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Exhibit 10.4

Form of Amended and Restated Employment Agreement between Newport Bancorp, Inc.
and Executives

NEWPORT BANCORP, INC.
AMENDED AND RESTATED EMPLOYMENT AGREEMENT BETWEEN
KEVIN M MCCARTHY, NINO MOSCARDI, RAY GILMORE AND BRUCE WALSH

On December 11, 2008, Newport Bancorp, Inc. amended the employment agreements
with Messrs. McCarthy, Moscardi, Gilmore and Walsh to comply with Section 409A
of the Internal Revenue Code. Messrs. McCarthy, Moscardi and Gilmore have a
three year agreements and Mr. Walsh has a two year agreement.

This Amended and Restated Three-Year Employment Agreement (the “Agreement”), by
and among Newport Bancorp, Inc., a Maryland corporation (the “Company”),
and ______________ (“Executive”), is hereby amended and restated effective as of
__________ (the “Effective Date”).  References to the “Bank” herein shall mean
Newport Federal Savings Bank.

WHEREAS, the Executive is currently employed as _____________________________ of
the Company pursuant to an employment agreement between the Company and the
Executive entered into as of July 18, 2006 (the “Prior Agreement”); and

WHEREAS, the Company desires to amend and restate the Prior Agreement in order
to comply with the final regulations issued under Section 409A of the Internal
Revenue Code of 1986, as amended (the “Code”) in April 2007; and

WHEREAS, the Executive has agreed to such changes.

NOW, THEREFORE, in consideration of the mutual covenants herein contained, and
upon the other terms and conditions hereinafter provided, the parties hereby
agree as follows:

1.             Employment.  Executive is employed as the
_____________________________ of the Company.  Executive shall perform all
duties and shall have all powers which are commonly incident to the offices of
_____________________________ of the Company or which, consistent with those
offices, are delegated to him by the Board of Directors of the Company. During
the term of this Agreement, Executive also agrees to serve, if elected, as an
officer and/or director of any subsidiary of the Company and in such capacity
carry out such duties and responsibilities reasonably appropriate to that
office.

2.             Location and Facilities.  The Executive will be furnished with
the working facilities and staff customary for executive officers with the title
and duties set forth in Section 1 and as are necessary for him to perform his
duties.  The location of such facilities and staff shall be at the principal
administrative offices of the Company, or at such other site or sites customary
for such offices.

3.             Term.  The period of Executive’s employment under this Agreement
shall be deemed to have commenced as of the date written above and shall
continue for a period of thirty-six (36) full calendar months (24 in the case of
Mr. Walsh), provided, however, that all changes intended to comply with Code
Section 409A shall be effective retroactively to July 18, 2006; and provided
further, that no retroactive changes shall affect the compensation or benefits
previously provided to the Executive.  The term of this Agreement shall be
extended for one day each day so that a constant thirty-six (36) calendar month
term (24 in the case of Mr. Walsh) shall remain in effect, until such time as
the Board of Directors of the Company (the “Board”) or Executive elects not to
extend the

 
 

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term of the Agreement by giving written notice to the other party in accordance
with the terms of this Agreement, in which case the term of this Agreement shall
be fixed and shall end on the third anniversary of the date of such written
notice

4.           Base Compensation.

 
a.
The Company agrees to pay the Executive during the term of this Agreement a base
salary at the rate of $______________ per year, payable in accordance with
customary payroll practices.

 
b.
The Board shall review the rate of the Executive’s base salary based upon
factors they deem relevant, and may maintain or increase his salary, provided
that no such action shall reduce the rate of salary below the rate in effect on
the Effective Date.  The Board review shall occur each December during the term
of this Agreement.

 
c.
In the absence of action by the Board, the Executive shall continue to receive
his base salary at the annual rate specified on the Effective Date or, if
another rate has been established under the provisions of this Section 4, the
rate last properly established by action of the Board under the provisions of
this Section 4.

5.             Bonuses.  The Executive shall be entitled to participate in
discretionary bonuses or other incentive compensation programs that the Company
may award from time to time to senior management employees pursuant to bonus
plans or otherwise.  Any bonuses or other payments made pursuant to this Section
5 shall be paid promptly by the Company and in any event no later than March 15
of the year immediately following the end of the calendar year for which such
amounts were payable.

