Document:

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                          JPS AUTOMOTIVE PRODUCTS CORP.

                                       and

                               JPS AUTOMOTIVE L.P.

                                 as Co-Obligors

                                  $180,000,000
                          11-1/8% SENIOR NOTES due 2001

                         --------------------------------

                          SECOND SUPPLEMENTAL INDENTURE

                             Dated January 28, 2000

                         Effective as of January 1, 2000

                         --------------------------------

                ------------------------------------------------

                       State Street Bank and Trust Company

                ------------------------------------------------

                                Successor Trustee

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<PAGE>

         THIS SECOND SUPPLEMENTAL INDENTURE (the "Supplemental Indenture"),
dated January 28, 2000, by and among JPS Automotive L.P., a Delaware limited
partnership ("JPS Partners"), JPS Automotive Products Corp., a Delaware
corporation wholly owned by JPS Partners ("JPS Automotive"), PACJ, Inc., a
Delaware corporation ("PACJ") and State Street Bank and Trust Company, as
successor trustee (the "Trustee").

         WHEREAS, JPS Automotive, JPS Partners and Shawmut Bank Connecticut
National Association, as trustee executed an indenture, dated as of June 28,
1994 (the "Original Indenture"), relating to $180 million principal amount of
the 11-1/8% Senior Notes due 2001 of JPS Automotive (the "Senior Notes"), and a
First Supplemental Indenture, dated October 5, 1994 (the "First Supplemental
Indenture");

         WHEREAS, pursuant to Section 9.01(a) of the Original Indenture, JPS
Automotive, JPS Partners and PACJ desire to amend Section 9.01(c) of the
Original Indenture to cure a potential ambiguity, defect and inconsistency;

         WHEREAS, pursuant to Section 5.01 and Section 10.02 of the Original
Indenture, JPS Automotive may merge with another Person upon the compliance with
certain conditions, including, among other things, that the surviving entity, if
other than JPS Partners, assumes all of the obligations of JPS Partners under
the Notes and the Original Indenture pursuant to a supplemental indenture;

         WHEREAS, pursuant to an Agreement and Plan of Merger, dated as of
January 1, 2000, between JPS Partners and PACJ, JPS Partners has agreed to merge
with and into PACJ under the name "JPS Automotive, Inc." (the "Merger");

         WHEREAS, in order to facilitate the Merger, JPS Partners, JPS
Automotive, PACJ and the Trustee desire to amend the Original Indenture as
required by Section 5.01 and Section 10.02, which amendment, pursuant to Section
9.01 of the Original Indenture, does not require the consent of the Holders of
the Senior Notes;

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

         1. Definitions. Except as otherwise provided herein, all terms used
herein which are defined in the Original Indenture shall have the meanings
assigned to them therein.

         2. Amendment to Section 1.01. The definition of "Continuing Directors"
is hereby amended in its entirety to read as follows:

                                       1
<PAGE>

                  "Continuing Directors" means, as of any date of determination,
                  any member of the Board of Directors of JPS Automotive or of
                  JPS Automotive, Inc. who (i) was a member of such Board of
                  Directors on the date of the Indenture or (ii) was nominated
                  for election or elected to such Board of Directors with the
                  affirmative vote of a majority of the Continuing Directors who
                  were members of such Board at the time of such nomination or
                  election.

         3. Amendment to Section 9.01. Section 9.01(c) is hereby amended and
restated as follows:

                  (c) to provide for the assumption of JPS Automotive, Inc.'s or
                  the Guarantor's obligations to the Holders of the Notes in the
                  case of a merger, consolidation or sale of all or
                  substantially all of the Company's, JPS Automotive, Inc.'s or
                  the Guarantor's assets pursuant to Section 4.16, Article 5 or
                  Section 10.02 hereof;

         4. Assumption of Obligations. PACJ hereby assumes all of the
obligations of JPS Partners under the Notes and, as supplemented and amended
hereby and by the First Supplemental Indenture, the Original Indenture, which
obligations JPS Partners assumed pursuant to the First Supplemental Indenture.
JPS Automotive acknowledges that it is not released from such obligations under
the Notes and the Original Indenture, as it has been amended and supplemented.

