Document:

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                                                                   EXHIBIT 10.23

                          REGISTRATION RIGHTS AGREEMENT
                          -----------------------------

         This Registration Rights Agreement (the "AGREEMENT") is entered into as
of October 18, 2002 by and between Persistence Software, Inc., a Delaware
corporation (the "COMPANY"), and RTX Securities Corporation (the "WARRANT SHARE
HOLDER"). For purposes of this Agreement, the term "Warrant Share Holder"
includes all subsequent holders of Warrant Shares (as defined below).

                                    RECITALS
                                    --------

         1. The Company and the Warrant Share Holder have entered into an
Advisory Agreement pursuant to which the Warrant Share Holder will provide
certain services to the Company in consideration, in part, for the issuance to
the Warrant Share Holder by the Company of a warrant to purchase common stock,
dated as of the date hereof (the "WARRANT").

         2. A condition to the Warrant Share Holder obligations' under the
Advisory Agreement is that the Company grant certain registration rights to the
Warrant Share Holder with respect to the shares of Common Stock issuable upon
exercise of the Warrant (the "WARRANT SHARES").

         3. The Company wishes to execute this Agreement and grant the Warrant
Share Holder the rights contained herein.

                                    AGREEMENT
                                    ---------

         The parties hereby agree as follows:

         1. REGISTRATION RIGHTS. The Company and the Warrant Share Holder
covenant and agree as follows:

                  1.1      DEFINITIONS.  For purposes of this Section 1:

                           (a) The terms "REGISTER," "REGISTERED," and
"REGISTRATION" refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the Securities Act
of 1933, as amended (the "SECURITIES ACT") on Form S-3, and the declaration or
ordering of effectiveness of such registration statement or document;

                           (b) The term "REGISTRABLE SECURITIES" means:

                                (i) the Warrant Shares that are exercisable from
time to time in accordance with the terms of the Warrant; and

                                (ii) any other shares of Common Stock of the
Company issued as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or other distribution
with respect to, or in connection with a stock split, or in exchange for or in
replacement of, the Warrant Shares, excluding in all cases, however, any
Registrable Securities sold by a person in a transaction in which his or her
rights under this Agreement are not assigned; PROVIDED, HOWEVER, that the
Warrant Shares shall only be treated as Registrable Securities if and so long as
they have not been (A) sold to or through a broker or dealer or underwriter in a
public distribution or a public securities transaction, or (B) sold in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act under Section 4(1) thereof so that all transfer restrictions,
and restrictive legends with respect thereto, if any, are removed upon the
consummation of such sale;

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                           (c) The term "HOLDER" means any holder of outstanding
Registrable Securities who, subject to the limitations set forth in Section 1.10
below, acquired such Registrable Securities in a transaction or series of
transactions not involving any registered public offering;

                           (d) The term "FORM S-3" means such form under the
Securities Act as in effect on the date hereof or any successor form under the
Securities Act; and

                           (e) The term "SEC" means the Securities and Exchange
Commission.

                  1.2 COMPANY REGISTRATION. If (but without any obligation to do
so) the Company proposes to register (including for this purpose a registration
effected by the Company for stockholders other than the Holders) any of its
stock under the Securities Act in connection with the public offering of such
securities solely for cash (other than a registration relating solely to the
sale of securities to participants in a Company stock plan or a transaction
covered by Rule 145 under the Securities Act, a registration in which the only
stock being registered is Common Stock issuable upon conversion of debt
securities which are also being registered, or any registration on any form
which does not include substantially the same information as would be required
to be included in a registration statement covering the sale of the Registrable
Securities), the Company shall, at such time, promptly give each Holder written
notice of such registration. Upon the written request of each Holder given
within 20 days after mailing of such notice by the Company in accordance with
Section 2.6, the Company shall, subject to the provisions of Section 1.7, cause
to be registered under the Securities Act all of the Registrable Securities that
each such Holder has requested to be registered. Each Holder understands and
agrees that the registration rights granted to the Holder(s) hereunder are to
rank junior to the piggyback registration rights held by certain of the
Company's other stockholders.

                  1.3 OBLIGATIONS OF THE COMPANY. Whenever required under this
Section 1 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:

                           (a) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective, and keep such
registration statement effective until the earlier of: (i) the date on which all
the Registrable Securities are sold thereunder, or (ii) 90 days.

                           (b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement pursuant to the terms and
subject to the conditions of this Agreement.

                           (c) Furnish to the Holder(s) such numbers of copies
of a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.

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                           (d) Use its commercially reasonable efforts to
register and qualify the securities covered by such registration statement under
such other securities or Blue Sky laws of such jurisdictions as shall be
reasonably requested by the Holder(s), PROVIDED that the Company shall not be
required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such states
or jurisdictions.

