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Exhibit 10.4

EMPLOYMENT AGREEMENT
 
Amended and Restated as of June 16, 2015

THIS EMPLOYMENT AGREEMENT (the “Agreement”) amends and restates as of June 16,
2015, the Employment Agreement dated as of the 18th day of December, 2012, by
and between ASB BANCORP, INC., a North Carolina corporation (“Company”),
ASHEVILLE SAVINGS BANK, S.S.B., a North Carolina chartered savings bank (the
“Bank”), and Vikki D. Bailey (“Executive”).  For purposes of this Agreement, the
term “Employer” shall mean the Company and the Bank.
 
RECITALS
 
WHEREAS, Company and the Bank wish to continue to employ Executive in positions
of substantial responsibility; and
 
WHEREAS, Company, the Bank and Executive desire to amend this Agreement to make
certain corrections and clarifications which are intended to bring the Agreement
further into compliance with the Internal Revenue Code and developments in the
law.
 
NOW, THEREFORE, in consideration of the mutual promises of the parties hereto
and for other good and valuable consideration, the receipt and adequacy whereof
each party hereby acknowledges, Company, the Bank and Executive hereby agree as
follows:
 
1.                    DEFINITIONS: The following terms shall have the following
meanings for all purposes of this Agreement:
 
Base Salary means the annual base compensation specified in Section 4 below.
 
Board means, unless otherwise indicated by the context, the Board of Directors
of Company and the Board of Directors of the Bank.
 
Cause means any of the reasons listed in Section 7(d) below for which this
Agreement may be terminated or Executive may be discharged prior to the end of
the Term hereof.
 
Change of Control means and shall be deemed to have occurred upon the occurrence
of any of the following events.
 
(1)           The acquisition by any “person” or “group” (as defined in or
pursuant to Sections 13(d) and 14(d) of the Exchange Act) (other than Company,
any Subsidiary or any Company or Subsidiary’s employee benefit plan), directly
or indirectly, as “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act) of securities representing more than fifty percent (50%) of either
the then outstanding shares or the combined voting power of the then outstanding
securities of Company or the Bank;
 
(2)           A majority of the directors of Company elected at Company’s annual
stockholders meeting shall have been nominated for election other than by or at
the direction of the “incumbent directors” of Company, and the “incumbent
directors” shall cease to constitute a majority of the directors of Company
during any twelve (12) month period. The term “incumbent director” shall mean
any director who was a director of Company on the Effective Date and any
individual who becomes a director of Company subsequent to the Effective Date
and who is elected or nominated by or at the direction of at least majority of
the then incumbent directors; or
 
(3)           The consummation of (x) a merger, consolidation or other business
combination of Company with any other “person” or “group” (as defined in or
pursuant to Sections 13(d) and 14(d) of the 1934 Act) or affiliate thereof,
other than a merger or consolidation that would result in the outstanding common
stock of Company immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into common stock of the surviving
entity or a parent or affiliate
 
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thereof) more than fifty percent (50%) of the outstanding common stock of
Company or such surviving entity or a parent or affiliate thereof outstanding
immediately after such merger, consolidation or other business combination, or
(y) the sale or disposition of all or substantially all of Company’s or the
Bank’s assets.
 
No event that occurs is a Change of Control unless it complies with Code Section
409A and the regulations thereunder.  No event that was not already covered by
this definition prior to the amendment and restatement of this Agreement is
added by such amendment and restatement.
 
Code means the Internal Revenue Code of 1986, as amended.
 
Effective Date means the first day of the initial Term.
 
Exchange Act means the Securities Exchange Act of 1934, as amended.
 
Good Reason means the occurrence of any of the conditions listed in Section 7(f)
below which is followed by the resignation of Executive within twelve (12)
months after such occurrence.
 
Protected Customer shall mean any person, business or entity who or which:
 
(1)            Was known by Executive to have purchased products or services
from Company, the Bank or any Subsidiary other than the Bank during the two-year
period immediately preceding Executive’s last day of employment with the Bank;
or
 
(2)            Purchased products or services from Company, the Bank or any
Subsidiary other than the Bank during the two-year period immediately preceding
Executive’s last day of employment with the Bank, and about whom Executive had
access to confidential or proprietary information during this period; or
 
(3)            Was known by Executive to have received (during the one-year
period prior to Executive’s last day of employment with the Bank) but not yet
acted upon a proposal by Company, the Bank or any Subsidiary other than the Bank
for the purchase of products or performance of services.
 
