PATAPSCO BANCORP, INC.
                      2000 STOCK OPTION AND INCENTIVE PLAN


     1. PURPOSE OF THE PLAN.

     The purpose of this Patapsco Bancorp,  Inc. 2000 Stock Option and Incentive
Plan (the "Plan") is to advance the interests of the Company  through  providing
select  key  Employees  and  Directors  of the  Bank,  the  Company,  and  their
Affiliates  with the opportunity to acquire  Shares.  By encouraging  such stock
ownership,  the Company seeks to attract, retain and motivate the best available
personnel for positions of substantial  responsibility and to provide additional
incentive to  Directors  and key  Employees  of the Company or any  Affiliate to
promote the success of the business.

     2. DEFINITIONS.

     As used herein, the following definitions shall apply.

     (a)  "Affiliate"  shall  mean  any  "parent   corporation"  or  "subsidiary
corporation"  of the  Company,  as such terms are defined in Section  424(e) and
(f), respectively, of the Code.

     (b) "Agreement"  shall mean a written  agreement entered into in accordance
with Paragraph 5(c).

     (c) "Awards" shall mean, collectively, Options and SARs, unless the context
clearly indicates a different meaning.

     (d) "Bank" shall mean The Patapsco Bank.

     (e) "Board" shall mean the Board of Directors of the Company.

     (f) "Change in Control" shall mean any one of the following events: (1) the
acquisition  of ownership,  holding or power to vote more than 25% of the Bank's
or the Company's voting stock, (2) the acquisition of the ability to control the
election  of a  majority  of the  Bank's  or the  Company's  directors,  (3) the
acquisition  of a controlling  influence  over the management or policies of the
Bank or the Company by any person or by persons acting as a "group"  (within the
meaning  of  Section  13(d) of the  Securities  Exchange  Act of 1934),  (4) the
acquisition  of control  of the Bank or the  Company  within  the  meaning of 12
C.F.R. Section 225.2(e) or its applicable equivalent (except in the case of (1),
(2), (3) and (4) hereof,  ownership or control of the Bank by the Company itself
shall not  constitute  a "change in  control"),  or (5) during any period of two
consecutive  years,  individuals who at the beginning of such period  constitute
the Board of  Directors of the Company or the Bank (the  "Existing  Board") (the
"Continuing  Directors")  cease for any reason to constitute at least a majority
thereof,  provided that any individual whose election or nomination for election
as a member of the Existing  Board was approved by a vote of at least a majority
of the  Continuing  Directors  then in office  shall be  considered a Continuing
Director. For purposes of this subparagraph only, the term "person" refers to an
individual or a corporation,  partnership,  trust,  association,  joint venture,
pool, syndicate, sole proprietorship,  unincorporated  organization or any other
form of entity not specifically listed herein.

     (g) "Code" shall mean the Internal Revenue Code of 1986, as amended.

     (h)  "Committee"  shall mean the Stock  Option  Committee  appointed by the
Board in accordance with Paragraph 5(a) hereof.

     (i) "Common  Stock" shall mean the common stock,  par value $.01 per share,
of the Company.

     (j) "Company" shall mean Patapsco Bancorp, Inc.

     (k)  "Continuous  Service"  shall mean the absence of any  interruption  or
termination  of service as an Employee,  Director,  or honorary  Director of the
Company or an Affiliate.  Continuous Service shall not be considered interrupted
in the case of sick leave, military leave or any other leave of absence approved
by



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the  Company,  in the case of  transfers  between  payroll  locations  of the
Company or between the Company, an Affiliate or a successor, or in the case of a
Director's  performance  of  services  in an  emeritus,  advisory,  or  honorary
capacity.

     (l)  "Director"  shall mean any member of the Board,  and any member of the
board of directors of any Affiliate that the Board has by resolution  designated
as being eligible for participation in this Plan.

     (m) "Disability"  shall mean a physical or mental  condition,  which in the
sole and absolute  discretion of the Committee,  is reasonably expected to be of
indefinite  duration and to substantially  prevent a Participant from fulfilling
his or her duties or responsibilities to the Company or an Affiliate.

     (n) "Effective Date" shall mean the date specified in Paragraph 15 hereof.

     (o) "Employee"  shall mean any person employed by the Company,  the Bank or
an Affiliate.