                           (e) Notify each Holder of Registrable Securities
covered by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of the happening of
any event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing, such obligation to continue for so long as the Company agrees to
keep the registration statement effective pursuant to the terms of Section
1.3(a), whereupon each Holder shall cease utilizing such prospectus until such
time as the Company files a supplement or file a post-effective amendment to the
registration statement or the prospectus or any document incorporated therein by
reference or files any other report or document so that, as thereafter delivered
to the purchasers of the Registrable Securities, the prospectus will not contain
an untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading (a "PROSPECTUS UPDATE").
As soon as the Prospectus Update has been effectuated, the Company will notify
each Holder that the prospectus is available for use, whereupon each such Holder
may thereupon commence utilizing such prospectus.

                           (f) Cause all such Registrable Securities registered
pursuant hereunder to be listed on each securities exchange or other market on
which similar securities issued by the Company are then listed.

                           (g) Provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereunder and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration.

                  1.4 FURNISH INFORMATION. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this Section 1
with respect to the Registrable Securities of any selling Holder that such
Holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such Holder's
Registrable Securities.

                  1.5 EXPENSES OF REGISTRATION. All expenses incurred in
connection with registrations, filings or qualifications of Registrable
Securities hereunder for each Holder (which right may be assigned as provided in
Section 1.10), including (without limitation) all registration, filing, and
qualification fees, printers' and accounting fees, and fees and disbursements of
counsel for the Company, shall be borne by the Company. The Company shall not be
required to pay any underwriters' or brokers' fees, discounts or commissions
relating to the Registrable Securities, or the fees or expenses of separate
counsel to the selling Holder(s) (such fees, discounts and expenses, if any, to
be borne pro rata by the Holders participating in the registration).

                  1.6 UNDERWRITING REQUIREMENTS. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 1.2 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters), and then only in such
quantity as the underwriters determine in their sole discretion will not

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jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by stockholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among all selling stockholders according to
the total amount of securities entitled to be included therein owned by each
selling stockholder, provided that the Warrant Shares shall be excluded entirely
from the offering before any shares of Common Stock issued on conversion of
Preferred Stock of the Company are excluded). For purposes of the preceding
parenthetical concerning apportionment, for any selling stockholder that is a
holder of Registrable Securities and that is a partnership or corporation, the
partners, retired partners and stockholders of such holder, or the estates and
family members of any such partners and retired partners and any trusts for the
benefit of any of the foregoing persons shall be deemed to be a single "SELLING
STOCKHOLDER," and any pro-rata reduction with respect to such "selling
stockholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling stockholder," as defined in this sentence.

                  1.7 DELAY OF REGISTRATION. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 1.

                  1.8 INDEMNIFICATION. In the event any Registrable Securities
are included in a registration statement under this Section 1:

                           (a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, any underwriter (as defined in the
Securities Act) for such Holder and each person, if any, who controls such
Holder or underwriter within the meaning of the Securities Act or the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), against any losses,
claims, damages, or liabilities (joint or several) to which they may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "VIOLATION"): (i) any untrue statement
or alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Company of the Securities Act, the Exchange Act, any
state securities law or any rule or regulation promulgated under the Securities
Act, the Exchange Act or any state securities law; and the Company will pay to
each such Holder, underwriter or controlling person, as incurred, any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; PROVIDED, HOWEVER,
that the indemnity agreement contained in this subsection 1.8(a) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability, or
action if such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld), nor shall the Company be liable to
any Holder, underwriter or controlling person for any such loss, claim, damage,
liability, or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
any such Holder, underwriter or controlling person.

                           (b) To the extent permitted by law, each selling
Holder will indemnify and hold harmless the Company, each of its directors, each
of its officers who has signed the registration statement, each person, if any,
who controls the Company within the meaning of the Securities Act, any

                                      -4-
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underwriter, any other Holder selling securities in such registration statement
and any controlling person of any such underwriter or other Holder, against any
losses, claims, damages, or liabilities (joint or several) to which any of the
foregoing persons may become subject, under the Securities Act, the Exchange Act
or other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Holder expressly for use in connection with such registration;
and each such Holder will pay, as incurred, any legal or other expenses
reasonably incurred by any person intended to be indemnified pursuant to this
subsection 1.8(b), in connection with investigating or defending any such loss,
claim, damage, liability, or action; PROVIDED, HOWEVER, that the indemnity
agreement contained in this subsection 1.8(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; PROVIDED, that in no event shall any indemnity
under this subsection 1.8(b) exceed the net proceeds from the offering received
by such Holder, except in the case of willful fraud by such Holder.

                           (c) Promptly after receipt by an indemnified party
under this Section 1.8 of notice of the commencement of any action (including
any governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 1.8,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; PROVIDED, HOWEVER, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the reasonable fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.8, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 1.8.

                           (d) If the indemnification provided for in this
Section 1.8 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage or expense
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage, or
expense in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the statements or omissions that resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations; PROVIDED, that in no event shall any contribution by a Holder
under this Subsection 1.8(d) exceed the net proceeds from the offering received
by such Holder, except in the case of willful fraud by such Holder. The relative
fault of the indemnifying party and of the indemnified party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and
the parties' relative intent, knowledge, access to information, and opportunity
to correct or prevent such statement or omission.

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                           (e) Notwithstanding the foregoing, to the extent that
the provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.

