Exhibit 10.1

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is amended and restated in its
entirety and entered into as of September 2, 2013, by and among FRATERNITY
FEDERAL SAVINGS AND LOAN ASSOCIATION, a federally-chartered savings and loan and
(the “Association”), and THOMAS K. STERNER (the “Executive”).

WHEREAS, the Executive serves in positions of substantial responsibility with
the Association; and

WHEREAS, the Association wishes to set forth the terms of the Executive’s
continued employment in these positions; and

WHEREAS, the Executive is willing and desires to serve in these positions with
the Association.

NOW THEREFORE, in consideration of these premises, the mutual covenants
contained herein, and other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows.

ARTICLE 1

EMPLOYMENT

1.1 Employment. The Association hereby employs the Executive to serve as Chief
Executive Officer and Chairman of the board of directors of the Association
according to the terms and conditions of this Agreement and for the period
stated in Section 1.3 of this Agreement. The Executive hereby accepts employment
according to the terms and conditions of this Agreement and for the period
stated in Section 1.3 of this Agreement.

1.2 Duties. As Chief Executive Officer, the Executive shall report directly to
the board of directors of the Association. The Executive shall serve the
Association faithfully, diligently, competently, and to the best of the
Executive’s ability. It is contemplated by this Agreement that the Executive’s
duties shall be comparable to those presently undertaken by the Executive. The
duties of employment shall include such additional executive duties on behalf of
the Association and its operations of a character in keeping with the
Executive’s position as may, from time to time, be assigned to the Executive by
the board of directors of the Association. The Executive shall exclusively
devote full working time, energy, and attention to the business of the
Association and to the promotion of the interests of the Association throughout
the term of this Agreement. Without the prior written consent of the board of
directors of the Association, during the term of this Agreement the Executive
shall not render services to or for any person, firm, corporation, or other
entity or organization in exchange for compensation, regardless of the form in
which the compensation is paid and regardless of whether it is paid directly or
indirectly to the Executive. Nothing in this Section 1.2 shall prevent the
Executive from managing personal investments and affairs, provided that doing so
does not interfere with the proper performance of the Executive’s duties and
responsibilities under this Agreement.

1.3 Term.

(a) The term of this Agreement shall include: (i) the initial term, consisting
of the period commencing on the date of this Agreement (the “Effective Date”)
and ending on the third anniversary of the Effective Date, plus (ii) any and all
extensions of the initial term made pursuant to this Section 1.3.

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(b) Commencing on the first anniversary of the Effective Date and continuing on
each anniversary of the Effective Date thereafter, the disinterested members of
the board of directors may extend the Agreement term for an additional year, so
that the remaining term of the Agreement again becomes thirty-six (36) months,
unless the Executive elects not to extend the term of this Agreement by giving
proper written notice. The board of directors of the Association will review the
Agreement and Executive’s performance annually for purposes of determining
whether to extend the Agreement term and will include the rationale and results
of its review in the minutes of the meetings. The board of directors will notify
the Executive as soon as possible after each annual review whether it has
determined to extend the Agreement.

ARTICLE 2

COMPENSATION AND BENEFITS

2.1 Base Salary. In consideration of the Executive’s performance of the
obligations under this Agreement, the Association shall pay or cause to be paid
to the Executive a salary at the annual rate of $205,369, payable according to
the regular payroll practices of the Association. The Executive’s salary shall
be subject to annual review. The Executive’s salary, as the same may be modified
from time to time, is referred to in this Agreement as the “Base Salary.” All
compensation under this Agreement shall be subject to customary income tax
withholding and such other employment taxes as are imposed by law.

2.2 Benefit Plans and Perquisites. For as long as the Executive is employed by
the Association, the Executive shall be eligible (x) to participate in any and
all officer or employee compensation, incentive compensation and benefit plans
in effect from time to time, including without limitation plans providing
retirement, medical, dental, disability, and group life benefits and including
incentive or bonus plans existing on the date of this Agreement or adopted after
the date of this Agreement, provided that the Executive satisfies the
eligibility requirements for any the plans or benefits, and (y) to receive any
and all other fringe and other benefits provided from time to time, including
the specific items described in (a)-(c) below.

(a) Reimbursement of business expenses. The Executive shall be entitled to
reimbursement for all reasonable business expenses incurred while performing his
obligations under this Agreement, including but not limited to all reasonable
business travel and entertainment expenses incurred while acting at the request
of or in the service of the Association and reasonable expenses for attendance
at annual and other periodic meetings of trade associations. Expenses will be
reimbursed if they are submitted in accordance with the Association’s policies
and procedures.

