EXHIBIT 10.5
<PAGE>
                              EMPLOYMENT AGREEMENT

         THIS AGREEMENT entered into this 31st day of December, 1996 ("Effective
Date"), by and between Virginia Beach Federal Savings Bank (the "Bank") and John
A.B. Davies, Jr., (the "Employee").

         WHEREAS,  the  Employee  has  heretofore  been  employed by the Bank as
President and Chief  Executive  Officer and is  experienced in all phases of the
business of the Bank; and

         WHEREAS, the parties desire by this writing to set forth the continuing
employment relationship of the Bank and the Employee.

         NOW, THEREFORE, it is AGREED as follows:

         1.  Employment.  The  Employee  is  employed  in  the  capacity  as the
President and Chief  Executive  Officer of the Bank.  The Employee  shall render
such  administrative  and  management  services to the Bank and  Virginia  Beach
Federal Financial  Corporation  ("Parent") as are currently  rendered and as are
customarily  performed by persons situated in a similar executive capacity.  The
Employee shall also promote, to the extent permitted by law, the business of the
Bank and  Parent.  The  Employee's  other  duties  shall be such as the Board of
Directors  for the  Bank  (the  "Board  of  Directors")  may  from  time to time
reasonably direct, including normal duties as an officer of the Bank.

         2. Base  Compensation.  The Bank agrees to pay the Employee  during the
term of this  Agreement a salary at the rate of $200,000  per annum,  payable in
cash not less  frequently than monthly;  provided,  that the rate of such salary
shall be reviewed by the Board of Directors  not less often than  annually,  and
Employee shall be entitled to receive annually an increase at such percentage or
in such an amount as the Board of Directors in its sole discretion may decide at
such time.

         3. (a)  Participation  in Retirement  and Medical  Plans.  The Employee
shall be entitled to  participate  in any plan of the Bank  relating to pension,
profit-sharing,   or  other   retirement   benefits  and  medical   coverage  or
reimbursement  plans that the Bank may adopt for the  benefit of its  employees.
Additionally,  Employee's  dependent  family shall be eligible to participate in
medical and dental insurance plans sponsored by the Bank or Parent.  The cost of
premiums for participation in the medical coverage or reimbursement plan for the
Employee and such dependent  family shall be 95% paid by the Bank and 5% paid by
the Employee.

         (b) Employee  Benefits;  Expenses.  The  Employee  shall be eligible to
participate in any fringe benefits which may be or may become  applicable to the
Bank's senior management employees,  including by example,  participation in any
stock  option or  incentive  plans  adopted by the Board of Directors of Bank or
Parent,   club  memberships,   a  reasonable  expense  account,  an  appropriate
automobile  allowance,  and any other benefits which are  commensurate  with the
responsibilities  and  functions  to be  performed  by the  Employee  under this
Agreement. The Bank

<PAGE>

shall  reimburse  Employee  for  all  reasonable  out-of-pocket  expenses  which
Employee shall incur in connection with his service for the Bank.

         4. Term. The term of employment of Employee under this Agreement  shall
be for the period  commencing on the Effective Date and ending  twenty-four (24)
months  thereafter.  Additionally,  on each  annual  anniversary  date  from the
Effective  Date, the term of employment  under this Agreement  shall be extended
for an additional one year period beyond the then effective expiration date upon
a determination and resolution of the Board of Directors that the performance of
the Employee has met the  requirements  and standards of the Board, and that the
term of such  Agreement  shall be extended.  To the extent  possible,  the Board
shall  furnish  the  Employee  with not less than sixty (60) days  notice of any
intention not to renew such Agreement.

         5.       Loyalty; Noncompetition.

         (a) The  Employee  shall  devote  his full  time and  attention  to the
performance  of  his  employment  under  this  Agreement.  During  the  term  of
Employee's employment under this Agreement, the Employee shall not engage in any
business or activity  contrary to the business  affairs or interests of the Bank
or Parent.

         (b) Nothing contained in this Paragraph 5 shall be deemed to prevent or
limit the right of Employee to invest in the capital  stock or other  securities
of any  business  dissimilar  from that of the Bank or Parent,  or,  solely as a
passive or minority investor, in any business.

         (c) For a period  of  twelve  (12)  months  following  the  voluntarily
termination  by Employee of his  employment  hereunder,  other than  pursuant to
Section 11(b) of this  Agreement,  Employee will not accept  employment with any
financial  institution or entity offering  similar  products and services as the
Bank within the geographic area generally known as Hampton Roads, Virginia.

         6.  Standards.  The  Employee  shall  perform  his  duties  under  this
Agreement in accordance  with such  reasonable  standards  expected of employees
with comparable positions in comparable  organizations and as may be established
from time to time by the Board of Directors. The Bank will provide Employee with
the working  facilities and staff customary for similar executives and necessary
for him to perform his duties.

         7. Vacation and Sick Leave.  At such  reasonable  times as the Board of
Directors  shall in its  discretion  permit,  the  Employee  shall be  entitled,
without loss of pay, to absent himself  voluntarily  from the performance of his
employment  under this Agreement,  with all such voluntary  absences to count as
vacation time; provided that:

         (a) The  Employee  shall  be  entitled  to  annual  vacation  leave  in
accordance  with the policies as are  periodically  established  by the Board of
Directors for senior management employees of the Bank.

                                        2

<PAGE>

         (b) The  Employee  shall not be  entitled  to  receive  any  additional
compensation  from the Bank on account of his failure to take vacation leave and
Employee  shall not be entitled to  accumulate  unused  vacation from one fiscal
year to the next, except in either case to the extent authorized by the Board of
Directors for senior management employees of the Bank.

