Exhibit (99)



                                             March 27, 1997



DEAR SHAREHOLDER:

         It is my pleasure  to invite you to attend the 1997  Annual  Meeting of
Shareholders of Monocacy  Bancshares,  Inc. to be held on Monday, April 28, 1997
at 3:00 p.m.,  prevailing  time. The Annual Meeting will be held in the lobby at
the main office of Taneytown  Bank & Trust Company,  222 East Baltimore  Street,
Taneytown, Maryland 21787.

         The  Notice  of the  Annual  Meeting  and the  Proxy  Statement  on the
following pages address the formal business of the meeting.  The formal business
schedule includes: the election of four (4) directors; the approval and adoption
of the Monocacy Bancshares,  Inc. 1997 Independent Directors' Stock Option Plan;
the approval and adoption of the proposed amendment to the Monocacy  Bancshares,
Inc. 1994 Stock  Incentive  Plan to increase the number of authorized  shares of
Common Stock  available for issuance  under the plan by 31,592  shares;  and the
adoption of the selection of the Corporation's independent auditors for 1997. At
the  meeting,   members  of  the   Corporation's   management  will  review  the
Corporation's  operations  during the past year and will be available to respond
to questions.

         We strongly  encourage you to vote your shares  whether or not you plan
to attend the meeting.  It is very important  that you sign,  date and return in
the postage prepaid  envelope the  accompanying  Proxy as soon as possible.  The
giving of such Proxy may be revoked at any time  before it is voted and does not
alter your right to attend the meeting and vote in person.

                                                Sincerely,



                                                Frank W. Neubauer
                                                President and
                                                Chief Executive Officer


<PAGE>


                     [This Page Intentionally Left Blank.]


<PAGE>



                        --------------------------------
                    NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
                          TO BE HELD ON APRIL 28, 1997
                        --------------------------------


TO THE SHAREHOLDERS OF MONOCACY BANCSHARES, INC.:

         Notice is hereby  given that the  Annual  Meeting  of  Shareholders  of
MONOCACY  BANCSHARES,  INC.  (the  "Corporation")  will be  held  at 3:00  p.m.,
prevailing  time,  on Monday,  April 28, 1997 in the lobby at the main office of
Taneytown Bank & Trust Company, 222 East Baltimore Street,  Taneytown,  Maryland
21787, for the following purposes:

         1.       To elect four (4) Directors to serve for a three-year term and
                  until their successors are elected and qualified;

         2.       To  approve  and  adopt  the  Monocacy  Bancshares,  Inc. 1997
                  Independent Directors' Stock Option Plan;

         3.       To  approve  and  adopt the proposed amendment to the Monocacy
                  Bancshares, Inc. 1994  Stock  Incentive  Plan  to increase the
                  number of authorized  shares  of  Common  Stock  available for
                  issuance under the plan by 31,592 shares;

         4.       To ratify the selection of Stegman & Company, Certified Public
                  Accountants, as  the  independent auditors for the Corporation
                  for the year ending December 31, 1997; and

         5.       To  transact  such  other business as may properly come before
                  the  Annual  Meeting  and   any  adjournment  or  postponement
                  thereof.


         In  accordance  with the By-laws of the  Corporation  and action of the
Board of Directors,  only those  shareholders of record at the close of business
on March 20,  1997  will be  entitled  to  notice  of and to vote at the  Annual
Meeting and any adjournment or postponement thereof.


<PAGE>

         A copy of the  Corporation's  Annual  Report for the fiscal  year ended
December  31, 1996 is enclosed  with this  Notice.  Copies of the  Corporation's
Annual  Report for the 1995 fiscal year may be obtained at no cost by contacting
Brian M. Etzler,  Secretary, 222 East Baltimore Street, P.O. Box 491, Taneytown,
Maryland 21787, telephone: (410) 756-2655.

         You are urged to mark, sign, date and promptly return your Proxy in the
enclosed  envelope  so that your  shares  may be voted in  accordance  with your
wishes and in order that the  presence  of a quorum may be  assured.  The prompt
return of your signed Proxy,  regardless of the number of shares you hold,  will
aid the  Corporation in reducing the expense of additional  proxy  solicitation.
The  giving of such  Proxy  may be  revoked  at any time  before it is voted and
therefore does not alter your right to attend the meeting and vote in person.

                                         By Order of the Board of Directors,





                                         Brian M. Etzler
                                         Secretary


March 27 , 1997


<PAGE>


                           MONOCACY BANCSHARES, INC.

                   PROXY STATEMENT FOR THE ANNUAL MEETING OF
                   SHAREHOLDERS TO BE HELD ON APRIL 28, 1997

                                    GENERAL

Introduction, Date, Time and Place of Annual Meeting

         This Proxy Statement is furnished in connection  with the  solicitation
by the Board of Directors of MONOCACY BANCSHARES,  INC. (the  "Corporation"),  a
Maryland business  corporation,  of proxies to be voted at the Annual Meeting of
Shareholders  of the  Corporation to be held on Monday,  April 28, 1997, at 3:00
p.m., prevailing time, in the lobby at the main office of Taneytown Bank & Trust
Company,  222 East Baltimore  Street,  Taneytown,  Maryland,  21787,  and at any
adjournment or postponement of the Annual Meeting.

         The  principal  executive  office  of the  Corporation  is  located  at
Taneytown Bank & Trust Company (the "Bank"), 222 East Baltimore Street, P.O. Box
491,  Taneytown,  Maryland  21787.  The telephone  number for the Corporation is
(410) 756-2655.  All inquiries should be directed to Brian M. Etzler,  Secretary
of the Corporation. The Bank is a wholly-owned subsidiary of the Corporation.

Solicitation and Voting of Proxies

         This Proxy  Statement  and the enclosed form of proxy (the "Proxy") are
first being sent to shareholders of the Corporation on or about March 28, 1997.

         Shares  represented by proxies on the  accompanying  Proxy, if properly
signed and returned,  will be voted in accordance with the  specifications  made
thereon by the  shareholders.  Any Proxy not  specifying to the contrary will be
voted FOR the  election  of the  nominees  for  director  named  below,  FOR the
approval  and  adoption  of  the  Monocacy  Bancshares,  Inc.  1997  Independent
Directors'  Stock  Option  Plan,  FOR the  approval and adoption of the proposed
amendment to the Monocacy  Bancshares,  Inc. 1994 Stock  Incentive Plan, and FOR
the  ratification  of the  selection  of  Stegman & Company  as the  independent
auditors for the Corporation  for the year ending  December 31, 1997.  Execution
and return of the enclosed Proxy will not alter a shareholder's  right to attend
the  Annual  Meeting  and vote in  person.  The cost of  preparing,  assembling,
printing,  mailing and soliciting proxies, and any additional material which the
Corporation may furnish shareholders in connection with the Annual Meeting, will
be  borne by the  Corporation.  In  addition  to the use of the  mails,  certain
directors,  officers and employees of the  Corporation  and the Bank may solicit
proxies  personally by telephone and by  telecopier.  Arrangements  will be made
with brokerage houses and other custodians,  nominees and fiduciaries to forward
proxy solicitation  material to the beneficial owners of stock held of record by
these persons,  and, upon request  thereof,  the Corporation will reimburse them
for their reasonable forwarding expenses.



Revocability of Proxy

                                     - 1 -

<PAGE>



         A  shareholder  who  returns a Proxy may  revoke  the Proxy at any time
before it is voted.  This  right of  revocation  is not  limited  or  subject to
compliance with any formal procedure.  Revocations  should be delivered to Brian
M. Etzler, Secretary of Monocacy Bancshares, Inc., at 222 East Baltimore Street,
P.O.  Box  491,  Taneytown,  Maryland  21787.  Shareholders  may  also  effect a
revocation of a previously  executed  Proxy by attending the Annual  Meeting and
voting in person.

Voting Securities, Record Date, and Quorum

         At the close of business on March 20, 1997, the  Corporation had issued
and outstanding 1,618,803 shares of common stock, par value $5.00 per share, the
only authorized, issued and outstanding class of stock (the "Common Stock").

         Only  holders  of Common  Stock of record at the close of  business  on
March 20, 1997, will be entitled to notice of and to vote at the Annual Meeting.
Cumulative voting rights do not exist with respect to the election of directors.
On all matters to come before the Annual Meeting,  each share of Common Stock is
entitled to one vote.

         Under Maryland law and the By-laws of the Corporation,  the presence of
a quorum is  required  for each  matter to be acted upon at the Annual  Meeting.
Pursuant  to Article I,  Section  1.05 of the  By-laws of the  Corporation,  the
presence,  in person or by proxy, of shareholders entitled to cast a majority of
all the votes  entitled to be cast at the meeting shall  constitute a quorum for
the  transaction  of  business  at  the  Annual  Meeting.   Votes  withheld  and
abstentions  will be counted in  determining  the  presence  of a quorum for the
particular  matter.  Broker  non-votes  will not be counted in  determining  the
presence of a quorum for the particular  matter as to which the broker  withheld
authority.

         Assuming the  presence of a quorum,  the four (4) nominees for director
receiving the highest number of votes cast by shareholders  entitled to vote for
the election of directors  shall be elected.  Votes  withheld from a nominee and
broker non-votes will not be cast for such nominee.

         Assuming the presence of a quorum,  the affirmative  vote of a majority
of all votes cast by  shareholders  is required for the approval and adoption of
the Monocacy Bancshares, Inc. 1997 Independent Directors' Stock Option Plan, for
the approval  and adoption of the increase by 31,592  shares the number of stock
options  eligible to be granted under the Monocacy  Bancshares,  Inc. 1994 Stock
Incentive  Plan  and  for  the  ratification  of the  selection  of  independent
auditors.  Abstentions and broker  non-votes are not votes cast and therefore do
not count  either  for or  against  such  ratification.  Abstentions  and broker
non-votes,  however,  have the  practical  effect  of  reducing  the  number  of
affirmative votes required to achieve a majority by reducing the total number of
shares voted from which the required majority is calculated.


                                     - 2 -

<PAGE>


             PRINCIPAL BENEFICIAL OWNERS OF THE CORPORATION'S STOCK

Principal Owners

         The  following  table sets forth,  as of March 20,  1997,  the name and
address  of each  person  who owns of  record  or who is  known by the  Board of
Directors  to be the  beneficial  owner of more  than five  percent  (5%) of the
Corporation's  outstanding Common Stock, the number of shares beneficially owned
by such person and the percentage of the Corporation's  outstanding Common Stock
so owned.


                                                                Percent of
                                             Number of          Outstanding
                                              Shares           Common Stock
                                           Beneficially        Beneficially
    Name and Address                          Owned(l)              Owned
    ----------------                       ------------        ------------
Eric E. Glass                               105,070(2)             6.49%
16117 Toms Creek Church Road
Emmitsburg, MD 21727

Jacob M. Yingling                            84,667(3)             5.23%
24 Kalten Road
Westminster, MD 21158
--------------

(1)      For the definition of "beneficially owned", see footnote 1 below  under
         the caption entitled "Beneficial Ownership by Officers,  Directors  and
         Nominees".

(2)      Includes  91,945 shares owned  individually;  4,432 shares held jointly
         with,  and 2,077 shares held  individually  by, Mr. Glass' wife;  1,532
         shares held by the Taney  Corporation of which Mr. Glass is Chairman of
         the Board; and 5,084 shares held by the Taney Corporation's  employees'
         profit sharing trust over which Mr. Glass has investment discretion.

(3)      Includes 83,813 shares owned individually; and 854 shares held  by  Mr.
         Yingling's wife.


                                     - 3 -

<PAGE>


Beneficial Ownership by Officers, Directors and Nominees

         The  following  table  sets  forth  as of  March  20,  1997,  and  from
information supplied by the respective individual,  the amount and percentage of
the Common Stock beneficially owned by each director,  each nominee,  each named
executive officer,  and all officers,  directors and nominees of the Corporation
and the Bank as a group.


                                       Amount and Nature
      Name of Individual                 of Beneficial            Percent
     or Identity of Group               Ownership(1)(2)        of Class (3)
     --------------------               ---------------        ------------

David M. Abramson                            1,884(4)                ---
E. Wayne Baumgardner                        62,514(5)               3.86%
George B. Crouse                            27,808(6)               1.72%
Glenn E. Eaves                              13,032(7)                ---
Eric E. Glass                              105,070(8)               6.49%
Donald R. Hull                              58,591(9)               3.62%
Frank W. Neubauer                           12,800(10)               ---
Jacob M. Yingling                           84,667(11)              5.23%
Michael K. Walsch                            5,108(12)               ---

All Officers, Directors and
Nominees as a Group (13 persons)           377,401(13)             23.10% (14)
--------------------

(1)      The securities  "beneficially owned" by an individual are determined in
         accordance with the definitions of "beneficial  ownership" set forth in
         the  General  Rules and  Regulations  of the  Securities  and  Exchange
         Commission and may include  securities owned by or for the individual's
         spouse and minor children and any other relative who has the same home,
         as well as securities to which the  individual  has or shares voting or
         investment  power or has the  right  to  acquire  beneficial  ownership
         within  60 days  after  March 20,  1997.  Beneficial  ownership  may be
         disclaimed as to certain of the securities.

(2)      Information furnished by the directors and the Corporation.

(3)      Less than one percent (1%) unless otherwise indicated.

(4)      Includes  252  shares  owned  individually;  and 1,632  shares held  as
         trustee of the Irma Abramson Pollack Revocable Intervivos Trust.

(5)      Includes  4,217 shares owned  individually;  54,667  shares held by Mr.
         Baumgardner  jointly with his mother;  and 3,630 shares held jointly by
         Mr. Baumgardner's wife and mother.

(6)      Includes  7,113  shares  owned  individually;  7,841 shares held by Mr.
         Crouse jointly with his wife; 495 shares held by Mr. Crouse's wife; and
         12,359 shares held by Mr. Crouse as a trustee of a trust under the will
         of his father.

(7)      Includes 2,054 shares owned individually; and 10,978 shares held by Mr.
         Eaves jointly with his wife.


                                     - 4 -

<PAGE>


(8)      See footnote 2 above under the caption  entitled "Principal Owners"  as
         to the shares of Common Stock held beneficially by Mr. Glass.

(9)      Includes 8,813 shares owned individually; 38,301  shares  held  by  Mr.
         Hull jointly with his wife; and 11,477  shares  held  by  the Residuary
         Trust of the Estate of Robert W. Smith, for which Mr. Hull is trustee.

(10)     Includes 2,787  shares  owned  individually;  7,040  exercisable shares
         granted as Stock Options; and 2,973 shares granted as Restricted  Stock
         Awards.

(11)     See footnote 3 above under the caption entitled "Principal  Owners"  as
         to the shares of Common Stock held beneficially by Mr. Yingling.

(12)     Includes  777  shares  owned  individually;  3,520  exercisable  shares
         granted as Stock Options; and 811 shares granted  as  Restricted  Stock
         Awards.

(13)     Includes  14,850  exercisable  shares  granted  as  Stock   Options  to
         Officers; and 3,784  shares  granted  as  Restricted  Stock  Awards  to
         Officers.

(14)     The percent of class assumes all  outstanding  Stock Options  issued to
         the directors and officers have been  exercised  and,  therefore,  on a
         proforma basis, 1,633,653 shares of Common Stock would be outstanding.


                             ELECTION OF DIRECTORS

         The By-laws of the Corporation provide that the Corporation's  business
shall be  managed  by its  Board  of  Directors.  Sections  2.02 and 2.03 of the
By-laws  provide that the number of directors  that shall  constitute  the whole
Board of  Directors  shall not be less than five nor more than  twenty-four  and
that the Board of Directors shall be classified  into three classes,  each class
to be elected for a term of three years.  Within the foregoing limits, the Board
of  Directors  may,  from time to time,  fix the number of  directors  and their
respective classifications.  No person shall serve as a director after he or she
has  attained the age of seventy (70) years,  except  those  directors  who were
serving at the  formation  of the  Corporation.  Pursuant to Section 2.05 of the
By-laws, vacancies on the Board of Directors, including vacancies resulting from
an increase in the number of  directors,  shall be filled by a majority  vote of
the  remaining  members of the Board of  Directors  and each person so appointed
shall be a director until the next Annual Meeting of the shareholders,  at which
time the  shareholders  shall elect a director  for the balance of the term then
remaining.  Alternatively,  vacancies may be filled at a Special  Meeting of the
shareholders by a majority vote of the shareholders, in which case a director so
chosen shall hold office for the balance of the term then remaining.