(b) Facilities. The Association will furnish the Executive with the working
facilities and staff customary for executive officers with the comparable titles
and duties of the Executive as set forth in Sections 1.1 and 1.2 of this
Agreement and as are necessary for the Executive to perform his duties. The
location of such facilities and staff shall be at the principal administrative
offices of the Association, or at such other site or sites customary for such
offices and as agreed to by the parties.

(c) Automobile and Associated Costs. The Executive shall, during the term
hereof, be entitled to the use of an Association owned vehicle. The make and
model of the vehicle to be determined, from time to time, by the board of
directors of the Association. Further, the Association shall furnish to the
Executive a credit card to be used by the Executive to purchase fuel and oil for
the operation of the vehicle and repairs to the vehicle. It shall be the
responsibility of the Executive to maintain all records appropriate to Internal
Revenue rules and regulations pertaining to the use of employer-owned vehicles
and, should the use of the employer-owned vehicle result in additional tax
consequences to the Executive, the tax shall be the responsibility of the
Executive to pay.

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2.3 Vacation; Leave. The Executive shall be entitled to sick leave and paid
annual four (4) week vacation in accordance with policies established from time
to time by the Association. In addition to paid vacations and other leave, the
board of directors may grant 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 of directors may determine. Vacation time must be taken during the
calendar year in which it is accrued and may be carried over into succeeding
calendar years or paid out to the Executive in accordance with the policies of
the Association. The Executive shall take his vacation at a reasonable time or
times taking into consideration the needs of the Association.

2.4 Insurance. The Association shall maintain or cause to be maintained
liability insurance covering the Executive throughout the term of this
Agreement.

2.5 Supplemental Executive Retirement Plan. The Association has established for
the benefit of the Executive and other employees under date of June 29, 2004, a
“Trust Account” in the form customarily referred to as the “Rabbi Trust”. This
Trust will be funded by the Association placing into the Trust Account for the
benefit of the Executive, the sum of $812.50 each and every month during the
term of this Agreement. Executive’s right to the principal and the earnings
thereon shall be one-hundred percent (100%) vested in employee at all times. The
Executive’s interest in this benefit shall include all contributions (and
earnings) made by the Association prior to the effective date of this Agreement
(that is, pursuant to the terms of any prior arrangement).

Notwithstanding any other provisions of this Agreement to the contrary,
following a separation from service (as such term is defined for purpose of
Section 409A of the Code) for any reason, including death, the Association shall
commence the payment of benefits set forth in this Section 2.5 on the 90th day
following the date the separation from service occurs. The payment of all
principal and accumulated income allocated to the Executive shall be paid over a
fifteen (15) year period on a weekly basis. The weekly amount to be paid shall
be determined by dividing the outstanding account balance as of the immediately
preceding weekly pay date by the number of weeks remaining in the 15-year
period. Following the occurrence of a Change in Control described in
Section 5.2, all amounts due to or for the benefit of the Executive shall be
paid in a lump-sum cash payment on the 90th day following the Change in Control.

The substantive terms of this Section 2.5 are consistent with the comparable
terms under the employment agreement between the Executive and the Association,
dated September 15, 2009, and the employment agreement between the Executive and
the Association, dated July 20, 2004, as amended December 13, 2005, and as
amended December 16, 2008, and no changes have been made under this Agreement
with regard to the timing or form of the payment of the benefit.

Notwithstanding any provision of this Agreement to the contrary, if Executive is
a “specified employee” within the meaning of Section 409A of the Internal
Revenue Code of 1986, as amended (the “Code”), then benefit distributions under
this Section 2.5 that are made upon separation from service may not commence
earlier than six (6) months after the date of such separation from service.
Therefore, in the event this paragraph is applicable to the Executive, any
distribution under this Section 2.5 which would otherwise be paid to the
Executive within the first six months following the separation from service
shall be accumulated and paid to the Executive in a lump sum on the first
business day of the seventh month following the separation from service. All
subsequent distributions shall be paid in the manner specified.

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ARTICLE 3

EMPLOYMENT TERMINATION

3.1 Termination Because of Death or Disability.

(a) Death. The Executive’s employment shall terminate automatically at the
Executive’s death. If the Executive dies in active service to the Association,
the Executive’s estate shall receive any sums due to the Executive as Base
Salary and reimbursement of expenses through the end of the month in which death
occurs.

