ex10_3.htm


    

    Exhibit
10.3

    


    Form of
Amended and Restated Employment Agreement between Newport Federal Savings Bank
and Kevin M. McCarthy, Nino Moscardi, Ray D. Gilmore, Bruce A. Walsh and Carol
R. Silven.

    


    On December 11, 2008, Newport Federal
Savings Bank amended Executive Employment Agreements to comply with Section 409A
of the Internal Revenue Code.

    


    FORM
OF

    NEWPORT
FEDERAL SAVINGS BANK

    AMENDED
AND RESTATED

    EMPLOYMENT
AGREEMENT

    


    This
Amended and Restated Employment Agreement (the “Agreement”), by
and between, Newport Federal Savings
Bank, a federally
chartered savings bank (the “Bank”), and ______________  (the “Executive”), is
hereby amended and restated effective as of __________,
____.  Any references to the “Company” shall mean Newport Bancorp,
Inc., the stock holding company of the Bank.

    


    WHEREAS, the Executive is
currently employed as _______________________________ of the Bank pursuant to an
employment agreement between the Bank and the Executive entered into as of
October 14, 2005 (the “Prior Agreement”);

    


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

    


    2.    
        Location
and Facilities.  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 Bank, or at such other site or
sites customary for such offices.

    


    3.     
        Term.


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    
      	
               
      

            	
              a.

            	
              The
      term of this Agreement shall be (i) the initial term, consisting of the
      period commencing on the date of this Agreement (the “Effective Date”) and
      ending on the third anniversary of the Effective Date, plus (ii) any and
      all extensions of the initial term made pursuant to this Section 3,
      provided, however, that all changes intended to comply with Code Section
      409A shall be effective retroactively to October 14, 2005; and provided
      further, that no retroactive changes shall affect the compensation or
      benefits previously provided to the
Executive.

            


    

    


    
      	
               
      

            	
              b.

            	
              Commencing
      December 2006 and each December thereafter, the disinterested members of
      the boards of directors of the Bank may extend the Agreement an additional
      year such that the remaining term of the Agreement shall be thirty-six
      (36) months, unless Executive elects not to extend the term of this
      Agreement by giving written notice in accordance with Section 19 of this
      Agreement.  The Board of Directors of the Bank (the “Board”)
      will review the Agreement and Executive’s performance annually for
      purposes of determining whether to extend the Agreement and the rationale
      and results thereof shall be included in the minutes of the Board’s
      meeting.  The Board of Directors of the Bank shall give notice
      to Executive as soon as possible after such review as to whether the
      Agreement is to be extended.

            


    

    


    4.       
      Base
Compensation.

    


    
      	
               
      

            	
              a.

            	
              The
      Bank agrees to pay 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 Executive’s base salary at least annually
      based upon factors they deem relevant, and may maintain or increase his
      base salary, provided that no such action shall reduce the rate of base
      salary below the rate in effect on the Effective
  Date.

            


    

    


    
      	
               
      

            	
              c.

            	
              In
      the absence of action by the Board, Executive shall continue to receive
      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.  Executive shall
be entitled to participate in discretionary bonuses or other incentive
compensation programs that the Bank 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 Bank, 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.  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 Bank for the
benefit of their employees.

    


    7.       
     Vacation and
Leave.

    


    
      	
               
      

            	
              a.

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

            


    

    


    
      	
               
      

            	
              b.

            	
              In
      addition to paid vacations and other leave, 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 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.  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
Bank.  Such reimbursements and payments shall be made promptly by the
Bank 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 Bank, including insurance, maintenance and work-related fuel expenses,
or, in the alternative and the sole discretion of the Bank, the Executive shall
be entitled to an automobile allowance which would approximate the expense of a
Bank-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 from
time to time, and the Bank shall annually include on Executive’s Form W-2 any
amount of income attributable to Executive’s personal use of such
automobile.  Such payments, if any, made under this Section 9 shall be
made promptly by the Bank and, in any event, not later than March 15 of the year
immediately following the year in which 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 Bank 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 Bank 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 or interests of any
      business dissimilar from that of the Bank, 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 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 Bank or its subsidiaries or affiliates to which
      he may be exposed during the course of his
      employment.  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 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 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.