     (p)  "Exercise  Price" shall mean the price per Optioned  Share at which an
Option or SAR may be exercised.

     (q)  "ISO"  means an  option  to  purchase  Common  Stock  which  meets the
requirements  set  forth  in  the  Plan,  and  which  is  intended  to be and is
identified as an "incentive  stock option"  within the meaning of Section 422 of
the Code.

     (r) "Market Value" shall mean the fair market value of the Common Stock, as
determined under Paragraph 7(b) hereof.

     (s) "Non-employee  Director" shall mean any member of the Board who, at the
time discretion under the Plan is exercised, is a "Non-employee Director" within
the meaning of Rule 16b-3.

     (t)  "Non-ISO"  means an option to  purchase  Common  Stock which meets the
requirements  set forth in the Plan but which is not  intended  to be and is not
identified as an ISO.

     (u) "Option" means an ISO and/or a Non-ISO.

     (v)  "Optioned  Shares"  shall mean  Shares  subject  to an Option  granted
pursuant to this Plan.

     (w)  "Participant"  shall mean any person who receives an Award pursuant to
the Plan.

     (x) "Plan" shall mean this  Patapsco  Bancorp,  Inc.  2000 Stock Option and
Incentive Plan.

     (y) "Rule 16b-3" shall mean Rule 16b-3 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended.

     (z) "Share" shall mean one share of Common Stock.

     (aa) "SAR" (or "Stock  Appreciation  Right")  means a right to receive  the
appreciation in value, or a portion of the appreciation in value, of a specified
number of shares of Common Stock.

     (bb) "Year of Service" shall mean a full twelve-month period, measured from
the  date of an  Award  and  each  anniversary  of  that  date,  during  which a
Participant has not terminated Continuous Service for any reason.

     3. TERM OF THE PLAN AND AWARDS.

     (a) Term of the Plan.  The Plan shall  continue in effect for a term of ten
years from the Effective Date, unless sooner terminated pursuant to Paragraph 17
hereof.  No Award  shall be  granted  under the Plan  after  ten years  from the
Effective Date.

     (b) Term of Awards.  The term of each Award granted under the Plan shall be
established by the Committee, but shall not exceed 10 years; provided,  however,
that in the case of an Employee  who owns


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Shares representing more than 10% of the outstanding Common Stock at the time an
ISO is granted, the term of such ISO shall not exceed five years.

     4. SHARES SUBJECT TO THE PLAN.

     (a)  General  Rule.  Except as  otherwise  required  by the  provisions  of
Paragraph 12 hereof,  the  aggregate  number of Shares  deliverable  pursuant to
Awards shall not exceed 20,000  shares.  Such Shares may be (i)  authorized  but
unissued Shares, (ii) Shares held in treasury, or (iii) Shares held in a grantor
trust. If any Awards should expire,  become  unexercisable,  or be forfeited for
any reason without having been exercised,  the Optioned Shares shall, unless the
Plan shall have been terminated, be available for the grant of additional Awards
under the Plan.

     (b) Special  Rule for SARs.  The number of Shares with  respect to which an
SAR is granted, but not the number of Shares which the Company delivers or could
deliver to an Employee or individual  upon exercise of an SAR,  shall be charged
against  the  aggregate  number of Shares  remaining  available  under the Plan;
provided,  however,  that in the case of an SAR granted in  conjunction  with an
Option,  under  circumstances  in  which  the  exercise  of the SAR  results  in
termination  of the Option and vice versa,  only the number of Shares subject to
the Option shall be charged  against the  aggregate  number of Shares  remaining
available  under the Plan.  The Shares  involved in an Option as to which option
rights have  terminated  by reason of the exercise of a related SAR, as provided
in Paragraph 10 hereof,  shall not be available for the grant of further Options
under the Plan.

     5. ADMINISTRATION OF THE PLAN.

     (a)  Composition of the Committee.  The Plan shall be  administered  by the
Committee, which shall consist of not less than two (2) members of the Board who
are Non-employee Directors. Members of the Committee shall serve at the pleasure
of the Board. In the absence at any time of a duly appointed Committee, the Plan
shall be  administered  by those  members  of the  Board  who are  Disinterested
Persons.

