Exhibit 10.1

                                ASHE FEDERAL BANK

                              EMPLOYMENT AGREEMENT


     This  EMPLOYMENT  AGREEMENT  ("Agreement")  is made and entered  into as of
October  4,  1996 by and  between  ASHE  FEDERAL  BANK,  a mutual  savings  bank
organized and  operating  under the federal laws of the United States and having
an office at 205 South Jefferson  Avenue,  West Jefferson,  North Carolina 28694
("Bank")  and JAMES A. TODD,  an  individual  residing  at 849 Clyde Houck Road,
Todd, North Carolina 28684 ("Executive").

                              W I T N E S S E T H :
                              ---------------------


     WHEREAS,  the  Executive  currently  serves  the  Bank in the  capacity  of
President, Chief Executive Officer and Director; and

     WHEREAS, the Bank has decided to reorganize from a mutual savings bank to a
stock form  savings  bank which is majority  owned by a mutual  holding  company
("Mutual Holding  Company") formed pursuant to the Plan of  Reorganization  from
Mutual Bank to Mutual Holding Company (the "Plan of Reorganization"); and

     WHEREAS,  the Bank desires to assure for itself the continued  availability
of the  Executive's  services  and the ability of the  Executive to perform such
services  with a minimum of  personal  distraction  in the event of a pending or
threatened Change in Control (as hereinafter defined); and

     WHEREAS,  the  Executive  is willing to  continue  to serve the Bank on the
terms and conditions hereinafter set forth; and

     WHEREAS,  the Bank has  agreed to provide  the  Executive  with  additional
salary as added  consideration  for the  Executive  agreeing to the  restrictive
covenants hereinafter set forth;

     NOW,  THEREFORE,  in consideration of the premises and the mutual covenants
and conditions hereinafter set forth, the Bank and the Executive hereby agree as
follows:

     SECTION 1. EMPLOYMENT.

     The Bank  agrees to  continue to employ the  Executive,  and the  Executive
hereby agrees to such continued employment, during the period and upon the terms
and conditions set forth in this Agreement.


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     SECTION 2. EMPLOYMENT PERIOD; REMAINING UNEXPIRED EMPLOYMENT PERIOD.

     (a) The terms  and  conditions  of this  Agreement  shall be and  remain in
effect  during  the  period  of  employment  established  under  this  section 2
("Employment  Period").  The  Employment  Period shall be for an initial term of
three  years  beginning  on the  date  of this  Agreement.  Prior  to the  first
anniversary of the date of this Agreement and each  anniversary  date thereafter
(each,  an  "Anniversary  Date"),  the Board of Directors of the Bank  ("Board")
shall review the terms of this  Agreement  and the  Executive's  performance  of
services  hereunder and may, in the absence of objection  from the Executive and
subject to section 2(d),  approve an extension of the Employment Period. In such
event, the Employment  Period shall be extended to the third  anniversary of the
relevant Anniversary Date.

     (b) For all  purposes  of this  Agreement,  the term  "Remaining  Unexpired
Employment  Period" as of any date shall mean the period  beginning on such date
and ending on the Anniversary  Date on which the Employment  Period (as extended
pursuant to section 2(a) of this Agreement) is then scheduled to expire.

     (c) Nothing in this  Agreement  shall be deemed to  prohibit  the Bank from
terminating the Executive's  employment at any time during the Employment Period
with or without  notice for any reason;  PROVIDED,  HOWEVER,  that the  relative
rights and  obligations  of the Bank and the  Executive in the event of any such
termination shall be determined under this Agreement.

     (d) In no event shall an extension of the Employment  Period be made during
any time period during which the Executive may tender voluntary  resignation and
collect severance benefits pursuant to either section 9(a) or section 11 of this
Agreement.

     SECTION 3. DUTIES.

     The Executive shall serve as the President and Chief Executive  Officer and
a Director of the Bank,  having such power,  authority  and  responsibility  and
performing such duties as are prescribed by or under the By-Laws of the Bank and
as are  customarily  associated  with such  position or as assigned by the Board
acting in good faith. The chief executive  officer is responsible for all facets
of operations of the bank and for  implementing  the  directions of the board of
directors  limited by regulatory  and prudent  business  constraints.  The chief
executive  officer is to engage full energies towards  improving the position of
the bank within its market area.  The  responsibilities  of the Chief  Executive
Officer include, but are not necessarily limited to, the following:

     o    Developing  strategic  objectives  for  presentation  to the  board of
          directors for approval.

     o    Developing  and   implementing   tactics   necessary  to  achieve  the
          objectives approved by the board of directors.

     o    Selecting and  implementing  marketing  plans necessary to achieve the
          bank's objectives.