         (c) In addition to the aforesaid paid vacations,  the Employee shall be
entitled without loss of pay, to absent himself voluntarily from the performance
of his employment with the Bank for such additional periods of time and for such
valid and  legitimate  reasons as the Board of Directors in its  discretion  may
determine.  Further,  the Board of  Directors  shall be entitled to grant to the
Employee 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 in its  discretion
may determine.

         (d) In addition, the Employee shall be entitled to an annual sick leave
benefit as established by the Board of Directors for senior management employees
of the Bank.  In the event that any sick leave  benefit shall not have been used
during any year, such leave shall accrue to subsequent  years only to the extent
authorized by the Board of Directors for employees of the Bank.

         8.       Termination and Termination Pay.

         The Employee's employment under this Agreement shall be terminated upon
any of the following occurrences:

         (a) The death of the  Employee  during the term of this  Agreement,  in
which event the Employee's  estate shall be entitled to receive the compensation
due the Employee  through the last day of the third calendar month subsequent to
the month in which Employee's death shall have occurred.

         (b) The Board of Directors may terminate the  Employee's  employment at
any time, but any termination by the Board of Directors  other than  termination
for Just Cause,  shall not prejudice the  Employee's  right to  compensation  or
other  benefits  under  the  Agreement,  except as  specified  at  Section  8(c)
hereinafter.  The Employee shall have no right to receive  compensation or other
benefits for any period after termination for Just Cause.  Termination for "Just
Cause" shall include termination because of the Employee's personal  dishonesty,
incompetence,  willful  misconduct,  breach of fiduciary duty involving personal
profit,  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, an extreme fiscal exigency  affecting the Bank (such as
insolvency) or material breach of any provision of the Agreement.

         (c) Except as  provided  pursuant  to  Section 11 herein,  in the event
Employee's  employment  under  this  Agreement  is  terminated  by the  Board of
Directors without Just Cause, the Bank shall be obligated to continue to pay the
Employee  the salary  provided  pursuant  to  Section 2 herein,  for a period of
twelve (12) months  thereafter,  without  regard to the term of this  Agreement.
Additionally, Employee shall be compensated or reimbursed for the cost of

                                        3

<PAGE>

Employee obtaining all health,  life,  disability,  and other benefits which the
Employee and his dependents  would be eligible to participate in for a period of
one-year  based  upon the  benefit  levels  substantially  equal to those  being
provided  Employee at the date of termination of employment.  At the election of
the Employee, such compensation to be paid hereunder shall be paid in a lump-sum
amount within 30 days of such termination  discounted in accordance with Section
11(a) herein; in which case the benefit  continuations  noted above shall not be
applicable,  except to the extent as may be required  by law or the  policies of
the Savings Bank.

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

         (e) If the Bank is in default (as  defined in Section  3(x)(1) of FDIA)
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.

         (f) All obligations under this Agreement shall be terminated, except to
the extent  determined that  continuation of this Agreement is necessary for the
continued  operation  of the Bank:  (i) by the  Director of the Office of Thrift
Supervision  ("Director of OTS"),  or his or her designee,  at the time that the
Federal  Deposit  Insurance   Corporation   ("FDIC")  or  the  Resolution  Trust
Corporation  enters into an agreement to provide  assistance  to or on behalf of
the Bank under the authority  contained in Section 13(c) of FDIA; or (ii) by the
Director of the OTS, or his or her  designee,  at the time that the  Director of
the OTS,  or his or her  designee  approves  a  supervisory  merger  to  resolve
problems  related to operation of the Bank or when the Bank is determined by the
Director of the OTS 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.

         (g) The voluntary  termination by the Employee  during the term of this
Agreement  with the delivery of no less than 60 days written notice to the Board
of Directors,  other than pursuant to Section 11(b),  in which case the Employee
shall be entitled  to receive  only the  compensation,  vested  rights,  and all
employee benefits up to the date of such termination.

         (h) Notwithstanding  anything herein to the contrary, any payments made
to the Employee pursuant to the Agreement, or otherwise, shall be subject to and
conditioned   upon  compliance  with  12  USC  ss.1828(k)  and  any  regulations
promulgated thereunder.

         9.  Suspension  of  Employment.  If the  Employee is  suspended  and/or
temporarily  prohibited from  participating in the conduct of the Bank's affairs
by a notice  served  under  Section  8(e)(3)  or (g)(1)  of the FDIA (12  U.S.C.
1818(e)(3)  and (g)(1)),  the Bank's  obligations  under the Agreement  shall be
suspended as of the date of service,  unless stayed by appropriate  proceedings.
If the charges in the notice are dismissed, the Bank shall, (i) pay the Employee

                                        4

<PAGE>

all or part of the  compensation  withheld while its contract  obligations  were
suspended and (ii) reinstate any of its obligations which were suspended.

         10. Disability.  If the Employee shall become disabled or incapacitated
to the extent  that he is unable to perform his duties  hereunder,  by reason of
medically determinable physical or mental impairment,  as determined by a doctor
engaged by the Board of  Directors,  Employee  shall  nevertheless  continue  to
receive the compensation and benefits which may be payable to Employee under the
provisions of disability insurance coverage in effect for Bank employees and any
payments under the Federal  Social  Security Act, but in no event less than 100%
of pay for a period of 12 months  and 65% for the  remainder  of the term of the
Agreement,  if applicable.  Upon returning to active full-time  employment,  the
Employee's full  compensation as set forth in this Agreement shall be reinstated
as of the  date of  commencement  of such  activities.  In the  event  that  the
Employee returns to active  employment on other than a full-time basis, then his
compensation (as set forth in Paragraph 2 of this Agreement) shall be reduced in
proportion to the time spent in said employment, or as shall otherwise be agreed
to by the parties.