         The  Board  of  Directors,  pursuant  to  Section  2.02 and 2.03 of the
By-laws of the Corporation, has fixed the number of Directors of the Corporation
at eight (8) members.  Four (4)  directors  shall stand for election at the 1997
Annual  Meeting  whose term will expire in 2000.  There are two (2) directors in
the class whose term  expires in 1998 and two (2)  directors  in the class whose
terms  expire  in  1999.   Therefore,   as  described  above,  the  Articles  of
Incorporation  and the By-laws provide for a classified  Board of Directors with
staggered,  three-year terms of office. Notwithstanding the foregoing, the Board
of Directors may,  pursuant to its powers conferred upon it by Sections 2.02 and
2.03 of the By-laws of the Corporation, fix the number of the Board of Directors
at a greater or lower number in order to best  accommodate  the interests of the
Corporation and its shareholders.


                                     - 5 -

<PAGE>



         Unless  otherwise  instructed,  the Proxy holders will vote the Proxies
received by them for the election of the four (4) nominees  named below.  If any
nominee should become unavailable for any reason, Proxies will be voted in favor
of a  substitute  nominee as the Board of  Directors  of the  Corporation  shall
determine.  The Board of  Directors  has no reason to believe  that the nominees
named will be unable to serve, if elected. Any vacancy occurring on the Board of
Directors of the  Corporation for any reason may be filled by a majority vote of
the directors then in office until the expiration of the term of the vacancy.

         There is no cumulative voting for the election of directors. Each share
of Common Stock is entitled to cast only one vote for each nominee. For example,
if a shareholder  owns ten shares of Common Stock,  he or she may cast up to ten
votes for each of the four (4) directors in the class to be elected.


          INFORMATION AS TO NOMINEES, DIRECTORS AND EXECUTIVE OFFICERS

         The following table contains  certain  information  with respect to the
nominees for director and the current directors:

<TABLE>
<CAPTION>
                                                               Principal Occupation
                                             Age as of         for Past Five Years                 Director
                                             March 20,      and Position Held with the              Since
                 Name                          1997          Corporation and the Bank             Corp/Bank
                 ----                          ----          ------------------------             ---------
<S> <C>
NOMINEES FOR DIRECTOR
WHOSE TERM EXPIRES IN 2000 AND
CURRENT DIRECTORS
WHOSE TERM EXPIRES IN 1997
David M. Abramson                               44          Senior VP and General                    1993/1992
                                                            Counsel,
                                                            JP Foodservice, Inc.
Glenn E. Eaves                                  61          Dairy Farmer                             1993/1988
(2)(4)
Jacob M. Yingling                               66          Independent Consultant and               1993/1986
(4)(5)                                                      Investor
Frank W. Neubauer                               54          Commercial Banker; President             1994/1994
(1)(6)                                                      and CEO of the Corporation
                                                            and the Bank
</TABLE>

                                     - 6 -

<PAGE>

<TABLE>

DIRECTORS
WHOSE TERM EXPIRES IN 1998
<S> <C>
E. Wayne Baumgardner                            60          Independent Investor                     1993/1984
(2)
George B. Crouse                                57          Vice President, Crouse Ford              1993/1985
(5)                                                         Sales, Inc.

DIRECTORS
WHOSE TERM EXPIRES IN 1999
Eric E. Glass                                   57          Chairman of the Board of the             1993/1977
(1)(3)(6)                                                   Taney Corporation; Chairman
                                                            of the Board  of the
                                                            Corporation and the Bank
Donald R. Hull                                  58          Accountant, E.A., Vice                   1993/1976
(1)(6)                                                      Chairman of the Board and
                                                            Chairman of the Executive
                                                            Committee of the Corporation
                                                            and the Bank
</TABLE>
-----------------

(1)      The President/CEO,  the Chairman of the Board, and the Vice Chairman of
         the Board are each ex-officio members of all standing committees of the
         Bank's Board of Directors.

(2)      Member of the Bank's Audit/Compliance  Committee.  The Audit/Compliance
         Committee has as its primary functions the review and recommendation of
         an outside auditor for each fiscal year and the oversight of the Bank's
         audit and compliance  functions.  This committee is also the source for
         reports   concerning   factual   conflicts   of  interest  and  reviews
         circumstances  regarding  conflicts of interest and reports same to the
         full Board of  Directors,  if  necessary.  This  committee met four (4)
         times in 1996.  Mr.  Baumgardner  was Chairman of the  Audit/Compliance
         Committee in 1996.

(3)      Member  of  the Bank's  Compensation Committee.  This committee reviews
         salary administration,  including  salary  ranges,  salary  surveys and
         benefits, and  approves  changes  in  salary  ranges  as  needed.  This
         committee  met  four (4) times in  1996.  Mr. Glass was Chairman of the
         Compensation  Committee  in  1996.   Other  members  of  the  Board  of
         Directors sit on  the  Compensation  Committee on a rotating basis each
         quarter.

(4)      Member  of  the  Bank's  Funds  Management  Committee.   This committee
         reviews major policies of  the  Bank  with  respect  to  interest  rate
         exposure, liquidity, investments,  earnings analysis and forecasts, tax
         planning, capital, funding and pricing.   This  committee met three (3)
         times in 1996.  Mr. Yingling  was  Chairman  of  the  Funds  Management
         Committee in 1996.

(5)      Member  of  the  Bank's  Trust  Committee.  This committee oversees the
         operations of the Trust Department  of  the  Bank.  This  committee met
         four (4) times in 1996.  Mr. Crouse was Chairman of the Trust Committee
         in 1996.

(6)      Permanent  member  of  the  Bank's Executive Committee.  This committee
         oversees the operations of the Bank.   This  committee  met twelve (12)
         times in 1996.  Mr. Glass was Chairman of the  Executive  Committee  in
         1996.  Other members of the Board of Directors  sit  on  the  Executive
         Committee on a rotating basis each quarter.

         The  aforementioned  committees  are committees of the Bank and not the
Corporation.


                                     - 7 -

<PAGE>


         During 1996,  the Bank's Board of  Directors  held 12 meetings.  During
1996,  the  Corporation's  Board  of  Directors  held 12  meetings.  Each of the
Directors  attended at least 75% of the combined total number of meetings of the
Corporation's  and Bank's Board of Directors and the committees of which he is a
member, except Mr. Abramson who attended 66.67% of such meetings.

         The Board of Directors of the  Corporation  has at present one standing
committee,  the Executive  Committee,  which met twelve (12) times in 1996.  The
same persons who are members of the Bank's  Executive  Committee  are members of
the Corporation's Executive Committee.

         A shareholder who desires to propose an individual for consideration by
the Board of  Directors as a nominee for  director  should  submit a proposal in
writing to the Secretary of the  Corporation  in accordance  with Article Eighth
(a)(8) of the  Corporation's  Articles of  Incorporation.  Any  shareholder  who
intends to nominate any  candidate  for election to the Board of Directors  must
notify the  Secretary  of the  Corporation  in writing not less than 30 days nor
more than 60 days prior to such meeting; provided, however, that if less than 31
days' notice of the meeting is given to shareholders,  such notice must be given
to the Secretary of the  Corporation not later than the close of business on the
tenth (10th) day  following the day on which notice of the meeting was mailed to
shareholders.  Each such notice must conform with the  requirements set forth in
Article Eighth (a)(8) of the Corporation's Articles of Incorporation.


                            SECTION 16(a) BENEFICIAL
                              OWNERSHIP COMPLIANCE

         Section  16(a) of the  Securities  Exchange  Act of 1934,  as  amended,
requires the Corporation's officers and directors, and persons who own more than
ten  percent  (10%)  of  the  registered  class  of  the  Corporation's   equity
securities,  to file  reports of  ownership  and changes in  ownership  with the
Securities and Exchange Commission ("SEC"). Officers, directors and greater than
ten percent  (10%)  shareholders  are required by SEC  regulation to furnish the
Corporation with copies of all Section 16(a) forms they file.

         Based solely on its review of the copies of such forms  received by it,
or written  representations from certain reporting persons that no Form's 5 were
required for those  persons,  the  Corporation  believes  that during the period
January 1, 1996,  through  December 31, 1996, its officers and directors were in
compliance with all filing requirements applicable to them.


                                     - 8 -

<PAGE>

                             EXECUTIVE COMPENSATION

         Shown  below is  information  concerning  the annual  compensation  for
services in all capacities to the Corporation for the fiscal year ended December
31, 1996, 1995 and 1994 of those persons who were, at December 31, 1996, (i) the
Chief  Executive  Officer,  and (ii)  the four  other  most  highly  compensated
executive  officers of the  Corporation to the extent such persons' total annual
salary and bonus exceeded $100,000:

                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
                                        Annual Compensation                              Long-Term Compensation
                                    --------------------------------      -------------------------------------------------
                                                                                   Awards             Payouts
                                                                          ----------------------      -------
          (a)            (b)         (c)          (d)          (e)            (f)          (g)          (h)          (i)
                                                              Other
                                                              Annual      Restricted                              All Other
                                                             Compen-         Stock       Options       LTIP        Compen-
     Name and                       Salary        Bonus       sation       Award(s)       /SARs       Payouts       sation
 Principal Position      Year        ($)           ($)         ($)          ($)(1)         (#)          ($)          ($)
 ------------------      ----       ------        -----      --------      ---------     -------      -------     ---------
<S> <C>
Frank W. Neubauer        1996      140,000        30,000        0           16,100        2,200          0        14,827 (2)
President and CEO        1995      126,500        27,638        0           14,556        2,200          0        19,046 (2)
                         1994      115,000        23,449        0           13,225        4,480          0        17,100 (2)

Michael K. Walsch        1996      102,500        25,000        0            5,980        1,100          0        16,939 (3)
Executive VP, CFO,       1995       93,000        19,411        0            5,354        1,100          0        18,059 (3)
and COO                  1994       88,000        12,638        0            5,060        2,420          0        17,447 (3)
</TABLE>

----------------
(1)      The  aggregate  restricted  stock  holdings by Mr.  Neubauer  are 2,973
         shares  of Common  Stock  valued  using the price of the  Corporation's
         Common  Stock on December  31, 1996 at $20.91 per share,  or $62,165 in
         the aggregate.  The aggregate  restricted  stock holdings of Mr. Walsch
         are  811  shares  of  Common  Stock  valued  using  the  price  of  the
         Corporation's Common Stock on December 31, 1996 at $20.91 per share, or
         $16,958 in the  aggregate.  Dividends are  reinvested on the restricted
         stock  holdings  of  Mr.  Neubauer  and  Mr.  Walsch  pursuant  to  the
         Corporation's Dividend Reinvestment Plan ("DRIP").

(2)      Includes  deferred  cash  contribution  pursuant   to   a  Supplemental
         Retirement Plan, Bank contributions to 401(k) plan, and group term life
         insurance premiums paid by Bank.

(3)      Includes  deferred  cash   contribution   pursuant  to  a  Supplemental
         Retirement  Plan,  split dollar life  insurance  premiums paid by Bank,
         Bank  contributions  to  401(k)  plan,  and group  term life  insurance
         premiums paid by Bank.


                                     - 9 -

<PAGE>


                     OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
                               Individual Grants

          (a)                    (b)                 (c)              (d)            (e)             (f)      (g)
                                                                                                     5%($)   10%($)

                                                                                                  Potential Realizable
                              Number of          % of Total                                         Value at Assumed
                             Securities         Options/SAR's      Exercise                         Annual Rates of
                             Underlying          Granted to         or Base                           Stock Price
                            Options/SAR's       Employees in         Price        Expiration        Appreciation for
          Name               Granted (#)         Fiscal Year       ($/Share)         Date             Option Term
          ----               -----------         -----------       ---------         ----             -----------
<S> <C>
Frank W. Neubauer                                                                January 10,
President and CEO               2,200              25.64%            20.00           2007         $30,932     $75,328

Michael K. Walsch
Executive VP, CFO                                                                January 10,
and COO                         1,100              12.82%            20.00           2007         $15,466     $37,664
</TABLE>


                 AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL
                       YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>

            (a)                         (b)                      (c)                    (d)                  (e)
                                                                                     Number of
                                                                                     Securities           Value of
                                                                                     Underlying        Unexercised In-
                                                                                    Unexercised           the-Money
                                                                                   Options/SAR's        Options/SAR's
                                                                                    at FY-End(#)        at FY-End(#)

                                Shares Acquired on                                  Exercisable/        Exercisable/
            Name                    Exercise(#)           Value Realized($)        Unexercisable        Unexercisable
            ----                ------------------        -----------------        -------------        -------------
<S> <C>
Frank W. Neubauer                        0                        0                 7,040/2,200        $12,892/$2,002
President and CEO

Michael K. Walsch                        0                        0                 3,520/1,100         $6,446/$1,001
Executive VP, CFO and
COO
</TABLE>



                                     - 10 -

<PAGE>


401(k) Plan

         Neither the  Corporation nor the Bank has a retirement or pension plan.
The Bank has a contributory  thrift plan qualifying  under Section 401(k) of the
Internal  Revenue Code (the  "Plan").  Employees  with six months of service are
eligible for participation in the Plan.  Participants are allowed to defer up to
15% of their annual  compensation by contributing  amounts to the Plan. The Bank
contributes  to the Plan  for  each  participant  $1.00  for  each  $2.00 of the
participants' contributions which do not exceed 6% of annual compensation.  Each
year,  the  Board  of  Directors,   at  its  discretion   authorizes  additional
contributions  to the Plan.  Plan  participants  are fully vested after five (5)
full years of service or upon death, disability or retirement.  Contributions by
participants,  matching contributions and annual discretionary  contributions by
the Bank are invested in pre-selected  investment  funds at the direction of the
participants. Annual discretionary contributions by the Bank are invested at the
direction of the participants of the Plan or distributed in cash.

         Mr.  Neubauer has five (5) credited years of service and is one hundred
percent  (100%) vested in the Plan.  Mr.  Walsch has four (4) credited  years of
service and is eighty percent (80%) vested in the Plan. The total amount of Bank
contributions  to all  employees,  including  $42,000  in  discretionary  profit
sharing distributions, under the plan in 1996 was $102,968.35.

Supplemental Retirement Plan

         The Bank has entered into supplemental  retirement  agreements with Mr.
Neubauer  (beginning  in 1993)  and Mr.  Walsch  (beginning  in 1994)  which are
performance-based.  The Bank maintains  deferred cash accounts for Mr.  Neubauer
and Mr.  Walsch to which is  allocated  each  year an amount  equal to .455% and
 .2275%,  respectively,  of the  pre-tax  net  income of the Bank for each  year;
provided that, the financial and other performance goals of the Bank, as set and
determined by the Board of Directors,  have been achieved  during the year. Such
goals were achieved in 1996. In addition to the Deferred Cash Account,  the Bank
annually  transfers to Mr. Neubauer and Mr. Walsch shares of the Common Stock of
the Corporation  valued at 11.5% of Mr.  Neubauer's base salary and 5.75% of Mr.
Walsch's  base  salary,  respectively;  provided  that the  financial  and other
performance  goals of the Bank, as set and determined by the Board of Directors,
have been achieved  during the year.  Such goals were achieved in 1996. All such
shares awarded under this  Supplemental  Retirement Plan shall be restricted and
may not be  transferred  during the period  prior to being fully  vested and are
subject  to  forfeiture  if  employment  is  terminated  prior to  vesting.  Mr.
Neubauer's deferred cash account and shares awarded shall vest beginning in 2001
at a rate of 20% per year. Mr. Walsch's deferred cash account and shares awarded
shall vest beginning in 2002 at a rate of 10% per year.

         In the event of death,  disability,  termination of employment  without
good  cause,  or a change in control of the  Corporation,  all awards will fully
vest. The Deferred Cash Accounts will be invested in such investment vehicles as
proposed in writing by Mr. Neubauer and Mr. Walsch,  respectively,  and approved
by the Bank's Board of  Directors.  The  restricted  shares will earn  dividends
pursuant to the Corporation's  Dividend  Reinvestment  Plan. No payments will be
made from the Deferred  Cash Accounts  until  retirement  (assuming  there is no
premature  death or  disability)  at which time the full balance  shall be paid,
unless  the  Bank and the  named  executive  agree  otherwise.

