<PAGE>

                                                                     EXHIBIT 2.1


                               AGREEMENT AND PLAN

                          OF REORGANIZATION AND MERGER


                                 By and Between

                         CARDINAL BANKSHARES CORPORATION

                                       and

                       MOUNTAINBANK FINANCIAL CORPORATION


                                  June 20, 2002

<PAGE>

                                                                     EXHIBIT 2.1

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                 PAGE
                                                                                                                 ----
<S>                                                                                                               <C>
ARTICLE I.   THE MERGER.....................................................................................       2

     1.01.    Names of Merging Corporations.................................................................       2
     1.02.    Nature of Transaction; Plan of Merger.........................................................       2
     1.03.    Effect of Merger; Surviving Corporation.......................................................       2
     1.04.    Assets and Liabilities of Cardinal............................................................       2
     1.05.    Conversion and Exchange of Stock..............................................................       2
              (a)     Conversion of Cardinal Stock..........................................................       2
              (b)     Description of MFC Series B Preferred Stock...........................................       3
              (c)     Exchange and Payment Procedures; Surrender of Certificates............................       3
              (d)     Antidilutive Adjustments..............................................................       4
              (e)     Dissenters............................................................................       4
              (f)     Fractional Shares.....................................................................       4
              (g)     Lost Certificates.....................................................................       4
     1.06.    Articles of Incorporation, Bylaws and Management..............................................       4
     1.07.    Closing; Effective Time.......................................................................       4

ARTICLE II.  REPRESENTATIONS AND WARRANTIES OF CARDINAL.....................................................       5

     2.01.    Organization; Standing; Power.................................................................       5
     2.02.    Capital Stock.................................................................................       5
     2.03.    Principal Shareholders........................................................................       5
     2.04     Subsidiaries..................................................................................       6
     2.05     Convertible Securities, Options, Etc..........................................................       6
     2.06     Authorization and Validity of Agreement.......................................................       6
     2.07.    Validity of Transactions; Absence of Required Consents or Waivers.............................       6
     2.08.    Cardinal Books and Records....................................................................       7
     2.09.    Cardinal Reports..............................................................................       7
     2.10.    Cardinal Financial Statements.................................................................       7
     2.11.    Cardinal Tax Returns and Other Tax Matters....................................................       8
     2.12.    Absence of Changes or Certain Other Events....................................................       8
     2.13.    Absence of Undisclosed Liabilities............................................................       8
     2.14.    Compliance with Existing Obligations..........................................................       9
     2.15.    Litigation and Compliance with Law............................................................       9
     2.16.    Real Properties...............................................................................       9
     2.17.    Loans, Accounts, Notes and Other Receivables..................................................      10
     2.18.    Securities Portfolio and Investments..........................................................      11
     2.19.    Personal Property and Other Assets............................................................      11
     2.20.    Patents and Trademarks........................................................................      12
     2.21.    Environmental Matters.........................................................................      12
     2.22.    Absence of Brokerage or Finders Commissions...................................................      13
     2.23.    Material Contracts............................................................................      13
     2.24.    Employment Matters; Employee Relations........................................................      14
     2.25.    Employment Agreements; Employee Benefit Plans.................................................      14
     2.26.    Insurance.....................................................................................      16
     2.27.    Insurance of Deposits.........................................................................      16
     2.28.    Obstacles to Regulatory Approval .............................................................      16
     2.29.    Disclosure....................................................................................      16

ARTICLE III. REPRESENTATIONS AND WARRANTIES OF MFC..........................................................      17

     3.01.    Organization; Standing; Power.................................................................      17
     3.02.    Capital Stock.................................................................................      17
     3.03.    Authorization and Validity of Agreement.......................................................      17
     3.04.    Validity of Transactions; Absence of Required Consents or Waivers.............................      17
     3.05.    Convertible Securities, Options, Etc..........................................................      18
     3.06.    MFC Books and Records.........................................................................      18
     3.07.    MFC Reports...................................................................................      18
     3.08     MFC Financial Statements......................................................................      19
     3.09.    MFC Tax Returns and Other Tax Matters.........................................................      19
</TABLE>

                                       ii

<PAGE>

                                                                     EXHIBIT 2.1

<TABLE>
     <S>                                                                                                          <C>
     3.10     Absence of Material Adverse Changes or Certain Other Events...................................      19
     3.11.    Absence of Undisclosed Liabilities............................................................      19
     3.12     Litigation and Compliance with Law............................................................      20
     3.13.    Reserve for Loan Losses.......................................................................      20
     3.14.    Insurance of Deposits.........................................................................      21
     3.15     Obstacles to Regulatory Approval..............................................................      21
     3.16     Disclosure....................................................................................      21

ARTICLE IV.  COVENANTS OF CARDINAL..........................................................................      21

     4.01.    Affirmative Covenants of Cardinal.............................................................      21
              (a)     Cardinal Shareholders' Meeting........................................................      21
              (b)     Affiliates Agreements.................................................................      22
              (c)     Conduct of Business Prior to Effective Time...........................................      22
              (d)     Periodic Financial and Other Information..............................................      22
              (e)     Notice of Certain Changes or Events...................................................      23
              (f)     Accruals for Loan Loss Reserve, Expenses and Other Accounting Matters.................      24
              (g)     Loan Charge-Offs......................................................................      24
              (h)     Correction of Credit Documentation and Compliance Deficiencies........................      24
              (i)     Consents to Assignment of Leases......................................................      24
              (j)     Access................................................................................      25
              (k)     Pricing of Deposits and Loans.........................................................      25
              (l)     Further Action; Instruments of Transfer...............................................      25
     4.02.    Negative Covenants of Cardinal................................................................      25
              (a)     Amendments to Articles of Incorporation or Bylaws.....................................      25
              (b)     Change in Capitalization..............................................................      25
              (c)     Sale or Issuance of Shares............................................................      25
              (d)     Purchase or Redemption of Shares......................................................      26
              (e)     Options, Warrants and Rights..........................................................      26
              (f)     Dividends.............................................................................      26
              (g)     Employment, Benefit or Retirement Agreements or Plans.................................      26
              (h)     Increase in Compensation; Bonuses.....................................................      26
              (i)     Accounting Practices..................................................................      26
              (j)     Acquisitions; Additional Branch Offices...............................................      26
              (k)     Changes in Business Practices.........................................................      26
              (l)     Exclusive Merger Agreement............................................................      27
              (m)     Debt; Liabilities.....................................................................      27
              (n)     Liens; Encumbrances...................................................................      27
              (o)     Waiver of Rights......................................................................      27
              (p)     Other Contracts.......................................................................      27
              (q)     Deposit Liabilities...................................................................      27
              (r)     Loan Participations...................................................................      27

ARTICLE V.   COVENANTS OF MFC...............................................................................      28

     5.01.    MFC Shareholders' Meeting.....................................................................      28
     5.02.    Registration Statement.........................................................................     28
     5.03.    "Blue Sky" Approvals..........................................................................      28
     5.04.    Employees; Employee Benefits..................................................................      28
              (a)     Employment Agreement..................................................................      28
              (b)     Employment of Other Floyd Employees...................................................      29
              (c)     Employee Benefits.....................................................................      29
     5.05.    Further Action; Instruments of Transfer.......................................................      29

ARTICLE VI.  ADDITIONAL AGREEMENTS..........................................................................      29

     6.01     Preparation and Distribution of Proxy Statement/Prospectus....................................      29
     6.02.    Regulatory Approvals..........................................................................      30
     6.03.    Information for Proxy Statement/Prospectus and Applications for Regulatory Approvals..........      30
     6.04.    Announcements; Confidential Information.......................................................      30
     6.05.    Real Property Matters.........................................................................      32
     6.06.    Treatment of Pension Plan.....................................................................      33
     6.07.    Directors' and Officers' Liability Insurance..................................................      33
</TABLE>

                                       iii

<PAGE>

                                                                     EXHIBIT 2.1

<TABLE>
     <S>                                                                                                          <C>
     6.08.    Tax Opinion...................................................................................      33
     6.09.    Final Tax Return..............................................................................      34
     6.10.    Restriction on MFC Stock Issued to Certain Persons............................................      34
              (a)     Affiliates of Cardinal................................................................      34
              (b)     Affiliates of MFC.....................................................................      34
     6.11.    Expenses......................................................................................      34
     6.12.    Directors.....................................................................................      34
     6.13.    Due Diligence Reviews and Right to Terminate..................................................      35

ARTICLE VII. CONDITIONS PRECEDENT TO MERGER.................................................................      35

     7.01.    Conditions to all Parties' Obligations........................................................      35
              (a)     Approval by Regulatory Authorities;  Disadvantageous Conditions.......................      35
              (b)     Adverse Proceedings, Injunction, Etc..................................................      35
              (c)     Approval by Boards of Directors and Shareholders......................................      36
              (d)     Approval by of Charter Amendment......................................................      36
              (e)     Fairness Opinion......................................................................      36
              (f)     Tax Opinion...........................................................................      36
              (g)     No Termination or Abandonment.........................................................      36
              (h)     Employment Agreement..................................................................      36
              (i)     Articles of Merger; Other Actions.....................................................      36
     7.02.    Additional Conditions to Cardinal's Obligations...............................................      36
              (a)     Material Adverse Change...............................................................      36
              (b)     Compliance with Laws..................................................................      36
              (c)     MFC's Representations and Warranties
                       and Performance of Agreements; Officers' Certificate.................................      37
              (d)     Legal Opinion of MFC's Counsel........................................................      37
              (e)     Other Documents and Information.......................................................      37
              (f)     Acceptance by Cardinal's Counsel......................................................      37
     7.03.    Additional Conditions to MFC's Obligations....................................................      37
              (a)     Material Adverse Change...............................................................      37
              (b)     Compliance with Laws..................................................................      37
              (c)     Cardinal's Representations and Warranties
                       and Performance of Agreements; Officers' Certificate.................................      37
              (d)     Affiliates Agreements.................................................................      38
              (e)     Legal Opinion of Cardinal's Counsel...................................................      38
              (f)     Other Documents and Information.......................................................      38
              (g)     Election of Floyd Directors...........................................................      38
              (h)     Consents to Assignment; Estoppel Certificates.........................................      38
              (i)     Acceptance by MFC's Counsel...........................................................      38

ARTICLE VIII.TERMINATION; BREACH; REMEDIES..................................................................      38

     8.01.    Mutual Termination............................................................................      38
     8.02.    Unilateral Termination........................................................................      38
              (a)     Termination by MFC....................................................................      38
              (b)     Termination by Cardinal...............................................................      40
              (c)     Survival of Certain Covenants Following Termination...................................      41
     8.03.    Breach; Remedies..............................................................................      41

ARTICLE IX.  INDEMNIFICATION................................................................................      41

     9.01.    Indemnification Following Termination of Agreement............................................      41
              (a)     By Cardinal...........................................................................      41
              (b)     By MFC................................................................................      42
     9.02.    Procedure for Claiming Indemnification........................................................      42

ARTICLE X.   MISCELLANEOUS PROVISIONS.......................................................................      43

     10.01.   Survival of Representations, Warranties, Indemnification and Other Agreements.................      43
     10.02.   Waiver........................................................................................      43
     10.03.   Amendment.....................................................................................      43
     10.04.   Notices.......................................................................................      43
</TABLE>

                                       iv

<PAGE>

                                                                     EXHIBIT 2.1

<TABLE>
     <S>                                                                                                          <C>
     10.05.   Further Assurance.............................................................................      44
     10.06.   Headings and Captions.........................................................................      44
     10.07.   Gender and Number.............................................................................      44
     10.08.   Entire Agreement..............................................................................      44
     10.09.   Severability of Provisions....................................................................      44
     10.10.   Assignment....................................................................................      44
     10.11.   Counterparts..................................................................................      44
     10.12.   Governing Law.........................................................................................
</TABLE>

                                        v

<PAGE>

                                                                     EXHIBIT 2.1

<TABLE>
     <S>                                                                                                         <C>
     10.13.   Previously Disclosed Information..............................................................      44
     10.14.   Best Knowledge................................................................................      45
     10.15.   Inspection....................................................................................      45

EXHIBIT A  - Plan of Merger.................................................................................     A-1
EXHIBIT B  - Description of MFC Series B Preferred Stock....................................................     B-1
EXHIBIT C  - Form of Affiliates Agreement...................................................................     C-1
EXHIBIT D  - Form of Employment Agreement...................................................................     D-1
</TABLE>

                                       vi

<PAGE>

                                                                     EXHIBIT 2.1

                 AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
                                 By and Between
                         CARDINAL BANKSHARES CORPORATION
                                       and
                       MOUNTAINBANK FINANCIAL CORPORATION

          THIS AGREEMENT AND PLAN OF REORGANIZATION AND MERGER (the "Agreement")
is entered into as of the 20th day of June, 2002, by and between CARDINAL
BANKSHARES CORPORATION ("Cardinal") and MOUNTAINBANK FINANCIAL CORPORATION
("MFC").

          WHEREAS, Cardinal is a Virginia business corporation with its
principal office and place of business located in Floyd, Virginia, and is the
owner of all the outstanding shares of common stock of Bank of Floyd ("Floyd");

          WHEREAS, Floyd is a Virginia banking corporation with its principal
office and place of business located in Floyd, Virginia, and is the wholly-owned
subsidiary of Cardinal; and,

          WHEREAS, Floyd owns all the outstanding shares of common stock of its
wholly-owned subsidiary, FBC, Inc. ("FBC") and, for purposes of this Agreement,
all references to "Floyd" shall be deemed to refer to both Floyd and FCB,
individually and collectively as the context shall require.

          WHEREAS, MFC is a North Carolina business corporation with its
principal office and place of business located in Hendersonville, North
Carolina, and is the owner of all the outstanding shares of common stock of
MountainBank; and,

          WHEREAS, MountainBank is a North Carolina banking corporation with its
principal office and place of business located in Hendersonville, North
Carolina, and is the wholly-owned subsidiary of MFC; and,

          WHEREAS, Cardinal and MFC have agreed that it is in their mutual best
interests and in the best interests of their respective shareholders for
Cardinal to be merged with and into MFC in the manner and upon the terms and
conditions contained in this Agreement; and,

          WHEREAS, to effectuate the foregoing, Cardinal and MFC desire to adopt
this Agreement as a plan of reorganization in accordance with the provisions of
Section 368(a) of the Internal Revenue Code of 1986, as amended; and,

          WHEREAS, Cardinal's Board of Directors has approved this Agreement and
will recommend to Cardinal's shareholders that they approve the transactions
described herein; and,

          WHEREAS, MFC's Board of Directors has approved this Agreement and will
recommend to MFC's shareholders that they approve the transactions described
herein.

          NOW, THEREFORE, in consideration of the premises, the mutual benefits
to be derived from this Agreement, and the representations, warranties,
conditions, covenants and promises herein contained, and subject to the terms
and conditions hereof, Cardinal and MFC hereby adopt and make this Agreement and
mutually agree as follows:

                                        1

<PAGE>

                                                                     EXHIBIT 2.1

                              ARTICLE I. THE MERGER

     1.01.   NAMES OF MERGING CORPORATIONS. The names of the corporations
proposed to be merged are CARDINAL BANKSHARES CORPORATION ("Cardinal") and
MOUNTAINBANK FINANCIAL CORPORATION ("MFC").

     1.02.   NATURE OF TRANSACTION; PLAN OF MERGER. Subject to the provisions of
this Agreement, at the "Effective Time" (as defined in Paragraph 1.07 below),
Cardinal will be merged into and with MFC (the "Merger") as provided in the plan
of merger (the "Plan of Merger") attached as Exhibit A to this Agreement.

     1.03.   EFFECT OF MERGER; SURVIVING CORPORATION. At the Effective Time, and
by reason of the Merger, the separate corporate existence of Cardinal shall
cease while the corporate existence of MFC as the surviving corporation in the
Merger shall continue with all of its purposes, objects, rights, privileges,
powers and franchises, all of which shall be unaffected and unimpaired by the
Merger. Following the Merger, MountainBank and Floyd each shall operate as a
wholly-owned banking subsidiary of MFC and, as North Carolina and Virginia
banking corporations, respectively, will conduct their business at their legally
established branch and main offices as they shall exist from time to time
following the Merger. The duration of the corporate existence of MFC, as the
surviving corporation, shall be perpetual and unlimited.

     1.04.   ASSETS AND LIABILITIES OF CARDINAL. At the Effective Time, and by
reason of the Merger, and in accordance with applicable law, all of the
property, assets and rights of every kind and character of Cardinal (including
without limitation all real, personal or mixed property, all debts due on
whatever account, all other choses in action and every other interest of or
belonging to or due to Cardinal, whether tangible or intangible) shall be
transferred to and vest in MFC, and MFC shall succeed to all the rights,
privileges, immunities, powers, purposes and franchises of a public or private
nature of Cardinal, all without any conveyance, assignment or further act or
deed; and MFC shall become responsible for all of the liabilities, duties and
obligations of every kind, nature and description of Cardinal as of the
Effective Time.

     1.05.   CONVERSION AND EXCHANGE OF STOCK.

             (a)   Conversion of Cardinal Stock. Except as otherwise provided in
this Agreement, at the Effective Time all rights of Cardinal's shareholders with
respect to all outstanding shares of Cardinal's $10.00 par value common stock
("Cardinal Stock") shall cease to exist and, as consideration for and to effect
the Merger, each such outstanding share shall be converted, without any action
by Cardinal, MFC or any Cardinal shareholder, into the right to receive a number
of shares of MFC's $4.00 par value common stock ("MFC Common Stock") calculated
in the manner described below, and an equal number of shares of a newly created
series of convertible preferred stock ("MFC Series B Preferred Stock).

             The number of shares of MFC Common Stock into which each share of
Cardinal Stock is converted at the Effective Time shall be the number (rounded
to four decimal places) equal to $12.00 divided by the "Market Value" (as
defined below). The number of shares of MFC Series B Preferred Stock into which
each share of Cardinal Stock is converted at the Effective Time shall be the
same as the number of shares of MFC Common Stock calculated as described above.

             For purposes of this Paragraph 1.05, the "Market Value" of a share
of MFC Common Stock shall be the average of the closing per share trade prices
of MFC Common Stock as reported on the OTC Bulletin Board (or, if MFC Common
Stock is then traded on The Nasdaq Stock Market, on Nasdaq) for the 20 trading
days immediately preceding the business day prior to the "Closing Date" (as
defined in Paragraph 1.07 below) on which trades of MFC Common Stock are
reported; provided however that, for purposes of calculating the numbers of
shares of MFC Common Stock and MFC Series B Preferred Stock

                                        2

<PAGE>

                                                                     EXHIBIT 2.1

into which Cardinal Stock will be converted, the Market Value used in the
calculation shall not exceed $26.82 or be less than $17.88. If the amount
determined as described above as the Market Value is more than $26.82, then the
Market Value shall be deemed to be $26.82, and if the amount determined as
described above as the Market Value is less than $17.88, then the Market Value
shall be deemed to be $17.88.

             At the Effective Time, and without any action by Cardinal, MFC or
any Cardinal shareholder, Cardinal's stock transfer books shall be closed and
there shall be no further transfers of Cardinal Stock on its stock transfer
books or the registration of any transfer of a certificate evidencing Cardinal
Stock (a "Cardinal Certificate") by any holder thereof, and the holders of
Cardinal Certificates shall cease to be, and shall have no further rights as,
stockholders of Cardinal other than as provided in this Agreement. Following the
Effective Time, Cardinal Certificates shall evidence only the right of the
registered holders thereof to receive certificates evidencing the numbers of
whole shares of MFC Common Stock and MFC Series B Preferred Stock into which
their Cardinal Stock was converted at the Effective Time, together with cash for
any fractional shares calculated as described in Paragraph 1.05(f) below, or, in
the case of Cardinal Stock held by shareholders who properly shall have
exercised their right of dissent and appraisal under Article 15 of the Virginia
Stock Corporation Act ("Dissenters' Rights"), cash as provided in that statute.

