PATAPSCO BANCORP, INC.
                           INCENTIVE COMPENSATION PLAN

                               ___________________

                               BASIC PLAN DOCUMENT
                               ___________________

<PAGE>


                             PATAPSCO BANCORP, INC.
                           INCENTIVE COMPENSATION PLAN
                           ___________________________

                               BASIC PLAN DOCUMENT
                           ___________________________
                                Table of Contents

                                                                            Page

ARTICLE I.    General Provisions                                             1

ARTICLE II.   Definitions                                                    1

ARTICLE III.  Eligibility and Participation                                  4

ARTICLE IV.   Benefits                                                       5

ARTICLE V.    Deferred Compensation                                          7

ARTICLE VI.   Plan Administration                                            8

ARTICLE VII.  Amendment and Termination                                      9

ARTICLE VIII. General Provisions                                             9

<PAGE>

                             PATAPSCO BANCORP, INC.
                           INCENTIVE COMPENSATION PLAN

                               ___________________

                               BASIC PLAN DOCUMENT
                               ___________________


ARTICLE I. GENERAL PROVISIONS

     1.01 Purpose.  This Basic Plan Document and the Adoption Agreement executed
          -------
by the Employer  together  establish the Plan,  which is being  implemented  and
maintained for the purpose of providing  select  Directors,  Key Employees,  and
Employees with incentive compensation in the form of Bonuses, Stock Options, and
Restricted  Stock in the event the  Employer  meets  certain  performance  goals
indicative of its  profitability  and stability in comparison to other financial
institutions in its Peer Group.

     1.02  Construction.  The Employer intends that the Plan be an unfunded plan
           ------------
maintained primarily for the purpose of providing Incentive Awards, and that the
Plan not  constitute  an  "employee  benefit  plan" within the meaning of ERISA.
Notwithstanding  the foregoing,  it is intended that Article V of the Plan shall
be maintained primarily for the purpose of providing deferred compensation for a
select group of management or highly compensated employees within the meaning of
Section  201(2)  of  ERISA.  The Plan  shall  be  administered,  construed,  and
interpreted in a manner consistent with the purpose and intent set forth in this
Section.

     1.03 Effective Date. The Plan shall become effective on July 1, 1996.
          --------------

ARTICLE II.  DEFINITIONS

     Unless the context clearly  requires  otherwise,  the terms defined in this
Article II shall,  for all purposes of this Plan,  have the respective  meanings
specified in this Article II.

     2.01  "Adoption  Agreement"  means the Adoption  Agreement  executed by the
            -------------------
Employer.

     2.02 "Basic Plan Document"  means this Basic Plan Document  associated with
           -------------------
the Patapsco Bancorp, Inc. Incentive Compensation Plan.

     2.03   "Beneficiary"   means  the  person  or  persons   designated   as  a
             -----------
Participant's  beneficiary  or  beneficiaries  in  accordance  with Section 4.07
hereof or a Participant's deferred compensation agreement.

     2.04 "Board" means the Employer's Board of Directors.
           -----

<PAGE>

     2.05 "Bonus Pool" has the meaning set forth in the Adoption Agreement.
           ----------

     2.06  "Bonuses"  mean cash  bonuses  payable to  Participants  pursuant  to
            -------
Section 4.01 hereof.

     2.07 "CAMEL Rating" means the most recent CAMEL rating given for its safety
           ------------
and soundness.

     2.08 "Cause" means personal dishonesty,  incompetence,  willful misconduct,
           -----
breach of duty involving personal profits, intentional failure to perform stated
duties, willful violation of a material provision of any law, rule or regulation
(other than traffic violations or similar offense), or a material violation of a
final  cease-and-desist order or any other action which results in a substantial
financial loss to the Employer.  A determination of "Cause" shall be made by the
Committee within its sole discretion.