6.             Benefit Plans.  The Executive shall be entitled to participate in
such life insurance, medical, dental, pension, profit sharing, retirement and
stock-based compensation plans and other programs and arrangements as may be
approved from time to time by the Company or its affiliates for the benefit of
its employees.

7.             Vacation and Leave.

 
a.
The Executive shall be entitled to vacation and other leave in accordance with
policy for senior executives, or otherwise as approved by the Board.

 
b.
In addition to paid vacation and other leave, the Executive shall be entitled,
without loss of pay, to absent himself voluntarily from the performance of his
employment for such additional periods of time and for such valid and legitimate
reasons as the Board may in its discretion determine.  Further, the Board may
grant to the Executive a leave or leaves of absence, with or without pay, at
such time or times and upon such terms and conditions as the Board in its
discretion may determine.

8.             Expense Payments and Reimbursements.  The Executive shall be
reimbursed for all reasonable out-of-pocket business expenses that he shall
incur in connection with his services under this Agreement upon substantiation
of such expenses in accordance with applicable policies of the Company.  Such
reimbursements and payments shall be made promptly by the Company and, in any
event, not later than March 15 of the year immediately following the year in
which Executive incurred such expense.

9.             Automobile Allowance.  During the term of this Agreement,
Executive shall be entitled to use of an automobile provided by the Company or
the Bank, including insurance, maintenance and work-related fuel expenses, or,
in the alternative and the sole discretion of the Bank or the Company, the
Executive shall be entitled to

 
 

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an automobile allowance which would approximate the expense of a Bank-provided
or Company provided automobile and related insurance, maintenance and fuel
costs.  Executive shall comply with reasonable reporting and expense limitations
on the use of such automobile as may be established by the Bank or the Company
from time to time, and the Bank or the Company shall annually include on
Executive’s Form W-2 any amount of income attributable to Executive’s personal
use of such automobile.  Payments, if any, made under this Section 9 shall be
made promptly by the Company and, in any event, not later than March 15 of the
year immediately following the year the expense was incurred.

10.           Loyalty and Confidentiality.

 
a.
During the term of this Agreement Executive:  (i) shall devote all his time,
attention, skill, and efforts to the faithful performance of his duties
hereunder; provided, however, that from time to time, Executive may serve on the
boards of directors of, and hold any other offices or positions in, companies or
organizations which will not present any conflict of interest with the Company
or any of its subsidiaries or affiliates, unfavorably affect the performance of
Executive’s duties pursuant to this Agreement, or violate any applicable statute
or regulation and (ii) shall not engage in any business or activity contrary to
the business affairs or interests of the Company or any of its subsidiaries or
affiliates.

 
b.
Nothing contained in this Agreement shall prevent or limit Executive’s right to
invest in the capital stock or other securities of any business dissimilar from
that of the Company, or, solely as a passive, minority investor, in any
business.

 
c.
Executive agrees to maintain the confidentiality of any and all information
concerning the operation or financial status of the Company and the Bank, the
names or addresses of any of its borrowers, depositors and other customers; any
information concerning or obtained from such customers; and any other
information concerning the Company and its affiliates to which he may be exposed
during the course of his employment.  The Executive further agrees that, unless
required by law or specifically permitted by the Board in writing, he will not
disclose to any person or entity, either during or subsequent to his employment,
any of the above-mentioned information which is not generally known to the
public, nor shall he employ such information in any way other than for the
benefit of the Company and the Bank.