Compensation of Directors

         During 1996, the Chairman and Vice  Chairman  of  the  Bank's  Board of
Directors received an

                                     - 11 -

<PAGE>


annual retainer of $15,000.  The non-employee Bank directors  received an annual
retainer  of  $10,800.  The  Chairman  of the Board of  Directors  of the Bank's
wholly-owned subsidiary,  TBT Investments,  Inc., received an annual retainer of
$12,000.  In the aggregate,  the Bank's Board of Directors received $101,680 for
service in 1996. This amount includes all directors fees paid to all individuals
who served as directors of the Bank in 1996.  Directors received no remuneration
for attendance at meetings of the Board of Directors of the Corporation.

Employment Contract

     On June 16, 1993, the Bank and Mr. Frank W.  Neubauer,  then Executive Vice
President  of the  Corporation  and the  Bank  (currently  President  and  Chief
Executive  Officer of the Corporation and the Bank),  entered into an employment
agreement.  The  employment  agreement  had a term of two (2) years,  which term
renews  automatically for an additional one (1) year at the end of each calendar
year unless  either Mr.  Neubauer or the Bank  provides  180 days prior  written
notification  of  termination  of the  employment  agreement.  Such  renewal  is
currently in effect. The agreement specifies Mr. Neubauer's position and duties,
compensation and benefits and termination.  The employment  agreement contains a
non-compete  provision and a  confidentiality  provision.  Also,  the employment
agreement  provided for the relocation of Mr. Neubauer to  Westminster,  Carroll
County  and a  relocation  bonus  equal to the  amount of loss,  ($88,235),  Mr.
Neubauer  sustained in 1993 on the sale of his former principal  residence.  The
relocation  bonus was paid to Mr.  Neubauer  in 1993 and vests  over a five year
period beginning in 1994. In 1996, the Bank accrued an additional  $17,647 (20%)
of the relocation bonus of $88,235 for compensation on the loss sustained on the
sale  of a  residence  by Mr.  Neubauer  under  his  employment  agreement.  The
remainder will be accrued in equal  installments  in 1997 and 1998. Mr. Neubauer
also received $5,000 to defray moving expenses in 1993.

         Under the terms of his employment  agreement,  Mr.  Neubauer  currently
serves as the President and Chief  Executive  Officer of the Bank. ln 1996,  Mr.
Neubauer's  annual  direct salary was set by the Board of Directors at $140,000.
In the event of Mr. Neubauer's  disability,  the employment  agreement  provides
that Mr.  Neubauer shall continue to receive his salary for a period of 90 days.
In  addition,  the Board of  Directors  of the Bank may provide for payment of a
periodic  bonus if such bonus is deemed  appropriate  by the Board of Directors.
Mr.  Neubauer is also entitled to receive the customary  employee  benefits made
available  by the Bank to its  employees,  as well as  twenty  (20) days of paid
vacation.


                                     - 12 -

<PAGE>

                              CERTAIN TRANSACTIONS

         Except as set forth  below,  there have been no  material  transactions
between the  Corporation and the Bank, nor any material  transactions  proposed,
with any director or executive  officer of the  Corporation and the Bank, or any
associate of the foregoing  persons.  The  Corporation and the Bank have had and
intend to continue to have banking and  financial  transactions  in the ordinary
course of business with directors and officers of the  Corporation  and the Bank
and their  associates on  comparable  terms and with similar  interest  rates as
those  prevailing  from time to time for other  customers of the Corporation and
the Bank.

         Total loans  outstanding  from the Corporation and the Bank at December
31, 1996, to the  Corporation's and the Bank's officers and directors as a group
and to members of their  immediate  families and  companies in which they had an
ownership interest of 10% or more was $2,321,478.11,  or approximately  10.6% of
the total  equity  capital of the Bank.  Loans to such  persons were made in the
ordinary  course  of  business,  were  made on  substantially  the  same  terms,
including  interest rates and  collateral,  as those  prevailing at the time for
comparable  transactions  with other persons,  and did not involve more than the
normal  risk of  collectibility  or  present  other  unfavorable  features.  The
aggregate amount of indebtedness  outstanding as of the latest practicable date,
February 28, 1997, to the above described group was $2,174,616.00.

         Certain loans from the Bank to directors were outstanding in 1996 in an
amount  considered by management of the Corporation and the Bank to be material.
Glenn E. Eaves,  Director, had two (2) loans outstanding on December 31, 1996 in
the amount of $816,265.69 and $411,606.21, respectively. Each loan is secured by
real  estate.  All of the  loans to Mr.  Eaves are  current  as to  payments  of
principal  and  interest,  and were made in the  ordinary  course of business on
substantially the same terms, including interest rates and collateral,  as those
prevailing  at the  time for  comparable  transactions  with  other  persons  as
discussed above.

                                     - 13 -

<PAGE>


Principal Officers of the Corporation

         The following table sets forth selected information about the principal
officers of the  Corporation,  each of whom is elected by the Board of Directors
and each of whom holds office at the discretion of the Board of Directors:

<TABLE>
<CAPTION>
                                                                                     Number of
                                                                   Bank                Shares             Age as of
                                                Held             Employee           Beneficially          March 20,
                  Name                          Since             Since                Owned                1997
                  ----                          -----             -----                -----                ----
<S> <C>
Eric E. Glass                                   1997               (1)               105,070(2)              57
Chairman of the Board

Donald R. Hull                                  1997               (1)                58,591(3)              58
Vice Chairman of the Board

Frank W. Neubauer                               1994               1992               12,800(4)              54
President and Chief Executive
Officer

Michael K. Walsch                               1995               1993                5,108(5)              41
Executive Vice President,
Treasurer, Chief Financial
Officer, and Chief Operating
Officer

Edward D. Leister                               1993               1977                5,398(6)              56
Senior Vice President

Brian M. Etzler                                 1994               1974                1,118(7)              42
Secretary
</TABLE>

(1)      Messrs. Glass and Hull are not employees of the Bank.

(2)      See footnote 2 above under the caption entitled "Principal  Owners"  as
         to the shares of Common Stock held beneficially by Mr. Glass.

(3)      See footnote 9 above under the caption entitled  "Beneficial  Ownership
         by Officers, Directors and Nominees" as to the shares of  Common  Stock
         held beneficially by Mr. Hull.

(4)      See footnote 10  above under the caption entitled "Beneficial Ownership
         by Officers, Directors and Nominees" as to the shares of  Common  Stock
         held beneficially by Mr. Neubauer.

(5)      See footnote 12  above under the caption entitled "Beneficial Ownership
         by Officers, Directors and Nominees" as to the shares of  Common  Stock
         held beneficially by Mr. Walsch.

(6)      Includes 1 share owned individually; 2,970 exercisable  shares  granted
         as  Stock  Options;  and  2,427  shares held jointly with Mr. Leister's
         wife.

(7)      Includes 220 exercisable shares granted as Stock Options and 898 shares
         held jointly with Mr. Etzler's wife.

Principal Officers of the Bank

                                     - 14 -

<PAGE>



         The following table sets forth selected information about the principal
officers of the Bank, each of whom is elected by the Board of Directors and each
of whom holds office at the discretion of the Board of Directors:

<TABLE>
<CAPTION>
                                                                                            Number of
                                                                            Bank             Shares           Age as of
                                  Office and Position         Held        Employee        Beneficially        March 20,
Name                                 with the Bank           Since          Since             Owned             1997
----                                 -------------           -----          -----             -----             ----
<S> <C>
Eric E. Glass                 Chairman of the                 1997           (1)           105,070(2)            57
                              Board

Donald R. Hull                Vice Chairman of                1997           (1)            58,591(3)            58
                              the Board

Frank W. Neubauer             President and Chief             1994          1992            12,800(4)            54
                              Executive Officer

Michael K. Walsch             Executive Vice                  1995          1993             5,108(5)            41
                              President, Treasurer,
                              Chief Financial
                              Officer, and Chief
                              Operating Officer

Edward D. Leister             Senior Vice                     1982          1977             5,398(6)            56
                              President

Francis X. Bossle, Jr.        Senior Vice                     1996          1996             1,111(8)            51
                              President of the
                              Bank(7)

Craig H. McConnell            Senior Vice                     1996          1996                 0               48
                              President

Brian M. Etzler               Vice President and              1994          1974             1,118(9)            42
                              Secretary
</TABLE>

(1)      Messrs. Glass and Hull are not employees of the Bank.

(2)      See footnote 2 above  under the  caption entitled "Principal Owners" as
         to the shares of Common Stock held beneficially by Mr. Glass.

(3)      See footnote  9 above  under the caption entitled "Beneficial Ownership
         by Officers, Directors and Nominees" as to the shares of  Common  Stock
         held beneficially by Mr. Hull.

(4)      See footnote  10 above under the caption entitled "Beneficial Ownership
         by Officers, Directors and Nominees" as to the shares of  Common  Stock
         held beneficially by Mr. Neubauer.

(5)      See footnote 12 above  under the caption entitled "Beneficial Ownership
         by Officers, Directors and Nominees" as to the shares of  Common  Stock
         held beneficially by Mr. Walsch.

(6)      See footnote 6 above  under the caption entitled "Principal Officers of
         the Corporation" as to the shares of Common Stock held beneficially  by
         Mr. Leister.

                                     - 15 -

<PAGE>



(7)      Mr. Bossle is Chief Executive Officer of Classic  Mortgage  Company,  a
         Division of the Bank.

(8)      Includes 11  shares  owned  individually  and  1,100 exercisable shares
         granted as Stock Options.

(9)      See footnote 7 above under  the caption entitled "Principal Officers of
         the Corporation" as to the shares  of Common Stock held beneficially by
         Mr. Etzler.


                         PROPOSAL TO APPROVE AND ADOPT
                       THE MONOCACY BANCSHARES, INC. 1997
                    INDEPENDENT DIRECTORS' STOCK OPTION PLAN

         The Board of  Directors  on  February  24, 1997  adopted  the  Monocacy
Bancshares,  Inc.  1997  Independent  Directors'  Stock Option Plan ("Plan") and
reserved  60,000 shares of Common Stock for issuance under the Plan. The purpose
of the  Plan  is to  advance  the  interests  of the  Corporation  by  providing
incentives to attract, retain, and motivate non-employee members of the Board of
Directors of the Corporation  through  participation  in the appreciation of the
capital stock of the Corporation.

         The Plan will become  effective upon approval by the  shareholders  and
will continue in effect until all awards under the Plan either have lapsed, been
exercised,  satisfied  or canceled  according  to the terms under the Plan.  The
shares of stock  that may be  issued  under  the Plan  shall  not  exceed in the
aggregate  60,000 shares of the Common Stock,  par value $5.00 per share, as may
be adjusted from time to time due to stock splits,  payments of stock  dividends
or other changes in the structure of the Corporation's capital.

         Persons  eligible  to  receive  awards  under  the Plan  shall be those
directors who are not employees of either the  Corporation  or its  subsidiaries
("Outside Directors").  Each Outside Director who has been elected or re-elected
or who is  continuing  as a member of the Board of Directors  subsequent  to the
1997 Annual Meeting shall automatically  receive a stock option for 5,000 shares
of Common Stock ("Stock Option") immediately  following the 1997 Annual Meeting.
The purchase  price of Common Stock  subject to a Stock Option shall be the fair
market  value (as  defined  in the Plan) at the time of grant.  Options  granted
under  the Plan may only be  exercised  after  the Stock  Options  have  vested.
Options  shall vest over a three year period as  specified  in the Stock  Option
Agreement. No Stock Option, however, shall be exercised after ten years from the
date of grant thereof.

         In  the  event  that  a  participant  ceases  to be a  director  of the
Corporation  for any cause  other  than  retirement,  death or  disability,  the
remaining  portion of a participant's  unexercised Stock Options shall terminate
one year after the date of  termination  as a  director  subject to the ten year
limitation on exercisability.  In the event that a participant retires,  dies or
becomes disabled prior to the expiration of the participant's Stock Options, and
without having fully  exercised  such Stock Options,  and to the extent that the
Stock  Options  are  exercisable  at the  time  of  such  retirement,  death  or
disability,  the participant or his legal representative shall have the right to
exercise  the Stock  Options  during their  respective  terms within three years
after such termination of Board membership.

         Every   award   made  to  a   director   under   the   Plan   shall  be
non-transferrable  other than by will or the laws of descent and distribution as
otherwise  previously described herein.  During the director's  lifetime,  Stock
Options granted to him shall only be exercisable by such director or in the

                                     - 16 -

<PAGE>



event of his disability or death by his legal representative.

Federal Income Tax Consequences of the Plan

         It is not  intended  that  options  issued  pursuant  to the Plan  will
qualify as incentive  stock options  issued  pursuant to a qualified plan within
the meaning of Sections  421 and 422 of the Internal  Revenue  Code of 1986,  as
amended (the "Code").  Under the provisions of the Code as in effect on the date
hereof,  a director  who  receives a  Non-Qualified  Option  will not  recognize
taxable income on the grant of the option,  however,  upon  exercise,  he or she
will  recognize  ordinary  income in an amount  equal to the  excess of the fair
market  value of the stock on the date that the  option  is  exercised  over the
purchase price paid for the stock. The Corporation will be entitled to an income
tax deduction in the year of exercise in an amount equal to the amount of income
recognized by the director.

                              NEW PLAN BENEFITS(1)


       Name and Position                      Dollar Value ($)  Number of Units
       -----------------                      ----------------  ---------------
Frank W. Neubauer                                     $0               -0-
President and CEO

Michael K. Walsch                                     $0               -0-
Executive Vice President, CFO and COO

Executive Group                                       $0               -0-

Non-Executive Director Group                        $52,500           35,000

Non-Executive Officer Employee Group                  $0               -0-
-----------------

(1)      If this Plan had been in effect during  calendar year 1996,  the dollar
         value of 35,000  Stock  Options  would be $52,500,  or $1.50 per share,
         based upon the increase in the price of the Corporation's  Common Stock
         from $21.50 to $23.00 per share during calander year 1996.

         The foregoing  discussion of the Plan consists of only a summary and is
qualified in its entirety by reference to the full text of the Plan  attached as
Exhibit  "A" to this Proxy  Statement.  Exhibit  "A" is deemed to be an integral
part of this Proxy Statement and incorporated in its entirety by reference.

         The Board of Directors  recommends a vote FOR the following  resolution
which will be presented at the Annual Meeting:

                  "RESOLVED, that the Monocacy Bancshares, Inc. 1997 Independent
         Directors'  Stock Option  Plan,  the text of which is set forth in full
         and its entirety in the Proxy  Statement for the 1997 Annual Meeting of
         Shareholders as Exhibit"A",  is hereby approved,  adopted, ratified and
         confirmed by the shareholders of the Corporation."


         The approval and adoption of the Plan requires the affirmative  vote of
at least a majority of all votes cast by shareholders.  Proxies solicited by the
Board  of  Directors  will  be  voted  for  the  foregoing   resolution   unless
shareholders specify to the contrary on their proxies.

                                     - 17 -

<PAGE>



         The Board  of  Directors recommends a vote FOR the resolution approving
and adopting the Monocacy Bancshares, Inc.  1997  Independent  Directors'  Stock
Option Plan.


                 PROPOSAL TO APPROVE AND ADOPT THE AMENDMENT TO
                         THE MONOCACY BANCSHARES, INC.
                           1994 STOCK INCENTIVE PLAN

         At the 1994 Annual Meeting of Shareholders,  the shareholders  approved
and adopted the  Corporation's  1994 Stock Incentive Plan (the "Stock  Incentive
Plan") and reserved  65,000 shares of Common Stock for issuance  under the Stock
Incentive Plan.  Because of stock dividends,  the number of shares available for
issuance under the Stock  Incentive Plan has increased to 78,408 shares by means
of the adjustment  clause to the Stock  Incentive Plan. The purpose of the Stock
Incentive Plan is to advance the development,  growth and financial condition of
the  Corporation  and  its   subsidiaries   by  providing   incentives   through
participation  in the  appreciation of capital stock of the Corporation in order
to secure,  retain and motivate  personnel  responsible  for the  operation  and
management of the Corporation and its subsidiaries.  The Stock Incentive Plan is
designed to attract and retain  individuals of outstanding  ability as employees
of the Corporation  and its  subsidiaries,  to encourage  employees to acquire a
proprietary  interest in the Corporation,  to continue their employment with the
Corporation and its subsidiaries and to render superior  performance during such
employment.  Currently,  59,480  shares  have  been  allocated  under  the Stock
Incentive Plan to the Bank's employees.

