EXHIBIT 10.4**CODE OF BUSINESS CONDUCT AND ETHICS****FOR DIRECTORS OFFICERS AND EMPLOYEES****OF****KENSINGTON BANKSHARES, INC.****Purpose**     Kensington Bankshares, Inc. (“Kensington” or the “Company”) is committed to the highest levelof ethical behavior. Kensington’s business success depends upon the reputation of the Company andits directors, officer and employees to perform with the highest level of integrity and principledbusiness conduct.     This Code of Ethics (“Code”) applies to all directors, officers and employees, temporaryagency personnel and contractor personnel of the Company, including Kensington’s principalexecutive officer and principal financial officer, (collectively, “Covered Persons”). This Codeis designed to deter wrongdoing and to promote: **•** Honest and ethical conduct, including the ethical handling of actual or apparentconflicts of interest between personal and professional relationships;  **•** Full, fair, accurate, timely, and understandable disclosure in reports anddocuments that a registrant files with, or submits to, the Commission and in otherpublic communications made by the registrant;  **•** Compliance with applicable governmental laws, rules and regulations;  **•** The prompt internal reporting to an appropriate person or persons identified in thecode of violations of the code; and  **•** Accountability for adherence to the code.     Each Covered Person must conduct himself or herself in accordance with this Code and mustseek to avoid even the appearance of improper behavior.     This Code is not intended to cover every applicable law or provide answers to all questionsthat might arise; for that Kensington relies on each person’s sense of what is right, including asense of when it is appropriate to seek guidance from others on an appropriate course of conduct.**Honest and Ethical Conduct**     Each Covered Person must always conduct himself or herself in an honest and ethical manner,which includes the responsibility to act in good faith, responsibly, with due care, competence anddiligence, without misrepresenting material facts or allowing his or her independent judgment tobe subordinated. Each Covered Person must act with the highest standards of personal andprofessional integrity and must not tolerate others who attempt to deceive or evade responsibilityfor actions. Honest and ethical conduct must be a driving force in every decision made by aCovered Person while performing his or her duties for the Company. When in doubt whether anaction is honest and ethical,
 

 
or otherwise in compliance with this Code, you should seek advice from your immediatesupervisor or senior management, as appropriate.**Conflicts of Interest**     The term “conflict of interest” refers to any circumstance which would cast doubt on aCovered Person’s ability to act objectively when representing the Company’s interest. CoveredPersons should not use their position or association with Kensington for their own or theirfamily’s1 personal gain and should avoid situations in which their personal interests(or those of their family) conflict or overlap, or appear to conflict or overlap, withKensington’s best interests. Some examples of situations which could give rise to a conflict ofinterest are given below. These examples do not limit the general scope of this policy and areoffered as guidance. **•** If a Covered Person’s association with (or financial interest in) another person orentity would reasonably be expected to interfere with the employee or director’sindependent judgment and/or the Company’s best interest, that association or financialinterest creates a conflict of interest and is prohibited.  **•** The holding of a financial interest in any organization that is a present orpotential competitor, customer, supplier, or contractor with or of the Company createsa conflict of interest and is prohibited, unless all of the following criteria aresatisfied: (i) the business or enterprise in which the Covered Person holds afinancial interest is publicly owned, (ii) the financial interest constitutes lessthan one percent (1%) of the ownership of that business or enterprise, and (iii) thefinancial interest constitutes less than five percent (5%) of the Covered Person’s networth.  **•** Acceptance of a membership on the Board of Directors, or serving as a consultant oradvisor to any board or any management of a business that is a present or potentialcompetitor, customer, supplier or contractor of the Company creates a conflict ofinterest and is prohibited, unless such membership or service is approved in writingby the Chairman of the Board of the Company.  **•** Engaging in any transaction involving Kensington, from which the Covered Person maybenefit, financially or otherwise, apart from regular compensation received in theusual course of business, creates a conflict of interest and is prohibited. Suchtransactions include the lending or borrowing of money, guaranteeing debts, andaccepting gifts, entertainment, or favors from a present or potential competitor,customer, supplier, or contractor. Loans are expressly prohibited from the Company toall Covered Persons. By way of further example, a modest gift, business luncheon ordinner may be appropriate and not create a conflict of interest; however theacceptance of an expensive, customer paid vacation would create a conflict of interestand is prohibited.  **•** The use, or disclosure to a third party, for personal benefit, of any unpublishedCompany information obtained by a Covered Person in connection with his or herassociation with the Company would create a conflict of interest and is prohibited. 1 Includes spouse, children, stepchildren,grandchildren, parents, stepparents, siblings, grandparents, in-laws, and anyperson living in the same household as the director, officer or employee.