(b) Disability. By delivery of written notice thirty (30) days in advance to the
Executive, the Association may terminate the Executive’s employment due to the
Executive’s Disability (as defined below). In the event that the Executive’s
employment hereunder terminates due to his Disability, no termination benefits
shall be payable to or in respect of the Executive. For purposes of this
Agreement, “Disability” shall mean a physical or mental condition due to which
the Executive shall have been absent from his duties on a full-time basis for a
twelve (12) consecutive month period. The Executive’s employment shall be deemed
to have terminated as a result of Disability on the date provided in the notice
of termination provided to the Executive by the Association. The Executive shall
not be considered Disabled, however, if the Executive has returned to employment
on a full-time basis within thirty (30) days of receiving such notice.

3.2 Involuntary Termination with Cause. The board of directors may, by written
notice to the Executive, immediately terminate the Executive’s employment under
this Agreement at any time for Cause, in which case the Executive shall be
entitled to receive only the unpaid Base Salary that has accrued through the
date of termination. The Association shall deliver to the Executive a copy of
the resolution duly adopted by the board of directors (after reasonable notice
to the Executive) and an opportunity for the Executive, together with the
Executive’s counsel, to be heard before the board of directors, such meeting and
the opportunity to be heard to be held prior to, or as soon as reasonably
practicable following, termination, but in no event later than 30 days following
such termination), finding that the Executive was guilty of conduct constituting
Cause. The notice provided to the Executive pursuant hereto shall specify in
detail the particulars of the conduct constituting Cause. If the board of
directors thereafter determines that such conduct did not constitute Cause and
the Executive’s employment hereunder is reinstated, then the Executive shall be
entitled to receive back pay for the period following termination and continuing
through reinstatement. If the Executive’s employment is not reinstated as
contemplated by the preceding sentence, then the termination of employment shall
be deemed to have occurred pursuant to Section 3.4 of this Agreement and the
Executive shall be entitled to the compensation and benefits provided therein.
For the purposes of this Agreement “Cause” means any of the following:

(1) a material act of personal dishonesty in performing Executive’s duties on
behalf of the Association;

(2) a willful misconduct that in the judgment of the board of directors will
likely cause economic damage to the Association or its affiliates or injury to
the business reputation of the Company or the Association or their affiliates;

(3) incompetence (in determining incompetence, the Executive must have
demonstrated a lack of ability to perform the duties assigned to him which lack
of ability directly causes material injury to the Association and the
Executive’s acts or omissions shall be measured against standards generally
prevailing in the savings institutions industry);

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(4) a breach of fiduciary duty involving personal profit;

(5) the intentional failure to perform stated duties under this Agreement after
written notice thereof from the board of directors;

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

(7) a material breach by the Executive of any provision of this Agreement.

No act, or failure to act, on the Executive’s part shall be considered “willful”
unless he has acted, or failed to act, with an absence of good faith and without
reasonable belief that his action or failure to act was in the best interest of
the Association.

3.3 Voluntary Termination by the Executive Without Good Reason. If the Executive
terminates employment without Good Reason, the Executive shall receive the Base
Salary and expense reimbursement to which the Executive is entitled through the
date on which termination becomes effective.

3.4 Involuntary Termination Without Cause and Voluntary Termination with Good
Reason. With written notice to the Executive thirty (30) days in advance, the
Association may terminate the Executive’s employment without Cause. Termination
shall take effect at the end of the thirty (30) day period. With advance written
notice to the Association as provided in clause (y), the Executive may terminate
employment for Good Reason. If the Executive’s employment terminates
involuntarily without Cause or voluntarily but with Good Reason, the Executive
shall be entitled to the benefits specified in Article 4 of this Agreement. For
purposes of this Agreement a voluntary termination by the Executive shall be
considered a voluntary termination with Good Reason if the conditions stated in
both clauses (x) and (y) of this Section 3.4 are satisfied:

(x) a voluntary termination by the Executive shall be considered a voluntary
termination with Good Reason if any of the following occur without the
Executive’s written consent, and the term Good Reason shall mean the occurrence
of any of the following without the Executive’s written consent:

(1) a material diminution of the Executive’s Base Salary (unless the reduction
is part of a company-wide or executive-level restructuring of compensation),

(2) a material diminution of the Executive’s authority, duties, or
responsibilities, or

(3) a change in the geographic location at which the Executive must perform
services for the Association by more than 30 miles from such location at the
effective date.

(y) the Executive must give notice to the Association of the existence of one or
more of the conditions described in clause (x) within sixty (60) days after the
initial existence of the condition, and the Association shall have thirty
(30) days thereafter to remedy the condition. In addition, the Executive’s
voluntary termination because of the existence of one or more of the conditions
described in clause (x) must occur within six (6) months after the initial
existence of the condition.

