EXHIBIT 10.3

                 WAKE FOREST FEDERAL SAVINGS & LOAN ASSOCIATION
                              EMPLOYMENT AGREEMENT

         This EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
April 1, 2002 by and between WAKE FOREST FEDERAL SAVINGS & LOAN ASSOCIATION, a
savings and loan association organized and operating under federal laws of the
United States and having an office at 302 South Brooks Street, Wake Forest,
North Carolina 27588-0707 ("Association") and BILLY B. FAULKNER, an individual
residing at 64 Norwood Faulkner Road, Louisburg, North Carolina 27549
("Executive").

         WHEREAS, the Executive currently serves the Association in the capacity
of Secretary/Treasurer and Vice President; and

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

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

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

         SECTION 1.        EMPLOYMENT.
                           -----------

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

         SECTION 2.        EMPLOYMENT PERIOD.
                           ------------------

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


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

         SECTION 3.        DUTIES.
                           -------

         The Executive shall serve as Secretary/Treasurer and Vice President of
the Association, having such power, authority and responsibility and performing
such duties as are prescribed by or under the By-laws of the Association and as
are customarily associated with such position or as assigned by the Board acting
in good faith. The Executive shall devote his full business time and attention
(other than during weekends, holidays, approved vacation periods, and periods of
illness or approved leaves of absence) to the business and affairs of the
Association and shall use his best efforts to advance the interests of the
Association.

         SECTION 4.        CASH COMPENSATION .
                           -------------------

         In consideration for the services to be rendered by the Executive
hereunder, the Association shall pay to him a salary at an initial annual rate
of SIXTY-SEVEN THOUSAND FIVE HUNDRED DOLLARS ($67,500), payable in approximately
equal installments in accordance with the Association's customary payroll
practices for senior officers. Prior to each Anniversary Date occurring during
the Employment Period, the Board shall review the Executive's annual rate of
salary and may, in its discretion, approve an increase therein. In addition to
salary, the Executive may receive other cash compensation, including bonuses,
from the Association for services hereunder at such times, in such amounts and
on such terms and conditions as the Board may determine from time to time.

         SECTION 5.        EMPLOYMENT BENEFIT PLANS AND PROGRAMS.
                           --------------------------------------

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


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<PAGE>


         SECTION 6.        INDEMNIFICATION AND INSURANCE.
                           ------------------------------

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

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

         SECTION 7.        OUTSIDE ACTIVITIES.
                           -------------------

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

         SECTION 8.        WORKING FACILITIES AND EXPENSES.
                           --------------------------------

         The Executive's principal place of employment shall be at the
Association's executive offices at the address first above written, or at such
other location within Wake County at which the Association and the Executive may
mutually agree upon. The Association shall provide the Executive at his
principal place of employment with a private office, secretarial services and
other support services and facilities suitable to his position with the
Association and necessary or appropriate in connection with the performance of
his assigned duties under this Agreement. The Association shall reimburse the
Executive for his ordinary and necessary business expenses,


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<PAGE>


including, without limitation, fees for membership in such clubs and
organizations as the Executive and the Association shall mutually agree are
necessary and appropriate for business purposes, and his travel and
entertainment expenses incurred in connection with the performance of his duties
under this Agreement, in each case upon presentation to the Association of an
itemized account of such expenses in such form as the Association may reasonably
require.

         SECTION 9.        TERMINATION OF EMPLOYMENT WITH SEVERANCE BENEFITS.
                           --------------------------------------------------

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

         (i) The Executive's voluntary resignation from employment with the
         Association within ninety (90) days following:

                           (A) the failure of the Board to appoint or re-appoint
                  or elect or reelect the Executive to the office of
                  Secretary/Treasuer and Vice President (or a more senior
                  office) of the Association;

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

                           (C) the expiration of a thirty (30) day period
                  following the date on which the Executive gives written notice
                  to the Association of its material breach of any term,
                  condition or covenant contained in this Agreement (including,
                  without limitation any reduction of the Executive's rate of
                  base salary in effect from time to time and any change in the
                  terms and conditions of any compensation or benefit program in
                  which the Executive participates which, either individually or
                  together with other changes, has a material adverse effect on
                  the aggregate value of his total compensation package),
                  unless, during such thirty (30) day period, the Association
                  fully cures such failure; or

         (ii) the termination of the Executive's employment with the Association
         for any other reason not described in section 10(a)- (Termination for
         "Cause").


