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                                                                    Exhibit 10.3

                                  MOUNTAINBANK

                        1997 EMPLOYEE STOCK OPTION PLAN
                        -------------------------------

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

                                   ARTICLE I
                           PURPOSE AND SCOPE OF PLAN
                           -------------------------

1.1  Purpose.
     -------

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

1.2  Stock Subject to Plan.
     ---------------------

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

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

1.3  Effective Date.
     --------------

The Plan shall become effective as of December 8, 1997 1997 (the "Effective
Date," which is the date of adoption of the Plan by the Bank's Board of
Directors); provided, however, that notwithstanding
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anything contained herein to the contrary, the Plan shall be subject to approval
of the North Carolina Commissioner of Banks and other banking regulators to the
extent required by law and to approval of the Bank's shareholders by a vote of
the holders of at least two-thirds of the outstanding shares of the Bank's
Common Stock at a meeting of the Bank's shareholders held in accordance with
North Carolina law. Options may be granted pursuant to the Plan prior to receipt
of such approvals, but any such Options granted shall be subject to, and may not
become exercisable until, receipt of such approvals.

1.4  Termination Date.  Unless sooner terminated as provided herein, the Plan
     ----------------
shall terminate at 5:00 P.M. on December 7, 2007 (the "Termination Date").
Following the Termination Date, no further Options may be granted under the
Plan, but such termination shall not effect any Option granted prior to the
Termination Date.

                                  ARTICLE II
                                  DEFINITIONS
                                  -----------

2.1  Bank.  "Bank" refers to MountainBank and to any successor to the Bank which
     ----
shall have assumed or become liable for the Bank's obligations pursuant to any
Option granted or Option Agreement entered into pursuant to the Plan.

2.2  Board.  "Board" refers to the Bank's Board of Directors.
     -----

2.3  Committee.  "Committee" refers to the committee of and appointed or
     ---------
designated by the Board to administer the Plan as described in Article III
below.

2.4  Common Stock.  "Common Stock" refers to the common stock of the Bank, par
     ------------
value $5.00 per share.

2.5  Date of Grant.  The "Date of Grant" of an Option refers to the effective
     -------------
date of action by the Committee granting such Option.

2.6  Employee.  "Employee" refers to any person who is a full-time employee of
     --------
the Bank or of any of its Subsidiaries.

2.7  Exercise Price.  "Exercise Price" refers to the price per share to be paid
     --------------
by an Optionee for the purchase of Option Stock upon the exercise of an Option.

2.8  Expiration Date.  "Expiration Date" refers to the date set by the Committee
     ---------------
at which time any unexercised portion of an Option automatically will terminate
and be of no further force or effect.

2.9  Modification, Extension or Renewal.  "Modification" refers to any change in
     ----------------------------------
an Option which alters or modifies the original terms, conditions or benefits of
the Option granted to the

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

2.10 Non-Employee Director.  "Non-Employee Director" refers to a member of the
     ---------------------
Board who satisfies the definition of that term contained in Rule 16b-3(b)(3)
under the Securities Exchange Act of 1934, as such rule may be amended from time
to time.

2.11  Option.  "Option" refers to a right granted to an Employee by the Bank
      ------
pursuant to the Plan to purchase shares of Common Stock at the Exercise Price
set by the Committee for such Option and on the terms and conditions set forth
herein and in the Option Agreement relating to such Option.

2.12  Option Agreement.  "Option Agreement" refers to a formal written agreement
      ----------------
executed between the Bank and an Optionee setting forth the terms and conditions
of an Option.

2.13  Option Stock.  "Option Stock" refers to the shares of Common Stock covered
      ------------
by an Option and which may be purchased by the Optionee upon the exercise, in
whole or in part, of such Option.

2.14  Optionee.  "Optionee" refers to an Employee to whom an Option is granted.
      --------

2.15 Regulatory Authority.  "Regulatory Authority" refers to any governmental
     --------------------
agency or authority having jurisdiction over the Bank or its Subsidiaries,
including but not limited to the Federal Deposit Insurance Corporation, the
North Carolina Banking Commissioner, the North Carolina State Banking
Commission, the Federal Reserve Board or any other regulator.