         5. Ratification of Original Indenture. The Original Indenture, as
previously supplemented and as supplemented and amended hereby, is in all
respects ratified and confirmed. The Original Indenture as so supplemented and
amended shall be read, taken and construed as one and the same instrument.

         6. Effective Date. The effective date of this Supplemental Indenture
and the amendments, assumptions of liabilities and ratifications contained
herein and contemplated hereby shall be January 1, 2000.

         7. Counterparts. This Supplemental Indenture may be executed in several
counterparts, each of which shall be an original and all of which together shall
constitute one instrument.

         8. Governing Law. This Supplemental Indenture shall be deemed to be a
contract under the internal laws of the State of New York and for all purposes
shall be construed in accordance with the laws of such state.

         9. Trustee. The Trustee accepts the modifications of the Trust effected
by this Second Supplemental Indenture, but only upon the terms and conditions
set forth in the Original Indenture. Without limiting the generality of the
foregoing, the Trustee assumes no responsibility for the correctness of the
recitals herein contained, which shall be taken as the statements of JPS

                                       2
<PAGE>

Automotive and JPS Partners and PACJ, and the Trustee shall not be responsible
or accountable in any way whatsoever for or with respect to the validity or
execution or sufficiency of this Second Supplemental Indenture, and the Trustee
makes no representation with respect thereto.

                                       3
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Second
Supplemental Indenture to be duly executed as of the day and year first above
written.

                                     JPS AUTOMOTIVE PRODUCTS CORP.

                                     By: /s/ Eugene A. White
                                         -------------------------------

                                     Name: Eugene A. White
                                     Title: Vice President-Taxes

                                     JPS AUTOMOTIVE L.P.
                                     By:  PACJ, Inc., its General Partner

                                     By: /s/ Eugene A. White
                                         -------------------------------
                                     Name: Eugene A. White
                                     Title: Vice President-Taxes

                                     PACJ, INC.

                                     By: /s/ Eugene A. White
                                         -------------------------------

                                     Name: Eugene A. White
                                     Title: Vice President-Taxes

                                     STATE STREET BANK AND TRUST
                                     COMPANY
                                     as Trustee

                                     By: /s/ E. C. Hammer
                                         -------------------------------

                                     Name: Elizabeth C. Hammer
                                     Title: Vice President

                                       4EXHIBIT 4.1

                        SPECIMEN COMMON STOCK CERTIFICATE

                       [specimen common stock certificate]

Incorporated Under the Laws of the State of North Carolina

Number of Shares of Common Stock: _________________ of Weststar Financial
Services Corporation $1.00 par value per share.

This Capital Stock of Weststar Financial Services Corporation is transferable
only on the books of the Corporation by the holder hereof in person or by
Attorney upon surrender of this Certificate properly endorsed.

IN WITNESS WHEREOF, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed this _____ day of _______, 2000.

--------------------------                  --------------------------
President                                   Secretary

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Certificate Number:___________ for ____________ Shares of Capital Stock

For Value Received, _____________ hereby sell, assign, and transfer unto
___________ Shares of the Capital Stock represented by the within Certificate,
said Stock on the books of the within named Corporation with full power of
substitution in the premises.

Dated: ______________, 2000.

In the presence of ___________________.EXHIBIT 10.1

STATE OF NORTH CAROLINA

COUNTY OF BUNCOMBE

                                                            EMPLOYMENT AGREEMENT

     THIS AGREEMENT entered into as of August 1, 1997, by and between THE BANK
OF ASHEVILLE (PROPOSED) (hereinafter referred to as the "Bank") and HOWARD B.
MONTGOMERY, JR. (hereinafter referred to as "Montgomery").

