EXHIBIT 10.1
QUAINT OAK BANK
EMPLOYMENT AGREEMENT

FOR JOHN J. AUGUSTINE

THIS EMPLOYMENT AGREEMENT (the “Agreement”) between Quaint Oak Bank, a
Pennsylvania-chartered stock savings bank with principal offices at 501 Knowles
Avenue, Southampton, Pennsylvania 18966 (the “Bank”), and John J. Augustine (the
“Executive”), is hereby adopted effective as of the 14th day of September, 2012.

WHEREAS, the Executive is presently employed as the Chief Financial Officer and
Treasurer of the Bank;

WHEREAS, the Bank desires to be ensured of the Executive’s continued active
participation in the business of the Bank; and

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

NOW THEREFORE, in consideration of the mutual promises and agreements set forth
herein, the parties hereby agree as follows:

1.           Definitions.  The following words and terms shall have the meanings
set forth below for the purposes of this Agreement:

(a)           Average Annual Compensation.  The Executive’s “Average Annual
Compensation” for purposes of this Agreement shall be deemed to mean the average
amount of compensation paid to the Executive by the Bank and any parent or
subsidiary thereof during the most recent three calendar years immediately
preceding the year in which the Date of Termination occurs and included in the
Executive’s gross income for tax purposes.

(b)           Base Salary.  “Base Salary” shall have the meaning set forth in
Section 3(a) hereof.

(c)           Cause. Termination of the Executive’s employment for “Cause” shall
mean termination because of personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit, conviction of a
felony, 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 which in the reasonable judgment of the Board of
Directors of the Bank will probably cause substantial economic damages to the
Bank, willful or intentional breach or neglect by the Executive of his duties,
or a material breach of any provision of this Agreement.  For purposes of this
Agreement, no act or failure to act on the Executive’s part shall be considered
“willful” unless done, or omitted to be done, by him not in good faith and
without reasonable belief that this action or omission was in the best interest
of the Bank; provided that any act or omission to act on the Executive’s behalf
in reliance upon an opinion of counsel to the Bank or counsel to the Executive
shall not be deemed to be willful. The terms “incompetence” and “misconduct”
shall be defined with reference to standards generally prevailing in the banking
industry. In determining incompetence and misconduct, the Bank shall have the
burden of proof with regard to the acts or omissions of the Executive and the
standards prevailing in the banking industry.

 
 

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(d)           Change in Control.  “Change in Control” shall mean a change in the
ownership of the Corporation or the Bank, a change in the effective control of
the Corporation or the Bank or a change in the ownership of a substantial
portion of the assets of the Corporation or the Bank, in each case as provided
under Section 409A of the Code and the regulations thereunder.

(e)           Code.  “Code” shall mean the Internal Revenue Code of 1986, as
amended.

(f)           Corporation.  “Corporation” shall mean Quaint Oak Bancorp, Inc.,
the holding company for the Bank.

(g)           Date of Termination.  “Date of Termination” shall mean (i) if the
Executive’s employment is terminated for Cause, the date on which the Notice of
Termination is given, and (ii) if the Executive’s employment is terminated for
any other reason, the date specified in such Notice of Termination.

(h)           Disability. “Disability” shall mean the Executive (i) is unable to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or can be expected to last for a continuous period of not less than twelve
(12) months, or (ii) is, by reason of any medically determinable physical or
mental impairment which can be expected to result in death or can be expected to
last for a continuous period of not less than twelve (12) months, receiving
income replacement benefits for a period of not less than three (3) months under
an accident and health plan covering employees of the Bank.  In the event of any
dispute between the Executive and the Bank as to the Executive’s Disability, the
matter shall be decided by a majority vote of a panel of physicians, one of whom
shall be selected by the Executive, one of whom shall be selected by the Bank,
and one of whom shall be selected by the other two physicians.  The physicians’
fees and any other costs associated with the resolution of said dispute shall be
borne by the Bank.