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ARTICLE 4

SEVERANCE COMPENSATION

4.1 Cash Severance after Termination Without Cause or Termination for Good
Reason.

(a) Subject to the possibility that cash severance after employment termination
might be delayed under Section 4.1(b), if the Executive’s employment terminates
involuntarily but without Cause or if the Executive voluntarily terminates
employment with Good Reason, the Executive shall for thirty-six (36) months and
in accordance with the Association’s regular pay practices continue to receive
the Base Salary in effect at termination of employment. However, the Association
and the Executive acknowledge and agree that the compensation and benefits under
this Section 4.1 shall not be payable if compensation and benefits are payable
or shall have been paid to the Executive under Article 5 of this Agreement.

(b) If when employment termination occurs the Executive is a “specified
employee” within the meaning of Section 409A of the Code, if the cash severance
payment under Section 4.1(a) would be considered deferred compensation under
Section 409A of the Code, and finally if an exemption from the six-month delay
requirement of Section 409A(a)(2)(B)(i) of the Code is not available, the
Executive’s continued Base Salary under Section 4.1(a) for the first six months
after employment termination shall be paid to the Executive in a single lump sum
without interest on the first business day of the seventh (7th) month after the
month in which the Executive’s employment terminates.

4.2 Post-Termination Insurance Coverage.

(a) If the Executive’s employment terminates involuntarily but without Cause or
voluntarily but with Good Reason, the Association shall continue or cause to be
continued at the Association’s expense health and life insurance benefits for
the Executive and any of his dependents covered at the time of his termination.
The health and life insurance benefits shall continue until the first to occur
of (w) the Executive’s return to employment with the Association or another
employer, (x) the Executive’s attainment of age 65, (y) the Executive’s (or
dependent’s) death, or (z) the end of the thirty-six (36) month period following
his termination of employment.

(b) If (x) under the terms of the applicable policy or policies for the
insurance benefits specified in section 4.2(a) it is not possible to continue
coverage for the Executive and his dependents, or (y) when employment
termination occurs the Executive is a “specified employee” within the meaning of
Section 409A of the Code, if any of the continued insurance coverage benefits
specified in Section 4.2(a) would be considered deferred compensation under
Section 409A of the Code, and finally, if an exemption from the six-month delay
requirement of Section 409A(a)(2)(B)(i) of the Code is not available for that
particular insurance benefit, the Association shall pay to the Executive in a
single lump sum an amount in cash equal to the present value of the
Association’s projected cost to maintain that particular insurance benefit (and
associated income tax gross-up benefit, if applicable) had the Executive’s
employment not terminated, assuming continued coverage for 36 months. The
lump-sum payment shall be made thirty (30) days after employment termination or,
if Section 4.1(b) applies, on the first business day of the seventh (7th) month
after the month in which the Executive’s employment terminates.

4.3 In addition, the Executive shall have the right to purchase from the
Association the Association owned vehicle that had been used by him at the then
“Kelly Blue Book Trade in Value” valuation, provided the Executive notifies
Association within seven (7) days of the termination of his intent to purchase
the vehicle. Should, at the time of termination, the “Kelly Blue Book Trade in
Value” not be published, the parties hereto agree to use the valuation book then
in use by institutions lending on used vehicles.

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ARTICLE 5

CHANGE IN CONTROL BENEFITS

5.1 Change in Control Benefits. If a Change in Control occurs during the term of
this Agreement and, thereafter during the then remaining term of the Agreement,
the Executive’s employment terminates involuntarily but without Cause or if the
Executive voluntarily terminates employment with Good Reason, the Association
shall make or cause to be made a lump-sum payment to the Executive in an amount
in cash equal to 2.99 times the Executive’s average annual compensation. For
this purpose, average annual compensation means the Executive’s taxable income
reported by the Association for the five (5) calendar years immediately
preceding the calendar year in which the Change in Control occurs. The payment
required under this paragraph is payable no later than five (5) business days
after the Executive’s termination of employment. If the Executive receives
payment under Section 5.1, the Executive shall not be entitled to any additional
severance benefits under Section 4.1 of this Agreement. In addition, the
Association shall provide the Executive and his dependents with the same
post-termination insurance coverage provided for in Section 4.2 of the
Agreement.

5.2 Change in Control Defined. For purposes of this Agreement “Change in
Control” means a change in control of the Association or the Company as defined
in Internal Revenue Section 409A of the Code and rules, regulations, and
guidance of general application thereunder issued by the Department of the
Treasury, including a “change in ownership,” “change in effective control” or
“change in ownership of a substantial portion of assets.”