 
11.
Termination and Termination Pay.  Subject to Section 12 of this Agreement,
Executive’s employment under this Agreement may be terminated in the following
circumstances:

 
a.
Death.  Executive’s employment under this Agreement shall terminate upon his
death during the term of this Agreement, in which event Executive’s estate shall
be entitled to receive the compensation due to the Executive through the last
day of the calendar month in which his death occurred.

 
b.
Retirement.  This Agreement shall be terminated upon Executive’s retirement
under the retirement benefit plan or plans in which he participates pursuant to
Section 6 of this Agreement or otherwise.  Executive will receive the
compensation due to him through his retirement date.

 
c.
Disability.

 
i.
The Board or Executive may terminate Executive’s employment after having
determined Executive has a Disability. For these purposes, the Executive shall
be deemed to have a “Disability” in any case in which it is determined the
Executive (A) is unable to engage in any substantial gainful activity by reason
of any medically determinable physical or

 
 

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mental impairment which can be expected to result in death, or last for a
continuous period of not less than twelve (12) months; (B) by reason of any
medically determinable physical or mental impairment which can be expected to
result in death, or last for a continuous period of not less than twelve (12)
months, is receiving income replacement benefits for a period of not less than
three months under an accident and health plan covering employees of the
Company; or (C) is totally disabled by the Social Security Administration. As a
condition to any benefits, the Board may require Executive to submit to such
physical or mental evaluations and tests as it deems reasonably appropriate.

 
ii.
In the event of such Disability, Executive’s obligation to perform services
under this Agreement will terminate.  The Company will pay Executive, as
Disability pay, an amount equal to 75% of Executive’s bi-weekly rate of base
salary in effect as of the date of his termination of employment due to
Disability.  Disability payments will be made on a monthly basis and will
commence on the first day of the month following the effective date of
Executive’s termination of employment for Disability and end on the earlier of:
(A) the date he returns to full-time employment at the Company in the same
capacity as he was employed prior to his termination for Disability; (B) his
death; (C) upon attainment of age 65 or (D) the date this Agreement would have
expired had Executive’s employment not terminated by reason of disability.  Such
payments shall be reduced by the amount of any short- or long-term disability
benefits payable to the Executive under any other disability programs sponsored
by the Company or its affiliates.  In addition, during any period of Executive’s
Disability, Executive and his dependents shall, to the greatest extent possible,
continue to be covered under all non-taxable benefit plans (including life
insurance and non-taxable medical and dental insurance plans) of the Company and
its affiliates, in which Executive participated prior to his Disability on the
same terms as if Executive were actively employed by the Company.

 
d.
Termination for Cause.

 
i.
The Board may, by written notice to the Executive in the form and manner
specified in this paragraph, terminate his employment at any time, for
“Cause”.  The Executive shall have no right to receive compensation or other
benefits for any period after termination for Cause.  Termination for “Cause”
shall mean termination because of, in the good faith determination of the Board,
Executive’s:

 
(1)
Personal dishonesty;

 
(2)
Incompetence;

 
(3)
Willful misconduct;

 
(4)
Breach of fiduciary duty involving personal profit;

 
(5)
Intentional failure to perform stated duties;

 
(6)
Willful violation of any law, rule or regulation (other than traffic violations
or similar offenses) that reflects adversely on the reputation of the Company
and the Bank, any felony conviction, any violation of law involving moral
turpitude or any violation of a final cease-and-desist order; or

 
 

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(7)
Material breach by Executive of any provision of this Agreement.

 
ii.
Notwithstanding the foregoing, Executive shall not be deemed to have been
terminated for Cause by the Company unless there shall have been delivered to
Executive a copy of a resolution duly adopted at a meeting of such Board where
in the good faith opinion of the Board, Executive was guilty of the conduct
described above and specifying the particulars thereof.

 
e.
Voluntary Termination by Executive.  In addition to his other rights to
terminate under this Agreement, Executive may voluntarily terminate employment
during the term of this Agreement upon at least sixty (60) days prior written
notice to the Board, in which case Executive shall receive only his
compensation, vested rights and employee benefits up to the date of his
termination.  Following a voluntary termination of employment under this Section
11(e), Executive will be subject to the restrictions set forth in Sections
11(g)(i) and 11(g)(ii) of this Agreement for a period of one (1) year from his
termination date.

 
f.
Without Cause or With Good Reason.

 
i.
In addition to termination pursuant to Sections 11(a) through 11(e) the Board
may, by written notice to Executive, immediately terminate his employment at any
time for a reason other than Cause (a termination “Without Cause”) and Executive
may, by written notice to the Board, immediately terminate this Agreement at any
time for “Good Reason” (as defined below).