(i)           Good Reason.  “Good Reason” means the occurrence of any of the
following events:
 
    (i) any material breach of this Agreement by the Bank, including without
limitation any of the following: (A) a material diminution in the Executive’s
base compensation, (B) a material diminution in the Executive’s authority,
duties or responsibilities, or (C) any requirement that the Executive report to
a corporate officer or employee of the Bank instead of reporting directly to the
President and Chief Executive Officer and the Board of Directors of the Bank, or
 
    (ii) any material change in the geographic location at which the Executive
must perform his services under this Agreement; provided, however, that prior to
any termination of employment for Good Reason, the Executive must first provide
written notice to the Bank within ninety (90) days of the initial existence of
the condition, describing the existence of such condition, and the Bank shall
thereafter have the right to remedy the condition within thirty (30) days of the
date the Bank received the written notice from the Executive.  If the Bank
remedies the condition within such thirty (30) day cure period, then no Good
Reason shall be deemed to exist with respect to such condition.  If the Bank
does not remedy the condition within such thirty (30) day cure period, then the
Executive may deliver a Notice of Termination for Good Reason at any time within
sixty (60) days following the expiration of such cure period.
 
 

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(j)           Notice of Termination.  Any purported termination of the
Executive’s employment by the Bank for any reason, including without limitation
for Cause or Disability, or by the Executive for any reason, including without
limitation for Good Reason, shall be communicated by a written “Notice of
Termination” to the other party hereto.  For purposes of this Agreement, a
“Notice of Termination” shall mean a dated notice which (i) indicates the
specific termination provision in this Agreement relied upon, (ii) sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive’s employment under the provision so indicated,
(iii) specifies a Date of Termination, which shall be not less than thirty (30)
nor more than ninety (90) days after such Notice of Termination is given, except
in the case of the Bank’s termination of the Executive’s employment for Cause,
which shall be effective immediately; and (iv) is given in the manner specified
in Section 10 hereof.

(k)           Regulatory Agency.  “Regulatory Agency” means any governmental
agency having regulatory or supervisory jurisdiction over the Bank at the time
of reference.

2.           Term of Employment.

(a)           The Bank hereby employs the Executive as Chief Financial Officer
and Treasurer, and the Executive hereby accepts said employment and agrees to
render such services to the Bank on the terms and conditions set forth in this
Agreement. Subject to the terms hereof, this Agreement shall terminate three (3)
years after December 31, 2012.  Beginning on December 31, 2013 and on each
December 31st thereafter, the term of this Agreement shall be extended for a
period of one additional year, provided that the Bank has not given notice to
the Executive in writing at least 30 days, and not more than 90 days, prior to
such December 31st that the term of this Agreement shall not be extended further
and/or the Executive has not given notice to the Bank of his election not to
extend the term at least 30 days, and not more than 90 days, prior to any such
December 31st. If any party gives timely notice that the term will not be
extended as of any such December 31st, then this Agreement shall terminate at
the conclusion of its remaining term.  References herein to the term of this
Agreement shall refer both to the initial term and successive terms.

(b)           During the term of this Agreement, the Executive shall perform
such executive services for the Bank as is consistent with his title of Chief
Financial Officer and Treasurer and from time to time assigned to him by the
Bank’s President and Chief Executive Officer or the Board of Directors.

 
 

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3.           Compensation and Benefits.

(a)           The Bank shall compensate and pay the Executive for his services
during the term of this Agreement at a minimum base salary of One Hundred
Fifty-Four Thousand and Five Hundred Dollars ($154,500.00) per year (“Base
Salary”) payable no less frequently than in monthly installments, which may be
increased from time to time in such amounts as may be determined by the Board of
Directors of the Bank.  In addition to his Base Salary, the Executive shall be
entitled to receive during the term of this Agreement such bonus payments as may
be authorized and declared by the Board of Directors of the Bank in its sole
discretion.

(b)           During the term of this Agreement, the Executive shall be entitled
to participate in any benefit plans as the Bank may adopt for the benefit of its
employees.  The Bank shall not make any changes in such benefit plans which
would adversely affect the Executive’s rights or benefits thereunder, unless
such change occurs pursuant to a program applicable to all executive officers of
the Bank and does not result in a proportionately greater adverse change in the
rights of or benefits to the Executive as compared with any other executive
officer of the Bank.  Nothing paid to the Executive under any plan or
arrangement presently in effect or made available in the future shall be deemed
to be in lieu of the salary payable to the Executive pursuant to Section 3(a)
hereof.