         11.      Change in Control.

         (a) Notwithstanding any provision herein to the contrary,  in the event
of the involuntary  termination of Employee's  employment  under this Agreement,
absent Just Cause, in connection with, or within  twenty-four (24) months after,
any change in control  of the Bank or Parent,  Employee  shall be paid an amount
equal the  product of 2.99  times the  Employee's  prior  calendar  year's  cash
compensation  paid as reflected on Form W-2,  excluding any commission  payments
paid,  but in no event in an amount in excess of the  product  of 2.99 times the
Employee's  "base  amount"  as defined in  Section  280G(b)(3)  of the  Internal
Revenue  Code of 1986,  as amended  (the  "Code")  and  regulations  promulgated
thereunder. Said sum shall be paid, at the option of Employee, either in one (1)
lump sum within thirty (30) days of such  termination  discounted to the present
value of such payment  using as the discount  rate the "prime rate" as published
in the Wall Street Journal Eastern Edition as of the date of such payment, or in
periodic  payments  over  the  next  36  months  or the  remaining  term of this
Agreement  whichever  is  less,  as  if  Employee's   employment  had  not  been
terminated,  and such  payments  shall be in lieu of any other  future  payments
which the Employee  would be otherwise  entitled to receive  under  Section 8 of
this  Agreement.  The term "control"  shall refer to the  ownership,  holding or
power to vote more than 25% of the Parent's or Bank's voting stock,  the control
of the election of a majority of the Parent's or Bank's directors,  the exercise
of a controlling influence over the management or policies of the Parent or Bank
by any person or by  persons  acting as a group  within  the  meaning of Section
13(d) of the  Securities  Exchange  Act of  1934.  The  term  "person"  means an
individual  other  than the  Employee,  or a  corporation,  partnership,  trust,
association, joint venture, pool, syndicate, sole proprietorship, unincorporated
organization or any other form of entity not specifically listed herein.

         (b)  Notwithstanding  any  other  provision  of this  Agreement  to the
contrary,  Employee may voluntary  terminate his employment under this Agreement
within  twenty-four  (24)  months  following  a change in control of the Bank or
Parent, and Employee shall thereupon be entitled

                                        5

<PAGE>

to receive the payment  described in Section 11(a) of this  Agreement,  upon the
occurrence,  or within  ninety  (90) days  thereafter,  of any of the  following
events,  which have not been consented to in advance by the Employee in writing:
(i) if Employee would be required to move his personal  residence or perform his
principal  executive  functions  more  than  thirty-five  (35)  miles  from  the
Employee's  primary office as of the signing of this  Agreement;  (ii) if in the
organizational  structure of the Bank or Parent,  Employee  would be required to
report to a person or  persons  other  than the Board of the Bank;  (iii) if the
Bank or  Parent  should  fail to  maintain  existing  employee  benefits  plans,
including  material fringe benefit,  stock option and retirement  plans; (iv) if
Employee would be assigned duties and responsibilities other than those normally
associated with his position as referenced at Section 1, herein; (v) if Employee
would not be elected or reelected to the Board of Directors of the Bank; or (vi)
if  Employee's  responsibilities  or authority  have in any way been  materially
diminished or reduced.

         12.      Successors and Assigns.

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

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

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

         14.  Applicable  Law. This agreement  shall be governed by all respects
whether as to validity, construction, capacity, performance or otherwise, by the
laws of the  Commonwealth  of  Virginia,  except to the extent that  Federal law
shall be deemed to apply.

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

         16. Entire Agreement. This Agreement together with any understanding or
modifications  thereof as agreed to in writing by the parties,  shall constitute
the entire agreement between the parties hereto.

                                        6
<PAGE>

                              EMPLOYMENT AGREEMENT

         THIS AGREEMENT entered into this 31st day of December, 1996 ("Effective
Date"), by and between Virginia Beach Federal Savings Bank (the "Bank") and John
M. Chattleton (the "Employee").

         WHEREAS,  the  Employee  has  heretofore  been  employed by the Bank as
Executive Vice President - Retail  Administration and Lending and is experienced
in all phases of the business of the Bank; and

         WHEREAS, the parties desire by this writing to set forth the continuing
employment relationship of the Bank and the Employee.

         NOW, THEREFORE, it is AGREED as follows:

         1.  Employment.  The  Employee  is  employed  in  the  capacity  as the
Executive  Vice President - Retail  Administration  and Lending of the Bank. The
Employee shall render such  administrative  and management  services to the Bank
and Virginia  Beach Federal  Financial  Corporation  ("Parent") as are currently
rendered  and as are  customarily  performed  by persons  situated  in a similar
executive capacity.  The Employee shall also promote, to the extent permitted by
law, the business of the Bank and Parent.  The Employee's  other duties shall be
such as the Board of Directors for the Bank (the "Board of Directors")  may from
time to time  reasonably  direct,  including  normal duties as an officer of the
Bank.

         2. Base  Compensation.  The Bank agrees to pay the Employee  during the
term of this  Agreement a salary at the rate of $112,000  per annum,  payable in
cash not less  frequently than monthly;  provided,  that the rate of such salary
shall be reviewed by the Board of Directors  not less often than  annually,  and
Employee shall be entitled to receive annually an increase at such percentage or
in such an amount as the Board of Directors in its sole discretion may decide at
such time.

