Exhibit
10.1


FORM OF


BRADFORD BANK


EMPLOYEE STOCK OWNERSHIP PLAN


 


 


Effective as of January 1, 2007


 


















 


BRADFORD BANK


EMPLOYEE STOCK OWNERSHIP PLAN


CERTIFICATION


I, Dallas R. Arthur, Chief Executive Officer of
Bradford Bank, hereby certify that the attached Bradford Bank Employee Stock
Ownership Plan, effective January 1, 2007, was adopted at a duly held meeting
of the Board of Directors of the Bank.


	
  

  	
  BRADFORD BANK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Dallas R. Arthur

  
	
   

  	
   

  	
  Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Date:

  	
   

  



 


















 


Bradford
Bank


Employee
Stock Ownership Plan


Table of
Contents


	
  Section 1 - Introduction

  	
   

  	
  1

  
	
   

  	
   

  	
   

  
	
  Section 2 - Definitions

  	
   

  	
  1

  
	
   

  	
   

  	
   

  
	
  Section 3 - Eligibility and Participation

  	
   

  	
  8

  
	
   

  	
   

  	
   

  
	
  Section 4 - Contributions

  	
   

  	
  10

  
	
   

  	
   

  	
   

  
	
  Section 5 - Plan Accounting

  	
   

  	
  12

  
	
   

  	
   

  	
   

  
	
  Section 6 - Vesting and Forfeitures

  	
   

  	
  18

  
	
   

  	
   

  	
   

  
	
  Section 7 - Distributions

  	
   

  	
  20

  
	
   

  	
   

  	
   

  
	
  Section 8 - Voting of Company Stock and Tender
  Offers

  	
   

  	
  25

  
	
   

  	
   

  	
   

  
	
  Section 9 - The Committee and Plan Administration

  	
   

  	
  26

  
	
   

  	
   

  	
   

  
	
  Section 10 - Rules Governing Benefit Claims

  	
   

  	
  29

  
	
   

  	
   

  	
   

  
	
  Section 11 - The Trust

  	
   

  	
  30

  
	
   

  	
   

  	
   

  
	
  Section 12 - Adoption, Amendment and Termination

  	
   

  	
  31

  
	
   

  	
   

  	
   

  
	
  Section 13 - General Provisions

  	
   

  	
  33

  
	
   

  	
   

  	
   

  
	
  Section 14 - Top-Heavy Provisions

  	
   

  	
  34

  



 


















 


SECTION 1


Introduction


Section
1.01         Nature of the Plan.


Effective as of
January 1, 2007 (the “Effective Date”), Bradford Bank (the “Bank”) hereby
establishes the Bradford Bank Employee Stock Ownership Plan (the “Plan”) to
enable Eligible Employees (as defined in Section 2.01(o) of the Plan) to
acquire stock owner­ship interests in Bradford Bancorp, Inc. (the “Company”),
the holding company of the Bank.  The
Bank intends this Plan to be a tax-qualified stock bonus plan under Section
401(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and an
employee stock ownership plan within the meaning of Section 407(d)(6) of the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and
Sections 409 and 4975(e)(7) of the Code. 
The Plan is designed to invest primarily in the common stock of the
Company, which stock constitutes “qualifying employer securities” within the
meaning of Section 407(d)(5) of ERISA and Sections 409(l) and 4975(e)(8) of the
Code.  Accordingly, the Plan and Trust Agreement
(as defined in Section 2.01(mm) of the Plan) shall be interpreted and applied
in a manner consistent with the Bank’s intent for it to be a tax-qualified plan
designed to invest primarily in qualifying employer securities.


The Plan reflects
certain provisions of the Economic Growth and Tax Relief Reconciliation Act of
2001 (“EGTRRA”).  The provisions related
to EGTRRA are intended as good faith compliance with EGTRRA and the guidance
issued thereunder.  To the extent any
provision of the Plan was operated according to an effective date earlier than
as required by law, then such date shall be the effective date with respect to
that provision of the Plan.


Section
1.02                            Employers
and Affiliates.


The Bank and each
of its Affiliates (as defined in Section 2.01(c) of the Plan) that, with the
consent of the Bank, adopt the Plan pursuant to the provisions of Section 12.01
of the Plan are collectively referred to as the “Employers” and individually as
an “Employer.”  The Plan shall be treated
as a single plan with respect to all participating Employers.


SECTION 2


Definitions


Section
2.01         Definitions.


In this Plan,
whenever the context so indicates, the singular or the plural number and the
masculine or feminine gender shall be deemed to include the other, the terms “he,”
“his,” and “him,” shall refer to a Participant or Beneficiary, as the case may
be, and, except as otherwise provided, or unless the context otherwise
requires, the capitalized terms shall have the following meanings:


(a)                                  “Account” or “Accounts” mean
a Participant’s or Beneficiary’s Company Stock Account and/or his Other
Investments Account, as the context so requires.



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(b)                                 “Acquisition Loan” means a loan or other extension of
credit, including an installment obligation to a “party in interest” (as
defined in Section 3(14) of ERISA) incurred by the Trustee in connection with
the purchase of Company Stock.


(c)                                  “Affiliate” means any corporation, trade or business, which,
at the time of reference, is together with the Bank, a member of a controlled
group of corporations, a group of trades or businesses (whether or not
incorporated) under common control, or an affiliated service group, as
described in Sections 414(b), 414(c), and 414(m) of the Code, respec­tively, or
any other organization treated as a single employer with the Bank under Section
414(o) of the Code; provided, however, that, where the context so requires, the
term “Affiliate” shall be construed to give full effect to the provisions of
Sections 409(l)(4) and 415(h) of the Code.


(d)                                 “Bank” means Bradford Bank, and any entity that succeeds to
the business of Bradford Bank and adopts this Plan in accordance with the
provisions of Section 12.02 of the Plan, or by written agreement assumes the
obligations of the Plan.


(e)                                  “Beneficiary” means the person(s) entitled to receive
benefits under the Plan following a Participant’s death, pursuant to Section
7.03 of the Plan.


(f)                                    “Change in Control” means any one of the following events
occurs:


(i)                                     Merger:  The Company or the Bank merges into or
consolidates with another corporation, or merges another corporation into the
Company or the Bank, and as a result less than a majority of the combined
voting power of the resulting corporation immediately after the merger or
consolidation is held by persons who were stockholders of the Company or the
Bank immediately before the merger or consolidation;


(ii)                                  Acquisition
of Significant Share Ownership:  The
Company files, or is required to file, a report on Schedule 13D or another form
or schedule (other than Schedule 13G) required under Sections 13(d) or 14(d) of
the Securities Exchange Act of 1934, if the schedule discloses that the filing
person or persons acting in concert has or have become the beneficial owner of
25% or more of a class of the Company’s voting securities, but this clause (b)
shall not apply to beneficial ownership of Company voting shares held in a
fiduciary capacity by an entity of which the Company directly or indirectly
beneficially owns 50% or more of its outstanding voting securities;


(iii)                               Change
in Board Composition:  During any
period of two consecutive years, individuals who constitute the Company’s or
the Bank’s Board of Directors at the beginning of the two-year period cease for
any reason to constitute at least a majority of the Bank’s or the Company’s
Board of Directors; provided, however, that for purposes of this clause (iii),
each director who is first elected by the board (or first nominated by the
board for election by the stockholders) by a vote of at least two-thirds (2/3)
of the directors who were directors at the beginning of the two-year period
shall be deemed to have also been a director at the beginning of such period;
or



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(iv)                              Sale
of Assets:  The Company or the Bank
sells to a third party all or substantially all of its assets.


(g)                                 “Code” means the Internal Revenue Code of 1986, as amended.


(h)                                 “Committee” means the individual(s) responsible for the
administration of the Plan in accordance with Section 9 of the Plan.


(i)                                     “Company” means  Bradford Bancorp, Inc.  and any entity which succeeds to the business of Bradford
Bancorp, Inc.


(j)                                     “Company Stock” means shares of the voting common stock or
preferred stock, meeting the requirements of Section 409 of the Code and
Section 407(d)(5) of ERISA, issued by the Company or its Affiliates.


(k)                                  “Company Stock Account” means the account established and
maintained in the name of each Participant or Beneficiary to reflect his share
of the Trust Fund invested in Company Stock.


(l)                                     “Compensation” [means a Participant’s wages, tips and other compensation
as reported on the Participant’s Form W-2.]  Compensation shall also include
amounts not currently includible in gross income by reason of the application
of Code Sections 125 (cafeteria plan), 132(f)(4) (qualified transportation
fringe), 402(e)(3) (401(k) plan), 402(h)(1)(B)(simplified employee pension
plan, 414(h) (employer pickup contributions under a governmental plan), 403(b)
(tax sheltered annuity) or 457(b) (eligible deferred compensation plan).