Resignation for Good Reason means resignation by Executive in accordance with
the provisions of Section 7(f) below.
 
Restricted Period means the one-year period described in Section 9(a) below.
 
Subsidiary means any corporation at least a majority of the stock of which is
owned by Company, either directly or through one or more other Subsidiaries, and
any other entity controlled, directly or indirectly, by Company or any other
Subsidiary.
 
Term means the term of this Agreement specified in Section 3 and 8(a) below,
including the initial term and any extended term.
 
Termination for Cause means discharge of Executive prior to the end of the Term
in accordance with the provisions of Section 7(d) below for any of the reasons
listed therein.
 
Termination without Cause means discharge of Executive prior to the end of the
Term in accordance with the provisions of Section 7(e) below.
 
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2.                    EMPLOYMENT:
 
(a)           During the Term, Executive shall serve as Executive Vice President
and Chief Retail Officer of Company and the Bank, reporting directly to and
under the direction of, the President and Chief Executive Officer of Company and
the Bank. Executive will perform all duties and have all powers associated with
such positions as and as may be set forth in the Bylaws of Company or the Bank.
In addition, Executive shall be responsible for such other duties as established
and determined within the discretion of the Board.  Executive agrees that,
during the Term, Executive will devote full business time and energy to the
business, affairs and interests of Company and the Bank and serve diligently and
to the best of Executive’s ability. Executive may serve as a director, trustee
or officer of other corporations and entities, including without limitation
charitable organizations, and engage in other activities to the extent those
activities and services do not inhibit the performance of Executive’s duties
hereunder or, in the opinion of the Board, conflict with the business of
Company, the Bank or any Subsidiary.
 
(b)          References in this Agreement to services rendered for Company and
compensation, benefits, indemnification and liability insurance payable or
provided by Company shall include services rendered for and compensation,
benefits, indemnification and liability insurance payable or provided by the
Bank and any Subsidiary other than the Bank, and references in this Agreement to
“ Company “ shall mean and include the Bank and any Subsidiary other than the
Bank if Executive performs any services therefore, as the context may require.
 
3.                   TERM: The initial term of this Agreement shall be for the
period beginning on June 16, 2015 and continuing for a twenty-four (24) month
period through and including June 15, 2017 subject, however, to earlier
termination in the manner provided in this Agreement. Commencing as of the first
anniversary of the Effective Date and continuing as of each anniversary of the
Effective Date thereafter, the disinterested members of the Board may, in the
sole discretion of the Board, extend the Agreement term for an additional year,
so that the remaining term of the Agreement again becomes twenty-four (24) full
months from the applicable anniversary of the Effective Date, unless the
Executive elects not to extend the term of this Agreement by giving written
notice at least thirty (30) days prior to the applicable anniversary date.
Notwithstanding the foregoing, the term of this Agreement shall be extended
pursuant to Section 8(a) below upon the occurrence of a Change of Control.
 
4.                    BASE SALARY; INCENTIVE COMPENSATION:
 
(a)           Executive shall receive a Base Salary at the rate of $155,000,
payable in substantially equal installments no less frequently than monthly
(less any amounts withheld as required by law or pursuant to any benefits plan).
At least annually, Company shall review and, in its sole discretion, may
increase, Executive’s Base Salary. If Executive’s Base Salary is increased by
Company, such increased Base Salary shall then constitute the Base Salary for
all purposes of this Agreement.
 
(b)           Executive shall be eligible to participate in any incentive
compensation, bonus plans or arrangements of the Company on the same terms as
other senior officers. Nothing paid to Executive under any such plans or
arrangements will be deemed to be in lieu of other compensation to which
Executive is entitled under this Agreement.
 
5.                    EMPLOYEE BENEFITS AND REIMBURSEMENTS:
 
(a)           During the Term, Executive shall be eligible to participate in any
retirement, group insurance, hospitalization, incentive or deferred compensation
and other benefit or compensation plans of the Bank presently in effect or
hereafter adopted and generally available to all Company’s senior officers,
subject to the terms and conditions specified in such plans. Executive shall
also be eligible to any additional compensation, benefits or perquisites, if
any, that may be provided specifically to or for Executive by Company or the
Bank from time to time. During the Term, to the extent provided by corporate
policies, Executive shall be reimbursed for expenditures (including travel,
entertainment,
 
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parking and business meetings) made in pursuance and furtherance of the business
and good will of Company.
(b)          Vacation and Leave. Executive will be entitled to vacation leave,
sick leave, holidays and other paid absences in accordance with the Bank’s
policies and procedures for senior officers.
 