            


    

    


    
      	
               
      

            	
              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 Bank; 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 Bank will pay
      Executive, as Disability pay, an amount equal to seventy-five percent
      (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 Bank in the same capacity as he was
      employed prior to his termination for Disability; (B) his death; (C) upon
      his 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 Executive under any other disability
      programs sponsored by the Bank.  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 medical and dental insurance
      plans) of the Bank, in which Executive participated prior to his
      Disability on the same terms as if Executive were actively employed by the
      Bank.

            


    

    


    
      	
               
      

            	
              d.

            	
              Termination for
      Cause.

            


    

    


    
      	
               
      

            	
              i.

            	
              The
      Board may, by written notice to Executive in the form and manner specified
      in this paragraph, immediately terminate his employment at any time, for
      “Cause.”  Executive shall have no right to receive compensation
      or other benefits for any period after termination for Cause except for
      vested benefits.  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 under this
  Agreement;

            


    

    


    
      	
               
      

            	
              (6)

            	
              Willful
      violation of any law, rule or regulation (other than traffic violations or
      similar offenses) that reflects adversely on the reputation of 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 Bank unless there shall have been delivered to Executive a
      copy of a resolution duly adopted by the affirmative vote of a majority of
      the entire membership of the Board at a meeting of such Board called and
      held for the purpose of finding that, 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. 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
      his base salary for the remaining term of the Agreement payable in a
      single  cash lump sum distribution within ten (10) calendar days
      following such termination.  Also, in such event, Executive
      shall, for the remaining term of the Agreement, continue to participate in
      any benefit plans of the Bank including life insurance and non-taxable
      medical and dental insurance coverage, upon terms and conditions no less
      favorable than the most favorable terms and conditions provided to senior
      executives of the Bank during such period.  In the event that
      the Bank is unable to provide such coverage by reason of Executive no
      longer being an employee, the Bank 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
      Bank materially breaches any of its 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
Bank;

            


    

    


    
      	
               
      

            	
              (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 Executive to be nominated or renominated 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 Executive 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 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 Bank, 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 Bank within ninety (90) days following the initial existence of the
condition, describing the existence of such condition, and the Bank shall
thereafter have the right to remedy the condition within thirty (30) days of the
date the Bank received the written notice from the Executive.  If the
Bank 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 Bank 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 Executive’s benefits under
      one or more benefit plans maintained by the Bank as part of a good faith,
      overall reduction or elimination of such plans or plans or benefits
      thereunder applicable 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 Bank
      or any company that controls either of them 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 Bank 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 Bank 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, Executive
      shall not serve as an officer, director or employee of any bank or its
      subsidiaries or affiliates holding company, bank, savings association,
      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 Bank from any office within
      fifty (50) miles from the main office or any branch of the Bank and shall
      not interfere with the relationship of the Bank, its subsidiaries or
      affiliates and any of their employees, agents, or
      representatives.

            


    

    


    h.      
      To the extent Executive is a member of the
Board, on the date of termination of employment with the Bank, Executive shall
resign from the Board immediately following such termination of employment with
the Bank.  Executive shall be obligated to tender such resignation
regardless of the method or manner of termination, and such resignation shall
not be conditioned upon any event or payment.

    


    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
      Bank or the Company merges into or consolidates with another entity, or
      merges another entity into the Bank or the Company, and as a result less
      than a majority of the combined voting power of the resulting entity
      immediately after the merger or consolidation is held by persons who were
      members of the Bank or the Company immediately before the merger or
      consolidation;

            


    

    


    
      	
               
      

            	
              ii.

            	
              Acquisition of
      Significant Share Ownership:  The Company files, or is
      required to file, 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 (ii) 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 Bank’s or 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 Bank’s or 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 members) 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 Bank or 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
      Bank shall terminate Executive’s employment Without Cause, or (ii)
      Executive voluntarily terminates his employment With Good Reason, the Bank
      shall, within ten (10) calendar days following the termination of
      Executive’s employment, make a single lump sum cash payment to him equal
      to 2.99 times 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(b) 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,
      Executive shall, following his termination of employment, continue to
      participate in any benefit plans of the Bank that provide life insurance
      and non-taxable medical and dental insurance coverage upon terms no less
      favorable than the most favorable terms provided to senior executives
      during such period.  In the event that the Bank is unable to
      provide such coverage by reason of Executive no longer being an employee,
      the Bank shall pay the Executive the value of such benefits in a single
      cash lump sum distribution within ten (10) calendar days following his
      termination.  The life and non-taxable medical and dental
      insurance coverage or other arrangement provided under this Section 12(b)
      shall cease upon the earlier of:  (i) the Executive’s death;
      (ii) his employment by another employer other than one of which he is the
      majority owner; or (iii) the expiration of thirty-six (36) months from his
      termination of employment.