         3. (a)  Participation  in Retirement  and Medical  Plans.  The Employee
shall be entitled to  participate  in any plan of the Bank  relating to pension,
profit-sharing,   or  other   retirement   benefits  and  medical   coverage  or
reimbursement  plans that the Bank may adopt for the  benefit of its  employees.
Additionally,  Employee's  dependent  family shall be eligible to participate in
medical and dental insurance plans sponsored by the Bank or Parent.  The cost of
premiums for participation in the medical coverage or reimbursement plan for the
Employee and such dependent  family shall be 95% paid by the Bank and 5% paid by
the Employee.

         (b) Employee  Benefits;  Expenses.  The  Employee  shall be eligible to
participate in any fringe benefits which may be or may become  applicable to the
Bank's senior management employees,  including by example,  participation in any
stock  option or  incentive  plans  adopted by the Board of Directors of Bank or
Parent,   club  memberships,   a  reasonable  expense  account,  an  appropriate
automobile  allowance,  and any other benefits which are  commensurate  with the
responsibilities  and  functions  to be  performed  by the  Employee  under this
Agreement. The Bank


<PAGE>



shall  reimburse  Employee  for  all  reasonable  out-of-pocket  expenses  which
Employee shall incur in connection with his service for the Bank.

         4. Term. The term of employment of Employee under this Agreement  shall
be for the period  commencing on the Effective Date and ending  twenty-four (24)
months  thereafter.  Additionally,  on each  annual  anniversary  date  from the
Effective  Date, the term of employment  under this Agreement  shall be extended
for an additional one year period beyond the then effective expiration date upon
a determination and resolution of the Board of Directors that the performance of
the Employee has met the  requirements  and standards of the Board, and that the
term of such  Agreement  shall be extended.  To the extent  possible,  the Board
shall  furnish  the  Employee  with not less than sixty (60) days  notice of any
intention not to renew such Agreement.

         5.       Loyalty; Noncompetition.

         (a) The  Employee  shall  devote  his full  time and  attention  to the
performance  of  his  employment  under  this  Agreement.  During  the  term  of
Employee's employment under this Agreement, the Employee shall not engage in any
business or activity  contrary to the business  affairs or interests of the Bank
or Parent.

         (b) Nothing contained in this Paragraph 5 shall be deemed to prevent or
limit the right of Employee to invest in the capital  stock or other  securities
of any  business  dissimilar  from that of the Bank or Parent,  or,  solely as a
passive or minority investor, in any business.

         (c) For a period  of  twelve  (12)  months  following  the  voluntarily
termination  by Employee of his  employment  hereunder,  other than  pursuant to
Section 11(b) of this  Agreement,  Employee will not accept  employment with any
financial  institution or entity offering  similar  products and services as the
Bank within the geographic area generally known as Hampton Roads, Virginia.

         6.  Standards.  The  Employee  shall  perform  his  duties  under  this
Agreement in accordance  with such  reasonable  standards  expected of employees
with comparable positions in comparable  organizations and as may be established
from time to time by the Board of Directors. The Bank will provide Employee with
the working  facilities and staff customary for similar executives and necessary
for him to perform his duties.

         7. Vacation and Sick Leave.  At such  reasonable  times as the Board of
Directors  shall in its  discretion  permit,  the  Employee  shall be  entitled,
without loss of pay, to absent himself  voluntarily  from the performance of his
employment  under this Agreement,  with all such voluntary  absences to count as
vacation time; provided that:

         (a) The  Employee  shall  be  entitled  to  annual  vacation  leave  in
accordance  with the policies as are  periodically  established  by the Board of
Directors for senior management employees of the Bank.

                                        2


<PAGE>




         (b) The  Employee  shall not be  entitled  to  receive  any  additional
compensation  from the Bank on account of his failure to take vacation leave and
Employee  shall not be entitled to  accumulate  unused  vacation from one fiscal
year to the next, except in either case to the extent authorized by the Board of
Directors for senior management employees of the Bank.

         (c) In addition to the aforesaid paid vacations,  the Employee shall be
entitled without loss of pay, to absent himself voluntarily from the performance
of his employment with the Bank for such additional periods of time and for such
valid and  legitimate  reasons as the Board of Directors in its  discretion  may
determine.  Further,  the Board of  Directors  shall be entitled to grant to the
Employee 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 in its  discretion
may determine.

         (d) In addition, the Employee shall be entitled to an annual sick leave
benefit as established by the Board of Directors for senior management employees
of the Bank.  In the event that any sick leave  benefit shall not have been used
during any year, such leave shall accrue to subsequent  years only to the extent
authorized by the Board of Directors for employees of the Bank.

         8.       Termination and Termination Pay.

         The Employee's employment under this Agreement shall be terminated upon
any of the following occurrences:

         (a) The death of the  Employee  during the term of this  Agreement,  in
which event the Employee's  estate shall be entitled to receive the compensation
due the  Employee  through  the last day of the  third  calendar  month in which
Employee's death shall have occurred.

         (b) The Board of Directors may terminate the  Employee's  employment at
any time, but any termination by the Board of Directors  other than  termination
for Just Cause,  shall not prejudice the  Employee's  right to  compensation  or
other  benefits  under  the  Agreement,  except as  specified  at  Section  8(c)
hereinafter.  The Employee shall have no right to receive  compensation or other
benefits for any period after termination for Just Cause.  Termination for "Just
Cause" shall include termination because of the Employee's personal  dishonesty,
incompetence,  willful  misconduct,  breach of fiduciary duty involving personal
profit,  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, an extreme fiscal exigency  affecting the Bank (such as
insolvency) or material breach of any provision of the Agreement.