     (b) Powers of the Committee. Except as limited by the express provisions of
the Plan or by resolutions  adopted by the Board,  the Committee shall have sole
and complete  authority  and  discretion  (i) to select  Participants  and grant
Awards,  (ii) to  determine  the form and  content of Awards to be issued in the
form of  Agreements  under  the  Plan,  (iii) to  interpret  the  Plan,  (iv) to
prescribe, amend and rescind rules and regulations relating to the Plan, and (v)
to make other  determinations  necessary or advisable for the  administration of
the Plan.  The  Committee  shall  have and may  exercise  such  other  power and
authority  as may be  delegated to it by the Board from time to time. A majority
of the entire  Committee shall  constitute a quorum and the action of a majority
of the  members  present at any  meeting at which a quorum is  present,  or acts
approved in writing by a majority of the Committee  without a meeting,  shall be
deemed the action of the Committee.

     (c)  Agreement.  Each  Award  shall be  evidenced  by a  written  agreement
containing  such  provisions  as may be  approved  by the  Committee.  Each such
Agreement  shall  constitute  a binding  contract  between  the  Company and the
Participant, and every Participant,  upon acceptance of such Agreement, shall be
bound by the terms and restrictions of the Plan and of such Agreement. The terms
of each such Agreement  shall be in accordance with the Plan, but each Agreement
may include  such  additional  provisions  and  restrictions  determined  by the
Committee,  in its  discretion,  provided that such  additional  provisions  and
restrictions are not inconsistent with the terms of the Plan. In particular, the
Committee  shall set forth in each Agreement (i) the Exercise Price of an Option
or SAR, (ii) the number of Shares  subject to, and the  expiration  date of, the
Award, (iii) the manner,  time and rate (cumulative or otherwise) of exercise or
vesting of such Award, and (iv) the restrictions, if any, to be placed upon such
Award, or upon Shares which may be issued upon exercise of such Award.

     The  Chairman of the  Committee  and such other  Directors  and officers as
shall be designated by the Committee are hereby authorized to execute Agreements
on behalf of the Company and to cause them to be delivered to the  recipients of
Awards.


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<PAGE>

     (d) Effect of the Committee's Decisions. All decisions,  determinations and
interpretations  of the Committee  shall be final and  conclusive on all persons
affected thereby.

     (e) Indemnification. In addition to such other rights of indemnification as
they may have, the members of the Committee  shall be indemnified by the Company
in connection with any claim,  action, suit or proceeding relating to any action
taken or  failure  to act  under or in  connection  with the Plan or any  Award,
granted hereunder to the full extent provided for under the Company's  governing
instruments with respect to the indemnification of Directors.

     6. GRANT OF OPTIONS.

     (a) General Rule. Only Employees and Directors shall be eligible to receive
Awards.  In  selecting  those  Employees  and  Directors  to whom Awards will be
granted and the number of shares  covered by such Awards,  the  Committee  shall
consider the position, duties and responsibilities of the eligible Employees and
Directors,  the value of their services to the Company and its  Affiliates,  and
any other factors the Committee may deem relevant.

     (b) Special Rules for ISOs. The aggregate  Market Value, as of the date the
Option is granted,  of the Shares with respect to which ISOs are exercisable for
the first time by an Employee  during any  calendar  year  (under all  incentive
stock option plans, as defined in Section 422 of the Code, of the Company or any
present  or  future  Affiliate  of  the  Company)  shall  not  exceed  $100,000.
Notwithstanding the foregoing,  the Committee may grant Options in excess of the
foregoing  limitations,  in which  case such  Options  granted in excess of such
limitation shall be Options which are Non-ISOs.

     7. EXERCISE PRICE FOR OPTIONS.

     (a) Limits on Committee Discretion. The Exercise Price as to any particular
Option shall not be less than 100% of the Market Value of the Optioned Shares on
the date of grant. In the case of an Employee who owns Shares  representing more
than 10% of the Company's  outstanding Shares of Common Stock at the time an ISO
is granted,  the Exercise  Price shall not be less than 110% of the Market Value
of the Optioned Shares at the time the ISO is granted.

     (b) Standards for Determining Exercise Price. If the Common Stock is listed
on a national  securities exchange (including the NASDAQ National Market System)
on the date in question, then the Market Value per Share shall be the average of
the highest and lowest  selling price on such exchange on such date, or if there
were no sales on such date,  then the  Exercise  Price shall be the mean between
the bid and asked price on such date.  If the Common  Stock is traded  otherwise
than on a national securities exchange on the date in question,  then the Market
Value per Share shall be the mean  between the bid and asked price on such date,
or,  if there is no bid and asked  price on such  date,  then on the next  prior
business day on which there was a bid and asked price.  If no such bid and asked
price is  available,  then the Market  Value per Share  shall be its fair market
value as determined by the Committee, in its sole and absolute discretion.