                                                A
Participant’s Compensation shall not exceed the limit set forth in Section
401(a)(17) of the Code ($225,000 for Plan Years beginning January 1,
2007).  If the Plan Year for which a
Participant’s Compensation is measured is less than twelve (12) calendar
months, then the amount of Compensation taken into account for such Plan Year
shall be the adjusted amount for such Plan Year, as prescribed by the Secretary
of the Treasury under Section 401(a)(17) of the Code, multiplied by a fraction,
the numerator of which is the number of months taken into account for such Plan
Year and the denominator of which is twelve (12).  In determining the dollar limitation
hereunder, Compensation received from an Affiliate shall be recognized as
Compensation.


(m)                               “Disability” means a physical or mental condition of a Participant
resulting from bodily injury, disease, or mental disorder which renders the
Participant incapable of continuing any gainful occupation and which condition
constitutes total disability under the federal Social Security Act.  The Disability of a Participant shall be
determined by the Plan Administrator, in its sole discretion.



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(n)                                 “Effective Date” means January 1, 2007.


(o)                                 “Eligible Employee” means any Employee who is not precluded
from participating in the Plan by reason of the provisions of Section 3.02 of
the Plan.


(p)                                 “Employee” means any person who is actually performing
services for the Employer or an Affiliate in a common-law, employer-employee
relationship as determined under Sections 31.3121(d)-1, 31.3306(i)-1, or
31.3401(c)-1 of the Treasury Regulations and any “Leased Employee” as defined
in Section 3.02(b) of this Plan.


(q)                                 “Employer” or “Employers” means
the Bank and any of its Affiliates that adopt the Plan in accordance with the
provisions of Section 12.01 of the Plan, and any entity which succeeds to the
business of the Bank or its Affiliates and which adopts the Plan in accordance
with the provisions of Section 12.02 of the Plan, or by written agreement
assumes the obligations under the Plan.


(r)                                    “Entry Date” means the [January 1st or July 1st] coincident with or next following the date the
Employee satisfies the requirements for participation under Section 3.01 of the
Plan.


(s)                                  “ERISA” means the Employee Retirement Income Security Act of
1974, as amended.


(t)                                    “Exchange Act” means the Securities Exchange Act of 1934, as
amended.


(u)                                 “Financed Shares” means shares of Company Stock acquired by
the Trustee with the proceeds of an Acquisition Loan, which shall constitute “qualifying
employer securities” under Section 409(l) of the Code and any shares of Company
Stock received upon conversion or exchange of such shares.


(v)                                 “Highly Compensated Employee” means an Employee who, for a
particular Plan Year,  satisfies one of
the following conditions:


(i)                                     was
a “5-percent owner” (as defined in Section 414(q)(2) of the Code) during the
year or the preceding year, or


(ii)                                  for
the preceding year, had “compensation” (as defined in Section 414(q)(4) of the
Code) from the Bank and its Affiliates exceeding the limit in Section 414(q)(1)
of the Code ($100,000 for Plan Years beginning January 1, 2007).


(w)                               “Hours of Service” means:


(i)                                     Each
hour for which an Employee is paid, or entitled to payment, for performing  duties for the Employer during the applicable
computation period.



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(ii)                                  Each
hour for which an Employee is paid, or entitled to payment, for a period during
which no duties are performed (irrespective of whether the employment
relationship has terminated) due to vacation, holiday, illness, incapacity
(including disability), layoff, jury duty, military duty or leave of
absence.  Notwithstanding the preceding
sentence, no credit shall be given to the Employee for:


(A)                              more
than 501 hours under this clause (ii) because of any single continuous period
in which the Employee performs no duties (whether or not such period occurs in
a single computation period);


(B)                                an
hour for which the Employee is directly or indirectly paid, or entitled to
payment, because of a period in which no duties are performed if such payment
is made or due under a plan maintained solely for the purpose of complying with
applicable worker’s or workmen’s compensation, unemployment, or disability
insurance laws; or


(C)                                an
hour or a payment which solely reimburses the Employee for medical or
medically-related expenses incurred by the Employee.


(iii)                               Each
hour for which back pay, irrespective of mitigation of damages, is either
awarded or agreed to by the Employer; provided, however, that hours credited
under either clause (i) or (ii) above shall not also be credited under this
clause (iii).  Crediting of hours for
back pay awarded or agreed to with respect to periods described in clause (ii)
above will be subject to the limitations set forth in that clause.


The crediting of
Hours of Service shall be determined by the Committee in accordance with the
rules set forth in Section 2530.200b-2 of the regulations prescribed by the
Department of Labor, which rules shall be consistently applied with respect to
all Employees within the same job classification.  If an Employer finds it impracticable to
count actual Hours of Service for any class or group of non-hourly Employees,
each Employee in that class or group shall be credited with 45 Hours of Service
for each weekly period in which he has at least one Hour of Service.  However, an Employee shall be credited with
Hours of Service only for his normal working hours during a paid absence.  Hours of Service shall be credited for
employment with an Affiliate.


For purposes of
determining whether an Employee has incurred a One Year Break in Service and
for vesting and participation purposes, if an Employee begins a
maternity/paternity leave of absence described in Section 411(a)(6)(E)(i) of
the Code, his Hours of Service shall include the Hours of Service that would
have been credited to him if he had not been so absent (or 45 Hours of Service
for each week of such absence if the actual Hours of Service cannot be
determined).  An Employee shall be
credited for such Hours of Service (up to a maximum of 501 Hours of Service) in
the Plan Year in which his absence begins (if such crediting will prevent him
from incurring a One Year Break in Service in such Plan Year) or, in all other
cases, in the following Plan Year.  An
absence from employment for maternity or paternity reasons means an absence:



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(i)            by reason of pregnancy of the
Employee,


(ii)           by reason of the birth of a child of
the Employee,


(iii)                               by
reason of the placement of a child with the Employee in connection with the
adoption of such child by such Employee, or


(iv)                              for
purposes of caring for such child for a period beginning immediately following
such birth or placement.


(x)                                   “Later Retirement Date” means the first day
of the month coincident with or next following a Participant’s date of actual
retirement which occurs after his Normal Retirement Date.


(y)                                 “Loan Suspense Account” means that portion of the Trust Fund
consisting of Company Stock acquired with an Acquisition Loan which has not yet
been allocated to the Participants’ Accounts.


(z)                                   “Named Fiduciary” means the Board of
Directors of the Bank.


(aa)                            “Normal Retirement Age” means attainment of [age 65].


(bb)                          “Normal Retirement Date” means the first
day of the month coincident with or next following the Participant’s attainment
of Normal Retirement Age.


(cc)                            “One Year Break in Service” means a twelve (12) consecutive
month period during which the Participant does not complete more than 500 Hours
of Service.


(dd)                        “Other Investments Account” means the account established
and maintained in the name of each Participant or Beneficiary to reflect his
share of the Trust Fund, other than Company Stock.


(ee)                          “Participant” means any Eligible Employee who has become a
Participant in accordance with Section 3.01 of the Plan or any other person
with an Account balance under the Plan.


(ff)                                “Plan” means this Bradford Bank Employee Stock Ownership
Plan, as amended from time to time.


(gg)                          “Plan Year” means the calendar year.



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(hh)                          “Recognized Absence” means a period for which:


(i)                                     an
Employer grants an Employee a leave of absence for a limited period of time, but
only if an Employer grants such leaves of absence on a nondiscriminatory basis
to all Eligible Employees; or


(ii)                                  an
Employee is temporarily laid off by an Employer because of a change in the
business conditions of the Employer; or


(iii)                               an
Employee is on active military duty, but only to the extent that his employment
rights are protected by the Military Selective Service Act of 1967 and the
Uniformed Services Employment and Reemployment Rights Act of 1994.


(ii)                                  “Retirement Date” means a Participant’s Normal or Later
Retirement Date, whichever is applicable.


(jj)                                  “Service”  means employment with
the Bank or an Affiliate.


(kk)                            “Termination of Service” means the earlier of (a) the date
on which an Employee’s Service is terminated by reason of his resignation,
retirement, discharge, death or Disability or (b) the first anniversary of the
date on which such Employee’s service is terminated for disability of a
short-term nature or any other reason. 
Service in the Armed Forces of the United States shall not constitute a
Termination of Service but shall be considered to be a period of employment by
the Employer provided (i) such military service is caused by war or other
emergency or the Employee is required to serve under the laws of conscription
in time of peace, (ii) the Employee returns to employment with the Employer
within six (6) months following discharge from such military service and (iii)
such Employee is reemployed by the Employer at a time when the Employee had a
right to reemployment at his former position or substantially similar position
upon separation from such military duty in accordance with seniority rights as
protected under the laws of the United States. 
A leave of absence granted to an Employee by the Employer shall not
constitute a Termination of Service provided that the Participant returns to
the active service of the Employer at the expiration of any such period for
which leave has been granted. 
Notwithstanding the foregoing, an Employee who is absent from service
with the Employer beyond the first anniversary of the first date of absence for
maternity or paternity reasons set forth in Section 2.01 of the Plan shall
incur a Termination of Service for purposes of the Plan on the second
anniversary of the date of such absence.