             (b)   Description of MFC Series B Preferred Stock. The MFC Series B
Preferred Stock to be issued to Cardinal shareholders will be non-cumulative,
nonparticipating, convertible preferred stock of MFC that will have terms
(including the stated dividend), relative rights, preferences and limitations
substantially the same as are described in Exhibit B to this Agreement. Each
share of Series B Preferred Stock will have the same voting rights as shares of
MFC Common Stock.

             (c)   Exchange and Payment Procedures; Surrender of Certificates.
As promptly as practicable, but not more than ten business days following the
Effective Time, MFC shall send or cause to be sent to each former Cardinal
shareholder of record immediately prior to the Effective Time written
instructions and transmittal materials (a "Transmittal Letter") for use in
surrendering Cardinal Certificates to MFC or to an exchange agent appointed by
MFC. Upon the proper surrender and delivery to MFC or its agent (in accordance
with its instructions, and accompanied by a properly completed Transmittal
Letter) by a former shareholder of Cardinal of his or her Cardinal
Certificate(s), and in exchange therefor, MFC shall as soon as practicable issue
and deliver to the shareholder stock certificates evidencing the numbers of
whole shares of MFC Common Stock and MFC Series B Preferred Stock into which the
shareholder's Cardinal Stock was converted at the Effective Time, together with
cash for any fractional shares calculated as described in Paragraph 1.05(f)
below.

                   Subject to Paragraph 1.05(g), no certificate evidencing MFC
Common Stock or MFC Series B Preferred Stock shall be issued or delivered to any
former Cardinal shareholder unless and until that shareholder shall have
properly surrendered to MFC or its agent the Cardinal Certificate(s) formerly
representing his or her shares of Cardinal Stock, together with a properly
completed Transmittal Letter. Further, until a former Cardinal shareholder's
Cardinal Certificates are so surrendered and certificates evidencing the MFC
Common Stock and MFC Series B Preferred Stock into which his or her Cardinal
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 Common
Stock or MFC Series B Preferred Stock as of any date subsequent to the Effective
Time shall be paid or delivered to the former Cardinal shareholder. However,
upon the proper surrender of the shareholder's Cardinal Certificate and the
issuance to that shareholder of certificates representing the MFC Common Stock
and MFC Series B Preferred Stock to which the shareholder is entitled, if MFC
shall have paid any dividend or made any distribution to the holders of its MFC
Common Stock or MFC Series B Preferred Stock of record as of a date after the
Effective Time and if MFC is holding the amount of that dividend or distribution
related to the MFC

                                        3

<PAGE>

                                                                     EXHIBIT 2.1

Common Stock or MFC Series B Preferred Stock being issued to the shareholder,
then MFC will pay that amount to the shareholder.

             (d)   Antidilutive Adjustments. If, prior to the Effective Time,
Cardinal or MFC shall declare any dividend payable in shares of Cardinal Stock
in the case of Cardinal, or MFC Common Stock or MFC Series B Preferred Stock in
the case of MFC, or shall subdivide, split, reclassify or combine the presently
outstanding shares of Cardinal Stock, MFC Common Stock or MFC Series B Preferred
Stock, then an appropriate and proportionate adjustment shall be made in the
number of shares of MFC Common Stock and/or MFC Series B Preferred Stock, as the
case may be, into which each share of Cardinal Stock will be converted at the
Effective Time pursuant to this Agreement.

             (e)   Dissenters. Any shareholder of Cardinal who properly
exercises Dissenters' Rights shall be entitled to receive payment of the fair
value of his or her shares of Cardinal Stock in the manner and pursuant to the
procedures provided for in Article 15 of the Virginia Stock Corporation Act.
Shares of Cardinal Stock held by persons who exercise Dissenters' Rights shall
not be converted as described in Paragraph 1.05(a). However, if any shareholder
of Cardinal who exercises Dissenters' Rights shall fail to perfect those rights,
or effectively shall waive or lose such rights, then each of his or her shares
of Cardinal Stock shall be deemed to have been converted into MFC Common Stock
and MFC Series B Preferred Stock as of the Effective Time as provided in
Paragraph 1.05(a).

             (f)   Fractional Shares. If the conversion of the shares of
Cardinal Stock held by any Cardinal shareholder results in a fraction of a share
of MFC Common Stock or MFC Series B Preferred Stock, then, in lieu of issuing
that fractional share, MFC will pay to that shareholder cash in an amount equal
to that fraction multiplied by the Market Value.

             (g)   Lost Certificates. Following the Effective Time, shareholders
of Cardinal whose Cardinal Certificates have been lost, destroyed, stolen or
otherwise are missing shall be entitled to receive certificates for the whole
shares of MFC Common Stock and MFC Series B Preferred Stock into which their
Cardinal Stock has been converted in accordance with and upon compliance with
reasonable conditions imposed by MFC, including without limitation a requirement
that those shareholders provide lost instruments indemnities or surety bonds in
form, substance and amount satisfactory to MFC.

     1.06.   ARTICLES OF INCORPORATION, BYLAWS AND MANAGEMENT. The Articles of
Incorporation and Bylaws of MFC in effect at the Effective Time shall be the
Articles of Incorporation and Bylaws of MFC as the surviving corporation in the
Merger, and the officers and directors of MFC in office at the Effective Time
shall continue to hold such offices until removed as provided by law or until
the election or appointment of their respective successors.

     1.07.   CLOSING; EFFECTIVE TIME. The consummation and closing of the Merger
and other transactions contemplated by this Agreement (the "Closing") shall take
place at the offices of MFC's legal counsel, Ward and Smith, P.A., in Raleigh,
North Carolina, or at such other place as MFC shall designate, on a date
mutually agreed upon by Cardinal and MFC (the "Closing Date") after the
expiration of any and all required waiting periods following the effective date
of required approvals of the Merger by governmental or regulatory authorities
(but in no event more than 30 days following the expiration of all such required
waiting periods). At the Closing, Cardinal and MFC shall take such actions
(including without limitation the delivery of certain closing documents and the
execution of Articles of Merger under North Carolina and Virginia law) as are
required in this Agreement and as otherwise shall be required by law to
consummate the Merger and cause it to become effective.

     Subject to the terms and conditions set forth in this Agreement, the Merger
shall become effective on the date and at the time (the "Effective Time")
specified in Articles of Merger executed by MFC and filed by it with, and as
provided in the Certificates of Merger issued by, the North Carolina Secretary
of

                                        4

<PAGE>

                                                                     EXHIBIT 2.1

State and the Virginia State Corporation Commission in accordance with
applicable law; provided, however, that the Effective Time shall in no event be
more than ten days following the Closing Date.

                                   ARTICLE II
                   REPRESENTATIONS AND WARRANTIES OF CARDINAL

     Except as otherwise specifically provided in this Agreement or as
"Previously Disclosed" (as defined in Paragraph 10.13) by Cardinal to MFC,
Cardinal hereby makes the following representations and warranties to MFC.

     As defined and used in this Agreement, the term "Cardinal Material Change"
or "Cardinal Material Effect" shall not include any change or effect resulting
directly or indirectly from: (i) the transactions contemplated by this Agreement
or their announcement, (ii) general economic, industry or financial conditions
or events that affect the banking industry as a whole, (iii) the impact of laws,
rules, regulations and court decisions (other than court decisions related to
litigation in which Cardinal or Floyd is a party, or (iv) acts of war or
terrorism.

     2.01.   ORGANIZATION; STANDING; POWER. Cardinal and Floyd each (i) is duly
organized and incorporated, validly existing and in good standing as a business
corporation and a banking corporation, respectively, under the laws of the
Commonwealth of Virginia; (ii) has all requisite power and authority (corporate
and other) to own, lease and operate its properties and to carry on its business
as it now is being conducted; (iii) is duly qualified to do business and is in
good standing in each jurisdiction in which the character of the properties
owned, leased or operated by it therein, or in which the transaction of its
business, makes such qualification necessary, except where failure so to qualify
would not have a material adverse effect on Cardinal and Floyd considered as one
entity, or on their financial condition, results of operations, prospects,
businesses, assets, loan portfolio, investments, properties or operations (a
"Cardinal Material Effect"); and (iv) is not transacting business or operating
any properties owned or leased by it in violation of any provision of federal,
state or local law or any rule or regulation promulgated thereunder, except
where such violation would not have a Cardinal Material Effect.

     2.02.   CAPITAL STOCK. Cardinal's authorized capital stock consists of
5,000,000 shares of common stock, $10.00 par value, of which 1,535,733 shares
are issued and outstanding and constitute Cardinal's only outstanding
securities.

             Floyd's authorized capital stock consists of 5,000,000 shares of
common stock, $10.00 par value, of which 465,536 shares are issued and
outstanding ("Floyd Stock") and constitute Floyd's only outstanding securities.
All of the Floyd Stock is held, beneficially and of record, by Cardinal, and
those shares constitute Floyd's only outstanding securities.

             Each outstanding share of Cardinal Stock and Floyd Stock (i) has
been duly authorized and is validly issued and outstanding, and is fully paid
and nonassessable, and (ii) has not been issued in violation of the preemptive
rights of any shareholder. The Cardinal Stock is registered with the Securities
Exchange Commission (the "SEC") under the Securities Exchange Act of 1934, as
amended (the "1934 Act") and Cardinal is subject to the registration and
reporting requirements of the 1934 Act. The Floyd Stock is not registered under,
and Floyd is not subject to the registration and reporting requirements of, the
1934 Act.

     2.03.   PRINCIPAL SHAREHOLDERS. Except as otherwise described below, to the
Best Knowledge of Cardinal, no person or entity beneficially owns, directly or
indirectly, more than 5% of the outstanding shares of Cardinal Stock.

                                        5

<PAGE>

                                                                     EXHIBIT 2.1

             As of the date of this Agreement, the following persons owned,
beneficially and of record, more than 5% of the outstanding shares of Cardinal
Stock:

                                                              NUMBER
                        NAME                                 OF SHARES
                 -------------------                       -----------

                 Joseph H. and
                 Katherine S Conduff                           146,736

     2.04.   SUBSIDIARIES. With the exception of Floyd and FCB, a wholly-owned
subsidiary of Floyd, Cardinal has no subsidiaries, direct or indirect, and,
except for equity securities included in its investment portfolio at June 10,
2002, and Previously Disclosed to MFC pursuant to Paragraph 10.13 below,
Cardinal does not own any stock or other equity interest in any other
corporation, service corporation, joint venture, partnership or other entity.

     With the exception of FCB, Floyd has no subsidiaries, direct or indirect,
and, except for equity securities included in its investment portfolio at June
10, 2002, and Previously Disclosed to MFC pursuant to Paragraph 10.13 below,
Floyd does not own any stock or other equity interest in any other corporation,
service corporation, joint venture, partnership or other entity.

     2.05.   CONVERTIBLE SECURITIES, OPTIONS, ETC. Neither Cardinal nor Floyd
has any outstanding (i) securities or other obligations (including debentures or
other debt instruments) which are convertible into shares of Cardinal Stock or
Floyd Stock or any other securities of Cardinal or Floyd, (ii) options,
warrants, rights, calls or other commitments of any nature which entitle any
person to receive or acquire any shares of Cardinal Stock or Floyd Stock or any
other securities of Cardinal or Floyd, or (iii) plan, agreement or other
arrangement pursuant to which shares of Cardinal Stock or Floyd Stock or any
other securities of Cardinal or Floyd, or options, warrants, rights, calls or
other commitments of any nature pertaining to any securities of Cardinal or
Floyd, have been or may be issued.

     2.06.   AUTHORIZATION AND VALIDITY OF AGREEMENT. This Agreement has been
duly and validly approved by Cardinal's Board of Directors. Subject only to
approval of this Agreement by the shareholders of Cardinal and MFC in the manner
required by law and required approvals of federal, state or local governmental,
regulatory, or judicial authorities having jurisdiction over Cardinal, Floyd,
MFC, or MountainBank, or any of their business operations, properties or assets,
or the transactions described herein (collectively, the "Regulatory
Authorities") (as contemplated by Paragraph 6.02), (i) Cardinal has the
corporate power and authority to execute and deliver this Agreement and to
perform its obligations and agreements and carry out the transactions described
in this Agreement, (ii) all corporate proceedings and approvals required to
authorize Cardinal to enter into this Agreement and to perform its obligations
and agreements and carry out the transactions described herein have been duly
and properly completed or obtained, and (iii) this Agreement constitutes the
valid and binding agreement of Cardinal enforceable in accordance with its terms
(except to the extent enforceability may be limited by (A) applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws from time to
time in effect which affect creditors' rights generally, (B) legal and equitable
limitations on the availability of injunctive relief, specific performance and
other equitable remedies, and (C) general principles of equity and applicable
laws or court decisions limiting the enforceability of indemnification
provisions).

     2.07.   VALIDITY OF TRANSACTIONS; ABSENCE OF REQUIRED CONSENTS OR WAIVERS.
Subject to approval of this Agreement by the shareholders of Cardinal and MFC in
the manner required by law and receipt of required approvals of Regulatory
Authorities (as contemplated by Paragraph 6.02), neither the execution and
delivery of this Agreement, nor the consummation of the transactions described
herein, nor compliance by Cardinal with any of its obligations or agreements
contained herein, nor any action or inaction by Cardinal required herein, will:
(i) conflict with or result in a breach of the terms and conditions of, or
constitute a default or violation under any provision of, the Articles of
Incorporation or Bylaws of

                                        6

<PAGE>

                                                                     EXHIBIT 2.1

Cardinal, or any material contract, agreement, lease, mortgage, note, bond,
indenture, license, obligation or understanding (oral or written) to which
Cardinal or Floyd is bound or by which either of them or its business, capital
stock or any of its properties or assets may be affected; (ii) result in the
creation or imposition of any material lien, claim, interest, charge,
restriction or encumbrance upon any of the properties or assets of Cardinal or
Floyd; (iii) violate any applicable federal or state statute, law, rule or
regulation, or any judgment, order, writ, injunction or decree of any court,
administrative or regulatory agency or governmental body, which violation will
or may have a Cardinal Material Effect, or a material adverse effect on
Cardinal's ability to consummate the transactions described herein; or (iv)
result in the acceleration of any material obligation or indebtedness of
Cardinal or Floyd.

             No consents, approvals or waivers are required to be obtained from
any person or entity in connection with Cardinal'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 Cardinal's and MFC's shareholders and of Regulatory Authorities (as
contemplated by Paragraph 6.02).

     2.08.   CARDINAL BOOKS AND RECORDS. Cardinal's and Floyd's respective books
of account and business records have been maintained in all material respects in
compliance with all applicable legal and accounting requirements, and such books
and records are complete and reflect accurately in all material respects their
respective items of income and expense and all of their respective assets,
liabilities and stockholders' equity. The minute books of Cardinal and Floyd are
complete and accurately reflect in all material respects all corporate actions
which their respective shareholders and boards 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.

     2.09.   CARDINAL REPORTS. To the "Best Knowledge" (as defined in Paragraph
10.14) of Cardinal, since December 31, 1996, Cardinal and Floyd each has filed
all reports, registrations and statements, together with any amendments required
to be made with respect thereto, that it or they were required to file with (i)
the Virginia Bureau of Financial Institutions or the Virginia Commissioner of
Financial Institutions (collectively, the "Virginia Commissioner"), (ii) the
Federal Deposit Insurance Corporation (the "FDIC"), (iii) the Federal Reserve
Board or any Federal Reserve Bank (the "FRB"), (iv) the SEC, or (v) any other
Regulatory Authorities. Each such report, registration and statement filed by
Cardinal or Floyd with the Virginia Commissioner, the FDIC, the FRB, the SEC, or
any other Regulatory Authorities are collectively referred to in this Agreement
as the "Cardinal Reports." To the Best Knowledge of Cardinal, the Cardinal
Reports complied in all material respects with all the statutes, rules and
regulations enforced or promulgated by the Regulatory Authorities with which
they were filed and did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. Neither Cardinal nor Floyd has been notified that any such
Cardinal Reports were deficient in any material respect as to form or content.

     2.10.   CARDINAL FINANCIAL STATEMENTS. Cardinal has Previously Disclosed to
MFC a copy of its audited consolidated statements of financial condition as of
December 31, 2000 and 2001, and its audited consolidated statements of income,
stockholders' equity and cash flows for the three years ended December 31, 1999,
2000 and 2001, together with notes thereto (collectively, the "Cardinal Audited
Financial Statements"), and its unaudited consolidated statements of financial
condition as of March 31, 2002, and unaudited consolidated statements of income
and cash flows for the three-months ended March 31, 2001 and 2002, together with
notes thereto (collectively, the "Cardinal Interim Financial Statements").
Following the date of this Agreement, Cardinal promptly will deliver to MFC all
other annual or interim financial statements prepared by or for Cardinal. The
Cardinal Audited Financial Statements and the Cardinal Interim Financial
Statements (i) were prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
indicated, (ii) are in accordance with Cardinal's books and records, and (iii)
present fairly Cardinal's consolidated

                                        7

<PAGE>

                                                                     EXHIBIT 2.1

financial condition, assets and liabilities, results of operations, changes in
stockholders' equity and changes in cash flows as of the dates indicated and for
the periods specified therein. The Cardinal Audited Financial Statements have
been audited by Larrowe & Company, PLC, which serves as Cardinal's independent
certified public accountants.

     2.11.   CARDINAL TAX RETURNS AND OTHER TAX MATTERS. (i) Cardinal and Floyd
each has timely filed or caused to be filed all federal, state and local income
tax returns and reports which are required by law to have been filed, and, to
the Best Knowledge of Cardinal, all such returns and reports were true, correct
and complete in all material respects and contained all material information
required to be contained therein; (ii) all federal, state and local income taxes
reflected in such returns, and all profits, franchise, sales, use, occupation,
property, excise, withholding, employment and other taxes (including interest
and penalties), charges and assessments, which have become due from or been
assessed or levied against Cardinal, Floyd or their respective properties have
been fully paid or, if not yet due, a reserve or accrual, which is adequate in
all material respects for the payment of all such taxes to be paid and the
obligation for such unpaid taxes, is reflected on the Cardinal Interim Financial
Statements; (iii) the income, profits, franchise, sales, use, occupation,
property, excise, withholding, employment and other tax returns and reports of
Cardinal and Floyd have not been subjected to audit by the Internal Revenue
Service (the "IRS") or the Virginia Department of Taxation in the last ten years
and neither Cardinal nor Floyd has received any indication of the pendency of
any audit or examination in connection with any such tax return or report and,
to the Best Knowledge of Cardinal, no such return or report is subject to
adjustment; and (iv) neither Cardinal nor Floyd has executed any waiver or
extended 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.

     2.12.   ABSENCE OF CHANGES OR CERTAIN OTHER EVENTS.

             (a)   Since December 31, 2001, Cardinal and Floyd each has
conducted its business only in the ordinary course, and there has been no
material adverse change in or affecting the financial condition of Cardinal and
Floyd considered as one entity or their results of operations, prospects,
business, assets, loan portfolio, investments, properties or operations (a
"Cardinal Material 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 Cardinal Material
Change.

             (b)   Since December 31, 2001, and except as described in Paragraph
2.13 below, Cardinal and Floyd, considered as one entity, have 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 Cardinal and Floyd at such times
and in such amounts as is consistent with their past practices and their salary
administration and review policies and procedures in effect prior to December
31, 2001), suffered any material loss, destruction or damage to any of their
properties or assets, or made a material acquisition or disposition of any
assets or entered into any material contract or lease.