                           (f) The obligations of the Company and Holder(s)
under this Section 1.8 shall survive the completion of any offering of
Registrable Securities in a registration statement under this Section 1, and
otherwise.

                  1.9 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view
to making available to the Holder(s) the benefits of Rule 144 promulgated under
the Securities Act and any other rule or regulation of the SEC that may at any
time permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to:

                           (a) make and keep public information available, as
those terms are understood and defined in SEC Rule 144, at all times so long as
the Company remains subject to the periodic reporting requirements under
Sections 13 or 15(d) of the Exchange Act;

                           (b) file with the SEC in a timely manner all reports
and other documents required of the Company under the Securities Act and the
Exchange Act; and

                           (c) furnish to any Holder, so long as the Holder owns
any Registrable Securities, forthwith upon request (i) a written statement by
the Company that it has complied with the reporting requirements of SEC Rule
144, the Securities Act and the Exchange Act, (ii) a copy of the most recent
annual or quarterly report of the Company and such other reports and documents
so filed by the Company, and (iii) such other information as may be reasonably
requested in availing any Holder of any rule or regulation of the SEC which
permits the selling of any such securities without registration.

                  1.10 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause
the Company to register Registrable Securities pursuant to this Section 1 may be
assigned by any Holder to a transferee or assignee of at least 25,000 shares of
the Warrant Shares, provided the Company is, within a reasonable time after such
transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned; and provided, further, that such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Securities Act.

                  1.11 CERTAIN ADDITIONAL AGREEMENTS OF THE HOLDER(S).

                           (a) Prior to and so long as the registration
statement shall remain effective, each Holder shall:

                                (i) Not engage in any stabilization activity in
connection with the Company's Common Stock;

                                (ii) Not bid for or purchase any of the
Company's Common Stock or any rights to acquire the Company's Common Stock, or
attempt to induce any person to purchase any of the Company's Common Stock other
than as permitted under the Exchange Act; or

                                (iii) Effect all sales of Registrable Securities
in broker's transactions through broker-dealers acting as agents, in
transactions directly with market makers or in privately negotiated transaction
where no broker or other third party (other than the purchaser) is involved.

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                           (b) Without limiting any other provision of this
Agreement, no Holder shall engage in any short-sales of the Company's Common
Stock prior to or during the effectiveness of the registration statement
pursuant to which the Holder(s) is offered the opportunity to sell its
Registrable Securities hereunder.

                  1.12 TERMINATION OF REGISTRATION RIGHTS. The rights granted
under this Section 1, including the rights to utilize any previously filed
registration statements, shall terminate upon the earlier of (a) October 18,
2007, (b) the date the Company has effected one registration statement pursuant
hereto or (c) such time as the Holder(s) may sell all of its Registrable
Securities in any single three month period pursuant to Rule 144 (or such
successor rule as may be adopted).

         2. MISCELLANEOUS.

                  2.1 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended or waived with the written consent of the Company and the holders of all
of the Warrant Shares then held by all Holders. Any amendment or waiver effected
in accordance with this Section 2.1 shall be binding upon the parties and their
respective successors and assigns.

                  2.2 SUCCESSORS AND ASSIGNS. Subject to the provisions of
Section 1.10, the terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective successors and assigns of the
parties. Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective successors and
assigns, any rights, remedies, obligations, or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.

                  2.3 GOVERNING LAW. The corporate laws of the State of Delaware
shall govern all issues concerning the relative rights of Company and the Holder
as a stockholder. All other questions concerning the construction, validity,
enforcement and interpretation of this Agreement and all acts and transactions
pursuant hereto shall be governed by and construed in accordance with the laws
of the State of California, without regard to principles of conflicts of law.

                  2.4 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.

                  2.5 TITLES AND SUBTITLES. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

                  2.6 NOTICES. Any notice required or permitted by this
Agreement shall be in writing and shall be deemed sufficient upon receipt, when
delivered personally or by courier, overnight delivery service or confirmed
facsimile, or 48 hours after being deposited in the regular mail as certified or
registered mail (airmail if sent internationally) with postage prepaid, if such
notice is addressed to the party to be notified at such party's address or
facsimile number as set forth below (or as subsequently modified by written
notice):

                  To the Company:           Persistence Software, Inc.
                                            1720 S. Amphlett Blvd, 3rd Floor
                                            San Mateo, CA 94402
                                            Attention: Chief Executive Officer
                                            Phone: (650) 372-3600
                                            Fax: (650) 341-8432

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                              With a copy to (which shall not constitute notice)

                                            Venture Law Group
                                            2775 Sand Hill Road
                                            Menlo Park, CA 94025
                                            Attn:  Laurel Finch
                                            Tel: (650) 854-4488
                                            Fax:  (650) 233-8386

                  To the Holders, at the respective addresses on the signature
pages hereto.

                  2.7. SEVERABILITY. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, the parties agree
to renegotiate such provision in good faith, in order to maintain the economic
position enjoyed by each party as close as possible to that under the provision
rendered unenforceable. In the event that the parties cannot reach a mutually
agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.