     2.09 "Change in Control" means (i) in the case of a stock institution,  the
           -----------------
acquisition of beneficial ownership of 25% or more of any Employer's outstanding
voting  stock,  and (ii) in the case of a mutual  institution,  a change  in the
Board such that as the  result of a merger or other  business  combination,  the
persons who were  Directors  at any time during the one-year  period  before the
transaction  cease to  constitute a majority of the Board of the Employer or its
successor.

     2.10 "Code" means the Internal  Revenue Code of 1986,  as amended from time
           ----
to time.  References to a Code section shall include any  comparable  section or
sections of future  legislation  that amends,  supplements  or  supersedes  such
section.

     2.11 "Committee" means the committee  specified in the Adoption  Agreement.
           ---------
In the  absence  at any time of a duly  appointed  committee,  the Plan shall be
administered  by those members of the  Employer's  Board who are  "disinterested
persons" within the meaning of Rule 16b-3.

     2.12  "Common  Stock"  means the common  stock  identified  in the Adoption
            -------------
Agreement.

     2.13  "Compensation"  means (i) in the case of an Employee,  the Employee's
            ------------
base  salary for the Plan  Year,  as in effect on the last day of the Plan Year,
and (ii) in the case of a Director who is not an  Employee,  the total fees that
the Director receives for service on the Board during the Plan Year.

     2.14 "CRA"  means the  rating  that the  Employer  or its  primary  banking
           ---
subsidiary  receives for  compliance  with the  Community  Reinvestment  Act, as
amended from time to time, and for any particular  Plan Year shall mean the most
recent CRA Rating as of the last day of the Plan Year.

     2.15 "Director" means any member of the Board.
           --------

<PAGE>

     2.16 "Disability"  means a physical or mental condition that is expected to
           ----------
be  of  indefinite  duration  and  to  substantially  impair  the  ability  of a
Participant to fulfill his duties to the Employer.

     2.17 "Eligible Director",  "Eligible Employee", and "Eligible Key Employee"
           ----------------     -------------------      -----------------------
shall have the meaning set forth in the Adoption Agreement.

     2.18 "Employee"  means any individual who performs service for any Employer
           --------
and who is treated as an employee for payroll tax purposes.

     2.19 "Employer" has the meaning set forth in the Adoption Agreement.
           --------

     2.20 "ERISA" means the Employee  Retirement Income Security Act of 1974, as
           -----
amended from time to time.

     2.21 "Factors" mean,  collectively,  the factors identified in the Adoption
           -------
Agreement as being  determinant  of the Bonus Pool.  When used in the  singular,
Factor means any Factor identified in the Adoption Agreement.

     2.22 "Incentive  Awards" mean any benefits  provided pursuant to Article IV
           -----------------
hereof, as modified by the Adoption Agreement.

     2.23  "Market  Value" means the fair market value of a Share on the date of
            -------------
an Incentive  Award, and shall be determined by the Committee in its discretion,
provided that --

             (i) if the Common Stock is listed on a national securities exchange
     (including the Nasdaq  National Market System or SmallCap  Market),  Market
     Value means the average of the  highest  and lowest  selling  prices on the
     exchange on the most recent date on which a sale occurred; and

             (ii) if the  Common  Stock is traded  otherwise  than on a national
     securities  exchange but bid and asked prices are  available,  Market Value
     means the  average of its bid and asked  price on the most  recent  date on
     which there was a bid and asked price.

     2.24 "NPA Ratio" means  nonperforming  loans (loans over 90 days delinquent
           ---------
and real estate owned) as a percentage of the Employer's  total assets as of the
last day of the Plan Year, as  determined  by the  Committee in accordance  with
generally accepted accounting principles.

     2.25  "Option" a stock  option  that is granted  pursuant  to Section  4.03
            ------
hereof.

     2.26 "Participant"  means an individual who has received an Incentive Award
           -----------
pursuant  to  Article  IV hereof or has made a  deferred  compensation  election
pursuant to Article V hereof.

     2.27  "Participant  Determination  Date" has the  meaning  set forth in the
            --------------------------------
Adoption Agreement.