(ll)                                  “Treasury Regulations” mean the regulations promulgated by
the Department of the Treasury under the Code.


(mm)                      “Trust” means the Bradford Bank Employee Stock Ownership
Plan Trust created in connection with the establishment of the Plan.


(nn)                          “Trust Agreement” means the trust agreement establishing the
Trust.



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(oo)                          “Trust Fund” means the assets held in the Trust for the
benefit of Participants and their Beneficiaries.


(pp)                        “Trustee” means the trustee or trustees from time to time in
office under the Trust Agreement.


(qq)                        “Valuation Date” means the last day of the Plan Year and
each other date as of which the Committee shall determine the investment
experience of the Trust Fund and adjust Participants’ Accounts accordingly.


(rr)                              “Valuation
Period” means the period following a Valuation Date and ending with the
next Valuation Date.


(ss)                          “Year of
Service” shall mean a Plan Year in which an Employee is credited with at
least 500 Hours of Service.


SECTION 3


Eligibility
and Participation


Section
3.01                            Participation.


(a) 
                            All Eligible Employees who are [at least 21 years of age] on the closing date of the Bank’s
mutual to stock conversion shall enter the Plan and become Participants as of
the later of:  (i) the Effective
Date; or (ii) the Eligible Employee’s date of hire.


(b)                               An Eligible Employee who is first
employed by an Employer after the closing date of the Bank’s mutual to stock
conversion shall become a Participant in the Plan upon satisfying the following
requirements:


(i)            The Eligible Employee is [at least 21 years of age]; and


(ii)                                  The
Eligible Employee completes [one Year of Service].


(c)                                  An
Eligible Employee who has satisfied the eligibility requirements of Section
3.01(b) shall enter the Plan and become a Participant on the Entry Date
coincident with or next following the date he satisfies such requirements.



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Section
3.02         Certain Employees
Ineligible.


The following
Employees are ineligible to participate in the Plan:


(a)                                  Employees
covered by a collective bargaining agreement between the Employer and the Employee’s
collective bargaining representative if:


(i)                                     retirement
benefits have been the subject of good faith bargaining between the Employer
and the representative, and


(ii)                                  the
collective bargaining agreement does not expressly provide that Employees of
such unit be covered under the Plan;


(b)                                 Employees
who are nonresident aliens and who receive no earned income from an Employer
which constitutes income from sources within the United States; and


(c)                                  Employees
of an Affiliate of the Bank that has not adopted the Plan pursuant to Sections
12.01 or 12.02 of the Plan.


Section
3.03                            Transfer
to and from Eligible Employment.


(a)                                  If
an Employee ineligible to participate in the Plan by reason of Section 3.02 of
the Plan transfers to employment as an Eligible Employee, he shall enter the
Plan as of the later of:


(i)            the first Entry Date after the date
of transfer, or


(ii)                                  the
first Entry Date on which he could have become a Participant pursuant to
Section 3.01 of the Plan.


(b)                               If a
Participant transfers to an employment position that makes him ineligible to
participate in the Plan as of the date of such transfer, he shall cease active
participation in the Plan as of such date.


Section
3.04                            Participation
after Reemployment.


(a)                                  If an Employee incurs a One Year Break in Service
prior to satisfying the eligibility requirements of Section 3.01 of the Plan,
Service prior to such One Year Break in Service shall be disregarded and the
Employee must satisfy the eligibility requirements of Section 3.01 as a new
Employee.


(b)                                 If an Employee incurs a One Year Break in
Service after satisfying the eligibility requirements of Section 3.01 of the
Plan and again performs an Hour of Service, the Employee shall receive credit
for Service prior to his One Year Break in Service and shall be eligible to
participate in the Plan immediately upon reemployment, provided the Employee is
not excluded from participation under the provisions of Section 3.02 of the
Plan.



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Section
3.05                            Participation
Not Guarantee of Employment.


Participation in
the Plan does not constitute a guarantee or contract of employment and will not
give any Employee the right to be retained in the employ of the Bank or any of
its Affiliates nor any right or claim to any benefit under the terms of the
Plan unless such right or claim has specifically accrued under the Plan.


SECTION 4


Contributions


Section
4.01         Employer Contributions.


(a)                                  Discretionary Contributions.  Each Plan Year, each Employer, in its
discretion, may make a contribution to the Trust.  Each Employer making a contribution for any
Plan Year under this Section 4.01(a) will contribute to the Trustee cash equal
to, or Company Stock or other property having an aggregate fair market value
equal to, such amount as the Board of Directors of the Employer shall determine
by resolution.  Notwithstanding the
Employer’s discretion with respect to the medium of contribution, an Employer
shall not make a contribution in any medium which would make such contribution
a prohibited transaction (for which no exemption is provided) under Section 406
of ERISA or Section 4975 of the Code.


(b)                                 Employer Contributions for Acquisition Loans.  Each Plan Year, the Employers
shall, subject to any regulatory prohibitions, contribute an amount of cash
sufficient to enable the Trustee to discharge any indebtedness incurred with
respect to an Acquisition Loan pursuant to the terms of the Acquisition
Loan.  The Employers’ obligation to make
contributions under this Section 4.01(b) shall be reduced to the extent of any
investment earnings attributable to such contributions and any cash dividends
paid with respect to Company Stock held by the Trustee in the Loan Suspense
Account. If there is more than one Acquisition Loan, the Employers shall
designate the one to which any contribution pursuant to this Section 4.01(b) is
to be applied.


Section
4.02                            Limitations
on Contributions.


In no event shall
an Employer’s contribution(s) made under Section 4.01 of the Plan for any Plan
Year exceed the lesser of:


(a)                                  The
maximum amount deductible under Section 404 of the Code by that Employer as an
expense for Federal income tax purposes; and


(b)                                 The
maximum amount which can be credited for that Plan Year in accordance with the
allocation limitation provisions of Section 5.05 of the Plan.



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Section
4.03         Acquisition Loans.


The Trustee may
incur Acquisition Loans from time to time to finance the acquisition of Company
Stock for the Trust or to repay a prior Acquisition Loan.  An Acquisition Loan shall be for a specific
term, shall bear a reasonable rate of interest, shall not be payable on demand,
except in the event of default, and shall be primarily for the benefit of
Participants and Beneficiaries of the Plan. 
An Acquisition Loan may be secured by a collateral pledge of the
Financed Shares so acquired and any other Plan assets which are permissible
securities within the provisions of Section 54.4975-7(b) of the Treasury
Regulations.  No other assets of the Plan
or Trust may be pledged as collateral for an Acquisition Loan, and no lender
shall have recourse against any other Trust assets.  Any pledge of Financed Shares must provide
for the release of shares so pledged on a basis equal to the principal and
interest (or if the requirements of Section 54.4975-7(b)(8)(ii) of the Treasury
Regulations are met and the Employer so elects, principal payments only), paid
by the Trustee on the Acquisition Loan. 
The released Financed Shares shall be allocated to Participants’
Accounts in accordance with the provisions of Sections 5.04 or 5.08 of the
Plan, whichever is applicable.  Payment
of principal and interest on any Acquisition Loan shall be made by the Trustee
only from the Employer contributions paid in cash to enable the Trustee to
repay such loan in accordance with Section 4.01(b) of the Plan, from earnings
attributable to such contributions, and any cash dividends received by the
Trustee on Financed Shares acquired with the proceeds of the Acquisition Loan
(including contributions, earnings and dividends received during or prior to
the year of repayment less such payments in prior years), whether or not
allocated.  Financed Shares shall
initially be credited to the Loan Suspense Account and shall be transferred for
allocation to the Company Stock Accounts of Participants only as payments of
principal and interest (or, if the requirements of Section 54.4975-7(b)(8)(ii)
of the Treasury Regulations are met and the Employer so elects, principal
payments only), on the Acquisition Loan are made by the Trustee.  The number of Financed Shares to be released
from the Loan Suspense Account for allocation to Participants’ Company Stock
Account for each Plan Year shall be based on the ratio that the payments of
principal and interest (or, if the requirements of Section 54.4975-7(b)(8)(ii)
of the Treasury Regulations are met and the Employer so elects, principal
payments only), on the Acquisition Loan for that Plan Year bears to the sum of
the payments of principal and interest on the Acquisition Loan for that Plan
Year plus the total remaining payment of principal and interest projected (or,
if the requirements of Section 54.4975-7(b)(8)(ii) of the Treasury Regulations
are met and the Employer so elects, principal payments only), on the
Acquisition Loan over the duration of the Acquisition Loan repayment period, subject
to the provisions of Section 5.05 of the Plan.


Section
4.04                            Conditions
as to Contributions.