                                   WITNESSETH:

     WHEREAS, the Bank desires to retain Montgomery's services as an officer of
the Bank for the period specified herein, and Montgomery is willing to serve
as an officer of the Bank for such period; and, the parties desire to enter into
this Agreement to set forth the terms and conditions of Montgomery's employment
with the Bank;

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

     1. Employment. The Bank hereby agrees to employ Montgomery, and Montgomery
hereby agrees to serve as an officer of the Bank, all upon the terms and
conditions stated herein. As an officer of the Bank, Montgomery will (i) serve
as President and Chief Executive Officer of the Bank, and (ii) have such other
duties and responsibilities, and render to the Bank such other management
services, as are customary for persons in Montgomery's position with the Bank or
as shall otherwise be reasonably assigned to him from time to time by the Bank.
     Montgomery shall faithfully and diligently discharge his duties and
responsibilities under this Agreement and shall use his best efforts to
implement the policies established by the Bank.
     Montgomery hereby agrees to devote to the employment granted hereunder
such number of hours as such efforts and endeavors as the Bank shall deem to be
necessary to discharge his duties hereunder, and, for so long as employment
hereunder shall exist, Montgomery shall not

<PAGE>

EMPLOYMENT AGREEMENT
Howard B. Montgomery, Jr.

engage in any other occupation which requires any significant amount of
Montgomery's personal attention during the Bank's regular business hours or
which otherwise interferes with Montgomery's attention to or performance of his
duties and responsibilities as an officer of the Bank hereunder except with the
prior written consent of the Bank. However, nothing herein contained shall
restrict or prevent Montgomery from personally, and for Montgomery's own
account, trading in stocks, bonds, securities, real estate or other forms of
investment for Montgomery's own benefit so long as said activities do not
interfere with Montgomery's attention to or performance of his duties and
responsibilities as an officer of the Bank hereunder.

     2. Compensation. For all services rendered by Montgomery to the Bank under
this Agreement, the Bank shall provide Montgomery a total compensation package
in the amount of One Hundred Thirteen Thousand dollars and 00/100's ($113,000)
per annum. The Board of Directors shall review this amount no less often than
annually, 30 days after the Bank's fiscal year end. In the first year,
Montgomery's compensation shall consist of a base salary at a rate of Ninety
Thousand dollars and 00/100's ($90,000) per annum. Salary paid under this
Agreement shall be payable in cash not less frequently than monthly. All
compensation hereunder shall be subject to customary withholding taxes and such
other employment taxes as are required by law. In the event of a Change in
Control (as defined in Paragraph 9), Montgomery's base salary shall be increased
not less than five percent (5%) annually during the term of this Agreement.
     In addition to the base salary, the Bank will provide Montgomery or pay for
his benefit the following:
     (a)  Medical insurance premiums to provide coverage for Montgomery and his
          dependents;
     (b)  Life insurance premiums;
     (c)  Use of an automobile owned or leased by the Bank;
     (d)  A moving allowance to assist Montgomery in moving his residence from
          Raleigh, North Carolina to Asheville, North Carolina;
     (e)  A matching contribution to the Bank's 401(k) Plan; and
     (f)  A contribution on behalf of Montgomery to a Non-Qualified Plan.

                                       2
<PAGE>

EMPLOYMENT AGREEMENT
Howard B. Montgomery, Jr.

     The cost of these benefits to the Bank shall be no more than Twenty Three
Thousand dollars and 00/100's ($23,000). The Bank and Montgomery reserve the
right to mix and match the benefits as mutually agreed as long as the total cost
of salary and benefits combined do not exceed One Hundred Thirteen Thousand
dollars and 00/100's ($113,000).

     3. Participation in Retirement and Employee Benefit Plan; Establishment of
Bonus Plans; Fringe Benefits. Subject to the terms and conditions of this
Agreement, Montgomery shall be entitled to participate in any and all employee
benefit programs and compensation plans from time to time maintained by the Bank
and available to all employees of the Bank, all in accordance with the terms and
conditions (including eligibility requirements) of such programs and plans of
the Bank, resolutions of the Bank's Board of Directors establishing such program
and plans, and the Bank's normal practices and established policies regarding
such programs and plans.
     The Bank shall develop and implement during the first year of the term of
this Agreement an incentive cash bonus plan whereby Montgomery will be entitled
to receive an annual cash bonus upon his attainment of prescribed goals set
forth in such plan.
     In addition to the other compensation and benefits described in this
Agreement, the Bank shall promptly reimburse Montgomery for all reasonable
expenses incurred by him in the performance of his duties under this Agreement
and documented to the reasonable satisfaction of the Bank or appropriate
officers of the Bank pursuant to established procedures. The Bank shall make the
payment of civic club and country club dues selected by Montgomery provided that
Montgomery shall be responsible for all personal expenses for use of such clubs.