                                  ARTICLE III
                              PLAN ADMINISTRATION
                              -------------------

3.1  General.
     -------

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

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3.2  Duties.
     ------

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

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

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

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

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

(e)  to determine:

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

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

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

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

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

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

                                       4
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3.3  Meetings and Voting.
     -------------------

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

3.4  Choice of Form of Option.
     ------------------------

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

3.5  Effect of Committee Action.
     --------------------------

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

3.6  Indemnification.
     ---------------

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

                                       5
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connection with the defense of any action, suit or proceeding, or in connection
with any appeal thereof, to which they or any of them may be made a party by
reason of any action taken or omitted in good faith under or in connection with
administration of the Plan or any Option granted hereunder and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Bank) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding that any such Committee member is liable for gross negligence or
misconduct in the performance of his duties; provided, however, that within
thirty (30) days after institution of any such action, suit or proceeding, such
Committee member(s) shall in writing offer the Bank the opportunity, at its own
expense, to handle and defend same.

                                  ARTICLE IV
                          GRANT AND TERMS OF OPTIONS
                          --------------------------

4.1  Authorization to Grant Options.
     ------------------------------

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

4.2  Number of Shares.
     ----------------

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

4.3  Exercise Price.
     --------------

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

                                       6
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The Exercise Price for each share of Option Stock covered by an Option shall not
be less than one hundred percent (100%) of the fair market value of one share of
the Common Stock on the Date of Grant of such Options (the "Fair Market Value").
The Fair Market Value on any particular date shall be, (i) if the Common Stock
is not then listed on the Nasdaq Stock Market, the fair market value of a share
of the Common Stock as determined by the Committee in its sole discretion in
such manner as it shall deem to be reasonable and appropriate, or, (ii) if the
Common Stock is listed on the Nasdaq Stock Market, the average of the bid and
asked prices for a share of the Common Stock as quoted by Nasdaq on such date.

4.4  Option Agreements.
     -----------------

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

4.5  Limits on Grant of ISOs.
     -----------------------

Notwithstanding anything contained herein to the contrary:

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

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

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                                   ARTICLE V
                              EXERCISE OF OPTIONS
                              -------------------

5.1  Waiting Period.
     --------------

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

5.2  Term; Conditions on Exercise; Expiration or Termination.
     -------------------------------------------------------

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

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

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

                                       8
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5.3  Notice of Exercise.
     ------------------

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

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

5.4  Payment Upon Exercise.
     ---------------------

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

5.5  Restrictions.
     ------------

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

5.6  Nontransferability.
     ------------------

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

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

5.7  Termination of Employment.
     -------------------------

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

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

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

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

                                       10
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                 such other circumstances as the Committee shall agree in
                 writing to treat as "Retirement" for purposes of the Plan,
                 shall be deemed to be a "Retirement" with the consent of the
                 Bank.

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

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

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

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

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

                                       11
<PAGE>

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

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

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

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

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

                                       12
<PAGE>

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

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

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

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

5.8  Modification, Extension and Renewal of Options.
     ----------------------------------------------

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

                                       13
<PAGE>

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

5.9  Other Provisions.
     ----------------

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

5.10  Issuance of Option Stock.
      ------------------------

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

                                   ARTICLE VI
                               GENERAL PROVISIONS
                               ------------------

6.1  Adjustment of Options.
     ---------------------

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

                                       14
<PAGE>

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

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

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

                                       15
<PAGE>

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

6.2  Rights as a Shareholder.
     -----------------------

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

6.3  No Right to Employment.
     ----------------------

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

6.4  Legal Restrictions.
     ------------------

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

                                       16
<PAGE>

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

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

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

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

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

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

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

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

                                       17
<PAGE>

6.5  No Obligation to Purchase Shares.
     --------------------------------

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

6.6  Payment of Taxes.
     ----------------

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

6.7  Choice of Law.
     -------------

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

6.8  Modification of Plan.
     --------------------

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

                                       18
<PAGE>

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

6.9  Application of Funds.
     --------------------

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

6.10 Notices.
     -------

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

6.11 Conformity With Applicable Laws and Regulations.
     -----------------------------------------------

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

                                       19
<PAGE>

6.12 Successors and Assigns.
     ----------------------

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

6.13 Severability.
     ------------

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

6.14 Titles.
     ------

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

6.15 Gender and Number.
     -----------------

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


                                       20
<PAGE>

                                 MOUNTAINBANK

                              AMENDMENT N0. 1 TO
                        1997 EMPLOYEE STOCK OPTION PLAN


     THIS AMENDMENT NO. 1 TO 1997 EMPLOYEE STOCK OPTION PLAN (the "Amendment")
is made as of this 16th day of October, 2000, by MountainBank (the "Bank").
                   ----

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

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

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

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

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

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

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

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

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

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

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


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


                                   MOUNTAINBANK



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

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

ATTEST:

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

                                       2