     2.13.   ABSENCE OF UNDISCLOSED LIABILITIES. Neither Cardinal nor Floyd has
any material liabilities or obligations, whether known or unknown, matured or
unmatured, accrued, absolute, contingent or otherwise, whether due or to become
due (including without limitation tax liabilities or unfunded liabilities under
employee benefit plans or arrangements), other than (i) those reflected in the
Cardinal Audited Financial Statements, (ii) new deposit accounts or increases in
existing deposit accounts in the ordinary course of Floyd's business since
December 31, 2001, or (iii) unfunded commitments to make, issue or extend loans,
lines of credit, letters of credit or other extensions of credit ("Loans")
entered into in the ordinary course of Floyd's business and in accordance with
its normal lending policies and practices.

                                        8

<PAGE>

                                                                     EXHIBIT 2.1

     2.14.   COMPLIANCE WITH EXISTING OBLIGATIONS. Cardinal and Floyd each has
performed in all material respects all obligations required to be performed by
it under, and it is not in default in any material respect under, or in
violation in any material respect of, the terms and conditions of its Articles
of Incorporation, Bylaws and/or any material contract, agreement, lease,
mortgage, note, bond, indenture, license, obligation, understanding or other
undertaking (whether oral or written) to which it is bound or by which its
business, operations, capital stock, properties or assets may be affected and
which default or violation would have a Cardinal Material Effect.

     2.15.   LITIGATION AND COMPLIANCE WITH LAW.

             (a)   There are no actions, suits, arbitrations, controversies or
other proceedings or investigations (or, to the Best Knowledge of Cardinal, any
facts or circumstances which reasonably could be expected to 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 Cardinal,
are threatened, contemplated or probable of assertion, against Cardinal or Floyd
or any of their respective properties or assets.

             (b)   Cardinal and Floyd each 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
Cardinal, threatened or probable of assertion, to suspend, cancel, revoke or
limit any Permit, except where the same would not have a Cardinal Material
Effect.

             (c)   Neither Cardinal nor Floyd is 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 Virginia Commissioner, the FDIC or the FRB)
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 either
Cardinal or Floyd which limit, restrict, regulate, enjoin or prohibit in any
material respect any present or past business or practice of Cardinal or Floyd;
and neither Cardinal nor Floyd has 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 Cardinal, neither Cardinal nor Floyd
is in violation or default in any material respect under, and each of them has
complied in all material respects with, all laws, statutes, ordinances, rules,
regulations, orders, writs, injunctions or decrees of any Regulatory Authority
(including without limitation all provisions of Virginia law relating to usury,
the Consumer Credit Protection Act, and all other federal and state laws and
regulations applicable to extensions of credit by Floyd), except where their
failure to comply would not have a Cardinal Material Effect. To the Best
Knowledge of Cardinal, 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).

     2.16.   REAL PROPERTIES. With respect to all real property owned by
Cardinal or Floyd (including Floyd's banking facilities and all other real
estate or foreclosed properties, including improvements thereon (collectively,
the "Real Property"), Cardinal or Floyd has good and marketable fee simple title
to that Real Property and owns the same free and clear of all mortgages, liens,
leases, encumbrances, title defects and exceptions to title other than (i) the
lien of current taxes not yet due and payable, and (ii) such imperfections of
title and restrictions, covenants and easements (including utility easements)
which do not

                                        9

<PAGE>

                                                                     EXHIBIT 2.1

materially affect the value or marketability of that Real Property or materially
detract from, interfere with or restrict the present or future use of that Real
Property for the purposes for which it currently is used by Cardinal or Floyd,
as the case may be.

             To the Best Knowledge of Cardinal, 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 Floyd's banking or other offices are situated, or which
are used by Floyd 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 Floyd 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 Floyd's use (or will interfere with Floyd's or MFC's use after
the Merger) of that Real Property or those improvements and fixtures as a
banking office, or, to the Best Knowledge of Cardinal, that materially adversely
affects the economic value of that Real Property or those improvements and
fixtures.

             Floyd leases space for its banking offices located in Willis and
Christianburg, Virginia, pursuant to written lease agreements (the "Real
Property Leases"). Otherwise, neither Cardinal nor Floyd is a party (whether as
lessee or lessor) to any lease or rental agreement with respect to any real
property.

             Floyd is the sole tenant, and the sole owner of the tenant's
interest, under each of the Real Property Lease, and it has not previously
assigned either of the Real Property Leases or any interest therein, or sublet
the premises subject to either Real Property Lease, in whole or in part, to any
other person or entity. Each of the Real Property is valid and enforceable in
accordance with its terms (subject to general principles of equity, the
enforceability of indemnity provisions and applicable bankruptcy, inso9lvency,
reorganization, moratorium or similar laws) and is in full force and effect, and
neither Real Property Lease has been amended or modified. Floyd is not in
default under any of the terms, covenants or conditions of either of the Real
Property Leases and that there exists no circumstance or condition which, either
now or by the passage of time, would constitute a default by Floyd under the
terms of either Real Property Lease or that would entitle the lessor of the
property thereunder to terminate either Real Property Lease or to abridge
Floyd's rights thereunder.

     2.17.   LOANS, ACCOUNTS, NOTES AND OTHER RECEIVABLES.

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

             (b)   All records of Cardinal and Floyd 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 Cardinal's or Floyd'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
Cardinal's and Floyd's records of such Loan (except for immaterial defects in
perfection or priority that, individually or in the aggregate, will not have a
Cardinal Material Effect).

                                       10

<PAGE>

                                                                     EXHIBIT 2.1

             (c)   To the Best Knowledge of Cardinal, each Loan reflected as an
asset on Cardinal's or Floyd's books, and each guaranty therefor, is the legal,
valid and binding obligation of the obligor or guarantor thereon (subject to the
application of general principles of equity and to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws), and no defense, offset
or counterclaim has been asserted with respect to any such Loan or guaranty.

             (d)   Cardinal has Previously Disclosed to MFC a written listing of
(i) each Loan or other asset of Cardinal or Floyd which, as of June 10, 2002,
was classified by any Regulatory Authority as "Loss," "Doubtful," "Substandard"
or "Special Mention" (or otherwise by words of similar import), and which
Cardinal or Floyd otherwise 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 of Cardinal or Floyd
which, as of June 10, 2002, 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, to the Best Knowledge of Cardinal,
the subject of a proceeding in bankruptcy, or on which any such obligor has
expressly indicated any inability or intention not to repay such Loan in
accordance with its terms, and that do not appear in the Loans Previously
Disclosed pursuant to (i) or (ii) above.

             (e)   To the Best Knowledge of Cardinal, each of the Loans of
Cardinal or Floyd (with the exception of those Loans Previously Disclosed to MFC
as described in Paragraph 2.17(d) above) is collectible in the ordinary course
of Cardinal's and Floyd's business in an amount which is not less than the
amount at which it is carried on Floyd's books and records, except for such
deficiencies which, individually or in the aggregate, would not result in a
Cardinal Material Event.

             (f)   Cardinal's and Floyd's reserve for possible Loan losses (the
"Loan Loss Reserve") has been established in conformity with GAAP, sound banking
practices and, to the Best Knowledge of Cardinal, all applicable requirements,
rules and policies of the Virginia Commissioner and the FDIC and, in the best
judgment of management and the Boards of Directors of Cardinal and Floyd, is
reasonable in view of the size and character of Cardinal's and Floyd'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
Cardinal's and Floyd's Loan portfolios and other real estate owned.

     2.18.   SECURITIES PORTFOLIO AND INVESTMENTS. All securities owned, of
record or beneficially, by Cardinal or Floyd as of the date hereof are held free
and clear of all mortgages, liens, pledges, encumbrances or any other
restriction or rights of any other person or entity, whether contractual or
statutory (other than customary pledges in the ordinary course of Cardinal's and
Floyd's business to secure public funds deposits and restrictions imposed by and
the rights of the issuers of such securities), which would materially impair the
ability of Cardinal or Floyd to dispose freely of any such security and/or
otherwise to realize the benefits of ownership thereof at any time. There are no
voting trusts or other agreements or undertakings to which either Cardinal or
Floyd is a party with respect to the voting of any such securities. With respect
to all "repurchase agreements" under which Cardinal or Floyd has "purchased"
securities under agreement to resell, Cardinal or Floyd 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 it
which is secured by such collateral.

             Since December 31, 2001, there has been no material deterioration
or adverse change in the quality, or any material decrease in the value, of
Cardinal's or Floyd's securities portfolio as a whole.

     2.19.   PERSONAL PROPERTY AND OTHER ASSETS. All banking equipment, data
processing equipment, vehicles, and other personal property used by Cardinal or
Floyd and material to the operation

                                       11

<PAGE>

                                                                     EXHIBIT 2.1

of its business are owned by them free and clear of all liens, encumbrances,
leases, title defects or exceptions to title. To the Best Knowledge of Cardinal,
all of Cardinal's and Floyd's personal property material to its business is in
good operating condition and repair, ordinary wear and tear excepted.

     2.20.   PATENTS AND TRADEMARKS. To the Best Knowledge of Cardinal, Cardinal
and Floyd each owns, possesses or has the right to use any and all patents,
licenses, trademarks, trade names, copyrights, trade secrets and proprietary and
other confidential information necessary to conduct its business as now
conducted; and, neither Cardinal nor Floyd has violated, and neither of them
currently is in conflict with, any patent, license, trademark, trade name,
copyright or proprietary right of any other person or entity, except where such
violation or conflict would not have a Cardinal Material Effect.

     2.21.   ENVIRONMENTAL MATTERS.

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

                 (i)   all federal, state and local statutes, regulations and
                       ordinances,

                 (ii)  all common law, and

                 (iii) all orders decrees, and similar provisions having the
                       force or effect of law and to which Cardinal or Floyd is
                       subject,

which, in the case of any of the above, concern or relate to pollution or
protection of the environment, standards of conduct and bases of obligations or
liability 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), or public or worker
health and safety.

                   "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)   Cardinal has Previously Disclosed to MFC, and provided MFC
with 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 Cardinal or Floyd.

             (c)   To the Best Knowledge of Cardinal, 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)   To the Best Knowledge of Cardinal, neither Cardinal nor Floyd
has 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

                                       12

<PAGE>

                                                                     EXHIBIT 2.1

obligation with respect to any particular matter or violation for which Cardinal
or Floyd is or may be responsible or liable.

             (e)   To the Best Knowledge of Cardinal, neither Cardinal nor Floyd
is 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)   To the Best Knowledge of Cardinal, no facts, events or
conditions relating to the Real Property, or the operations of Cardinal or Floyd
at any of their 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 Cardinal (it being understood by MFC
that, for purposes of this representation, management of Cardinal has not
undertaken a review of each of Floyd'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 for which Cardinal
or Floyd is or may be responsible or liable, (ii) Floyd 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.

     2.22.   ABSENCE OF BROKERAGE OR FINDERS COMMISSIONS. Except for the
engagement by Cardinal of Scott & Stringfellow, (i) all negotiations relative to
this Agreement and the transactions described herein have been carried on by
Cardinal directly (or through its legal counsel) with MFC, and no person or firm
has been retained by or has acted on behalf of, pursuant to any agreement,
arrangement or understanding with, or under the authority of Cardinal or its
Board of Directors, as a broker, finder or agent or has performed similar
functions or otherwise is or may be entitled to receive or claim a brokerage fee
or other commission in connection with or as a result of the transactions
described herein; and (ii) Cardinal has not agreed, and has no obligation, to
pay any brokerage fee or other commission, fee or other compensation to any
person or entity in connection with or as a result of the transactions described
herein.

     2.23.   MATERIAL CONTRACTS. Other than a benefit plan or employment
agreement Previously Disclosed pursuant to Paragraph 2.25, and with the
exception of Loans and deposit accounts made or accepted by Floyd in the
ordinary course of its business, neither Cardinal nor Floyd is a party to or
bound by any agreement (i) involving money or other property in an amount or
with a value in excess of $25,000, (ii) which is not to be performed in full
prior to December 31, 2002, (iii) which calls for the provision of goods or
services to Cardinal or Floyd and cannot be terminated without material penalty
upon written notice to the other party thereto, (iv) which is material to
Cardinal or Floyd and was not entered into in the ordinary course of business,
(v) which involves hedging, options or any similar trading activity, or interest
rate exchanges or swaps, (vi) which commits Cardinal or Floyd to make, issue or
extend any Loan other than commitments in the ordinary course of Floyd's
business for Loans which do not exceed an aggregate of $2,000,000 in the case of
one or more Loan commitments to any one borrower or group of related borrowers
or $10,000,000 in the aggregate for all Loan commitments to all borrowers),
(vii) which

                                       13

<PAGE>

                                                                     EXHIBIT 2.1

involves the sale of any assets of Cardinal or Floyd which are used in and
material to the operation of its business, (viii) which involves any purchase or
sale of real property in any amount, or which involves the purchase or sale of
any other assets in the amount of more than $50,000 in the case of any single
transaction or $100,000 in the case of all such transactions, (ix) which
involves the purchase, sale, issuance, redemption or transfer of any capital
stock or other securities of Cardinal or Floyd, or (x) with any director,
officer or principal shareholder of Cardinal or Floyd (including without
limitation any consulting agreement, but not including any agreements relating
to Loans or other banking services which were made in the ordinary course of
Cardinal's or Floyd's business and on substantially the same terms and
conditions as were prevailing at that time for similar agreements with unrelated
persons).

             Neither Cardinal nor Floyd is 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 by Cardinal or Floyd, 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 Cardinal Material Effect.

     2.24.   EMPLOYMENT MATTERS; EMPLOYEE RELATIONS. Cardinal and Floyd each (i)
has in all material respects paid in full to or accrued on behalf of all its
respective directors, officers and employees all wages, salaries, commissions,
bonuses, fees and other direct compensation for all labor or services performed
by them to the date of this Agreement, and all vacation pay, sick pay, severance
pay, overtime pay and other amounts for which it is obligated under applicable
law or its existing agreements, benefit plans, policies or practices, and (ii)
is in compliance with all applicable federal, state and local laws, statutes,
rules and regulations with regard to employment and employment practices, terms
and conditions, wages and hours and other compensation matters, except where its
lack of compliance would not have a Cardinal Material Effect; and no person has,
to the Best Knowledge of Cardinal, asserted that either Cardinal or Floyd is
liable in any amount for any arrearage in wages or employment taxes or for any
penalties for failure to comply with any of the foregoing.

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

             Neither Cardinal nor Floyd is 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 Cardinal or Floyd and any of
their employees, or any pending or threatened proceeding in which it is asserted
that Cardinal or Floyd has committed an unfair labor practice; and to the Best
Knowledge of Cardinal, 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.

     2.25.   EMPLOYMENT AGREEMENTS; EMPLOYEE BENEFIT PLANS.

             (a)   Cardinal 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, all disability and death benefit plans; and all other
employee benefit plans, contracts, or arrangements maintained or contributed to
by Cardinal or Floyd for the benefit of any of their respective current or
former employees or directors or any of their beneficiaries (collectively, the
"Plans"). 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,

                                       14

<PAGE>

                                                                     EXHIBIT 2.1

and neither Cardinal nor Floyd is 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 Cardinal or Floyd) 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 Cardinal or Floyd, 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 Cardinal or Floyd. Neither
Cardinal nor Floyd has engaged in a transaction with respect to any Plan that
could subject either of them to a tax or penalty imposed by either Section 4975
of the Code or Section 502(i) of ERISA.

             (c)   All retirement Plans maintained by either Cardinal or Floyd
which are intended to be plans qualified under Section 401(a) of the Code (a
"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 each such qualification and exemption, including determination
letters covering the current terms and provisions of the Retirement Plans. The
Retirement Plans have been, or not later than the date such amendments are
required by law to have been made will have been, amended to comply with the
Uruguay Round Agreements Act, the Small Business Job Protection Act of 1996, the
Uniformed Services Employment and Re-Employment Rights Act of 1994, the Taxpayer
Relief Act of 1997, and the Internal Revenue Service Restructuring and Reform
Act of 1998 (collectively, "GUST"). 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 provisions, 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 the
Retirement Plans, 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 Cardinal or Floyd, or any
trustee or other fiduciary thereunder, and any governmental agency, any current
or former employee of Cardinal or Floyd 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.

                                       15

<PAGE>

                                                                     EXHIBIT 2.1

             (d)   No liability under subtitle C or D of Title IV of ERISA has
been or is expected to be incurred by Cardinal or Floyd 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 Cardinal or
Floyd. Neither Cardinal nor Floyd presently contributes to a "Multiemployer
Plan" and neither of them has contributed to such a plan since December 31,
1996. 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 maintained by Cardinal or Floyd) have
been timely made. Neither the Retirement Plans nor any other "pension plan"
maintained by Cardinal or Floyd have an "accumulated funding deficiency"
(whether or not waived) within the meaning of Section 412 of the Code or Section
302 of ERISA. Neither Cardinal nor Floyd has provided, and neither of them is
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 Cardinal or Floyd 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 Cardinal or Floyd 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.

     2.26.   INSURANCE. Cardinal maintains blanket bonds and liability
insurance, property and casualty, workers' compensation and employer liability,
life, or other insurance policies (the "Policies") which provide coverage in
such amounts and against such liabilities, casualties, losses or risks as
Cardinal and Floyd are required by applicable law or regulation to maintain;
and, in the reasonable opinion of management of Cardinal, the insurance coverage
provided under the Policies is reasonable and adequate in all respects for
Cardinal and Floyd. Each of the Policies is in full force and effect and is
valid and enforceable in accordance with its terms (subject to general
principles of equity and applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws), and is underwritten by an insurer qualified to
issue those policies in Virginia; and Cardinal and Floyd each has complied in
all material respects with requirements (including the giving of required
notices) under each such Policy in order to preserve all rights thereunder with
respect to all matters. Neither Cardinal nor Floyd is in default under the
provisions of, has received notice of cancellation or nonrenewal of or any
premium increase on, or has failed to pay any premium on, any Policy (where, in
the case of failure to pay any premium, such failure gives rise to a current
right of cancellation), and, to the Best Knowledge of Cardinal, there has not
been any material inaccuracy in any application for any Policy which would give
the insurer a valid defense against paying a claim under that Policy. There are
no pending claims with respect to any Policy, and, to the Best Knowledge of
Cardinal, there currently are no conditions, and there has occurred no event,
that is reasonably likely to form the basis for any such claim.

     2.27.   INSURANCE OF DEPOSITS. All deposits of Floyd are insured by the
Bank Insurance Fund of the FDIC to the maximum extent permitted by law, all
deposit insurance premiums due from Floyd to the FDIC have been paid in full in
a timely fashion, and to the Best Knowledge of Cardinal, no proceedings have
been commenced or are contemplated by the FDIC or otherwise to terminate such
insurance.

                                       16

<PAGE>

                                                                     EXHIBIT 2.1

     2.28.   OBSTACLES TO REGULATORY APPROVAL. To the Best Knowledge of
Cardinal, there exists no fact or condition (including without limitation
Floyd's record of compliance with the Community Reinvestment Act) that may
reasonably be expected to prevent or materially impede or delay MFC or Cardinal
from obtaining the regulatory approvals required in order to consummate the
transactions described in this Agreement; and if any such fact or condition
becomes known to Cardinal, Cardinal shall promptly (and in any event within
three days after obtaining such Knowledge) give notice of such fact or condition
to MFC in the manner provided herein.

     2.29.   DISCLOSURE. To the Best Knowledge of Cardinal, no written
statement, certificate, schedule, list or other written information prepared by
or on behalf of Cardinal and furnished to MFC or MountainBank in connection with
this Agreement and the transactions described herein, when considered as a
whole, contains or has contained any untrue statement of a material fact or
omits or has omitted to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.