     4. Vacation. Montgomery shall be entitled to paid vacation leave of four
weeks each year.

     5. Term. Unless sooner terminated as provided in this Agreement and subject
to the right of either Montgomery or the Bank to terminate Montgomery's
employment at any time as provided herein, the initial term of this Agreement
and Montgomery's employment with the Bank hereunder shall commence upon August
15, 1997 and shall continue for a period of three (3) years. On the second
anniversary of the date of this Agreement, and if Montgomery has successfully
met objectives as set forth in the Business Plan, the term of this Agreement
shall be extended for an

                                       3
<PAGE>

EMPLOYMENT AGREEMENT
Howard B. Montgomery, Jr.

additional one year period beyond the then effective expiration date unless
written notice from the Bank to Montgomery or from Montgomery to the Bank is
received 90 days prior to the anniversary date notifying the other party that
this Agreement shall not be so extended. It is contemplated that the Board of
Directors will review Montgomery's performance annually and make a determination
whether to renew this Agreement prior to the 90 day notice period.
     Community First Organizers, LLC shall serve as substitute for the Bank as a
party to this agreement until such time as the Bank is fully subscribed and
meets all requirements to become chartered in the State of North Carolina.
     In the event the Bank is not fully subscribed, or the Bank does not meet
all requirements to become chartered in the State of North Carolina, or the Bank
fails to open for business for any reason known or unknown, this contract shall
terminate.

     6. Confidentiality. Montgomery hereby acknowledges and agrees that (i) in
the course of his service as an officer of the Bank, he will gain substantial
knowledge of and familiarity with the Bank's customers and the Bank's dealings
with them, and other information concerning the Bank's business, all of which
constitute valuable assets and privileged information which is 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 it
to the benefit of its business, it is reasonable and necessary to place certain
restrictions on Montgomery to prevent him from competing with the Bank and to
prevent him from disclosing information about the Bank's business and customers.
For that purpose, and in consideration of this Employment Agreement, Montgomery
convenants and agrees with the Bank as follows:
     For the purpose of this Paragraph 6, the following terms shall have these
meanings;
     Customer. The term "Customer" means any Person with whom, as of the
effective date of termination of this Agreement or Montgomery's employment with
the Bank for any reason, the Bank has or has had a depository, loan or any other
bank relationship.
     Financial Institution. The term "Financial Institution" means any federal
or state chartered bank, savings bank, savings and loan association or credit
union, or any holding company or corporation which owns or controls any such
entity, or any other Person engaged in the business of making loans of any type
or receiving deposits, other than the Bank.