         The Board of Directors  on February  24, 1997  approved an amendment to
the Stock Incentive Plan to increase the number of shares available for issuance
under the Stock Incentive Plan by 31,592 shares. The shares of stock that may be
issued  under the Stock  Incentive  Plan,  if  amended,  shall not exceed in the
aggregate  110,000 shares of the Common Stock, par value $5.00 per share, as may
be adjusted from time to time due to stock splits,  payments of stock  dividends
or other changes in the structure of the Corporation's capital.

         The Stock Incentive Plan will be administered by a committee consisting
of two or more non-employee directors (the "Committee") and, except as otherwise
permitted by certain  securities  laws,  who have not,  during the year prior to
commencing  service  on the  Committee  been,  nor  will,  while a member of the
Committee,  be granted any awards under the Stock  Incentive  Plan, or any other
Stock Incentive Plan of the Corporation that provides for  discretionary  grants
or awards. Persons eligible to receive awards under the Stock Incentive Plan are
those key officers and other  management  employees of the  Corporation  and its
subsidiaries as determined by the Committee.



                                     - 18 -

<PAGE>



Awards

         Awards made under the Stock  Incentive  Plan may be in the form of: (i)
options to purchase stock  intended to qualify as incentive  stock options under
Sections 421 and 422 of the Code  (referred to herein as  "Qualified  Options");
(ii)  options  which do not so qualify  (referred  to herein as "Non-  Qualified
Options");  (iii) stock appreciation rights ("SARs");  and (iv) restricted stock
(referred to herein as "Restricted  Stock").  Every award made to a person under
the Stock  Incentive Plan is exercisable  during his or her lifetime only by the
recipient  and is not  saleable,  transferable  or  assignable  by the recipient
except by will or  pursuant  to  applicable  laws of descent  and  distribution.
Generally,  awards may be exercised in whole or in part.  Funds  received by the
Corporation  from the  exercise  of any  award  shall  be used  for its  general
corporate  purposes.  The  Committee  may permit an  acceleration  of previously
established  exercise  terms  of any  award  as,  when,  under  such  facts  and
circumstances,  and subject to such other or further requirements and conditions
as the Committee may deem necessary or appropriate,  including,  but not limited
to,  upon a change  of  control  of the  Corporation  (as  defined  in the Stock
Incentive Plan).

Qualified Options

         Qualified  Options may not be awarded  under the Stock  Incentive  Plan
more than ten (10) years after the earlier of the date the Stock  Incentive Plan
is adopted by the Board of  Directors  or the date on which the Stock  Incentive
Plan is approved by the shareholders are only exercisable upon the expiration of
six  months  after  the  date  of the  award  and may not  continue  beyond  the
expiration of ten (10) years beyond the date of the award. The purchase price of
the stock subject to any Qualified Option,  as determined by the Committee,  may
not be less  than the  stock's  fair  market  value  (as  defined  in the  Stock
Incentive Plan) at the time the option is awarded or less than its par value. If
the recipient of a Qualified Option ceases to be employed by the Corporation, or
subsidiary  thereof,  the  Committee  may permit the  recipient to exercise such
option during its remaining term for a period of not more than three (3) months.
This period may be extended to a 12 month  period if such  employment  cessation
was due to the recipient's  disability,  as defined in the Stock Incentive Plan.
If the  recipient  ceases  to be  employed  by the  Corporation,  or  subsidiary
thereof,  due to his or her death,  the  committee  may  permit the  recipient's
qualified  personal  representatives,  or any  persons  who  acquire the options
pursuant to his or her will or the laws of descent and distribution, to exercise
such option during its remaining term for a period not to exceed 12 months after
the  recipient's  death to the  extent  that  the  option  was then and  remains
exercisable.

Non-Qualified Options

         Similar  to   Qualified   Options,   Non-Qualified   Options  are  only
exercisable  upon the  expiration  of six (6) months after the date of the award
and shall not continue  beyond the  expiration of ten (10) years beyond the date
of the award.  If a recipient of a  Non-Qualified  Option  ceases to be eligible
under the Stock  Incentive  Plan before the option  lapses or before it is fully
exercised,  the Committee may permit the recipient to exercise the option during
its  remaining  term,  to the  extent  that the  option  was  then  and  remains
exercisable,  for such time period and under such terms and conditions as may be
prescribed by the Committee.  The purchase price of a share of stock pursuant to
a Non-Qualified  Option, as determined by the Committee,  shall not be less than
the stock's  fair market value (as defined in the Stock  Incentive  Plan) at the
time such option is awarded.

Stock Appreciation Rights

                                     - 19 -

<PAGE>




         SARs  may be  granted  either  alone,  or in  connection  with  another
previously or contemporaneously granted award (other than another SAR). Each SAR
entitles its recipient to receive, upon exercise, all or a portion of the excess
of: the fair market value at the time of such exercise of a specified  number of
shares of stock as determined by the  Committee;  and (ii) a specified  price as
determined  by the  Committee  of such number of shares of stock that,  on a per
share basis,  is not less than the stock's fair market value at the time the SAR
is awarded.  Upon  exercise of any SAR, the recipient is either paid in cash, in
stock or a combination  thereof,  as determined by the Committee.  SARs are only
exercisable  upon the  expiration  of six (6) months after the date of the award
and shall not continue  beyond the  expiration of ten (10) years beyond the date
of the award;  however, no SAR connected with another award shall be exercisable
beyond  the last date that such other  connected  award may be  exercised.  If a
recipient of a SAR ceases to be eligible  under the Stock  Incentive Plan before
it  lapses or  before  it is fully  exercised,  the  Committee  may  permit  the
recipient to exercise such SAR during its remaining term, to the extent that the
SAR was then and remains exercisable,  for such time period and under such terms
and conditions as may be prescribed by the Committee.

Restricted Stock

         Restricted  Stock is stock  that may be  acquired  by and  issued  to a
recipient at such time, for such or for no purchase price, and under and subject
to such transfer, forfeiture and other restrictions, conditions, or terms as are
determined by the Committee,  including but not limited to, prohibitions against
transfer,  substantial  risks of forfeiture  within the meaning of Section 83 of
the Code, and attainment of performance or other goals, objectives or standards,
all for or applicable to time periods,  determined by the Committee. A recipient
of  restricted  stock  has  the  rights  of a  shareholder,  including,  without
limitation,  the right to vote the shares and receive  dividends  on the shares.
During the period of any  restrictions,  conditions,  or terms applicable to the
Restricted  Stock,  however,  the  shares,  the right to vote the  shares and to
receive  dividends  on the  shares  may  not  be  sold,  assigned,  transferred,
exchanged, pledged, hypothecated,  encumbered or otherwise disposed of except as
permitted by the Stock  Incentive  Plan or by the award.  Each  certificate  for
shares of Restricted  Stock will bear a restrictive  legend until all conditions
or  restrictions  lapse or are satisfied.  If a recipient's  employment with the
Corporation  or its  subsidiaries  ceases,  for any  reason,  prior  to lapse or
satisfaction  of  the  restrictions,  conditions  or  terms  applicable  to  the
restricted  stock,  all stock  subject to  unexpired  restrictions  is forfeited
absolutely by the recipient to the Corporation.

Federal Tax Consequences

         An employee who receives  Qualified  Options will not recognize taxable
income on the grant or the exercise of the option.  If the stock acquired by the
exercise  of a  Qualified  Option is held  until the later of: (i) two (2) years
from the date of the grant; and (ii) one (1) year from the date of exercise, any
gain (or loss)  recognized  on the sale or exchange of the stock will be treated
as long-term capital gain (or loss), and the Corporation will not be entitled to
any income tax deduction. If stock acquired on exercise of a Qualified Option is
sold or exchanged  before the  expiration of the required  holding  period,  the
employee will recognize  ordinary income in the year of disposition in an amount
equal to the  difference  between  the  option  price and the lesser of the fair
market value of the

                                     - 20 -

<PAGE>



stock  on the  date  of  exercise,  or the  selling  price.  In the  event  of a
disqualifying  disposition,  the  Corporation  will be entitled to an income tax
deduction  in the year of such  disposition  in an amount equal to the amount of
ordinary income recognized by the employee.

         An employee  who  receives a  Non-Qualified  Option will not  recognize
taxable income on the grant of the option,  however,  upon  exercise,  he or she
will  recognize  ordinary  income in an amount  equal to the  excess of the fair
market  value of the stock on the date that the  option  is  exercised  over the
purchase price paid for the stock. The Corporation will be entitled to an income
tax  deduction  in the year of exercise in an amount  equal the amount of income
recognized by the employee.

         A SAR is not taxed at the time it is granted, even if it is immediately
exercisable.  A SAR is taxed at exercise.  If cash is received at exercise,  the
payment is considered compensation income to the recipient,  and the Corporation
may take a deduction for this expense. In addition,  the Corporation  receives a
deduction equal to the amount included in income by the recipient.

         The  recipient of  restricted  stock is deemed to have  received  gross
income in an amount  equal to the excess of the fair  market  value of the stock
over the amount paid for the stock,  if any, by the  recipient  at the time that
all  restrictions  applicable  to  the  stock  lapse  or are  satisfied.  If the
restricted   stock  is  forfeited   prior  to  the  lapse  or   satisfaction  of
restrictions,  there are tax consequences to the recipient. The Corporation will
be  entitled to a  deduction  equal to the amount  included in the income of the
recipient  in the  Corporation's  taxable  year in which or with  which ends the
taxable year of the recipient in which the income was included.

                             New Plan Benefits (1)

        Name and Position                   Dollar Value ($)   Number of Units
        -----------------                   ----------------   ---------------
Frank W. Neubauer                                $3,300             2,200
President and CEO

Michael K. Walsch                                $1,650             1,100
Executive Vice President and CFO

Executive Group                                  $7,755             5,170

Non-Executive Director Group                       $0                 0

Non-Executive Officer                            $3,630             2,420
Employee Group
-----------------

(1)      This plan was in effect  during  calendar  year  1996,  when the dollar
         value of each Stock Option was $1.50 per share, based upon the increase
         in the price of the  Corporation's  Common  Stock from $21.50 to $23.00
         per share during 1996. The number of units reflects the number of Stock
         Options granted under the plan during 1996.

         The foregoing discussion of the Stock Incentive Plan consists of only a
summary and is  qualified  in its  entirety by reference to the full text of the
Stock  Incentive  Plan as  amended  is  attached  as  Exhibit  "B" to this Proxy
Statement.  Exhibit "B" is deemed to be an integral part of this Proxy Statement
and incorporated in its entirety by reference.

                                     - 21 -

<PAGE>




         The Board of Directors  recommends a vote FOR the following  resolution
which will be presented at the Annual Meeting:

                  "RESOLVED, that the amendment to the Monocacy Bancshares, Inc.
         1994 Stock Incentive  Plan, and the Plan as amended,  the text of which
         is set forth in full and in its entirety in the Proxy Statement for the
         1997 Annual Meeting of Shareholders as Exhibit "B," is hereby approved,
         adopted,   ratified   and   confirmed  by  the   shareholders   of  the
         Corporation."

         The approval and adoption of the amendment to the Stock  Incentive Plan
requires  the  affirmative  vote of at least a  majority  of all  votes  cast by
shareholders.  Proxies solicited by the Board of Directors will be voted for the
foregoing  resolution  unless  shareholders  specify  to the  contrary  on their
proxies.

         The Board of  Directors  recommends a vote FOR the resolution approving
and adopting the amendment to the Monocacy Bancshares, Inc. 1994 Incentive Stock
Option Plan.


                      RATIFICATION OF INDEPENDENT AUDITORS

         Unless  instructed to the  contrary,  it is intended that votes will be
cast pursuant to the proxies for the  ratification of the selection of Stegman &
Company as the Corporation's  independent auditors for its 1997 fiscal year. The
Corporation  has been  advised by Stegman & Company that none of its members has
any financial  interest in the  Corporation.  Ratification  of Stegman & Company
will  require the  affirmative  vote of a majority of the shares of Common Stock
represented  in  person  or by proxy at the  Annual  Meeting.  Stegman & Company
served as the  Corporation's  independent  auditors  for the 1996  fiscal  year,
assisted the  Corporation and the Bank with the preparation of their federal and
state tax returns,  provided  assistance in connection with regulatory  matters,
and provided data  processing  consulting  services,  charging the Bank for such
services at its customary  hourly billing rates.  These non-audit  services were
approved  by the  Corporation's  and the  Bank's  Board of  Directors  after due
consideration  of the effect of the performance  thereof on the  independence of
the auditors and after the conclusion by the  Corporation's and the Bank's Board
of Directors that there was no effect on the independence of the auditors.

         In the event  that the  shareholders  do not ratify  the  selection  of
Stegman & Company as the Corporation's  independent auditors for the 1997 fiscal
year,  another  accounting  firm may be  chosen  to  provide  independent  audit
services for the 1997 fiscal year.  The Board of Directors  recommends  that the
shareholders  vote FOR the ratification of the selection of Stegman & Company as
the  independent  auditors for the  Corporation for the year ending December 31,
1997.




                                     - 22 -

<PAGE>



                                 ANNUAL REPORT

         A copy of the  Corporation's  Annual  Report for its fiscal  year ended
December 31, 1996 is enclosed with this Proxy  Statement.  A  representative  of
Stegman & Company,  the accounting firm which examined the financial  statements
in the Annual Report, will attend the meeting.  The representative will have the
opportunity  to make a statement,  if he desires to do so, and will be available
to respond to any appropriate  questions  concerning the Annual Report presented
by shareholders at the Annual Meeting.


                             SHAREHOLDER PROPOSALS

         Any  shareholder  who, in accordance with and subject to the provisions
of the proxy rules of the Securities and Exchange Commission, wishes to submit a
proposal for inclusion in the Corporation's  Proxy Statement for its 1998 Annual
Meeting of  Shareholders  must deliver such proposal in writing to the President
of  Monocacy  Bancshares,  Inc. at its  principal  executive  offices,  222 East
Baltimore Street, Taneytown, Maryland 21787, not later than December 1, 1997.


                                 OTHER MATTERS

         The Board of Directors does not know of any matters to be presented for
consideration  other than the matters  described in the  accompanying  Notice of
Annual Meeting of Shareholders, but if any matters are properly presented, it is
the  intention of the persons  named in the  accompanying  Proxy to vote on such
matters in accordance with their best judgment.


                             ADDITIONAL INFORMATION

         UPON WRITTEN REQUEST OF ANY  SHAREHOLDER,  A COPY OF THE  CORPORATION'S
REPORT ON FORM 10-K FOR ITS FISCAL YEAR ENDED  DECEMBER 31, 1996  INCLUDING  THE
FINANCIAL  STATEMENTS AND THE SCHEDULES  THERETO,  REQUIRED TO BE FILED WITH THE
SECURITIES AND EXCHANGE  COMMISSION  PURSUANT TO RULE 13a-1 UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, MAY BE OBTAINED,  WITHOUT CHARGE, FROM MICHAEL
K. WALSCH,  EXECUTIVE  VICE  PRESIDENT  AND CHIEF  FINANCIAL  OFFICER,  MONOCACY
BANCSHARES,  INC., 222 EAST BALTIMORE STREET, P.O. BOX 491, TANEYTOWN,  MARYLAND
21787.

                                     - 23 -

<PAGE>



                           MONOCACY BANCSHARES, INC.

                                     PROXY

           ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 28 1997
          THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.