6.                    INDEMNIFICATION:
 
(a)           Company, the Bank and any Subsidiary other than the Bank for which
Executive provides services shall indemnify and hold Executive harmless from and
against all liability and expense resulting from (1) all acts or omissions of
Executive while acting in the capacity of a director, officer, trustee, or
fiduciary and/or employee of Company, the Bank and any such Subsidiary during
Executive’s employment as such director, officer, and/or employee and (2) acts
or omissions of Company, the Bank and any such Subsidiary occurring or alleged
to have occurred during or prior to Executive’s employment, on terms and
conditions no less favorable to Executive than the terms and conditions
providing for indemnification of officers and directors under the Articles of
Incorporation and the Bylaws of Company, the Bank charter and each such
Subsidiary’s governing documents.
 
(b)          The Bank shall carry directors and officers liability insurance in
such amounts as the Bank in its discretion deems appropriate, and any payments
made under such policy to Executive or on Executive’s behalf shall be offset
against the indemnification obligation set forth in Section 6(a).
 
(c)           Notwithstanding the foregoing, the indemnification provided by
Section 6(a) shall not apply, and Executive shall not be indemnified, with
respect to any acts or omissions which constitute wanton or willful misconduct
or willful gross negligence. The indemnity obligation set forth in this Section
6 shall be subject to the prohibitions and limitations established by applicable
law and as set forth in applicable regulations adopted by any federal or state
bank regulatory agency having jurisdiction over Company, the Bank or any
Subsidiary other than the Bank for which Executive performs services.
 
(d)           The provisions of this Section 6 shall survive termination of this
Agreement.
 
7.                   TERMINATION: Executive’s employment under this Agreement
may be terminated under any of the following conditions.
 
(a)           Disability: If Executive is unable to perform the essential
functions of Executive’s positions on a full-time basis for a period of six (6)
consecutive months (or for such shorter period ending with Executive’s
eligibility for and receipt of long-term disability benefits under an insurance
policy or employee benefit plan provided or made available to Executive by
Company) by reason of illness or other physical or mental disability, Company
shall have the right to terminate Executive’s employment under this Agreement at
the end of the applicable period by written notice thereof. If Executive’s
employment is so terminated, Executive shall be paid any salary and benefits to
which Executive may be entitled until the end of the payroll period in which the
date of termination occurs, and thereafter, Company shall have no further
obligation for additional compensation and benefits under this Agreement. A
condition of disability shall be determined by Company on the basis of competent
evidence. A written opinion of a licensed physician certified in his field of
specialization and acceptable to Company, or Executive’s entitlement to or
receipt of long-term disability benefits under any insurance policy or employee
benefit plan provided or made available to Executive by Company or under federal
Social Security law, shall be conclusive evidence of disability.
 
(b)           Death: In the event of Executive’s death during the Term,
Executive’s estate, legal representatives or named beneficiaries (as directed by
Executive in writing) shall be paid Base Salary at the rate in effect at the
time of Executive’s death for a period of one (1) month after the date of
Executive’s death and shall be paid for any accrued and unused paid time off.
Such additional compensation and accrued and unused paid time off shall be paid
in a single lump sum within thirty (30) days from Executive’s date of death.
 
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(c)           Resignation By Executive: Upon thirty (30) days prior notice,
Executive may resign or voluntarily leave the employ of Company, other than
under circumstances treated as Resignation for Good Reason.  In the event of
Executive’s resignation under this Section 7(c), Executive shall be paid any
accrued and unpaid salary and accrued and unused paid time off through
Executive’s date of resignation.
(d)           Termination For Cause: Company may, in its sole discretion, by
written notice to Executive, terminate Executive’s employment immediately for
Cause upon the occurrence of any of the following:
 
(1)            Executive’s willful failure to follow or to cooperate in carrying
out any of the lawful policies of Company or the Bank or the lawful directions
of the Board;
 
(2)            Continued and willful neglect by Executive of Executive’s duties
for or on behalf of Company, the Bank or any Subsidiary other than the Bank for
which Executive provides services;
 