         (c) Except as  provided  pursuant  to  Section 11 herein,  in the event
Employee's  employment  under  this  Agreement  is  terminated  by the  Board of
Directors without Just Cause, the Bank shall be obligated to continue to pay the
Employee  the salary  provided  pursuant  to  Section 2 herein,  for a period of
twelve (12) months  thereafter,  without  regard to the term of this  Agreement.
Additionally,  Employee  shall  be  compensated  or  reimbursed  for the cost of
Employee obtaining all health,  life,  disability,  and other benefits which the
Employee and his

                                        3


<PAGE>



dependents  would be eligible to participate in for a period of six months based
upon the benefit levels  substantially equal to those being provided Employee at
the date of  termination of  employment.  At the election of the Employee,  such
compensation  to be paid hereunder  shall be paid in a lump-sum amount within 30
days of such termination  discounted in accordance with Section 11(a) herein; in
which case the benefit continuations noted above shall not be applicable, except
to the extent as may be required by law or the policies of the Savings Bank.

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

         (e) If the Bank is in default (as  defined in Section  3(x)(1) of FDIA)
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.

         (f) All obligations under this Agreement shall be terminated, except to
the extent  determined that  continuation of this Agreement is necessary for the
continued  operation  of the Bank:  (i) by the  Director of the Office of Thrift
Supervision  ("Director of OTS"),  or his or her designee,  at the time that the
Federal  Deposit  Insurance   Corporation   ("FDIC")  or  the  Resolution  Trust
Corporation  enters into an agreement to provide  assistance  to or on behalf of
the Bank under the authority  contained in Section 13(c) of FDIA; or (ii) by the
Director of the OTS, or his or her  designee,  at the time that the  Director of
the OTS,  or his or her  designee  approves  a  supervisory  merger  to  resolve
problems  related to operation of the Bank or when the Bank is determined by the
Director of the OTS 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.

         (g) The voluntary  termination by the Employee  during the term of this
Agreement  with the delivery of no less than 60 days written notice to the Board
of Directors,  other than pursuant to Section 11(b),  in which case the Employee
shall be entitled  to receive  only the  compensation,  vested  rights,  and all
employee benefits up to the date of such termination.

         (h) Notwithstanding  anything herein to the contrary, any payments made
to the Employee pursuant to the Agreement, or otherwise, shall be subject to and
conditioned  upon  compliance  with 12  U.S.C.  ss.1828(k)  and any  regulations
promulgated thereunder.

         9.  Suspension  of  Employment.  If the  Employee is  suspended  and/or
temporarily  prohibited from  participating in the conduct of the Bank's affairs
by a notice  served  under  Section  8(e)(3)  or (g)(1)  of the FDIA (12  U.S.C.
1818(e)(3)  and (g)(1)),  the Bank's  obligations  under the Agreement  shall be
suspended as of the date of service,  unless stayed by appropriate  proceedings.
If the charges in the notice are dismissed, the Bank shall, (i) pay the Employee
all or part of the  compensation  withheld while its contract  obligations  were
suspended and (ii) reinstate any of its obligations which were suspended.

                                        4


<PAGE>




         10. Disability.  If the Employee shall become disabled or incapacitated
to the extent  that he is unable to perform his duties  hereunder,  by reason of
medically determinable physical or mental impairment,  as determined by a doctor
engaged by the Board of  Directors,  Employee  shall  nevertheless  continue  to
receive the compensation and benefits which may be payable to Employee under the
provisions of disability insurance coverage in effect for Bank employees and any
payments under the Federal  Social  Security Act, but in no event less than 100%
of pay for a period of 12 months  and 60% for the  remainder  of the term of the
Agreement,  if applicable.  Upon returning to active full-time  employment,  the
Employee's full  compensation as set forth in this Agreement shall be reinstated
as of the  date of  commencement  of such  activities.  In the  event  that  the
Employee returns to active  employment on other than a full-time basis, then his
compensation (as set forth in Paragraph 2 of this Agreement) shall be reduced in
proportion to the time spent in said employment, or as shall otherwise be agreed
to by the parties.

         11.      Change in Control.

         (a) Notwithstanding any provision herein to the contrary,  in the event
of the involuntary  termination of Employee's  employment  under this Agreement,
absent Just Cause, in connection with, or within  twenty-four (24) months after,
any change in control  of the Bank or Parent,  Employee  shall be paid an amount
equal the  product  of two times  the  Employee's  prior  calendar  year's  cash
compensation  paid as reflected on Form W-2,  excluding any commission  payments
paid,  but in no event in an amount in excess of the  product  of 2.99 times the
Employee's  "base  amount"  as defined in  Section  280G(b)(3)  of the  Internal
Revenue  Code of 1986,  as amended  (the  "Code")  and  regulations  promulgated
thereunder. Said sum shall be paid, at the option of Employee, either in one (1)
lump sum within thirty (30) days of such  termination  discounted to the present
value of such payment  using as the discount  rate the "prime rate" as published
in the Wall Street Journal Eastern Edition as of the date of such payment, or in
periodic  payments  over  the  next  24  months  or the  remaining  term of this
Agreement  whichever  is  less,  as  if  Employee's   employment  had  not  been
terminated,  and such  payments  shall be in lieu of any other  future  payments
which the Employee  would be otherwise  entitled to receive  under  Section 8 of
this  Agreement.  The term "control"  shall refer to the  ownership,  holding or
power to vote more than 25% of the Parent's or Bank's voting stock,  the control
of the  election  of a majority  of the  Parent's  or Bank's  directors,  or the
exercise  of a  controlling  influence  over the  management  or policies of the
Parent or Bank by any person or by persons  acting as a group within the meaning
of Section 13(d) of the Securities Exchange Act of 1934. The term "person" means
an individual  other than the Employee,  or a corporation,  partnership,  trust,
association, joint venture, pool, syndicate, sole proprietorship, unincorporated
organization or any other form of entity not specifically listed herein.

