EXHIBIT 10.1

                 WAKE FOREST FEDERAL SAVINGS & LOAN ASSOCIATION
                              EMPLOYMENT AGREEMENT


         This EMPLOYMENT AGREEMENT  ("Agreement") is made and entered into as of
April 3, 1999 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 ANNA O. SUMERLIN,  an individual
residing  at  10112  Ligon  Mill  Road,   Wake  Forest,   North  Carolina  27587
("Executive").

         WHEREAS, the Executive currently serves the Association in the capacity
of the Chief Executive Officer; 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 President and Chief  Executive  Officer 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 her 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 her 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 her a salary at an initial annual rate
of EIGHTY-NINE THOUSAND FIVE HUNDRED DOLLARS ($89,500), 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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         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 her  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 she 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 her duties under this Agreement.  The Executive may also
engage in personal  business and investment  activities  which do not materially
interfere with the performance of her 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 her 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 her
principal place of employment with a private  office,  secretarial  services and
other  support  services  and  facilities  suitable  to her  position  with  the
Association  and necessary or appropriate in connection  with the performance of
her assigned  duties under this Agreement.  The Association  shall reimburse the
Executive for her ordinary and necessary business expenses,  including,  without
limitation, fees for membership in such clubs and organizations as the

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Executive and the Association shall mutually agree are necessary and appropriate
for business  purposes,  and her travel and  entertainment  expenses incurred in
connection with the performance of her 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 her 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 President
                  and Chief  Executive  Officer (or a more senior office) of the
                  Association;

                           (B)  the   failure   of  the   stockholders   of  the
                  Association  to elect or reelect the Executive to the Board or
                  the failure of the Board (or the nominating committee thereof)
                  to nominate the  Executive  for such  election or  reelection;
                  provided, however, that such failure is not the result of vote
                  cast by the Executive;

                           (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  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;

                           (D)  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  her  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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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 her death,
                  to her estate):

         (i)  her  earned  but  unpaid  compensation  as  of  the  date  of  the
         termination of her 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  she 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 she would  have been  entitled  under such plans (as in effect on
         the date of her  termination of employment,  or, if her  termination of
         employment occurs after a Change in Control, on the date of such Change
         in  Control,  whichever  benefits  are  greater)  if she had  continued
         working for the Association.

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

         (v) within  thirty (30) days  following her  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 she would be entitled  under any and all  qualified  and
                  non-qualified  retirement  plans,  maintained  by, or covering
                  employees  of the  Association  as if she 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 her will be  computed  based
                  upon:  (1) the fair market value of such assets at termination
                  of employment,  assuming she 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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         (vi) at the  election  of the  Association's  Board of  Directors  made
         within thirty (30) days following her  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 she 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 she is not vested under such
plan or program.


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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 she
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 she 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  her  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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         then the  Association  shall  have no  further  obligations  under this
         Agreement,  other than the payment to the  Executive ( or, in the event
         of her death,  to her estate) of her earned but unpaid  compensation as
         of the date of the termination of her employment,  and the provision of
         such  other  benefits,  if any,  to which she 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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         (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 her 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  her  demotion,   loss  of  title,  office  or
                  significant  authority or  responsibility,  or  following  any
                  reduction  in any element of her 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 her 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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                  (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 her; 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 her 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 her  termination of
employment with the Association (or, if less, the remaining unexpired Employment
Period),  she 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) she 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 she obtains the prior written consent of the  Association,  the Executive
shall keep confidential and shall refrain from using for the benefit of herself,
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 her
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 her 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  Association's
consent,  from  participating  in or  disclosing  documents  or  information  in
connection  with  any  judicial  or


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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 her termination of employment with the Association, she 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 her  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 her  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.


                                       11
<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, her 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:

                  Anna O. Sumerlin
                  10112 Ligon Mill Road
                  Wake Forest, North Carolina  27587


         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


                                       12
<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 her in connection
with or  arising  out of any  action,  suit or  proceeding  in which  she may be
involved,  as a result of her 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  her   termination  of  employment  with  the
         Association   (or  for  her  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 her 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 her
         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 3, 1999.


                                       15
<PAGE>



                  In Witness Whereof,  the Association has caused this Agreement
to be executed and the  Executive  has hereunto set her hand,  all as of the day
and year first above written.

                                                  /s/ Anna O. Sumerlin
                                                 -------------------------------
                                                      Anna O. Sumerlin



ATTEST:                                      WAKE FOREST FEDERAL
                                                  SAVINGS AND LOAN ASSOCIATION


By /s/ Carlton E. Chappell                     By  /s/ Howard L. Brown
  ------------------------                       ----------------------------
        Secretary                                Name: Howard R. Brown
                                                 Title:   Chairman of the Board

[Seal]


                                       16

<PAGE>

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


                  On this 8 day of April,  1999,  before me personally came Anna
O. Sumerlin,  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 she
resides at the address set forth is said instrument and that she signed her name
to the foregoing instrument.


                                                     /s/  Carolyn D. Clark
                                                     --------------------------
                                                            Notary Public




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

                  On this 8 day of April, 1999, 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.


                                                       /s/ /Carolyn D. Clark
                                                       ------------------------
                                                             Notary Public

                                       17