(c)           During the term of this Agreement, the Executive shall be entitled
to paid annual vacation as approved from time to time by the Board of Directors
of the Bank.  The timing of paid vacations shall be scheduled in a reasonable
manner by the Executive.  The Executive shall not be entitled to receive any
additional compensation from the Bank for failure to take a vacation, nor shall
the Executive be able to accumulate unused vacation time from one year to the
next, except to the extent authorized by the Board of Directors of the Bank.

4.           Expenses.  The Bank shall reimburse the Executive or otherwise
provide for or pay for all reasonable expenses incurred by the Executive in
furtherance of or in connection with the business of the Bank, including, but
not by way of limitation, traveling expenses for attending annual and periodic
meetings of trade associations, subject to such reasonable documentation and
other limitations as may be established by management of the Bank.  If such
expenses are paid in the first instance by the Executive, the Bank shall
reimburse the Executive therefor.  Such reimbursement shall be made promptly by
the Bank and, in any event, no later than March 15th of the year immediately
following the year in which such expenses were incurred.

5.           Termination.

(a)           The Bank shall have the right, at any time upon prior Notice of
Termination, to terminate the Executive’s employment hereunder for any reason,
including without limitation termination for Cause or Disability, and the
Executive shall have the right, upon prior Notice of Termination, to terminate
his employment hereunder for any reason.

(b)           In the event that (i) the Executive’s employment is terminated by
the Bank for Cause, or (ii) the Executive terminates his employment hereunder
other than for Good Reason, the Executive shall have no right pursuant to this
Agreement to compensation or other benefits for any period after the applicable
Date of Termination.

 
 

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(c)           In the event that the Executive’s employment is terminated as a
result of Disability during the term of this Agreement, then the Bank shall pay
to the Executive the following: (i) in a lump sum within thirty (30) days
following the Date of Termination, a cash severance amount equal to one times
the Executive’s then current Base Salary, plus (ii) in a lump sum payable at the
time annual bonuses are normally paid, the pro rata portion of any annual bonus
that the Executive would have anticipated earning for the year in which the Date
of Termination occurs if he had remained in the employ of the Bank for the full
calendar year, based upon the portion of the calendar year that the Executive
was able to perform his duties prior to his termination due to Disability,
provided that the pro rata bonus shall be paid no later than March 15th of the
year immediately following the year in which the Date of Termination occurs.

(d)           In the event that the Executive’s employment is terminated as a
result of the Executive’s death during the term of this Agreement, then the Bank
shall pay to the Executive’s spouse or, if none, to his estate or legal
representative, the following: (i) in a lump sum within thirty (30) days
following the Date of Termination, a cash severance amount equal to one times
the Executive’s then current Base Salary, plus (ii) in a lump sum payable at the
time annual bonuses are normally paid, the pro rata portion of any bonus that
the Executive would have anticipated earning for the year in which the Date of
Termination occurs if he had remained in the employ of the Bank for the full
calendar year, based upon the portion of the calendar year that Executive was
able to perform his duties prior to his death, provided that the pro rata bonus
shall be paid no later than March 15th of the year immediately following the
year in which the Date of Termination occurs.

(e)           In the event that prior to a Change in Control the Executive’s
employment is terminated either (i) by the Bank for other than Cause, Disability
or the Executive’s death or (ii) by the Executive for Good Reason, then the Bank
shall pay to the Executive, in a lump sum within thirty (30) days following the
Date of Termination, a cash severance amount equal to three (3) times the
Executive’s then current Base Salary.

(f)           In the event that concurrently with or subsequent to a Change in
Control the Executive’s employment is terminated either (i) by the Bank for
other than Cause, Disability or the Executive’s death or (ii) by the Executive
for Good Reason, then the Bank shall pay to the Executive, in a lump sum within
five (5) business days following the Date of Termination, a cash severance
amount equal to 2.99 times the Executive’s Average Annual Compensation, subject
to the provisions of Section 6 hereof, if applicable.