                                   ARTICLE III
                      REPRESENTATIONS AND WARRANTIES OF MFC

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

     As defined and used in this Agreement, the term "MFC Material Change" or
"MFC Material Effect" shall not include any change or effect resulting directly
or indirectly from: (i) the transactions contemplated by this Agreement or their
announcement, (ii) general economic, industry or financial conditions or events
that affect the banking industry as a whole, (iii) the impact of laws, rules,
regulations and court decisions (other than court decisions related to
litigation in which MFC or MountainBank is a party, or (iv) acts of war or
terrorism.

     3.01.   ORGANIZATION; STANDING; POWER. MFC and MountainBank each (i) is
duly organized and incorporated, validly existing and in good standing under the
laws of North Carolina, (ii) has all requisite power and authority (corporate
and other) to own its respective properties and conduct its respective business
as it now is being conducted, and (iii) is duly qualified to do business and is
in good standing in each jurisdiction in which the character of the properties
owned or leased by it therein, or in which the transaction of its respective
business, makes such qualification necessary, except where failure so to qualify
would not have a material adverse effect on MFC and MountainBank considered as
one enterprise (an "MFC Material Effect").

     3.02.   CAPITAL STOCK. MFC's authorized capital stock consists of
10,000,000 shares of MFC Common Stock, of which 3,112,022 shares are issued and
outstanding, and 3,000,000 shares of no par value preferred stock, of which
450,000 shares have been designated as a separate series ("MFC Series A
Preferred Stock") and an aggregate of 419,243 of those shares of MFC Series A
Preferred Stock are issued and outstanding. The outstanding shares of MFC Common
Stock and MFC Series A Preferred Stock constitute MFC's only outstanding equity
securities. The shares of MFC Common Stock and MFC Series B Preferred Stock into
which shares of Cardinal Stock are converted at the Effective Time pursuant to
this Agreement will, at the time of issuance, be duly authorized, validly
issued, fully paid and nonassessable.

     3.03.   AUTHORIZATION AND VALIDITY OF AGREEMENT. This Agreement has been
duly and validly approved by MFC's Board of Directors. Subject only to receipt
of required approvals of Regulatory Authorities (as contemplated by Paragraph
6.02) and the approval of MFC's shareholders (as contemplated by Paragraph
5.01), (i) MFC has the corporate power and authority to execute and deliver this
Agreement and to perform its obligations and agreements and carry out the
transactions described herein, (ii) all corporate proceedings required to be
taken to authorize MFC to enter into this Agreement and to perform

                                       17

<PAGE>

                                                                     EXHIBIT 2.1

its obligations and agreements and carry out the transactions described herein
have been duly and properly taken, and (iii) this Agreement constitutes the
valid and binding agreement of MFC enforceable in accordance with its terms
(except to the extent enforceability may be limited by (A) applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws from time to
time in effect which affect creditors' rights generally, (B) legal and equitable
limitations on the availability of injunctive relief, specific performance and
other equitable remedies, and (C) general principles of equity and applicable
laws or court decisions limiting the enforceability of indemnification
provisions).

     3.04.   VALIDITY OF TRANSACTIONS; ABSENCE OF REQUIRED CONSENTS OR WAIVERS.
Subject to receipt of required approvals of Regulatory Authorities (as
contemplated by Paragraph 6.02), neither the execution and delivery of this
Agreement, nor the consummation of the transactions described herein, nor
compliance by MFC with any of its obligations or agreements contained herein,
will: (i) conflict with or result in a breach of the terms and conditions of, or
constitute a default or violation under any provision of, MFC's Articles of
Incorporation or Bylaws, or, except where the same would not have a material
adverse effect on MFC and MountainBank considered as one entity or on their
financial condition, results of operations, prospects, businesses, assets, Loan
portfolio, investments, properties or operations (an "MFC Material Effect"), any
material contract, agreement, lease, mortgage, note, bond, indenture, license,
or obligation or understanding (oral or written) to which MFC or MountainBank is
bound or by which either of them, or their respective businesses, capital stock
or any of their respective properties or assets may be affected; (ii) result in
the creation or imposition of any material lien, claim, interest, charge,
restriction or encumbrance upon any of MFC's or MountainBank's properties or
assets, except where the same would not have an MFC Material Effect; (iii)
violate any applicable federal or state statute, law, rule or regulation, or any
order, writ, injunction or decree of any court, administrative or regulatory
agency or governmental body, which violation will or may have an MFC Material
Effect or a material adverse effect on MFC's ability to consummate the
transactions described herein; or (iv) result in the acceleration of any
material obligation or indebtedness of MFC or MountainBank.

             No consents, approvals or waivers are required to be obtained from
any person or entity in connection with MFC'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 and the approval
of MFC's shareholders described in Paragraph 5.01.

     3.05.   CONVERTIBLE SECURITIES, OPTIONS, ETC. With the exception of its
outstanding shares of Series A Preferred Stock which is convertible into shares
of MFC Common Stock, and outstanding options to purchase shares of MFC Common
Stock granted pursuant to MFC's employee and director stock option plans, MFC
has no outstanding (i) securities or other obligations (including debentures or
other debt instruments) which are convertible into shares of MFC Common Stock or
any other securities of MFC, (ii) options, warrants, rights, calls or other
commitments of any nature which entitle any person to receive or acquire any
shares of MFC Common Stock or any other securities of MFC, or (iii) plan,
agreement or other arrangement pursuant to which shares of MFC Common Stock or
any other securities of MFC, or options, warrants, rights, calls or other
commitments of any nature pertaining to any securities of MFC, have been or may
be issued.

     3.06.   MFC BOOKS AND RECORDS. MFC's and MountainBank's respective books of
account and business records have been maintained in all material respects in
compliance with all applicable legal and accounting requirements, and such books
and records are complete and reflect accurately in all material respects their
respective items of income and expense and all of their respective assets,
liabilities and stockholders' equity. The minute books of MFC and MountainBank
are complete and accurately reflect in all material respects all corporate
actions which their respective shareholders and boards 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 Cardinal
and its representatives.

                                       18

<PAGE>

                                                                     EXHIBIT 2.1

     3.07.   MFC REPORTS. To the "Best Knowledge" (as defined in Paragraph
10.14) of MFC, since December 31, 1996, MFC and MountainBank each has filed all
reports, registrations and statements, together with any amendments required to
be made with respect thereto, that it or they were required to file with (i) the
North Carolina Commissioner of Banks (the "N.C. Commissioner"), (ii) the FDIC,
(iii) the FRB, (iv) the SEC, or (v) any other Regulatory Authorities. Each such
report, registration and statement filed by MFC or MountainBank with the N.C.
Commissioner, the FDIC, the FRB, the SEC, or any other Regulatory Authorities
are collectively referred to in this Agreement as the "MFC Reports." To the Best
Knowledge of MFC, the MFC Reports complied in all material respects with all the
statutes, rules and regulations enforced or promulgated by the Regulatory
Authorities with which they were filed and did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Neither MFC nor
MountainBank has been notified that any such MFC Reports were deficient in any
material respect as to form or content.

     3.08.   MFC FINANCIAL STATEMENTS. MFC has Previously Disclosed to Cardinal
a copy of its audited consolidated statements of financial condition as of
December 31, 2000 and 2001, and its audited consolidated statements of income,
stockholders' equity and cash flows for the three years ended December 31, 1999,
2000 and 2001, together with notes thereto (collectively, the "MFC Audited
Financial Statements"), and its unaudited consolidated statements of financial
condition as of March 31, 2002, and unaudited consolidated statements of income
and cash flows for the three-months ended March 31, 2001 and 2002, together with
notes thereto (collectively, the "MFC Interim Financial Statements"). The MFC
Audited Financial Statements and the MFC Interim Financial Statements (i) were
prepared in accordance with GAAP applied on a consistent basis throughout the
periods indicated, (ii) are in accordance with MFC's books and records, and
(iii) present fairly MFC's consolidated financial condition, assets and
liabilities, results of operations, changes in stockholders' equity and changes
in cash flows as of the dates indicated and for the periods specified therein.
The MFC Audited Financial Statements have been audited by Larrowe & Company PLLC
which serves as MFC's independent certified public accountants.

     3.09.   MFC TAX RETURNS AND OTHER TAX MATTERS. (i) MFC and MountainBank
each has timely filed or caused to be filed all federal, state and local income
tax returns and reports which are required by law to have been filed, and, to
the Best Knowledge of MFC, all such returns and reports were true, correct and
complete in all material respects and contained all material information
required to be contained therein; (ii) all federal, state and local income taxes
reflected in such returns, and all profits, franchise, sales, use, occupation,
property, excise, withholding, employment and other taxes (including interest
and penalties), charges and assessments, which have become due from or been
assessed or levied against MFC, MountainBank or their respective properties have
been fully paid or, if not yet due, a reserve or accrual, which is adequate in
all material respects for the payment of all such taxes to be paid and the
obligation for such unpaid taxes, is reflected on the MFC Interim Financial
Statements; (iii) the income, profits, franchise, sales, use, occupation,
property, excise, withholding, employment and other tax returns and reports of
MFC and MountainBank have not been subjected to audit by the Internal Revenue
Service (the "IRS") or the North Carolina Department of Revenue in the last ten
years and neither MFC nor MountainBank has received any indication of the
pendency of any audit or examination in connection with any such tax return or
report and, to the Best Knowledge of MFC, no such return or report is subject to
adjustment; and (iv) neither MFC nor MountainBank has executed any waiver or
extended 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.

     3.10.   ABSENCE OF MATERIAL ADVERSE CHANGES OR CERTAIN OTHER EVENTS. Since
December 31, 2001, there has been no material adverse change in MFC's
consolidated assets, liabilities or operations, and there currently exists no
condition or circumstance in MFC's consolidated assets, liabilities or
operations which, with the lapse of time or otherwise, may or could cause,
create or result in a material adverse

                                       19

<PAGE>

                                                                     EXHIBIT 2.1

change in or affecting the consolidated financial condition of MFC or its
consolidated results of operations, prospects, business, assets, Loan portfolio,
investments, properties or operations (an "MFC Material Change").

     3.11.   ABSENCE OF UNDISCLOSED LIABILITIES. Neither MFC nor MountainBank
has any material liabilities or obligations, whether known or unknown, matured
or unmatured, accrued, absolute, contingent or otherwise, whether due or to
become due (including without limitation tax liabilities or unfunded liabilities
under employee benefit plans or arrangements), other than (i) those reflected in
the MFC Audited Financial Statements, (ii) increases in deposit accounts in the
ordinary course of MountainBank's business since December 31, 2001, or (iii)
unfunded commitments to make, issue or extend loans, lines of credit, letters of
credit or other extensions of credit entered into in the ordinary course of
MountainBank's business and in accordance with its normal lending policies and
practices.

     3.12.   LITIGATION AND COMPLIANCE WITH LAW.

             (a)   There are no actions, suits, arbitrations, controversies or
other proceedings or investigations (or, to the Best Knowledge of MFC, 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 MFC, threatened, contemplated
or probable of assertion, against MFC or MountainBank or any of their respective
properties, assets which, if determined adversely, could have an MFC Material
Effect or a material adverse effect on MFC's ability to consummate the Merger.

             (b)   MFC and MountainBank each 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
MFC, threatened or probable of assertion, to suspend, cancel, revoke or limit
any Permit, except where the same would not have an MFC Material Effect.

             (c)   Neither MFC nor MountainBank is 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 North Carolina Commissioner of Banks, the FDIC
or the FRB) 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
either MFC or MountainBank which limit, restrict, regulate, enjoin or prohibit
in any material respect any present or past business or practice of MFC or
MountainBank; and neither MFC or MountainBank has 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 MFC, neither MFC nor MountainBank is
in violation or default in any material respect under, and each of them has
complied in all material respects with, all laws, statutes, ordinances, rules,
regulations, orders, writs, injunctions or decrees of any Regulatory Authority
(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 MountainBank), except
where their failure to comply would not have an MFC Material Effect. To the
Best Knowledge of MFC, 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).

                                       20

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                                                                     EXHIBIT 2.1

     3.13.   RESERVE FOR LOAN LOSSES. MFC's and MountainBank's reserve for
possible Loan losses (the "Loan Loss Reserve") has been established in
conformity with GAAP, sound banking practices and, to the Best Knowledge of MFC,
all applicable requirements, rules and policies of the North Carolina
Commissioner of Banks and the FDIC and, in the best judgment of management and
the Boards of Directors of MFC, is reasonable in view of the size and character
of MountainBank'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 MountainBank's Loan portfolios and other real estate owned.

     3.14.   INSURANCE OF DEPOSITS. All deposits of MountainBank are insured by
the Bank Insurance Fund of the FDIC to the maximum extent permitted by law, all
deposit insurance premiums due from MountainBank to the FDIC have been paid in
full in a timely fashion, and to the Best Knowledge of MFC, no proceedings have
been commenced or are contemplated by the FDIC or otherwise to terminate such
insurance.

     3.15.   OBSTACLES TO REGULATORY APPROVAL. To the Best Knowledge of MFC, no
fact or condition (including without limitation MountainBank's record of
compliance with the Community Reinvestment Act) exists that may reasonably be
expected to prevent or materially impede or delay MFC or Cardinal from obtaining
the regulatory approvals required in order to consummate the transactions
described in this Agreement; and, if any such fact or condition becomes known to
the executive officers of MFC, MFC promptly (and in any event within three days
after obtaining such Knowledge) shall communicate such fact or condition to the
Chairman, President and Chief Executive Officer of Cardinal.

     3.16.   DISCLOSURE. To the Best Knowledge of MFC, no written statement,
certificate, schedule, list or written information furnished by or on behalf of
MFC to Cardinal in connection with this Agreement, when considered as a whole,
contains or will contain any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements herein or
therein, in light of the circumstances under which they were made, not
misleading.

                                   ARTICLE IV
                              COVENANTS OF CARDINAL

     4.01.   AFFIRMATIVE COVENANTS OF CARDINAL. Cardinal hereby covenants and
agrees as follows with MFC:

             (a)   Cardinal Shareholders' Meeting. Cardinal agrees to cause a
meeting of its shareholders (the "Cardinal Shareholders' Meeting") to be duly
called and held as soon as practicable after the date of this Agreement for the
purpose of voting by Cardinal's shareholders on the approval of the Merger and
the ratification and adoption of this Agreement. In connection with the call and
conduct of, and all other matters relating to, the Cardinal Shareholders'
Meeting (including the solicitation of appointments of proxies), Cardinal will
comply in all material respects with all provisions of applicable law and
regulations and with its Articles of Incorporation and Bylaws.

             Cardinal will solicit appointments of proxies from its shareholders
for use at the Cardinal 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, Cardinal'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 Cardinal or to its
shareholders, and provided that MFC is then in compliance with its obligations
under this Agreement, Cardinal covenants that its directors, individually and
collectively as Cardinal's Board of Directors, will recommend

                                       21

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                                                                     EXHIBIT 2.1

to and actively encourage Cardinal's shareholders to vote their shares of
Cardinal Stock at the Cardinal Shareholders' Meeting in favor of ratification
and approval of this Agreement and the Merger, and the Proxy Statement
distributed to Cardinal's shareholders in connection with the Cardinal
Shareholders' Meeting will so indicate and state that Cardinal's Board of
Directors considers the Merger to be advisable and in the best interests of
Cardinal and its shareholders.

             (b)   Affiliates Agreements. With respect to shareholders of
Cardinal whose shares of MFC Common Stock and MFC Series B Preferred Stock to be
received in connection with the Merger are deemed by MFC to be subject to the
transfer restrictions under the Securities Act of 1933 (the "1933 Act) described
in Paragraph 6.10(a) below, Cardinal will use its reasonable best efforts to
cause each such person to execute and deliver to MFC prior to the Effective Time
a written agreement (an "Affiliates Agreement") relating to those transfer
restrictions. Each Affiliates Agreement shall be in form and content reasonably
satisfactory to MFC and substantially in the form attached as Exhibit C to this
Agreement.

             (c)   Conduct of Business Prior to Effective Time. Although the
parties recognize that the operation of Cardinal and Floyd until the Effective
Time is the responsibility of their respective Boards of Directors and officers,
Cardinal agrees that, between the date of this Agreement and the Effective Time,
and except as otherwise provided herein or expressly agreed to in writing by
MFC's President or Chief Financial Officer, Cardinal will carry on its business,
and will cause Floyd to carry on its business, in and only in the regular and
usual course in substantially the same manner as such business heretofore was
conducted, and, to the extent consistent with such business and within its
ability to do so, Cardinal agrees to use its best efforts, and to cause Floyd to
use its best efforts, to:

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

                 (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, to 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 the Policies described in
Paragraph 2.26; and not cancel, terminate, fail to renew, or modify any Policy,
or allow any Policy to be cancelled or terminated, unless the cancelled or
terminated Policy is replaced with a bond or policy providing coverage, or
unless the Policy as modified provides coverage, that is substantially
equivalent to the Policy that is replaced or modified; 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.

                                       22

<PAGE>

                                                                     EXHIBIT 2.1

             (d)   Periodic Financial and Other Information. Upon the request of
MFC following the date of this Agreement and from time to time until the
Effective Time, Cardinal promptly will deliver the following information to MFC
in writing within five business days following each such request by MFC:

                 (i)   a consolidated income statement and a consolidated
statement of condition;

                 (ii)  a copy of all interim consolidated financial statements;

                 (iii) a copy of each report, registration, statement, or other
communication or regulatory filing made by Cardinal or Floyd with or to any
Regulatory Authority;

                 (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; and,

                 (v)   the following information with respect to Floyd's Loans
or any commitment to make, issue or extend any Loan:

                   (A) a list of Loans that are past due as to principal or
                       interest for more than 30 days;

                   (B) a list of Loans in nonaccrual status;

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

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

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

                   (F) a list of any actual or threatened litigation by or
                       against Floyd pertaining to any Loan or credit, which
                       list shall contain a description of circumstances
                       surrounding such litigation, its present status and,
                       unless such disclosure would result in a waiver of
                       attorney-client privilege or be discoverable,
                       management's evaluation of such litigation.

                 (vi)  the following additional information:

                   (A) a listing of each new Loan in an original principal
                       amount of $250,000 or more made since the same
                       information was last provided;

                   (B) a listing of each renewal, extension or modification of
                       the terms of a Loan effected since the same information
                       was last provided;

                   (C) a listing of each commitment to extend credit in a
                       principal amount of $250,000 or more issued since the
                       same information was last provided; and

                                       23

<PAGE>

                                                                     EXHIBIT 2.1

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

             (e)   Notice of Certain Changes or Events. Following the execution
of this Agreement and up to the Effective Time, Cardinal promptly will notify
MFC in writing of and provide to it such further information as it shall request
regarding (i) any Cardinal Material Change, or of the actual or prospective
occurrence of any condition or event which, with the lapse of time or otherwise,
may or could cause, create or result in any such Cardinal Material Change, or of
(ii) the actual or, to the Best Knowledge of Cardinal, 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
Cardinal 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 Cardinal's
covenants or agreements contained herein or in the failure of any of the
conditions described in Paragraphs 7.01 or 7.03.

             (f)   Accruals for Loan Loss Reserve, Expenses and Other Accounting
Matters. Cardinal will make, or will cause Floyd to make, such appropriate
accounting entries in its books and records and take such other actions as MFC,
in its sole discretion, deems to be required by GAAP, or which MFC otherwise
deems to be necessary, appropriate or desirable in anticipation of the Merger,
including without limitation additional provisions to Floyd's Loan Loss Reserve
or accruals or the creation of reserves for employee benefit and Merger-related
expenses; provided, however, that notwithstanding any provision of this
Agreement to the contrary, and except as otherwise agreed to by Cardinal and
MFC, Cardinal shall not be required to make any such accounting entries until
immediately prior to the Closing and unless all conditions to its obligation to
consummate the Merger have been satisfied as described in Paragraph 7.02 below
(except to the extent that any such conditions are waived by Cardinal).