(3)            Willful misconduct of Executive in connection with the
performance of any of Executive’s duties, including, by way of example, but not
limitation, misappropriation of funds or property of Company, the Bank or a
Subsidiary other than the Bank or a depositor therein or borrower therefrom, or
securing or attempting to secure personally any profit in connection with any
transaction entered into on behalf of Company, the Bank or Subsidiary other than
the Bank to the prejudice of the Bank or its Subsidiaries;
 
(4)            Conduct by Executive which results in Executive’s suspension
and/or temporary prohibition or removal and/or permanent prohibition from
participation in the conduct of the affairs of Company, the Bank or any
Subsidiary other than the Bank pursuant to the rules and regulations of the
primary federal or state banking agency for Company, the Bank or the other
Subsidiary or any other federal or state banking agency having regulatory
jurisdiction over Company, the Bank or the other Subsidiary;
 
(5)            Conviction of Executive of a felony or any misdemeanor involving
moral turpitude or Executive’s willful violation of any law, rule or regulation
to which Company, the Bank or other Subsidiary for which Executive performs
services is subject or of a final order or other formal administrative action
entered into, by or imposed upon Company, the Bank or any such Subsidiary;
 
(6)            Willful violation of any code of conduct or standards of ethics
applicable to employees of Company or the Bank that results in material and
demonstrable damage to the business or reputation of Company or the Bank; or
 
(7)            The issuance of a permanent injunction or similar remedy against
Executive preventing Executive from executing or performing all or part of this
Agreement.
 
If Executive’s employment is Terminated for Cause or Company has Cause for
termination and Executive voluntarily resigns, Executive shall not be entitled
to any further compensation or benefits under this Agreement other than payment
for any accrued and unused paid time off.
 
Notwithstanding anything herein to the contrary, except as “willful” may be
otherwise defined by the rules and regulations of the primary federal or state
banking agency for the Bank for which Executive performs services or any other
federal or state banking agency having regulatory jurisdiction over the Bank for
which Executive performs services, (x) no act or failure to act on Executive’s
part shall be considered “willful” unless done, or omitted to be done, by
Executive in bad faith and without reasonable belief that Executive’s action or
omission was in the best interest of Company or the Bank for which Executive
performs services, and (y) no failure to act on Executive’s part shall be
considered “willful” if such failure is a result of a condition of disability
within the meaning of Section 7(a) of this Agreement. Executive shall not be
deemed to have been Terminated for Cause under this Agreement unless and until
there is delivered to Executive a copy of a resolution adopted at a meeting of
the Company Board called and held for the purpose, which resolution shall (x)
contain findings that
 
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Executive has committed an act constituting Cause, and (y) specify the
particulars thereof. The resolution of the Board shall be deemed to have been
duly adopted if and only if it is adopted by the affirmative vote of a majority
of the directors then in office, excluding Executive. Notice of the meeting and
the proposed termination for Cause shall be given to Executive a reasonable time
before the meeting of the Board. Executive and Executive’s counsel (if the
Executive chooses to have counsel present) shall have a reasonable opportunity
to be heard by the Board at the meeting.
(e)           Termination Without Cause: Company may, in its sole discretion, by
written notice to Executive terminate Executive’s employment under this
Agreement immediately without Cause at any time (other than following a Change
of Control, in which case a termination without Cause is governed by Section 8
of this Agreement).  In the event of such termination, Executive shall continue
to be paid the Base Salary that Executive is entitled to receive as of the date
Executive is Terminated without Cause through the expiration of the then current
Term.  Nothing in this Section shall affect Executive’s rights to receive any
benefit which has been earned but not paid with respect to Executive’s
performance prior to the date of such termination. The payments described in
this Section 7(e) will be due Executive regardless of any subsequent employment
attained by Executive, other than the following benefit.  If Executive is
eligible for and timely and properly elects continuation coverage under the
Consolidated Omnibus Reconciliation Act of 1985 (“COBRA”), the Employer shall
reimburse the Executive monthly for the monthly COBRA premium paid by Executive
for himself and his dependents for a period of eighteen (18) months after the
Termination Date (the “COBRA Reimbursement”). If the terms of the applicable
plan documents do not allow the Employer to continue to provide COBRA coverage
to Executive and Executive's dependents beyond the expiration of the
statutorily-proscribed COBRA period, the Employer shall make monthly cash
payments to Executive in an amount equal to the monthly COBRA premium for
coverage for Executive and Executive's dependents for the duration of the
eighteen (18) month period. Provided, however, that Employer’s obligations under
this provision for COBRA/health coverage shall terminate on the date on which
the Executive enrolls in a group health plan offered by another employer that
provides substantially similar coverage.
 