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     o    Maintaining  an  awareness  of the  bank and its  contribution  to the
          community by providing a personal  presence  within the bank's  market
          area.

     o    Developing  policies and  procedures  for the  activities of the bank,
          presenting those policies to the board of directors for  consideration
          and approval, for seeing that the approved policies are implemented by
          all  functions  within  the bank and for  developing  changes to those
          policies  as  conditions  change  within the  market  place and as the
          objectives of the bank change.

     o    Developing  and  implementing  an employee  training  and  development
          program so that the  quality  of  service  provided  to  customers  is
          delivered by a well informed staff.

     o    Identifying new  opportunities for the bank including new products and
          market segments that will enhance the bank's  attractiveness to people
          within  the  bank's  market  area and that  will  enhance  the  income
          opportunities.  A long term  viewpoint is critical so that longer term
          stability is not sacrificed for shorter term profits.

     o    Maintaining  an adequate  system on internal  control  including  loan
          quality  control and compliance  with rules,  regulations  and prudent
          practices.

     o    Reporting  accurately  the  condition  of the  bank  to the  board  of
          directors,  regulators  and other  entities  with a vested or required
          interest in the condition of the bank.

     o    Business development through contacts within the community and through
          directing officer and employee call programs.

The Executive  shall devote his full  business  time and  attention  (other than
during weekends,  holidays, approved vacation periods, and periods of illness or
approved  leaves of absence) to the  business  and affairs of the Bank and shall
use his best efforts to advance the interests of the Bank.

     SECTION 4. CASH COMPENSATION.

     (a) In  consideration  for the  services to be  rendered  by the  Executive
hereunder,  the Bank  shall pay to him a salary  at an  initial  annual  rate of
EIGHTY THOUSAND DOLLARS ($80,000),  payable in approximately  equal installments
in accordance with the Bank's customary  payroll  practices for senior officers.
Prior to each Anniversary Date occurring during the Employment Period, the Board
shall review the  Executive's  annual rate of salary and may, in its discretion,
approve an increase  therein.  In addition to salary,  the Executive may receive
other cash compensation  from the Bank for services  hereunder at such times, in
such amounts and on such terms and  conditions as the Board may  determine  from
time to time.

     (b) If  elected  to the Board,  and if  Executive  chooses to serve on such
Board,  Executive  will be  compensated  for such  service in the same manner as
other members of the Board.


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     SECTION 5. EMPLOYEE BENEFIT PLANS AND PROGRAMS.

     During the Employment Period, the Executive shall be treated as an employee
of the Bank and shall be eligible to participate  in and receive  benefits under
any  and  all  qualified  or   non-qualified   retirement,   pension,   savings,
profit-sharing  or stock bonus plans, any and all group life,  health (including
hospitalization,  medical and major  medical),  dental,  accident  and long term
disability  insurance  plans,  and any other employee  benefit and  compensation
plans  (including,  but not  limited  to, any  incentive  compensation  plans or
programs, stock option and appreciation rights plans and restricted stock plans)
as may from time to time be maintained by, or cover executive  employees of, the
Bank, in accordance with the terms and conditions of such employee benefit plans
and programs and compensation  plans and programs and consistent with the Bank's
customary practices.

     SECTION 6. INDEMNIFICATION AND INSURANCE.

     (a)  During  the  Employment  Period  and for a  period  of six  (6)  years
thereafter,  the Bank shall cause the Executive to be covered by and named as an
insured  under any policy or contract of insurance  obtained by it to insure its
directors  and  officers  against  personal  liability  for acts or omissions in
connection  with  service as an officer  or  director  of the Bank or service in
other  capacities  at the  request of the Bank.  The  coverage  provided  to the
Executive  pursuant to this section 6 shall be of the same scope and on the same
terms and  conditions  as the  coverage (if any)  provided to other  officers or
directors of the Bank.

     (b) To the maximum extent permitted under 12 C.F.R. ss.545.121,  during the
Employment  Period  and for a period  six (6) years  thereafter,  the Bank shall
indemnify,  and shall cause its  subsidiaries  and  affiliates  to indemnify the
Executive against and hold him harmless from any costs, liabilities,  losses and
exposures to the fullest extent and on the most  favorable  terms and conditions
that similar  indemnification  is offered to any director or officer of the Bank
or  any  subsidiary  or  affiliate  thereof.  This  section  6(b)  shall  not be
applicable where section 18 is applicable.

     SECTION 7. OUTSIDE ACTIVITIES.

     The  Executive  may serve as a member of the  boards of  directors  of such
business,  community and charitable  organizations  as he may disclose to and as
may  be  approved  by the  Board  (which  approval  shall  not  be  unreasonably
withheld);  PROVIDED,  HOWEVER, that such service shall not materially interfere
with the performance of his duties under this Agreement.  The Executive may also
engage in personal  business and investment  activities  which do not materially
interfere with the performance of his duties hereunder;  PROVIDED, HOWEVER, that
such  activities are not  prohibited  under any code of conduct or investment or
securities  trading policy  established by the Bank and generally  applicable to
all similarly situated executives (including, without limitation, any applicable
conflict of interest policy adopted by the Board of Directors as contemplated by
12 C.F.R. ss.571.7 and ss.571.9).  The Executive may also serve as an officer or
director of the Mutual Holding  Company on such terms and conditions as the Bank
and the Mutual  Holding  Company may mutually agree upon, and such service shall
not be deemed to materially interfere with the


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Executive's  performance  of his duties  hereunder  or  otherwise to result in a
material breach of this Agreement.

     SECTION 8. WORKING FACILITIES AND EXPENSES.