In addition to the
provisions of Section 12.03 of the Plan for the return of an Employer’s
contributions in connection with a failure of the Plan to qualify initially
under the Code, any amount contributed by an Employer due to a good faith
mistake of fact, or based upon a good faith but erroneous determination of its
deductibility under Section 404 of the Code, shall be returned to the Employer
within one year after the date on which the Employer originally made such
contribution, or within one year after its nondeductibility has been finally
determined.  However, the amount to be
returned shall be reduced to take account of any adverse investment experience
within the Trust in order that the balance credited to each Participant Account
is not less than it would have been if the contribution had never been made by
the Employer.



 11
 









Section
4.05                            Employee
Contributions.


Employee
contributions are neither required nor permitted under the Plan.


Section
4.06                            Rollover
Contributions.


Rollover
contributions to the Plan of assets from other tax-qualified retirement plans
are not permitted under the Plan.


Section
4.07                            Trustee-to-Trustee
Transfers.


Trustee-to-trustee
transfers of assets from other tax-qualified retirement plans are not permitted
under the Plan.


SECTION 5


Plan
Accounting


Section
5.01                            Accounting
for Allocations.


The Committee
shall establish the Accounts (and sub-accounts, if deemed necessary) for each
Participant, and the accounting procedures for the purpose of making
allocations to Participants’ Accounts as provided for in this Section 5.  The Committee shall maintain adequate records
of the cost basis of shares of Company Stock allocated to each Participant’s
Company Stock Account.  The Committee
also shall keep separate records of Financed Shares attributable to each
Acquisition Loan and of contributions made by the Employers (and any earnings
thereon) made for the purpose of enabling the Trustee to repay any Acquisition
Loan.  From time to time, the Committee
may modify its accounting procedures for the purpose of achieving equitable and
nondiscriminatory allocations among the Accounts of Participants, in accordance
with the provisions of this Section 5 and the applicable requirements of the
Code and ERISA.  In accordance with
Section 9 of the Plan, the Committee may delegate the responsibility for
maintaining Accounts and records.


Section
5.02                            Maintenance
of Participants’ Company Stock Accounts.


As of each Valuation
Date, the Committee shall adjust the Company Stock Account of each Participant
to reflect activity during the Valuation Period as follows:


(a)                                  First,
charge to each Participant’s Company Stock Account all distributions and
payments made to the Participant that have not been previously charged;


(b)                                 Next,
credit to each Participant’s Company Stock Account the shares of Company Stock,
if any, that have been purchased with amounts from the Participant’s Other
Investments Account, and adjust such Other Investments Account in accordance
with the provisions of Section 5.03 of the Plan;



 12
 









(c)                                  Next,
credit to each Participant’s Company Stock Account the shares of Company Stock
representing contributions made by the Employers in the form of Company Stock
and the number of Financed Shares released from the Loan Suspense Account under
Section 4.03 of the Plan that are to be allocated and credited as of that date
in accordance with the provisions of Section 5.04 of the Plan; and


(d)                                 Finally,
credit to each Participant’s Company Stock Account the shares of Company Stock
released from the Loan Suspense Account that are to be allocated in accordance
with the provisions of Section 5.09 of the Plan.


Section
5.03         Maintenance of
Participants’ Other Investments Accounts.


Except as
otherwise provided for under Section 5.08 of the Plan, as of each Valuation
Date, the Committee shall adjust the Other Investments Account of each
Participant to reflect activity during the Valuation Period as follows:


(a)                                  First,
charge to each Participant’s Other Investments Account all distributions and
payments made to the Participant that have not previously been charged;


(b)                                 Next,
if Company Stock is purchased with assets from a Participant’s Other
Investments Account, charge the Participant’s Other Investments Account
accordingly;


(c)                                  Next,
subject to the dividend provisions of Section 5.09 of the Plan, credit to the
Other Investments Account of each Participant any cash dividends paid to the
Trustee on shares of Company Stock held in that Participant’s Company Stock
Account (as of the record date for such cash dividends) and dividends paid on
shares of Company Stock held in the Loan Suspense Account that have not been
used to repay any Acquisition Loan. 
Subject to the provisions of Section 5.09 of the Plan, cash dividends
that have not been used to repay any Acquisition Loan and have been credited to
a Participant’s Other Investments Account shall be applied by the Trustee to
purchase shares of Company Stock, which shares shall then be credited to the
Company Stock Account of such Participant. 
The Participant’s Other Investments Account shall then be charged by the
amount of cash used to purchase such Company Stock.  In addition, any earnings on:


(i)                                     Participants’
Other Investments Accounts will be allocated to Accounts, pro rata, based on
Participants’ Other Investments Account balances as of the first day of the
Valuation Period, and


(ii)                                  the
Loan Suspense Account, other than dividends used to repay the Acquisition Loan,
will be allocated to Participants’ Other Investments Accounts, pro rata, based
on their Other Investments Account balances as of the first day of the
Valuation Period;



 13
 









(d)                                 Next,
allocate and credit the Employer contributions made pursuant to Section 4.01(b)
of the Plan for the purpose of repaying any Acquisition Loan, in accordance
with Section 5.04 of the Plan.  Such
amount shall then be used to repay any Acquisition Loan and such Participant’s
Other Investments Account shall be charged accordingly; and


(e)                                  Finally,
allocate and credit the Employer contributions (other than amounts contributed
to repay an Acquisition Loan) that are made in cash (or property other than
Company Stock) for the Plan Year to the Other Investments Account of each
Participant in accordance with Section 5.04 of the Plan.


Section
5.04                            Allocation
and Crediting of Employer Contributions.


(a)                                  Except
as otherwise provided for in Sections 5.08 and 5.09 of the Plan, as of the
Valuation Date for each Plan Year:


(i)                                     Company
Stock released from the Loan Suspense Account for that year and shares of
Company Stock contributed directly to the Plan shall be allocated and credited
to each Active Participant’s (as defined in paragraph (b) of this Section 5.04)
Company Stock Account based on the ratio that each Active Participant’s
Compensation bears to the aggregate Compensation of all Active Participants for
the Plan Year, and then


(ii)                                  The
cash contributions not used to repay an Acquisition Loan and any other property
contributed for that year shall be allocated and credited to each Active
Participant’s Other Investments Account based on the ratio determined by
comparing each Active Participant’s Compensation while a Participant to the
aggregate Compensation of all Active Participants for the Plan Year.


(b)                                 For
purposes of this Section 5.04, the term “Active Participant” means those
Eligible Employees who:


(i)                                     are
employed on the last day of the Plan Year; or


(ii)                                  terminated
employment during the Plan Year by reason of death, Disability, or attainment
of their Normal or Later Retirement Date.


Section
5.05                            Limitations
on Allocations.


(a)                                  In General.  Subject
to the provisions of this Section 5.05, Section 415 of the Code shall be
incorporated by reference into the terms of the Plan.  No allocation shall be made under Section
5.04 of the Plan that would result in a violation of Section 415 of the Code.


(b)                                 Code Section 415 Compensation.  For purposes of this Section
5.05, Compensation shall be adjusted to reflect the general rule of Section
1.415-2(d) of the Treasury Regulations.



 14
 









(c)                                  Limitation Year. 
The “limitation year” (within the meaning of Section 415
of the Code) shall be the calendar year.


(d)                                 Multiple Defined Contribution Plans.  In any case where a
Participant also participates in another defined contribution plan of the Bank
or its Affiliates, the appropriate committee of such other plan shall first
reduce the after-tax contributions under any such plan, shall then reduce any
elective deferrals under any such plan subject to Section 401(k) of the Code,
shall then reduce all other contributions under any other such plan and, if
necessary, shall then reduce contributions under this Plan.


(e)                                  Excess Allocations. 
If, after applying the allocation provisions under
Section 5.04 of the Plan, allocations under Section 5.04 of the Plan would
otherwise result in a violation of Section 415 of the Code, the Committee shall
allocate and reallocate employer contributions to other Participants in the
Plan for the limitation year or, if such allocation and reallocation causes the
limitations of Section 415 of the Code to be exceeded, shall hold excess
amounts in an unallocated suspense account for allocation in a subsequent Plan
Year in accordance with Section 1.415-6(b)(6)(i) of the Treasury Regulations.  Such suspense account, if permitted, will be
credited before any allocation of contributions for subsequent limitation
years.


(f)                                  Allocations Pursuant to Section
5.08.  For purposes of
this Section 5.05, no amount credited to any Participant’s Account pursuant to
Section 5.08 of the Plan shall be counted as an “annual addition” for purposes
of Section 415 of the Code.  In the event
any amount cannot be allocated to Affected Participants (as defined in Section
5.08 of the Plan) under the Plan pursuant to Section 5.08 of the Plan in the
year of a Change in Control, the amount which may not be so allocated in the
year of the Change in Control shall be treated in accordance with paragraph (e)
of this Section 5.05.


Section
5.06                            Other
Limitations.