             (g)   Loan Charge-Offs. Cardinal will make, or will cause Floyd to
make, such appropriate accounting entries in its books and records and take such
other actions as MFC deems to be necessary, appropriate or desirable to
charge-off any Loans on Floyd's books, or any portions thereof, that MFC, in its
sole discretion, considers to be losses or that MFC otherwise believes, in good
faith, are required to be charged off pursuant to applicable banking
regulations, GAAP or otherwise, or that otherwise would be charged off by MFC
after the Effective Time in accordance with its Loan administration and
charge-off policies and procedures; provided, however, that notwithstanding any
provision of this Agreement to the contrary, and except as otherwise agreed to
by Cardinal and MFC, Cardinal shall not be required to make any such accounting
entries or take any such actions until immediately prior to the Closing and
unless all conditions to its obligation to consummate the Merger have been
satisfied as described in Paragraph 7.02 below (except to the extent that any
such conditions are waived by Cardinal).

             (h)   Correction of Credit Documentation and Compliance
Deficiencies. If, during the course of its continuing review of Floyd's credit
files after the date of this Agreement, MFC notifies Cardinal of situations or
circumstances relating to specific Loans or credit files that MFC has identified
and that MFC, in its discretion, considers to be deficiencies in Loan
documentation or to constitute violations of applicable banking rules or
regulations relating to Loans, Cardinal will in good faith reviw such situations
and circumstances and, to the extent it concurs, will cause Floyd to promptly
take all such actions as are necessary or that MFC specifies in order to correct
those deficiencies or violations, and each of those deficiencies or violations
shall be corrected to MFC's reasonable satisfaction prior to the Effective Time.

             (i)   Consents to Assignment of Contracts and Leases. With respect
to each contract or other agreement, including without limitation each lease or
rental agreement pertaining to real or personal property (including each of the
Real Property Leases), to which Cardinal or Floyd is a party and which MFC
reasonably believes requires the consent of any other contracting party in
connection with an actual or deemed assignment or transfer of Cardinal's or
Floyd's interest or obligation thereunder as a

                                       24

<PAGE>

                                                                     EXHIBIT 2.1

result of the Merger, Cardinal will use its reasonable best efforts to obtain
the written consent of that other party to the assignment to MFC of Cardinal's
or Floyd's rights and obligations under the agreement and, in the case of the
Real Property Leases and without regard to any requirement of the lessor's
consent, Floyd will use its reasonable best efforts to obtain from each lessor
of the property thereunder a landlord's estoppel certificate, each of which
consents or certificates shall be in a form reasonably satisfactory to MFC;
provided, however, that Cardinal's "best efforts" shall not be deemed to require
Cardinal to pay any monetary consideration or make any lease concessions
therefor except as necessary to cure any default or condition of default.

             (j)   Access. Cardinal agrees that, following the date of this
Agreement and to and including the Effective Time, it will provide MFC and its
employees, accountants, legal counsel, environmental consultants or other
consultants or other representatives and agents access to all its and Floyd's
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, environmental or other consultants, or other representatives or
agents, as MFC shall, in its sole discretion, consider to be necessary or
appropriate for the purpose of conducting ongoing reviews and investigations of
the assets and business affairs of Cardinal and Floyd, preparing for
consummation of the Merger and the consolidation of Cardinal's operations into
those of MFC, determining the accuracy of Cardinal'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 shall be performed in such a manner as
will not interfere unreasonably with Cardinal's or Floyd's normal operations or
with its relationship with its customers or employees, or result in a waiver of
attorney-client privilege, and shall be conducted in accordance with procedures
established by the parties.

                   Notwithstanding anything contained in this Paragraph 4.01(j)
to the contrary, (i) any discussions by MFC's employees or other agents or
representatives with Floyd's employees (other than discussions regarding
information about financial transactions between Floyd and its customers) shall
be in the presence of Cardinal's President or with his prior written or verbal
consent, and (ii) in the event that Cardinal's or Floyd's providing of
information to MFC pursuant to this Agreement results in a breach of any
confidentiality obligation of Cardinal or Floyd to any third party, such breach
and the consequences of such breach shall not constitute a breach or violation
of any provision of this Agreement, and MFC shall indemnify and hold harmless
Cardinal and Floyd from all damages, losses and expenses which it may incur as a
result of that breach of confidentiality.

             (k)   Pricing of Deposits and Loans. Following the date of this
Agreement, Cardinal will make, and will cause Floyd to make, pricing decisions
with respect to Floyd's deposit accounts and Loans in a manner consistent with
its past practices based on competition and prevailing market rates in its
banking markets.

             (l)   Further Action; Instruments of Transfer. Cardinal covenants
and agrees with MFC that it (i) will use its best efforts in good faith to take
or cause to be taken all action required of it under this Agreement as promptly
as practicable so as to permit the consummation of the transactions described
herein at the earliest practicable date, (ii) shall perform all acts and execute
and deliver to MFC all documents or instruments required of it herein, or as
otherwise shall be reasonably necessary or useful to or requested by MFC, in
consummating such transactions, and, (iii) will cooperate with MFC in every
reasonable way in carrying out, and will pursue diligently the expeditious
completion of, such transactions.

     4.02.   NEGATIVE COVENANTS OF CARDINAL. Cardinal hereby covenants and
agrees that, between the date hereof and the Effective Time, without the prior
written consent and authorization of MFC's President or Chief Financial Officer:

             (a)   Amendments to Articles of Incorporation or Bylaws. Neither
Cardinal nor Floyd will amend its Articles of Incorporation or Bylaws.

                                       25

<PAGE>

                                                                     EXHIBIT 2.1

             (b)   Change in Capitalization. Neither Cardinal nor Floyd will
make any change in its authorized capital stock, create any other or additional
authorized capital stock or other securities, or reclassify, combine or split
any shares of its capital stock or other securities.

             (c)   Sale or Issuance of Shares. Neither Cardinal nor Floyd will
sell or issue any additional shares of capital stock or other securities,
including any securities convertible into capital stock, or enter into any
agreement or understanding with respect to any such action.

             (d)   Purchase or Redemption of Shares. Neither Cardinal nor Floyd
will purchase, redeem, retire or otherwise acquire any shares of its capital
stock.

             (e)   Options, Warrants and Rights. Neither Cardinal nor Floyd will
grant or issue any options, warrants, calls, puts or other rights of any kind
relating to the purchase, redemption or conversion of shares of its capital
stock or any other securities (including securities convertible into capital
stock) or enter into any agreement or understanding with respect to any such
action.

             (f)   Dividends. Cardinal will not declare or pay any dividends on
its outstanding shares of capital stock or make any other distributions on or in
respect of any shares of its capital stock or otherwise to its shareholders,
other than cash dividends which Cardinal shall be permitted to declare on
Cardinal Stock during June 2002 in an amount not to exceed $.20 per share, and,
unless the transactions described herein shall previously have been consummated,
during December 2002 in an amount not to exceed $.24 per share; provided,
however, that in no event shall the aggregate amount of cash dividends declared
by Cardinal during 2002 exceed 105% of the aggregate amount of cash dividends
declared by Cardinal during 2001.

             (g)   Employment, Benefit or Retirement Agreements or Plans. Except
as required by law, and with the exception of the "SERP" and "BOLI" plans
presently being adopted by Floyd for Leon Moore, neither Cardinal nor Floyd will
(i) enter into or become bound by any oral or written contract, agreement or
commitment for the employment or compensation of any director, officer, employee
or consultant which is not immediately terminable by it without cost or other
liability on no more than 30 days' notice; (ii) adopt, enter into or become
bound by any new or additional profit-sharing, bonus, incentive, change in
control or "golden parachute," stock option, stock purchase, pension,
retirement, insurance (hospitalization, life or other), paid leave (sick leave,
vacation leave or other) or similar contract, agreement, commitment,
understanding, plan or arrangement (whether formal or informal) with respect to
or which provides for benefits for any of its current or former directors,
officers, employees or consultants; or (iii) enter into or become bound by any
contract with or commitment to any labor or trade union or association or any
collective bargaining group.

             (h)   Increase in Compensation; Bonuses. Neither Cardinal nor Floyd
will increase the compensation or benefits of, or pay any bonus or other special
or additional compensation to, any of its current or former directors, officers,
employees or consultants. However, notwithstanding anything contained herein to
the contrary, prior to the Effective Time Cardinal and Floyd may review and make
routine increases in the salaries of their employees; provided that the times
and amounts of those increases are consistent with Cardinal's and Floyd's past
practices and their salary administration and review policies and procedures in
effect on December 31, 2001.

             (i)   Accounting Practices. Neither Cardinal nor Floyd will make
any changes in its accounting methods, practices or procedures or in
depreciation or amortization policies, schedules or rates heretofore applied
(except as required by GAAP or governmental regulations).

                                       26

<PAGE>

                                                                     EXHIBIT 2.1

             (j)   Acquisitions; Additional Branch Offices. Except to the extent
that the respective Presidents of MFC and Cardinal, following consultation, both
agree, neither Cardinal nor Floyd will directly or indirectly (i) acquire
(whether by merger or otherwise), or acquire any branch or all or any
significant part of the assets of, any other person or entity, (ii) open any new
branch office, or (iii) enter into or become bound by any contract, agreement,
commitment or letter of intent relating to, or otherwise take or agree to take
any action in furtherance of, any such transaction or the opening of a new
branch office.

             (k)   Changes in Business Practices. Except as may be required by
the Virginia Commissioner, the FDIC or any other Regulatory Authority, or as
shall be required by applicable law, regulation or this Agreement, neither
Cardinal nor Floyd will (i) change in any material respect the nature of its
business or the manner in which it conducts its business, (ii) discontinue any
material portion or line of its business, or (iii) change in any material
respect its lending, investment, asset-liability management or other material
banking or business policies.

             (l)   Exclusive Merger Agreement. Unless, due to a material change
in circumstances after the date hereof, Cardinal's Board of Directors reasonably
believes in good faith, based on the written opinion of its legal counsel, that
any such action or inaction would violate the directors' duties or obligations
as such to Cardinal or to its shareholders, neither Cardinal, nor its directors,
individually or acting as Cardinal's Board of Directors, will, directly, or
indirectly through any person, (i) encourage, solicit or attempt to initiate or
procure discussions, negotiations or offers with or from any person or entity
(other than MFC) relating to a merger or other acquisition of Cardinal or Floyd
or the purchase or acquisition of any Cardinal Stock, any branch office of Floyd
or all or any significant part of Cardinal's or Floyd's assets, or provide
assistance to any person in connection with any such offer; (ii) except to the
extent required by law, disclose to any person or entity any information not
customarily disclosed to the public concerning Cardinal, Floyd or their
business, or afford to any other person or entity access to either of their
respective properties, facilities, books or records; (iii) sell or transfer any
branch office of Floyd or all or any significant part of Cardinal's or Floyd's
assets to any other person or entity; or (iv) enter into or become bound by any
contract, agreement, commitment or letter of intent relating to, or otherwise
take or agree to take any action in furtherance of, any such transaction.

             (m)   Debt; Liabilities. Neither Cardinal nor Floyd will (i) enter
into or become bound by any promissory note, Loan agreement or other agreement
or arrangement pertaining to its borrowing of money, (ii) assume, guarantee,
endorse or otherwise become responsible or liable for any obligation of any
other person or entity (except pursuant to standby letters of credit issued by
Floyd in the ordinary course of its lending business), or (iii) except in the
ordinary course of its business consistent with its past practices, incur any
other liability or obligation (absolute or contingent).

             (n)   Liens; Encumbrances. Neither Cardinal nor Floyd will
mortgage, pledge or subject any of its assets to, or permit any of its assets to
become or, except for those liens or encumbrances Previously Disclosed to MFC,
remain subject to, any lien (which in the case of any involuntary lien is in an
amount which exceeds $10,000 and remains outstanding or of record for more than
30 days) or any other encumbrance (other than in the ordinary course of business
consistent with its past practices in connection with securing public funds
deposits or repurchase agreements).

             (o)   Waiver of Rights. Neither Cardinal nor Floyd will waive,
release or compromise any rights in its favor against or with respect to any of
its current or former officers, directors, shareholders, employees, consultants,
or members of families of current or former officers, directors, shareholders,
employees or consultants, nor will either of them waive, release or compromise
any material rights against or with respect to any other person or entity except
in the ordinary course of business and in good faith for fair value in money or
money's worth.

             (p)   Other Contracts. Neither Cardinal nor Floyd will enter into
or become bound by any contracts, agreements, commitments or understandings
(other than those permitted elsewhere in this

                                       27

<PAGE>

                                                                     EXHIBIT 2.1

Paragraph 4.02) (i) for or with respect to any charitable contributions except
in the ordinary course of Cardinal's or Floyd's business and in amounts and to
organizations consistent with their past practices; (ii) with any governmental
or regulatory agency or authority (except in connection with Floyd's acceptance
of public funds deposits in the ordinary course of its deposit business); or
(iii) which is entered into other than in the ordinary course of its business.

             (q)   Deposit Liabilities. Floyd will not make any material change
in its current deposit policies and procedures or take any actions designed to
materially increase or decrease the aggregate level of its deposits as of the
date of this Agreement.

             (r)   Loan Participations. Floyd will not buy or sell any
participation or interest in any Loan except from or to MountainBank.

                                    ARTICLE V
                                COVENANTS OF MFC

     MFC hereby covenants and agrees as follows with Cardinal:

     5.01    MFC SHAREHOLDERS' MEETING. MFC agrees to cause a meeting of its
shareholders (the "MFC Shareholders' Meeting") to be duly called and held as
soon as practicable after the date of this Agreement for the purpose of voting
by MFC's shareholders on the approval of the Merger and the ratification and
adoption of this Agreement. In connection with the call and conduct of, and all
other matters relating to, the MFC Shareholders' Meeting (including the
solicitation of proxies), MFC will comply in all material respects with all
provisions of applicable law and regulations and with its Articles of
Incorporation and Bylaws.

             MFC will solicit appointments of proxies from its shareholders for
use at the MFC 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, MFC'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 MFC or to its shareholders, MFC
covenants that its Board of Directors will recommend to and actively encourage
MFC's shareholders to vote their shares of MFC Common Stock at the MFC
Shareholders Meeting in favor of ratification and approval of this Agreement and
the Merger, and the Proxy Statement distributed to MFC's shareholders in
connection with the MFC Shareholders' Meeting will so indicate and state that
MFC's Board of Directors considers the Merger to be advisable and in the best
interests of MFC and its shareholders.

     5.02    REGISTRATION STATEMENT. As soon as practicable following the date
of this Agreement, MFC will prepare and file with the Securities and Exchange
Commission (the "SEC") under the 1933 Act a registration statement on Form S-4
or other appropriate form (the "MFC Registration Statement") which covers MFC's
offer of MFC Common Stock and MFC Series B Preferred Stock to Cardinal's
shareholders in exchange for their shares of Cardinal Stock as described in this
Agreement. The "Prospectus" contained in the MFC Registration Statement will be
in the form of the "Proxy Statement/Prospectus" described in Paragraph 6.01
below. Following the filing of the MFC Registration Statement, MFC will respond
to comments of the SEC with respect thereto, file any necessary amendments
thereto, and take all such other actions as reasonably shall be necessary, to
cause the MFC Registration Statement to be declared effective by the SEC as soon
as practicable; provided, however, that MFC shall not be required to file any
such amendment, or take any such other action, which is demonstrably excessively
burdensome or which would involve excessive expense in relation to the benefits
of the Merger, or which would have an MFC Material Effect.

                                       28

<PAGE>

                                                                     EXHIBIT 2.1

     5.03.   "BLUE SKY" APPROVALS. As soon as practicable following the date of
this Agreement, MFC will take all actions, if any, required by applicable state
securities or "blue sky" laws (i) to cause the MFC Common Stock and MFC Series B
Preferred Stock to be, at the time of the issuance thereof, duly qualified or
registered (unless exempt) under such laws, or to cause all conditions to any
exemptions from qualification or registration thereof under such laws to have
been satisfied, and (ii) to obtain any and all other approvals or consents to
the issuance of the MFC Common Stock and MFC Series B Preferred Stock that are
required under applicable state law.

     5.04.   Employees; Employee Benefits.

             (a)   Employment Agreement. Provided that he remains employed as
Chairman, President and Chief Executive Officer of Cardinal and Floyd, at the
Effective Time MFC will cause Floyd to enter into an employment agreement with
R. Leon Moore in substantially the form of Exhibit D to this Agreement (the
"Employment Agreement"). MFC will guarantee Floyd's payment obligations under
the Employment Agreement.

             (b)   Employment of Other Floyd Employees. Employees of Floyd at
the Effective Time, other than R. Leon Moore, may choose to continue as
employees "at will" of Floyd after the Effective Time. However, in the case of
each such employee who elects to continue his or her employment with Floyd
following the Effective Time on that basis (a "Floyd Employee"), and
notwithstanding anything contained in this Agreement to the contrary, neither
Floyd, Cardinal nor MFC shall have any obligation to employ or provide
employment to any Floyd Employee for any particular term or length of time
following the Effective Time, and the ongoing employment of each Floyd Employee
shall be in such a position, at such location within Floyd's branch system, and
for such rate of compensation, as shall be determined in the ordinary course of
Floyd's business following the Effective Time. The employment of each Floyd
Employee after the Effective Time will be on an "at-will" basis, and nothing in
this Agreement shall be deemed to constitute an employment agreement between
Floyd and any such person or to obligate Floyd or MFC to employ any such person
for any specific period of time, in any specific position, or at any specific
salary or rate of compensation, or to restrict Floyd's right to terminate the
employment of any such person at any time following the Effective Time and for
any reason satisfactory to it.

             (c)   Employee Benefits. Except as otherwise provided in this
Agreement, and subject to the requirements of applicable law, following the
Effective Time, each Floyd Employee shall be entitled to participate in employee
benefit plans provided generally by Floyd to its employees prior to the
Effective Time (other than Floyd's defined benefit pension plan as provided for
in Paragraph 6.06 below) and, with respect to any employee benefit plan offered
by MFC generally to the employees of MountainBank and for which Floyd does not
offer a comparable plan, in those plans, all on the same basis, and subject to
the same eligibility and vesting requirements and other conditions, restrictions
and limitations, as generally are in effect and applicable to other Floyd
Employees or employees of MountainBank, as the case may be. In the case of plans
provided by Floyd prior to the Effective Time for which MFC offers a comparable
plan, following the Effective Time Floyd's and MFC's respective Presidents
shall, in good faith, confer and determine, as between Floyd's and MFC's
comparable plans, which plans are the most advantageous to Floyd Employees, and,
if MFC's plan is determined to be the most advantageous, that plan will be
offered to Floyd Employees in place of the comparable Floyd plan (subject to the
requirements of applicable law regarding the offering of employee benefits
plans). In the event that, following the Effective Time, Floyd Employees become
eligible to participate in any employee benefit plan or program of MFC,
including any such plan or program offered in the place of a plan or program
offered by Floyd prior to the Effective Time but which is discontinued after the
Effective Time, then, so long as the same shall be legally permissible, each
Floyd Employee will be given credit for his or her full years of service with
Floyd prior to the Effective Time for purposes of (i) eligibility for
participation and vesting (in the case of MFC's Section 401(k) savings plan if
that plan is adopted by Floyd), and (ii) for all purposes under other benefit
plans (including for purposes of entitlement to vacation leave) that may be
offered to Floyd Employees from time to time.