6.           Limitation of Benefits under Certain Circumstances.  If any payment
pursuant to Section 5 hereof, either alone or together with other payments and
benefits which the Executive has the right to receive from the Bank and the
Corporation, would constitute a “parachute payment” under Section 280G of the
Code, then the payment payable by the Bank pursuant to Section 5 hereof shall be
reduced by the minimum amount necessary to result in no portion of the payment
payable by the Bank under Section 5 being non-deductible to the Bank pursuant to
Section 280G of the Code and subject to the excise tax imposed under Section
4999 of the Code.  The determination of any reduction in the payments to be made
pursuant to Section 5 shall be based upon the opinion of independent tax counsel
selected by the Bank and paid by the Bank.  Such counsel shall promptly prepare
the foregoing opinion, but in no event later than thirty (30) days from the Date
of Termination, and may use such actuaries as such counsel deems necessary or
advisable for the purpose.  Nothing contained in this Section 6 shall result in
a reduction of any payments or benefits to which the Executive may be entitled
upon termination of employment under any circumstances other than as specified
in this Section 6, or a reduction in the payments specified in Section 5 below
zero.

 
 

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7.           Covenant Not to Compete.

(a)           Except as provided in Section 7(b) hereof, the Executive hereby
covenants and agrees that, in the event of his termination of employment with
the Bank for any reason prior to the expiration of the term of this Agreement,
for a period of one year following the date of his termination of employment
with the Bank, he shall not, without the written consent of the Bank, become an
officer, employee, consultant, director or trustee of any savings bank, savings
and loan association, savings and loan holding company, bank or bank holding
company, credit union or any direct or indirect subsidiary or affiliate of any
such entity, that entails working within Philadelphia, Montgomery, Bucks,
Chester, Delaware, Lehigh, Berks or Northampton Counties, Pennsylvania.

(b)           The Executive shall not be subject to the provisions of Section
7(a) if (i) the Executive is terminated by the Bank for Cause and does not
receive any further compensation or benefits from the Bank subsequent to the
applicable Date of Termination or (ii) the Executive’s employment with the Bank
is terminated by the Bank or the Executive subsequent to a Change in Control.

(c)           The Executive expressly agrees that (i) in the event of a
violation of these noncompetition provisions by the Executive, monetary damages
alone will be inadequate to compensate the Bank, (ii) the Bank will be entitled
to injunctive relief against the Executive in addition to any other remedies
provided by law or in equity and (iii) the noncompetition obligations contained
herein shall be extended by the length of time during which the Executive shall
have been in breach thereof.

8.           Mitigation; Exclusivity of Benefits.

(a)           The Executive shall not be required to mitigate the amount of any
benefits hereunder by seeking other employment or otherwise, nor shall the
amount of any such benefits be reduced by any compensation earned by the
Executive as a result of employment by another employer after the Date of
Termination or otherwise.

(b)           The specific arrangements referred to herein are not intended to
exclude any other benefits which may be available to the Executive upon a
termination of employment with the Bank pursuant to employee benefit plans of
the Bank or otherwise.

9.           Withholding.  All payments required to be made by the Bank
hereunder to the Executive shall be subject to the withholding of such amounts,
if any, relating to tax and other payroll deductions as the Bank may reasonably
determine should be withheld pursuant to any applicable law or regulation.

 
 

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10.           Assignability.  The Bank may assign this Agreement and its rights
and obligations hereunder in whole, but not in part, to any corporation, bank or
other entity with or into which the Bank may hereafter merge or consolidate or
to which the Bank may transfer all or substantially all of its assets, if in any
such case said corporation, bank or other entity shall by operation of law or
expressly in writing assume all obligations of the Bank hereunder as fully as if
it had been originally made a party hereto, but may not otherwise assign this
Agreement or its rights and obligations hereunder.  The Executive may not assign
or transfer this Agreement or any rights or obligations hereunder.