<PAGE>

     2.28 "Peer Group" means the group of publicly-traded financial institutions
           ----------
identified in the Adoption Agreement.

     2.29 "Peer Group Adjustment Factor" means with respect to each Factor other
           ----------------------------
than the NPA Factor,  the ratio of the median  Factor for the Peer Group for the
current  Plan Year to the median  Factor for the Peer Group for the  immediately
preceding Plan Year, and the converse of this ratio for the NPA Factor.

     2.30  "Plan"  means  the  Employer's   Incentive   Compensation   Plan,  as
            ----
established by the Employer's execution of the Adoption Agreement.

     2.31  "Restricted  Stock  Award"  means an award  pursuant to Section  4.02
            ------------------------
hereof.

     2.32 "ROAA" means return-on-average  assets, as determined by the Committee
           ----
(i) in accordance with generally accepted accounting  principles,  and (ii) on a
pre-dividend, pre-loan loss reserve, and pre-Plan payment basis.

     2.33 "ROAE" means  return-on-average  equity as determined by the Committee
           ----
(i) in accordance with generally accepted accounting  principles,  and (ii) on a
pre-dividend, pre-loan loss reserve, and pre-Plan payment basis.

     2.34  "Safety  and  Soundness  Factor"  has the  meaning  set  forth in the
            ------------------------------
Adoption Agreement.

     2.35 "Share" means one share of Common Stock.
           -----

     2.36 "Year of Service" means the number of full 12-month periods,  measured
           ---------------
from the date of an  Incentive  Award and each  anniversary  of that date during
which a Participant has remained in the service of the Employer.

ARTICLE III. ELIGIBILITY AND PARTICIPATION

     The Committee shall make determinations of eligibility and participation in
accordance with the Adoption Agreement. The Committee shall have the discretion,
before a new Plan Year begins, to change (i) the employees  participating in the
Plan, and/or (ii) the formula for calculating the Bonus Pool.

ARTICLE IV. BENEFITS

     As soon as practicable  after the end of the Plan Year, the Committee shall
make the Incentive Awards provided for in this Article IV.

     4.01 Bonuses.  In  accordance  with the Adoption  Agreement,  the Committee
          -------
shall determine the Bonuses payable to Eligible  Directors,  Eligible Employees,
and  Eligible  Key  Employees,  and shall  promptly  notify the  Employer of the
Bonuses  to be paid to such  individuals.  Notwithstanding  the  foregoing,  the
Committee  shall,  except  under  extraordinary
<PAGE>

circumstances,  proportionately  reduce the Bonuses paid  hereunder for the Plan
Year to the extent necessary to ensure that the aggregate amount paid as Bonuses
does  not  jeopardize  the  status  of the  Employer  (or  its  primary  banking
subsidiary) as a well-capitalized institution.

     4.02  Restricted  Stock Award.  To the extent,  if any,  required under the
           -----------------------
Adoption Agreement, the Committee shall make Restricted Stock Awards to Eligible
Directors and Eligible Key Employees,  and shall promptly provide each recipient
of an award with a notice thereof.

          (a) General  Vesting Rule.  The Shares  subject to a Restricted  Stock
Award shall become vested and nonforfeitable according to the schedule set forth
in the Adoption  Agreement.  The Employer  shall  deliver to the  Committee  all
Shares  subject to Restricted  Stock Awards,  and the Committee  shall hold such
Shares in escrow until they are  transferred to  Participants in accordance with
this Section.  In this regard, the relationship of the Committee to the Employer
shall be that of agent to principal.

          (b)  Exception  for Change in Control or  Termination  due to Death or
Disability.  Notwithstanding  the  vesting  schedule  set forth in the  Adoption
Agreement,  all Shares subject to a Participant's  Restricted  Stock Award shall
become  fully  (100%)  vested  upon  the  date of a Change  in  Control,  or the
Participant's  termination  of  service  with the  Employer  due to his death or
Disability.  Such Shares shall be  transferred  to the  Participant  (or, in the
event of his death, his Beneficiary) as soon as practicable after the event that
accelerates vesting hereunder.