                  2.8. ENTIRE AGREEMENT. This Agreement is the product of
all of the parties hereto, and constitutes the entire agreement between such
parties pertaining to the subject matter hereof, and merges all prior
negotiations and drafts of the parties with regard to the transactions
contemplated herein. Any and all other written or oral agreements existing
between the parties hereto regarding such transactions are expressly canceled.

                  2.9. ADVICE OF LEGAL COUNSEL. Each party acknowledges and
represents that, in executing this Agreement, it has had the opportunity to seek
advice as to its legal rights from legal counsel and that the person signing on
its behalf has read and understood all of the terms and provisions of this
Agreement. This Agreement shall not be construed against any party by reason of
the drafting or preparation thereof.

                  2.10. DELAYS OR OMISSIONS. No delay or omission to exercise
any right, power or remedy accruing to any party to this Agreement, upon any
breach or default of the other party, shall impair any such right, power or
remedy of such non-breaching party nor shall it be construed to be a waiver of
any such breach or default, or an acquiescence therein, or of or in any similar
breach or default thereafter occurring; nor shall any waiver of any single
breach or default be deemed a waiver of any other breach or default theretofore
or thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be made in writing and shall be effective
only to the extent specifically set forth in such writing. All remedies, either
under this Agreement, or by law or otherwise afforded to any Holder, shall be
cumulative and not alternative.

                  2.11. THIRD PARTIES. Nothing in this Agreement, express or
implied, is intended to confer upon any party, other than the parties hereto,
and their respective successors and assigns, any rights, remedies, obligations
or liabilities under or by reason of this Agreement, except as expressly
provided herein.

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                  2.12. PRIORITY OF RIGHTS. The registration rights granted
to the Holder(s) under this Agreement are intended by the parties to rank junior
to the piggyback registration rights held by other Company stockholders. The
parties agree to interpret the terms of this Agreement in a manner consistent
with the foregoing intention.

                            [Signature Page Follows]

                                      -9-
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         The parties have executed this Registration Rights Agreement as of the
date first above written.

COMPANY:

PERSISTENCE SOFTWARE, INC.

By:      /s/ Christine Russell
         ---------------------------
Title:   Chief Financial Officer

WARRANT SHARE HOLDER

Name:  RTX SECURITIES CORPORATION

By:  /s/ Gregory S. Curhan
     --------------------------
Title:  President

Address: 100 Pine Street
         San Francisco, CA 94111

Fax Number: (415) 274-5669

                                      -10-<PAGE>

                                                                    Exhibit 10.3

STATE OF NORTH CAROLINA
COUNTY OF HENDERSON

                                                            EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
August 2, 1999, by and between MOUNTAINBANK (hereinafter referred to as the
"Bank") and Vincent K. Rees (hereinafter referred to as the "Officer").

                              W I T N E S S E T H :

     WHEREAS, the Bank desires to retain the Officer's services as an executive
employee of the Bank for the Term (as defined below), and the Officer is willing
to serve as an executive employee of the Bank for such period; and

     WHEREAS, the parties desire to enter into this Agreement to set forth the
terms and conditions of the Officer's employment with the Bank.

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

          1. Employment. The Bank hereby agrees to employ the Officer, and the
Officer hereby agrees to serve as an executive employee of the Bank, upon the
terms and conditions stated herein. The Officer will (i) serve as the Senior
Vice President, Chief Lending Officer with such duties, responsibility and
authority as are generally associated with such executive office, and (ii) have
such other duties, responsibilities and authority, and render to the Bank such
other management services, as are customary for a person having such an
executive office with a commercial bank and as are reasonable assigned to him
from time to time by the Board of Directors of the Bank (the "Board") or the
Bank's Chief Executive Officer (the "CEO"). He shall be provided with such
office, working facilities and staff at the offices of the Bank in
Hendersonville, North Carolina as are necessary for the Officer to perform his
obligations under this Agreement.

          The Officer shall faithfully and diligently discharge his duties and
responsibilities under this Agreement and shall use his best effort to implement
the policies established by the Board or the CEO. Officer, in the execution of
his duties under this Agreement, shall comply in all material respects with
personnel policies or any code of conduct adopted by the Board of Directors and
generally applicable to Officers and employees as the same shall be in effect,
amended or supplemented from time to time, and with all applicable federal and
state statutes applicable to Officer and all rules, regulations, administrative
orders, statements of policy and other pronouncements or standards promulgated
thereunder.

          The Officer hereby agrees to devote such number of hours of his
working time and endeavors to his duties and responsibilities hereunder as the
Officer and the CEO shall deem to be reasonably necessary to discharge such
duties and responsibilities. Except with prior consent of the Board, the Officer
shall not engage in any other occupation which requires a significant amount of
the Officer's personal attention during the Bank's regular business hours or
which otherwise interferes with the Officer's attention to or performance of his
duties and responsibilities under this Agreement. However, nothing herein
contained shall restrict or prevent the Officer from personally, and for the
Officer's own account or for the account of the Officer's immediate family,
trading in stocks, bonds, securities, real estate or other forms of investment
so long as such investment activities do not interfere with the Officer's
attention to or performance of his duties and responsibilities under this
Agreement.