         (b)  Notwithstanding  any  other  provision  of this  Agreement  to the
contrary,  Employee may voluntary  terminate his employment under this Agreement
within  twenty-four  (24)  months  following  a change in control of the Bank or
Parent,  and  Employee  shall  thereupon  be  entitled  to receive  the  payment
described in Section 11(a) of this  Agreement,  upon the  occurrence,  or within
ninety (90) days thereafter, of any of the following events, which have not been
consented  to in advance by the  Employee in writing:  (i) if Employee  would be
required to move his

                                        5


<PAGE>



personal  residence  or perform  his  principal  executive  functions  more than
thirty-five  (35) miles from the Employee's  primary office as of the signing of
this Agreement;  (ii) if in the organizational  structure of the Bank or Parent,
Employee  would be  required  to report to a person or  persons  other  than the
President  of the Bank;  (iii) if the Bank or  Parent  should  fail to  maintain
existing  employee  benefits plans,  including  material  fringe benefit,  stock
option and  retirement  plans;  (iv) if Employee  would be  assigned  duties and
responsibilities  other than those  normally  associated  with his  position  as
referenced  at Section  1,  herein;  or (v) if  Employee's  responsibilities  or
authority have in any way been materially diminished or reduced.

         12.      Successors and Assigns.

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

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

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

         14.  Applicable  Law. This agreement  shall be governed by all respects
whether as to validity, construction, capacity, performance or otherwise, by the
laws of the  Commonwealth  of  Virginia,  except to the extent that  Federal law
shall be deemed to apply.

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

         16. Entire Agreement. This Agreement together with any understanding or
modifications  thereof as agreed to in writing by the parties,  shall constitute
the entire agreement between the parties hereto.

                                        6
<PAGE>
                              EMPLOYMENT AGREEMENT
                              --------------------


         THIS AGREEMENT entered into this 31st day of December, 1995 ("Effective
Date"),  by and between  Virginia  Beach  Federal  Savings Bank (the "Bank") and
Dennis R. Stewart (the "Employee").

         WHEREAS,  the  Employee  has  heretofore  been  employed by the Bank as
Executive Vice President and Chief  Financial  Officer and is experienced in all
phases of the business of the Bank; and

         WHEREAS, the parties desire by this writing to set forth the continuing
employment relationship of the Bank and the Employee.

         NOW, THEREFORE, it is AGREED as follows:

         1.  Employment.  The  Employee  is  employed  in  the  capacity  as the
Executive Vice President and Chief  Financial  Officer of the Bank. The Employee
shall  render  such  administrative  and  management  services  to the  Bank and
Virginia  Beach  Federal  Financial  Corporation  ("Parent")  as  are  currently
rendered  and as are  customarily  performed  by persons  situated  in a similar
executive capacity.  The Employee shall also promote, to the extent permitted by
law, the business of the Bank and Parent.  The Employee's  other duties shall be
such as the Board of Directors for the Bank (the "Board of Directors")  may from
time to time  reasonably  direct,  including  normal duties as an officer of the
Bank.

         2. Base  Compensation.  The Bank agrees to pay the Employee  during the
term of this Agreement a salary at the rate of $ per annum,  payable in cash not
less  frequently than monthly;  provided,  that the rate of such salary shall be
reviewed by the Board of Directors  not less often than  annually,  and Employee
shall be entitled to receive  annually an increase at such percentage or in such
an amount as the Board of  Directors in its sole  discretion  may decide at such
time.

         3. (a)  Participation  in Retirement  and Medical  Plans.  The Employee
shall be entitled to  participate  in any plan of the Bank  relating to pension,
profit-sharing,   or  other   retirement   benefits  and  medical   coverage  or
reimbursement  plans that the Bank may adopt for the  benefit of its  employees.
Additionally,  Employee's  dependent  family shall be eligible to participate in
medical and dental insurance plans sponsored by the Bank or Parent.  The cost of
premiums for participation in the medical coverage or reimbursement plan for the
Employee and such dependent family shall be fully paid by the Bank.

     (b)  Employee  Benefits;  Expenses.  The  Employee  shall  be  eligible  to
participate in any fringe benefits which may be or may become  applicable to the
Bank's senior management employees,  including by example,  participation in any
stock  option or  incentive  plans  adopted by the Board of Directors of Bank or
Parent,   club  memberships,   a  reasonable  expense  account,  an  appropriate
automobile  allowance,  and any other benefits which are  commensurate  with the
responsibilities  and  functions  to be  performed  by the  Employee  under this
Agreement. The Bank


<PAGE>



shall  reimburse  Employee  for  all  reasonable  out-of-pocket  expenses  which
Employee shall incur in connection with his service for the Bank.

         4. Term. The term of employment of Employee under this Agreement  shall
be for the period  commencing on the Effective Date and ending  twenty-four (24)
months  thereafter.  Additionally,  on each  annual  anniversary  date  from the
Effective  Date, the term of employment  under this Agreement  shall be extended
for an additional one year period beyond the then effective expiration date upon
a determination and resolution of the Board of Directors that the performance of
the Employee has met the  requirements  and standards of the Board, and that the
term of such  Agreement  shall be extended.  To the extent  possible,  the Board
shall  furnish  the  Employee  with not less than sixty (60) days  notice of any
intention not to renew such Agreement.

         5.       Loyalty; Noncompetition.

         (a) The  Employee  shall  devote  his full  time and  attention  to the
performance  of  his  employment  under  this  Agreement.  During  the  term  of
Employee's employment under this Agreement, the Employee shall not engage in any
business or activity  contrary to the business  affairs or interests of the Bank
or Parent.