          (c) Accrual of Dividends. Whenever the Committee transfers Shares to a
Participant or Beneficiary  under this Section,  such Participant or Beneficiary
shall also be entitled to receive, with respect to each Share transferred,  both
an amount  equal to any cash  dividends  declared  and paid between the date the
relevant Restricted Stock Award was initially granted to the Participant and the
date the Shares are being  transferred.  The Participant  shall also receive the
net earnings, if any, that are attributable to any cash dividends so paid out.

          (d) Timing of  Distributions.  The Committee shall transfer the Shares
subject to a Restricted  Stock Award to the Participant or his  Beneficiary,  as
the case may be,  as soon as  practicable  after  the later of (i) the date they
have become fully vested and  nonforfeitable,  or (ii) the date of  distribution
that the  Participant  elects in writing on a form and in a manner  that is both
acceptable to the  Committee  and  delivered to the Committee  within the 30-day
period after the Participant  receives the Restricted  Stock Award covering such
Shares. Any election that a Participant makes hereunder shall be irrevocable.

          (e) Form of Distribution.  Whenever a Participant  becomes entitled to
receive Shares in accordance herewith, the Committee shall transfer such Shares,
together with any Shares  representing  stock  dividends,  in the form of Common
Stock. One Share of Common Stock shall be given for each Share earned.  Payments
representing cash dividends (and earnings thereon) shall be made in cash.
<PAGE>

          (f) Voting of Shares held in Escrow.  After a  Restricted  Stock Award
has been granted hereunder,  the Committee shall vote the Shares subject thereto
in the manner directed by the Board,  and otherwise in the manner  determined by
the Committee in its sole discretion.

     4.03 Stock  Options.  To the extent,  if any,  required  under the Adoption
          --------------
Agreement,  the Committee shall grant Options to Eligible Directors and Eligible
Key  Employees,  and shall  promptly  provide each recipient of an Option with a
stock  option  agreement  specifying  the terms and  conditions  of the  Option;
provided  that each Option  shall have an exercise  price per Share equal to its
Market Value on the date of the grant,  shall become  exercisable  in accordance
with the schedule set forth in the Adoption  Agreement,  and shall expire on the
earlier of ten years after the date of its grant, and --

          (a)  two  years  after  a  Participant's  service  with  the  Employer
               terminates due to his death;

          (b)  immediately  upon the  Participant's  termination  of service for
               Cause;

          (c)  three  months  after a  Participant's  service  with the Employer
               terminates for a reason other than death or Cause.

     Notwithstanding the provision of any Option which provides for its exercise
in  installments,  all  Options  outstanding  on the date of a Change in Control
shall become immediately exercisable.

     4.04 Revocation for Cause. Notwithstanding anything herein to the contrary,
          --------------------
if the  Participant is discharged from service with the Employer for Cause or is
discovered  after  termination  of service to have engaged in conduct that would
have justified  termination  for Cause,  the Committee may  immediately  revoke,
rescind,  and terminate any Incentive Award made under this Plan to the extent a
Participant has not collected a Bonus,  exercised an Option,  or received Shares
upon the vesting of a Restricted Stock Award.

     4.05 Duty of the Committee.  The Committee shall have no  responsibility to
          ---------------------
Participants other than (i) to inform the Employer, as soon as practicable after
the end of each Plan Year, in writing, as to the Bonuses to be provided, (ii) to
provide  Eligible  Directors  and  Eligible  Key  Employees  with  stock  option
agreements  and  Restricted  Stock Awards,  and (iii) to follow such  reasonable
directions  as the Employer  shall make as to the  provision  of such  Incentive
Awards to Participants.

