ex10_4.htm


    

    Exhibit
10.4

    


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

    


    NEWPORT
BANCORP, INC.

    AMENDED
AND RESTATED EMPLOYMENT AGREEMENT BETWEEN

    KEVIN
M MCCARTHY, NINO MOSCARDI, RAY GILMORE AND BRUCE WALSH

    


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

    


    


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

    


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

    


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

    


    WHEREAS, the Executive has
agreed to such changes.

    


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

    


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

    


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

    


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


    
      
         


      

      
         


        
          

        

      

      
         


      

    


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

    


    4.           Base
Compensation.

    


    
      	
               
      

            	
              a.

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

            


    

    


    
      	
               
      

            	
              b.

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

            


    

    


    
      	
               
      

            	
              c.

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

            


    

    


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

    


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

    


    7.           
 Vacation and
Leave.

    


    
      	
               
      

            	
              a.

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

            


    

    


    
      	
               
      

            	
              b.

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

            


    

    


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

    


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


    
      
         


      

      
         


        
          

        

      

      
         


      

    


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

    


    10.           Loyalty and
Confidentiality.

    


    
      	
               
      

            	
              a.

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

            


    

    


    
      	
               
      

            	
              b.

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

            


    

    


    
      	
               
      

            	
              c.

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

            


    

    


    
      	
               
      

            	
              11.

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

            


    

    


    
      	
               
      

            	
              a.

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

            


    

    


    
      	
               
      

            	
              b.

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

            


    

    


    
      	
               
      

            	
              c.

            	
              Disability.

            


    

    


    
      	
               
      

            	
              i.

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

            


    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


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

    


    
      	
               
      

            	
              ii.

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

            


    

    


    
      	
               
      

            	
              d.

            	
              Termination for
      Cause.

            


    

    


    
      	
               
      

            	
              i.

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

            


    

    


    
      	
               
      

            	
              (1)

            	
              Personal
      dishonesty;

            


    

    


    
      	
               
      

            	
              (2)

            	
              Incompetence;

            


    

    


    
      	
               
      

            	
              (3)

            	
              Willful
      misconduct;

            


    

    


    
      	
               
      

            	
              (4)

            	
              Breach
      of fiduciary duty involving personal
profit;

            


    

    


    
      	
               
      

            	
              (5)

            	
              Intentional
      failure to perform stated duties;

            


    

    


    
      	
               
      

            	
              (6)

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

            


    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    
      	
               
      

            	
              (7)

            	
              Material
      breach by Executive of any provision of this
  Agreement.

            


    

    


    
      	
               
      

            	
              ii.

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

            


    

    


    
      	
               
      

            	
              e.

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

            


    

    


    
      	
               
      

            	
              f.

            	
              Without Cause or With
      Good Reason.

            


    

    


    
      	
               
      

            	
              i.

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

            


    

    


    
      	
               
      

            	
              ii.

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

            


    

    


    
      	
               
      

            	
              iii.

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

            


    

    


    
      	
               
      

            	
              (1)

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

            


    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    
      	
               
      

            	
              (2)

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

            


    

    


    
      	
               
      

            	
              (3)

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

            


    

    


    
      	
               
      

            	
              (4)

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

            


    

    


    
      	
               
      

            	
              (5)

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

            


    

    


    
      	
               
      

            	
              (6)

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

            


    

    


    
      	
               
      

            	
              (7)

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

            


    

    


    provided,
however, that prior to any termination of employment for Good Reason (a
termination “With Good Reason”), the Executive must first provide written notice
to the Company within ninety (90) days following the initial existence of the
condition, describing the existence of such condition, and the Company shall
thereafter have the right to remedy the condition within thirty (30) days of the
date the Company received the written notice from the Executive.  If
the Company remedies the condition within such thirty (30) day cure period, then
no Good Reason shall be deemed to exist with respect to such
condition.  If the Company does not remedy the condition within such
thirty (30) day cure period, then the Executive may deliver a notice of
termination for Good Reason at any time within sixty (60) days following the
expiration of such cure period.

    


    
      	
               
      

            	
              iv.

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

            


    

    


    
      	
               
      

            	
              v.

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

            


    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


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

    


    
      	
               
      

            	
              g.

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

            


    

    


    
      	
               
      

            	
              i.

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

            


    

    


    
      	
               
      

            	
              ii.

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

            


    

    


    12.           Termination in Connection
with a Change in Control.

    


    
      	
               
      

            	
              a.

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

            


    

    


    
      	
               
      

            	
              (i)

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

            


    

    


    
      	
               
      

            	
              (ii)

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

            


    

    


    
      	
               
      

            	
              (iii)

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

            


    

    


    
      	
               
      

            	
              (iv)

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

            


    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    
      	
               
      

            	
              b.

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

            


    

    


    
      	
               
      

            	
              c.

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

            


    

    


    
      	
               
      

            	
              13.

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

            


    

    


    
      	
               
      

            	
              a.

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

            


    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    
      	
               
      

            	
              b.

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

            


    

    


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

    


    15.           Adjustment of Certain
Payments and Benefits.

    


    
      	
               
      

            	
              a.

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

            


    

    


    
      	
               
      

            	
              b.

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

            


    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


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

    


    
      	
               
      

            	
              c.

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

            


    

    


    
      	
               
      

            	
              i.

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

            


    

    


    
      	
               
      

            	
              ii.

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

            


    

    


    
      	
               
      

            	
              iii.

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

            


    

    


    
      	
               
      

            	
              iv.

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

            


    

    


    
      	
               
      

            	
              d.

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

            


    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


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

    


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

    


    17.           Successors and
Assigns.

    


    
      	
               
      

            	
              a.

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

            


    

    


    
      	
               
      

            	
              b.

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

            


    

    


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

    


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

    


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

    


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

    


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

    


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


    
      
         


      

      
         


        
          

        

      

      
         


      

    


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

    


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

    


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

    


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

    


    
      	
               
      

            	
              a.

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

            


    

    


    
      	
               
      

            	
              b.

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

            


    

    


    
      	
               
      

            	
              c.

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

            


    

    


    [signature
page follows]


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    


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

     

    


    
      	 
      	 
      	
              NEWPORT
      FEDERAL SAVINGS BANK

            	 
	 
      	 
      	 
      	 
      	 
	 
      	 
      	 
      	 
      	 
	 
      	 
      	
              By:

            	 
      	 
	
              Date

            	 
      	 
      	 
      	 
	 
      	 
      	 
      	 
      	 
	 
      	 
      	 
      	 
      	 
	 
      	 
      	
              EXECUTIVE

            	 
	 
      	 
      	 
      	 
      	 
	 
      	 
      	 
      	 
      	 
	 
      	 
      	
              By:

            	 
      	 
	
              Date