Aside from the
limitations set forth in Section 5.05 of the Plan, in no event shall more than
one-third of the Employer contributions to the Plan be allocated to the
Accounts of Highly Compensated Employees. 
In order to ensure that such allocations are not made, the Committee
shall, beginning with the Participants whose Compensation exceeds the limit
then in effect under Section 401(a)(17) of the Code, reduce the amount of
Compensation of such Highly Compensated Employees on a pro-rata basis per
individual that would otherwise be taken into account for purposes of
allocating benefits under Section 5.04 of the Plan.  If, in order to satisfy this Section 5.06,
any such Participant’s Compensation must be reduced to an amount that is lower
than the Compensation amount of the next highest paid (based on such
Participant’s Compensation) Highly Compensated Employee (the “breakpoint amount”),
then, for purposes of allocating benefits under Section 5.04 of the Plan, the
Compensation of all concerned Participants shall be reduced to an amount not to
exceed such breakpoint amount.



 15
 









Section
5.07                            Limitations
as to Certain Section 1042 Transactions.


To the extent that
a shareholder of Company Stock sells qualifying Company Stock to the Plan and
elects (with the consent of the Bank) nonrecognition of gain under Section 1042
of the Code, no portion of the Company Stock purchased in such nonrecognition
transaction (or other dividends or other income attributable thereto) may
accrue or be allocated during the nonalloca­tion period (the ten (10) year
period beginning on the later of the date of the sale of the qualified Company
Stock, or the date of the Plan allocation attributable to the final payment of
an Acquisition Loan incurred in connection with such sale) for the benefit of:


(a)                                  the
selling shareholder;


(b)                                 the
spouse, brothers or sisters (whether by the whole or half blood), ancestors or
lineal descendants of the selling shareholder or descendant referred to in (a)
above; or


(c)                                  any
other person who owns, after application of Section 318(a) of the Code, more
than twenty-five percent (25%) of:


(i)                                     any
class of outstanding stock of the Company or any Affiliate, or


(ii)                                  the
total value of any class of outstanding stock of the Company or any Affiliate.


For purposes of
this Section 5.07, Section 318(a) of the Code shall be applied without regard
to the employee trust exception of Section 318(a)(2)(B)(i) of the Code.


Section
5.08         Allocations Upon
Termination Prior to Satisfaction of Acquisition Loan.


(a)                                  Notwithstanding
any other provision of the Plan, in the event of a Change in Control, the Plan
shall terminate as of the effective date of the Change in Control and, as soon
as practicable thereafter, the Trustee shall repay in full any outstanding
Acquisition Loan.  In connection with
such repayment, the Trustee shall:  (i)
apply cash, if any, received by the Plan in connection with the transaction
constituting a Change in Control, with respect to the unallocated shares of
Company Stock acquired with the proceeds of the Acquisition Loan, and (ii) to
the extent additionally required to effect the repayment of the Acquisition
Loan, obtain cash through the sale of any stock or security received by the
Plan in connection with such transaction, with respect to such unallocated
shares of Company Stock.  After repayment
of the Acquisition Loan, all remaining shares of Company Stock held in the Loan
Suspense Account, all other stock or securities, and any cash proceeds from the
sale or other disposition of any shares of Company Stock held in the Loan
Suspense Account, shall be allocated among the Accounts of all Participants who
were employed by an Employer on the date immediately preceding the effective
date of the Change in Control.  Such
allocations of shares or cash proceeds shall be credited as earnings for
purposes of Section 5.05 of the Plan and Section 415 of the Code, as of the
effective date of the Change in Control, to the Account of each Participant who
is either in active Service with an Employer, or is on a Recognized Absence, on
the date immediately preceding the effective date of the Change of Control
(each an “Affected Participant”), in proportion to the opening balances in
their Company Stock Accounts as of the first day of the current Valuation
Period.  As of the effective date of a
Change in Control, all Participant Accounts shall be fully vested and
nonforfeitable.



 16
 









(b)                                 In
the event of a termination of the Plan in connection with a Change in Control,
this Section 5.08 shall have no force and effect unless the price paid for the
Company Stock in connection with a Change in Control is greater than the
average basis of the unallocated Company Stock held in the Loan Suspense
Account as of the date of the Change in Control.


Section
5.09                            Dividends.


(a)                                  Stock Dividends. 
Dividends on Company Stock which are received by the
Trustee in the form of additional Company Stock shall be retained in the
portion of the Trust Fund consisting of Company Stock, and shall be allocated
among the Participants’ Accounts and the Loan Suspense Account in accordance
with their holdings of the Company Stock on which the dividends have been paid.


(b)                                 Cash Dividends on Allocated Shares.  Dividends on Company Stock credited to
Participants’ Accounts which are received by the Trustee in the form of cash
shall, at the direction of the Bank, either:


(i)                                     be
credited to Participants’ Accounts in accordance with Section 5.03 of the Plan
and invested as part of the Trust Fund;


(ii)                                  be
distributed immediately to the Participants;


(iii)                               be
distributed to the Participants within ninety (90) days of the close of the
Plan Year in which paid; or


(iv)                              be
used to repay principal and interest on the Acquisition Loan used to acquire
Company Stock on which the dividends were paid.


In addition to the
alternatives specified in the preceding paragraph regarding the treatment of
cash dividends paid with respect to shares of Company Stock credited to
Participants’ Accounts, if authorized by the Committee for the Plan Year, a
Participant may elect that cash dividends paid on Company Stock credited to the
Participant’s Account shall either be:


(i)                                     paid
to the Plan, reinvested in Company Stock and credited to the Participant’s
Account;


(ii)                                  distributed
in cash to the Participant; or


(iii)                               distributed
to the Participant within ninety (90) days of the close of the Plan Year in which
paid.



 17
 









Dividends subject
to an election under this paragraph (and any Company Stock acquired therewith
pursuant to a Participant’s election) shall at all times be fully vested.  To the extent the Committee authorizes
dividend elections pursuant to this paragraph, the Committee shall establish
policies and procedures relating to Participant elections and, if applicable,
the reinvestment of cash dividends in Company Stock, which are consistent with
guidance issued under Section 404(k) of the Code.


(c)                                  Cash Dividends on Unallocated Shares.  Dividends on Company Stock held in the Loan
Suspense Account received by the Trustee in the form of cash shall be applied
as soon as practicable to payments of principal and interest under the
Acquisition Loan incurred with the purchase of Company Stock.


(d)                               Financed Shares.  Financed Shares released from the Loan
Suspense Account by reason of dividends paid with respect to Company Stock
shall be allocated under Sections 5.03 and 5.04 of the Plan as follows:


(i)                                     First,
Financed Shares with a fair market value at least equal to the dividends paid
with respect to the Company Stock allocated to Participants’ Accounts shall be
allocated among and credited to the Accounts of such Participants, pro rata,
according to the number of shares of Company Stock held in such accounts on the
date the dividend is declared by the Company; and


(ii)                                  Next,
any remaining Financed Shares released from the Loan Suspense Account by reason
of dividends paid with respect to Company Stock held in the Loan Suspense
Account shall be allocated among and credited to the Accounts of all
Participants, pro rata, according to each Participant’s Compensation.


SECTION 6


Vesting
and Forfeitures


Section
6.01         Deferred Vesting in
Accounts.


(a)           A Participant shall vest in his
Accounts according to the following schedule.




	
  Completed

  Years of Service

  	
   

  	
  

  Vested Percentage

  
	
   

  	
   

  	
   

  
	
  Less than 2

  	
   

  	
  0

  
	
  2

  	
   

  	
  20%

  
	
  3

  	
   

  	
  40%

  
	
  4

  	
   

  	
  60%

  
	
  5

  	
   

  	
  80%

  
	
  6

  	
   

  	
  100%

  






 


(b)                                 For
purposes of determining a Participant’s Years of Service under Section 6.01(a),
all Years of Service shall be included, beginning with the Employee’s initial
service with the Employer.  Also for
purposes of this Section 6.01, employment with the Bank or any affiliate shall
be deemed employment with the Employer.



 18
 









Section
6.02                            Immediate
Vesting in Certain Situations.


(a)                                  Notwithstanding
Section 6.01(a) of the Plan, a Participant shall become fully vested in his
Accounts upon the earlier of:


(i)                                     termination
of the Plan or the permanent and complete discontinuance of contributions by
the Employer to the Plan; provided, however, that in the event of a partial
termination of the Plan, the interest of each Participant shall fully vest only
with respect to that part of the Plan which is terminated;


(ii)                                  Termination
of Service on or after the Participant’s Normal Retirement Date;


(iii)                               a
Change in Control; or


(iv)                              Termination
of Service by reason of death or Disability.


Section
6.03                          Treatment
of Forfeitures.


(a)                                  If
a Participant who is not fully vested in his Accounts terminates employment,
that portion of his Accounts in which he is not vested shall be forfeited upon
the earlier of:


(i)                                     the
date the Participant receives a distribution of his entire vested benefits
under the Plan, or


(ii)                                  the
date at which the Participant incurs five (5) consecutive One Year Breaks in
Service.