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<PAGE>


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

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

         (i) his earned but unpaid compensation as of the date of the
         termination of his employment with the Association, such payment to be
         made at the time and in the manner prescribed by law applicable to the
         payment of wages but in no event later than thirty (30) days after
         termination of employment;

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

         (iii) continued group life, health (including hospitalization, medical
         and major medical), dental, accident and long term disability insurance
         benefits, in addition to that provided pursuant to section 9(b)(ii),
         and after taking into account the coverage provided by any subsequent
         employer, if and to the extent necessary to provide for the Executive,
         for a period of three (3) years, coverage equivalent to the coverage to
         which he would have been entitled under such plans (as in effect on the
         date of his termination of employment, or, if his termination of
         employment occurs after a Change in Control, on the date of such Change
         in Control, whichever benefits are greater) if he had continued working
         for the Association.

         (iv) with thirty (30) days following his termination of employment with
         the Association, a lump sum payment, in an amount equal to three (3)
         times the Executive's highest rate of annual salary, including bonuses
         and stock awards included as W-2 wages, achieved during the Employment
         Period.

         (v) within thirty (30) days following his termination of employment
         with the Association, a lump sum payment in an amount equal to:

                           (A) the present value of the aggregate benefits to
                  which he would be entitled under any and all qualified and
                  non-qualified retirement plans, maintained by, or covering
                  employees of the Association as if he were 100% vested at date
                  of termination. Present value is to be determined in
                  accordance with IRC Section 280G. In the case of the
                  Association's leveraged Employee Stock Ownership Plan, the
                  additional assets allocable to him will be computed based
                  upon: (1) the fair market value of such assets at termination
                  of employment, assuming he were 100% vested in the Plan, and
                  (2) the Association made the maximum amount of employee
                  contributions required under the Plan during the remaining
                  debt service period, and (3) the Executive had continued
                  working for the Association at the highest rate of pay during
                  the Employment Period.


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<PAGE>


         (vi) at the election of the Association's Board of Directors made
         within thirty (30) days following his termination of employment with
         the Association, upon surrender of stock options or appreciation rights
         granted such Executive under any stock option or appreciation rights
         plan covering employees of the Association, a lump sum payment equal to
         the product of:

                           (A) the excess of (1) the fair market value of a
                  share of stock of the same class as the stock subject to the
                  option or appreciation right, determined as of the date of
                  termination of employment, over (2) the exercise price per
                  share for such option or appreciation right, as specified in
                  or under the relevant plan or program; multiplied by

                           (B) the number of shares with respect to which
                  options or appreciation rights are being surrendered.

For purposes of this section 9(b)(vi), the Executive shall be deemed fully
vested in all options and appreciation rights under any stock option or
appreciation rights plan or program maintained by, or covering employees of the
Association, even if he is not vested under such plan or program.

                           (vii) at the election of the Association's Board of
                  Directors made with thirty (30) days following the Executive's
                  termination of employment with the Association, upon surrender
                  of any shares awarded to the Executive under any restricted
                  stock plan maintained by, or covering employees of the
                  Association, a lump sum payment in an amount equal to the
                  product of:

                                            (A) the fair market value of a share
                           of stock of the same class of stock granted under
                           such plan, determined as of the date of the
                           Executive's termination of employment; multiplied by

                           (B) the number of shares which are being surrendered.

For purposes of this section 9(b)(vii), the Executive shall be deemed fully
vested in all shares awarded under any restricted stock plan maintained by, or
covering employees of, the Association, even if he is not vested under such plan
or program.


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<PAGE>



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

         SECTION 10.       TERMINATION WITHOUT ADDITIONAL ASSOCIATION LIABILITY.
                           -----------------------------------------------------

         In the event that the Executive's employment with the Association shall
terminate during the Employment Period on account of:

         (a) the discharge of the Executive for "cause," which, for purposes of
         this Agreement shall mean personal dishonesty, incompetence, willful
         misconduct, breach of fiduciary duty involving personal profit,
         intentional failure to perform stated duties, willful violation of any
         law, rule or regulation (other than traffic violations or similar
         offenses) or final cease and desist order, or any material breach of
         this Agreement, in each case as measured against standards generally
         prevailing at the relevant time in the savings and community banking
         industry; provided, however, that the Executive shall not be deemed to
         have been discharged for cause unless and until he shall have received
         a written notice of termination from the Board, which notice shall be
         given to the Executive not later than five (5) business days after the
         Board adopts, and shall be accompanied by, a resolution duly approved
         by affirmative vote a a majority of the entire Board at a meeting
         called and held for such purpose (which meeting shall be held not more
         than fifteen (15) days nor more than thirty (30) days after notice to
         the Executive), at which meeting there shall be a reasonable
         opportunity for the Executive to make oral and written presentations to
         the members of the Board, on his own behalf, or through a
         representative, who may be legal counsel, to refute the grounds for the
         proposed determination finding that in the good faith opinion of the
         Board grounds exist for discharging the Executive for cause; or