     4.06 Minority,  Disability, or Incompetency. If any Incentive Award becomes
          --------------------------------------
payable or  transferable  under this Plan to a minor,  to a person  under  legal
disability or to a person not  adjudicated  incompetent but who the Committee in
its  discretion  determines  to be  incapable  by reason of illness or mental or
physical disability of managing his financial affairs,  the Committee may direct
that such Incentive Award be paid or transferred to the legal  representative or
custodian of such person or to any  relative or friend of such  person,  or that
such amount be paid directly for such person's support and maintenance. Payments
so made in good faith shall
<PAGE>

completely  discharge the Committee and the Employer of any and all  obligations
and liabilities with respect to such Incentive Awards.

     4.07 Designation of Beneficiary.  A Participant may file with the Committee
          --------------------------
a written  designation  of a  Beneficiary  who is to  receive  his or her vested
benefits in the event of the Participant's  death prior to his or her collection
of said benefits.  Such designation of Beneficiary may be changed at any time by
written notice to the Committee.  The designation  last filed with the Committee
shall be  controlling.  In the  event of the death of a  Participant  and in the
absence of a beneficiary  validly designated under the Plan who is living at the
time of the Participant's  death, the Participant's estate shall be deemed to be
the Beneficiary for purposes of this Plan.

     4.08  Source  of  Benefits.  To the  extent  required  under  the  Adoption
           --------------------
Agreement,  the Employer shall pay Bonuses out of its general  assets,  provided
that the Board may in its discretion  establish and fund a grantor trust meeting
the requirements of Revenue  Procedure 92-64, as amended or revised from time to
time. Nothing contained in the Plan itself shall constitute, or be treated as, a
trust or create any fiduciary relationship (other than the Committee's retention
of Shares in escrow pursuant to Section 4.02) . Except to the extent provided in
Section 4.02 the Employer, shall be under any obligation to segregate any assets
for the purpose of providing  Incentive Awards, and no person or entity which is
entitled  to payment  under the terms of the Plan  shall have any claim,  right,
security  interest,  or other interest in any fund,  trust,  account,  insurance
contract,  or asset of the  Employer.  To the extent that a  Participant  or any
other person  acquires a right to receive any Benefit under the Plan, such right
shall be limited to that of a recipient of an unfunded, unsecured promise to pay
amounts in the future and the  Participant's  (or other person's)  position with
respect to such amounts shall be that of a general unsecured creditor.

     4.09 Shares Subject to the Plan.  Except as otherwise  required  hereunder,
          --------------------------
the aggregate number of Shares deliverable to Participants  pursuant to the Plan
shall not exceed the number of Shares designated in the Adoption Agreement. Such
Shares may either be authorized but unissued  Shares or Shares held in treasury.
The number and kind of shares  which may be  purchased or issued under the Plan,
and the number and kind of shares subject to outstanding Incentive Awards, shall
be equitably adjusted for any increase,  decrease, change, or exchange of Shares
for a different  number or kind of shares or other  securities of the Company or
another  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
(including a transaction in which the Employer is not the surviving entity).  In
addition, the Committee shall have the discretionary  authority to impose on the
Shares subject to Incentive  Awards such  restrictions as the Committee may deem
appropriate or desirable, including but not limited to a right of first refusal,
or repurchase option, or both of these restrictions.

     If an Option should expire,  become  unexercisable  or be forfeited for any
reason  without  having been  exercised in full, or if a Restricted  Stock Award
should be  forfeited  for any  reason,  the Shares  subject  to such  Options or
Restricted  Stock Award shall,  unless the Plan shall have

<PAGE>

been terminated,  be available for the grant of additional Options or Restricted
Share Awards under the Plan.

ARTICLE V.  DEFERRED COMPENSATION

     This Article of the Plan  establishes a deferred  compensation  program for
Participants,  subject to the terms and  conditions  provided in this Basic Plan
Document and in the Adoption Agreement. In addition, the terms and conditions of
the Deferred  Compensation  Agreement  attached as Exhibit "A" are  incorporated
herein by reference,  and may not be changed  except through  affirmative  Board
action in accordance with Article VII hereof.