                                       4

<PAGE>

EMPLOYMENT AGREEMENT
Howard B. Montgomery, Jr

     Person. The term "Person" means any natural person or any corporation,
partnership, proprietorship, joint venture, limited liability company, trust,
estate, governmental agency or instrumentality, fiduciary, unincorporated
association or other entity.
     (a) Confidentiality Covenant. Montgomery covenants and agrees with the Bank
that any and all data, figures, projections, estimates, lists, files, records,
documents, manuals and all other such materials or information (financial or
otherwise) relating to the Bank and its banking business, regulatory
examinations, financial results and conditions, lending and deposit operations,
customers (including lists of the Bank's customers and information regarding
their accounts and business dealings with the Bank), policies and procedures,
computer systems and software, shareholders, employees, officers and directors
(herein referred to as "Confidential Information") are proprietary to the Bank
and are valuable, special and unique assets of the Bank and its business to
which Montgomery will have access during his employment with the Bank.
Montgomery agrees that (i) all such Confidential Information shall be considered
and kept as the confidential, private and privileged records and information of
the Bank, and (ii) at all times during the term of his employment with the Bank
and following the termination of this Agreement or his employment for any
reason, and Montgomery will not: (a) divulge any such Confidential Information
to any other Person or Financial Institution; (b) remove any such Confidential
Information in written or other recorded form from the Bank's premises; or (c)
make any use of any Confidential Information for his own purpose or for the
benefit of any Person or Financial Institution other than the Bank.
     (b) Remedies for Breach. Montgomery understands and agrees that a breach or
violation by him of any convenant contained in Paragraph 6(a) of this Agreement
would constitute a material breach of this Agreement and would cause irreparable
damage and injury to the Bank for which the Bank would not have an adequate
remedy at law in that it would be difficult to ascertain the amount of monetary
damages which would result from any such breach or violation. In the event of
Montgomery's actual or threatened breach or violation of any covenant contained
in Paragraph 6(a), Montgomery agrees the Bank shall be entitled to bring a civil
action seeking a temporary restraining order and preliminary and permanent
injunction restraining Montgomery from violating or continuing to violate any of
these covenants or from threatening to violate any of them and seeking any other
legal or equitable relief relating to the breach or violation of any of these
covenants. Montgomery agrees if the Bank institutes any such civil action
against Montgomery, Montgomery shall have waived any claim or defense that the
Bank has an adequate remedy at law and shall not

                                      5
<PAGE>

EMPLOYMENT AGREEMENT
Howard B. Montgomery, Jr.

plead or contend in any such civil action any claim or defense that the Bank has
adequate remedy at law. Moreover, the parties agree the exercise by the Bank of
its right to seek in injunctive relief shall not preclude the Bank or its
successors or assigns from pursing any other remedy or exercising any other
right, power or privilege available to it for any such breach or violation,
whether at law or in equity, including the recovery of damages, all of which
shall be cumulative and in addition to all other rights and remedies, available
to the Bank.

     Further, Montgomery agrees the provisions of Paragraph 6(a) above and the
remedies provided in this Paragraph 6(b) 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 Statues, or the rights of the Bank under any
other state or federal law or regulation dealing with or providing a remedy for
the wrongful disclosure, misuse or misappropriation of trade secrets or other
proprietary or confidential information.

     (c) Survival of Covenants. Montgomery's covenants and agreements and the
Bank's rights and remedies provided for in this Paragraph 6 shall survive any
termination of this Agreement or termination of Montgomery's employment with the
Bank regardless of the reason for such termination.

     7. Termination and Termination Pay.
     (a) Montgomery's employment under this Agreement shall be terminated by his
death and his estate shall be entitled to receive any unpaid compensation due
him computed through the last day of the calendar month in which his death
occurs.

     (b) Montgomery shall have cause to terminate his employment by the Bank if
he determines in good faith that the Bank has breached in any material respect
any of the terms or conditions of this Agreement. Prior to any such termination
by Montgomery upon his determination in good faith the Bank has breached in a
material respect any of the terms or conditions of this Agreement, Montgomery
shall give the Bank written notice which describes such breach and if the Bank
within five days following its receipt of such notice cures or corrects the
breach to the reasonable satisfaction of Montgomery, this Agreement shall remain
in full force and effect.

                                        6
<PAGE>

EMPLOYMENT AGREEMENT
Howard B. Montgomery, Jr.

     (c) Montgomery may terminate his employment at any time without cause
provided (i) Montgomery provides at least 90 days notice to the Bank of his
intention to terminate his employment by the Bank and (ii) Montgomery agrees to
be bound by a covenant not to compete by his employment with any Financial
Institution in Buncombe County for a period of not less than 2 years.

     (d) The Bank may terminate Montgomery's employment at any time with cause
or without cause as "Cause" is defined below.

     If Montgomery's employment is terminated for any reason other than for
cause, the termination shall not prejudice Montgomery's right to compensation
for other benefits under this Agreement for the remaining term of the Agreement.