 
ii.
Subject to Section 12 of this Agreement, in the event of termination under this
Section 11(f), Executive shall be entitled to receive an amount equal to (i) his
base salary in effect as of his termination date for the remaining term of the
Agreement, and (ii) the value of the benefits he would have received during the
remaining term of the Agreement under any retirement programs (whether
tax-qualified or non-qualified) in which Executive participated prior to his
termination (with the amount of the benefits determined by reference to the
benefits received by the Executive or accrued on his behalf under such programs
during the twelve (12) months preceding his termination), payable in a single
cash lump sum distribution within ten (10) calendar days following such
termination.  In addition, the Executive shall  continue to participate in any
benefit plans of the Company or its affiliates that provide life insurance and
non-taxable medical and dental insurance, or similar coverage upon terms no less
favorable than the most favorable terms provided to senior executives of the
Company or its affiliates during such period.  In the event that the Company or
its affiliates are unable to provide such coverage by reason of Executive no
longer being an employee, the Company shall pay the Executive the value of such
benefits in a single cash lump sum distribution within ten (10) calendar days
following his termination.

 
iii.
“Good Reason” shall exist if, without Executive’s express written consent, the
Company materially breach any of their respective obligations under this
Agreement.  Without limitation, such a material breach shall be deemed to occur
upon the occurrence of any of the following:

 
(1)
A material reduction in Executive’s responsibilities or authority in connection
with his employment with the Company, or a material diminution in the authority,
duties or responsibilities of the officer to whom the Executive is required to
report;

 
 

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(2)
Assignment to Executive of duties of a non-executive nature or duties for which
he is not reasonably equipped by his skills and experience;

 
(3)
Failure of the Executive to be nominated or re-nominated to the Board to the
extent Executive is a Board member prior to the Effective Date;

 
(4)
A material reduction in Executive’s salary or benefits contrary to the terms of
this Agreement, or, following a Change in Control as defined in Section 12 of
this Agreement, any reduction in salary or material reduction in benefits below
the amounts to which he was entitled prior to the Change in Control;

 
(5)
Termination of incentive and benefit plans (other than the Bank’s tax-qualified
plans), programs or arrangements, or reduction of Executive’s participation to
such an extent as to materially reduce their aggregate value below their
aggregate value as of the Effective Date;

 
(6)
A requirement that Executive relocate his principal business office or his
principal place of residence outside of the area consisting of a twenty-five
(25) mile radius from the current main office of the Company and any branch of
the Bank, or the assignment to Executive of duties that would reasonably require
such a relocation; or

 
(7)
Liquidation or dissolution of the Company, other than liquidations or
dissolutions that are caused by reorganizations that do not negatively affect
the status of  the Executive;

provided, however, that prior to any termination of employment for Good Reason
(a termination “With Good Reason”), the Executive must first provide written
notice to the Company within ninety (90) days following the initial existence of
the condition, describing the existence of such condition, and the Company shall
thereafter have the right to remedy the condition within thirty (30) days of the
date the Company received the written notice from the Executive.  If the Company
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 Company
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.

 
iv.
Notwithstanding the foregoing, a reduction or elimination of the Executive’s
benefits under one or more benefit plans maintained by the Company or an
affiliate as part of a good faith, overall reduction or elimination of such
plans or plans or benefits thereunder applicably to all participants in a manner
that does not discriminate against Executive (except as such discrimination may
be necessary to comply with law) shall not constitute an event of Good Reason or
a material breach of this Agreement, provided that benefits of the type or to
the general extent as those offered under such plans prior to such reduction or
elimination are not available to other officers of the Company or any affiliate
under a plan or plans in or under which Executive is not entitled to
participate.

 
v.
For purposes of this Agreement, any termination of Executive’s employment shall
be construed to require a “Separation from Service” in accordance with Code
Section 409A

 
 

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and the regulations promulgated thereunder, such that the Company and Executive
reasonably anticipate that the level of bona fide services Executive would
perform after termination would permanently decrease to a level that is less
than 50% of the average level of bona fide services performed (whether as an
employee or an independent contractor) over the immediately preceding thirty-six
(36)-month period.