         The undersigned  hereby  constitutes and appoints Michael K. Walsch and
Brian M. Etzler and each or any of them,  proxies of the undersigned,  with full
power of substitution,  to vote all of the shares of Monocacy  Bancshares,  Inc.
(the  "Corporation")  that the undersigned may be entitled to vote at the Annual
Meeting of  Shareholders  of the  Corporation  to be held at the main  office of
Taneytown Bank & Trust Company, 222 East Baltimore Street,  Taneytown,  Maryland
21787,  on  Monday,  April 28 1997 at 3:00  p.m.,  prevailing  time,  and at any
adjournment or postponement thereof as follows:

1.       ELECTION OF FOUR DIRECTORS WHOSE TERM EXPIRES IN 2000.

         David M. Abramson, Glenn E. Eaves, Jacob M. Yingling, Frank W. Neubauer

         [   ]     FOR all nominees                [   ]    WITHHOLD AUTHORITY
                   listed above (except                     to vote for all
                   as marked to the                         nominees listed
                   contrary below)                          above

         (INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
         NOMINEE, WRITE THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)

--------------------------------------------------------------------------------

2.       PROPOSAL TO APPROVE AND ADOPT THE MONOCACY BANCSHARES, INC. 1997
         INDEPENDENT DIRECTORS' STOCK OPTION PLAN.

         [   ]    FOR                [  ]  AGAINST                [  ]  ABSTAIN

         The Board of Directors recommends a vote FOR this proposal.
--------------------------------------------------------------------------------

3.       PROPOSAL TO APPROVE AND ADOPT THE PROPOSED AMENDMENT TO THE
         MONOCACY BANCSHARES, INC. 1994 INCENTIVE STOCK OPTION PLAN  TO
         INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
         AVAILABLE FOR ISSUANCE UNDER THE PLAN BY 31,592 SHARES.

         [   ]    FOR                [  ]  AGAINST                [  ]  ABSTAIN

         The Board of Directors recommends a vote FOR this proposal.
--------------------------------------------------------------------------------

<PAGE>

4.       PROPOSAL TO RATIFY THE SELECTION OF STEGMAN & COMPANY, CERTIFIED PUBLIC
         ACCOUNTANTS,  AS THE  INDEPENDENT  AUDITORS FOR THE CORPORATION FOR THE
         YEAR ENDING DECEMBER 31, 1997.

         [   ]    FOR                [  ]   AGAINST               [  ]  ABSTAIN

         The Board of Directors recommends a vote FOR this proposal.

--------------------------------------------------------------------------------

5.       In their discretion, the proxies are authorized to vote upon such other
         business as may properly come before the meeting and any adjournment or
         postponement thereof.

--------------------------------------------------------------------------------

         THIS PROXY, WHEN PROPERLY SIGNED,  WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER.  IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR ALL NOMINEES LISTED ABOVE AND FOR PROPOSALS 2, 3 and 4.

                                  Dated:                               , 1997
                                         ______________________________


                                  ___________________________________________
                                  Signature(s) of Shareholders


                                  ___________________________________________
                                  Signature(s) of Shareholders


Number of Shares Held
of Record on March 20,
1997
    _________________



THE  PROXY  MUST BE DATED, SIGNED BY THE SHAREHOLDER(S) AND RETURNED PROMPTLY TO
THE TRANSFER  AGENT  IN  THE  ENCLOSED  ENVELOPE.   WHEN  SIGNING  AS  ATTORNEY,
EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE.   IF  MORE
THAN ONE TRUSTEE, ALL SHOULD SIGN.  IF STOCK IS HELD JOINTLY,  EACH OWNER SHOULD
SIGN.


<PAGE>

                                                                     EXHIBIT "A"


                           MONOCACY BANCSHARES, INC.
                 1997 INDEPENDENT DIRECTORS' STOCK OPTION PLAN


1.       Purpose.  The  purpose  of  this  Stock Option Plan (the "Plan") is  to
         advance the development, growth and  financial  condition  of  Monocacy
         Bancshares, Inc. and its subsidiaries (the "Corporation"), by providing
         incentives through participation in the  appreciation  of capital stock
         of the Corporation so as to secure, retain and motivate  members of the
         Corporation's Board of Directors (the "Board") who are not officers and
         employees of the Corporation or any  subsidiary  thereof ("non-employee
         directors").   This  Plan  shall  be  interpreted  and implemented in a
         manner so that non-employee directors will not fail,  by reason of this
         Plan or their participation in it, to be "disinterested persons" within
         the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as
         amended  ("Exchange  Act")  as  to  any  employee  benefit  plan of the
         Corporation or its affiliates.

2.       Term. The Plan shall become effective as of the date the  Corporation's
         stockholders duly approve the Plan (the "Effective  Date"). If the Plan
         is so approved,  it shall  continue in effect  until any stock  options
         granted under the Plan either have lapsed or been exercised,  satisfied
         or canceled according to their terms under the Plan.

3.       Stock.  The shares of stock that may be issued under the Plan shall not
         exceed, in  the  aggregate,  sixty  thousand  (60,000)  shares  of  the
         Corporation's  common  stock,  par value $5.00 per share (the "Stock").
         The aggregate amount of Stock under  the  Plan may be adjusted pursuant
         to paragraph 10.  Such shares of Stock may  be  either  authorized  and
         unissued shares of Stock, or authorized shares of Stock issued  by  the
         Corporation and subsequently reacquired by it as treasury stock.  Under
         no circumstances shall any fractional shares of  Stock  be issued under
         the Plan.  The Corporation shall reserve and  keep available, and shall
         duly apply for any requisite governmental  authority to grant the stock
         options under this Plan,  and  issue  or  sell  the number of shares of
         Stock needed  to  satisfy the requirements of the Plan while in effect.
         The Corporation's  failure  to  obtain  any such governmental authority
         deemed necessary by the Corporation's  legal  counsel  for  the  proper
         grant of the stock options under this Plan and/or the issuance and sale
         of Stock under the Plan  shall  relieve the Corporation of any duty, or
         liability for the failure to grant the  stock  options  under this Plan
         and/or issue or sell the Stock as to which such authority has not  been
         obtained.

4.       Stock  Options.  Stock  options  shall be granted under the Plan to all
         current non-employee directors of the Corporation, and any non-employee
         director, other than current or prior members of the Board, who  become
         a member of the Board at any time within a five (5) year  period  after
         the Effective Date (such directors shall be referred to under this Plan
         as a "Director").  Every stock option granted  to  a  Director shall be
         exercisable during his or her lifetime only  by the Director, and shall
         not be salable, transferable  or  assignable  by the Director except by
         his or  her  Will  or  pursuant  to  applicable  laws  of  descent  and
         distribution.  Commencing  on  the  Effective Date, or in the case of a
         Director who becomes a member of the Board at  any  time  within a five
         (5) year period after the Effective Date, commencing on the date  he or
         she is elected or appointed to the Board, a Director shall be granted a
         stock option to purchase five thousand (5,000)  shares  of  Stock  (the
         "Stock Option") under the following terms and conditions:

         (a)      The time period  during which any Stock Option is  exercisable
                  shall be ten (10)  years  after the date the  Stock  Option is
                  granted to the Director.  However,  no option may be exercised
                  after the  expiration  of its term or after the date set forth
                  in subsections (b), (c) or (d) below, if earlier.  Options are
                  exercisable only to the extent they are vested.

         (b)      If  the  Optionee  ceases  to be a  Director  after  attaining
                  mandatory  retirement  age (as  defined  in the  Corporation's
                  By-Laws) or on account of death or disability, all outstanding
                  options  granted to such Optionee  shall vest and the Optionee
                  (or the Optionee's  legatees or  distributees  or the personal
                  representative  of the Director's  estate, in the event of the
                  Optionee's  death) may  exercise  the  Optionee's  outstanding
                  options at any time until the first of the  following to occur
                  (1) that date  that is two  years  after the date on which the
                  Optionee ceases to be a Director or (2) the date on which such
                  outstanding options expire according to their terms.

         (c)      If an Optionee  ceases to be a Director  for any reason  other
                  than  described  in  subsection  (b) above,  the  Director may
                  exercise his or her  outstanding  options to the extent vested
                  at any time  (subject to the  limitations  of  subsection  (f)
                  below) until the first of the  following to occur (1) the date
                  that is three months

                                      A-1

<PAGE>


                  after the date on which the  Optionee  ceases to be a Director
                  or (2) the  date on  which  such  outstanding  options  expire
                  according to their terms.

         (d)      If an  Optionee  dies  after  the  Optionee  ceases  to  be  a
                  Director, but within the time period during which his  or  her
                  outstanding  Options  are still  exercisable,  the  Optionee's
                  outstanding Options may be exercised by his or her legatees or
                  distributees  or  the  personal  representative  of his or her
                  estate.  Such outstanding Options may be exercised at any time
                  (subject to the limitations of subsection (f) below) until the
                  first of the following to occur (1) the date that is two years
                  after the date on which the  Optionee  ceases to be a Director
                  or (2) the  date on  which  such  outstanding  Options  expire
                  according to their terms.

         (e)      The  purchase  price of a share of  Stock  subject  to a Stock
                  Option  shall  be  the  fair  market  value  of the  Stock  as
                  determined under paragraph 6 hereof.

         (f)      Options  are  exercisable  only to the extent they are vested,
                  and no option  may be  exercised  during  the first six months
                  after the  Option  Grant  Date,  unless the  Optionee  dies or
                  becomes  disabled (as determined  under Title II of the Social
                  Security  Act,  42  U.S.C.   ss.ss.301  et  seq.)  before  the
                  expiration of the six-month period.  The Stock Option shall be
                  made by a written  agreement  attached  hereto as Exhibit "1",
                  which written  agreement  contains the vesting schedule of the
                  Stock Option, as follows:

                  Period From
                  Option Grant                       Vested          Number of
                  Date                              Percentage     Shares Vested
                  ------------                      ----------     -------------
                  Less Than 1 Year                     25%             1,250
                  1 Year But Less Than 2 Years         50%             2,500
                  2 Years But Less Than 3 Years        75%             3,750
                  3 Or More Years                     100%             5,000

5.       Exercise.  Except  as  otherwise provided in the Plan, the Stock Option
         may be exercised in whole or in part by giving written  notice  thereof
         to  the   Secretary  of  the  Corporation,  or  his  or  her  designee,
         identifying  the  Stock Option being exercised, the number of shares of
         Stock with respect  thereto,  and  other  information  pertinent to the
         exercise of the Stock Option.   The  purchase  price  of  the shares of
         Stock with respect to which a Stock  Option  is exercised shall be paid
         with the written notice of exercise, either in  cash  or in Stock which
         has been held by the Director for at least six (6) months  at  its then
         current fair market  value,  or  in  any  combination  thereof.   Funds
         received by the Corporation from the exercise of any Stock Option shall
         be used for its general  corporate  purposes.  The  number of shares of
         Stock subject to a Stock Option shall  be  reduced  by  the  number  of
         shares of Stock with respect to which the Director has exercised rights
         under the Stock Option.

         If the Corporation or its stockholders  execute an agreement to dispose
         of all or  substantially  all of the  Corporation's  assets or  capital
         stock  by  means  of  sale,  merger,   consolidation,   reorganization,
         liquidation  or  otherwise,  as a  result  of which  the  Corporation's
         stockholders as of immediately  before such transaction will not own at
         least fifty  percent  (50%) of the total  combined  voting power of all
         classes  of voting  capital  stock of the  surviving  entity (be it the
         Corporation or otherwise)  immediately  after the  consummation of such
         transaction,  thereupon  any and all Stock  Options  which the Director
         would be  entitled  to  receive  under  the Plan  shall be  immediately
         granted to the Director until the consummation of such transaction,  or
         if  not  consummated,  until  the  agreement  therefor  expires  or  is
         terminated, in which case thereafter all Stock Options shall be treated
         as if said agreement  never had been executed.  If during any period of
         two (2) consecutive years, the individuals who at the beginning of such
         period  constituted  the Board,  cease for any reason to  constitute at
         least a majority of the Board,  unless the election of each director of
         the Board, who was not a director of the Board at the beginning of such
         period,  was approved by a vote of at least two-thirds of the directors
         then  still in  office  who were  directors  at the  beginning  of such
         period, thereupon any and all Stock Options which the Director would be
         entitled to receive under the Plan shall be immediately  granted to the
         Director. If there is an actual,  attempted or threatened change in the
         ownership  of at least  twenty-five  percent  (25%) of any  classes  of
         voting capital stock of the Corporation  through the acquisition of, or
         an offer to acquire such percentage of the Corporation's voting capital
         stock by any person or entity, or persons or entities acting in concert
         or as a group, and such acquisition or offer has not been duly approved
         by the Board,  thereupon  any and all Stock  Options which the Director
         would be  entitled  to  receive  under  the Plan  shall be  immediately
         granted.

6.       Value.  Where  used in the Plan, the "fair market value" of Stock shall
         mean and be determined as follows:  (i) in the event that the Stock  is
         listed on an established exchange, the closing price of  the  Stock  on
         the date when the

                                      A-2
<PAGE>

         Stock Option is granted to the Director (the "Relevant Date") or, if no
         trade did occur on that day, on the next preceding day on which a trade
         occurred;  or (ii) in the  event  that the  Stock is not  listed  on an
         established exchange, but is then quoted on the National Association of
         Securities Dealers Automated  Quotation System ("NASDAQ"),  the average
         of the average of the closing bid and asked quotations of the Stock for
         the five (5) trading days  immediately  preceding the Relevant Date. In
         either  case,  in the event that no closing bid or asked  quotation  is
         available  on one (1) or more of such  trading  days,  the fair  market
         value shall be  determined  by  reference  to the five (5) trading days
         immediately  preceding the Relevant Date on which closing bid and asked
         quotations are available.

7.       Continued  Relationship.  Nothing in the Plan or any Stock Option shall
         confer  upon  any  Director  or  any  right  to  continue  his  or  her
         relationship with the Corporation as a director, or limit or affect any
         rights, powers or privileges that the Corporation or its affiliates may
         have to supervise,  discipline  and terminate  such  Director,  and the
         relationships thereof.

8.       General  Restrictions.   Each  Stock  Option  shall  be  subject to the
         requirement and provision that if at any time the Board  determines  it
         necessary or desirable as a condition of or in  consideration of making
         such Stock Option, or the purchase or issuance or Stock thereunder, (a)
         the listing, registration or qualification of the  Stock subject to the
         Stock Option, or the Stock Option itself, upon any  securities exchange
         or under  any  federal  or  state  securities  or  other  laws, (b) the
         approval of  any  governmental  authority,  or (c)  an agreement by the
         Director with respect to disposition of any  Stock  (including  without
         limitation that at the time of the Director's  exercise  of  the  Stock
         Option, any Stock thereby acquired is being and will be acquired solely
         for investment purposes and without any intention to sell or distribute
         such Stock), then such Stock Option shall not be consummated  in  whole
         or in part unless such listing,  registration,  qualification, approval
         or agreement shall have been  appropriately effected or obtained to the
         satisfaction  of  the  Board  and  legal  counsel  for the Corporation.
         Notwithstanding anything to the contrary herein, a Director  shall  not
         sell, transfer or otherwise dispose of any  shares  of  Stock  acquired
         pursuant to a Stock Option unless at  least six (6) months have elapsed
         from  the  date  the  Stock  Option  was  granted, the election of such
         transaction  is  made  at  least  six  months following the date of the
         Director's most  recent  "opposite-way  election" under any plan of the
         Corporation  or  the  transaction  is otherwise made in accordance with
         Section 16 of the Exchange Act, as the  same  my  be amended, if at the
         time of such disposition the Director is subject  to  Section 16 of the
         Exchange Act.

9.       Rights.  Except  as  otherwise provided in the Plan, the Director shall
         have no rights as a holder of the  Stock  subject  thereto  unless  and
         until one or more certificates for the  shares of such Stock are issued
         and delivered to  the  Director.  No  adjustments  shall  be  made  for
         dividends, either ordinary or extraordinary, or any other distributions
         with  respect  to  Stock,  whether  made  in  cash, securities or other
         property, or any rights with respect thereto, for which the record date
         is prior to the date that any certificates for Stock subject to a Stock
         Option are issued to the  Director  pursuant to  his  or  her  exercise
         thereof.  No Stock Option,  or the grant thereof, shall limit or affect
         the right  or  power  of  the  Corporation or its affiliates to adjust,
         reclassify, recapitalize, reorganize or otherwise change its  or  their
         capital or business structure,  or  to  merge,  consolidate,  dissolve,
         liquidate or  sell  any  or  all  of its or their business, property or
         assets.