     On the other hand, if Montgomery's employment is terminated for cause,
Montgomery shall not thereafter have any rights under this Agreement (including
the right to receive any compensation or other benefits for any period after the
date of termination for cause).

     For the purpose of Paragraph 7(d), the Bank shall be entitled to terminate
Montgomery's employment for cause upon any one or more of the following seven
grounds:

     (i)  A determination by the Bank's Board of Directors that there has been a
material adverse divergence from the annual Business Plan.

     (ii) A determination by the Bank, in good faith, that Montgomery (A) has
breached in any material respect any of the terms or conditions of this
Agreement, or (B) is engaged or has engaged in willful misconduct or conduct
which is detrimental to the business prospects of the Bank or which has had or
likely will have a material adverse effect on the Banies business or reputation.
Prior to any termination by the Bank of Montgomery's employment for such a
breach, failure to perform, or conduct described in this subparagraph (ii) the
Bank shall give Montgomery written notice which describes such breach, failure
to perform, or conduct and if, during a period of five (5) days following such
notice, Montgomery cures or corrects the same to the reasonable satisfaction of
the Bank, then this Agreement shall remain in full force and effect. However,
notwithstanding the above, if the Bank has given written notice to Montgomery on
a previous occasion of the same or substantially similar breach, failure to
perform or conduct, or of a breach, failure to perform, or conduct which the
Bank determines in good faith to be of substantially similar import, or if the
Bank determines in good faith that the then current breach, failure to perform,
or conduct is not reasonably curable, then termination under this subparagraph
(ii) shall

                                       7
<PAGE>

EMPLOYMENT AGREEMENT
Howard B. Montgomery, Jr.

be effective immediately and Montgomery shall have no right to cure such breach,
failure to perform, or conduct.

     (iii) The violation by Montgomery of any applicable federal or state law,
or any applicable rule, regulation, order or statement of policy promulgated by
any governmental agency or authority having jurisdiction over the Bank or any of
its affiliates or subsidiaries (a "Regulatory Authority") including without
limitation the Federal Deposit Insurance Corporation, the North Carolina
Commissioner of Banks, the Federal Reserve Board or any other banking
regulator), which results from Montgomery'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 any of its affiliates or subsidiaries or to the Bank's
reputation;

     (iv) The commission in the course of Montgomery's employment with the Bank
of an act of fraud, embezzlement, theft or proven personal dishonesty (whether
or not resulting in criminal prosecution or conviction);

     (v) The conviction of Montgomery 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 Montgomery from serving as an employee or
executive officer of, or a party affiliated with, the Bank or its bank holding
company; if any.

     (vi) Montgomery becomes unacceptable to, or is removed, suspended or
prohibited from participating in the conduct of the Bank's affairs or if
proceedings for that purpose are commenced by, any Regulatory Authority and

     (vii) The occurrence of any event believed by the Bank, in good faith, to
have resulted in Montgomery being excluded from coverage, or having coverage
limited as to Montgomery as compared to other covered officers or employees,
under the Bank's then current "blanket bond" or other fidelity bond or insurance
policy covering its directors, officers or employees.

     8. Disability. In the event Montgomery becomes disabled during the term of
his employment and it is determined Montgomery is permanently unable to perform
his duties under this Agreement, Montgomery's employment under this Agreement
shall terminate. The Bank shall continue to compensate Montgomery at the level
of compensation set forth in Paragraph "2" above, and provide Montgomery each of
the benefits described in this Agreement, for the

                                       8
<PAGE>

EMPLOYMENT AGREEMENT
Howard B. Montgomery, Jr.

remaining term of this Agreement, so long as Montgomery remains disabled, less
all other payments to which Montgomery is entitled under any insurance or
disability plan of the Bank applicable to Montgomery and such disability
payments as Montgomery may be entitled to receive from Social Security or any
other source.

     In the event Montgomery becomes disabled during the term of his employment
and it is determined that Montgomery is temporarily unable to perform his duties
under this Agreement, the Bank will continue to compensate Montgomery at the
level of compensation set forth in Paragraph "2" above for a period of ninety
days.