         (b) Nothing contained in this Paragraph 5 shall be deemed to prevent or
limit the right of Employee to invest in the capital  stock or other  securities
of any  business  dissimilar  from that of the Bank or Parent,  or,  solely as a
passive or minority investor, in any business.

         (c) For a period  of  twelve  (12)  months  following  the  voluntarily
termination  by Employee of his  employment  hereunder,  other than  pursuant to
Section 11(b) of this  Agreement,  Employee will not accept  employment with any
financial  institution or entity offering  similar  products and services as the
Bank within the geographic area generally known as Hampton Roads, Virginia.

         6.  Standards.  The  Employee  shall  perform  his  duties  under  this
Agreement in accordance  with such  reasonable  standards  expected of employees
with comparable positions in comparable  organizations and as may be established
from time to time by the Board of Directors. The Bank will provide Employee with
the working  facilities and staff customary for similar executives and necessary
for him to perform his duties.

         7. Vacation and Sick Leave.  At such  reasonable  times as the Board of
Directors  shall in its  discretion  permit,  the  Employee  shall be  entitled,
without loss of pay, to absent himself  voluntarily  from the performance of his
employment  under this Agreement,  with all such voluntary  absences to count as
vacation time; provided that:

         (a) The  Employee  shall  be  entitled  to  annual  vacation  leave  in
accordance  with the policies as are  periodically  established  by the Board of
Directors for senior management employees of the Bank.

                                        2

<PAGE>




         (b) The  Employee  shall not be  entitled  to  receive  any  additional
compensation  from the Bank on account of his failure to take vacation leave and
Employee  shall not be entitled to  accumulate  unused  vacation from one fiscal
year to the next, except in either case to the extent authorized by the Board of
Directors for senior management employees of the Bank.

         (c) In addition to the aforesaid paid vacations,  the Employee shall be
entitled without loss of pay, to absent himself voluntarily from the performance
of his employment with the Bank for such additional periods of time and for such
valid and  legitimate  reasons as the Board of Directors in its  discretion  may
determine.  Further,  the Board of  Directors  shall be entitled to grant to the
Employee 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 in its  discretion
may determine.

         (d) In addition, the Employee shall be entitled to an annual sick leave
benefit as established by the Board of Directors for senior management employees
of the Bank.  In the event that any sick leave  benefit shall not have been used
during any year, such leave shall accrue to subsequent  years only to the extent
authorized by the Board of Directors for employees of the Bank.

         8.       Termination and Termination Pay.

         The Employee's employment under this Agreement shall be terminated upon
any of the following occurrences:

         (a) The death of the  Employee  during the term of this  Agreement,  in
which event the Employee's  estate shall be entitled to receive the compensation
due the  Employee  through  the last day of the  third  calendar  month in which
Employee's death shall have occurred.

         (b) The Board of Directors may terminate the  Employee's  employment at
any time, but any termination by the Board of Directors  other than  termination
for Just Cause,  shall not prejudice the  Employee's  right to  compensation  or
other  benefits  under  the  Agreement,  except as  specified  at  Section  8(c)
hereinafter.  The Employee shall have no right to receive  compensation or other
benefits for any period after termination for Just Cause.  Termination for "Just
Cause" shall include termination because of the Employee's personal  dishonesty,
incompetence,  willful  misconduct,  breach of fiduciary duty involving personal
profit,  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, an extreme fiscal exigency  affecting the Bank (such as
insolvency) or material breach of any provision of the Agreement.

         (c) Except as  provided  pursuant  to  Section 11 herein,  in the event
Employee's  employment  under  this  Agreement  is  terminated  by the  Board of
Directors without Just Cause, the Bank shall be obligated to continue to pay the
Employee  the salary  provided  pursuant  to  Section 2 herein,  for a period of
twelve (12) months  thereafter,  without  regard to the term of this  Agreement.
Additionally,  Employee  shall  be  compensated  or  reimbursed  for the cost of
Employee obtaining all health,  life,  disability,  and other benefits which the
Employee and his

                                        3

<PAGE>



dependents  would be eligible to participate in for a period of six months based
upon the benefit levels  substantially equal to those being provided Employee at
the date of  termination of  employment.  At the election of the Employee,  such
compensation  to be paid hereunder  shall be paid in a lump-sum amount within 30
days of such termination  discounted in accordance with Section 11(a) herein; in
which case the benefit continuations noted above shall not be applicable, except
to the extent as may be required by law or the policies of the Savings Bank.

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

         (e) If the Bank is in default (as  defined in Section  3(x)(1) of FDIA)
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.

         (f) All obligations under this Agreement shall be terminated, except to
the extent  determined that  continuation of this Agreement is necessary for the
continued  operation  of the Bank:  (i) by the  Director of the Office of Thrift
Supervision  ("Director of OTS"),  or his or her designee,  at the time that the
Federal  Deposit  Insurance   Corporation   ("FDIC")  or  the  Resolution  Trust
Corporation  enters into an agreement to provide  assistance  to or on behalf of
the Bank under the authority  contained in Section 13(c) of FDIA; or (ii) by the
Director of the OTS, or his or her  designee,  at the time that the  Director of
the OTS,  or his or her  designee  approves  a  supervisory  merger  to  resolve
problems  related to operation of the Bank or when the Bank is determined by the
Director of the OTS 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.

         (g) The voluntary  termination by the Employee  during the term of this
Agreement  with the delivery of no less than 60 days written notice to the Board
of Directors,  other than pursuant to Section 11(b),  in which case the Employee
shall be entitled  to receive  only the  compensation,  vested  rights,  and all
employee benefits up to the date of such termination.

