC or First Western. The undersigned further understands and agrees that the Act requires that certain transfer and resale restrictions be placed on any shares of MFC Stock received by an Affiliate or by a Related Person in connection with the Merger, and that MFC has an obligation to take reasonable steps to prevent violations of those restrictions. For that reason, the undersigned is entering into this Agreement with MFC to evidence the undersigned's agreement to comply with restrictions under the Act with respect to the MFC Stock received by the undersigned.

The undersigned (jointly and severally if more than one) hereby represents and warrants to, and agrees with, MFC as follows:

A. The undersigned Affiliate and Related Persons, if any, each agrees that he or she is an Affiliate, or a Related Person, of First Western or MFC.

B. The names of all Related Persons, if any, of the undersigned Affiliate who may receive BancShares Stock in connection with the Merger are listed on the signature page hereto and this letter agreement also has been signed by them or on their behalf.

C. The undersigned Affiliate and each of the undersigned Related Persons, if any, have carefully read this letter and have discussed its requirements and other applicable limitations upon the sale, transfer or other disposition of all MFC Stock received by them in connection with the Merger, to the extent they deem necessary, with their own legal counsel.

D. The undersigned Affiliate and each of the undersigned Related Persons, if any, are not participants in or aware of any plan, arrangement, understanding or proposal (whether written or oral, formal or informal) pursuant to which any individual holder or group of holders of 50% or more of the outstanding shares of First Western's capital stock intend to sell or otherwise dispose of the MFC Stock to be received by them pursuant to the Merger.

The undersigned (jointly and severally if more than one) hereby covenants and agrees with MFC as follows:

A. The undersigned Affiliate and each of the undersigned Related Persons, if any, has been informed that, since at the time the Merger is to be submitted to a vote of First Western's shareholders the Affiliate and each such Related Person was considered to be an Affiliate of First Western or MFC, any resale by the Affiliate or a Related Person of any such MFC Stock would require either (i) the registration under the Act of the MFC Stock to be sold, (ii) compliance by the Affiliate or such Related Person with the requirements of Rule 145(d) promulgated under the Act, or (iii) the availability of another exemption from the registration requirements of the Act.

B. Following the date of the Merger, neither the undersigned Affiliate nor any of the undersigned Related Persons, if any, will make any sale, transfer or other disposition of MFC Stock acquired by them in connection with the Merger except in compliance with the requirements of the Act and the rules and regulations of the Commission (including Rule 145) promulgated thereunder.

C. The undersigned understands that MFC is under no obligation to register the sale, transfer or other disposition of the MFC Stock for them or on their behalf or to take any other action necessary in order to render available an exemption (including without limitation Rule 145) from the registration requirements of the Act. Therefore, they may be compelled to hold such shares for a period of at least two years after which such shares may be sold, transferred, or otherwise disposed of without restriction, provided that at the time of any such sale, transfer or other disposition they are not considered to be Affiliates of MFC. Further, if the undersigned Affiliate or Related Person is or becomes an "affiliate" of MFC, then the above two-year rule will not apply and that person's MFC Stock may have to be held indefinitely.

D. MFC may place transfer restrictions on the shares of MFC Stock held by the Affiliate and each of the Related Persons, if any, which are subject to this Agreement, and there will be placed on the certificates evidencing such shares, and any substitutions therefor, a legend stating in substance as follows:

"The shares of Preferred Stock of MountainBank Financial Corporation ("MFC"), represented by this certificate were issued in a transaction to which Rule 145 promulgated under the Securities Act of 1933 applies and may be transferred only in accordance with the terms of an Agreement

dated __________, 2001, between the registered holder hereof and MFC, a copy of which Agreement is on file at MFC's principal office in Hendersonville, North Carolina.

Yours very truly,

Affiliate:

______________________________ (Seal)

Related Persons:

______________________________ (Seal)

______________________________ (Seal)

EXHIBIT C

FORM OF EMPLOYMENT AGREEMENT

STATE OF NORTH CAROLINA
COUNTY OF HENDERSON

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of the _____ day of _____________, 20___ (the "Effective Date"), by and between MOUNTAINBANK ("Employer") and RONNIE E. DEYTON ("Employee").

W I T N E S S E T H:

WHEREAS, Employee heretofore has been employed as President of FIRST WESTERN BANK ("FWB") pursuant to an employment agreement between him and FWB, and in such position he has provided leadership and guidance in the growth and development of FWB's business; and,

WHEREAS, as of the Effective Date, FWB has been merged into Employer; and,

WHEREAS, Employee's experience and knowledge of FWB's operations, customers and affairs, and his knowledge of and standing and reputation in FWB's market area, would be of benefit to Employer in its continuation of FWB's business; and, for that reason, Employer desires to retain Employee's services as an employee of Employer for the Term of Employment specified below, and Employee desires to become an employee of Employer, all subject to the terms and conditions provided herein; and,

WHEREAS, Employer and Employee desire to terminate Employee's existing employment agreement with FWB and to set forth the terms and conditions of Employee's employment with Employer in a new written agreement which will supercede and replace the existing employment agreement and, for that purpose, Employer and Employee have agreed and desire to enter into this Agreement.