          2. Compensation. For all services rendered by the Officer to the Bank
under this Agreement, the Bank shall pay the Officer a base salary of no less
than Seventy Thousand Dollars ($70,000.00) per annum ("Base Salary"), payable in
cash not less frequently than monthly; provided, however,

<PAGE>

that the amount of the Base Salary shall be reviewed by the CEO not less often
than annually for the purpose of considering such increases therein as are
appropriate to reflect the duties, responsibilities and performance of the
Officer. Such Base Salary shall be subject to customary withholding taxes and
such other employment taxes as are required by law. The Officer's Base Salary
may be increased by the CEO, and all reference to Base Salary herein shall mean
his Base Salary as so increased.

          In reviewing the Officer's Base Salary, the CEO shall consider the
employee compensation policies established by the Executive Committee of the
Board for application to the employees of the Bank, the duties and
responsibilities of the Officer, and the overall performances of the Officer and
the Bank, compensation paid to officers in comparable positions at comparable
financial institutions, as well as increases in the cost of living, and may also
consider the appropriateness of performance or merit increases. Neither
participation in, or receipt of payment from, any other benefits plan granted to
the Officer ("Fringe Benefits") shall reduce, or be deemed an offset against the
Base Salary to the Officer.

          3. Participation in Benefit P1ans; Fringe Benefits. During the Term,
the Officer shall be entitled to participate in any and all Benefit Plans from
time to time maintained by the Bank in accordance with the terms and conditions
(including eligibility requirements) of such Benefit Plans and the policies
adopted by the Board in establishing such Benefit Plans. The Officer shall be
entitled to paid vacation leave in accordance with the Board's policy for the
senior executive employees of the Bank now or hereafter in effect.

          The Officer shall be entitled to such customary Fringe Benefits,
including such vacation and sick leave, as are consistent with the normal
practices and established policies of the Bank.

          In addition to the other compensation and other benefits described in
the Agreement, the Bank shall promptly reimburse the Officer for all reasonable
and duly documented expenses incurred by him in the performance of his duties
and responsibilities under this Agreement in accordance with the policies
established by the Board. The Bank shall pay the Officer's civic club dues.

          4. Term. Unless sooner terminated as provided in this Agreement and
except as otherwise provide in Paragraph 7, the term of this Agreement and the
Officer's employment hereunder ("Term") shall be for a period commencing on the
date hereof and continuing until the close of business as of the third
anniversary of such date; provided, however that unless the Bank or the Officer
gives written notice to the other of non-extension at least thirty (30) days
prior to any anniversary of the date hereof, the term of this Agreement shall be
extended for a one (1) year period on each such anniversary of the date hereof
(i.e., absent the giving of such notice, the remainder of the Term shall not be
less that two (2) nor more that three (3) years at any time).

          5. Non-Competition and Confidentiality.

               (a) Confidential Information. The Officer hereby acknowledges and
agrees that; (i) in the course of his service as an executive officer of the
Bank, he will gain substantial knowledge of and familiarity with the Bank's
customers and its dealings with them, and other Confidential Information (as
defined below) concerning the Bank's business, all of which constitute valuable
and privileged assets that are particularly sensitive due to the fiduciary
responsibilities inherent in the banking business; and (ii) in order to protect
the Bank's interest in and to assure the benefit of its business, it is
reasonable and necessary to place certain restriction on the Officer's ability
to Compete (as defined below) against the Bank and on his disclosure of
Confidential Information.

          All Confidential Information shall be considered and kept by the
Officer as the confidential, private and proprietary property of the Bank. At
all times during and following the term of this Agreement or his employment for
any reasons, and except as shall be required in the course of the performance by
the Officer of his duties on behalf of the Bank or permitted by a direct,
written authorization of the CEO or the Board, he will not divulge any such
Confidential Information to any Person (as defined below) not employed by the
Bank (except as required by applicable Laws (as defined below), remove any such
Confidential Information in written or other recorded form from the Bank's
premises, or make any use of any

                                        2

<PAGE>

Confidential Information for his own purposes or for the benefit of any person
other than the Bank. The Officer may share confidential information in the
reasonable discharge of his responsibilities with Directors, vendors,
consultants, and regulatory agents. Following the termination of the Officer's
employment with the Bank, this Paragraph 5(a) shall not apply to any
Confidential Information which then is in the public domain (provided that the
Officer was not responsible, directly or indirectly, for permitting such
Confidential Information to enter the public domain without the Bank's consent)
or which was obtained by the Officer from a Person who is not obligated under an
agreement of confidentiality with respect to such information.