5.3 Potential Limitation of Benefits Under Certain Circumstances.
Notwithstanding any other provisions of this Agreement, in the event that
(x) the aggregate payments or benefits to be made or afforded to the Executive
under this Agreement or otherwise, which are deemed to be parachute payments as
defined in Section 280G of the Code, or any successor thereof (the “Termination
Benefits”), would be deemed to include an “excess parachute payment” under
Section 280G of the Code; and (y) if such Termination Benefits were reduced to
an amount (the “Non-Triggering Amount”), the value of which is one dollar
($1.00) less than an amount equal to three (3) times the Executive’s “base
amount,” as determined in accordance with Section 280G of the Code and the
Non-Triggering Amount less the product of the marginal rate of any applicable
state and federal income tax and the Non-Triggering Amount would be greater than
the aggregate value of the Termination Benefits (without such reduction) minus
(1) the amount of tax required to be paid by the Executive thereon by
Section 4999 of the Code and further minus (2) the product of the Termination
Benefits and the marginal rate of any applicable state and federal income tax,
then the Termination Benefits shall be reduced to the Non-Triggering Amount. The
allocation of the reduction required hereby among the Termination Benefits shall
be first deducted from the cash payment due under Section 5.1 of this Agreement.
Notwithstanding the foregoing, if required by regulation, the Association shall
not pay the Executive severance benefits under this Agreement in excess of three
(3) times his average annual compensation (or, if required, such other amount
that may be permitted by the Office of the Comptroller of the Currency pursuant
to regulation or regulatory guidance). The Association’s independent public
accountants will determine the value of any reduction in the payments and
benefits; the Association will pay for the accountants’ opinion. If the
Association and/or the Executive do not agree with the accountants’ opinion, the
Association will pay to the Executive the maximum amount of payments and
benefits pursuant to this Agreement or otherwise, as selected by Executive, that
the opinion indicates have a high probability of not causing any of the payments
and benefits to be non-deductible and subject to the excise tax imposed under
Section 4999 of the Code. The Association may also request, and the Executive
has the right to demand that, a ruling from the IRS as to whether the disputed
payments and benefits have such tax consequences. The Association will promptly
prepare and file the request for a ruling from the IRS, but in no event will the
Association make this filing later than thirty (30) days from the date of the
accountant’s opinion referred to above. The request will be subject to the
Executive’s approval prior to filing; the Executive shall not

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unreasonably withhold his approval. The Association and the Executive agree to
be bound by any ruling received from the IRS and to make appropriate payments to
each other to reflect any IRS rulings, together with interest at the applicable
federal rate provided for in Section 7872(1)(2) of the Code. Nothing contained
in this Agreement shall result in a reduction of any payments or benefits to
which the Executive may be entitled upon termination of employment other than
pursuant to this Section 5.3 hereof, or a reduction in the payments and benefits
specified, below zero.

ARTICLE 6

CONFIDENTIALITY AND CREATIVE WORK

6.1 Non-disclosure. The Executive covenants and agrees not to reveal to any
person, firm, or corporation any confidential information of any nature
concerning the Association or its business, or anything connected therewith. As
used in this Article 6 the term “confidential information” means all of the
Association’s and the Association’s affiliates’ confidential and proprietary
information and trade secrets in existence on the date hereof or existing at any
time during the term of this Agreement, including but not limited to:

(a) the whole or any portion or phase of any business plans, financial
information, purchasing data, supplier data, accounting data, or other financial
information,

(b) the whole or any portion or phase of any research and development
information, design procedures, algorithms or processes, or other technical
information,

(c) the whole or any portion or phase of any marketing or sales information,
sales records, customer lists, prices, sales projections, or other sales
information, and

(d) trade secrets, as defined from time to time by the laws of Maryland. This
Section 6.1 does not prohibit disclosure required by an order of a court having
jurisdiction or a subpoena from an appropriate governmental agency or disclosure
made by the Executive in the ordinary course of business and within the scope of
the Executive’s authority.

6.2 Return of Materials. The Executive agrees to immediately deliver or return
to the Association upon termination, upon expiration of this Agreement, or as
soon thereafter as possible, all written information and any other similar items
furnished by the Association or prepared by the Executive in connection with the
Executive’s services hereunder and to immediately delete all electronically
stored data of the Association maintained on the Executive’s personal computers
and to return all Association-provided computers or communication devices (i.e.,
laptop, Blackberry, PDA, etc.). The Executive will retain no copies thereof
after termination of this Agreement or termination of the Executive’s
employment.

6.3 Creative Work. The Executive agrees that all creative work and work product,
including but not limited to all technology, business management tools,
processes, software, patents, trademarks, and copyrights developed by the
Executive during the term of this Agreement, regardless of when or where such
work or work product was produced, constitutes work made for hire, all rights of
which are owned by the Association. The Executive hereby assigns to the
Association all rights, title, and interest, whether by way of copyrights, trade
secret, trademark, patent, or otherwise, in all such work or work product,
regardless of whether the same is subject to protection by patent, trademark, or
copyright laws.