     5.01 Deferred  Compensation Amounts. A Participant who has elected to defer
          ------------------------------
the  receipt  of fees  otherwise  payable  to him may not  elect  to  defer  any
additional  fees  payable  to  him  on or  after  August  15,  2001.  All of the
Participant's  previous deferred amounts have been credited by the Employer to a
bookkeeping  account  ("Deferral  Account") in the name of the  Participant  and
adjusted with the  appreciation or depreciation  that would have occurred if the
Deferral  Account had been invested in the manner that the Participant  selected
in his deferred compensation agreement with the Employer. Effective as of August
15, 2001, a Participant may elect that amounts  credited to his Deferral Account
shall be  converted  into the right to receive a fixed  number  (rounded  to the
nearest  whole number) of Shares of Common Stock based upon the most recent sale
price of the Shares  occurring  prior to August 15, 2001. In no event,  however,
will  dividends  on any such Shares be credited  to the  Participant's  Deferral
Account. Alternatively, a Participant may elect that (a) a percentage (less than
100%) of his Deferral  Account  shall be  converted  into the right to receive a
fixed  number of Shares of Common Stock based upon the most recent sale price of
the Shares occurring prior to August 15, 2001, and (b) the remaining  percentage
of the value of his Account,  as of August 15, 2001, shall be transferred to the
Patapsco Cash Deferred Compensation Plan.

     Shares of Common  Stock that are  credited  to the  Participant's  Deferred
Account shall be proportionately adjusted for any increase, decrease or exchange
of shares for a different  number or kind of shares or other  securities  of the
Employer   which  results  from  a  merger,   consolidation,   recapitalization,
reorganization,  reclassification,  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 Employer.

     "5.02 Distributions to Participants. A Participant's Deferral Account shall
           -----------------------------
be paid,  in whole shares of Employer  common stock,  in  accordance  with those
terms set forth in his deferred  compensation  agreement which are applicable to
the deferred amounts.  If a Participant should die before receiving all deferred
compensation  benefits payable under this Article,  then such remaining payments
shall be made to the Participant's Beneficiary."

     5.03 Agreements.  Deferred compensation agreements made prior to August 15,
          ----------
2001,  shall be irrevocable  with respect to the timing and form of distribution
(i.e.,  lump sum or installment  payments) of amounts deferred pursuant thereto,
except that (a) a  Participant  may at any time and from time to time change the
Beneficiary  designated  therein,  and (b) a  Participant  may  make a  one-time
election in accordance with Section 5.01, not later than August 31, 2001, to (1)
convert the value of his Deferral Account, as of August 15, 2001, into the right
to receive a fixed  number of Shares of Common Stock or (2) convert a percentage
of the value of his Deferral  Account,  as of
<PAGE>

August 15,  2001,  into the right to receive a fixed  number of Shares of Common
Stock and to transfer  the value of the  remaining  percentage  of his  Deferral
Account to the Patapsco Cash Deferred  Compensation  Plan. The Employer and each
Participant  who has  previously  elected to defer  amounts under the Plan shall
enter into a new deferred  compensation  agreement to reflect the  provisions of
this 2001 Amendment to the Plan.

ARTICLE VI.  PLAN ADMINISTRATION

     6.01 The Committee.  In its sole and absolute discretion,  which discretion
          -------------
when exercised shall be final and binding on all parties affected  thereby,  the
Committee  shall  have the  authority  and the  responsibility  to  control  the
administration and operation of the Plan in accordance with its terms including,
without limiting the generality of the foregoing,  the powers and duties: (i) to
interpret,   apply,  and  administer  the  Plan,  to  decide  all  questions  of
eligibility,  participation,  status,  benefits,  and rights of Participants and
Beneficiaries  under the  Plan;  (ii) to  establish  and  amend  such  rules and
procedures as it deems necessary or appropriate to the proper  administration of
the  Plan;  (iii) to  employ or retain  such  agents  as it deems  necessary  or
advisable to assist in the  administration  of the Plan,  and to delegate to the
extent  permitted by applicable law such powers and duties as it deems necessary
or  advisable,  (iv) to prepare and file all  statements,  returns,  and reports
required  to be filed by the Plan with any agency of  government;  (v) to comply
with all requirements of applicable  state and federal law including  applicable
securities,  labor,  and tax law;  and (vi) to perform all  functions  otherwise
assigned to it under the terms of the Plan.