 
g.
Continuing Covenant Not to Compete or Interfere with Relationships.  Regardless
of anything herein to the contrary, following a termination by the Company or
Executive pursuant to Section 11(f):

 
i.
Executive’s obligations under Section 10(c) of this Agreement will continue in
effect; and

 
ii.
During the period ending on the first anniversary of such termination, the
Executive shall not serve as an officer, director or employee of any bank
holding company, bank, savings bank, savings and loan holding company, or
mortgage company (any of which, a “Financial Institution”) which Financial
Institution offers products or services competing with those offered by the
Company or its subsidiaries or affiliates from any office within fifty (50)
miles from the main office of the Company or any branch of the Bank and,
further, Executive shall not interfere with the relationship of the Company, its
subsidiaries or affiliates and any of its employees, agents, or representatives.

12.           Termination in Connection with a Change in Control.

 
a.
For purposes of this Agreement, a Change in Control means any of the following
events:

 
(i)
Merger:  The Company merges into or consolidates with another corporation, or
merges another corporation into the Company, and as a result less than a
majority of the combined voting power of the resulting corporation immediately
after the merger or consolidation is held by persons who were stockholders of
the Company immediately before the merger or consolidation.

 
(ii)
Acquisition of Significant Share Ownership:  There is filed or required to be
filed a report on Schedule 13D or another form or schedule (other than Schedule
13G) required under Sections 13(d) or 14(d) of the Securities Exchange Act of
1934, if the schedule discloses that the filing person or persons acting in
concert has or have become the beneficial owner of 25% or more of a class of the
Company’s voting securities, but this clause (b) shall not apply to beneficial
ownership of Company voting shares held in a fiduciary capacity by an entity of
which the Company directly or indirectly beneficially owns 50% or more of its
outstanding voting securities.

 
(iii)
Change in Board Composition:  During any period of two consecutive years,
individuals who constitute the Company’s Board of Directors at the beginning of
the two-year period cease for any reason to constitute at least a majority of
the Company’s Board of Directors; provided, however, that for purposes of this
clause (iii), each director who is first elected by the board (or first
nominated by the board for election by the stockholders) by a vote of at least
two-thirds (2/3) of the directors who were directors at the beginning of the
two-year period shall be deemed to have also been a director at the beginning of
such period; or

 
(iv)
Sale of Assets:  The Company sells to a third party all or substantially all of
its assets.

 
 

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b.
Termination.  If within the period ending two (2) years after a Change in
Control, (i) the Company shall terminate the Executive’s employment Without
Cause, or (ii) Executive voluntarily terminates his employment With Good Reason,
the Company shall, within ten (10) calendar days following the termination of
Executive’s employment, make a single lump sum cash payment to him equal to
three (3) times the Executive’s average Annual Compensation (as defined in this
Section 12(b)) over the five (5) most recently completed calendar years ending
with the year immediately preceding the effective date of the Change in
Control.  In determining Executive’s average Annual Compensation, Annual
Compensation shall include base salary and any other taxable income, including
but not limited to amounts related to the granting, vesting or exercise of
restricted stock or stock option awards, commissions, bonuses (whether paid or
accrued for the applicable period), as well as, retirement benefits, director or
committee fees and fringe benefits paid or to be paid to Executive or paid for
Executive’s benefit during any such year, profit sharing, employee stock
ownership plan and other retirement contributions or benefits, including to any
tax-qualified plan or arrangement (whether or not taxable) made or accrued on
behalf of Executive of such year.  The cash payment made under this Section
12(a) shall be made in lieu of any payment also required under Section 11(f) of
this Agreement because of a termination in such period.  Executive’s rights
under Section 11(f) are not otherwise affected by this Section 12.  Also, in
such event, the Executive shall, for a thirty-six (36) month period following
his termination of employment, receive the value of the benefits he would have
received over such period under any retirement programs (whether tax-qualified
or nonqualified) in which the Executive participated prior to his termination
(with the amount of the benefits determined by reference to the benefits
received by the Executive or accrued on his behalf under such programs during
the twelve (12) months preceding the Change in Control), payable as a single
cash lump sum distribution within ten (10) calendar days following such
termination.  In addition, the Executive shall and continue to participate in
any benefit plans of the Company and/or the Bank that provide life insurance and
non-taxable medical and dental insurance or similar coverage upon terms no less
favorable than the most favorable terms provided to senior executives of the
Company or its subsidiaries during such period.  In the event that the Company
or its subsidiaries are unable to provide such coverage by reason of the
Executive no longer being an employee, the Company shall pay the Executive the
value of such benefits in a single cash lump sum distribution within ten (10)
calendar days following his termination.