               (b) Noncompetition. In consideration of employment of the
Officer, during the Term and any subsequent Payment Period (as defined below),
the Officer agrees that Term (the "Market"), directly or indirectly, own,
manage, operate, join, control or participate in the management, operation or
control of, or be employed by or connected in any manner with, and any Person
who competes with the Bank, without the prior written consent of the Board;
provided however, that the provisions of this Paragraph 5(b) shall not apply
prospectively in the event this Agreement is terminated by the Bank without
Cause (as defined below); and, provided further, however, that if the Officer is
terminated for Cause under Paragraph 7(d), the period of noncompetition shall
extend until the first anniversary of the date of such termination.
Noncompetition provisions are void if there is a change in control.
Notwithstanding the foregoing, the Officer shall be free, without such consent,
to purchase or hold as an investment or otherwise up to five percent (5%) of the
outstanding stock or other securities of any Person which has its securities
listed on any national securities exchange or which has transactions in its
securities quoted on any level of The NASDAQ Stock Market, Inc. or other
over-the-counter market or inter-dealer quotation system.

               (c) Remedies for Breaches. The Officer understands and agrees
that a breach by him of the covenants contained in Paragraphs 5(a) or 5(b) of
this Agreement will be deemed a material breach of this Agreement and will cause
irreparable injury to the Bank, and that it would be difficult to ascertain the
amount of monetary damages that would result from any such breach. In the event
of the officer's actual or threatened breach of the covenants contained in
Paragraphs 5(a) or 5(b), the Bank shall be entitled to bring a civil action
seeking an injunction restraining the Officer from breaching or continuing to
breach those covenants or from any threatened breach thereof, or any other legal
or equitable relief relating to the breach of such covenants. The Officer agrees
that, if the Bank institutes any action or proceeding against him seeking to
enforce any of such covenants or to recover other relief relating to an actual
or threatened breach of any of such covenants, he shall be deemed to have waived
any claim or defense that the Bank has an adequate remedy at law and shall not
urge in any such action or proceeding the claim or defense that such a remedy at
law exists. The exercise by the Bank of any such right, remedy, power, or
privilege, however, shall not preclude the Bank from pursuing any other remedy
or exercising any other right, power or privilege available to it for any such
breach, whether at law or in equity, including the recovery of damages, all of
which shall be cumulative and in addition to all other rights, remedies, powers
or privileges of the Bank.

          Notwithstanding anything contained herein to the contrary, the Officer
agrees that the provisions of Paragraphs 5(a) and 5(b) above and the remedies
provided in this Paragraph 5(c) for a breach shall be in addition to, and shall
not be deemed to supersede or to otherwise restrict, limit, or impair the rights
of the Bank under the Trade Secrets Protection Act contained in "Article 24,
Chapter 66 of the North Carolina General Statutes, or any other state of federal
law or regulation dealing with or providing a remedy for this wrongful
disclosure, misuse or misappropriation of trade secrets or other proprietary or
confidential information.

               (d) Survival of Covenants. The Officer's covenants and agreements
and the Bank's rights and remedies provided for in this Paragraph 5 shall
survive any termination of this Agreement or the officer's employment with the
Bank.

               (e) Definitions. For purposes of this Agreement:

                    (i) "Confidential Information" means any and all data,
                    figures, projections, estimates, lists, files, records,
                    documents, manuals or other such materials or information,
                    (financial or otherwise) relating to the Bank and its

                                        3

<PAGE>

                    banking business, regulatory examination, financial results
                    and condition, lending and deposit operations, customers
                    (including lists of customers and information regarding
                    their accounts and business dealings with the Bank),
                    policies and procedures, computer system and software,
                    shareholders, employees, officers and directors.

                    (ii) A Person that "Competes" means a person that (A)
                    solicits or secures deposits from any Person, (B) solicits
                    or makes loans to any Person, (C) induces or attempts to
                    induce any Person who was a customer of the Bank at the time
                    of the termination of the Officer's employment to change the
                    customer's depository, loan, or other banking relationship
                    from the Bank to another financial institution, or (E)
                    otherwise provides any type of commercial banking services,
                    in each case from banking offices located with, the Market.

                    (iii) "Person" means (A) an individual or a corporation,
                    partnership (limited or general), trust, limited liability
                    company, business trust, association (mutual or stock,
                    including a mutual holding company), joint venture, pool,
                    syndicate, unincorporated organization or any other form of
                    entity; and (B) any Affiliate (as defined below) of any
                    individual or entity listed in item (A). "Affiliate" means
                    any person who controls, is under common control with, or is
                    controlled by the Person to whom reference is being made;
                    and for the purposes of the definition of Affiliate, control
                    shall be deemed to exist in a Person who beneficially owns
                    ten percent (10%) or more of the outstanding equity
                    interests (or options, warrants or other rights to acquire
                    such, equity interests) of another Person.

                    (iv) "Payment Period" means the period of time following the
                    end of the Term during which the Officer receives payments
                    of money, participates in Benefit Plans and/or receives
                    Fringe Benefits under Paragraph 7(b), 7(c), 7(f), or 7(g),
                    as applicable.

          6. Standards. The Officer, in the execution of his duties and
responsibilities under this Agreement, shall at all times and in all respects
comply in all material respects with the policies of the Board, including any
code of business conduct or code of ethics adopted by the Board for application
to the Bank's employees, and with all applicable statutes and with all Laws as
defined below.