     The  Executive's  principal  place of  employment  shall  be at the  Bank's
executive offices at the address first above written,  or at such other location
within  Ashe County at which the Bank shall  maintain  its  principal  executive
offices,  or at such other  location as the Bank and the  Executive may mutually
agree upon.  The Bank shall  provide the  Executive  at his  principal  place of
employment  with a  private  office,  secretarial  services  and  other  support
services and facilities  suitable to his position with the Bank and necessary or
appropriate in connection with the performance of his assigned duties under this
Agreement. The Bank shall reimburse the Executive for his ordinary and necessary
business expenses,  including,  without limitation, fees for memberships in such
clubs and  organizations  as the Executive and the Bank shall mutually agree are
necessary  and   appropriate   for  business   purposes,   and  his  travel  and
entertainment expenses incurred in connection with the performance of his duties
under this Agreement,  in each case upon presentation to the Bank of an itemized
account of such expenses in such form as the Bank may reasonably require.

     SECTION 9. TERMINATION OF EMPLOYMENT WITH SEVERANCE BENEFITS.

     (a) The  Executive  shall be entitled to the severance  benefits  described
herein in the event  that his  employment  with the Bank  terminates  during the
Employment Period under any of the following circumstances:

          (i) the  Executive's  voluntary  resignation  from employment with the
     Bank within forty-five (45) days following:

               (A) the failure of the Board to appoint or re-appoint or elect or
          re-elect  the  Executive  to the  office  stated in  section 3 of this
          Agreement (or a more senior office) of the Bank;

               (B) the expiration of a thirty (30) day period following the date
          on  which  the  Executive  gives  written  notice  to the  Bank of its
          material  failure,  whether by  amendment  of the Bank's  Organization
          Certificate or By-laws, action of the Board or the Bank's stockholders
          or  otherwise,  to vest in the  Executive the  functions,  duties,  or
          responsibilities  prescribed in section 3 of this  Agreement as of the
          date  hereof,  unless,  during such  thirty (30) day period,  the Bank
          fully cures such failure;

               (C) the expiration of a thirty (30) day period following the date
          on  which  the  Executive  gives  written  notice  to the  Bank of its
          material breach of any term,  condition or covenant  contained in this
          Agreement   (including,   without  limitation  any  reduction  of  the
          Executive's rate of base


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          salary  in effect  from  time to time and any  change in the terms and
          conditions  of any  compensation  or  benefit  program  in  which  the
          Executive  participates  which,  either  individually or together with
          other changes, has a material adverse effect on the aggregate value of
          his total compensation  package),  unless, during such thirty (30) day
          period, the Bank fully cures such failure; or

          (ii) the termination of the  Executive's  employment with the Bank for
     any other reason not described in section 10(a); or

          (iii) the Executive's  mandatory  resignation from employment with the
     Bank within 45 days following the failure of the  stockholders  of the Bank
     to elect or re-elect the Executive to the Board of the failure of the Board
     (or the  nominating  committee  thereof) to nominate the Executive for such
     election or re-election;  PROVIDED,  HOWEVER,  that such failure is not the
     result of a vote cast by the Executive.

In such event,  subject to section 25, the Bank shall  provide the  benefits and
pay to the Executive the amounts described in section 9(b).

     (b) Upon the termination of the Executive's  employment with the Bank under
circumstances  described in section 9(a) of this  Agreement,  the Bank shall pay
and provide to the Executive (or, in the event of his death, to his estate):

          (i) his earned but unpaid compensation,  including bonuses awarded and
     not yet received,  as of the date of the termination of his employment with
     the Bank, such payment to be made at the time and in the manner  prescribed
     by law applicable to the payment of wages but in no event later than thirty
     (30) days after termination of employment;

          (ii)  the  benefits,  if any,  to  which  he is  entitled  as a former
     employee  under the employee  benefit  plans and programs and  compensation
     plans and pro- grams  maintained for the benefit of the Bank's officers and
     employees;

          (iii) continued group life, health (including hospitalization, medical
     and major medical),  dental,  accident and long term  disability  insurance
     benefits,  in addition to that provided pursuant to section  9(b)(ii),  and
     after taking into account the coverage provided by any subsequent employer,
     if and to the  extent  necessary  to  provide  for the  Executive,  for the
     Remaining Unexpired Employment Period,  coverage equivalent to the coverage
     to which he would have been entitled  under such plans (as in effect on the
     date of his termination of employment, or, if his termination of employment
     occurs  after a Change in  Control,  on the date of such Change in Control,
     whichever  benefits are greater) if he had  continued  working for the Bank
     during the Remaining Unexpired Employment Period at the highest annual rate
     of compensation achieved during that portion of the Employment Period which
     is prior to the Executive's termination of employment with the Bank; and


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          (iv) within thirty (30) days  following his  termination of employment
     with the Bank, a lump sum payment,  in an amount equal to the present value
     of the salary  that the  Executive  would have  earned if he had  continued
     working for the Bank during the Remaining  Unexpired  Employment  Period at
     the highest  annual  rate of salary  achieved  during  that  portion of the
     Employment  Period  which  is  prior  to  the  Executive's  termination  of
     employment  with the Bank,  where such  present  value is to be  determined
     using a  discount  rate equal to the  applicable  short-term  federal  rate
     prescribed  under  section  1274(d) of the  Internal  Revenue  Code of 1986
     ("Code"),  compounded  using the compounding  period  corresponding  to the
     Bank's regular payroll  periods for its officers,  such lump sum to be paid
     in lieu of all other  payments of salary  provided for under this Agreement
     in respect of the period following any such termination.