 
c.
The provisions of Section 12 and Sections 14 through 27, including the defined
terms used is such sections, shall continue in effect until the later of the
expiration of this Agreement or two (2) years following a Change in Control.

 
13.
Indemnification and Liability Insurance.  Subject to, and limited by Section
27(b) of this Agreement, the Company shall provide the following:

 
a.
Indemnification.  The Company agrees to indemnify the Executive (and his heirs,
executors, and administrators), and to advance expenses related thereto, to the
fullest extent permitted under applicable law and regulations against any and
all expenses and liabilities reasonably incurred by him in connection with or
arising out of any action, suit, or proceeding in which he may be involved by
reason of his having been a director or Executive of the Company or any
affiliate or subsidiary of the Company (whether or not he continues to be a
director or Executive at the time of incurring any such expenses or liabilities)
such expenses and liabilities to include, but not be limited to, judgments,
court costs, and attorney’s fees and the cost of reasonable settlements, such
settlements to be approved by the Board, if such action is brought against the
Executive in his capacity as an Executive or director of the Company or any
affiliate or subsidiary of the Company.  Indemnification for expense shall not
extend to matters for which the Executive has been terminated for
Cause.  Nothing contained herein shall be deemed to provide indemnification
prohibited by applicable law or regulation.  Notwithstanding anything herein to
the contrary, the obligations of this Section 13 shall survive the term of this
Agreement by a period of six (6) years.

 
 

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b.
Insurance.  During the period in which indemnification of the Executive is
required under this Section, the Company shall provide the Executive (and his
heirs, executors, and administrators) with coverage under a directors’ and
Executives’ liability policy at the expense of the Company, at least equivalent
to such coverage provided to directors and senior Executives of the Company and
subsidiaries.

14.           Reimbursement of Executive’s Expenses to Enforce this
Agreement.  The Company shall reimburse the Executive for all reasonable
out-of-pocket expenses, including, without limitation, reasonable attorney’s
fees, incurred by the Executive in connection with successful enforcement by the
Executive of the obligations of the Company to the Executive under this
Agreement.  The Company shall make such payments promptly and, in any event, not
later than March 15 of the year immediately following the year in which such
expense was incurred by Executive.  Successful enforcement shall mean the grant
of an award of money or the requirement that the Company take some action
specified by this Agreement:  (i) as a result of court order; or (ii) otherwise
by the Company following an initial failure of the Company to pay such money or
take such action promptly after written demand therefor from the Executive
stating the reason that such money or action was due under this Agreement at or
prior to the time of such demand.

15.           Adjustment of Certain Payments and Benefits.

 
a.
Tax Indemnification.  Anything in this Agreement to the contrary notwithstanding
and except as set forth below, in the event it shall be determined that any
payment, benefit or distribution made or provided by the Company to or for the
benefit of the Executive (whether made or provided pursuant to the terms of this
Agreement or otherwise) (each referred to herein as a “Payment”), would be
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended (the “Code”) or any interest or penalties are incurred by
the Executive with respect to such excise tax (the excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
“Excise Tax”), the Executive shall be entitled to receive an additional payment
(a “Gross-Up Payment”) in an amount such that, after payment by the Executive of
all taxes (including any interest or penalties imposed with respect to such
taxes), including, without limitation, any income taxes (and any interest and
penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up
Payment, the Executive retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payments.