NOW, THEREFORE, in consideration of the premises and mutual promises, covenants and conditions hereinafter set forth, and for other good and valuable considerations, the receipt and sufficiency of which hereby are acknowledged, Employer and Employee hereby agree as follows:

All compensation hereunder shall be subject to such applicable withholding taxes and/or other employment taxes as are required by law.

Employee acknowledges that the terms and provisions of Employer's employee benefit plans and programs may be determined only by reading the actual plan documents under which Employer, MFC or the plan administrator, as applicable, may make certain administrative determinations with discretion, and that Employer and MFC reserve the right to modify or terminate each plan or program and any benefits provided thereunder.

Employee, in the execution of his employment duties under this Agreement, at all times and in all material respects shall comply with all personnel policies and procedures, and any code of employee conduct, as are established or modified, amended or supplemented from time to time by Employer during the Term of Employment, and with all federal and state statutes, and all rules, regulations, administrative orders, statements of policy and other pronouncements or standards promulgated thereunder, which are applicable to Employer and MFC and their business, operations and employees.

For purposes of this Paragraph 6, the following terms shall have the meanings set forth below:

competent jurisdiction to be unreasonable, Employee hereby agrees that the Relevant Market shall be reduced by excluding any separately identifiable and geographically severable area necessary to make the remaining geographic restriction reasonable, but this Paragraph 6 shall be enforced as to all other areas included in the Relevant Market which are not so excluded.

Notwithstanding anything contained herein to the contrary, Employee agrees that the provisions of Paragraphs 6(b) and 6(c) above and the remedies provided in this Paragraph 6(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.

hardship, or (iii) by cessation of all deferrals under this Paragraph 7. In the event of an early distribution by reason of an Unforeseeable Emergency, the amount of all subsequent installments of the Non-Compete Payment shall be reduced, on a present value basis using a discount rate of nine percent (9%) per annum, to reflect the amount withdrawn pursuant to this Paragraph 7(c).

For purposes of this Paragraph 8(c), Employer shall have "Cause" to terminate Employee's employment upon:

(i) A determination by Employer, in good faith, that Employee (A) has breached in any material respect any of the terms or conditions of this Agreement or of the Code of Conduct, (B) has failed in any material respect to perform or discharge his duties or responsibilities of employment in the manner provided herein, or (C) is engaging or has engaged in willful misconduct or conduct which is detrimental in any material respect to the business or business prospects of Employer or which has had or likely will have an adverse effect on Employer's business or reputation;

(ii) The violation by Employee of any applicable federal or state law, or any applicable rule, regulation, order or statement of policy promulgated by any governmental agency or authority having jurisdiction over Employer, MFC or any of their affiliates or subsidiaries (a "Regulatory Authority"), including but not limited to the Federal Deposit Insurance Corporation, the North Carolina Banking Commissioner, the North Carolina State Banking Commission, the Federal Reserve Board or any other banking regulator, which results from Employee's 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 Employer or any of its affiliates or subsidiaries or to Employer's reputation;

(iii) The commission in the course of Employee's employment with Employer of an act of fraud, embezzlement, theft or proven personal dishonesty (whether or not such act or charge results in criminal indictment, charges, prosecution or conviction);

(iv) The conviction of Employee 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 Employee from serving as an employee or executive officer of, or a party affiliated with, Employer or MFC; or, in the event Employee becomes unacceptable to, or is removed, suspended or prohibited from participating in the conduct of Employer's or MFC's affairs (or if proceedings for that purpose are commenced), by any Regulatory Authority; or,

(v) 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.

(d) Except as otherwise provided below, upon the earlier of the Expiration Date of the Term of Employment or the effective date of any actual termination of Employee's employment with Employer under this Agreement for any reason, the provisions of this Agreement likewise shall terminate and be of no further force or effect. However, Employee's covenants contained in Paragraph 6 above, and Employer's obligations, if any, for continued payments of Base Salary and Non-Compete Payments shall survive and remain in effect in accordance with their terms following the Expiration Date or any actual termination of Employee's employment; provided, however, that in the event the actual termination of Employee's employment occurs before the Expiration Date, the Restriction Period shall terminate five years thereafter.

(a) Employer 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 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 Regulatory Authority, or (iii) otherwise would be prohibited by any Regulatory Authority.

(a) 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.

(b) Employer is contracting for the unique and personal skills of Employee. Therefore, Employee shall be precluded from assigning or delegating his rights or duties hereunder without first obtaining the written consent of Employer.

party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party, shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No amendments or additions to this Agreement shall be binding unless in writing and signed by both parties, except as herein otherwise provided.

If to Employer:                               If to Employee:

MountainBank Financial Corporation            Ronnie E. Deyton
201 Wren Drive                                ____________________
Hendersonville, NC  28792                     ____________________
Att: J.W. Davis, President and CEO

IN WITNESS WHEREOF, Employer has caused this Agreement to be executed by its duly authorized officer in pursuance of authority duly given by its Board of Directors, and Employee has set hereunto his hand and adopted as his seal the typewritten word "SEAL" appearing beside his name, all as of the day and year first above written.

__________________________________________(SEAL) Ronnie E. Deyton

MOUNTAINBANK

By: _____________________________________
J.W. Davis, President

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APPENDIX B

ARTICLE 13.
Dissenters' Rights.