The Bank and the  Executive  hereby  stipulate  that the  damages  which  may be
incurred by the Executive  following any such  termination of employment are not
capable of accurate  measurement as of the date first above written and that the
payments and benefits  contemplated by this section 9(b)  constitute  reasonable
damages under the  circumstances and shall be payable without any requirement of
proof of actual damage and without regard to the Executive's efforts, if any, to
mitigate  damages.  The Bank and the  Executive  further agree that the Bank may
condition  the payments and benefits (if any) due under  sections  9(b)(iii) and
(iv) on the receipt of the  Executive's  resignation  from any and all positions
which he holds as an officer,  director or committee  member with respect to the
Bank or the Mutual  Holding  Company or any subsidiary or affiliate of either of
them.

     SECTION 10. TERMINATION WITHOUT ADDITIONAL BANK LIABILITY.

     (a) In the  event  that  Executive's  employment  with  the  Company  shall
terminate during the Employment Period on account of:

          (i) the discharge of the Executive for "cause," which, for purposes of
     this  Agreement  shall  mean  personal  dishonesty,  incompetence,  willful
     misconduct, breach of fiduciary duty involving personal profit, intentional
     failure to perform  stated  duties,  willful  violation of any law, rule or
     regulation  (other than traffic  violations  or similar  offenses) or final
     cease and desist order, or any material  breach of this Agreement,  in each
     case as measured  against  standards  generally  prevailing at the relevant
     time in the savings and community banking industry; PROVIDED, HOWEVER, that
     the Executive  shall not be deemed to have been discharged for cause unless
     and until the following procedures shall have been followed:

               (A)  the  Board  shall  adopt  a  resolution   duly  approved  by
          affirmative vote of a majority of the entire Board at a meeting called
          and held for such purpose calling for the Executive's  termination for
          cause and setting  forth the  purported  grounds for such  termination
          ("Proposed Termination Resolution");


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               (B) as soon as  practicable,  and in any  event  within  five (5)
          days,  after adoption of such  resolution,  the Board shall furnish to
          the  Executive  a  written  notice  of  termination   which  shall  be
          accompanied by a certified copy of the Proposed Termination Resolution
          ("Notice of Proposed Termination");

               (C) the Executive  shall be afforded a reasonable  opportunity to
          to make oral and written presentations to the members of the Board, on
          his own  behalf,  or  through a  representative,  who may be his legal
          counsel,  to refute the grounds set forth in the Proposed  Termination
          Resolution  at one or more  meetings of the Board to be held no sooner
          than  fifteen  (15)  days and no later  than  thirty  (30)  after  the
          Executive's receipt of the Proposed  Termination Notice  ("Termination
          Hearings"); and

               (D) within  ten (10) days  following  the end of the  Termination
          Hearings,  the  Board  shall  adopt  a  resolution  duly  approved  by
          affirmative vote of a majority of the entire Board at a meeting called
          and held for such purpose (A) finding  that in the good faith  opinion
          of the Board the grounds  for  termination  set forth in the  Proposed
          Termination  Resolution  exist  and (B)  terminating  the  Executive's
          employment ("Termination Resolution"); and

               (E) as promptly as  practicable,  and in any event within one (1)
          business day after adoption of the Termination  Resolution,  the Board
          shall furnish to the Exective  written  notice of  termination,  which
          notice shall include a copy of the Termination  Resolution and specify
          an effective  date of  termination  that is not later than the date on
          which such notice is given;

          (ii)  Executive's  voluntary  resignation  from  employment  with  the
     Company for reasons other than those specified in section 9(a);

          (iii) Executive's death; or

          (iv)  a  determination   that  Executive  is  eligible  for  long-term
     disability  benefits  under the Company's  long-term  disability  insurance
     program or, if there is no such program,  under the federal Social Security
     Act;

then the Company shall have no further  obligations under this Agreement,  other
than the payment to Executive (or, in the event of his death,  to his estate) of
his  earned  but  unpaid  salary  as of  the  date  of  the  termination  of his
employment,  and the  provision of such other  benefits,  if any, to which he is
entitled as a former  employee  under the employee  benefit plans and pro- grams
and compensation plans and programs maintained by, or covering employees of, the
Company.

     (b) For purposes of section  10(a)(i)(A)  or (B), no act or failure to act,
on the part of Executive,  shall be considered  "willful"  unless it is done, or
omitted to be done, by Executive in bad faith or without  reasonable belief that
Executive's  action or omission was in the best  interests  of the Company.  Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or based upon the written advice of counsel for the


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Company  shall be  conclusively  presumed to be done,  or omitted to be done, by
Executive in good faith and in the best interests of the Company.  The cessation
of  employment  of  Executive  shall not be deemed to be for "cause"  within the
meaning of section  10(a)(i) unless and until there shall have been delivered to
Executive  a copy  of a  resolution  duly  adopted  by the  affirmative  vote of
three-fourths of the non-employee members of the Board at a meeting of the Board
called  and held for such  purpose  (after  reasonable  notice  is  provided  to
Executive and Executive is given an  opportunity,  together with counsel,  to be
heard before the Board),  finding  that, in the good faith opinion of the Board,
Executive is guilty of the conduct  described  in section  10(a)(i)  above,  and
specifying the particulars thereof in detail.