(b)                                 If
a Participant who has terminated employment and has received a distribution of
his entire vested benefits under the Plan is subsequently reemployed by an
Employer prior to incurring five (5) consecutive One Year Breaks in Service, he
shall have the portion of his Accounts which was previously forfeited restored
to his Accounts, provided he repays to the Trustee within five (5) years of his
subsequent employment date an amount equal to the previous distribution.  The amount restored to the Participant’s
Account shall be credited to his Account as of the last day of the Plan Year in
which the Participant repays the distributed amount to the Trustee and the
restored amount shall come from other Employees’ forfeitures and, if such
forfeitures are insufficient, from a special contribu­tion by the Employer for
that year.  If a Participant’s employment
terminates prior to his Account having become vested, such Participant shall be
deemed to have received a distribution of his entire vested interest as of the
Valuation Date next following his termination of employment.



 19
 









(c)                                  If
a Participant who has terminated employment but has not received a distribution
of his entire vested benefits under the Plan is subsequently reemployed by an
Employer subse­quent to incurring five (5) consecutive One Year Breaks in
Service, any undistributed balance of his Accounts from his prior participation
which was not forfeited shall be maintained as a fully vested subaccount within
his Account.


(d)                                 If
a portion of a Participant’s Account is forfeited, assets other than Company
Stock must be forfeited before any Company Stock may be forfeited.


(e)                                  Forfeitures
shall be reallocated among the other Participants in the Plan.


Section
6.04                            Accounting
for Forfeitures.


A forfeiture shall
be charged to the Participant’s Account as of the first day of the first
Valuation Period in which the forfeiture becomes certain pursuant to Section
6.03 of the Plan.  Except as otherwise
provided in Section 6.03 of the Plan, a forfeiture shall be added to the
contributions of the terminated Participant’s Employer which are to be credited
to other Participants pursuant to Section 5 as of the last day of the Plan Year
in which the forfeiture becomes certain.


Section
6.05                            Vesting
Upon Reemployment.


If a Participant
incurs a One Year Break in Service and again performs an Hour of Service, such
Participant shall receive credit, for purposes of Section 6.01 of the Plan, for
his Years of Service prior to his One Year Break in Service.


SECTION 7


Distributions


Section
7.01                            Distribution
of Benefit Upon a Termination of Employment.


(a)                                  A
Participant whose employment terminates for any reason shall receive the entire
vested portion of his Accounts in a single payment on a date selected by the
Committee; provided, however, that such date shall be on or before the 60th day
after the end of the Plan Year in which the Participant’s employment
terminated.  The benefits from that
portion of the Participant’s Other Investments Account shall be calculated on
the basis of the most recent Valuation Date before the date of payment.  Subject to the provisions of Section 7.05 of
the Plan, if the Committee so provides, a Participant may elect that his
benefits be distributed to him in the form of Company Stock, cash, or some
combination thereof.


(b)                                 Notwithstanding
paragraph (a) of this Section 7.01, if the balance credited to a Participant’s
Accounts exceeds, at the time such benefit was distributable, $1,000, his
benefits shall not be paid before the latest of his 65th birthday or the tenth
anniversary of the year in which he commenced participation in the Plan, unless
he elects an early pay­ment date in a written election filed with the
Committee.  Such an election is not valid
unless it is made after the Participant has received the required notice under
Section 1.411(a)-11(c) of the Treasury Regulations that provides a general
description of the material features of a lump sum distribution and the
Participant’s right to defer receipt of



 20















 


                                                his
benefits under the Plan.  The notice
shall be provided no less than 30 days and no more than 90 days before the
first day on which all events have occurred which entitle the Participant to
such benefit.  Written consent of the
Participant to the distribution generally may not be made within 30 days of the
date the Participant receives the notice and shall not be made more than 90
days from the date the Participant receives the notice.  However, a distribution may be made less than
30 days after the notice provided under Section 1.411(a)-11(c) of the Treasury
Regulations is given, if:


(i)                                     the
Committee clearly informs the Participant that he has a right to a period of at
least 30 days after receiving the notice to consider the decision of whether or
not to elect a distribution (and if applicable, a particular distribution
option), and


(ii)                                  the
Participant, after receiving the notice, affirmatively elects a distribution.


A Participant may
modify such an election at any time, provided any new benefit payment date is
at least 30 days after a modified election is delivered to the Committee.


Section
7.02         Minimum Distribution
Requirements.


With respect to
all Participants, other than those who are “5% owners” (as defined in Section
416 of the Code), benefits shall be paid on the required beginning date which
is no later than the April 1st of the later of:


(i)                                     the
calendar year following the calendar year in which the Participant attains age
70-1/2, or


(ii)                                  the
calendar year in which the Participant retires.


With respect to
all Participants who are 5% owners within the meaning of Section 416 of the
Code, such Participants’ benefits shall be paid no later than the April 1st of
the calendar year following the calendar year in which the Participant attains
age 70-1/2.


Section
7.03                            Benefits
on a Participant’s Death.


(a)                                  If
a Participant dies before his benefits are paid pursuant to Section 7.01 of the
Plan, the balance credited to his Accounts shall be paid to his Beneficiary in
a single distribution on or before the 60th day after the end of the Plan Year
in which the Participant died.  If the
Participant has not named a Beneficiary or his named Beneficiary should not
survive him, then the balance in his Accounts shall be paid to his estate.  The benefits from that portion of the
Participant’s Other Investments Account shall be calculated on the basis of the
most recent Valuation Date before the date of payment.



 21
 









(b)                                 If
a married Participant dies before his benefit payments begin, then, unless he
has specifically elected otherwise, the Committee shall cause the balance in
his Accounts to be paid to his spouse, as Beneficiary.  A married Participant may name an individual
other than his spouse as Beneficiary provided that such election is accompanied
by the spouse’s written consent which must:


(i)                                     acknowledge
the effect of the election;


(ii)                                  explicitly
provide either that the designated Beneficiary may not subsequently be changed
by the Participant without the spouse’s further consent or that it may be
changed without such consent; and


(iii)                               must
be witnessed by the Committee, its representative, or a notary public.


This requirement
shall not apply if the Participant establishes to the Committee’s satisfaction
that the spouse may not be located.


(c)                                  The
Committee shall, from time to time, take whatever steps it deems appropriate to
keep informed of each Participant’s marital status.  Each Employer shall provide the Committee
with the most reliable information in the Employer’s possession regarding its
Participants’ marital status, and the Committee may, in its discretion, require
a notarized affidavit from any Participant as to his marital status.  The Committee, the Plan, the Trustee, and the
Employers shall be fully protected and discharged from any liability to the
extent of any benefit payments made as a result of the Committee’s good faith
and reasonable reliance upon information obtained from a Participant as to the
Participant’s marital status.


Section
7.04                            Delay
in Benefit Determination.


If the Committee
is unable to determine the benefits payable to a Participant or Beneficiary on
or before the latest date prescribed for payment pursuant to this Section 7,
the benefits shall in any event be paid within 60 days after they can first be
determined.


Section
7.05                            Options
to Receive and Sell Company Stock.


(a)                                  Unless
ownership of virtually all Company Stock is restricted to active Employees and
qualified retirement plans for the benefit of Employees pursuant to the
certificates of incorporation or by-laws of the Employers issuing Company
Stock, a terminated Participant or the Beneficiary of a deceased Participant
may instruct the Committee to distribute the Participant’s entire vested
interest in his Accounts in the form of Company Stock.  In that event, the Committee shall apply the
Participant’s vested interest in his Other Investments Account to purchase
sufficient Company Stock to make the required distribution.


(b)                                 Any
Participant who receives Company Stock pursuant to this Section 7.05, and any
person who has received Company Stock from the Plan or from such a Participant
by reason of the Participant’s death or incompetency, by reason of divorce or
separation from the Participant, or by reason of a rollover distribution
described in Section 402(c) of the Code, shall have the right to require the
Employer which issued the Company Stock 



 22
 









                                                to
purchase the Company Stock for its current fair market value (hereinafter
referred to as the “put right”).  The put
right shall be exercisable by written notice to the Committee during the first
60 days after the Company Stock is distributed by the Plan, and, if not
exercised in that period, during the first 60 days in the following Plan Year
after the Committee has communicated to the Participant its determination as to
the Company Stock’s current fair market value. 
If the put right is exercised, the Trustee may, if so directed by the
Committee in its sole discretion, assume the Employer’s rights and obligations
with respect to purchasing the Company Stock. 
However, the put right shall not apply to the extent that the Company
Stock, at the time the put right would otherwise be exercisable, may be sold on
an established market in accordance with federal and state securities laws and
regulations.