     8. EXERCISE OF OPTIONS.

     (a) Generally.  Except as otherwise determined by the Committee each Option
shall become  exercisable  with respect to twenty  percent (20%) of the Optioned
Shares  upon the  Participant's  completion  of each of five  Years of  Service,
provided that an Option shall become fully (100%)  exercisable  immediately upon
termination of the  Participant's  Continuous  Service due to the  Participant's
Disability,  death  or  retirement  at or after  age 65.  An  Option  may not be
exercised for a fractional Share.

     (b) Procedure for Exercise. A Participant may exercise Options,  subject to
provisions relative to its termination and limitations on its exercise,  only by
(1) written  notice of intent to exercise the Option with respect to a specified
number  of  Shares,  and (2)  payment  to the  Company  (contemporaneously  with
delivery  of such  notice)  in cash,  in  Common  Stock  owned for more than six
months,  or a  combination  of cash and  Common  Stock  owned  for more than six
months,  of the  amount  of the  Exercise  Price for the  number of Shares  with
respect to which the  Option is then  being  exercised.  Each such  notice  (and
payment where required) shall be delivered,  or mailed by prepaid  registered or
certified  mail,  addressed  to the  Treasurer  of the Company at


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the  Company's  executive  offices.  Common Stock owned for more than six months
utilized in full or partial  payment of the Exercise  Price for Options shall be
valued at its Market Value at the date of exercise.

     (c) Period of  Exercisability.  Except to the extent otherwise  provided in
the terms of an  Agreement,  an Option may be  exercised by a  Participant  only
while he is an Employee and has maintained  Continuous  Service from the date of
the grant of the  Option,  or within  three  months  after  termination  of such
Continuous  Service  (but not  later  than the date on which  the  Option  would
otherwise  expire),  except if the Employee's  Continuous  Service terminates by
reason of --

     (1)  "Just  Cause"  which for  purposes  hereof  shall have the meaning set
          forth in any unexpired  employment or severance  agreement between the
          Participant  and the  Association  and/or  the  Company  (and,  in the
          absence of any such agreement,  shall mean termination  because of the
          Employee's  personal  dishonesty,  incompetence,  willful  misconduct,
          breach  of  fiduciary  duty  involving  personal  profit,  intentional
          failure to perform stated duties,  willful  violation of any law, rule
          or regulation  (other than traffic  violations or similar offenses) or
          final  cease-and-desist  order),  then  the  Participant's  rights  to
          exercise such Option shall expire on the date of such termination;

     (2)  Death,  then to the  extent  that  the  Participant  would  have  been
          entitled to exercise the Option  immediately  prior to his death, such
          Option of the deceased  Participant may be exercised within five years
          from the date of his death  (but not later  than the date on which the
          Option would otherwise expire) by the personal  representatives of his
          estate,  a duly  established  trust (in the case of a non-ISO) for the
          benefit of the participant's spouse, lineal ascendants or descendants,
          or person or persons to whom his rights  under such Option  shall have
          passed by will or by laws of descent and distribution;

     (3)  Disability,  then to the extent that the  Participant  would have been
          entitled  to  exercise  the  Option  immediately  prior  to his or her
          Disability, such Option may be exercised within one year from the date
          of termination of employment due to Disability, but not later than the
          date on which the Option would otherwise expire.

     (4)  Retirement on or after age 65, then to the extent that the Participant
          would have been entitled to exercise the Option  immediately  prior to
          his  retirement,  such Option may be exercised  within five years from
          the date on which the Option would otherwise expire.

     (d) Effect of the  Committee's  Decisions.  The  Committee's  determination
whether a Participant's  Continuous  Service has ceased,  and the effective date
thereof, shall be final and conclusive on all persons affected thereby.

     9. GRANTS OF OPTIONS TO NON-EMPLOYEE DIRECTORS

     (a)  Grants.  Grants of Non-ISOs to  Non-employee  Directors  shall have an
Exercise Price per Share equal to the Market Value of a Share on the date of the
grant.