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     It is our policy and it is expected that all Covered Persons should endeavor to avoid allsituations that present an actual or apparent conflict of interest. All actual or apparentconflicts of interest between personal and professional relationships must be handled honestly andethically. If any Covered Person believes he or she may have a conflict of interest, that CoveredPerson must report the situation and seek guidance from the appropriate party, as set forth inthis Policy. For purposes of this Code, officers and directors, shall report any such situationsto the Chairman of the Audit Committee. The Audit Committee Chairman shall report any suchsituations involving himself to the Nominating Committee Chairman. Employees of theCompany shall report any such situations to their immediate supervisor who shall report all suchsituations to the Chairman of the Audit Committee. It is the responsibility of the AuditCommittee Chairman or the Nominating Committee Chairman, as the case may be, to determine if aconflict of interest exists and whether such situation is likely to impair the Covered Personsability to perform his or her assigned duties with the Company, and if such situation isdetermined to present a conflict, to determine the necessary resolution.**Compliance with Applicable Laws, Rules and Regulations**     Compliance with applicable governmental laws, rules and regulations, and applicable rules andstandards of the national securities exchange on which the Company’s securities are listed, bothin letter and in spirit, is one of the foundations on which this Company’s ethical policies arebuilt. Each Covered Person must understand and take responsibility for complying with theapplicable governmental laws, rules and regulations of the cities, states and countries in whichthe Company operates, and for complying with the applicable rules and standards of the nationalsecurities exchange on which the Company’s securities are listed.**Rules to Promote Full, Fair, Accurate, Timely and Understandable Disclosure**     As a public company, Kensington has a responsibility to report financial information tosecurity holders so that they are provided accurate information in all material respects about theCompany’s financial condition and results of operations. It is the policy of the Company to fullyand fairly disclose the financial condition of the Company in compliance with applicableaccounting principles, laws, rules and regulations. Further, it is the Company’s policy topromote full, fair, accurate, timely and understandable disclosure in all Company reports requiredto be filed with, or submitted to, the Securities and Exchange Commission (“SEC”) as required byapplicable laws, rules and regulations then in effect, and in other public communications made bythe Company.     Covered Persons may be called upon to provide or prepare necessary information to ensure thatthe Company’s public reports are complete, fair and understandable. The Company expects CoveredPersons to take this responsibility seriously and to provide accurate information related to theCompany’s public disclosure requirements.     All books and records of the Company shall fully and fairly reflect all Company transactionsin accordance with accounting principles generally accepted in the United States of America, andany other financial reporting or accounting regulations to which the Company is subject. Noentries to the Company’s books and records shall be made or omitted to intentionally conceal ordisguise the true nature of any transaction. Covered Persons shall maintain all Company books andrecords in accordance with the Company’s record retention policy.     All Covered Persons must report to Kensington any questionable accounting or auditing mattersthat may come to their attention. This applies to all operating reports or records prepared forinternal or external purposes, such as sales or backlog information. If any Covered Person hasconcerns or
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complaints regarding accounting, internal accounting controls or auditing matters, all suchconcerns or complaints should be reported to the Company’s Audit Committee in accordance with theCompany’s “Policy Regarding Complaints to the Audit Committee Regarding Accounting and AuditingMatters.”**Corporate Opportunities**     Covered Persons owe a duty to the Company to advance the Company’s legitimate interests whenthe opportunity to do so arises. Covered Persons are prohibited from taking for themselvesopportunities that are discovered through the use of corporate property, information or position,or using corporate property, information or position for personal gain, unless the Board ofDirectors has first declined to pursue the opportunity. Covered Persons shall not use corporateproperty, information, or position for gain or to compete with the Company, directly orindirectly.