     SECTION 11. TERMINATION UPON OR FOLLOWING A CHANGE IN CONTROL.

     (a) A Change in Control of the Bank  ("Change in Control")  shall be deemed
to have occurred upon the happening of any of the following events:

          (i) approval by the  stockholders  of the Bank of a  transaction  that
     would result in the  reorganization,  merger or  consolidation of the Bank,
     respectively,  with one or more other  persons,  other  than a  transaction
     following which:

               (A) at least 51% of the equity ownership  interests of the entity
          resulting from such  transaction  are  beneficially  owned (within the
          meaning of Rule 13d-3 promulgated under the Securities Exchange Act of
          1934 ("Exchange Act")) in substantially the same relative  proportions
          by persons who,  immediately prior to such  transaction,  beneficially
          owned (within the meaning of Rule 13d-3 promulgated under the Exchange
          Act) at least 51% of the outstanding equity ownership interests in the
          Bank; and

               (B) at least 51% of the securities  entitled to vote generally in
          the  election  of  directors  of  the  entity   resulting   from  such
          transaction are  beneficially  owned (within the meaning of Rule 13d-3
          promulgated under the Exchange Act) in substantially the same relative
          proportions  by persons who,  immediately  prior to such  transaction,
          beneficially owned (within the meaning of Rule 13d-3 promulgated under
          the  Exchange  Act) at least 51% of the  securities  entitled  to vote
          generally in the election of directors of the Bank;

          (ii) the acquisition of all or substantially  all of the assets of the
     Bank or beneficial  ownership (within the meaning of Rule 13d-3 promulgated
     under the Exchange Act) of 25% or more of the outstanding securities of the
     Bank entitled to vote  generally in the election of directors by any person
     or by any persons acting in concert, or approval by the stockholders of the
     Bank of any transaction which would result in such an acquisition; or

          (iii) a complete  liquidation  or dissolution of the Bank, or approval
     by the  stockholders  of  the  Bank  of a  plan  for  such  liquidation  or
     dissolution; or


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          (iv) the occurrence of any event if, immediately following such event,
     at least 50% of the  members of the board of  directors  of the Bank do not
     belong to any of the following groups:

               (A)  individuals who were members of the Board of the Bank on the
          date of this Agreement; or

               (B) individuals who first became members of the Board of the Bank
          after the date of this Agreement either:

                    (I) upon  election  to serve  as a  member  of the  Board of
               directors of the Bank by affirmative  vote of  three-quarters  of
               the members of such board, or of a nominating  committee thereof,
               in office at the time of such first election; or

                    (II) upon election by the stockholders of the Board to serve
               as a member of the board of directors  of the Board,  but only if
               nominated for election by affirmative vote of  three-quarters  of
               the  members  of the board of  directors  of the  Board,  or of a
               nominating committee thereof, in office at the time of such first
               nomination;

          PROVIDED,  HOWEVER,  that such individual's election or nomination did
          not result from an actual or threatened  election  contest (within the
          meaning  of Rule  14a-11  of  Regulation  14A  promulgated  under  the
          Exchange Act) or other actual or threatened solicitation of proxies or
          consents  (within  the  meaning  of  Rule  14a-11  of  Regulation  14A
          promulgated  under the Exchange Act) other than by or on behalf of the
          Board of the Bank;

In no event, however,  shall a Change in Control be deemed to have occurred as a
result of any  acquisition  of  securities or assets of the Bank by any employee
benefit plan  maintained by the Bank.  For purposes of this section 11, the term
"person"  shall have the  meaning  assigned  to it under  sections  13(d)(3)  or
14(d)(2) of the Exchange Act.

     (b) In the event of a Change in Control, the Executive shall be entitled to
the  payments  and  benefits  contemplated  by section  9(b) in the event of his
termination of employment with the Bank under any of the circumstances described
in section 9(a) of this Agreement or under any of the following circumstances:

          (i) resignation,  voluntary or otherwise, by the Executive at any time
     during the  Employment  Period and within  ninety (90) days  following  his
     demotion, loss of title, office or significant authority or responsibility,
     or following  any  reduction in any element of his package of  compensation
     and benefits;

          (ii) resignation, voluntary or otherwise, by the Executive at any time
     during the  Employment  Period and within  ninety (90) days  following  any
     relocation  of his  principal  place of employment or any change in working
     conditions at such  principal  place of employment  which is  embarrassing,
     derogatory or otherwise materially adverse to the Executive;


                                  Page 10 of 18

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          (iii)  resignation,  voluntary or  otherwise,  by the Executive at any
     time during the Employment Period following the failure of any successor to
     the  Bank  in the  Change  in  Control  to  include  the  Executive  in any
     compensation  or benefit  program  maintained  by it or covering any of its
     executive   officers,   unless  the  Executive  is  already  covered  by  a
     substantially  similar  plan of the Bank which is at least as  favorable to
     his; or

          (iv)  resignation,  voluntary or otherwise,  for any reason whatsoever
     following the expiration of a transition period of thirty days beginning on
     the effective date of the Change in Control (or such longer period,  not to
     exceed ninety (90) days  beginning on the  effective  date of the Change in
     Control, as the Bank or its successor may reasonably request) to facilitate
     a transfer of management responsibilities.

     SECTION 12. COVENANT NOT TO COMPETE.