     (h) Notwithstanding  anything herein to the contrary,  any payments made to
the Employee  pursuant to the Agreement,  or otherwise,  shall be subject to and
conditioned  upon  compliance  with 12  U.S.C.  ss.1828(k)  and any  regulations
promulgated thereunder.

         9.  Suspension  of  Employment.  If the  Employee is  suspended  and/or
temporarily  prohibited from  participating in the conduct of the Bank's affairs
by a notice  served  under  Section  8(e)(3)  or (g)(1)  of the FDIA (12  U.S.C.
1818(e)(3)  and (g)(1)),  the Bank's  obligations  under the Agreement  shall be
suspended as of the date of service,  unless stayed by appropriate  proceedings.
If the charges in the notice are dismissed, the Bank shall, (i) pay the Employee
all or part of the  compensation  withheld while its contract  obligations  were
suspended and (ii) reinstate any of its obligations which were suspended.

                                        4

<PAGE>




         10. Disability.  If the Employee shall become disabled or incapacitated
to the extent  that he is unable to perform his duties  hereunder,  by reason of
medically determinable physical or mental impairment,  as determined by a doctor
engaged by the Board of  Directors,  Employee  shall  nevertheless  continue  to
receive the compensation and benefits which may be payable to Employee under the
provisions of disability insurance coverage in effect for Bank employees and any
payments under the Federal  Social  Security Act, but in no event less than 100%
of pay for a period of 12 months  and 60% for the  remainder  of the term of the
Agreement,  if applicable.  Upon returning to active full-time  employment,  the
Employee's full  compensation as set forth in this Agreement shall be reinstated
as of the  date of  commencement  of such  activities.  In the  event  that  the
Employee returns to active  employment on other than a full-time basis, then his
compensation (as set forth in Paragraph 2 of this Agreement) shall be reduced in
proportion to the time spent in said employment, or as shall otherwise be agreed
to by the parties.

         11.      Change in Control.

         (a) Notwithstanding any provision herein to the contrary,  in the event
of the involuntary  termination of Employee's  employment  under this Agreement,
absent Just Cause, in connection with, or within  twenty-four (24) months after,
any change in control  of the Bank or Parent,  Employee  shall be paid an amount
equal the  product  of two times  the  Employee's  prior  calendar  year's  cash
compensation  paid as reflected on Form W-2,  excluding any commission  payments
paid,  but in no event in an amount in excess of the  product  of 2.99 times the
Employee's  "base  amount"  as defined in  Section  280G(b)(3)  of the  Internal
Revenue  Code of 1986,  as amended  (the  "Code")  and  regulations  promulgated
thereunder. Said sum shall be paid, at the option of Employee, either in one (1)
lump sum within thirty (30) days of such  termination  discounted to the present
value of such payment  using as the discount  rate the "prime rate" as published
in the Wall Street Journal Eastern Edition as of the date of such payment, or in
periodic  payments  over  the  next  24  months  or the  remaining  term of this
Agreement  whichever  is  less,  as  if  Employee's   employment  had  not  been
terminated,  and such  payments  shall be in lieu of any other  future  payments
which the Employee  would be otherwise  entitled to receive  under  Section 8 of
this  Agreement.  The term "control"  shall refer to the  ownership,  holding or
power to vote more than 25% of the Parent's or Bank's voting stock,  the control
of the  election  of a majority  of the  Parent's  or Bank's  directors,  or the
exercise  of a  controlling  influence  over the  management  or policies of the
Parent or Bank by any person or by persons  acting as a group within the meaning
of Section 13(d) of the Securities Exchange Act of 1934. The term "person" means
an individual  other than the Employee,  or a corporation,  partnership,  trust,
association, joint venture, pool, syndicate, sole proprietorship, unincorporated
organization or any other form of entity not specifically listed herein.

         (b)  Notwithstanding  any  other  provision  of this  Agreement  to the
contrary,  Employee may voluntary  terminate his employment under this Agreement
within  twenty-four  (24)  months  following  a change in control of the Bank or
Parent,  and  Employee  shall  thereupon  be  entitled  to receive  the  payment
described in Section 11(a) of this  Agreement,  upon the  occurrence,  or within
ninety (90) days thereafter, of any of the following events, which have not been
consented  to in advance by the  Employee in writing:  (i) if Employee  would be
required to move his

                                        5

<PAGE>



personal  residence  or perform  his  principal  executive  functions  more than
thirty-five  (35) miles from the Employee's  primary office as of the signing of
this Agreement;  (ii) if in the organizational  structure of the Bank or Parent,
Employee  would be  required  to report to a person or  persons  other  than the
President  of the Bank;  (iii) if the Bank or  Parent  should  fail to  maintain
existing  employee  benefits plans,  including  material  fringe benefit,  stock
option and  retirement  plans;  (iv) if Employee  would be  assigned  duties and
responsibilities  other than those  normally  associated  with his  position  as
referenced  at Section  1,  herein;  or (v) if  Employee's  responsibilities  or
authority have in any way been materially diminished or reduced.

         12. Successors and Assigns.

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

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

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

         14.  Applicable  Law. This agreement  shall be governed by all respects
whether as to validity, construction, capacity, performance or otherwise, by the
laws of the  Commonwealth  of  Virginia,  except to the extent that  Federal law
shall be deemed to apply.

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

         16. Entire Agreement. This Agreement together with any understanding or
modifications  thereof as agreed to in writing by the parties,  shall constitute
the entire agreement between the parties hereto.



                                        6