**Confidentiality**     “Confidential Information” is any and all of the Company’s non-public information, andincludes business, marketing and service plans, records, salary information, financial data,contracts, customer lists and reports. Covered Persons must maintain the confidentiality of theCompany’s Confidential Information entrusted to them by the Company, its customers or itssuppliers and use that information only to further the business interests of the Company, exceptwhere disclosure or other use is duly authorized by the Company or legally mandated. Thisincludes information disseminated to employees in an effort to keep them informed or in connectionwith their work activities, but with the instruction, confidential labeling, or reasonableexpectation that the information be kept confidential. Unauthorized use or distribution ofConfidential Information violates Company policy, and may also be illegal and result in civil orcriminal penalties. Each Covered Person must sign an agreement designed to protect the Company’sConfidential Information.**Intellectual Property**     Kensington expends a great deal of time, effort and money to protect our “IntellectualProperty.” Intellectual Property includes trade secrets, patents, trademarks, and copyrights, andengineering and manufacturing plans, designs and databases. In fulfillment of our legalobligations with respect to intellectual property rights, Kensington adheres to copyright laws,including the application of those laws to copyrighted work in computer software or otherelectronic formats. Employees must not make any unauthorized reproduction of any copyrightedwork. All unauthorized use or distribution of the Company’s Intellectual Property violatesCompany policy, and may also be illegal and result in civil or criminal penalties. Each CoveredPerson must sign an agreement designed to protect the Company’s Intellectual Property.**Trading on Insider Information**     Covered Persons may become aware of material “Inside Information” relating to the Company.Inside Information includes any non-public information, whether favorable or unfavorable, thatinvestors generally consider important in making investment decisions. Examples include,financial results not yet released, imminent regulatory approval, the purchase or sale of abusiness unit or significant assets, threatened litigation, or other significant facts about abusiness. Under the federal securities laws and Company policy, Covered Persons are prohibitedfrom buying or selling the Company’s securities or disclosing Inside Information as a “tip” toothers, until such information has been disclosed to the public and the market has had adequateopportunity to absorb the information.
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**Protection and Proper Use of Company Assets**     Covered Persons should protect the Company’s assets and ensure their efficient use. Theft,carelessness and waste have an adverse impact on the Company and its profitability. Companyassets may only be used for legitimate Kensington business purposes.**Reporting of Violations of the Code**     Any Covered Person who becomes aware of any violation of this Code must promptly bring theviolation to the attention of the appropriate party, as follows: (i) officers and directors ofthe Company shall report on a confidential basis violations of this Code to the Chairman of theCompany’s Audit Committee; and (ii) employees of the Company shall report any violations of thisCode to the Company’s Chairman of the Board, the principal executive officer or principalfinancial officer.**Compliance with Code**     All issues of non-compliance with this policy will be reviewed and evaluated according to thecircumstances and severity of the problem. The Company will take such action, as it deemsappropriate, which can include disciplinary action up to and including termination of employment,legal action, and other measures.**Compliance Standards/Procedures and Disciplinary Actions**     This Code is intended as a statement of basic principles and standards and does not includespecific rules that apply to every situation. Its contents must be viewed within the framework ofthe Company’s other policies, practices, instructions and the requirements of the law. This Codeis in addition to other policies, practices or instructions of our Company that must be observed.Moreover, the absence of a specific corporate policy, practice or instruction covering aparticular situation does not relieve Covered Persons of the responsibility for exercising thehighest ethical standards applicable to the circumstances.     In some situations, it is difficult to know right from wrong. Because this Code does notanticipate every situation that will arise, it is important that each Covered Person approaches anew question or problem in a deliberate fashion. The Company suggests the following process: a. Determine if you know all the facts.  b. Identify exactly what it is that concerns you.  c. Discuss the problem with a supervisor or, if you are a director,the Company’s legal counsel.  d. Seek help from other resources, such as other managementpersonnel or the Company’s legal counsel.  e. Seek guidance before taking any action that you believe may beunethical or dishonest.