          7. Termination and Termination Pay.

               (a) Termination by Death. This Agreement shall be terminated upon
the death of the Officer during the Term. Upon the Officer's death, the
Officer's estate shall be entitled to receive all compensation and benefits
payable to, or accruable or vested for the benefit of, the Officer under this
Agreement through the end of the calendar month in which the Officer's death
shall have occurred.

               (b) Termination by Total Disability. This Agreement shall be
terminated upon the total disability (as defined below) of the Officer during
the Term. In the event of his total Disability, the Officer shall receive all
compensation and benefits payable to, or accruable or vested for the benefit of,
the Officer under this Agreement through the date of the determination of his
Total disability and for a period of ninety (90) days thereafter. The Officer
shall be deemed to have suffered "Total disability" upon the determination of
his total permanent disability by the United States Social Security
Administration or the Bank's receipt of a certification to such effect by the
Officer's regular physician, in each case such total permanent disability
meaning the Officer's loss of ability to perform at least the majority of his
then applicable duties hereunder.

                                        4

<PAGE>

               (c) Termination by Officer. This Agreement may be terminated at
any time by the Officer upon sixty (60) days prior written notice to the Bank.
Unless the provisions of Paragraphs 7(f)(ii) or 7(g) are applicable and the
Officer elects to apply the applicable provisions, upon such termination, the
Officer shall be entitled to receive the compensation and benefits payable to,
or accruable or vested for the benefit of, the Officer under this Agreement
through the effective date of such termination.

               (d) Termination for Cause. The Board may terminate this Agreement
for Cause, in which event the Officer shall have no right to receive, or to have
accrued or vested for his benefit, compensation or other benefits hereunder for
any period after such termination. Termination for Cause shall mean termination
of this Agreement because of the Officer's (A) a willful and material breach of
fiduciary duty involving personal profit, (B) intentional and material failure
to perform stated duties (after written notice thereof), (C) conviction of a
crime of dishonesty or moral turpitude, (D) willful and material violation of
any law, statute, rule, regulation order, statement of policy or final
cease-and-desist order ("Laws") of any governmental agency or body having
regulatory authority over the Bank ("Regulatory Authorities") whether or not
resulting in criminal prosecution or conviction, or (E) a material and
continuing breach of any provision of this Agreement (after written notice
thereof) or (F) the occurrence of any event that shall result in the Officer
being excluded from coverage, or having coverage limited as to the Officer as
compared to other executives of the Bank, under the Bank's then current "blanket
bond" or other fidelity or insurance policy covering its directors, officers or
employees. With respect to the first occurrence of any instance listed above
specifically requiring written notice, the Bank shall give the Officer written
notice which describes the failure or breach, and the Officer shall have thirty
(30) days to cure such breach or failure to the reasonable satisfaction of the
board; provided, however, that no opportunity to cure shall be allowed for any
subsequent substantially similar failure or breach and termination for cause in
such circumstances shall be effective upon the giving of such written notice.

               (e) Termination Without Cause. The Board may terminate this
Agreement without cause at any time upon sixty (60) days prior written notice to
the Officer; provided, however, that in the event of such termination, unless
the provisions of Paragraph 7(f) or 7(g) are applicable, the Officer will
continue to receive his Base salary and all other benefits (including bonuses
and continuation of all Benefit Plans and Fringe Benefits except for qualified
retirement plans) for a period of one (1) year from the date of termination. At
the election of the officer, the Present Value of such Base Salary and bonuses,
determined as provided in Paragraph 7(g), shall be paid within sixty (60) days
of the date of termination. Termination without cause requires full board
approval and absence thereof voids this paragraph.

               (f) Unapproved Change in Control Termination. In the event of (i)
the termination of this Agreement without Cause or (ii) the voluntary
termination of this Agreement by the Officer, in each case in connection with,
or within one (1) year after, any Change in, Control (as defined below) which
has not been approved in advance by a formal resolution of two-thirds (2/3) of
the members of the Board who are not Affiliates of the Person effecting or
proposing to effect the Change in Control ("Independent Directors"), the Officer
shall be entitled at his election:

                    (A) to continue to receive his Base Salary and bonuses as
                    provided in this agreement for a period of two (2) years
                    subsequent to the effective date of such termination; and

                    (B) to continue to participate in all Benefit Plans and
                    Fringe Benefits, except qualified retirement p1ans or for
                    the period of two (2) years.

          Upon written notice by the Officer to the Bank, in lieu of paying the
amount in item (A) above for a period of two (2) years in installments, the
Officer shall be paid the Present Value of such Base Salary and bonuses in a
lump sum within sixty (60) days of the termination of his employment. The
calculation of the amount due shall be made by the independent accounting firm
then performing the Bank's independent audit (the "Auditor") at the expense of
the Bank. If Officer does not agree with the calculation performed by the
Auditor, then Officer may choose an auditor to perform such calculation on his
behalf and at his expense. Following such calculation, if the auditor and the
auditor appointed by the officer are unable to

                                        5

<PAGE>

agree on the calculation, the Bank and the officer shall agree on an independent
third-party auditor who shall be appointed to determine the calculation of the
amount due to Officer pursuant to this paragraph. The determination of such
third-party auditor shall be conclusive and binding on all parties hereunder. In
the event Officer elects such lump sum payment, the officer shall continue to
participate in the Benefit Plans and Fringe Benefits for the aforesaid two (2)
year period. The Officer shall also be entitled to a cash payment of an amount
equal to the amount of any and all excise tax liability incurred by Officer
pursuant to the Internal Revenue Code of 1986, as amended, in connection with
the payments and benefits compensation in Paragraph 7 (such amount to be
determined by the Auditor at the Bank's expense).