(c)                                  With
respect to a put right, the Employer or the Trustee, as the case may be, may
elect to pay for the Company Stock in equal periodic installments, not less
frequently than annually, over a period not longer than five (5) years from the
30th day after the put right is exercised pursuant to paragraph (b) of this
Section 7.05, with adequate security and interest at a reasonable rate on the
unpaid balance, all such terms to be set forth in a promissory note delivered
to the seller with normal terms as to acceleration upon any uncured default.


(d)                                 Nothing
contained in this Section 7.05 shall be deemed to obligate any Employer to
register any Company Stock under any federal or state securities law or to
create or maintain a public market to facilitate the transfer or disposition of
any Company Stock.  The put right
described in this Section 7.05 may only be exercised by a person described in
paragraph (b) of this Section 7.05, and may not be transferred with any Company
Stock to any other person.  As to all
Company Stock purchased by the Plan in exchange for any Acquisition Loan, the
put right must be nonterminable.  The put
right for Company Stock acquired through an Acquisition Loan shall continue
with respect to such Company Stock after the Acquisition Loan is repaid or the
Plan ceases to be an employee stock ownership plan.  Except as provided above, in accordance with
the provisions of Sections 54.4975-7(b)(4) of the Treasury Regulations, no
Company Stock acquired with the proceeds of an Acquisition Loan may be subject
to any put, call or other option or buy-sell or similar arrangement while held
by, and when distributed from, the Plan, whether or not the Plan is then an
employee stock ownership plan.


Section
7.06                            Restrictions
on Disposition of Company Stock.


Except in the case
of Company Stock which is traded on an established market, a Participant who
receives Company Stock pursuant to this Section 7, and any person who has
received Company Stock from the Plan or from such a Participant by reason of
the Participant’s death or incompetency, divorce or separation from the
Participant, or a rollover distribution described in Section 402(c) of the
Code, shall, prior to any sale or other transfer of the Company Stock to any
other person, first offer the Company Stock to the issuing Employer and to the
Plan at its current fair market value. 
This restriction shall apply to any transfer, whether voluntary,
involuntary, or by operation of law, and whether for consideration or
gratuitous.  Either the Employer or the
Trustee may accept the offer within 14 days after it is delivered.  Any Company Stock distributed by the Plan
shall bear a conspicuous legend describing the right of first refusal under
this Section 7.06, as applicable, as well as any other restrictions upon the
transfer of the Company Stock imposed by federal and state securities laws and
regulations.



 23
 









Section
7.07                            Direct
Transfer of Eligible Plan Distributions.


(a)                                  Notwithstanding
any provision of the Plan to the contrary that would otherwise limit a
distributee’s election under this Section, a distributee (as defined below) may
elect to have any portion of an eligible rollover distribution (as defined
below) paid directly to an eligible retirement plan (as defined below)
specified by the distributee in a direct rollover (as defined below).  A “distributee” includes a Participant or
former Participant.  In addition, the
Participant’s or former Participant’s surviving spouse and the Participant’s or
former Participant’s spouse or former spouse who is the alternate payee under a
qualified domestic relations order, as defined in Section 414(p) of the Code,
are distributees with regard to the interest of the spouse or former
spouse.  For purposes of this Section
7.07 a “direct rollover” is a payment by the Plan to the eligible retirement
plan specified by the distributee.


(b)                                 To
effect such a direct transfer, the distributee must notify the Committee that a
direct rollover is desired and provide to the Committee sufficient information
regarding the eligible retirement plan to which the payment is to be made.  Such notice shall be made in such form and at
such time as the Committee may prescribe. 
Upon receipt of such notice, the Committee shall direct the Trustee to
make a trustee-to-trustee transfer of the eligible rollover distribution to the
eligible retirement plan so specified.


(c)                                  For
purposes of this Section 7.07, an “eligible rollover distribution” shall have
the meaning set forth in Section 402(c)(4) of the Code and any Treasury
Regulations promulgated thereunder.  To
the extent such meaning is not inconsistent with the above references, an
eligible rollover distribution shall mean any distribution of all or any
portion of the Participant’s Account, except that such term shall not include
any distribution which is one of a series of substantially equal periodic
payments (not less frequently than annually) made (i) for the life (or life
expectancy) of the Participant or the joint lives (or joint life expectancies)
of the Participant and a designated Beneficiary, or (ii) for a period of ten
years or more.  Further, the term “eligible
rollover distribution” shall not include any distribution required to be made
under Section 401(a)(9) of the Code or, the portion of any distribution that is
not includible in gross income (determined without regard to the exclusions for
net unrealized appreciation with respect to Company Stock).   To the extent applicable under the Plan, “eligible
rollover distributions” shall also not include any hardship distribution
described in Section 401(k)(2)(B)(i)(IV) of the Code.


(d)                                 For
purposes of this Section 7.07, an “eligible retirement plan” shall have the
meaning set forth in Section 402(c)(8) of the Code and any Treasury Regulations
promulgated thereunder.  To the extent
such meaning is not consistent with the above references, an eligible
retirement plan shall mean: (i) an individual retirement account described in 



 24
 









                                                Section
408(a) of the Code, (ii) an individual retirement annuity described in Section
408(b) of the Code, (iii) an annuity or annuity plan described in Section
403(a) or Section 403(b) of the Code, (iv) a qualified trust described in
Section 401(a) of the Code, or (v) a governmental plan under Section 457 of the
Code that accepts the distributee’s eligible rollover distribution.  However, in the case of an eligible rollover
distribution to a surviving spouse, an eligible retirement plan means an
individual retirement account or individual retirement annuity.


(e)                                  An
eligible retirement plan shall also mean an annuity contract described in
Section 403(b) of the Code and an eligible plan under Section 457(b)
of the Code which is maintained by a state, political subdivision of a state,
or any agency or instrumentality of a state or political subdivision of a state
which agrees to separately account for amounts transferred into such plan from
this Plan.  The definition of eligible
retirement plan shall also apply in the case of a distribution to a surviving
spouse, or to a spouse or former spouse who is the alternate payee under a
qualified domestic relation order as defined in Section 414(p) of the
Code.


SECTION 8


Voting of
Company Stock and Tender Offers


Section
8.01         Voting of Company Stock.


(a)                                  In General.  The Trustee shall generally vote all shares
of Company Stock held in the Trust in accordance with the provisions of this
Section 8.01.


(b)                                 Allocated Shares.  Shares of Company Stock which have been
allocated to Participants’ Accounts shall be voted by the Trustee in accordance
with the Participants’ written instructions.


(c)                                  Uninstructed and Unallocated Shares.  Shares of Company Stock which
have been allocated to Participants’ Accounts but for which no written
instructions have been received by the Trustee regarding voting shall be voted
by the Trustee in a manner calculated to most accurately reflect the instructions
the Trustee has received from Participants regarding voting shares of allocated
Company Stock.  Shares of unallocated
Company Stock shall also be voted by the Trustee in a manner calculated to most
accurately reflect the instructions the Trustee has received from Participants
regarding voting shares of allocated Company Stock.  Notwithstanding the preceding two sentences,
all shares of Company Stock which have been allocated to Participants’ Accounts
and for which the Trustee has not timely received written instructions
regarding voting and all unallocated shares of Company Stock must be voted by
the Trustee in a manner determined by the Trustee to be solely in the best
interests of the Participants and Beneficiaries.


(d)                                 Voting Prior to Allocation.  In the event no shares of Company Stock have
been allocated to Participants’ Accounts at the time Company Stock is to be
voted, each Participant shall be deemed to have one share of Company Stock
allocated to his Accounts for the sole purpose of providing the Trustee with
voting instructions.



 25
 









(e)                                  Procedure and Confidentiality.  Whenever such voting rights
are to be exercised, the Employers, the Committee, and the Trustee shall see
that all Participants and Beneficiaries are provided with the same notices and
other materials as are provided to other holders of the Company Stock, and are
provided with adequate opportunity to deliver their instructions to the Trustee
regarding the voting of Company Stock allocated to their Accounts or deemed
allocated to their Accounts for purposes of voting.  The instructions of the Participants with
respect to the voting of shares of Company Stock shall be confidential.


Section
8.02                            Tender
Offers.


In the event of a
tender offer, Company Stock shall be tendered by the Trustee in the same manner
set forth in Section 8.01 of the Plan regarding the voting of Company Stock.


SECTION 9


The
Committee and Plan Administration


Section
9.01                            Identity
of the Committee.


The Committee
shall consist of three or more individuals selected by the Bank.  Any individual, including a director,
trustee, shareholder, officer, or Employee of an Employer, shall be eligible to
serve as a member of the Committee.  The
Bank shall have the power to remove any individual serving on the Committee at
any time without cause upon ten (10) days’ written notice to such individual
and any individual may resign from the Committee at any time without reason
upon ten (10) days’ written notice to the Bank. 
The Bank shall notify the Trustee of any change in membership of the
Committee.


Section
9.02                            Authority
of Committee.