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

         (c) the Executive's death;

         (d) a determination that the Executive is eligible for long-term
         disability benefits under the Association's long-term disability
         insurance program or, if there is not such program, under the federal
         Social Security Act; or

         (e) the Executive's termination of employment for any reason at or
         after attainment of mandatory retirement age under the Association's
         mandatory retirement policy for executive officers in effect as of the
         date of this Agreement;


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<PAGE>

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

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

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

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

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

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

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

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


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<PAGE>


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

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

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

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

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

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

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

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

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


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<PAGE>

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

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

                  SECTION 12.       COVENANT NOT TO COMPETE.
                                    ------------------------

The Executive hereby covenants and agrees that, in the event of his termination
of employment with the Association prior to the expiration of the Employment
Period, for a period of one (1) year following the date of his termination of
employment with the Association (or, if less, the remaining unexpired Employment
Period), he shall not, without the written consent of the Association, become an
officer, employee, consultant, director or trustee with executory, managerial,
supervisory or strategic authority or influence at any savings bank, savings and
loan association, savings and loan holding company, bank or bank holding
company, or any direct or indirect subsidiary of affiliate of any such entity,
that entails working within 50 miles of the headquarters of the Association on
the date of the Executive's termination of employment; provided, however, that
this section 12 shall not apply if the Executive's employment is terminated for
the reasons set forth in section 9(a) or section 11; and provided, further, that
if the Executive's employment shall be terminated on account of disability as
provided in section 10(d) of this Agreement, this section 12 shall not prevent
the Executive from accepting any position or performing any services if (a) he
first offers, by written notice, to accept a similar position with, or perform
similar services for, the Association on substantially the same terms and
conditions and (b) the Association declines to accept such offer within ten (10)
days after such notice is given.

SECTION 13.       CONFIDENTIALITY.
                  ----------------

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


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<PAGE>


Association's consent, from participating in or disclosing documents or
information in connection with any judicial or administrative investigation,
inquiry or proceeding to the extent that such participation or disclosure is
required under applicable law.

                  SECTION 14.       SOLICITATION
                                    ------------

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

         (a) solicit, offer employment to, or take any other action intended, or
         that a reasonable person acting in like circumstances would expect, to
         have the effect of causing any officer or employee of the Association
         or any affiliate, as of the date of this Agreement, of either of them
         to terminate her or his employment and accept employment or become
         affiliated with, or provide services for compensation in any capacity
         whatsoever to, any savings bank, savings and loan association, bank,
         bank holding company, savings and loan holding company, or other
         institution engaged in the business of accepting deposits and making
         loans, doing business with 50 miles of the headquarters of the
         Association or any affiliate, as of the date of this Agreement, of
         either of them;

         (b) provide any information, advice or recommendation with respect to
         any such officer or employee of any savings bank, savings and loan
         association, bank, bank holding company, savings and loan holding
         company, or other institution engaged in the business of accepting
         deposits and making loans, doing business within 50 miles of the
         headquarters of the Association or any affiliate, as of the date of
         this Agreement, of either of them that is intended, or that a
         reasonable person acting in like circumstances would expect, to have
         the effect of causing any officer or employee of the Association or any
         affiliate, as of the date of this Agreement, of either of them to
         terminate her or his employment and accept employment or become
         affiliated with, or provide services for compensation in any capacity
         whatsoever to, any savings bank, savings and loan association, bank,
         bank holding company, savings and loan holding company, or other
         institution engaged in the business of accepting deposits and making
         loans, doing business within 50 miles of the headquarters of the
         Association or any affiliate, as of the date of this Agreement, of
         either of them;

         (c) solicit, provide any information, advice or recommendation or take
         any other action intended, or that a reasonable person acting in like
         circumstances would expect to have the effect of causing any customer
         of the Association to terminate an existing business or commercial
         relationship with the Association.


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<PAGE>


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

         The termination of the Executive's employment during the term of this
Agreement or thereafter, whether by the Association or by the Executive, shall
have no effect on the rights and obligations of the parties hereto under the
Association's qualified or non-qualified retirement, pension, savings, thrift,
profit-sharing or stock bonus plans, group life, health (including
hospitalization, medical and major medical), dental, accident and long term
disability insurance plans or such other employee benefit plans or programs, or
compensation plans or programs, as may be maintained by, or cover employees of
the Association from time to time.