               (g) Approved Change in control Termination. Upon ten (l0) days
prior written notice, the Officer may declare this Agreement to have been
terminated without Cause by the Bank, upon the occurrence of any of the
following events, which have not been consented to in advance by the Officer in
writing, following a Change in Control approved in advance by a formal
resolution of at least two-thirds (2/3) of the Independent Directors: (i) if the
Officer is required to move his personal residence or perform his principal
executive function more than fifty (50) miles from the city limits of
Hendersonville, North Carolina; (ii) if the Bank should fail to maintain Salary
and Benefit Plans providing to him at least substantially the same level
afforded the officer as of the date of the change in control; or (iii) if the
Officer's responsibilities or authority in the capacity described in Paragraph 1
have been diminished materially.

          Upon such termination, or upon any other termination of this Agreement
without Cause by the Bank within one (1) year following an approved Change in
control, the Officer shall be entitled to receive the compensation and benefit
continuation when and as provided in Paragraph 7(f) above.

               (h) Definitions. A "Change in control" means a change in control
of the Bank of a nature that would be required to be reported in response to
Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities and
Exchange Act of 1934, as amended (the "1934 Act"), or the acquisition of
control, within the meaning of Section 2(a)(2) of the Bank Holding Act of 1956,
as amended, or Section 602 of the Change in Control Act of 1978, of the Bank by
any Person; provided that, without limitation, a Change in Control also shall be
deemed to have occurred if:

                    (i) Any Person is or becomes the "beneficial owner" (as
                    defined in Rule 13d-3 under the 1934 Act), directly or
                    indirectly, of securities of the Bank representing 30% or
                    more of the combined voting power of the Bank's then
                    outstanding securities; or

                    (ii) During any period of two (2) consecutive years,
                    individuals who at the beginning of the Term constitute the
                    Board cease for any reason to constitute at least a majority
                    thereof unless the election, or the nomination for election
                    by the Bank's shareholders, of each new director was
                    approved by a vote of at least two-thirds (2/3) of the
                    directors then still in office who were directors at the
                    beginning of the Term.

          8. Additional Regulatory Requirement. Notwithstanding anything
contained in this Agreement to the contrary, it is understood and agreed that
the Bank shall not be required to make any payment or take any action under this
Agreement if (a) such payment or action would be prohibited by or would violate
any law or (b) such payment or action otherwise would be prohibited by any
Regulatory Authority.

          9. Successors and Assigns.

               (a) This Agreement shall inure to the benefit of and be binding
upon any corporate or other successor of the Bank, including any Person
exchange, purchase or otherwise, all or substantially all of the capital stock
or assets of the Bank.

                                        6

<PAGE>

               (b) The Bank is contracting for the unique and personal skill of
the Officer. Therefore, the Officer shall be precluded from assigning or
delegating his rights, duties or responsibilities hereunder.

          10. Modification: Waiver; Amendments. No provision of this Agreement
may be modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing and signed by the parties hereto. No waiver by
either party hereto, at any time, of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provision or
conditions at the same or at any prior or subsequent time. No amendments or
additions to this Agreement shall be binding unless in writing and signed by
both parties, except as herein otherwise provided.

          11. Applicable Law. This Agreement shall be governed in all respects,
whether as to validity, construction, capacity, performance or otherwise, by the
laws of North Carolina.

          12. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.

          13. Entire Agreement. This Agreement 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 and of the
parties hereto other than those contained herein in writing.

          14. Disputes. In the event any dispute shall arise between the Officer
and the Bank (or its Board) as to the terms or interpretation of this Agreement,
whether instituted by formal legal proceedings or otherwise, including any
action taken by the officer to enforce the terms of this Agreement or in
defending against any action taken by the Bank, unless the Officer shall have
received no recovery or other relief on his claims or shall have not prevailed
on his defenses, the Bank shall reimburse the Officer for all cost and expenses,
including reasonable attorneys' fees, incurred by him in such disputes or
proceedings.

          IN WITNESS WHEREOF, the parties have executed this Agreement under
seal to be effective as of the day and year first hereinabove written.

                                        MOUNTAINBANK

                                        By: /S/ Boyd L. Hyder
                                            ------------------------------------
                                                Boyd L. Hyder
                                                Chairman

[CORPORATE SEAL]

ATTEST:

/S/ J. W. Davis
--------------------------------
    President

                                        By: /S/ Vincent K. Rees
                                            ------------------------------------
                                                Vincent K. Rees

                                       7

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