6.4 Affiliates’ Confidential Information is Covered; Confidentiality Obligation
Survives Termination. For purposes of this Agreement, the term “affiliate” of
the Association includes any entity that directly, or indirectly through one or
more intermediaries, controls, is controlled by, or is under common control with
the Association. The rights and obligations set forth in this Article 6 shall
survive termination of this Agreement.

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6.5 Injunctive Relief. The Executive acknowledges that it is impossible to
measure in money the damages that will accrue to the Association if the
Executive fails to observe the obligations imposed by this Article 6.
Accordingly, if the Association institutes an action to enforce the provisions
hereof, the Executive hereby waives the claim or defense that an adequate remedy
at law is available to the Association, and the Executive agrees not to urge in
any such action the claim or defense that an adequate remedy at law exists. The
confidentiality and remedies provisions of this Article 6 shall be in addition
to and shall not be deemed to supersede or restrict, limit, or impair the
Association’s rights under applicable state or federal statute or regulation
dealing with or providing a remedy for the wrongful disclosure, misuse, or
misappropriation of trade secrets or proprietary or confidential information.

ARTICLE 7

COMPETITION AFTER EMPLOYMENT TERMINATION

7.1 Covenant Not to Solicit Employees. The Executive agrees not to, directly or
indirectly, solicit or employ the services of any officer or employee of the
Association (including an individual who was an officer or employee of the
Association during the one year period following the Executive’s termination)
for two years after the Executive’s employment termination.

7.2 Covenant Not to Compete.

(a) The Executive covenants and agrees not to compete directly or indirectly
with the Association for one year after employment termination. For purposes of
this Section 7.2:

 

  (1) the term compete means:

 

  (i) providing financial products or services on behalf of any financial
institution for any person residing in the territory,

 

  (ii) assisting (other than through the performance of ministerial or clerical
duties) any financial institution in providing financial products or services to
any person residing in the territory, or

 

  (iii) inducing or attempting to induce any person who was a customer of the
Association at the date of the Executive’s employment termination to seek
financial products or services from another financial institution.

 

  (2) the words directly or indirectly mean:

 

  (i) acting as a consultant, officer, director, independent contractor, or
employee of any financial institution in competition with the Association in the
territory, or

 

  (ii) communicating to such financial institution the names or addresses or any
financial information concerning any person who was a customer of the
Association when the Executive’s employment terminated.

 

  (3) the term customer means any person to whom the Association is providing
financial products or services on the date of the Executive’s employment
termination or within one year thereafter.

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  (4) the term financial institution means any bank, savings association, or
bank or savings association holding company, or any other institution, the
business of which is engaging in activities that are financial in nature or
incidental to such financial activities as described in Section 4(k) of the Bank
Holding Company Act of 1956, other than the Association or any of its affiliated
corporations.

 

  (5) financial product or service means any product or service that a financial
institution or a financial holding company could offer by engaging in any
activity that is financial in nature or incidental to such a financial activity
under Section 4(k) of the Bank Holding Company Act of 1956 and that is offered
by the Association or an affiliate on the date of the Executive’s employment
termination, including but not limited to banking activities and activities that
are closely related and a proper incident to banking.

 

  (6) the term person means any individual or individuals, corporation,
partnership, fiduciary or association.

 

  (7) the term territory means the area within a 25-mile radius of any office of
the Association at the date of the Executive’s employment termination.

(b) If any provision of this section or any word, phrase, clause, sentence or
other portion thereof (including, without limitation, the geographical and
temporal restrictions contained therein) is held to be unenforceable or invalid
for any reason, the unenforceable or invalid provision or portion shall be
modified or deleted so that the provisions hereof, as modified, are legal and
enforceable to the fullest extent permitted under applicable law.

(c) The Executive acknowledges that the Association’s willingness to enter into
this Agreement and to make the payments contemplated by Articles 3 and 4 of this
Agreement is conditioned on the Executive’s acceptance of the covenants set
forth in Articles 6 and 7 of this Agreement and that the Association would not
have entered into this Agreement without such covenants in force.