         SECTION 16.       SUCCESSORS AND ASSIGNS.
                           -----------------------

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

         SECTION 17.       NOTICES.
                           --------

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

         If to the Executive:

                  Billy B. Faulkner
                  64 Norwood Faulkner Road
                  Louisburg, North Carolina  27549

         If to the Association:

                  Wake Forest Federal Savings and Loan Association
                  302 S. Brooks Street, P.O. Box 1167
                  Wake Forest, North Carolina, 27588

                  Attention:  Chairman of the Board
                              ---------------------


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<PAGE>



         SECTION 18.       INDEMNIFICATION FOR ATTORNEYS' FEES.
                           ------------------------------------

         The Association shall indemnify, hold harmless and defend the Executive
against reasonable costs, including legal fees, incurred by him in connection
with or arising out of any action, suit or proceeding in which he may be
involved, as a result of his efforts, in good faith, to defend or enforce the
terms of this Agreement; provided, however, that the Executive shall have
substantially prevailed on the merits pursuant to a judgment, decree or order of
a court of competent jurisdiction or of an arbitrator in an arbitration
proceeding, or in a settlement. For purposes of this Agreement, any settlement
agreement which provides for payment of any amounts in settlement of the
Association's obligations hereunder shall be conclusive evidence of the
Executive's entitlement to indemnification hereunder, and any such
indemnification payments shall be in addition to amounts payable pursuant to
such settlement agreement, unless such settlement agreement expressly provides
otherwise.

         SECTION 19.       SEVERABILITY.
                           -------------

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

         SECTION 20.       WAIVER.
                           -------

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

         SECTION 21.       COUNTERPARTS.
                           -------------

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

         SECTION 22.       GOVERNING LAW.
                           --------------

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

         SECTION 23.       HEADINGS AND CONSTRUCTION.
                           --------------------------

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


                                       13
<PAGE>


         SECTION 24.       ENTIRE AGREEMENT; MODIFICATIONS.
                           --------------------------------

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

         SECTION 25.       REQUIRED REGULATORY PROVISIONS.
                           -------------------------------

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

         (a) Notwithstanding anything herein contained to the contrary, in no
         event shall the aggregate amount of compensation payable to the
         Executive under section 9(b) hereof (exclusive of amounts described in
         Section 9(b)(i), (vi) and (vii)) exceed three times the Executive's
         average annual compensation for the last five consecutive calendar
         years to end prior to his termination of employment with the
         Association (or for his entire period of employment with the
         Association if less than five calendar years). The compensation payable
         to the Executive hereunder shall be further reduced (but not below
         zero) if such reduction would avoid the assessment of excise taxes on
         excess parachute payments (within the meaning of section 280G of the
         Code). "Annual compensation" is defined to include any cash bonuses and
         the value of stock awards vested during a calendar year under any
         restricted stock plan maintained by, or covering employees of the
         Association, which are reportable as taxable wages.

         (b) Notwithstanding anything herein contained to the contrary, any
         payments to the Executive by the Association, whether pursuant to this
         Agreement or otherwise, are subject to and conditioned upon their
         compliance with section 18(k) of the Federal Deposit Insurance Act
         ("FDI Act"), 12 U.S.C. 1828(k), and any regulations promulgated
         thereunder.

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


                                       14
<PAGE>

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

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

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

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

         SECTION 26.       EFFECTIVE DATE.
                           ---------------

         This Agreement shall take effect April 1, 2002.


                                       15
<PAGE>

                  IN WITNESS WHEREOF, the Association has caused this Agreement
to be executed and the Executive has hereunto set his hand, all as of the day
and year first above written.
                                               /s/ Billy B. Faulkner
                                              -------------------------------
                                                     BILLY B. FAULKNER

ATTEST:                                       WAKE FOREST FEDERAL

                                                  SAVINGS AND LOAN ASSOCIATION

By /s/ Robert C. White                           By /s/ Howard R. Brown
  ------------------------------                   ---------------------------
             President                             Name:  Howard R. Brown
                                                   Title: Chairman of the Board

[Seal]


                                       16
<PAGE>


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

                  On this _____ day of ________________, 2002, before me
personally came Billy B. Faulkner, to me known, and known to me to be the
individual described in the foregoing instrument, who, being by me duly sworn,
did depose and say that he resides at the address set forth is said instrument
and that he signed his name to the foregoing instrument.

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

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

                  On this ______ day of ___________________, 2002, before me
personally came Howard L. Brown, to me known, who, being by me duly sworn, did
depose and say that he resides at 900 Averette Road, Wake Forest, North
Carolina, 27587, that he is Chairman of the Board of Directors of WAKE FOREST
FEDERAL SAVINGS & LOAN ASSOCIATION, the savings institution described in and
which executed the foregoing instrument; that he knows the seal of said savings
institution; that the seal affixed to said instrument is such seal; that it was
so affixed by order of the Board of Directors of said savings institution, and
that he signed his name thereto by like order.

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

                                       17