(f)            Resignation For Good Reason:
 
(1)             Executive may Resign for Good Reason upon the occurrence of any
of the following conditions without Executive’s prior written consent:
 
(A)            a material change in Executive’s positions, authority and
responsibilities relative to Executive’s positions, authority and
responsibilities at the Effective Date;

(B)             a liquidation or dissolution of Company or the Bank, other than
liquidations or dissolutions that are caused by reorganizations that do not
affect the status of Executive;

(C)             a reduction in Executive’s Base Salary;

(D)             a relocation of Executive’s principal place of employment by
more than thirty-five (35) miles from its location as of the Effective Date; or

(E)              a material breach of this Agreement by Company or the Bank.
 
(2)             Resignation for Good Reason shall be effected by delivering to
Company, within twelve (12) months after the occurrence of one of the conditions
described above, a written notice specifying a date for termination of
employment (a) which is not less than thirty (30) days after the date of the
notice, and (b) which is not more than ninety (90) days after the date of the
notice. The notice shall also state that Executive is resigning for Good Reason
as contemplated by this Section 7(f) and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for Resignation for Good
Reason hereunder. If within the notice period, Company cures or corrects any
circumstances providing a
 
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basis for Resignation for Good Reason pursuant to Sections 7(f)(1)(A) or (E)
only, Executive shall not be entitled to Resign for Good Reason.
(3)            If Executive Resigns for Good Reason at any time after the date
of this Agreement (other than a Resignation for Good Reason during the Term
after a Change of Control, which shall be governed by Section 8 below), then
Executive shall continue to be paid the Base Salary that Executive is entitled
to receive as of the date Executive Resigns for Good Reason through the
expiration of the then current Term.  Nothing in this Section shall affect
Executive’s rights to receive any benefit which has been earned but not paid
with respect to Executive’s performance prior to the date of such termination.
In addition, the Bank shall pay for post-employment health coverage in the same
manner as described in Section 7(e) above.  The payments, other than
post-employment health benefits, described in this Section 7(f) will be due
Executive regardless of any subsequent employment attained by Executive which is
not in violation of this Agreement.
 
8.                  CHANGE OF CONTROL: Notwithstanding the preceding provisions
of this Agreement, upon the occurrence of a Change of Control, the following
provisions shall apply:
 
(a)           The Term shall be extended to a period of one (1) year after the
date on which the Change of Control occurs if the remaining Term as of the
Change of Control effective date is less than one (1) year.
 
(b)           If, during the Term, as extended pursuant to Section 8(a), either
Executive’s employment is Terminated without Cause or Executive Resigns for Good
Reason, in either case, Company shall provide to Executive the following
severance benefits:
 
(1)            Company shall pay to Executive, in lieu of the compensation
specified in Sections 7(e) or 7(f), a severance payment (subject to any
applicable payroll or other taxes required to be withheld) equal to three (3)
times the sum of (i) Executive’s Base Salary at the rate then in effect, or if
greater, in effect immediately preceding the Change of Control and (ii) the
average of the cash bonuses paid or accrued on Executive’s behalf with respect
to the three (3) completed calendar years preceding the effective date of the
Change of Control (or, if Executive has not been employed for three (3) years,
the average of the completed calendar years in which Executive was employed) in
a lump sum. In addition, the Bank shall pay for Executive’s health coverage in
the same manner as set forth in Section 7(e).
 
(2)            The payments described in this Section 8, other than COBRA/health
benefits, shall be due Executive regardless of any subsequent employment
obtained by Executive.  If payment cannot be made upon the occurrence of the
Change of Control, it will be paid on or before the first payroll following the
Change of Control.
 