                                       29

<PAGE>

                                                                     EXHIBIT 2.1

     5.05    FURTHER ACTION; INSTRUMENTS OF TRANSFER. MFC covenants and agrees
with Cardinal that it (i) will use its best efforts in good faith to take or
cause to be taken all action required of it under this Agreement as promptly as
practicable so as to permit the consummation of the transactions described
herein at the earliest possible date, (ii) shall perform all acts and execute
and deliver to Cardinal all documents or instruments required of it herein, and
(iii) will cooperate with Cardinal in every way in carrying out, and will pursue
diligently the expeditious completion of, such transactions.

                                   ARTICLE VI
                              ADDITIONAL AGREEMENTS

     6.01.   PREPARATION AND DISTRIBUTION OF PROXY STATEMENT/PROSPECTUS.
Cardinal and MFC jointly will prepare a "Proxy Statement/Prospectus" for
distribution to their respective shareholders as Cardinal's "Proxy Statement"
described in Paragraph 4.01(a) above and MFC's "Proxy Statement" described in
Paragraph 5.01 above, and as MFC's Prospectus contained in the MFC Registration
Statement as described in Paragraph 5.02 above. The Proxy Statement/Prospectus
will be prepared, in all material respects in such form, and will contain or be
accompanied by such information regarding the Cardinal Shareholders' Meeting,
the MFC Shareholder's Meeting, this Agreement, the parties hereto, the Merger
and other transactions described herein, or otherwise, as is required by the
1933 Act and rules and regulations of the SEC thereunder to be included in MFC's
Prospectus, and as is required by the 1934 Act and rules and regulations of the
SEC thereunder (including without lmitation Regulation 14A) to be included in
Cardinal's Proxy Statement and MFC's Proxy Statement, or as otherwise shall be
agreed upon by legal counsel for MFC and Cardinal.

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

     6.02.   REGULATORY APPROVALS. Cardinal and MFC each agrees with the other
that, as soon as practicable following the date of this Agreement, it will
prepare and file, or cause to be prepared and filed, all applications required
to be filed by it under applicable law and regulations for approvals by
Regulatory Authorities of the Merger or other transactions described in this
Agreement, including without limitation any required applications for the
approval of the Virginia Commissioner and the FRB. Cardinal and MFC each agrees
(i) to use its reasonable best efforts in good faith to obtain all necessary
approvals of Regulatory Authorities required for consummation of the Merger and
other transactions described herein, and (ii) before the filing of any such
application required to be filed, to give each other party an opportunity to
review and comment on the form and content of such application. Should the
appearance of any of the officers, directors, employees or counsel of Cardinal
or MFC be requested by each other or by any Regulatory Authority at any hearing
in connection with any such application, it will use its best efforts to arrange
for such appearance.

     6.03.   INFORMATION FOR PROXY STATEMENT/PROSPECTUS AND APPLICATIONS FOR
REGULATORY APPROVALS. Cardinal and MFC each covenants with the other that (i) it
will cooperate with the other in the preparation of the Proxy
Statement/Prospectus and applications for required approvals of Regulatory
Authorities, and it will promptly respond to requests by the other and its 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

                                       30

<PAGE>

                                                                     EXHIBIT 2.1

and as of the time (A) MFC's Registration Statement is filed with and/or
declared effective by the SEC, (B) Cardinal's Proxy Statement is filed with
and/or approved by the SEC, (C) the Proxy Statement/Prospectus is mailed to
Cardinal's and MFC's shareholders, or (D) the applications for required
approvals of Regulatory Authorities are filed and/or such approvals are granted.

     6.04.   ANNOUNCEMENTS; CONFIDENTIAL INFORMATION.

             (a)   Cardinal and MFC each agrees that no persons other than the
parties to this Agreement are authorized to make any public announcements or
statements about this Agreement or any of the transactions described herein, and
that, without the prior review and consent of the other parties (which consent
shall not unreasonably be denied or delayed), it will not make any public
announcement, statement or disclosure as to the terms and conditions of this
Agreement or the transactions described herein, except for such disclosures as
may be required incidental to obtaining the required approval of any Regulatory
Authority to the consummation of the transactions described herein.

             (b)   For purposes of this Paragraph 6.04, "Confidential
Information" refers to any information (including business and financial
information) that a party to whom the information pertains (an "Informing
Party") provides or makes available, in connection with this Agreement, to a
party for whose benefit the information is provided, or to that party's
affiliates, directors, officers, employees, attorneys, advisors, consultants,
representatives and agents (a "Receiving Party"), or which a Receiving Party may
otherwise obtain from any examination of an Informing Party's documents, books,
records, files or other written materials or from any discussions with any of
the Informing Party's directors, officers, employees, attorneys, advisors,
consultants, representatives and agents, and shall be deemed to include, without
limitation, (i) all such documents, books, records, files or other written
materials themselves and all information contained therein (whether maintained
in writing, electronically, on microfiche or otherwise), (ii) all corporate
minutes, financial projections and budgets, historical and projected sales
reports, acquisition or other expansion analyses or plans, pro forma financial
data, capital spending budgets and plans, market studies and business plans,
(iii) all information relative to financial results and condition, operations,
policies and procedures, computer systems and software, shareholders, employees,
officers, and directors, and (iv) all information relative to customers and
former or prospective customers.

             (c)   Prior to the Effective Time, all Confidential Information of
an Informing Party is proprietary to the Informing Party and constitutes either
trade secrets or confidential information of the Informing Party. Without the
Informing Party's express written consent, the Receiving Party shall not remove
any Confidential Information of the Informing Party in written or other recorded
form from the Informing Party's premises.

             (d)   Prior to the Effective Time, all Confidential Information of
an Informing Party is to be held in strict confidence by a Receiving Party and,
except as otherwise provided herein, may not be disclosed by a Receiving Party
to any person or entity not a party to this Confidentiality Agreement, unless
the Receiving Party:

                 (i)   can demonstrate that the same information as the
                       Confidential Information to be disclosed already was in
                       its possession prior to such Confidential Information
                       being obtained;

                 (ii)  can demonstrate that the same information as the
                       Confidential Information to be disclosed is already
                       publicly available or, at that time, has become publicly
                       available through no fault of, or violation of this
                       Confidentiality Agreement by, the Receiving Party or any
                       other person that the Receiving Party knows, or has
                       reason to know, is obligated to protect such Confidential
                       Information; or

                 (iii) demonstrates that the same information as the
                       Confidential Information to be disclosed was developed
                       independently by or for the Receiving Party,

                                       31

<PAGE>

                                                                     EXHIBIT 2.1

                       without the use of the Confidential Information disclosed
                       to or obtained by the Receiving Party.

             (e)   Prior to the Effective Time, the Receiving Party (i) may
disclose Confidential Information of the Informing Party to the Receiving
Party's affiliates, directors, officers, employees, agents, attorneys, advisors
and consultants who are directly involved in discussions of a potential
transaction, only on a need to know basis and only if such persons or entities
are provided a copy of, and agree in writing for the benefit of the other party
to be bound by, the restrictions and obligations of this Confidentiality
Agreement; and (ii) will enforce its obligations under this Confidentiality
Agreement against all persons to whom it discloses Confidential Information and
shall be responsible and liable to the Informing Party for any disclosure of
Confidential Information by such persons or entities in violation of such
restrictions and obligations.

             (f)   Upon termination of this Agreement the Receiving Party will
deliver or cause to be delivered to the Informing Party all written Confidential
Information of the Informing Party in the possession of the Receiving Party, or
provide an officer's affidavit as to the destruction of all copies of such
Confidential Information.

             (g)   Prior to the Effective Time, the Receiving Party shall not
use any Confidential Information of the Informing Party in an unlawful manner,
to interfere with or attempt to terminate or otherwise adversely affect any
actual or proposed contractual or business relationship of the Informing Party,
or for any other purposes other than in conjunction with the transactions
described herein. Without limiting the generality of the foregoing, in no event
shall the Receiving Party use any Confidential Information of the Informing
Party, directly or indirectly, for the purpose of competing against the
Informing Party.

             (h)   Notwithstanding anything contained in this Paragraph 6.04 to
the contrary, neither Cardinal nor MFC shall be required to obtain the prior
consent of the other parties for any such disclosure which it, in good faith and
upon the advice of its legal counsel, believes is required by law; provided,
however, that before any such disclosure may be made by a Receiving Party upon
the advice of its legal counsel, it shall, except where such notice is
prohibited by law, give the Informing Party reasonable notice of its intent to
make such disclosure, the form of content of that disclosure, and the basis upon
which its legal counsel has advised it that such disclosure is required by law,
so that the Informing Party may seek a protective order or other similar or
appropriate relief, and the Receiving Party also shall undertake in good faith
to have the Confidential Information to be disclosed treated confidentially by
the party to whom the disclosure is made.

     6.05.   REAL PROPERTY MATTERS. At its option and expense, MFC may cause to
be conducted (i) a title examination, physical survey, zoning compliance review,
and structural inspection of the Real Property and improvements thereon
(collectively, the "Property Examination") and (ii) site inspections, historic
reviews, regulatory analyses, and environmental assessments of the Real
Property, together with such other studies, testing and intrusive sampling and
analyses as MFC shall deem necessary or desirable (collectively, the
"Environmental Survey").

             If, in the course of the Property Examination or Environmental
Survey, MFC discovers a "Material Defect" (as defined below) with respect to the
Real Property, MFC will give prompt written notice thereof to Cardinal
describing the facts or conditions constituting the Material Defect, and MFC
shall have the option exercisable upon written notice to Cardinal within 120
days following the date of this Agreement, to (i) waive the Material Defect, or
(ii) terminate this Agreement.

                                       32

<PAGE>

                                                                     EXHIBIT 2.1

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

                 (a) 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 Cardinal's representations and warranties contained in Paragraph 2.16
or 2.21 (a "Title Defect"), in either such case that MFC reasonably believes
will materially and adversely 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 MFC reasonably believes that the
costs and expenses associated with the elimination or correction of the Title
Defect, together with all other Title Defects, would be an aggregate of $50,000
or more as to all such Real Property; or

                 (b) 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 MFC reasonably believes would
cost an aggregate of $50,000 or more to repair, remove or correct as to all such
Real Property;

                 (c) the existence of facts or circumstances relating to any of
the Real Property reflecting that (i) 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
(ii) 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 Cardinal or Floyd and any other person or entity, as to which,
in either such case, MFC reasonably believes, based on the advice of legal
counsel or other consultants, that Cardinal or Floyd could become responsible or
liable, or that 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 Cardinal or Floyd could incur, or
for which MFC 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 $100,000 or more as to all such Real Property.

             It is contemplated that MFC 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 Cardinal 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 MFC to constitute a "Material Defect," with the result that it may
exercise its right to terminate this Agreement, within 120 days of the date
hereof, without regard to any knowledge on the part of MFC or its 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 Cardinal
to MFC, or any of its officers or advisors prior to the date of this Agreement
(whether pursuant to Paragraph 10.13 below or otherwise).

     6.06.   TREATMENT OF PENSION PLAN. Immediately prior to the Effective Time,
and provided that all conditions to the parties' respective obligations to
consummate the Merger as described in Article VII below have been satisfied or
effectively waived, Cardinal shall make any such additional contributions to its
defined benefit pension plan (the "Pension Plan") as shall be required to cause
it to be fully funded or to eliminate any funding deficiency as of the Effective
Time. The Pension Plan will be suspended effective as of the Effective Time.,
and no further contributions will be made to the Pension Plan after the
Effective Time.

             Cardinal agrees that, prior to the Effective Time, and provided
that all conditions to the parties' respective obligations to consummate the
Merger as described in Article VII below have been satisfied or effectively
waived, it will take or cause to be taken such actions as MFC shall reasonably
consider to be necessary or desirable in connection with or to effect or
facilitate the above suspension of the Pension Plan. MFC agrees that it will
assume, as of the Effective Time, any and all administrative and fiduciary
duties of

                                       33

<PAGE>

                                                                     EXHIBIT 2.1

Cardinal with respect to the day-to-day operation of Cardinal's Pension Plan,
including duties relating to filings with the Internal Revenue Service relating
to that plan.

     6.07.   DIRECTORS' AND OFFICERS' LIABILITY INSURANCE. Cardinal and MFC
agree that, to the extent the same can be purchased at a reasonable cost (to be
determined in MFC's reasonable discretion), then immediately prior to the
Effective Time Cardinal shall purchase "tail" coverage, effective at the
Effective Time and for the maximum term available, under and in the same amount
of coverage as is provided by its then current directors' and officers'
liability insurance policy. Notwithstanding the purchase of such insurance, MFC
acknowledges that, by virtue of the Merger, it shall become responsible for
Cardinal's obligation under applicable Virginia law to indemnify its current and
former directors and officers for liabilities arising out of their status as
directors and officers prior to the Effective Time.

     6.08.   TAX OPINION. Cardinal and MFC each agrees to use its best efforts
to cause the Merger, and the conversion of outstanding shares of Cardinal Stock
into shares of MFC Common Stock and MFC Series B Preferred Stock, on the terms
contained in this Agreement, to be treated as a tax-free reorganization within
the meaning of Section 368(a) of the Internal Revenue Code and to obtain the
written opinion of a firm of independent certified public accountants, or a law
firm, which shall in either case be mutually satisfactory to them (the "Tax
Opinion"), addressed jointly to the Boards of Directors of Cardinal and MFC, to
the foregoing effect.

     6.09.   FINAL TAX RETURN. Cardinal and MFC each agrees that MFC will make
all necessary arrangements for Cardinal's and MFC's independent accountants,
Larrowe & Company PLLC, to prepare, and MFC will cause to be filed, Cardinal's
final federal and state income tax returns for the year in which the Effective
Time occurs.

     6.10    RESTRICTIONS ON MFC STOCK ISSUED TO CERTAIN PERSONS.

             (a)   Affiliates of Cardinal. The transfer restrictions provided
for in Subsection (d) of the SEC's Rule 145 will apply to shares of MFC Common
Stock and MFC Series B Preferred Stock issued in connection with the Merger to
persons who are deemed by MFC to be "underwriters" pursuant to Subsection (c) of
that Rule, including without limitation all persons who are "affiliates" of
Cardinal (as that term is defined in the SEC's Rule 144(a)) on the date of the
Cardinal Shareholders' Meeting and to those persons' related parties.
Certificates evidencing the shares of MFC Common Stock and MFC Series B
Preferred Stock issued to those persons and their related parties will bear a
restrictive legend relating to those restrictions substantially in the form set
forth in the form of Affiliates Agreement attached as Exhibit C hereto.

             (b)   Affiliates of MFC. MFC Common Stock and MFC Series B
Preferred Stock issued in connection with the Merger to persons who are
"affiliates" of MFC (as that term is defined in the SEC's Rule 144(a)) following
the Merger, and to those persons' related parties, may only be resold or
otherwise transferred pursuant to the procedures described in Rule 144, an
effective registration statement filed with and declared effective by the SEC,
or another exemption from registration under the 1933 Act. Certificates
evidencing the shares of MFC Common Stock and MFC Series B Preferred Stock
issued to those persons and their related parties may, at MFC's option, bear a
restrictive legend relating to those restrictions.

     6.11.   EXPENSES. Subject to the provisions of Paragraph 8.03 below, and
whether or not this Agreement shall be terminated or the Merger shall be
consummated, Cardinal and MFC each agrees to pay its own legal, accounting and
financial advisory fees and all its other costs and expenses incurred or to be
incurred in connection with the execution and performance of its obligations
under this Agreement, or otherwise in connection with this Agreement and the
transactions described herein (including without 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
Cardinal and MFC in proportion to their respective numbers of shareholders. All
amounts owed by Cardinal to Scott & Stringfellow, including its consulting fees
and fees for rendering the "Cardinal Fairness Opinion" described in Paragraph
7.01(e)(i), will be deemed to have been incurred solely by Cardinal. All

                                       34

<PAGE>

                                                                     EXHIBIT 2.1

amounts owed by MFC to The Carson Medlin Company, including its consulting fees
and fees for rendering the "MFC Fairness Opinion" described in Paragraph
7.01(e)(ii), will be deemed to have been incurred solely by MFC.

     6.12.   DIRECTORS. So long as they remain directors of Cardinal at the
Effective Time, then: (i) within ten business days following the Effective Time,
MFC's Board of Directors will increase its number of members by one, and R. Leon
Moore ("Moore") will be appointed to serve as a director of MFC for a term of
office extending to the next annual meeting of MFC's shareholders at which its
directors are elected, and Moore and a second director of Cardinal to be
mutually agreed upon by MFC and Cardinal's Board of Directors following the date
of this Agreement each will be appointed to serve as a director of MountainBank,
and (ii) the remaining members of Cardinal's Board of Directors, who also serve
as directors of Floyd, will continue to serve as directors of Floyd. Immediately
prior to the Closing, and as a condition to MFC's obligation to consummate the
Merger, and so long as all conditions to Cardinal's obligation to consummate the
Merger have been satisfied as described in Paragraph 7.02 below, Cardinal will
take, and it will cause Floyd to take, any and all action required to increase
the number of Floyd's directors to nine and will elect, effective as of the
Effective Time, MFC's President and Chief Executive Officer, J.W. Davis, and one
other person to be named by MFC as directors of Floyd to fill all of the
resulting vacancies. Following the initial appointments of Moore and the other
agreed upon Cardinal director as directors of MFC, and at the end of the then
current terms of Floyd's directors who continue to serve as directors of Floyd
following the Effective Time, the continued service of those persons as
directors of MFC or Floyd will be subject to MFC's and Floyd's then current
nomination and election processes.

     6.13.   DUE DILIGENCE REVIEWS AND RIGHT TO TERMINATE. Cardinal and MFC each
agrees that, during the period beginning on the date of this Agreement and
ending at 5:00 P.M. on the tenth business day following the date of this
Agreement (the "Due Diligence Period"), either of them, or their employees,
legal counsel or other representative, may conduct continuing investigations of
the assets and business affairs of the other and may terminate this agreement
without liability or any further obligation to the other if it, in its sole
discretion exercised in good faith, and based on information that comes to its
attention during such continuing investigation, believes that the Merger is not
in the best interests of its shareholders. For purposes of Cardinal's continuing
investigation of MFC, during the Due Diligence Period MFC will give Cardinal
access to MFC's and MountainBank's books, records, files and other information
to the same extent and in the same manner as Cardinal is required to give access
to MFC through the Effective Time pursuant to Paragraph 4.01(j) above.

                                   ARTICLE VII
                         CONDITIONS PRECEDENT TO MERGER

     7.01.   CONDITIONS TO ALL PARTIES' OBLIGATIONS. Notwithstanding any other
provision of this Agreement to the contrary, the obligations of each of the
parties to this Agreement to consummate the transactions described herein shall
be conditioned upon the satisfaction of each of the following conditions
precedent on or prior to the Closing Date:

             (a)   Approval by Regulatory Authorities; Disadvantageous
Conditions. (i) The Merger and other transactions described in this Agreement
shall have been approved, to the extent required by law, by the Virginia
Commissioner and the FRB, and by all other Regulatory Authorities having
jurisdiction over such transactions; (ii) no Regulatory Authority shall have
objected to or withdrawn its approval of such transactions or imposed any
condition on such transactions or its approval thereof, which condition is
reasonably deemed by MFC to so adversely impact the economic or business
benefits of this Agreement to MFC and MountainBank as to substantially reduce
the financial value of the Merger to MFC and MountainBank considered as one
entity and render it inadvisable for it to consummate the Merger; (iii) the
15-day or 30-day waiting period, as applicable, required following necessary
approvals by the FRB for review of the transactions described herein by the
United States Department of Justice shall have expired, and, in connection with
any such review, no objection to the Merger shall have been raised; and (iv) all
other consents, approvals and permissions, and the satisfaction of all of the
requirements prescribed by law or regulation, necessary to the carrying out of
the transactions contemplated herein shall have been procured.