10.      Adjustments.  In  the  event  that  the  shares  of Common Stock of the
         Corporation,  as  presently  constituted,  shall  be  changed  into  or
         exchanged  for  a  different number or kind of shares of stock or other
         securities of the Corporation or of other securities of the Corporation
         or of another corporation (whether  by reason of merger, consolidation,
         recapitalization, reclassification, split-up,  combination of shares or
         otherwise) or if the number of such shares of  stock shall be increased
         through  the  payment  of  a  stock  dividend,  then,  there  shall  be
         substituted for or added to each share  of  stock  of  the  Corporation
         which  was  theretofore  appropriated,  or  which thereafter may become
         subject to an option under the Plan,  the  number and kind of shares of
         stock or other securities into  which each  outstanding  share  of  the
         stock of  the  Corporation  shall  be so changed or for which each such
         share shall  be  exchanged  or  to  which  each  such  shares  shall be
         entitled, as the  case may  be.   Outstanding  Options  shall  also  be
         appropriately amended  as to price and other terms, as may be necessary
         to reflect the foregoing events.

         If  there  shall  be any  other  change  in the  number  or kind of the
         outstanding shares of the stock of the Corporation,  or of any stock or
         other  securities in which such stock shall have been  changed,  or for
         which  it  shall  have  been  exchanged,  and  if  a  majority  of  the
         disinterested  members  of the  Board  shall,  in its sole  discretion,
         determine  that such change  equitably  requires an  adjustment  in any
         Option which was theretofore granted or which may thereafter be granted
         under the Plan, then such  adjustment  shall be made in accordance with
         such determination.

         The grant of an Option pursuant to the Plan shall not affect in any way
         the   right  or  power  of  the   Corporation   to  make   adjustments,
         reclassifications,   reorganizations  or  changes  of  its  capital  or
         business structure, to merge, to

                                      A-3

<PAGE>


         consolidate,  to  dissolve,  to liquidate or to sell or transfer all or
         any part of its business or assets.

         A  dissolution  or  liquidation  of the  Corporation,  or a  merger  or
         consolidation   in  which  the   Corporation   is  not  the   surviving
         Corporation,  shall cause each outstanding Option to terminate,  except
         to the extent that another  corporation may and does in the transaction
         assume and continue to the Option or substitute its own options.

         Fractional  shares resulting from any adjustment in Options pursuant to
         this  Article  10 may be settled  as a  majority  of the  disinterested
         members  of the  Board or the  Committee  (as the  case  may be)  shall
         determine.

         To the  extent  that  the  foregoing  adjustments  relate  to  stock or
         securities  of the  Corporation,  such  adjustments  shall be made by a
         majority of the disinterested members of the Board, whose determination
         in that respect shall be final,  binding and conclusive.  Notice of any
         adjustment  shall be  given by the  Corporation  to each  holder  of an
         Option which shall been so adjusted.

11.      Forfeiture.  Notwithstanding  anything to the contrary in this Plan, if
         the involved Director has been engaged in fraud,  embezzlement,  theft,
         commission  of a  felony,  or  dishonesty  in the  course of his or her
         relationship  with the  Corporation or its affiliates  that has damaged
         them,  or  that  the  Director  has  disclosed  trade  secrets  of  the
         Corporation  or its  affiliates,  the Director shall forfeit all rights
         under and to all  unexercised  Stock Options,  and all exercised  Stock
         Options under which the Corporation has not yet delivered  certificates
         for  shares of Stock (as the case may be),  and all  rights to  receive
         Stock Options shall be automatically canceled.

12.      Miscellaneous.   Any  reference  contained in this Plan to a particular
         section or provision of law, rule  or  regulation,  including  but  not
         limited to the Internal Revenue Code of 1986 and the Exchange Act, both
         as amended, shall  include  any  subsequently  enacted  or  promulgated
         section or provision of law, rule or regulation, as the case may be, of
         similar import.  With  respect  to persons subject to Section 16 of the
         Exchange Act, transactions under  this Plan are intended to comply with
         all applicable conditions of Rule 16b-3  or any successor rule that may
         be  promulgated  by  the  Securities  and  Exchange Commission.  To the
         extent  any  provision  of  this  Plan  fails to so comply, it shall be
         deemed null and void,  to  the  extent  permitted  by  applicable  law,
         subject  to  the  provisions of paragraph 13 below.  Where used in this
         Plan:  the  plural  shall  include the singular, and unless the context
         otherwise clearly requires, the singular shall include the plural; and,
         the term "affiliates" shall  mean  each  and  every  subsidiary  of the
         Corporation.  The captions of the numbered paragraphs contained in this
         Plan are for convenience only,  and  shall  not  limit  or  affect  the
         meaning, interpretation or construction of any of the provisions of the
         Plan.

13.      Amendment. The Plan may not be amended,  suspended or terminated except
         as  may be  provided  for  herein,  or as may  be  required  under  the
         provisions  of the  Internal  Revenue  Code of 1986,  as  amended,  and
         Section 16 of the Exchange Act, and the rules  regulations  thereunder.
         If any provision of the Plan would cause a non-employee director not to
         be a "disinterested  person" within the meaning of Rule 16b-3 under the
         Exchange Act as then  applicable  to any  employee  benefit plan of the
         Corporation, such provision shall be construed or deemed amended to the
         extent necessary to preserve such  non-employee  director's status as a
         "disinterested person".

14.      Taxes.  The issuance of shares of Stock under the Plan shall be subject
         to any applicable taxes or other laws  or  regulations  of  the  United
         States of America and any state or local  authority having jurisdiction
         thereover.

                                 - - - - - - -
                                      END
                                 - - - - - - -

                                      A-4


<PAGE>

                                                                     EXHIBIT "1"

                           MONOCACY BANCSHARES, INC.
                 1997 INDEPENDENT DIRECTORS' STOCK OPTION PLAN
                             STOCK OPTION AGREEMENT


         A STOCK OPTION for a total of five  thousand  (5,000)  shares of common
stock,  par value $5.00 per share,  of  Monocacy  Bancshares,  Inc.,  a Maryland
business corporation (herein the "Corporation") is hereby granted to
                                             (herein the "Director"), subject in
all respects to the terms and  provisions  of  Monocacy  Bancshares,  Inc.  1997
Independent Directors' Stock  Option Plan (herein the "Plan"),  dated  April 28,
1997,  which has been  adopted by the  Corporation's  shareholders  and which is
incorporated  herein  by  reference.   The  "Option  Price"  as determined under
paragraphs 4 and 6 of the Plan is $       per share.

1.       This  Option  shall  vest and become exercisable in accordance with the
         following schedule:

           Period From
           Option Grant                     Vested           Number of
           Date                           Percentage      Shares Vested
           ------------                   ----------      -------------
           Less Than 1 Year                   25%              1,250
           1 Year But Less Than 2 Years       50%              2,500
           2 Years But Less Than 3 Years      75%              3,750
           3 Or More Years                   100%              5,000

         Notwithstanding  the  foregoing,  the  Option  shall  vest  and  become
         immediately  exercisable upon the occurrence of an event constituting a
         Change in Control if the Option has been  outstanding  for at least six
         (6) months after the Option Grant Date. Vesting shall cease on the date
         on which the Optionee ceases to serve as a Director, except as provided
         in the Plan and Section 4 of this Agreement.

2.       Method of Exercise of Option.  The Option may be exercised  (in full or
         in part) by  delivery  of a written  notice to the  Corporation  at its
         principal executive office,  accompanied by payment of the Option Price
         for the Shares as to which such Option is  exercised.  The Option Price
         of each Share as to which  this  Option is  exercised  shall be paid in
         full at the time of  exercise  (i) in  cash,  or (ii) by  surrender  of
         Shares owned by the Optionee exercising the Option having a fair market
         value on the date of exercise equal to the aggregate  Option Price,  or
         (iii) any combination thereof.

3.       Withholding.  Upon  exercise  of  all  or  any part of this Option, the
         Optionee   shall   make  arrangements  with  the  Corporation  for  the
         withholding of any  applicable  federal,  state and local income taxes.
         The Director may elect to satisfy such withholding  obligations  in any
         manner permitted under the Plan.

4.       Expiration Date. Subject to earlier termination as provided in the Plan
         or this  Agreement,  this Option  shall expire ten (10) years after the
         Option Grant Date.  Unless the Optionee  ceases to be a Director  after
         the Optionee attains his or her mandatory retirement age (as defined in
         the  corporation's  bylaws) or on account  of the  Optionee's  death or
         Disability,  vesting of the Option shall cease on the date on which the
         Optionee  ceases to be a Director and the Option shall terminate on the
         date  which is three (3)  months  after the date on which the  Optionee
         ceases  to be a  Director.  In the  event of death or  disability,  the
         Option  shall  terminate  two (2)  years  after  the date on which  the
         Optionee ceases to be a Director.

5.       Agreement  to Terms of Plan.  By signing this  Agreement,  the Optionee
         accepts the Option  subject to the terms and conditions of the Plan and
         this   Agreement.   Unless   otherwise   provided  in  this  Agreement,
         capitalized  terms used in this  Agreement  shall have the meanings set
         forth in the Plan.  As provided in the Plan,  this  Agreement  shall be
         governed by, and construed in accordance  with the laws of the State of
         Maryland.

6.       Receipt  of  Prospectus.   By  signing  this  Agreement,  the  Optionee
         acknowledged receipt of the Prospectus filed by


<PAGE>


         the  Corporation  with the Securities and Exchange Commission under the
         Securities Act of 1933.



Dated:       April 28, 1997
       ____________________



ATTEST:                                         MONOCACY BANCSHARES, INC.


                                             By
___________________________                     ____________________________
Brian M. Etzler, Secretary                      Frank W. Neubauer, President



         The Optionee acknowledges receipt of a copy of the Plan, and represents
that he or she is familiar with the terms and provisions  thereof.  The Optionee
hereby accepts this Option subject to all the terms and provisions of the Plan.


Dated:      April 28, 1997
       ____________________


                                                ____________________________
                                                Optionee


<PAGE>
                                                                     EXHIBIT "B"


                           MONOCACY BANCSHARES, INC.
                           1994 STOCK INCENTIVE PLAN
                                  (as amended)

1.       Purpose.  The purpose of this Stock  Incentive  Plan (the "Plan") is to
         advance the  development,  growth and  financial  condition of Monocacy
         Bancshares,  Inc. (the  "Corporation")  and each subsidiary  thereof as
         defined in Section 424 of the Internal Revenue Code of 1986, as amended
         (the "Code"),  by providing  incentives  through  participation  in the
         appreciation  of  capital  stock of the  Corporation  so as to  secure,
         retain and motivate  personnel who may be responsible for the operation
         and  management  of  the  affairs  of  the  Corporation  and  any  such
         subsidiary now or hereafter existing ("Subsidiary").

2.       Term.  The Plan shall become  effective as of the date it is adopted by
         the  Corporation's  Board of Directors  (the  "Board"),  so long as the
         Corporation's  stockholders  duly  approve the Plan within  twelve (12)
         months either  before or after the date of the Board's  adoption of the
         Plan. Any and all options and rights awarded under the Plan  ("Awards")
         before it is so approved  by the  Corporation's  stockholders  shall be
         conditional upon and may not be exercised  before timely  obtainment of
         such approval, and shall lapse upon the failure thereof. If the Plan is
         so approved,  it shall  continue in effect until all Awards either have
         lapsed or been  exercised,  satisfied  or canceled  according  to their
         terms under the Plan.

3.       Stock.  The shares of stock that may be issued under the Plan shall not
         exceed in the aggregate 110,000  shares  of  the  Corporation's  common
         stock,  par  value $5.00  per  share  (the "Stock"), as may be adjusted
         pursuant to  paragraph  18  hereof.  Such shares of Stock may be either
         authorized and unissued shares  of Stock, or authorized shares of Stock
         issued by the Corporation and subsequently reacquired by it as treasury
         stock.  Under no circumstances shall  any fractional shares of Stock be
         issued or sold under the Plan or any Award.  Except as may be otherwise
         provided in the Plan, any Stock subject to an Award that for any reason
         lapses or terminates prior to its  exercise  as  to  such  Stock  shall
         become and again be available  under  the  Plan.  The Corporation shall
         reserve and keep available, and shall  duly  apply  for  any  requisite
         governmental authority to issue or  sell  the number of shares of Stock
         needed to  satisfy  the  requirements of the Plan while in effect.  The
         Corporation's  failure to obtain any such governmental authority deemed
         necessary by the  Corporation's  legal  counsel for the lawful issuance
         and sale of Stock under the Plan shall relieve  the  Corporation of any
         duty, or liability for the failure to issue or sell such  Stock  as  to
         which such authority has not been obtained.

4.       Administration.  The  Plan  shall  be  administered by a committee (the
         "Committee") consisting of two (2) or more  directors  from  the  Board
         serving for such  terms  as  determined,  selected and appointed by the
         Board.  The Board shall fill all vacancies occurring in the Committee's
         membership,  and  at  any  time  and  for any reason may add additional
         members to the Committee or may remove  members  from the Committee and
         appoint their successors. Except as otherwise permitted  under  Section
         16(b)  of  the  Securities  Exchange  Act  of  1934,  as  amended,  and
         applicable rules and regulations thereto, a  member  of  the  Committee
         must be a director  of  the  Corporation  and  during the year prior to
         commencing  service  on  the  Committee,  and  while  a  member  of the
         Committee, was not granted or awarded any Awards, allocations  or other
         options or rights of or with respect  to  Stock  or  any  other  equity
         securities of the Corporation or its affiliates pursuant to the Plan or
         any other plan of the Corporation  or its affiliates which provides for
         grants or awards.   A  majority  of  the  Committee's  membership shall
         constitute a  quorum  for  the  transaction  of  all  business  of  the
         Committee, and  all  decisions and actions taken by the Committee shall
         be determined by a majority of the members of the Committee attending a
         meeting at which a quorum of the Committee is present.

         The Committee  shall be responsible for the management and operation of
         the Plan and, subject to its provisions,  shall have full, absolute and
         final  power and  authority,  exercisable  in its sole  discretion:  to
         interpret and construe the  provisions of the Plan,  adopt,  revise and
         rescind   rules  and   regulations   relating   to  the  Plan  and  its
         administration,  and  decide  all  questions  of  fact  arising  in the
         application  thereof;  to determine  what, to whom, when and under what
         facts and  circumstances  Awards shall be made,  and the form,  number,
         terms,  conditions and duration  thereof,  including but not limited to
         when  exercisable,  the number of shares of Stock subject thereto,  and
         Stock option purchase prices; to adopt,  revise and rescind  procedural
         rules for the transaction of the Committee's  business,  subject to any
         directives of the Board not inconsistent  with the provisions or intent
         of the Plan or  applicable  provisions  of law;  and to make all  other
         determinations  and  decisions,  take  all  actions  and do all  things
         necessary or appropriate in and for the administration of the Plan. The
         Committee's determinations, decisions and actions

                                      B-1

<PAGE>

         under the Plan,  including  but not limited to those  described  above,
         need not be uniform or consistent, but may be different and selectively
         made and applied,  even in similar  circumstances  and among  similarly
         situated  persons.  Unless  contrary to the provisions of the Plan, all
         decisions,  determinations  and actions made or taken by the  Committee
         shall be final and  binding  upon the  Corporation  and all  interested
         persons,   and  their  heirs,   personal  and  legal   representatives,
         successors, assigns and beneficiaries. No member of the Committee or of
         the Board  shall be liable for any  decision,  determination  or action
         made or taken in good faith by such person under or with respect to the
         Plan or its administration.