7.3 Injunctive and Other Relief. Because of the unique character of the services
to be rendered by the Executive hereunder, the Executive understands that the
Association would not have an adequate remedy at law for the material breach or
threatened breach by the Executive of any one or more of the Executive’s
covenants in this Article 7. Accordingly, the Executive agrees that the
Association’s remedies for a breach of this Article 7 include, but are not
limited to, (x) forfeiture of any money representing accrued salary, contingent
payments, or other fringe benefits (including any amount payable pursuant to
Article 4) due and payable to the Executive during the period of any breach by
Executive, and (y) a suit in equity by the Association to enjoin the Executive
from the breach or threatened breach of such covenants. The Executive hereby
waives the claim or defense that an adequate remedy at law is available to the
Association and the Executive agrees not to urge in any such action the claim or
defense that an adequate remedy at law exists. Nothing herein shall be construed
to prohibit the Association from pursuing any other or additional remedies for
the breach or threatened breach.

7.4 Article 7 Survives Termination But Is Void After a Change in Control. The
rights and obligations set forth in this Article 7 shall survive termination of
this Agreement. However, Article 7 shall become null and void effective
immediately upon a Change in Control.

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ARTICLE 8

MISCELLANEOUS

8.1 Successors and Assigns.

(a) This Agreement shall be binding upon the Association and any successor to
the Association, including any persons acquiring directly or indirectly all or
substantially all of the business or assets of the Association by purchase,
merger, consolidation, reorganization, or otherwise. But this Agreement and the
Association’s obligations under this Agreement are not otherwise assignable,
transferable, or delegable by the Association. By agreement in form and
substance satisfactory to the Executive, the Association shall require any
successor to all or substantially all of the business or assets of the
Association expressly to assume and agree to perform this Agreement in the same
manner and to the same extent the Association would be required to perform had
no succession occurred.

(b) This Agreement shall inure to the benefit of and be enforceable by the
Executive’s personal or legal representatives, executors, administrators,
successors, heirs, distributees, and legatees.

(c) Without written consent of the other parties, no party shall assign,
transfer, or delegate this Agreement or any rights or obligations under this
Agreement, except as expressly provided herein. Without limiting the generality
or effect of the foregoing, the Executive’s right to receive payments hereunder
is not assignable or transferable, whether by pledge, creation of a security
interest, or otherwise, except for a transfer by the Executive’s will or by the
laws of descent and distribution. If the Executive attempts an assignment or
transfer that is contrary to this Section 8.1, the Association shall have no
liability to pay any amount to the assignee or transferee.

8.2 Governing Law, Jurisdiction and Forum. Unless pre-empted by Federal law,
this Agreement shall be construed under and governed by the internal laws of the
State of Maryland, without giving effect to any conflict of laws provision or
rule that would cause the application of the laws of any jurisdiction other than
Maryland. By entering into this Agreement, the Executive acknowledges that the
Executive is subject to the jurisdiction of both the federal and state courts in
Maryland.

8.3 Entire Agreement. This Agreement sets forth the entire agreement of the
parties concerning the employment of the Executive by the Association. Any oral
or written statements, representations, agreements, or understandings made or
entered into prior to or contemporaneously with the execution of this Agreement
are hereby rescinded, revoked, and rendered null and void by the parties.

8.4 Notices. All notices, requests, demands, and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered by
hand or mailed, certified or registered mail, return receipt requested, with
postage prepaid. Unless otherwise changed by notice, notice shall be properly
addressed to the Executive if addressed to the address of the Executive on the
books and records of the Association at the time of the delivery of such notice,
and properly addressed to the Association if addressed to the board of directors
of the Association.

8.5 Severability. If there is a conflict between any provision of this Agreement
and any statute, regulation, or judicial precedent, the latter shall prevail,
but the affected provisions of this Agreement shall be curtailed and limited
solely to the extent necessary to bring them within the requirements of law. If
any provisions of this Agreement is held by a court of competent jurisdiction to
be indefinite, invalid, void or voidable, or otherwise unenforceable, the
remainder of this Agreement shall continue in full force and effect unless that
would clearly be contrary to the intentions of the parties or would result in an
injustice.

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8.6 Captions and Counterparts. The captions in this Agreement are solely for
convenience. The captions do not define, limit, or describe the scope or intent
of this Agreement. This Agreement may be executed in several counterparts, each
of which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.

8.7 No Duty to Mitigate. The Executive shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other
employment. Moreover, provided the Executive is not in breach of any obligation
under Articles 6 and 7 of this Agreement, the amount of any payment provided for
in this Agreement shall not be reduced by any compensation earned or benefits
provided as the result of employment of the Executive or as a result of the
Executive being self-employed after employment termination.