     (b)  Terms of  Exercise.  Options  received  under the  provisions  of this
Paragraph will become  exercisable in accordance with the general rule set forth
in Paragraph 8(a) hereof and shall be  exercisable in accordance  with the terms
of Paragraph 8(b) hereof.

     Options  granted  under  this  Paragraph  shall  have a term of ten  years;
provided that Options granted under this Paragraph shall (i) become  exercisable
in accordance  with  paragraph  8(a) of the Plan, and (ii) expire one year after
the date on which a Director terminates Continuous Service as a voting member on
the Board, or five years after the date on which a Director  retires at or after
age 72,  but in no  event  later  than  the date on  which  such  Options  would
otherwise  expire.  In the event of such Director's death during the term of his
directorship,  Options  granted under this  Paragraph  shall become  immediately
exercisable,  and may be exercised  within five years from the date of his death
by the personal  representatives of his estate, a duly established trust for the
benefit of the Director's spouse lineal ascendants or descendants,  or person or
persons to whom his rights  under such  Option  shall have  passed by will or by
laws of descent and  distribution,  but in no event later than the date on which
such Options would otherwise expire. In the event of such Director's


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Disability  during his or her  directorship,  the Director's Option shall become
immediately exercisable, and such Option may be exercised within one year of the
termination of directorship due to Disability,  but not later than the date that
the Option would otherwise expire. Unless otherwise inapplicable or inconsistent
with the  provisions of this  Paragraph,  the Options to be granted to Directors
hereunder shall be subject to all other provisions of this Plan.

     (c) Effect of the  Committee's  Decisions.  The  Committee's  determination
whether a Participant's  Continuous  Service has ceased,  and the effective date
thereof, shall be final and conclusive on all persons affected thereby.

     10. SARs (Stock Appreciation Rights)

     (a) Granting of SARs. In its sole  discretion,  the Committee may from time
to time grant SARs to Employees either in conjunction with, or independently of,
any Options granted under the Plan. An SAR granted in conjunction with an Option
may be an  alternative  right wherein the exercise of the Option  terminates the
SAR to the extent of the number of shares  purchased upon exercise of the Option
and,  correspondingly,  the  exercise  of the SAR  terminates  the Option to the
extent of the  number  of Shares  with  respect  to which the SAR is  exercised.
Alternatively, an SAR granted in conjunction with an Option may be an additional
right  wherein both the SAR and the Option may be  exercised.  An SAR may not be
granted in conjunction with an ISO under  circumstances in which the exercise of
the SAR affects the right to exercise the ISO or vice versa,  unless the SAR, by
its terms, meets all of the following requirements:

          (1)  The SAR will expire no later than the ISO;

          (2)  The  SAR may be for no  more  than  the  difference  between  the
               Exercise  Price of the ISO and the  Market  Value  of the  Shares
               subject to the ISO at the time the SAR is exercised;

          (3)  The SAR is transferable  only when the ISO is  transferable,  and
               under the same conditions;

          (4)  The SAR may be exercised only when the ISO may be exercised; and

          (5)  The SAR may be exercised only when the Market Value of the Shares
               subject to the ISO exceeds the Exercise Price of the ISO.

     (b) Exercise  Price.  The Exercise Price as to any particular SAR shall not
be less than the Market Value of the Optioned Shares on the date of grant.

     (c) Timing of Exercise.  Any  election by a  Participant  to exercise  SARs
shall be made during the period  beginning on the 3rd business day following the
release for publication of quarterly or annual financial  information and ending
on the 12th business day following such date.  This condition shall be deemed to
be satisfied when the specified financial data is first made publicly available.
In no event,  however,  may an SAR be  exercised  within  the  six-month  period
following the date of its grant.

     The provisions of Paragraph 8(c) regarding the period of  exercisability of
Options are incorporated by reference herein,  and shall determine the period of
exercisability of SARs.

     (d) Exercise of SARs. An SAR granted hereunder shall be exercisable at such
times and under such  conditions as shall be permissible  under the terms of the
Plan and of the Agreement granted to a Participant, provided that an SAR may not
be exercised for a fractional  Share.  Upon exercise of an SAR, the  Participant
shall be  entitled  to  receive,  without  payment  to the  Company  except  for
applicable  withholding  taxes,  an amount  equal to the  excess of (or,  in the
discretion  of the  Committee  if provided in the  Agreement,  a portion of) the
excess of the then aggregate  Market Value of the number of Optioned Shares with
respect to which the Participant  exercises the SAR, over the aggregate Exercise
Price of such number of  Optioned  Shares.  This amount  shall be payable by the
Company, in the discretion of the Committee,  in cash or in Shares valued at the
then Market Value thereof, or any combination thereof.