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     Covered Persons will be governed by the following compliance standards: a. You are personally responsible for your own conduct and forcomplying with all provisions of this Code and for properly reporting known orsuspected violations;  b. If you are a supervisor, manager, director or officer, you mustuse your best efforts to ensure that employees understand and comply with thisCode;  c. No one has the authority or right to order, request or eveninfluence you to violate this Code or the law; a request or order from anotherperson will not be an excuse for your violation of this Code;  d. Any attempt by you to induce another director, officer oremployee of the Company to violate this Code, whether successful or not, isitself a violation of this Code, and may be a violation of law;  e. Any retaliation or threat of retaliation against any director,officer or employee of the Company for refusing to violate this Code, or forreporting in good faith the violation or suspected violation of this Code, isitself a violation of this Code may also be a violation of our Policy RegardingComplaints to the Audit Committee Regarding Accounting and Auditing Standardsand may be a violation of law; and  f. The Company expects that every reported violation of this Codewill be carefully considered and, where appropriate, investigated.     The following actions by any Covered Person will result in disciplinary measures being takenby the Company: **•** violating of the Code  **•** knowingly authorizing or participating in actions which are in violation of the Code  **•** failing to report a violation of the Code or withholding relevant and materialinformation concerning such a violation of which any Covered Person becomes aware.  **•** retaliating, directly or indirectly, or encouraging others to do so, against anindividual who reports a violation of the Code  **•** reporting information which is known or suspected by the reporting person tobe untrue     Disciplinary action may include any one or more of the following, not necessarily in theorder shown: **•** a warning  **•** a written reprimand (to be noted in individual’s personnel file)  **•** probation  **•** temporary suspension
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 **•** discharge  **•** required reimbursement of losses or damages  **•** referral for criminal prosecution or civil action     Disciplinary action will be taken against: **•** any Covered Person who willfully violates the standards described in this Code  **•** any Covered Person who deliberately withholds relevant information concerning aviolation of this Code  **•** any manager or supervisor of a violator, to the extent that the circumstances ofthe violation occurred with the knowledge of acquiescence of the supervisor  **•** any supervisor or other Covered Person who retaliates (or encourages others to doso) against any person who reports a violation of the Code**Government Investigations**     It is the policy of the Company to cooperate fully with governmental investigations. Duringany government inspection or investigation, you should never destroy or alter any Companydocuments, lie or make misleading statements to a government investigator, attempt to causeanother employee to fail to provide accurate information and/or obstruct, mislead or delay thecommunication of information or records to any governmental authority. If you receive any inquiryfrom a government investigator, the Company requires that you immediately notify your immediatesupervisor or an executive officer of the Company. You may not provide Company documents to anygovernment entity in response to such a request without the prior approval of an executiveofficer. The law guarantees all of us a right to be represented by legal counsel during anyinvestigation or inquiry by any governmental agency. In view of the technical nature of theinvestigations, the Company believes that it should be represented and that you should at least bemade aware of the opportunity for personal representation.**Corporate Communication**     All written and oral communications geared toward external audiences that discuss theCompany’s business matters — in speeches, press releases, presentations and other such materials — must be cleared by the Company’s Chief Executive Officer, President or Chief Financial Officerprior to the release. This policy also applies to any public communication about the Company anemployee might post over the Internet, including in such forums as “chat rooms” and “messageboards.” All communication to the investment community also must be cleared through one of theaforesaid officers. Requests for information about the Company, its business or a pending legalmatter should be directed to one of the aforesaid officers.**Reservation of Rights**     This Code is not intended to confer any special rights or privileges upon specificindividuals, provide greater or lesser rights under applicable law or entitle any person to remainemployed by the Company. This Code should not be interpreted as altering any at-will employmentrelationship between the Company and any employee and does not constitute an employmentrelationship between the Company and any employee and does not constitute an employment contract.This Code is not a
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contract, and the Company reserves the right to change, modify, suspend, interpret oreliminate any provision in this Code, retroactively or prospectively, at any time, with or withoutnotice.     This Code is for the benefit of the Company, and no other person is entitled to enforce thisCode. This Code does not, and should not be construed to, create any private cause of action orremedy in any other person for a violation of the Code.**Waiver of the Code**     Any waiver of this Code may be made only by the independent directors of the Board ofDirectors, or by an authorized committee of the Board of Directors comprised solely of independentdirectors. Waivers of this Code will be disclosed as required by law, SEC regulations or therules and standards of the national securities exchange on which the Company’s securities arelisted.
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