11.           Notice.  For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by certified or
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below:

 
To the Bank:
Board of Directors
Quaint Oak Bank
501 Knowles Avenue
Southampton, Pennsylvania 18966
 
 
To the Executive:
John J. Augustine
At the address last appearing on the
personnel records of the Bank

12.           Amendment; Waiver.  No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Executive and such officer or officers as
may be specifically designated by the Board of Directors of the Bank to sign on
its behalf.  No waiver by any party hereto at any time of any breach by any
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.  In addition, notwithstanding anything in this Agreement to the
contrary, the Bank may amend in good faith any terms of this Agreement,
including retroactively, in order to comply with Section 409A of the Code.

13.           Governing Law.  The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the United States
where applicable and otherwise by the substantive laws of the Commonwealth of
Pennsylvania.

14.           Nature of Obligations.  Nothing contained herein shall create or
require the Bank to create a trust of any kind to fund any benefits which may be
payable hereunder, and to the extent that the Executive acquires a right to
receive benefits from the Bank hereunder, such right shall be no greater than
the right of any unsecured general creditor of the Bank.

15.           Headings.  The section headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

 
 

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16.           Validity.  The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.

17.           Changes in Statutes or Regulations. If any statutory or regulatory
provision referenced herein is subsequently changed or re-numbered, or is
replaced by a separate provision, then the references in this Agreement to such
statutory or regulatory provision shall be deemed to be a reference to such
section as amended, re-numbered or replaced.

18.           Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.

19.           Regulatory Prohibitions and Actions.

(a)           Notwithstanding any other provision of this Agreement to the
contrary, any payments made to the Executive pursuant to this Agreement, or
otherwise, are subject to and conditioned upon their compliance with Section
18(k) of the FDIA (12 U.S.C. §1828(k)) and the regulations promulgated
thereunder, including 12 C.F.R. Part 359.  In the event of the Executive’s
termination of employment with the Bank for Cause, all employment relationships
and managerial duties with the Bank shall immediately cease regardless of
whether the Executive is in the employ of the Corporation following such
termination.  Furthermore, following such termination for Cause, the Executive
will not, directly or indirectly, influence or participate in the affairs or the
operations of the Bank.

(b)           If the Bank is in default, as defined to mean an adjudication or
other official determination of a court of competent jurisdiction or other
public authority pursuant to which a conservator, receiver or other legal
custodian is appointed for the Bank for the purpose of liquidation, all
obligations under this Agreement shall terminate as of such date as a competent
governmental authority may lawfully terminate this Agreement, but rights of the
Executive to compensation earned prior to such termination shall not be
affected.

(c)           If the Executive is suspended from office and/or temporarily
prohibited from participating in the conduct of the Bank’s affairs pursuant to
notice served by any Regulatory Agency, then the Bank’s obligations 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 Bank
shall (i) pay the Executive all the compensation withheld while contract
obligations were suspended, and (ii) reinstate (in whole or in part) any of its
obligations which were suspended.

(d)           If the Executive is removed from office and/or permanently
prohibited from participating in the conduct of the Bank’s affairs by an order
issued by any Regulatory Agency, all obligations of the Bank under this
Agreement shall terminate as of the effective date of the order, but rights of
the Executive to compensation earned as of the Date of Termination shall not be
affected.

 
 

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(e)           All obligations under this Agreement are subject to termination by
any Regulatory Agency in accordance with any applicable provisions of law or
regulations granting such authority, but rights of the Executive to compensation
earned as of the date of termination of the Agreement shall not be affected.

20.           Entire Agreement.  This Agreement embodies the entire agreement
between the Bank and the Executive with respect to the matters agreed to
herein.  All prior agreements between the Bank and the Executive with respect to
the matters agreed to herein are hereby superseded and shall have no force or
effect.
 
[Signature page follows]

 
 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.

ATTEST:
 
QUAINT OAK BANK
         
By:
/s/ Diane J. Coyler
 
By:
/s/ Robert T. Strong
  Diane J. Colyer
Corporate Secretary
        Robert T. Strong
President and Chief Executive Officer
             
EXECUTIVE
               
By:
/s/ John J. Augustine
         John J. Augustine