     The  Executive  hereby  covenants  and  agrees  that,  in the  event of his
termination  of  employment  with  the  Bank  prior  to  the  expiration  of the
Employment  Period,  for a  period  of one (1)  year  following  the date of his
termination  of  employment  with  the Bank  (or,  if  less,  for the  Remaining
Unexpired  Employment  Period), he shall not, without the written consent of the
Bank,  become  an  officer,  employee,  consultant,  director  or  trustee  with
executory,  managerial,  supervisory or strategic  authority or influence at any
savings bank,  savings and loan  association,  savings and loan holding company,
bank or bank holding company,  or any direct or indirect subsidiary or affiliate
of any such entity,  that entails  working within one hundred (100) miles of the
headquarters  of  the  Bank  on  the  date  of the  Executive's  termination  of
employment;  PROVIDED,  HOWEVER,  that  this  section  12 shall not apply if the
Executive's  employment  is ter-  minated  for the  reasons set forth in section
9(a);  and  PROVIDED,  further,  that if the  Executive's  employment  shall  be
terminated  on account  of  disability  as  provided  in  section  10(d) of this
Agreement,  this section 12 shall not prevent the Executive  from  accepting any
position or performing any services if (a) he first offers,  by written  notice,
to accept a similar  position with, or perform similar services for, the Bank on
substantially  the same terms and conditions and (b) the Bank declines to accept
such offer within ten (10) days after such notice is given.

     SECTION 13. CONFIDENTIALITY.

     Unless he obtains  the prior  written  consent of the Bank,  the  Executive
shall keep confidential and shall refrain from using for the benefit of himself,
or any person or entity  other than the Bank or any entity which is a subsidiary
of the Bank or of which  the Bank is a  subsidiary,  any  material  document  or
information  obtained from the Bank, or from its parent or subsidiaries,  in the
course  of  his  employment  with  any  of  them  concerning  their  properties,
operations  or  business   (unless  such  document  or  information  is  readily
ascertainable  from  public or  published  information  or trade  sources or has
otherwise  been made  available to the public through no fault of his own) until
the same  ceases to be  material  (or becomes so  ascertainable  or  available);
PROVIDED,  HOWEVER, that nothing in this section 13 shall prevent the Executive,
with  or  without  the  Bank's  consent,  from  participating  in or  disclosing
documents or information in connection with


                                  Page 11 of 18

<PAGE>



any  judicial or  administrative  investigation,  inquiry or  proceeding  to the
extent that such participation or disclosure is required under applicable law.

     SECTION 14. SOLICITATION.

     The Executive  hereby  covenants  and agrees that,  for a period of one (1)
year  following  his  termination  of  employment  with the Bank,  he shall not,
without the written consent of the Bank, either directly or indirectly:

          (a) 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 the Bank or any
     affiliate, as of the date of this Agreement, of either of them to terminate
     his or his employment and accept  employment or become  affiliated with, or
     provide  services  for  compensation  in any  capacity  whatsoever  to, any
     savings bank,  savings and loan  association,  bank, bank holding  company,
     savings  and loan  holding  company,  or other  institution  engaged in the
     business of accepting  deposits and making loans, doing business within one
     hundred (100) miles of the headquarters of the Bank or any affiliate, as of
     the date of this Agreement, of either of them;

          (b) provide any information,  advice or recommendation with respect to
     any  such  officer  or  employee  of any  savings  bank,  savings  and loan
     association,  bank, bank holding company, savings and loan holding company,
     or other  institution  engaged in the  business of  accepting  deposits and
     making  loans,  doing  business  within  one  hundred  (100)  miles  of the
     headquarters  of  the  Bank  or  any  affiliate,  as of the  date  of  this
     Agreement,  of either of them that is intended, or that a reasonable person
     acting in like  circumstances  would expect,  to have the effect of causing
     any  officer or employee  of the Bank or any  affiliate,  as of the date of
     this  Agreement,  of either of them to terminate his or his  employment and
     accept  employment  or become  affiliated  with,  or provide  services  for
     compensation in any capacity  whatsoever to, any savings bank,  savings and
     loan  association,  bank,  bank holding  company,  savings and loan holding
     company, or other institution engaged in the business of accepting deposits
     and making  loans,  doing  business  within one hundred  (100) miles of the
     headquarters  of  the  Bank  or  any  affiliate,  as of the  date  of  this
     Agreement, of either of them;

          (c) 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 customer of
     the Bank to terminate an existing business or commercial  relationship with
     the Bank.

     SECTION 15. NO EFFECT ON EMPLOYEE BENEFIT PLANS OR PROGRAMS.

     The  termination  of the  Executive's  employment  during  the term of this
Agreement or thereafter,  whether by the Bank or by the Executive, shall have no
effect on the rights and  obligations  of the parties  thereto  under the Bank's
qualified or non-qualified retirement, pension,


                                  Page 12 of 18

<PAGE>



savings,  thrift,  profit-sharing  or stock  bonus  plans,  group  life,  health
(including  hospitalization,  medical and major medical),  dental,  accident and
long term  disability  insurance  plans or such other employee  benefit plans or
programs,  or compensation plans or programs,  as may be maintained by, or cover
employees of, the Bank from time to time.

     SECTION 16. SUCCESSORS AND ASSIGNS.