5.       Awards.  Awards  may  be  made  under  the  Plan  in  the form of:  (a)
         "Qualified Options" to purchase Stock that are intended to qualify  for
         certain tax treatment as incentive stock options under Sections 421 and
         422 of the Code, (b) "Non-Qualified Options" to purchase Stock that are
         not intended to qualify under Sections 421-424 of the Code,  (c)  Stock
         appreciation rights ("SARs"), or (d) "Restricted Stock".  More than one
         Award may be granted to an eligible person, and the grant  of any Award
         shall not prohibit the grant of any  other  Award,  either  to the same
         person or otherwise, or  impose  any obligation upon the person to whom
         granted to exercise the Award.  All Awards and the terms and conditions
         thereof  shall  be  set  forth  in written agreements, in such form and
         content as approved by the Committee  from  time  to time, and shall be
         subject to the provisions of the Plan whether or not  contained in such
         agreements.  Multiple Awards for a particular person may  be  set forth
         in a single written agreement or in multiple agreements, as  determined
         by the Committee, but in  all  cases  each  agreement  for  one or more
         Awards  shall  identify  each  of  the  Awards thereby represented as a
         Qualified Option, Non-Qualified Option,  SAR,  or  Restricted Stock, as
         the case may be.  Every Award made to a person (a "Recipient") shall be
         exercisable during his or her lifetime only by the Recipient, and shall
         not be salable, transferable or assignable by the  Recipient  except by
         his or  her  Will  or  pursuant  to  applicable  laws  of  descent  and
         distribution.

6.       Eligibility.  Persons  eligible  to  receive  Awards shall be those key
         officers and other management employees of  the  Corporation  and  each
         Subsidiary as determined by the Committee.   In no case, however, shall
         any current member of the Committee be eligible  to receive any Awards.
         A person's eligibility to receive Awards shall  not  confer upon him or
         her any right to receive any Awards; rather, the  Committee  shall have
         the sole authority, exercisable in its  discretion  consistent with the
         provisions of the Plan, to  select  when,  to whom and under what facts
         and circumstances Awards will be made.  Except as otherwise provided, a
         person's eligibility to receive,  or actual receipt of Awards under the
         Plan shall not limit or affect his or her benefits under or eligibility
         to participate in any other incentive or benefit plan or program of the
         Corporation or its affiliates.

7.       Qualified  Options.  In  addition to other applicable provisions of the
         Plan, all Qualified Options and  Awards  thereof  shall  be  under  and
         subject to the following terms and conditions:

         (a)      No Qualified  Option shall be awarded more than ten (10) years
                  after  the date the Plan is  adopted  by the Board or the date
                  the  Plan  is  approved  by  the  Corporation's  stockholders,
                  whichever date is earlier;

         (b)      The  time  period  during  which  any   Qualified   Option  is
                  exercisable,   as  determined  by  the  Committee,  shall  not
                  commence  before the  expiration of six (6) months or continue
                  beyond the  expiration  of ten (10) years  after the date such
                  Option is awarded;

         (c)      If  the  Recipient of a Qualified Option ceases to be employed
                  by the Corporation or any Subsidiary for any reason other than
                  his or her death,  the  Committee  may  permit  the  Recipient
                  thereafter to  exercise  such Option during its remaining term
                  for a  period  of  not  more  than three (3) months after such
                  cessation  of  employment  to  the extent that the  Option was
                  then and remains exercisable, unless such employment cessation
                  was due to the Recipient's disability  as  defined  in Section
                  22(e)(3) of the Code, in  which  case  such  three  (3)  month
                  period shall be twelve (12)  months;  if  the  Recipient  dies
                  while  employed  by  the  Corporation  or  a  Subsidiary,  the
                  Committee  may  permit  the  Recipient's  qualified   personal
                  representatives, or any  persons  who  acquire  the  Qualified
                  Option pursuant to his  or  her  Will  or  laws of descent and
                  distribution, thereafter to  exercise  such  Option during its
                  remaining term for a period  of  not  more  than  twelve  (12)
                  months after the Recipient's death to the extent that the

                                      B-2

<PAGE>


                  Option was then and remains  exercisable;  the  Committee  may
                  impose terms and conditions upon and for said exercise of such
                  Qualified  Option  after  such  cessation  of the  Recipient's
                  employment or his or her death;

         (d)      The  purchase  price  of a  share  of  Stock  subject  to  any
                  Qualified Option, as determined by the Committee, shall not be
                  less  than the  Stock's  fair  market  value at the time  such
                  Option is awarded, as determined under paragraph 13 hereof, or
                  less than the Stock's par value.

8.       Non-Qualified Options.  In  addition  to other applicable provisions of
         the Plan, all Non-Qualified Options and Awards  thereof  shall be under
         and subject to the following terms and conditions:

         (a)      The time  period  during  which  any  Non-Qualified  Option is
                  exercisable,   as  determined  by  the  Committee,  shall  not
                  commence  before the  expiration of six (6) months or continue
                  beyond the  expiration  of ten (10) years  after the date such
                  Option is awarded;

         (b)      If a Recipient of a Non-Qualified  Option, before its lapse or
                  full  exercise,  ceases to be  eligible  under  the Plan,  the
                  Committee may permit the Recipient thereafter to exercise such
                  Option  during its  remaining  term,  to the  extent  that the
                  Option was then and remains exercisable,  for such time period
                  and under such terms and  conditions  as may be  prescribed by
                  the Committee;

         (c)      The  purchase  price  of a  share  of  Stock  subject  to  any
                  Non-Qualified  Option,  as determined by the Committee,  shall
                  not be less than the  Stock's  fair  market  value at the time
                  such Option is  awarded,  as  determined  under  paragraph  13
                  hereof.

9.       Stock Appreciation Rights.  In  addition to other applicable provisions
         of the Plan, all SARs and Awards  thereof shall be under and subject to
         the following terms and conditions:

         (a)      SARs  may be  granted  either  alone,  or in  connection  with
                  another previously or  contemporaneously  granted Award (other
                  than  another  SAR) so as to  operate in tandem  therewith  by
                  having the  exercise of one affect the right to  exercise  the
                  other,  as and when the Committee may determine;  however,  no
                  SAR shall be awarded in  connection  with a  Qualified  Option
                  more than ten (10) years after the date the Plan is adopted by
                  the   Board  or  the  date  the  Plan  is   approved   by  the
                  Corporation's stockholders, whichever date is earlier;

         (b)      Each SAR shall  entitle its Recipient to receive upon exercise
                  of the SAR all or a  portion  of the  excess  of (i) the  fair
                  market  value  at the  time of such  exercise  of a  specified
                  number of shares of Stock as determined by the Committee, over
                  (ii) a specified  price as determined by the Committee of such
                  number of shares of Stock that,  on a per share basis,  is not
                  less than the Stock's fair market value at the time the SAR is
                  awarded;

         (c)      Upon exercise of any SAR, the  Recipient  shall be paid either
                  in cash or in Stock,  or in any  combination  thereof,  as the
                  Committee  shall  determine;  if such payment is to be made in
                  Stock,  the number of shares thereof to be issued  pursuant to
                  the  exercise  shall be  determined  by  dividing  the  amount
                  payable upon  exercise by the Stock's fair market value at the
                  time of exercise;

         (d)      The  time  period  during  which  any SAR is  exercisable,  as
                  determined  by the  Committee,  shall not commence  before the
                  expiration of six (6) months or continue beyond the expiration
                  of ten (10) years after the date such SAR is awarded; however,
                  no SAR  connected  with  another  Award  shall be  exercisable
                  beyond  the last date that such other  connected  Award may be
                  exercised;

         (e)      If a Recipient  of a SAR,  before its lapse or full  exercise,
                  ceases to be eligible under the Plan, the Committee may permit
                  the  Recipient  thereafter  to  exercise  such SAR  during its
                  remaining  term,  to the  extent  that  the SAR was  then  and
                  remains exercisable, for such time period and under such terms
                  and conditions as may be prescribed by the Committee;


                                      B-3

<PAGE>


         (f)      No SAR  shall be  awarded  in  connection  with any  Qualified
                  Option unless the SAR (i) lapses no later than the  expiration
                  date of such connected  Option,  (ii) is for not more than the
                  difference   between  the  Stock  purchase  price  under  such
                  connected Option and the Stock's fair market value at the time
                  the SAR is exercised,  (iii) is transferable  only when and as
                  such  connected  Option  is  transferable  and  under the same
                  conditions,  (iv) may be  exercised  only when such  connected
                  Option may be  exercised,  and (v) may be exercised  only when
                  the Stock's fair market value exceeds the Stock purchase price
                  under such connected Option.

10.      Restricted Stock.  In  addition  to  other applicable provisions of the
         Plan, all Restricted Stock  and  Awards  thereof  shall  be  under  and
         subject to the following terms and conditions:

         (a)      Restricted  Stock shall consist of shares of Stock that may be
                  acquired by and issued to a Recipient  at such time,  for such
                  or no purchase price,  and under and subject to such transfer,
                  forfeiture  and  other  restrictions,  conditions  or terms as
                  shall  be  determined  by the  Committee,  including  but  not
                  limited to prohibitions against transfer, substantial risks of
                  forfeiture  within the meaning of Section 83 of the Code,  and
                  attainment  of  performance  or  other  goals,  objectives  or
                  standards,  all for or  applicable  to such  time  periods  as
                  determined by the Committee;

         (b)      Except as  otherwise  provided  in the Plan or the  Restricted
                  Stock Award,  a Recipient of shares of Restricted  Stock shall
                  have all the  rights  as does a  holder  of  Stock,  including
                  without  limitation  the right to vote such shares and receive
                  dividends  with  respect  thereto;  however,  during  the time
                  period of any restrictions,  conditions or terms applicable to
                  such  Restricted  Stock,  the shares  thereof and the right to
                  vote the same and receive dividends thereon shall not be sold,
                  assigned,   transferred,   exchanged,  pledged,  hypothecated,
                  encumbered or otherwise disposed of except as permitted by the
                  Plan or the Restricted Stock Award;

         (c)      Each  certificate  issued for shares of Restricted Stock shall
                  be deposited  with the  Secretary of the  Corporation,  or the
                  office thereof,  and shall bear a legend in substantially  the
                  following form and content:

                  This  Certificate  and the shares of Stock hereby  represented
                  are  subject  to the  provisions  of the  Corporation's  Stock
                  Incentive  Plan and a certain  agreement  entered into between
                  the owner  and the  Corporation  pursuant  to said  Plan.  The
                  release of this  Certificate  and the  shares of Stock  hereby
                  represented  from such provisions shall occur only as provided
                  by said Plan and agreement, a copy of which are on file in the
                  office of the Secretary of the Corporation.

                  Upon the lapse or satisfaction of the restrictions, conditions
                  and terms  applicable to such Restricted  Stock, a certificate
                  for the shares of Stock free thereof without such legend shall
                  be issued to the Recipient;

         (d)      If  a  Recipient's  employment  with  the  Corporation  or   a
                  Subsidiary ceases for any reason prior to  the  lapse  of  the
                  restrictions,  conditions  or  terms  applicable to his or her
                  Restricted Stock,  all  of  the  Recipient's  Restricted Stock
                  still subject to unexpired  restrictions,  conditions or terms
                  shall  be  forfeited  absolutely  by  the  Recipient  to   the
                  Corporation without payment or delivery of  any  consideration
                  or other thing of value by the Corporation  or its affiliates,
                  and thereupon and thereafter neither the  Recipient nor his or
                  her heirs,  personal  or  legal  representatives,  successors,
                  assigns, beneficiaries, or any claimants under the Recipient's
                  Last Will or  laws of descent and distribution, shall have any
                  rights or claims to  or  interests in the forfeited Restricted
                  Stock or any  certificates  representing  shares  thereof,  or
                  claims against  the Corporation or its affiliates with respect
                  thereto.

11.      Exercise.  Except as  otherwise  provided  in the Plan,  Awards  may be
         exercised in whole or in part by giving  written  notice thereof to the
         Secretary of the Corporation,  or his or her designee,  identifying the
         Award  being  exercised,  the  number of shares of Stock  with  respect
         thereto, and other information  pertinent to exercise of the Award. The
         purchase price of the shares of Stock with respect to which an Award is
         exercised shall be paid

                                      B-4

<PAGE>


         with the written notice of exercise,  either in cash or in Stock at its
         then current fair market value, or in any combination  thereof,  as the
         Committee  shall  determine;  provided,  that if the Stock  tendered as
         payment for a Qualified  Option was acquired  through the exercise of a
         Qualified Option,  the Recipient must have held such Stock for a period
         not less than the holding period  described in Code Section  422(a)(1).
         Funds received by the Corporation  from the exercise of any Award shall
         be used for its general corporate purposes.

         The number of shares of Stock  subject to an Award  shall be reduced by
         the number of shares of Stock with respect to which the  Recipient  has
         exercised  rights  under the Award.  If a SAR is awarded in  connection
         with another Award,  the number of shares of Stock that may be acquired
         by the Recipient  under the other  connected  Award shall be reduced by
         the number of shares of Stock with respect to which the  Recipient  has
         exercised  his or her SAR, and the number of shares of Stock subject to
         the  Recipient's  SAR shall be reduced by the number of shares of Stock
         acquired by the Recipient pursuant to the other connected Award.

         The Committee  may permit an  acceleration  of  previously  established
         exercise terms of any Awards or the lapse of  restrictions  thereon as,
         when, under such facts and circumstances,  and subject to such other or
         further requirements and conditions as the Committee may deem necessary
         or appropriate. In addition: (a) if the Corporation or its stockholders
         execute an  agreement  to dispose  of all or  substantially  all of the
         Corporation's  assets  or  capital  stock by  means  of  sale,  merger,
         consolidation, reorganization, liquidation or otherwise, as a result of
         which the  Corporation's  stockholders  as of  immediately  before such
         transaction  will not own at least  fifty  percent  (50%) of the  total
         combined  voting  power of all classes of voting  capital  stock of the
         surviving entity (be it the Corporation or otherwise) immediately after
         the  consummation  of such  transaction,  thereupon  any and all Awards
         immediately  shall  become and remain  exercisable  with respect to the
         total number of shares of Stock still subject thereto for the remainder
         of their respective terms unless the transaction is not consummated and
         the agreement  expires or is terminated,  in which case  thereafter all
         Awards shall be treated as if said  agreement  never had been executed;
         (b) if  there is an  actual,  attempted  or  threatened  change  in the
         ownership  of at least  twenty-five  percent  (25%) of all  classes  of
         voting capital stock of the Corporation, as determined by the Committee
         in its sole  discretion,  through  the  acquisition  of, or an offer to
         acquire such  percentage of the  Corporation's  voting capital stock by
         any person or entity,  or persons or entities acting in concert or as a
         group,  and such acquisition or offer has not been duly approved by the
         Board, thereupon any and all Awards immediately shall become and remain
         exercisable  with  respect to the total number of shares of Stock still
         subject thereto for the remainder of their respective  terms; or (c) if
         during any period of two (2) consecutive  years, the individuals who at
         the  beginning  of such  period  constituted  the Board,  cease for any
         reason to  constitute  at least a  majority  of the  Board,  unless the
         election of each  director of the Board,  who was not a director of the
         Board at the  beginning  of such  period,  was approved by a vote of at
         least  two-thirds  of the  directors  then  still  in  office  who were
         directors at the beginning of such period, thereupon any and all Awards
         immediately  shall  become and remain  exercisable  with respect to the
         total amount of shares of Stock still subject thereto for the remainder
         of their  respective  terms.  If an event  described in (a), (b) or (c)
         occurs,  the  Committee  shall  immediately  notify the  Recipients  in
         writing of the  occurrence  of such event and their  rights  under this
         paragraph 11.

12.      Withholding.  Whenever  the  Corporation  is about to issue or transfer
         Stock pursuant to any Award,  the Corporation may require the Recipient
         to remit to the  Corporation an amount  sufficient to satisfy fully any
         federal,   state  and  other   jurisdictions'   income  and  other  tax
         withholding  requirements prior to the delivery of any certificates for
         such shares of Stock.  Whenever  payments are to be made in cash to any
         Recipient  pursuant to his or her exercise of an Award,  such  payments
         shall be made net after deduction of all amounts  sufficient to satisfy
         fully any federal,  state and other jurisdictions' income and other tax
         withholding requirements.