     6.02 Claims Procedure. Claims for Benefits under the Plan shall be filed in
          ----------------
writing with the Committee.  Written notice of the Committee's  disposition of a
claim  generally  shall be furnished  to the  claimant  within 60 days after the
application therefor is filed.  However, if special circumstances exist of which
the Committee notifies the claimant within such 60 day period, the Committee may
extend  such  period to the extent  necessary,  but in no event  beyond 180 days
after the claim is filed. In the event the claim is denied,  the reasons for the
denial shall be specifically set forth in writing,  pertinent  provisions of the
Plan  shall  be cited  and,  where  appropriate,  an  explanation  as to how the
claimant  can  perfect the claim will be  provided.  Any  claimant  who has been
denied a Benefit shall be entitled, upon request to the Committee, to appeal the
denial  of his claim  within 60 days  following  the  Committee's  determination
described in the preceding  sentence.  Upon such appeal,  the  claimant,  or his
representative,  shall be entitled to examine pertinent documents, submit issues
and  comments  in writing to the  Committee,  and meet with the  Committee.  The
Committee  shall review its decision and issue a final  decision to the claimant
in writing,  generally within 60 days following such appeal. However, if special
circumstances  exist of which the Committee notifies the claimant within such 60
day period, the Committee may extend such period to the extent necessary, but in
no event beyond 120 days following such appeal.

<PAGE>

ARTICLE VII. AMENDMENT AND TERMINATION

     The  Employer,  acting  by its  Board,  reserves  the  right at any time to
terminate or amend the Plan in any manner and for any reason;  provided, that no
amendment or termination  shall,  without the consent of the  Participant or, if
applicable,  the Beneficiary,  either (i) adversely affect such Participant's or
Beneficiary's  rights with  respect to  Benefits  accrued as of the date of such
amendment or  termination,  or (ii) suspend or terminate  the Plan during a Plan
Year without  providing for both advance written notice to Participants  and the
payment of Benefits  for the portion of the Plan Year during  which the Plan was
in effect.

ARTICLE VIII. GENERAL PROVISIONS

     8.01 Prohibition Against  Alienation.  Benefits payable to a Participant or
          -------------------------------
Beneficiary  under the terms of this Plan  shall not be subject in any manner to
alienation,  anticipation,  sale, transfer,  assignment,  pledge, hypothecation,
attachment,  receivership,  or encumbrance of any kind, nor shall it pass to any
trustee in  bankruptcy  or be reached  or applied by any legal  process  for the
payment of any  obligations of the  Participant or  Beneficiary,  except at such
times and in such manner as provided in this Plan.

     8.02 No Enlargement of Employment  Rights.  Nothing  contained in this Plan
          ------------------------------------
shall give or be  construed  as giving any  Employee or Director the right to be
retained in the service of any Employer,  or shall  interfere  with the right of
any Employer to discharge or otherwise  terminate  any  Employee's or Director's
service at any time.

     8.03 Gender.  Whenever any masculine  terminology  is used in this Plan, it
          ------
shall be taken to include the feminine, unless the context otherwise indicates.

     8.04  Applicable  Law. This Plan shall be construed and regulated,  and its
           ---------------
validity and effect and the rights hereunder of all parties  interested shall at
all times be determined,  in accordance  with the laws of the State of Maryland,
except to the extent such state law is preempted by federal law.

     8.05  Titles and  Headings.  The titles and  headings  included  herein are
           --------------------
included for convenience only and shall not be construed as in any way affecting
or modifying the text of this Plan, which text shall control.