     This  Agreement  will  inure  to the  benefit  of and be  binding  upon the
Executive, his legal representatives and testate or intestate distributees,  and
the Bank and its  successors  and assigns,  including any successor by merger or
consolidation  or any  other  person  or firm or  corporation  to  which  all or
substantially  all of the  assets  and  business  of the  Bank  may be  sold  or
otherwise  transferred.  Failure of the Bank to obtain  from any  successor  its
express written  assumption of the Bank's  obligations  hereunder at least sixty
(60) days in  advance of the  scheduled  effective  date of any such  succession
shall be deemed a material breach of this Agreement unless cured within ten (10)
days after notice thereof by the Executive to the Bank.

     SECTION 17. NOTICES.

     Any  communication  required or permitted to be given under this Agreement,
including any notice, direction, designation, consent, instruction, objection or
waiver,  shall be in writing and shall be deemed to have been given at such time
as it is delivered personally, or five (5) days after mailing if mailed, postage
prepaid, by registered or certified mail, return receipt requested, addressed to
such party at the  address  listed  below or at such  other  address as one such
party may by written notice specify to the other party:

                  If to the Executive:
                           James A. Todd
                           849 Clyde Houck Road
                           Todd, North Carolina 28684

                  If to the Bank:
                           Ashe Federal Bank
                           P.O. Box 26
                           West Jefferson, North Carolina 28694
                           Attention:  Chairman Of The Board
                                       ---------------------

                           with a copy to:
                             Thacher Proffitt & Wood
                             Two World Trade Center
                             New York, New York 10048
                             Attention:  W. Edward Bright, Esq.
                                        ---------------------


                                  Page 13 of 18

<PAGE>



     SECTION 18. INDEMNIFICATION FOR ATTORNEYS' FEES.

     The Bank shall  indemnify,  hold harmless and defend the Executive  against
reasonable costs,  including legal fees, incurred by the Executive in connection
with or  arising  out of any  action,  suit or  proceeding  in  which  he may be
involved,  as a result of his efforts,  in good faith,  to defend or enforce the
terms of this  Agreement;  PROVIDED,  HOWEVER,  that the  Executive  shall  have
substantially prevailed on the merits pursuant to a judgment, decree or order of
a  court  of  competent  jurisdiction  or of  an  arbitrator  in an  arbitration
proceeding   and  such   court  or   arbitrator   shall   have   approved   such
indemnification,  or  in  a  settlement.  In  the  case  of a  settlement,  such
indemnification  provided for in this section  shall  require an approval from a
majority of the  disinterested  directors  of the Board of Directors of the Bank
that the Executive acted in good faith and that such  indemnification  is in the
best  interests  of  the  institution.  For  purposes  of  this  Agreement,  any
settlement  agreement which provides for payment of any amounts in settlement of
the Bank's obligations hereunder shall be conclusive evidence of the Executive's
entitlement to indemnification  hereunder, and any such indemnification payments
shall be in addition to amounts payable  pursuant to such settlement  agreement,
unless such settlement agreement expressly provides otherwise.

     SECTION 19. SEVERABILITY.

     A  determination  that  any  provision  of this  Agreement  is  invalid  or
unenforceable  shall not  affect the  validity  or  enforceability  of any other
provision hereof.

     SECTION 20. WAIVER.

     Failure to insist upon strict  compliance with any of the terms,  covenants
or  conditions  hereof shall not be deemed a waiver of such term,  covenant,  or
condition.  A waiver of any provision of this Agreement must be made in writing,
designated as a waiver,  and signed by the party against whom its enforcement is
sought.  Any waiver or relinquishment of any right or power hereunder at any one
or more times  shall not be deemed a waiver or  relinquishment  of such right or
power at any other time or times.

     SECTION 21. COUNTERPARTS.

     This  Agreement  may be executed in two (2) or more  counterparts,  each of
which shall be deemed an original, and all of which shall constitute one and the
same Agreement.

     SECTION 22. GOVERNING LAW.

     This  Agreement  shall  be  governed  by  and  construed  and  enforced  in
accordance  with the federal  laws of the United  States and, to the extent that
federal law is  inapplicable,  in accordance with the laws of the State of North
Carolina  applicable  to contracts  entered  into and to be  performed  entirely
within the State of North Carolina.


                                  Page 14 of 18

<PAGE>



     SECTION 23. HEADINGS AND CONSTRUCTION.

     The headings of sections in this Agreement are for convenience of reference
only and are not intended to qualify the meaning of any section.  Any  reference
to a section number shall refer to a section of this Agreement, unless otherwise
stated.

     SECTION 24. ENTIRE AGREEMENT; MODIFICATIONS.

     This instrument  contains the entire  agreement of the parties  relating to
the subject  matter  hereof,  and  supersedes  in its entirety any and all prior
agreements,  understandings  or  representations  relating to the subject matter
hereof. No modifications of this Agreement shall be valid unless made in writing
and signed by the parties hereto.

     SECTION 25. REQUIRED REGULATORY PROVISIONS.