                                       35

<PAGE>

                                                                     EXHIBIT 2.1

             (b)   Adverse Proceedings, Injunction, Etc. There shall not be (i)
any order, decree or injunction of any court or agency of competent jurisdiction
which enjoins or prohibits the Merger or any of the other transactions described
in this Agreement or either of the parties hereto from consummating any such
transaction, (ii) any pending or threatened investigation of the Merger or any
of such other transactions by the United States Department of Justice, or any
actual or threatened litigation under federal antitrust laws relating to the
Merger or any other such transaction, (iii) any suit, action or proceeding by
any person (including any Regulatory Authority), pending or threatened before
any court or governmental agency in which it is sought to restrain or prohibit
Cardinal or MFC from consummating the Merger or carrying out any of the terms or
provisions of this Agreement, or (iv) any other suit, claim, action or
proceeding pending or threatened against Cardinal or MFC or any of their
respective officers or directors which shall reasonably be considered by
Cardinal or MFC to be materially burdensome in relation to the proposed Merger,
or which Cardinal or MFC reasonably believes would have a Cardinal Material
Effect or a MFC Material Effect , and which has not been dismissed, terminated
or resolved to the satisfaction of all parties hereto within 90 days of the
institution or threat thereof.

             (c)   Approval by Boards of Directors and Shareholders. The Boards
of Directors of Cardinal and MFC shall have duly approved, adopted and ratified
this Agreement by appropriate resolutions, and the shareholders of Cardinal and
MFC shall have duly approved, ratified and adopted this Agreement at the
Cardinal Shareholders' Meeting and the MFC Shareholders' Meeting, all to the
extent required by and in accordance with the provisions of this Agreement,
applicable law, and applicable provisions of their respective Articles of
Incorporation and ByLaws.

             (d)   Approval of Charter Amendment. MFC's Board of Directors shall
have approved an amendment to MFC's Articles of Incorporation to authorize
issuance of the MFC Series B Preferred Stock, and that amendment shall have been
effected through the filing of appropriate Articles of Amendment with the North
Carolina Secretary of State.

             (e)   Fairness Opinions.

                 (i)   Cardinal shall have received from its financial advisor,
Scott & Stringfellow, a written opinion, in a form satisfactory to it (the
"Cardinal Fairness Opinion"), to the effect that the consideration to be
received by Cardinal's shareholders in the Merger is fair, from a financial
point of view, to Cardinal and its shareholders; and Scott & Stringfellow shall
have delivered a letter to Cardinal, 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 Cardinal
and its shareholders.

                 (ii)  MFC shall have received from its financial advisor, The
Carson Medlin Company, 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 The Carson Medlin
Company 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.

             (f)   Tax Opinion. Cardinal and MFC shall have received the Tax
Opinion in form satisfactory to each of them.

             (g)   No Termination or Abandonment. This Agreement shall not have
been terminated or abandoned by any party hereto.

             (h)   Employment Agreement. The Employment Agreement between Floyd
and R. Leon Moore shall have been executed and delivered as described in
Paragraph 5.04(a) above.

             (i)   Articles of Merger; Other Actions. The Articles of Merger
described in Paragraph 1.07 shall have been duly executed by MFC and filed with
the North Carolina Secretary of State and the Virginia State Corporation
Commission as provided in that Paragraph.

                                       36

<PAGE>

                                                                     EXHIBIT 2.1

     7.02.   ADDITIONAL CONDITIONS TO CARDINAL'S OBLIGATIONS. Notwithstanding
any other provision of this Agreement to the contrary, Cardinal's separate
obligation to consummate the transactions described herein shall be conditioned
upon the satisfaction of each of the following conditions precedent on or before
the Closing Date:

             (a)   Material Adverse Change. There shall not have occurred any
MFC Material Change, and there shall not have occurred any event or development,
and there shall not exist any condition or circumstance which, with the lapse of
time or otherwise, may or could cause, create or result in any such MFC Material
Change.

             (b)   Compliance with Laws. MFC shall have complied in all material
respects with all federal and state laws and regulations applicable to the
transactions described in this Agreement where the violation of or failure to
comply with any such law or regulation could or may have a MFC Material Effect
or a material adverse effect on MFC's ability to consummate the Merger.

             (c)   MFC's Representations and Warranties and Performance of
Agreements; Officers' Certificate. Unless waived in writing by Cardinal as
provided in Paragraph 10.02, each of the representations and warranties of MFC
contained in this Agreement shall have been true and correct in all material
respects as of the date hereof, and they shall remain true and correct on and as
of the Closing Date with the same force and effect as though made on and as of
such date, except (i) for changes which, in the aggregate, do not constitute an
MFC Material Change, will not have a MFC Material Effect, and do not have a
material adverse affect on MFC's ability to consummate the Merger and other
transactions described herein, and (ii) as otherwise contemplated by this
Agreement; and MFC shall have performed in all material respects all of its
obligations, covenants and agreements hereunder to be performed by it on or
before the Closing Date.

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

             (d)   Legal Opinion of MFC's Counsel. Cardinal shall have received
the written legal opinion of Ward and Smith, P.A., counsel for MFC, dated as of
the Closing Date, covering matters normally covered in such opinions and such
other matters as Cardinal shall reasonably request and otherwise in form and
substance reasonably satisfactory to Cardinal.

             (e)   Other Documents and Information. MFC shall have provided to
Cardinal correct and complete copies (certified by its Secretary) of resolutions
of its Board of Directors and shareholders pertaining to approval of this
Agreement and the Merger and other transactions contemplated herein, together
with a certificate of the incumbency of MFC's officers who executed this
Agreement or any other documents delivered to Cardinal in connection with the
Closing.

             (f)   Acceptance by Cardinal's Counsel. The form and substance of
all legal matters described in this Agreement or related to the transactions
contemplated herein shall be reasonably acceptable to Cardinal's legal counsel.

     7.03.   ADDITIONAL CONDITIONS TO MFC'S OBLIGATIONS. Notwithstanding any
other provision of this Agreement to the contrary, MFC's separate obligation to
consummate the transactions described herein shall be conditioned upon the
satisfaction of each of the following conditions precedent on or before the
Closing Date:

             (a)   Material Adverse Change. There shall not have occurred any
Cardinal Material Change, and there shall not have occurred any event or
development, and there shall not exist any condition or circumstance which, with
the lapse of time or otherwise, may or could cause, create or result in any such
Cardinal Material Change.

                                       37

<PAGE>

                                                                     EXHIBIT 2.1

             (b)   Compliance with Laws. Cardinal and Floyd shall have complied
in all material respects with all federal and state laws and regulations
applicable to the transactions described in this Agreement and where the
violation of or failure to comply with any such law or regulation could or may
have a Cardinal Material Effect, or an MFC Material Effect after the Effective
Time, or a material adverse effect on Cardinal's ability to consummate the
Merger.

             (c)   Cardinal's Representations and Warranties and Performance of
Agreements; Officers' Certificate. Unless waived in writing by MFC as provided
in Paragraph 10.02, each of the representations and warranties of Cardinal
contained in this Agreement shall have been true and correct in all material
respects as of the date hereof, and they shall remain true and correct at and as
of the Closing Date with the same force and effect as though made on and as of
such date, except (i) for changes which, in the aggregate, do not constitute a
Cardinal Material Change, will not have a Cardinal Material Effect, and do not
have a material adverse affect on Cardinal's ability to consummate the Merger
and other transactions described herein, and (ii) as otherwise contemplated by
this Agreement; and Cardinal shall have performed in all material respects all
its obligations, covenants and agreements hereunder to be performed by it on or
before the Closing Date.

             MFC shall have received a certificate dated as of the Closing Date
and executed by Cardinal and its Chairman, President and Chief Executive Officer
and its [Chief Financial Officer] 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.

             (d)   Affiliates Agreements. Cardinal shall have delivered to MFC
an Affiliates Agreement described in Paragraph 4.01(b), in form and content
reasonably satisfactory to MFC and substantially in the form attached as Exhibit
C to this Agreement, and signed by each person who is deemed by MFC or its
counsel to be subject to the transfer restrictions described in Paragraph
6.10(a).

             (e)   Legal Opinion of Cardinal's Counsel. MFC shall have received
the written legal opinion of Flippin Densmore Morse & Jessee, counsel to
Cardinal, dated as of the Closing Date, covering matters normally covered in
such opinions and such other matters as MFC shall reasonably request and
otherwise in form and substance reasonably satisfactory to MFC.

             (f)   Other Documents and Information. Cardinal shall have provided
to MFC correct and complete copies (all certified by Cardinal's Secretary) of
Cardinal's Articles of Incorporation and Bylaws, and resolutions of its Board of
Directors and shareholders pertaining to approval of this Agreement and the
Merger and other transactions contemplated herein, together with a certificate
as to the incumbency of Cardinal's officers who executed this Agreement or any
other documents delivered to MFC in connection with the Closing.

             (g)   Election of Floyd Directors. Cardinal and Floyd shall have
taken any and all necessary action to increase the number of Floyd's directors
to nine and shall have elected, effective as of the Effective Time, J. W. Davis
and the one additional persons named by MFC as directors of Floyd to fill the
resulting two vacancies, all as described in Paragraph 6.12 above.

             (h)   Consents to Assignment; Estoppel Certificates. Cardinal shall
have obtained and delivered to MFC the consents to assignments of leases and
contracts and landlords' estoppel certificates requested by MFC as described in
Paragraph 4.01(i) above.

             (i)   Acceptance by MFC's Counsel. The form and substance of all
legal matters described in this Agreement or related to the transactions
contemplated herein shall be reasonably acceptable to MFC's legal counsel.

                                       38

<PAGE>

                                                                     EXHIBIT 2.1

                                  ARTICLE VIII
                          TERMINATION; BREACH; REMEDIES

     8.01.   MUTUAL TERMINATION. At any time prior to the Effective Time (and
whether before or after approval hereof by the shareholders of Cardinal and
MFC), this Agreement may be terminated by the mutual agreement of Cardinal and
MFC. Upon any such mutual termination, all obligations of Cardinal and MFC
hereunder shall terminate and each party shall pay its own costs and expenses as
provided in Paragraph 6.11.

     8.02.   UNILATERAL TERMINATION. Prior to the Effective Time, this Agreement
may be terminated by either MFC or Cardinal (whether before or after approval
hereof by Cardinal's and MFC's shareholders) upon written notice to the other
parties in the manner provided herein and under the circumstances described
below.

             (a)   Termination by MFC. This Agreement may be terminated by MFC
by action of its Board of Directors or Executive Committee:

                 (i)    if any of the conditions to MFC's obligations set forth
in Paragraph 7.01 or 7.03 above shall not have been satisfied in all material
respects or effectively waived in writing by MFC by November 30, 2002 (except to
the extent that the failure of such condition to be satisfied has been caused by
the failure of MFC to satisfy any of its obligations, covenants or agreements
contained herein);

                 (ii)   if Cardinal 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 any of Cardinal'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 Cardinal, or there has occurred any
event or development or 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 Cardinal, and which, in any event, will have a Cardinal Material
Effect or, following the Effective Time, would have an MFC Material Effect;

                 (iv)   if, notwithstanding MFC's satisfaction of its
obligations under Paragraphs 6.01 and 6.03 above, Cardinal's shareholders do not
ratify and approve this Agreement and the Merger at the Cardinal Shareholders'
Meeting or if the Cardinal Shareholders' Meeting is not held by November 15,
2002;

                 (v)    if, notwithstanding MFC's satisfaction of its
obligations under Paragraphs 5.01, 6.01 and 6.03 above, MFC's shareholders do
not ratify and approve this Agreement and the Merger at the MFC Shareholders'
Meeting;

                 (vi)   if the Merger shall not have become effective on or
before February 28, 2003, or such later date as shall be mutually agreed upon in
writing by MFC and Cardinal;

                 (vii)  if the shareholders of Cardinal and/or MFC exercise
their right of dissent and appraisal under Article 15 of the Virginia Stock
Corporations Act or under Article 13 of the North Carolina Business Corporation
Act with respect to an aggregate number of shares of Cardinal Stock or MFC
Common Stock such as would result in a reduction of 1.0% or more in the
aggregate number of shares of MFC Common Stock that otherwise would be
outstanding following the Effective Time;

                 (viii) under the circumstances described in Paragraph 6.05, or,

                 (ix)   before the end of the Due Diligence Period under the
circumstances described in Paragraph 6.14 above.

                                       39

<PAGE>

                                                                     EXHIBIT 2.1

                   However, before MFC may terminate this Agreement for any of
the reasons specified above in (i), (ii) or (iii) of this Paragraph 8.02(a), it
shall give written notice to Cardinal 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 MFC shall not become effective if, within 30 days following the
giving of such notice, Cardinal shall cure such breach, default or violation or
satisfy such condition to the reasonable satisfaction of MFC or, if such breach,
default, violation or other condition is not reasonably susceptible to cure or
satisfaction within 30 days, then following receipt of MFC's written notice
Cardinal shall have promptly commenced good faith efforts to cure or satisfy the
breach default, violation or condition, shall diligently continue those efforts,
and shall actually cure or satisfy the breach, default, violation or condition
within a reasonable time thereafter . In the event Cardinal cannot or does not
cure such breach, default or violation or satisfy such condition to the
reasonable satisfaction of MFC within such notice period (or, if the breach,
default, violation or condition is not reasonably susceptible to cure or
satisfaction within the notice period, thereafter as described above),
termination of this Agreement by MFC thereafter shall be effective upon their
giving of written notice thereof to Cardinal in the manner provided herein.

             (b)   Termination by Cardinal. Prior to the Effective Time, this
Agreement may be terminated by Cardinal by action of its Board of Directors of
Executive Committee:

                 (i)    if any of the conditions to Cardinal's obligations set
forth in Paragraph 7.01 or 7.02 above shall not have been satisfied in all
material respects or effectively waived in writing by Cardinal by November 30,
2002 (except to the extent that the failure of such condition to be satisfied
has been caused by the failure of Cardinal to satisfy any of its obligations,
covenants or agreements contained herein);

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

                 (iii)  if any of MFC's 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 MFC, or there has occurred any event or
development or 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 MFC, and which, in any
event, will have an MFC Material Effect;

                 (iv)   if, notwithstanding Cardinal's satisfaction of its
obligations under Paragraphs 6.01 and 6.03 above, MFC's shareholders do not
ratify and approve this Agreement and the Merger at the MFC Shareholders'
Meeting or if the MFC Shareholders' Meeting is not held by November 15, 2002;

                 (v)    if, notwithstanding Cardinal's satisfaction of its
obligations under Paragraphs 4.01(a), 6.01 and 6.03 above, its shareholders do
not ratify and approve this Agreement and the Merger at the Cardinal
Shareholders' Meeting;

                 (vi)   if the Merger shall not have become effective on or
before February 28, 2003, unless such date is extended as evidenced by the
written mutual agreement of the parties hereto, or,

                 (vii)  before the end of the Due Diligence Period under the
circumstances described in Paragraph 6.14 above.

                                       40

<PAGE>

                                                                     EXHIBIT 2.1

             However, before Cardinal 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 Cardinal shall not become effective if, within 30 days
following the giving of such notice, MFC shall cure such breach, default or
violation or satisfy such condition to the reasonable satisfaction of Cardinal
or, if such breach, default, violation or other condition is not reasonably
susceptible to cure or satisfaction within 30 days, then following receipt of
Cardinal's written notice MFC shall have promptly commenced good faith efforts
to cure or satisfy the breach default, violation or condition, shall diligently
continue those efforts, and shall actually cure or satisfy the breach, default,
violation or condition within a reasonable time thereafter. In the event MFC
cannot or does not cure such breach, default or violation or satisfy such
condition to the reasonable satisfaction of Cardinal within such notice period
(or, if the breach, default, violation or condition is not reasonably
susceptible to cure or satisfaction within the notice period, thereafter as
described above),, termination of this Agreement by Cardinal thereafter shall be
effective upon its giving of written notice thereof to MFC in the manner
provided herein.

             (c)   Survival of Certain Covenants Following Termination.
Notwithstanding anything contained in this Agreement to the contrary, Cardinal's
and MFC's respective obligations and liabilities pursuant to Paragraph 6.04 and
Articles VIII and IX of this Agreement shall not be affected by a termination of
this Agreement, and, following any such termination, those obligations and
liabilities shall survive, remain in full force and effect and be fully
enforceable in accordance with their terms.

     8.03.   BREACH; REMEDIES.

             (a)   Except as otherwise provided below, (i) in the event of a
breach by Cardinal of any of its representations or warranties contained in
Article II of this Agreement or in any other certificate or writing delivered
pursuant to this Agreement, or in the event of Cardinal's failure to perform or
violation of any of its obligations, agreements or covenants contained in
Articles IV or VI of this Agreement, then MFC's sole right and remedy shall be
to terminate this Agreement prior to the Effective Time as provided in Paragraph
8.02(a); and (ii) in the event of any such termination of this Agreement by MFC
due to a failure by Cardinal to perform any of its obligations, agreements or
covenants contained in Articles IV or VI of this Agreement, then Cardinal shall
be obligated to reimburse MFC for up to (but not more than) $[500,000] in
expenses described in Paragraph 6.11 which actually have been incurred by MFC.

             (b)   Likewise, and except as otherwise provided in this Paragraph
8.03, (i) in the event of a breach by MFC of any of its representations or
warranties contained in Article III of this Agreement, or in the event of MFC's
failure to perform or violation of any of its obligations, agreements or
covenants contained in Articles V or VI of this Agreement, then Cardinal's sole
right and remedy shall be to terminate this Agreement prior to the Effective
Time as provided in Paragraph 8.02(b); and (ii) in the event of any such
termination of this Agreement by Cardinal due to a failure by MFC to perform any
of its obligations, agreements or covenants contained in Articles V or VI of
this Agreement, then MFC shall be obligated to reimburse Cardinal for up to (but
not more than) $[500,000] in expenses described in Paragraph 6.11 which actually
have been incurred by Cardinal.

             (c)   Notwithstanding subparagraphs 8.02(a) and 8.02(b), or any
other provision of this Agreement to the contrary:

                 (i)   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 6.11, together with other
                       damages recoverable at law or in equity; and,

                 (ii)  either party shall be entitled to commence a suit at law
                       for the purposes of (A) obtaining appropriate equitable
                       relief in the event of a violation, or

                                       41

<PAGE>

                                                                     EXHIBIT 2.1

                       imminent violation, by the other party of Section 6.04
                       above, or (B) enforcing the indemnification obligation of
                       the other party under Article IX of this Agreement.

                                   ARTICLE IX
                                 INDEMNIFICATION

     9.01.   INDEMNIFICATION FOLLOWING TERMINATION OF AGREEMENT.

             (a)   By Cardinal. Cardinal agrees that, in the event this
Agreement is terminated for any reason and the Merger is not consummated, it
will indemnify, hold harmless and defend MFC and its officers, directors,
attorneys, financial advisors and consultants from and against any and all
claims, disputes, demands, causes of action, suits or proceedings of any third
party (including any Regulatory Authority), together with all losses, damages,
liabilities, obligations, costs and expenses of every kind and nature in
connection therewith (including without limitation reasonable attorneys' fees
and legal costs and expenses in connection therewith), whether known or unknown,
and whether now existing or hereafter arising, which may be threatened against,
incurred, undertaken, received or paid by MFC:

                 (i)   in connection with or which arise out of, result from, or
are based upon (A) Cardinal's or Floyd's operations or business transactions or
its relationship with any of its employees, or (B) Cardinal's or Floyd'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
Cardinal 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 Cardinal 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 Cardinal which is included in the
Proxy Statement and which information causes the Proxy Statement at the time of
its mailing to Cardinal's and MFC'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.