     8.06  Withholding.  The Committee  and each  Employer  reserve the right to
           -----------
withhold  from  payments of Bonuses and other  Incentive  Awards such amounts of
income,  payroll, and other taxes as it deems advisable or required,  and if the
amount of such cash payment is not sufficient, the Committee or any Employer may
require  that the  Participant  or  Beneficiary  pay the amount  required  to be
withheld as a condition of delivering Bonuses or other Incentive Awards.

     8.07  Stockholder  Approval.  The  effectiveness  of  this  Plan  shall  be
           ---------------------
contingent  on its approval by the  favorable  vote of the holders of the Common
Stock,  only to the extent  required  under federal or state law or the Adoption
Agreement. Any Incentive Awards made prior to the receipt of such approval shall
be contingent thereon. Section 4.01 and Article V of the Plan shall be effective
whether or not the Plan receives stockholder approval.

<PAGE>

                                                                     Exhibit "A"

                             PATAPSCO BANCORP, INC.
                           INCENTIVE COMPENSATION PLAN
                         _______________________________

                         DEFERRED COMPENSATION AGREEMENT
                         _______________________________

     AGREEMENT,   made  this  ____  day  of  ________,   199_,  by  and  between
_______________   (the   "Participant"),   and  Patapsco   Bancorp,   Inc.  (the
"Employer").

     WHEREAS,  Patapsco Bancorp, Inc. has established the Patapsco Bancorp, Inc.
Incentive  Compensation  Plan (the "Plan"),  and the  Participant is eligible to
make a deferred compensation election pursuant to Article V of said Plan;

     NOW THEREFORE, it is mutually agreed as follows:

     1. The Participant,  by the execution hereof,  agrees to participate in the
Plan  upon the terms  and  conditions  set forth  therein,  and,  in  accordance
therewith, makes the following elections:

          a. The amount of fees/compensation which the Participant hereby elects
to defer is ______ percent (____%) of the amount  otherwise earned from the date
of this Agreement forward.

          b. Until distributed to the Participant, the amounts deferred pursuant
hereto shall  appreciate  or  depreciate  for each Plan Year as though they were
invested as follows:

                  ___%     in a fund having the highest  interest rate which the
                           Company pays on  certificates  of deposit having a
                           term of one year.

                  ___%     in a fund invested in common stock of Patapsco
                           Bancorp, Inc.

          c. The amounts  deferred  and any related  accumulated  income on such
deferrals shall be distributed, in cash, beginning on the first day of the month
following the  Participant's  _____  termination  of service with the Employer,*
______ attainment of age ______, OR ______ the later to occur of these events.

          d. The Participant hereby elects to have the amount deferred hereunder
and any earnings attributable thereto be distributed as follows:  _____ one lump
sum, OR _____  substantially  equal annual (____ monthly) payments over a period
of ______ years.


--------
* The Participant shall be treated as having terminated  service upon ending all
duties  and  positions  with  the  Employer  (including  those  of  an  honorary
director).

<PAGE>


     2. The Participant hereby designates  _______________________  to be his or
her beneficiary  and to receive the balance of any unpaid deferred  compensation
and related earnings.

     3. With respect to amounts deferred while this Agreement is in effect,  the
elections made hereunder shall be irrevocable,  except that a Participant may at
any time and from time to time prospectively  change (i) the investment election
made in paragraph 1.b.  hereof,  and (ii) the  beneficiary  designation  made in
paragraph 2 hereof.  A  Participant  may at any time file a new  agreement  that
supersedes  this  Agreement  with respect to amounts earned from the date of the
superseding agreement forward.

     4. The Employer agrees to make payment of the amount due the Participant in
accordance  with the terms of the Plan and the elections made by the Participant
herein.

     IN WITNESS  WHEREOF,  the parties  hereto have hereunto set their hands the
day and year first above-written.

                                         PARTICIPANT

                                         ______________________________________
                                         Participant

                                         EMPLOYER

                                         PATAPSCO BANCORP, INC.


                                         By ___________________________________
                                            Its _______________________________