13.      Value.  Where  used  in  the  Plan, the "fair market value" of Stock or
         Options or rights with respect thereto, including  Awards,  shall  mean
         and be determined by:  (a) in the event that the Stock  is listed on an
         established exchange, the closing price of the Stock  on  the  relevant
         date or, if no trade occurred on that day, on the next preceding day on
         which a trade occurred, (b) in the event that  the  Stock is not listed
         on  an  established  exchange,  but  is  then  quoted  on  the National
         Association   of   Securities   Dealers   Automated   Quotation  System
         ("NASDAQ"), the average of the average  of  the  closing  bid and asked
         quotations of the Stock for  the  five  (5)  trading  days  immediately
         preceding the relevant date, or (c)  in the event that the Stock is not
         then listed on an established exchange or quoted on NASDAQ, the average
         of the average of the closing bid and asked

                                      B-5

<PAGE>


         quotations of the Stock for five (5) trading days immediately preceding
         the relevant  date as reported by such  brokerage  firms which are then
         making a market in the Stock. In the event that the Stock is not listed
         on an established  exchange and no closing bid and asked quotations are
         available,  fair market value shall be  determined in good faith by the
         Committee.  In the  case  of (b) or (c)  above,  in the  event  that no
         closing  bid or asked  quotation  is  available  on one or more of such
         trading days, fair market value shall be determined by reference to the
         five (5) trading days immediately  preceding the relevant date on which
         closing bid and asked quotations are available.

14.      Amendment.  To  the  extent  permitted by applicable law, the Board may
         amend, suspend, or terminate the Plan at any time;  provided,  however,
         that:  (a) no amendment may  be  adopted  that  permits  an Award to be
         granted to any member of the Committee; (b) with respect  to  qualified
         options, except as specified in paragraph 18 hereof,  no  amendment may
         be adopted that will increase the number of shares  reserved for Awards
         under the Plan,  change  the  option  price,  or  change the provisions
         required  for  compliance  with Section 422 of the Code and regulations
         issued thereunder; and (c)  notwithstanding  anything  to  the contrary
         herein,  no  amendment  may  be  adopted  to  increase  the  number  of
         securities  that  may  be issued under the Plan, except as specified in
         paragraph 18 hereof,  materially  increase  the  benefits  accruing  to
         recipients or  materially  modify  the  requirements for eligibility to
         participate in the Plan, without the  approval  of  the shareholders of
         the Corporation, to the extent that shareholder  approval  is  required
         under Section 16 of the Securities Exchange Act of  1934,  as  amended,
         and the regulations thereunder, as from  time  to  time in effect.  The
         amendment or termination of this Plan shall not, without the consent of
         the Recipients, alter  or  impair  any  rights or obligations under any
         Award previously granted hereunder.

         In addition and subject to the  foregoing,  the Committee may prescribe
         other or additional  terms,  conditions and provisions  with respect to
         the  grant  or  exercise  of any or all  Awards  as the  Committee  may
         determine  necessary  or  appropriate  for such  Awards  and the  Stock
         subject  thereto to qualify under and comply with all applicable  laws,
         rules and regulations,  and changes therein,  including but not limited
         to the  provisions  of Sections 421 and 422 of the Code,  Section 16 of
         the  Securities  Exchange  Act of 1934,  as  amended,  and  Rule  16b-3
         promulgated by the Securities and Exchange Commission. Without limiting
         the generality of the preceding  sentence,  each Qualified Option,  and
         any SAR awarded in connection therewith, shall be subject to such other
         and  additional  terms,  conditions and provisions as the Committee may
         deem  necessary or  appropriate  in order to qualify  such  Option,  or
         connected  Option and SAR, as an incentive  stock option under  Section
         422 of the Code, including but not limited to the following provisions:

                  (i)      the  aggregate  fair market  value,  at the time such
                           Option is awarded,  of the Stock subject  thereto and
                           of any Stock or other  capital  stock with respect to
                           which  incentive  stock  options   qualifying   under
                           Sections 421 and 422 of the Code are  exercisable for
                           the first time by the  Recipient  during any calendar
                           year  under  the  Plan  and any  other  plans  of the
                           Corporation  or  its  affiliates,  shall  not  exceed
                           $100,000.00; and

                  (ii)     No  Qualified   Option,  or  any  SAR  in  connection
                           therewith,  shall be  awarded to any person if at the
                           time of such Award, such person owns Stock possessing
                           more than ten  percent  (10%) of the  total  combined
                           voting  power of all classes of capital  stock of the
                           Corporation  or its  affiliates,  unless  at the time
                           such  Option or SAR is  awarded  the  Stock  purchase
                           price  under such  Option is at least one hundred and
                           ten percent  (110%) of the fair  market  value of the
                           Stock  subject to such Option and the Option (and any
                           SAR   connected   therewith)  by  its  terms  is  not
                           exercisable  after the  expiration  of five (5) years
                           from the date it is awarded.

         From time to time, the Committee may rescind,  revise and add to any of
         such  terms,   conditions   and  provisions  as  may  be  necessary  or
         appropriate to have any Awards be or remain qualified and in compliance
         with all applicable laws, rules and regulations,  and may delete,  omit
         or waive any of such terms, conditions or provisions that are no longer
         required by reason of changes in applicable laws, rules or regulations.


                                      B-6

<PAGE>



15.      Continued  Employment.  Nothing  in  the Plan or any Award shall confer
         upon any Recipient or other  persons  any  right  to  continue  in  the
         employment  of,  or  maintain  any  particular  relationship  with  the
         Corporation or its affiliates, or limit or affect any rights, powers or
         privileges  that   the  Corporation  or  its  affiliates  may  have  to
         supervise,  discipline  and  terminate such Recipient or other persons,
         and the employment  and  other  relationships  thereof.   However,  the
         Committee may require as a condition of making  and/or  exercising  any
         Award that its Recipient agree to, and in fact provide services, either
         as an employee or in another capacity, to or for the Corporation or any
         Subsidiary for such time period  following  the  date the Award is made
         and/or  exercised  as  the  Committee  may  prescribe.  The immediately
         preceding sentence shall not apply  to  any  Qualified  Option  to  the
         extent such application would result in disqualification of said Option
         as an incentive stock option under Sections 421 and 422 of the Code.

16.      General Restrictions.   Each  Award shall be subject to the requirement
         and provision that if at any time the Committee determines it necessary
         or desirable as a condition of  or  in  consideration  of  making  such
         Award,  or  the  purchase  or  issuance  or  Stock  thereunder, (a) the
         listing, registration or qualification of  the  Stock  subject  to  the
         Award, or the Award itself, upon  any  securities exchange or under any
         federal  or  state  securities  or  other laws, (b) the approval of any
         governmental  authority,  or  (c)  an  agreement  by the Recipient with
         respect to disposition of any Stock (including without  limitation that
         at the time of the Recipient's exercise of the Award, any Stock thereby
         acquired is being and will be acquired solely for  investment  purposes
         and without any intention to sell or distribute  such Stock), then such
         Award shall not be consummated in whole or in part unless such listing,
         registration, qualification, approval  or  agreement  shall  have  been
         appropriately effected or obtained to the satisfaction of the Committee
         and legal counsel for the Corporation.

17.      Rights.  Except as otherwise provided in the Plan, the Recipient of any
         Award shall have no rights as a holder of  the  Stock  subject  thereto
         unless and until one or more certificates for  the shares of such Stock
         are issued and delivered to the Recipient.   No  adjustments  shall  be
         made for dividends, either ordinary  or  extraordinary,  or  any  other
         distributions with respect to Stock,  whether  made in cash, securities
         or other property, or any rights with respect thereto,  for  which  the
         record date is prior to  the  date  that  any  certificates  for  Stock
         subject to an Award are issued  to the Recipient pursuant to his or her
         exercise thereof.  No Award, or  the  grant  thereof,  shall  limit  or
         affect  the  right  or  power  of  the Corporation or its affiliates to
         adjust, reclassify, recapitalize, reorganize or otherwise change its or
         their   capital  or  business  structure,  or  to  merge,  consolidate,
         dissolve,  liquidate  or  sell  any  or  all  of its or their business,
         property or assets.

18.      Adjustments.  In  the  event  of any change in the number of issued and
         outstanding shares of Stock which results from a stock  split,  reverse
         stock split, payment of a stock  dividend  or  any  other change in the
         capital   structure   of   the   Corporation,   the   Committee   shall
         proportionately  adjust  the  maximum  number of shares subject to each
         outstanding Award, and (where appropriate) the purchase price per share
         thereof (but not  the  total  purchase  price under the Award), so that
         upon exercise or realization of such Award, the Recipient shall receive
         the same number of  shares  he or she would have received had he or she
         been the holder of all shares subject  to  his or her outstanding Award
         and immediately before the effective date of  such change in the number
         of issued and outstanding shares of Stock.  Such adjustments shall not,
         however, result in the issuance of fractional shares.  Any  adjustments
         under this paragraph 18 shall be  made  by  the  Committee,  subject to
         approval by the Board.  No adjustments shall be made that would cause a
         Qualified Option to fail to continue  to  qualify as an incentive stock
         option within the meaning of Section 422 of the Code.

                  In the  event  the  Corporation  is a  party  to  any  merger,
         consolidation or other  reorganization,  any and all outstanding Awards
         shall apply and relate to the  securities to which a holder of Stock is
         entitled after such merger, consolidation or other reorganization. Upon
         any  liquidation  or  dissolution  of  the  Corporation,  any  and  all
         outstanding   Awards  shall   terminate  upon   consummation   of  such
         liquidation or  dissolution,  but prior to such  consummation  shall be
         exercisable to the extent that the same otherwise are exercisable under
         the Plan.



                                      B-7

<PAGE>


19.      Forfeiture.   Notwithstanding anything to the contrary in this Plan, if
         the Committee finds after full consideration of the facts presented  on
         behalf of the Corporation and the  involved  Recipient,  that he or she
         has been engaged in fraud, embezzlement, theft, commission of a felony,
         or dishonesty in the course of his or her employment by the Corporation
         or  any  Subsidiary  that  has  damaged  it, or  that the Recipient has
         disclosed trade secrets  of  the  Corporation  or  its  affiliates, the
         Recipient shall forfeit all rights under and to all unexercised Awards,
         and all exercised  Awards  under  which  the  Corporation  has  not yet
         delivered payment or certificates for shares of Stock (as the  case may
         be), all of which Awards and rights shall  be  automatically  canceled.
         The  decision  of  the  Committee  as  to the cause of the  Recipient's
         discharge from employment with the Corporation or  any  Subsidiary  and
         the damage thereby suffered shall be  final  for  purposes of the Plan,
         but shall not affect the finality of the Recipient's discharge  by  the
         Corporation or  Subsidiary  for  any  other  purposes.   The  preceding
         provisions of this paragraph shall not apply to any Qualified Option to
         the extent such application  would  result  in disqualification of said
         Option as an incentive stock option under Sections  421  and 422 of the
         Code.

20.      Indemnification.  In  and  with  respect  to  the administration of the
         Plan, the Corporation shall indemnify each present and future member of
         the Committee and/or of  the  Board,  who  shall  be  entitled  without
         further action on his or her part to indemnity from the Corporation for
         all damages, losses, judgments,  settlement  amounts, punitive damages,
         excise taxes, fines, penalties, costs and  expenses (including  without
         limitation attorneys' fees and disbursements)  incurred  by such member
         in connection with any threatened, pending or completed action, suit or
         other   proceedings  of  any  nature,  whether  civil,  administrative,
         investigative or criminal,  whether  formal or informal, and whether by
         or in the right or name of the Corporation, any class of  its  security
         holders, or otherwise, in  which  such  member  may  be  or  have  been
         involved, as  a  party  or  otherwise, by reason of his or her being or
         having  been  a member of the Committee and/or of the Board, whether or
         not  he or  she  continues  to  be  such  a  member.   The  provisions,
         protection and benefits of this paragraph shall apply and exist to  the
         fullest extent permitted by applicable law to and for  the  benefit  of
         all present and future members of the Committee  and/or  of  the Board,
         and   their   respective  heirs,  personal and  legal  representatives,
         successors and assigns, in  addition  to all other rights that they may
         have as a matter of law, by contract, or  otherwise,  except (a) as may
         not  be  allowed  by  applicable  law,  (b)  to  the  extent  there  is
         entitlement to insurance proceeds under insurance  coverage provided by
         the Corporation on account of the same matter  or  proceeding for which
         indemnification hereunder  is  claimed,  or (c)  to the extent there is
         entitlement to indemnification  from  the Corporation, other than under
         this paragraph, on account of the same matter  or  proceeding for which
         indemnification hereunder is claimed.

21.      Miscellaneous.  Any  reference  contained  in this Plan to a particular
         section or provision of law, rule  or  regulation,  including  but  not
         limited to the  Internal  Revenue  Code  of  1986  and  the  Securities
         Exchange Act of 1934,  both  as amended, shall include any subsequently
         enacted or promulgated section or provision of law, rule or regulation,
         as the case may be, of similar import.  With respect to persons subject
         to  Section  16  of  the  Securities  Exchange Act of 1934, as amended,
         transactions under this Plan are intended to comply with all applicable
         conditions of Rule 16b-3 or any successor rule that may be  promulgated
         by the Securities and  Exchange  Commission,  and  to  the  extent  any
         provision of this  Plan  or action by the Committee fails to so comply,
         it shall be deemed null and void, to the extent permitted by applicable
         law and deemed advisable by the Committee.  Where used  in  this  Plan:
         the plural shall include the singular, and unless the context otherwise
         clearly requires, the singular shall include the  plural; and, the term
         "affiliates" shall mean each and every Subsidiary and any parent of the
         Corporation.  The captions of the numbered paragraphs contained in this
         Plan are for  convenience  only,  and  shall  not  limit  or affect the
         meaning, interpretation or construction of any of the provisions of the
         Plan.

                            - - - - - - - - - - - -
                                      END
                            - - - - - - - - - - - -

                                      B-8

<PAGE>



                                   SIGNATURES

                  Pursuant to the  requirements  of the  Securities Act of 1933,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the  requirements  for  filing  on  Form  S-8 and has  duly  caused  this
registration statement to be signed on its behalf by the undersigned,  thereunto
duly authorized in the City of Taneytown, State of Maryland on           , 1994.

                                              MONOCACY BANCSHARES, INC.

                                          By:
                                              _________________________________
                                              Frank W. Neubauer, President and
                                              Chief Executive Officer



                               POWER OF ATTORNEY

                  KNOWN  ALL MEN BY  THESE  PRESENTS,  that  each  person  whose
signature appears below constitutes  and appoints  Frank W. Neubauer and Michael
K. Walsch, and each of them, his true and  law  attorney-in-fact,  as agent with
full  power  of substitution and resubstitution for him and in his  name,  place
and stead, in any and all capacity,  to sign  any  or  all  amendments  to  this
registration  statement and to file  the  same,  with all  exhibits thereto, and
other  documents  in connection therewith,  with  the  Securities  and  Exchange
Commission,  granting  unto  said  attorney-in-fact  and  agents  full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises,  as fully and to all  intents and purposes
as they might or could do in person,  hereby  ratifying and  confirming all that
said  attorneys-in-fact  and  agents, or  their  substitute or substitutes,  may
lawfully do or cause to be done by virtue hereof.

                  Pursuant to the  requirements  of the  Securities Act of 1933,
this  registration  statement  has been signed by the  following  persons in the
capacities and on the date indicated.

<TABLE>
<CAPTION>
                                                Capacity                          Date
<S> <C>

-------------------------        President and Chief Executive                        , 1994
Frank W. Neubauer                Officer and Director (Principal
                                 Executive Officer)

-------------------------        Senior Vice President                                , 1994
Michael K. Walsch                and Treasurer (Principal
                                 Financial and Accounting
                                 Officer)

-------------------------        Chairman of the Board                                , 1994
Donald R. Hull                   and Director


-------------------------        Vice Chairman of the Board                           , 1994
Eric E. Glass                    and Director


-------------------------        Director                                             , 1994
David M. Abramson



                                      B-9

<PAGE>


-------------------------        Director                                             , 1994
E. Wayne Baumgardner


-------------------------        Director                                             , 1994
George B. Crouse


-------------------------        Director                                             , 1994
Harry B. Dougherty, Sr.


-------------------------        Director                                             , 1994
Glenn E. Eaves


-------------------------        Director                                             , 1994
George A. Fream


-------------------------        Director                                             , 1994
Jacob M. Yingling



                                      B-10



</TABLE>