            


    

    


    
      	
               
      

            	
              c.

            	
              The
      provisions of Section 12 and Sections 14 through 25, including the defined
      terms used in such sections, shall continue in effect until the later of
      the expiration of this Agreement or two years following a Change in
      Control.

            


    

    


    
      	
               
      

            	
              d.

            	
              Notwithstanding
      anything in this Section 12, a “Change in Control” for purposes of this
      Agreement shall not include any corporate restructuring transaction by the
      Bank in mutual or stock form, including but not limited to a mutual to
      stock conversion or mutual holding company reorganization or minority
      stock offering, provided that the Board of Directors of the Bank
      immediately preceding such transaction constitutes at least a majority of
      the Board of Directors of the Bank after such
  transaction.

            


    

    


    
      	
               
      

            	
              13.    
            Indemnification and
      Liability Insurance.

            


    

    


    
      	
               
      

            	
              a.

            	
              Indemnification.  The
      Bank agrees to indemnify 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 Bank or any of
      its subsidiaries

            


    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    (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 cost, and attorney’s fees and the costs of
reasonable settlements, such settlements to be approved by the Board, if such
action is brought against Executive in his capacity as an Executive or director
of the Bank or any of its subsidiaries. Indemnification for expenses shall not
extend to matters for which 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 Executive is required under this
      Section, the Bank shall provide Executive (and his heirs, executors, and
      administrators) with coverage under a directors’ and officers’ liability
      policy at the expense of the Bank, at least equivalent to such coverage
      provided to directors and senior executives of the
  Bank.

            


    

    


    14.           Reimbursement
of Executive’s Expenses to Enforce this Agreement.  The Bank shall
reimburse Executive for all out-of-pocket expenses, including, without
limitation, reasonable attorney’s fees, incurred by Executive in connection with
successful enforcement by Executive of the obligations of the Bank to Executive
under this Agreement.  The Bank 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 Bank take some action specified by this Agreement: (i) as a result of court
order; or (ii) otherwise by the Bank following an initial failure of the Bank to
pay such money or take such action promptly after written demand therefor from
Executive stating the reason that such money or action was due under this
Agreement at or prior to the time of such demand.

    


    15.           Limitation
of Benefits under Certain Circumstances.  If the payments
and benefits pursuant to Section 12 of this Agreement, either alone or together
with other payments and benefits which Executive has the right to receive from
the Bank, would constitute a “parachute payment” under Section 280G of the Code,
the payments and benefits pursuant to Section 12 shall be reduced or revised by
the amount, if any, which is the minimum necessary to result in no portion of
the payments and benefits under Section 12 being non-deductible to the Bank
pursuant to Section 280G of the Code and subject to the excise tax imposed under
Section 4999 of the Code.  For purposes of the prior sentence, the
reduction in specific benefits shall be determined by Executive, provided,
however, that if such reduction violates Code Section 409A, then the reduction
shall be applied to the severance benefits otherwise payable under Section 12(b)
hereof.  The determination of any reduction in the payments and
benefits to be made pursuant to Section 12 shall be based upon the opinion of
the Bank’s counsel or independent public accountants which such opinion shall be
paid for by the Bank.  In the event that the Bank and/or Executive do
not agree with the opinion of such counsel or independent accountants, (i) the
Bank shall pay to Executive the maximum amount of payments and benefits pursuant
to Section 12, as selected by Executive, but only to the extent that such
opinion indicates there is a high probability that such payments and benefits do
not result in any of such payments and benefits being non-deductible to the Bank
and subject to the imposition of the excise tax imposed under Section 4999 of
the Code and (ii) the Bank may request, and Executive shall have the right to
demand that the Bank request, a ruling from the IRS as to whether the disputed
payments and benefits pursuant to Section 12 have such consequences. Any such
request for a ruling from the IRS shall be promptly prepared and filed by the
Bank, but in no event later than thirty (30) days from the date of the opinion
of counsel or independent accountants referred to above, and shall be subject to
Executive’s approval prior to filing, which shall not be unreasonably
withheld.  The Bank and Executive agree to be bound by any ruling
received from the IRS and to make appropriate payments to each other to reflect
any such rulings, together with interest at the applicable federal rate provided
for in Section 7872(f)(2) of the Code.  Nothing contained herein shall
result in a reduction of any payments or benefits to which Executive may be
entitled upon termination of employment other than pursuant to Section 12
hereof, or a reduction in the payments and benefits specified in Section 12
below zero.