(c)           The  Company shall engage an independent accounting firm or
independent tax counsel (“Tax Adviser”), at the Company’s expense, to calculate
and determine (i) the amount of payments, distributions and benefits payable or
receivable by Executive in the event of a Change of Control (whether under this
Agreement or otherwise) that constitute “parachute payments” for purposes of
Section 280G of the Code, and (ii) whether any portion of such parachute
payments would constitute an “excess parachute payment” subject to the excise
tax imposed under Section 4999 of the Code (“Excess Payments”).  The Tax Adviser
may rely on reasonable, good faith assumptions and approximations concerning the
application of Section 280G and Section 4999.  The calculations and
determinations of the Tax Adviser shall be conclusive and binding on the Company
and Executive for all purposes.  In the event that the aggregate payments or
benefits to be made or afforded to Executive in the event of a Change of Control
(whether under this Agreement or otherwise) would be deemed to be Excess
Payments, then such payments or benefits shall be reduced to the extent
necessary to avoid treatment as an “excess parachute payment”, with the
reduction among such payments and benefits to be made first to payments and
benefits payable or provided under this Agreement.  In connection with making
determinations under this Section 8(c), the Tax Advisor shall take into account
the value of any
 
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reasonable compensation for services to be rendered by the Executive before or
after the Change in Control, including without limitation, the Executive’s
agreeing to refrain from performing services pursuant to a covenant not to
compete or similar covenant, and the Company shall act in good faith in
connection with any such valuations and reasonable compensation positions.
Without limiting the generality of the foregoing, for purposes of this
provision, the Company agrees to allocate as consideration for the covenants set
forth in Section 9 the maximum amount of compensation and benefits payable under
Section 8 hereof reasonably allocable thereto so as to avoid, to the extent
possible, subjecting any payment to tax under Section 4999 of the Code.
9.                    NONCOMPETITION, NONSOLICITATION AND NONDISCLOSURE:
 
(a)           Executive hereby covenants and agrees that, for a period of one
(1) year following a termination of employment in the circumstances described in
Sections 7(e), 7(f), or 8, Executive shall not, without the written consent of
Company, either directly or indirectly:
 
(i)              become an officer, employee, consultant, director, independent
contractor, agent, joint venturer, partner or trustee of any business whatsoever
that competes with the business of  Company, the Bank or any Subsidiary other
than the Bank;

(ii)            solicit, offer employment to, or take any other action intended
(or that a reasonable person acting in like circumstances would expect) to have
the effect of causing any officer or employee of Company, the Bank or any
Subsidiary other than the Bank to terminate his employment and accept employment
or become affiliated with, or provide services for compensation in any capacity
whatsoever to, any business whatsoever that competes with the business of
Company, the Bank or any Subsidiary other than the Bank; or

(iii)           solicit, provide any information, advice or recommendation or
take any other action intended (or that a reasonable person acting in like
circumstances would expect) to have the effect of causing any Protected Customer
to terminate an existing business or commercial relationship with  Company, the
Bank or any Subsidiary other than the Bank.

(iv)           For purposes of this Section 9(a), a business that “competes with
the business of Company, the Bank or any Subsidiary other than the Bank” shall
mean a depository financial institution doing business within twenty-five (25)
miles of any office of the Bank in existence on the date of Executive’s
termination of employment.
 
(b)           During the Term and thereafter, Executive shall hold in a
fiduciary capacity for the benefit of Company and its Subsidiaries all secret or
confidential information, knowledge or data relating to Company and its
Subsidiaries and their respective businesses, which shall have been obtained by
Executive during Executive’s employment by Company, the Bank and any Subsidiary
other than the Bank and which shall not be or become public knowledge (other
than by acts by Executive or representatives of Executive in violation of this
Agreement). Executive shall not, without the prior written consent of Company,
the Bank and such other Subsidiary, as applicable, or as may otherwise be
required by law or legal process, communicate or divulge any such information,
knowledge or data to anyone other than Company, the Bank and such other
Subsidiary and those designated by them. After the end of the Restricted Period,
the existence and identity of the customers and employees of Company, the Bank,
and any Subsidiaries other than the Bank shall not constitute secret or
confidential information, knowledge or data.
 
(c)           During any period in which Section 9(a) is effective, Section 9(a)
shall not preclude Executive from holding any publicly traded stock provided
Executive does not acquire any stock interest in any one company in excess of
one percent (1%) of the outstanding voting stock of that company.
 