8.8 Amendment and Waiver. This Agreement may not be amended, released,
discharged, abandoned, changed, or modified in any manner, except by an
instrument in writing signed by each of the parties hereto. The failure of any
party hereto to enforce at any time any of the provisions of this Agreement
shall not be construed to be a waiver of any such provision, nor affect the
validity of this Agreement or any part thereof or the right of any party
thereafter to enforce each and every such provision. No waiver or any breach of
this Agreement shall be held to be a waiver of any other or subsequent breach.

8.9 Compliance with Internal Revenue Code Section 409A.

(a) The Executive will be deemed to have a termination of employment for
purposes of determining the timing of any payments that are classified as
deferred compensation only upon a “separation from service” within the meaning
of Section 409A.

(b) If at the time of the Executive’s separation from service, (i) the Executive
is a “specified employee” (within the meaning of Section 409A and using the
methodology selected by the Association) and (ii) the Association makes a good
faith determination that an amount payable or the benefits to be provided
hereunder constitutes deferred compensation (within the meaning of
Section 409A), the payment of which is required to be delayed pursuant to the
six-month delay rule of Section 409A in order to avoid taxes or penalties under
Section 409A, then the Association will not pay the entire amount on the
otherwise scheduled payment date but will instead pay on the scheduled payment
date the maximum amount permissible in order to comply with Section 409A (i.e.,
any amount that satisfies an exception under the Section 409A rules from being
categorized as deferred compensation) and will pay the remaining amount (if any)
in a lump sum on the first business day after such six month period.

(c) To the extent the Executive would be subject to an additional 20% tax
imposed on certain deferred compensation arrangements pursuant to Section 409A
as a result of any provision of this Agreement, such provision shall be deemed
amended to the minimum extent necessary to avoid application of such tax and the
parties shall promptly execute any amendment reasonably necessary to implement
this Section 8.9. The Executive and the Association agree to cooperate to make
such amendment to the terms of this Agreement as may be necessary to avoid the
imposition of penalties and taxes under Section 409A; provided, however, that
the Executive agrees that any such amendment shall provide the Executive with
economically equivalent payments and benefits, and the Executive agrees that any
such amendment will not materially increase the cost to, or liability of, the
Association with respect to any payment.

(d) For purposes of this Agreement, Section 409A shall refer to Section 409A of
the Internal Revenue Code of 1986, as amended, and the Treasury regulations and
any other authoritative guidance issued thereunder.

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8.10 Required Provisions. In the event any of the foregoing provisions of this
Agreement conflict with the terms of this Section 8.10, this Section 8.10 shall
prevail.

(a) The Association’s board of directors may terminate the Executive’s
employment at any time, but any termination by the Association, other than
termination for Cause, shall not prejudice the Executive’s right to compensation
or other benefits under this Agreement. The Executive shall not have the right
to receive compensation or other benefits for any period after termination for
Cause as defined in Section 3.2 of this Agreement.

(b) If the Executive is suspended from office and/or temporarily prohibited from
participating in the conduct of the Association’s affairs by a notice served
under Section 8(e)(3) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C.
Section 1818(e)(3) or (g)(1), the Association’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 Association may, in
its discretion: (i) pay the Executive all or part of the compensation withheld
while its contract obligations were suspended; and (ii) reinstate (in whole or
in part) any of the obligations which were suspended.

(c) If the Executive is removed and/or permanently prohibited from participating
in the conduct of the Association’s affairs by an order issued under
Section 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C.
Section 1818(e)(4) or (g)(1), all obligations of the Association under this
Agreement shall terminate as of the effective date of the order, but vested
rights of the contracting parties shall not be affected.

(d) If the Association is in default as defined in Section 3(x)(1) of the
Federal Deposit Insurance Act, 12 U.S.C. Section 1813(x)(1), all obligations
under this Agreement shall terminate as of the date of default, but this
paragraph shall not affect any vested rights of the contracting parties.

(e) All obligations under this Agreement shall terminate, except to the extent
determined that continuation of the Agreement is necessary for the continued
operation of the Association: (i) by the Comptroller of the Currency, or his or
her designee (the “Comptroller”), at the time the Federal Deposit Insurance
Corporation (FDIC) enters into an agreement to provide assistance to or on
behalf of the Association under the authority contained in Section 13(c) of the
Federal Deposit Insurance Act, 12 U.S.C. Section 1823(c), or (ii) by the
Comptroller at the time the Comptroller approves a supervisory merger to resolve
problems related to the operations of the Association or when the Association is
determined by the Comptroller to be in an unsafe or unsound condition. Any
rights of the parties that have already vested, however, shall not be affected
by such action.

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

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

 

FRATERNITY FEDERAL SAVINGS AND LOAN ASSOCIATION

/s/ William D. Norton

For the board of directors

/s/ Thomas K. Sterner

Executive