 
b.
Determination of Gross-Up Payment.  Subject to the provisions of Section 15(c)
of this Agreement, all determinations required to be made under this Section 15,
including whether and when a Gross-Up Payment is required, the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by a certified public accounting firm or
independent tax counsel reasonably acceptable to the Company as may be
designated by the Executive (the “Consulting Firm”) which shall provide detailed
supporting calculations to the Company and the Executive within fifteen (15)
business days of the receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by the Company.  All fees and
expenses of the Consulting Firm shall be borne solely by the Company.  Any
Gross-Up Payment, as determined pursuant to this Section 15, shall be paid by
the Company to the Executive within five (5) business days of the later of (i)
the due date for the payment of any Excise Tax, and (ii) the receipt of the
Consulting Firm’s determination, provided however that the Gross-Up Payment
shall be made no later than December 31 of the calendar year immediately
following the calendar year in which the Executive remits the Excise Tax to the
applicable taxing authority.  Any determination by the Consulting Firm shall be
binding upon the Company and the Executive.  As a result of the uncertainty in
the application of Section 4999 of the Code, at the time of the initial
determination by the Consulting Firm hereunder, it is possible that a Gross-Up
Payment will not have been made by the Company which should have been made (an
“Underpayment”), consistent with the calculations required to be made
hereunder.  In the event

 
 

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that the Company exhausts its remedies pursuant to Section 15(c) and the
Executive thereafter is required to make a payment of any Excise Tax, the
Consulting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive.

 
c.
Treatment of Claims.  The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require a
Gross-Up Payment to be made.  Such notification shall be given as soon as
practicable, but no later than ten (10) business days, after the Executive is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid.  The
Executive shall not pay such claim prior to the expiration of the thirty (30)
day period following the date on which it gives such notice to the Company (or
any shorter period ending on the date that payment of taxes with respect to such
claim is due).  If the Company notifies the Executive in writing prior to the
expiration of this period that it desires to contest such claim, the Executive
shall:

 
i.
give the Company any information reasonably requested by the Company relating to
such claim;

 
ii.
take such action in connection with contesting such claim as the Company shall
reasonably request in writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by an attorney
reasonably selected by the Company;

 
iii.
cooperate with the Company in good faith in order to effectively contest such
claim; and

 
iv.
permit the Company to participate in any proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and indemnity and hold the Executive harmless, on an after-tax
basis, for any Excise Tax or related taxes, interest or penalties imposed as a
result of such representation and payment of costs and expenses.  Without
limitation on the foregoing provisions of this Section 15(c) of this Agreement,
the Company shall control all proceedings taken in connection with such contest
and, at their option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority with respect to
such claim and may, at their option, either direct the Executive to pay the tax
claimed and sue for a refund or contest the claim in any permissible
manner.  Further, the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis (including interest or
penalties with respect thereto).  Furthermore, the Company’s control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issues raised by the Internal Revenue
Service or any other taxing authority.

 
d.
Adjustments to the Gross-Up Payment.  If, after the receipt by the Executive of
an amount advanced by the Company pursuant to Section 15(c) of this Agreement,
the Executive becomes entitled to receive any refund with respect to such claim,
the Executive shall (subject to the Company’s compliance with the requirements
of Section 15(c) of this Agreement) promptly pay to the Company the amount of
such refund (together with any interest paid or credited thereon after
applicable taxes).  If, after the receipt by the Executive of an amount advanced
by the Company

 
 

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pursuant to Section 15(c) of this Agreement, a determination is made that the
Executive shall not be entitled to any refund with respect to such claim and
such denial of refund occurs prior to the expiration of thirty (30) days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of the Gross-Up Payment required to be paid.

16.           Injunctive Relief.  If there is a breach or threatened breach of
Section 11(g) of this Agreement or the prohibitions upon disclosure contained in
Section 10(c) of this Agreement, the parties agree that there is no adequate
remedy at law for such breach, and that the Company shall be entitled to
injunctive relief restraining the Executive from such breach or threatened
breach, but such relief shall not be the exclusive remedy hereunder for such
breach.  The parties hereto likewise agree that the Executive, without
limitation, shall be entitled to injunctive relief to enforce the obligations of
the Company under this Agreement.