     If at any time a disagreement arises between Montgomery and the Bank as to
whether Montgomery is disabled or whether any disability of Montgomery is
permanent or temporary, either or both of such questions shall be submitted to
an impartial, reputable physician selected by agreement between Montgomery and
the Bank. Should Montgomery and the Bank be unable to agree upon such a
physician to resolve either or both of these questions, the Bank shall select a
physician, Montgomery shall select a physician, and these two physicians shall
select a third physician. This panel of three physicians shall resolve either or
both of these questions and the determination by the panel shall be final and
binding upon Montgomery and the Bank. The Bank shall pay the reasonable fees and
expenses of the physician or physicians making this determination.

     9. Additional Regulatory Requirement. Notwithstanding anything contained in
this Agreement to the contrary, it is understood and agreed that the Bank (or
its successors in interest) shall not be required to make any payment or take
any action under this Agreement if (a) the Bank is declared by any Regulatory
Authority to be insolvent, in default or operating in an unsafe or unsound
manner, or if (b) in the opinion of counsel to the Bank such payment or action
(i) would be prohibited by or would violate any provision of state or federal
law applicable to the Bank, including without limitation the Federal Deposit
Insurance Act and Chapter 53 of the North Carolina General Statutes 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.

                                       9
<PAGE>

EMPLOYMENT AGREEMENT
Howard B. Montgomery, Jr.

     10. Change in Control.

     (a) In the event of a termination of Montgomery's employment in connection
with, or within twenty-four (24) months after, a "Change in Control" (as defined
in Subparagraph (d) below) of the Bank, for reasons other than for "cause" (as
defined in Paragraph 7(d) hereof), Montgomery shall be entitled to receive the
sum set forth in Subparagraph (c) below. Said sum shall be payable as provided
in Subparagraph (e) below.

     (b) Montgomery shall have the right to terminate this Agreement upon the
occurrence of any of the following events (the "Termination Events") within the
twenty-four (24) months following a Change in Control of the Bank:

          (i) Montgomery is assigned any duties or responsibilities which are
     inconsistent with his position, duties, responsibilities, or status at the
     time of the Change in Control or with his reporting responsibilities or
     titles with the Bank in effect as such time;

          (ii) Montgomery's annual base salary is reduced below the amount in
     effect as of the effective date of a Change in Control or as the same shall
     have been increased from time to time following such effective date;

          (iii) Montgomery's life insurance, medical or hospitalization
     insurance, disability insurance, stock option plans, stock purchase plans,
     deferred compensation plans, management retention plans, retirement plans,
     or similar plans or benefits being provided by the Bank to Montgomery as of
     the effective date of the Change in Control are reduced in their level,
     scope, or coverage, or any such insurance, plans, or benefits are
     eliminated, unless such reduction or elimination applies proportionately to
     all salaried employees of the Bank who participated in such benefits prior
     to such Change in Control; or

          (iv) Montgomery is transferred to a location outside of Buncombe
     County, North Carolina, without Montgomery's express written consent.

     A Termination Event shall be deemed to have occurred on the date such
action or event is implemented or takes effect.

     (c) In the event Montgomery terminates this Agreement or the Bank
terminates this Agreement pursuant to this Paragraph 10, the Bank will be
obligated to pay or cause to be paid to Montgomery an amount equal to two
hundred ninety nine percent (299%) of Montgomery's "base amount" as defined in
Section 280G(b)(3)(A) of the Internal Revenue Code of 1986, as amended (the
"Code").

                                       10

<PAGE>

EMPLOYMENT AGREEMENT
Howard B. Montgomery, Jr.