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(d)           The parties agree that the restrictions contained in this Section
9 are reasonable and fair. If Executive competes in violation of the terms of
this Section 9, the parties agree that Company will be irreparably harmed
without an adequate remedy at law. Accordingly, Executive acknowledges that if
Executive breaches or threatens to breach any provision of this Section 9,
Company shall be entitled to an injunction, both preliminary and permanent,
restraining Executive from such breach or threatened breach, but such injunctive
relief shall not preclude Company from pursuing all other legal or equitable
remedies arising out of such a breach.
10.                REFORMATION: The parties have attempted to limit Executive’s
right to compete only to the extent necessary to protect Company, the Bank and
Subsidiaries other than the Bank from unfair competition. The parties recognize,
however, that reasonable people may differ in making such a determination.
Consequently, the parties hereby agree that, if the scope or enforceability of a
restrictive covenant set forth in Section 9 is in any way disputed at any time,
a court or other trier of fact may modify and reform such provision to
substitute such other terms as are reasonable to protect the legitimate business
interests of Company, the Bank and Subsidiaries other than the Bank.
 
11.                NOTICES: For the purposes of this Agreement, notices or other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when hand delivered to the party to whom directed
or mailed by United States certified mail, return receipt requested, postage
prepaid, addressed to such party at such party’s address last known by the party
giving such notice. Each party may, from time to time, and shall, upon request
of another party, designate an address to which notices should be sent. Notices
of change of address shall be effective only upon receipt.
 
12.               MODIFICATION; WAIVERS; APPLICABLE LAW: No provisions of this
Agreement may be modified, waived or discharged unless such waiver, modification
or discharge is agreed to in writing, signed by Executive, and on behalf of
Company, by such officers as may be specifically designated by Company. No
waiver of any breach, condition or provision of this Agreement by any party
hereto at any time shall be deemed a waiver of similar or dissimilar provisions
or conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by any party that are not set forth
expressly in this Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of North Carolina,
except to the extent that federal applies.
 
13.                INVALIDITY - ENFORCEABILITY: The invalidity or enforceability
of any provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain in
full force and effect. Any provision in this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
only to the extent of such prohibition or unenforceability without invalidating
or affecting the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
 
14.               SUCCESSOR RIGHTS: This Agreement shall inure to the benefit of
and be enforceable by Executive’s personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees, and
shall be binding upon Company and any successor to Company. If Executive should
die while any amounts would still be payable to Executive hereunder all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to Executive’s devisee, legatee or other designee or, if
there is no such designee, to Executive’s estate.
 
15.                 ATTORNEY’S FEES: In the event that either party incurs costs
and fees, including attorney’s fees, in enforcing its rights under this
Agreement, the party substantially prevailing in such suit or action including
any appeal shall be entitled to recover from the other all such costs and
reasonable attorney’s fees.
 
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16.                 EFFECT OF FEDERAL BANKING STATUTES AND REGULATIONS:
Notwithstanding anything herein contained to the contrary, any payments to
Executive by the Employer whether pursuant to this Agreement or otherwise, are
subject to and conditioned upon their compliance with Section 18(k) of the
Federal Deposit Insurance Act, 12 U.S.C. Section 1828(k), and the regulations
promulgated thereunder in 12 C.F.R. Part 359.   In addition, Executive agrees
that this Agreement is subject to amendment at any time in order to comply with
laws that are applicable to Company and the Bank (including regulations and
rules relating to any governmental program in which Company or the Bank may
participate).
17.                 HEADINGS: Descriptive headings contained in this Agreement
are for convenience only and shall not control or affect the meaning or
construction of any provision hereof.
 
18.                EFFECT ON PRIOR AGREEMENTS: This Agreement supersedes all
prior agreements, either expressed or implied, between the parties hereto with
respect to the employment of Executive.
 
19.                INTERNAL REVENUE CODE SECTION 409A/CONTINUATION OF BENEFITS/
REIMBURSEMENTS:  This Agreement is intended to and shall be interpreted to
comply with Section 409A of the Code, or, if applicable, to be exempt from
Section 409A of the Code. All references to a termination of employment and
separation from service shall mean and be administered to comply with the
definition of “separation from service” in Section 409A of the Code. All
reimbursements provided under this Agreement shall comply with Section 409A of
the Code and shall be subject to the following requirements:
 
(a)           The amount of expenses eligible for reimbursement, during
Executive’s taxable year may not affect the expenses eligible for reimbursement
to be provided in another taxable year; and
 
(b)           The reimbursement of an eligible expense must be made by December
31 following the taxable year in which the expense was incurred. The right to
reimbursement is not subject to liquidation or exchange for another benefit.
 