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<PAGE>

     (e) Procedure for Exercising SARs. To the extent not inconsistent herewith,
the provisions of Paragraph 8(b) as to the procedure for exercising  Options are
incorporated  by reference,  and shall  determine  the procedure for  exercising
SARs.

     11. CHANGE IN CONTROL

     Notwithstanding the provisions of any Award which provides for its exercise
or vesting in installments, upon a Change in Control, all Options and SARs shall
be immediately  exercisable  and fully vested.  With respect to Options,  at the
time of a Change in Control,  the  Participant  shall,  at the discretion of the
Committee,  be entitled to receive  cash in an amount equal to the excess of the
Market Value of the Common Stock subject to such Option over the Exercise  Price
of such  Shares,  in  exchange  for the  cancellation  of  such  Options  by the
Participant.

     12. EFFECT OF CHANGES IN COMMON STOCK SUBJECT TO THE PLAN.

     (a)  Recapitalizations;  Stock  Splits,  Etc. The number and kind of shares
reserved for issuance  under the Plan, and the number and kind of shares subject
to outstanding Awards, and the Exercise Price thereof,  shall be proportionately
adjusted  for any  increase,  decrease,  change  or  exchange  of  Shares  for a
different  number or kind of shares or other  securities  of the  Company  which
results  from  a  merger,   consolidation,   recapitalization,   reorganization,
reclassification,  stock dividend,  split-up,  combination of shares, or similar
event in which the number or kind of shares is changed  without  the  receipt or
payment of consideration by the Company.

     (b) Transactions in which the Company is Not the Surviving  Entity.  In the
event of (i) the  liquidation or  dissolution  of the Company,  (ii) a merger or
consolidation  in which the Company is not the  surviving  entity,  or (iii) the
sale or disposition of all or substantially  all of the Company's assets (any of
the  foregoing  to be referred to herein as a  "Transaction"),  all  outstanding
Awards,  together with the Exercise Prices thereof,  shall be equitably adjusted
for any change or exchange of Shares for a different number or kind of shares or
other securities which results from the Transaction.

     (c) Special Rule for ISOs.  Any adjustment  made pursuant to  subparagraphs
(a) or  (b)(1)  hereof  shall be made in such a manner  as not to  constitute  a
modification,  within the meaning of Section  424(h) of the Code, of outstanding
ISOs.

     (d) Conditions and Restrictions on New, Additional,  or Different Shares or
Securities.  If, by reason of any adjustment made pursuant to this Paragraph,  a
Participant becomes entitled to new, additional, or different shares of stock or
securities,  such new,  additional,  or different  shares of stock or securities
shall thereupon be subject to all of the conditions and restrictions  which were
applicable to the Shares pursuant to the Award before the adjustment was made.

     (e) Other Issuances.  Except as expressly  provided in this Paragraph,  the
issuance by the Company or an Affiliate  of shares of stock of any class,  or of
securities  convertible  into  Shares  or stock of  another  class,  for cash or
property or for labor or services  either upon direct sale or upon the  exercise
of rights or warrants to subscribe therefor, shall not affect, and no adjustment
shall be made with respect to, the number,  class,  or Exercise  Price of Shares
then subject to Awards or reserved for issuance under the Plan.

     13. NON-TRANSFERABILITY OF AWARDS.

         Awards may not be sold, pledged, assigned, hypothecated, transferred or
disposed  of in any  manner  other  than by will or by the laws of  descent  and
distribution.  Notwithstanding  the  foregoing,  or any other  provision of this
Plan,  an Optionee who holds Options that are non-ISOs may transfer such Options
to  his or her  spouse,  lineal  ascendants,  lineal  descendants,  or to a duly
established trust for the benefit of one or more of these  individuals.  Options
so transferred may thereafter be transferred only to the Optionee who originally
received the grant or to an individual or trust to whom the Optionee  could have
initially  transferred the Option pursuant to this Paragraph.  Options which are
transferred  pursuant to this  Paragraph  shall be exercisable by the transferee
according to the same terms and conditions as applied to the Optionee.