             (b)   By MFC. MFC agrees that, in the event this Agreement is
terminated for any reason and the Merger is not consummated, it will indemnify,
hold harmless and defend Cardinal and its officers, directors, attorneys,
financial advisors and consultants from and against any and all claims,
disputes, demands, causes of action, suits, proceedings of any third party
(including any Regulatory Authority), together with all losses, damages,
liabilities, obligations, costs and expenses of every kind and nature in
connection therewith (including without limitation reasonable attorneys' fees
and legal costs and expenses in connection therewith), whether known or unknown,
and whether now existing or hereafter arising, which may be threatened against,
incurred, undertaken, received or paid by Cardinal:

                 (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 of, or any inaccuracy, incompleteness or inadequacy in, any of its
representations or warranties under or in connection with this Agreement, or any

                                       42

<PAGE>

                                                                     EXHIBIT 2.1

failure of MFC 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 which is included in the Proxy
Statement and which information causes the Proxy Statement at the time of its
mailing to Cardinal's and MFC'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.

     9.02.   PROCEDURE FOR CLAIMING INDEMNIFICATION. If any matter subject to
indemnification under this Article IX arises in the form of a claim (herein
referred to as a "Third Party Claim") against MFC or Cardinal, or their
respective successors and assigns, or any of their respective subsidiary
entities, officers, directors, attorneys, financial advisors or consultants
(collectively, "Indemnitees"), the Indemnitee promptly shall give notice and
details thereof, including copies of all pleadings and pertinent documents, to
the party obligated for indemnification hereunder (the "Indemnitor"). Within 15
days of such notice, the Indemnitor either (i) shall pay the Third Party Claim
either in full or upon agreed compromise, or (ii) shall 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

     10.01.  SURVIVAL OF REPRESENTATIONS, WARRANTIES, INDEMNIFICATION AND OTHER
AGREEMENTS. Except as otherwise provided in Paragraph 8.02(c) above, none of the
representations, warranties or agreements of Cardinal or MFC contained in this
Agreement shall survive consummation of the Merger, and no party shall have any
right after the Effective Time to recover damages or any other relief from any
other party to this Agreement by reason of any breach of representation or
warranty, any nonfulfillment or nonperformance of any agreement contained
herein, or otherwise.

     10.02.  WAIVER. Any term or condition of this Agreement may be waived
(except as to matters of regulatory approvals and other approvals required by
law), either in whole or in part, at any time by the party which is, and whose
shareholders are, entitled to the benefits thereof; provided, however, that any
such waiver shall be effective only upon a determination by the waiving party
(through action of its Board of Directors) that such waiver would not adversely
affect the interests of the waiving party or its shareholders; and, provided
further, that no waiver of any term or condition of this Agreement by any party
shall be effective unless such waiver is in writing and signed by the waiving
party, nor shall any such waiver be construed to be a waiver of any succeeding
breach of the same term or condition or a waiver of any other or different term
of condition. No failure or delay of either party to exercise any power, or to
insist upon a strict compliance by the other party of any obligation, and no
custom or practice at variance with any terms hereof, shall constitute a waiver
of the right of any either to demand full and complete compliance with such
terms.

                                       43

<PAGE>

                                                                     EXHIBIT 2.1

     10.03.  AMENDMENT. This Agreement may be amended, modified or supplemented
at any time or from time to time prior to the Effective Time, and either before
or after its approval by the shareholders of Cardinal and MFC, by an agreement
in writing approved by the Boards of Directors of MFC and Cardinal executed in
the same manner as this Agreement; provided however, that, except with the
further approval of Cardinal's and MFC's shareholders of that change or as
otherwise provided herein, following approval of this Agreement by Cardinal's
and MFC's shareholders no change may be made in the amount of consideration into
which each share of Cardinal Stock will be converted.

     10.04.  NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered personally or
by courier, or by U.S. mail, first class postage prepaid, and addressed as
follows (or to such other address as shall have been communicated to the party
giving the notice as provided above):

<TABLE>
  <S>                                                 <C>
  IF TO CARDINAL, TO:                                 WITH COPY TO:

    Cardinal Bankshares Corporation                    Douglas W. Densmore
    101 Jacksonville Circle                            Flippin Densmore Morse & Jessee
    Floyd, VA  24091                                   1800 First Union Tower, Drawer 1200
    Att:  R. Leon Moore, Chief Executive Officer       Roanoke, VA  24006

  IF TO MFC, 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
</TABLE>

     10.05.  FURTHER ASSURANCE. Cardinal and MountainBank each agrees to furnish
to each other party such further assurances with respect to the matters
contemplated in this Agreement and their respective agreements, covenants,
representations and warranties contained herein, including the opinion of legal
counsel, as such other party may reasonably request.

     10.06.  HEADINGS AND CAPTIONS. Headings and captions of the Paragraphs of
this Agreement have been inserted for convenience of reference only and do not
constitute a part hereof.

     10.07.  GENDER AND NUMBER. As used in this Agreement, the masculine gender
shall include the feminine and neuter, the singular number shall include the
plural, and vice versa, whenever such meanings are appropriate.

     10.08.  ENTIRE AGREEMENT. This Agreement (including all schedules and
exhibits attached hereto and all documents incorporated herein by reference)
contains the entire agreement of the parties with respect to the transactions
described herein and supersedes any and all other oral or written agreement(s)
heretofore made, and there are no representations or inducements by or to, or
any agreements between, either of the parties hereto other than those contained
herein in writing.

     10.09.  SEVERABILITY OF PROVISIONS. The invalidity or unenforceability of
any term, phrase, clause, paragraph, restriction, covenant, agreement or other
provision hereof shall in no way affect the validity or enforceability of any
other provision or part hereof.

     10.10.  ASSIGNMENT. This Agreement may not be assigned by either party
hereto except with the prior written consent of the other parties hereto.

                                       44

<PAGE>

                                                                     EXHIBIT 2.1

     10.11.  COUNTERPARTS. Any number of counterparts of this Agreement may be
signed and delivered, each of which shall be considered an original and which
together shall constitute one agreement.

     10.12.  GOVERNING LAW. This Agreement is made in and shall be construed and
enforced in accordance with the laws of North Carolina.

     10.13.  PREVIOUSLY DISCLOSED INFORMATION. As used in this Agreement,
"Previously Disclosed" shall mean the disclosure of information by Cardinal to
MFC, or by MFC to Cardinal, as of June 10, 2002, in a letter delivered by the
disclosing party to the other party prior to the date hereof, specifically
referring to this Agreement, and arranged in paragraphs corresponding to the
Paragraphs, Subparagraphs and items of this Agreement applicable thereto.
Information shall be deemed Previously Disclosed for the purpose of a given
Paragraph, Subparagraph or item of this Agreement only to the extent that a
specific reference thereto is made in connection with disclosure of such
information at the time of such delivery.

     10.14   BEST KNOWLEDGE. The terms "Best Knowledge," "Knowledge" and "Known"
as used in this Agreement with reference to certain facts or information shall
be deemed to refer to facts or information of which, in the case of the
Knowledge of Cardinal, executive officers of Cardinal or Floyd are consciously
aware or of which they should have become consciously aware in the ordinary
course of business and the performance of their management duties, or which, in
the case of the Knowledge of MFC, executive officers of MFC or MountainBank are
consciously aware or of which they should have become consciously aware in the
ordinary course of business and the performance of their management duties.

     10.15.  INSPECTION. Any right of MFC under this Agreement to investigate or
inspect the premises, properties, books, records, files and other assets or
information of Cardinal or Floyd in no way shall establish any presumption that
MFC should have conducted any investigation or that such right has been
exercised by MFC, its agents, representatives or others. Any investigations or
inspections actually made by MFC or its agents, representatives or others prior
to the date of this Agreement or otherwise prior to the Effective Time shall not
be deemed in any way in derogation or limitation of the covenants,
representations and warranties made by or on behalf of Cardinal in this
Agreement.

     IN WITNESS WHEREOF, Cardinal 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.

                                            CARDINAL BANKSHARES CORPORATION
[CORPORATE SEAL]


ATTEST:                                     By:  /s/ R. Leon Moore
                                                 -------------------------------
                                            Ronald Leon Moore
                                                   Chairman, President and
                                                   Chief Executive Officer
-----------------------
Secretary


                                            MOUNTAINBANK FINANCIAL CORPORATION
[CORPORATE SEAL]


ATTEST:                                     By:  /s/ J.W. Davis
                                                 -------------------------------
                                                  J.W. Davis
                                                  President and
                                                  Chief Executive Officer
-----------------------
Secretary

                                       45

<PAGE>

                                                                     EXHIBIT 2.1
                                                                     EXHIBIT A

                                 PLAN OF MERGER
                                 By and Between
                               CARDINAL BANKSHARES
                                       and
                       MOUNTAINBANK FINANCIAL CORPORATION

     1.01.   NAMES OF MERGING CORPORATIONS. The names of the corporations
proposed to be merged are CARDINAL BANKSHARES CORPORATION ("Cardinal") and
MOUNTAINBANK FINANCIAL CORPORATION ("MFC").

     1.02.   NATURE OF TRANSACTION; PLAN OF MERGER. Subject to the provisions of
this Plan of Merger, at the "Effective Time" (as defined in Paragraph 1.07
below), Cardinal will be merged into and with MFC (the "Merger").

     1.03.   EFFECT OF MERGER; SURVIVING CORPORATION. At the Effective Time, and
by reason of the Merger, the separate corporate existence of Cardinal shall
cease while the corporate existence of MFC as the surviving corporation in the
Merger shall continue with all of its purposes, objects, rights, privileges,
powers and franchises, all of which shall be unaffected and unimpaired by the
Merger. Following the Merger, Floyd shall operate as a wholly-owned banking
subsidiary of MFC and, as a Virginia banking corporation, will conduct its
business at its legally established branch and main offices as they shall exist
from time to time following the Merger. The duration of the corporate existence
of MFC, as the surviving corporation, shall be perpetual and unlimited.

     1.04.   ASSETS AND LIABILITIES OF CARDINAL. At the Effective Time, and by
reason of the Merger, and in accordance with applicable law, all of the
property, assets and rights of every kind and character of Cardinal (including
without limitation all real, personal or mixed property, all debts due on
whatever account, all other choses in action and every other interest of or
belonging to or due to Cardinal, whether tangible or intangible) shall be
transferred to and vest in MFC, and MFC shall succeed to all the rights,
privileges, immunities, powers, purposes and franchises of a public or private
nature of Cardinal, all without any conveyance, assignment or further act or
deed; and MFC shall become responsible for all of the liabilities, duties and
obligations of every kind, nature and description of Cardinal as of the
Effective Time.

     1.05.   CONVERSION AND EXCHANGE OF STOCK.

             (a)   Conversion of Cardinal Stock. Except as otherwise provided in
this Plan of Merger, at the Effective Time all rights of Cardinal's shareholders
with respect to all outstanding shares of Cardinal's $10.00 par value common
stock ("Cardinal Stock") shall cease to exist and, as consideration for and to
effect the Merger, each such outstanding share shall be converted, without any
action by Cardinal, MFC or any Cardinal shareholder, into the right to receive a
number of shares of MFC's $4.00 par value common stock ("MFC Common Stock")
calculated in the manner described below, and an equal number of shares of a
newly created series of convertible preferred stock ("MFC Series B Preferred
Stock).

             The number of shares of MFC Common Stock into which each share of
Cardinal Stock is converted at the Effective Time shall be the number (rounded
to four decimal places) equal to $12.00 divided by the "Market Value" (as
defined below). The number of shares of MFC Series B Preferred Stock into which
each share of Cardinal Stock is converted at the Effective Time shall be the
same as the number of shares of MFC Common Stock calculated as described above.

             For purposes of this Paragraph 1.05, the "Market Value" of a share
of MFC Common Stock shall be the average of the closing per share trade prices
of MFC Common Stock as reported on the

                                       A-1

<PAGE>

                                                                     EXHIBIT 2.1

OTC Bulletin Board (or, if MFC Common Stock is then traded on The Nasdaq Stock
Market, on Nasdaq) for the 20 trading days immediately preceding the business
day prior to the "Closing Date" (as defined in Paragraph 1.07 below) on which
trades of MFC Common Stock are reported; provided however that, for purposes of
calculating the numbers of shares of MFC Common Stock and MFC Series B Preferred
Stock into which Cardinal Stock will be converted, the Market Value used in the
calculation shall not exceed $26.82 or be less than $17.88. If the amount
determined as described above as the Market Value is more than $26.82, then the
Market Value shall be deemed to be $26.82, and if the amount determined as
described above as the Market Value is less than $17.88, then the Market Value
shall be deemed to be $17.88.

             At the Effective Time, and without any action by Cardinal, MFC or
any Cardinal shareholder, Cardinal's stock transfer books shall be closed and
there shall be no further transfers of Cardinal Stock on its stock transfer
books or the registration of any transfer of a certificate evidencing Cardinal
Stock (a "Cardinal Certificate") by any holder thereof, and the holders of
Cardinal Certificates shall cease to be, and shall have no further rights as,
stockholders of Cardinal other than as provided in this Plan of Merger.
Following the Effective Time, Cardinal Certificates shall evidence only the
right of the registered holders thereof to receive certificates evidencing the
numbers of whole shares of MFC Common Stock and MFC Series B Preferred Stock
into which their Cardinal Stock was converted at the Effective Time, together
with cash for any fractional shares calculated as described in Paragraph 1.05(f)
below, or, in the case of Cardinal Stock held by shareholders who properly shall
have exercised their right of dissent and appraisal under Article 15 of the
Virginia Stock Corporation Act ("Dissenters' Rights"), cash as provided in that
statute.

             (b)   Description of MFC Series B Preferred Stock. The MFC Series B
Preferred Stock to be issued to Cardinal shareholders will be non-cumulative,
nonparticipating, convertible preferred stock of MFC that will have terms
(including the stated dividend), relative rights, preferences and limitations as
are described in MFC's Articles of Incorporation, as amended. Each share of
Series B Preferred Stock will have the same voting rights as shares of MFC
Common Stock.

             (c)   Exchange and Payment Procedures; Surrender of Certificates.
As promptly as practicable, but not more than ten business days following the
Effective Time, MFC shall send or cause to be sent to each former Cardinal
shareholder of record immediately prior to the Effective Time written
instructions and transmittal materials (a "Transmittal Letter") for use in
surrendering Cardinal Certificates to MFC or to an exchange agent appointed by
MFC. Upon the proper surrender and delivery to MFC or its agent (in accordance
with its instructions, and accompanied by a properly completed Transmittal
Letter) by a former shareholder of Cardinal of his or her Cardinal
Certificate(s), and in exchange therefor, MFC shall as soon as practicable issue
and deliver to the shareholder stock certificates evidencing the numbers of
whole shares of MFC Common Stock and MFC Series B Preferred Stock into which the
shareholder's Cardinal Stock was converted at the Effective Time, together with
cash for any fractional shares calculated as described in Paragraph 1.05(f)
below.

                                       A-2

<PAGE>

                                                                     EXHIBIT 2.1

                   Subject to Paragraph 1.05(g), no certificate evidencing MFC
Common Stock or MFC Series B Preferred Stock shall be issued or delivered to any
former Cardinal shareholder unless and until that shareholder shall have
properly surrendered to MFC or its agent the Cardinal Certificate(s) formerly
representing his or her shares of Cardinal Stock, together with a properly
completed Transmittal Letter. Further, until a former Cardinal shareholder's
Cardinal Certificates are so surrendered and certificates evidencing the MFC
Common Stock and MFC Series B Preferred Stock into which his or her Cardinal
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 Common
Stock or MFC Series B Preferred Stock as of any date subsequent to the Effective
Time shall be paid or delivered to the former Cardinal shareholder. However,
upon the proper surrender of the shareholder's Cardinal Certificate and the
issuance to that shareholder of certificates representing the MFC Common Stock
and MFC Series B Preferred Stock to which the shareholder is entitled, if MFC
shall have paid any dividend or made any distribution to the holders of its MFC
Common Stock or MFC Series B Preferred Stock of record as of a date after the
Effective Time and if MFC is holding the amount of that dividend or distribution
related to the MFC Common Stock or MFC Series B Preferred Stock being issued to
the shareholder, then MFC will pay that amount to the shareholder.

             (d)   Antidilutive Adjustments. If, prior to the Effective Time,
Cardinal or MFC shall declare any dividend payable in shares of Cardinal Stock
in the case of Cardinal, or MFC Common Stock or MFC Series B Preferred Stock in
the case of MFC, or shall subdivide, split, reclassify or combine the presently
outstanding shares of Cardinal Stock, MFC Common Stock or MFC Series B Preferred
Stock, then an appropriate and proportionate adjustment shall be made in the
number of shares of MFC Common Stock and/or MFC Series B Preferred Stock, as the
case may be, into which each share of Cardinal Stock will be converted at the
Effective Time pursuant to this Plan of Merger.

             (e)   Dissenters. Any shareholder of Cardinal who properly
exercises Dissenters' Rights shall be entitled to receive payment of the fair
value of his or her shares of Cardinal Stock in the manner and pursuant to the
procedures provided for in Article 15 of the Virginia Stock Corporation Act.
Shares of Cardinal Stock held by persons who exercise Dissenters' Rights shall
not be converted as described in Paragraph 1.05(a). However, if any shareholder
of Cardinal who exercises Dissenters' Rights shall fail to perfect those rights,
or effectively shall waive or lose such rights, then each of his or her shares
of Cardinal Stock shall be deemed to have been converted into MFC Common Stock
and MFC Series B Preferred Stock as of the Effective Time as provided in
Paragraph 1.05(a).

             (f)   Fractional Shares. If the conversion of the shares of
Cardinal Stock held by any Cardinal shareholder results in a fraction of a share
of MFC Common Stock or MFC Series B Preferred Stock, then, in lieu of issuing
that fractional share, MFC will pay to that shareholder cash in an amount equal
to that fraction multiplied by the Market Value (calculated as described in
Paragraph 1.05(a) above).

             (g)   Lost Certificates. Following the Effective Time, shareholders
of Cardinal whose Cardinal Certificates have been lost, destroyed, stolen or
otherwise are missing shall be entitled to receive certificates for the whole
shares of MFC Common Stock and MFC Series B Preferred Stock into which their
Cardinal Stock has been converted in accordance with and upon compliance with
reasonable conditions imposed by MFC, including without limitation a requirement
that those shareholders provide lost instruments indemnities or surety bonds in
form, substance and amount satisfactory to MFC.

     1.06.   ARTICLES OF INCORPORATION, BYLAWS AND MANAGEMENT. The Articles of
Incorporation and Bylaws of MFC in effect at the Effective Time shall be the
Articles of Incorporation and Bylaws of MFC as the surviving corporation in the
Merger, and the officers and directors of MFC in office at the Effective

                                      A-iii

<PAGE>

                                                                     EXHIBIT 2.1

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

     1.07.   CLOSING; EFFECTIVE TIME. The consummation and closing of the Merger
and other transactions contemplated by this Plan of Merger (the "Closing") shall
take place at the offices of MFC's legal counsel, Ward and Smith, P.A., in
Raleigh, North Carolina, or at such other place as MFC shall designate, on a
date mutually agreed upon by Cardinal and MFC (the "Closing Date") after the
expiration of any and all required waiting periods following the effective date
of required approvals of the Merger by governmental or regulatory authorities
(but in no event more than 30 days following the expiration of all such required
waiting periods). At the Closing, Cardinal and MFC shall take such actions
(including without limitation the delivery of certain closing documents and the
execution of Articles of Merger under North Carolina and Virginia law) as are
agreed upon by the parties and/or as required by law to consummate the Merger
and cause it to become effective.

     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 MFC and filed by it with, and as
provided in the Certificates of Merger issued by, the North Carolina Secretary
of State and the Virginia State Corporation Commission in accordance with
applicable law; provided, however, that the Effective Time shall in no event be
more than ten days following the Closing Date.

                                      A-iv