If Executive is a “specified employee” (as defined under Section 409A of the
Code) at the time of separation from service, to the extent that any amount
payable under this Agreement constitutes “deferred compensation” under Section
409A of the Code (and is not otherwise excepted from Section 409A of the Code
coverage by virtue of being considered “separation pay” or a “short term
deferral” or otherwise) and is payable to Executive based upon a separation from
service (other than death or “disability” as defined under Section 409A of the
Code), such amount shall not be paid until the first day following the six (6)
month anniversary of Executive’s separation from service. Any right to a series
of installment payments shall be treated as a right to a series of separate
payments for purposes of Section 409A of the Code. Payment of any accrued and
unused paid time off, unless expressly provided otherwise herein shall be made
in a single lump sum within thirty (30) days of separation from service.
 
20.                ARBITRATION OF DISPUTES:  Any dispute or controversy arising
under or in connection with this Agreement shall be settled exclusively by
binding arbitration, as an alternative to civil litigation and without any trial
by jury to resolve such claims, conducted by a single arbitrator who is
certified by the American Arbitration Association and is mutually acceptable to
Executive and Company, sitting in a location selected by the Employer within
fifty (50) miles from the main office of the Employer, in accordance with the
rules of the American Arbitration Association’s National Rules for the
Resolution of Employment Disputes then in effect. Judgment may be entered on the
arbitrator’s award in any court having jurisdiction.
 
21.                 COUNTERPARTS:  This Agreement may be executed in
counterparts.
 
22.                [reserved]
 
23.                 REGULATORY REQUIREMENTS:
 
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(a)           If the Executive is removed and/or permanently prohibited from
participating in the conduct of the Employer’s affairs by an order issued under
Section 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act (“FDIA”) (12
U.S.C. 1818(e)(4) and (g)(1)), all obligations of the Employer under this
Agreement shall terminate, as of the effective date of such order, except for
the payment of Base Salary due and owing under Section 4(a) on the effective
date of said order, and reimbursement under Section 5(a) of expenses incurred as
of the effective date of termination.
(b)          If the Executive is suspended and/or temporarily prohibited from
participating in the conduct of the Employer’s affairs by a notice served under
Section 8(e)(3) or 8(g)(1) of the FDIA (12 U.S.C. 1818(e)(3) and (g)(1)), all
obligations of the Employer under this Agreement shall be suspended as of the
date of service unless stayed by appropriate proceedings.  If the charges in the
notice are dismissed, the Employer shall reinstate (in whole or in part) any of
its obligations which were suspended.

(c)           If the Employer is in default (as defined in Section 3(x)(1) of
the FDIA), all obligations under this Agreement shall terminate as of the date
of default, but the vested rights of the parties shall not be affected.

(d)           All obligations under this Agreement shall be terminated, except
to the extent a determination is made that continuation of the contract is
necessary for the continued operation of the Employer (1) by the director of the
Federal Deposit Insurance Corporation (the “FDIC”) or his or her designee (the
“Director”), at the time the FDIC enters into an agreement to provide assistance
to or on behalf of the Employer under the authority contained in Section 13(c)
of the FDIA; or (2) by the Director, at the time the Director approves a
supervisory merger to resolve problems related to operation of the Employer when
the Employer is determined by the Director to be in an unsafe and unsound
condition.  Any rights of the Executive that have already vested, however, shall
not be affected by such action.

(e)           All obligations under this Agreement are further subject to such
conditions, restrictions, limitations and forfeiture provisions as may
separately apply pursuant to any applicable state banking laws.
 
 (f)           Notwithstanding anything contained in this Agreement to the
contrary, no payments shall be made pursuant any provision herein in
contravention of the requirements of the Federal Deposit Insurance Act (12
U.S.C. 1828(k)).

[Signatures on following page]
 
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IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the
date first above written.

 
ASB BANCORP, INC.
       
By:
/s/ Patricia S. Smith
   
Patricia S. Smith
   
Chairman of the Board
       
ASHEVILLE SAVINGS BANK, S.S.B.
       
By:
/s/ Patricia S. Smith
   
Patricia S. Smith
   
Chairman of the Board
       
/s/ Vikki D. Bailey
 
Vikki D. Bailey

 
 
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