17.           Successors and Assigns.

 
a.
This Agreement shall inure to the benefit of and be binding upon any corporate
or other successor of the Company which shall acquire, directly or indirectly,
by merger, consolidation, purchase or otherwise, all or substantially all of the
assets or stock of the Company.

 
b.
Since the Company is contracting for the unique and personal skills of
Executive, Executive shall be precluded from assigning or delegating his rights
or duties hereunder without first obtaining the written consent of the Company.

18.           No Mitigation.  Executive shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other employment
or otherwise and no such payment shall be offset or reduced by the amount of any
compensation or benefits provided to Executive in any subsequent employment.

19.           Notices.  All notices, requests, demands and other communications
in connection with this Agreement shall be made in writing and shall be deemed
to have been given when delivered by hand or 48 hours after mailing at any
general or branch United States Post Office, by registered or certified mail,
postage prepaid, addressed to the Company at their principal business offices
and to Executive at his home address as maintained in the records of the
Company.

20.           No Plan Created by this Agreement.  Executive and the Company
expressly declare and agree that this Agreement was negotiated among them and
that no provision or provisions of this Agreement are intended to, or shall be
deemed to, create any plan for purposes of the Employee Retirement Income
Security Act or any other law or regulation, and each party expressly waives any
right to assert the contrary.  Any assertion in any judicial or administrative
filing, hearing, or process that such a plan was so created by this Agreement
shall be deemed a material breach of this Agreement by the party making such an
assertion.

21.           Amendments.  No amendments or additions to this Agreement shall be
binding unless made in writing and signed by all of the parties, except as
herein otherwise specifically provided.

22.           Applicable Law.  Except to the extent preempted by Federal law,
the laws of the State of Maryland shall govern this Agreement in all respects,
whether as to its validity, construction, capacity, performance or otherwise.

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

 
 

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24.           Headings.  Headings contained herein are for convenience of
reference only.

25.           Entire Agreement.  This Agreement, together with any understanding
or modifications thereof as agreed to in writing by the parties, shall
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof, other than written agreements with respect to specific
plans, programs or arrangements described in Sections 5 and 6.

26.           Source of Payments.  Notwithstanding any provision in this
Agreement to the contrary, to the extent payments and benefits, as provided for
under this Agreement, are paid or received by Executive under the Employment
Agreement in effect between Executive and the Bank, the payments and benefits
paid by the Bank will be subtracted from any amount or benefit due
simultaneously to Executive under similar provisions of this
Agreement.  Payments will be allocated in proportion to the level of activity
and the time expended by Executive on activities related to the Company and the
Bank, respectively, as determined by the Company and the Bank.

27.           Miscellaneous.  In the event any of the foregoing provisions of
this Section 27 are in conflict with the terms of this Agreement, this Section
27 shall prevail.

 
a.
The Board may terminate Executive’s employment at any time, but any termination
by the Company, other than Termination for Cause, shall not prejudice
Executive’s right to compensation or other benefits under this
Agreement.  Executive shall not have the right to receive compensation or other
benefits for any period after Termination for Cause as defined in Section 11(d)
hereinabove.

 
b.
Any payments made to employees pursuant to this Agreement, or otherwise, are
subject to and conditioned upon their compliance with 12 U.S.C. §1828(k) and
FDIC regulation 12 C.F.R. Part 359, Golden Parachute and Indemnification
Payments.

 
c.
Notwithstanding the foregoing, in the event the Executive is a Specified
Employee (as defined herein), then, solely, to the extent required to avoid
penalties under Code Section 409A, the Executive’s payments shall be paid on the
first day of the seventh month following the Executive’s Separation from Service
(together with interest thereon at the prevailing prime rate).  A “Specified
Employee” shall be interpreted to comply with Code Section 409A and shall mean a
key employee within the meaning of Code Section 416(i) (without regard to
paragraph 5 thereof), but an individual shall be a “Specified Employee” only if
the Company or the Bank is or becomes a publicly traded company.

[signature page follows]

 
 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
first set forth below.
 

   
NEWPORT FEDERAL SAVINGS BANK
                         
By:
   
Date
                               
EXECUTIVE
                         
By:
   
Date
                           

 
 

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