     The following  provisions  are included for the purposes of complying  with
various laws, rules and regulations applicable to the Bank:

          (a) Notwithstanding  anything herein contained to the contrary,  in no
     event shall the aggregate  amount of compensation  payable to the Executive
     under  section  9(b)  hereof  (exclusive  of amounts  described  in section
     9(b)(i)) exceed the three times the Executive's average annual compensation
     for  the  last  five  consecutive  calendar  years  to  end  prior  to  his
     termination  of  employment  with  the Bank (or for his  entire  period  of
     employment  with  the  Bank  if  less  than  five  calendar   years).   The
     compensation  payable to the Executive  hereunder  shall be further reduced
     (but not below zero) if such reduction would avoid the assessment of excise
     taxes on excess  parachute  payments (within the meaning of section 280G of
     the Code).

          (b)  Notwithstanding  anything herein  contained to the contrary,  any
     payments to the Executive by the Bank,  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 ("FDI Act"), 12 U.S.C.
     ss.1828(k), and any regulations promulgated thereunder.

          (c) Notwithstanding  anything herein contained to the contrary, if the
     Executive is  suspended  from office  and/or  temporarily  prohibited  from
     participating  in the  conduct  of the  affairs of the Bank  pursuant  to a
     notice  served under  section  8(e)(3) or 8(g)(1) of the FDI Act, 12 U.S.C.
     ss.1818(e)(3) or 1818(g)(1),  the Bank's  obligations  under this Agreement
     shall be suspended as of the date of service of such notice,  unless stayed
     by  appropriate  proceedings.  If the charges in such notice are dismissed,
     the Bank,  in its  discretion,  may (i) pay to the Executive all or part of
     the  compensation  withheld  while the Bank's  obligations  hereunder  were
     suspended and (ii)  reinstate,  in whole or in part, any of the obligations
     which were suspended.


                                  Page 15 of 18

<PAGE>



          (d) Notwithstanding  anything herein contained to the contrary, if the
     Executive is removed and/or  permanently  prohibited from  participating in
     the conduct of the Bank's affairs by an order issued under section  8(e)(4)
     or  8(g)(1)  of the  FDI  Act,  12  U.S.C.  ss.1818(e)(4)  or  (g)(1),  all
     prospective obligations of the Bank under this Agreement shall terminate as
     of the effective  date of the order,  but vested rights and  obligations of
     the Bank and the Executive shall not be affected.

          (e) Notwithstanding  anything herein contained to the contrary, if the
     Bank is in default  (within the meaning of section  3(x)(1) of the FDI Act,
     12 U.S.C. ss.1813(x)(1), all prospective obligations of the Bank under this
     Agreement shall terminate as of the date of default,  but vested rights and
     obligations of the Bank and the Executive shall not be affected.

          (f)  Notwithstanding  anything herein  contained to the contrary,  all
     prospective  obligations of the Bank hereunder shall be terminated,  except
     to the extent that a  continuation  of this  Agreement is necessary for the
     continued  operation  of the Bank:  (i) by the  Director  of the  Office of
     Thrift Supervision ("OTS") or his designee or the Federal Deposit Insurance
     Corporation  ("FDIC"),  at the time the FDIC  enters into an  agreement  to
     provide  assistance  to or on  behalf  of  the  Bank  under  the  authority
     contained in section  13(c) of the FDI Act, 12 U.S.C.  ss.1823(c);  (ii) by
     the  Director  of the OTS or his  designee  at the time  such  Director  or
     designee  approves a supervisory  merger to resolve problems related to the
     operation of the Bank or when the Bank is determined by such Director to be
     in an unsafe or unsound condition. The vested rights and obligations of the
     parties shall not be affected.

If and to the extent  that any of the  foregoing  provisions  shall  cease to be
required  or by  applicable  law,  rule or  regulation,  the same  shall  become
inoperative as though eliminated by formal amendment of this Agreement.


                                  Page 16 of 18

<PAGE>


     IN WITNESS  WHEREOF,  the Bank has caused this Agreement to be executed and
the Executive has hereunto set his hand,  all as of the day and year first above
written.

                                         --------------------------------------
                                         JAMES A. TODD
                                         President and Chief Executive Officer

ATTEST:                                  ASHE FEDERAL BANK

By   _____________________________       By  __________________________________
     MELANIE C. PAISLEY                  JAN R. CADDELL
     Secretary                           Chairman of the Board of Directors
[Seal]


                                  Page 17 of 18

<PAGE>

STATE OF NORTH CAROLINA             )
                                     : ss.:
COUNTY OF ASHE                      )

     On this ________ day of  ____________________,  1996,  before me personally
came James A. Todd, to me known, and known to me to be the individual  described
in the foregoing  instrument,  who,  being by me duly sworn,  did depose and say
that he resides at the address set forth in said instrument,  and that he signed
his name to the foregoing instrument.

                                        ---------------------------------------
                                                       Notary Public

STATE OF NORTH CAROLINA             )
                                     : ss.:
COUNTY OF ASHE                      )

     On this ________ day of  ____________________,  1996,  before me personally
came  ___________________,  to me known, who, being by me duly sworn, did depose
and say that he resides at ______________________________________________,  that
he is a member of the Board of Directors of ASHE FEDERAL BANK,  the savings bank
described in and which executed the foregoing instrument; that he knows the seal
of said mutual  savings bank;  that the seal affixed to said  instrument is such
seal;  that it was so affixed by order of the Board of Directors of said savings
bank; and that he signed his name thereto by like order.

                                        ---------------------------------------
                                                     Notary Public


                                  Page 18 of 18