     (d) For the purpose of this Agreement, the term Change in Control shall
mean any of the following events:

          (i) After the effective date of this Agreement, any "person" (as such
     term is defined in Section 70)(8)(A) of the Change in Bank Control Act of
     1978), directly or indirectly, acquires beneficial ownership of voting
     stock, or acquires irrevocable proxies or any combination of voting stock
     and irrevocable proxies, representing twenty-five percent (25%) or more of
     any class of voting securities of the Bank, or acquires control, in any
     manner of the election of a majority of the directors of the Bank;

          (ii) The Bank consolidates or merges with or into another corporation,
     association, or entity, or is otherwise reorganized, as the result of which
     the Bank is not the surviving corporation in such transaction; or

          (iii) All or substantially all of the assets of the Bank are sold or
     otherwise transferred to or are acquired by any other corporation,
     association, or other person, entity, or group; "provided, however, that
     should the Bank reorganize itself into the holding company form of
     organization, whereby the share holders of the Bank immediately prior to
     such reorganization are substantially the same share holders as the Bank's
     holding company, such reorganization shall not be considered a "change in
     control" for the purpose of this agreement."

     Notwithstanding the other provisions of this Paragraph 10, a transaction or
event shall not be considered a Change in Control if, prior to the consummation
or occurrence of such transaction or event, Montgomery and the Bank agree in
writing that the same shall not be treated as a Change in Control for the
purposes of this Agreement.

     (e) Amounts payable pursuant to this Paragraph 9 shall be paid, at the
option of Montgomery, either in one lump sum or in equal monthly payments over
the remaining term of this Agreement.

     (f) Following a Termination Event which gives rise to Montgomery's right
hereunder, Montgomery shall have twelve (12) months from the date of the
occurrence of the Termination Event to terminate this Agreement pursuant to this
Paragraph 9. Any such termination shall be

                                       11
<PAGE>

EMPLOYMENT AGREEMENT
Howard B. Montgomery, Jr.

deemed to have occurred only upon delivery to the Bank or any successor thereto,
of written notice of termination which describes the Change in Control and
Termination Event. If Montgomery does not so terminate this Agreement within
such twelve months period, Montgomery shall thereafter have no further rights
hereunder with respect to that Termination Event, but shall retain rights, if
any, hereunder with respect to any other Termination Event as to which such
twelve month period has not expired.

     (g) It is the intent of the parties hereto that all payment made pursuant
to this Agreement be deductible by the Bank for federal income tax purpose and
not result in the imposition of an excise tax on Montgomery. Notwithstanding
anything contained in this Agreement to the contrary, any payments to be made to
or for the benefit of Montgomery which are deemed to be "parachute payments" as
that term is defined in Section 280G(b)(2) of the Code, shall be modified or
reduced to the extent deemed to be necessary by the Bank's Board of Directors to
avoid the imposition of an excise tax on Montgomery under Section 4999 of the
Code or the disallowance of a deduction to the Bank under Section 280G(a) of the
Code.

     11. Successors and Assigns.
     (a) This Agreement shall insure to the benefit of and be binding upon any
corporate or other successor of the Bank which shall acquire, directly or
indirectly, by conversion, merger, consolidation, purchase or otherwise, all or
substantially all of the assets of the Bank.

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

     12. Modification; Waiver; Amendments. No provision of the Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
contained in a written Agreement executed by the parties hereto. No waiver by
either party hereto, at any time, of any breach by the other party hereto of, or
the failure of the other party to comply with any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No amendments or additions to this Agreement shall be effective
unless in writing and signed by both parties.

                                       12
<PAGE>

EMPLOYMENT AGREEMENT
Howard B. Montgomery, Jr.

     13. Applicable Law. This Agreement shall be governed in all respects by the
laws of North Carolina, except to the extent that federal law shall be deemed to
apply.

     14. 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.

     15. Entire Agreement. This Agreement contains the entire agreement between
the parties and its supersedes any and all other oral or written agreement(s)
heretofore made, and there are no representations or inducements by or to, or
and agreements between, any of the parties hereto other than those contained
herein in writing.

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

     THE BANK OF ASHEVILLE (PROPOSED)
     By: ____________________________
     Max O. Cogburn, Sr.
     Chairman

     Attest:

     _________________________________
     Secretary

     ___________________________(SEAL)
     Howard B. Montgomery, Jr.

                                       13

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