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     14. TIME OF GRANTING AWARDS.

     The date of grant of an Award shall, for all purposes,  be the later of the
date on which the Committee  makes the  determination  of granting such Award or
the  Effective  Date.  Notice  of the  determination  shall  be  given  to  each
Participant  to whom an Award is so granted  within a reasonable  time after the
date of such grant.

     15. EFFECTIVE DATE.

     The  Plan  shall  become  effective  immediately  upon  its  approval  by a
favorable  vote of  stockholders  owning at least a majority  of the total votes
eligible to be cast at a duly called meeting of the Company's  stockholders held
in accordance with  applicable  laws. No Awards may be made prior to approval of
the Plan by the stockholders of the Company.

     16. MODIFICATION OF AWARDS.

     At any time,  and from time to time,  the Board may authorize the Committee
to direct  execution of an  instrument  providing  for the  modification  of any
outstanding  Award,  provided no such modification shall confer on the holder of
said Award any right or benefit which could not be conferred on him by the grant
of a new Award at such time,  or impair  the Award  without  the  consent of the
holder of the Award.

     17. AMENDMENT AND TERMINATION OF THE PLAN.

     The  Board may from  time to time  amend  the  terms of the Plan and,  with
respect to any Shares at the time not  subject to Awards,  suspend or  terminate
the Plan;  provided  that the  provisions of Paragraph 9 may not be amended more
than once every six months  (other than to comport  with  changes in the Code or
the regulations thereunder).

     No amendment,  suspension  or  termination  of the Plan shall,  without the
consent  of any  affected  holders  of an Award,  alter or impair  any rights or
obligations under any Award theretofore granted.

     18. CONDITIONS UPON ISSUANCE OF SHARES.

     (a) Compliance  with Securities  Laws.  Shares of Common Stock shall not be
issued with respect to any Award unless the issuance and delivery of such Shares
shall comply with all relevant provisions of law, including, without limitation,
the Securities Act of 1933, as amended,  the rules and  regulations  promulgated
thereunder,  any applicable  state  securities law, and the  requirements of any
stock exchange upon which the Shares may then be listed.

     (b) Special Circumstances.  The inability of the Company to obtain approval
from any  regulatory  body or authority  deemed by the  Company's  counsel to be
necessary to the lawful issuance and sale of any Shares  hereunder shall relieve
the  Company of any  liability  in respect of the  non-issuance  or sale of such
Shares.  As a condition  to the  exercise  of an Option or SAR,  the Company may
require the person exercising the Option or SAR to make such representations and
warranties as may be necessary to assure the  availability  of an exemption from
the registration requirements of federal or state securities law.

     (c)  Committee  Discretion.  The  Committee  shall  have the  discretionary
authority to impose in  Agreements  such  restrictions  on Shares as it may deem
appropriate or desirable, including but not limited to the authority to impose a
right  of first  refusal  or to  establish  repurchase  rights  or both of these
restrictions.

     19. RESERVATION OF SHARES.

     The Company, during the term of the Plan, will reserve and keep available a
number of Shares sufficient to satisfy the requirements of the Plan.

     20. WITHHOLDING TAX.

     The Company's  obligation to deliver Shares upon exercise of Options and/or
SARs  shall be  subject  to the  Participant's  satisfaction  of all  applicable
federal, state and local income and employment tax withholding


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<PAGE>

obligations.  The amount of the withholding  requirement shall be the applicable
statutory  minimum federal,  state or local income tax with respect to the award
on the date that the amount of tax is to be withheld.

     21. NO EMPLOYMENT OR OTHER RIGHTS.

     In no event shall an Employee's or Director's eligibility to participate or
participation  in the Plan create or be deemed to create any legal or  equitable
right of the Employee, Director, or any other party to continue service with the
Company,  the Bank, or any Affiliate of such corporations.  Except to the extent
provided in Paragraphs 6(b) and 9(a), no Employee or Director shall have a right
to be  granted  an Award or,  having  received  an Award,  the right to again be
granted an Award. However, an Employee or Director who has been granted an Award
may, if otherwise eligible, be granted an additional Award or Awards.

     22. GOVERNING LAW.

     The Plan shall be governed by and construed in accordance  with the laws of
the State of Maryland,  except to the extent that federal law shall be deemed to
apply.


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