    


    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 Bank shall be entitled to injunctive relief restraining
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
Executive, without limitation, shall be entitled to injunctive relief to enforce
the obligations of the Bank 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 Bank which shall acquire, directly or
      indirectly, by merger, consolidation, purchase or otherwise, all or
      substantially all of the assets or stock of the
  Bank.

            


    

    


    
      	
               
      

            	
              b.

            	
              Since
      the Bank 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
      Bank.

            


    

    


    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 Bank
at their principal business offices and to Executive at his home address as
maintained in the records of the Bank.

    


    20.           No Plan
Created by this Agreement.  Executive and the
Bank 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 Rhode Island 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.           Required
Provisions.  In the event any
of the foregoing provisions of this Section 26 are in conflict with the terms of
this Agreement, this Section 26 shall prevail.

    


    
      	
               
      

            	
              a.

            	
              The
      Bank may terminate Executive’s employment at any time, but any termination
      by the Bank, 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.

            	
              If
      Executive is suspended from office and/or temporarily prohibited from
      participating in the conduct of the Bank’s affairs by a notice served
      under Section 8(e)(3) or 8(g)(1) of the Federal Deposit Insurance Act, 12
      U.S.C. Section 1818(e)(3) or (g)(1); the Bank’s obligations under this
      Agreement shall be suspended as of the date of service, unless stayed by
      appropriate proceedings.  If the charges in the notice are
      dismissed, the Bank may, in its discretion:  (i) pay Executive
      all or part of the compensation withheld while their contract obligations
      were suspended; and (ii) reinstate (in whole or in part) any of the
      obligations which were suspended.

            


    

    


    
      	
               
      

            	
              c.

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

            


    

    


    
      	
               
      

            	
              d.

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

            


    

    


    
      	
               
      

            	
              e.

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

            


    

    


    
      	
               
      

            	
              f.

            	
              Any
      payments made to Executive pursuant to this Agreement, or otherwise, are
      subject to and conditioned upon compliance with 12 U.S.C. Section 1828(k)
      and 12 C.F.R. Section 545.121 and any rules and regulations promulgated
      thereunder.

            


    

    


    
      	
               
      

            	
              g.

            	
              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 Bank, or the
      Company, is or becomes a publicly traded
  company.

            


    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    27.           Source of
Payments.

     

    
      	
               
      

            	
              a.

            	
              All
      payments provided for in this Agreement shall be timely made in cash or
      check from the general funds of the Bank.  The Company, however,
      unconditionally guarantees payment and provision of all amounts and
      benefits due hereunder to Executive and, if such amounts and benefits due
      from the Bank are not timely paid or provided by the Bank, such amounts
      and benefits shall be paid or provided by the
  Company.

            


    

    


    
      	
               
      

            	
              b.

            	
              Notwithstanding
      any provision herein to the contrary, to the extent that payments and
      benefits, as provided by this Agreement, are paid to or received by
      Executive under the Employment Agreement in effect between Executive and
      the Company (the “Company Agreement”), such compensation payments and
      benefits paid by the Company will be subtracted from any amount due
      simultaneously to Executive under similar provisions of this
      Agreement.  Payments pursuant to this Agreement and the Company
      Agreement shall be allocated in proportion to the level of activity and
      the time expended on such activities by Executive as determined by the
      Company and the Bank.

            


    

    


    [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

            	 
      	 
      	
              For
      the Entire Board of Directors

            
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	
              EXECUTIVE

            
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	
              By:

            	 
      
	
              Date