(a)                                  The
Committee shall be the “plan administrator” within the meaning of ERISA and
shall have exclusive responsibility and authority to control and manage the
operation and administration of the Plan, including the interpretation and
application of its provisions, except to the extent such responsibility and
authority are otherwise specifically:


(i)                                     allocated
to the Bank, the Employers, or the Trustee under the Plan and Trust Agreement;


(ii)                                  delegated
in writing to other persons by the Bank, the Employers, the Committee, or the
Trustee; or


(iii)                               allocated
to other parties by operation of law.


(b)                                 The
Committee shall have exclusive responsibility regarding decisions concerning
the payment of benefits under the Plan.



 26
 









(c)                                  The
Committee shall have full investment responsibility with respect to the
Investment Fund except to the extent, if any, specifically provided for in the
Trust Agreement.


(d)                                 In
the discharge of its duties, the Committee may employ accountants, actuaries,
legal counsel, and other agents (who also may be employed by an Employer or the
Trustee in the same or some other capacity) and may pay such individuals
reasonable compensation and expenses for their services rendered with respect
to the operation or administration of the Plan, to the extent such payments are
not otherwise prohibited by law.


Section
9.03                            Duties
of Committee.


(a)                                  The
Committee shall keep whatever records may be necessary in connection with the
maintenance of the Plan and shall furnish to the Employers whatever reports may
be required from time to time by the Employers. 
The Committee shall furnish to the Trustee whatever information may be
necessary to properly administer the Trust. 
The Committee shall see to the filing with the appropriate government
agencies of all reports and returns required with respect to the Plan under
ERISA, the Code and other applicable laws and regulations.


(b)                                 The
Committee shall have exclusive responsibility and authority with respect to the
Plan’s holdings of Company Stock and shall direct the Trustee in all respects
regarding the purchase, retention, sale, exchange, and pledge of Company Stock
and the creation and satisfaction of any Acquisition Loan to the extent such
responsibilities are not set forth in the Trust Agreement.


(c)                                  The
Committee shall at all times act consistently with the Bank’s long-term
intention that the Plan, as an employee stock ownership plan, be invested
primarily in Company Stock.  Subject to
the direction of the Committee with respect to any Acquisition Loan pursuant to
the provisions of Section 4.03 of the Plan, and subject to the provisions of
Sections 7.05 and 11.04 of the Plan as to Participants’ rights under certain
circumstances to have their Accounts invested in Company Stock or in assets
other than Company Stock, the Committee shall determine, in its sole
discretion, the extent to which assets of the Trust shall be used to repay any
Acquisition Loan, to purchase Company Stock, or to invest in other assets
selected by the Committee or an investment manager.  No provision of the Plan relating to the
allocation or vesting of any interests in Company Stock or invest­ments other
than Company Stock shall restrict the Committee from changing any holdings of
the Trust Fund, whether the changes involve an increase or a decrease in the
Company Stock or other assets credited to Participants’ Accounts.  In determining the proper extent of the Trust
Fund’s investment in Company Stock, the Committee shall be authorized to employ
investment counsel, legal counsel, appraisers, and other agents and to pay
their reasonable compensation and expenses to the extent such payments are not
prohibited by law.



 27
 









(d)                                 If
the valuation of any Company Stock is not established by reported trading on a
generally recognized public market, then the Committee shall have the exclusive
authority and responsibility to determine the value of the Company Stock for
all purposes under the Plan.  Such value
shall be determined as of each Valuation Date and on any other date as of which
the Trustee purchases or sells Company Stock in a manner consistent with
Section 4975 of the Code and the Treasury Regulations issued thereunder.  The Committee shall use generally accepted methods
of valuing stock of similar corporations for purposes of arm’s length business
and investment transactions, and in this connection the Committee shall obtain,
and shall be protected in relying upon, the valuation of Company Stock as
determined by an independent appraiser (as defined in Section 401(a)(28)(c) of
the Code).


Section
9.04                            Compliance
with ERISA and the Code.


The Committee
shall perform all acts necessary to ensure the Plan’s compliance with ERISA and
the Code.  Each individual member of the
Committee shall discharge his duties in good faith and in accordance with the
applicable requirements of ERISA and the Code.


Section
9.05                            Action
by Committee.


All actions of the
Committee shall be governed by the affirmative vote of a majority of the total
number of Committee members.  The members
of the Committee may meet informally and may take any action without meeting as
a group.


Section
9.06                            Execution
of Documents.


Any instrument to
be executed by the Committee may be signed by any member of the Committee.


Section
9.07                            Adoption
of Rules.


The Committee
shall adopt such rules and regulations of uniform applicability as it deems
necessary or appropriate for the proper operation, administration and
interpretation of the Plan.


Section
9.08                            Responsibilities
to Participants.


The Committee
shall determine which Employees qualify to participate in the Plan.  The Committee shall furnish to each Eligible
Employee whatever summary plan descriptions, summary annual reports, and other
notices and information that may be required under ERISA.  The Committee also shall determine when a
Participant or his Beneficiary qualifies for the payment of benefits under the
Plan.  The Committee shall furnish to
each such Participant or Beneficiary whatever information is required under
ERISA or the Code (or is otherwise appropriate) to enable the Participant or
Beneficiary to make whatever elections may be available pursuant to Section 7,
and the Committee shall provide for the payment of benefits in the proper form
and amount from the Trust.  The Committee
may decide in its sole discretion to permit modifications of elections and to
defer or accelerate benefits to the extent consistent with the terms of the
Plan, applicable law, and the best interests of the individuals concerned.



 28















 


Section
9.09                            Alternative
Payees in Event of Incapacity.


If the Committee
finds at any time that an individual qualifying for benefits under this Plan is
a minor or is incompetent, the Committee may direct the benefits to be paid, in
the case of a minor, to his parents, his legal guardian, a custodian for him
under the Uniform Transfers to Minors Act, or the person having actual custody
of him, or, in the case of an incompetent, to his spouse, his legal guardian,
or the person having actual custody of him.  The Committee and the Trustee shall not be
obligated to inquire as to the actual use of the funds by the person receiving
them under this Section 9.09, and any such payment shall completely discharge
the obligations of the Plan, the Trustee, the Committee, and the Employers to
the extent of the payment.


Section
9.10         Indemnification by
Employers.


Except as
separately agreed upon in writing, the Committee, and any member or employee of
the Committee, shall be indemnified and held harmless by the Employers, jointly
and severally, to the fullest extent permitted by law, against any and all
costs, damages, expenses, and liabilities reasonably incurred by or imposed
upon the Committee or such individual in connection with any claim made against
the Committee or such individual, or in which the Committee or such individual
may be involved by reason of being, or having been, the Committee, or a member
or employee of the Committee, to the extent such amounts are not paid by
insurance.


Section
9.11         Abstention by Interested
Member.


Any member of the
Committee who is also a Participant in the Plan shall take no part in any
determination specifically relating to his own participation or benefits under
the Plan, unless an abstention would render the Committee incapable of acting
on the matter.


SECTION
10


Rules
Governing Benefit Claims


Section
10.01                     Claim
for Benefits.


Any Participant or
Beneficiary who qualifies for the payment of benefits shall file a claim for
benefits with the Committee on a form provided by the Committee.  The claim, including any election of an
alternative benefit form, shall be filed at least 30 days before the date on
which the benefits are to begin.  If a
Participant or Beneficiary fails to file a claim by the 30th day before the
date on which benefits become payable, he shall be presumed to have filed a
claim for payment for the Participant’s benefits in the standard form
prescribed by Section 7  of the Plan.



 29
 









Section
10.02                     Notification
by Committee.


Within 90 days
after receiving a claim for benefits (or within 180 days, if special
circumstances require an extension of time and written notice of the extension
is given to the Participant or Beneficiary within 90 days after receiving the
claim for benefits), the Committee shall notify the Participant or Beneficiary
whether the claim has been approved or denied. 
If the Committee denies a claim in any respect, the Committee shall set
forth in a written notice to the Participant or Beneficiary:


(a)                                  each
specific reason for the denial;


(b)                                 specific
references to the pertinent Plan provisions on which the denial is based;


(c)                                  a
description of any additional material or information which could be submitted
by the Participant or Beneficiary to support his claim, with an explanation of
the relevance of such information; and


(d)                                 an
explanation of the claims review procedures set forth in Section 10.03 of the
Plan.


Section
10.03                     Claims
Review Procedure.


Within 60 days
after a Participant or Beneficiary receives notice from the Committee that his
claim for benefits has been denied in any respect, he may file with the
Committee a written notice of appeal setting forth his reasons for disputing
the Committee’s determination.  In
connection with his appeal, the Participant or Beneficiary or his
representative may inspect or purchase copies of pertinent documents and
records to the extent not inconsistent with other Participants’ and
Beneficiaries’ rights of privacy.  Within
60 days after receiving a notice of appeal from a prior determination (or
within 120 days, if special circumstances require an extension of time and
written notice of the extension is given to the Participant or Beneficiary and
his representative within 60 days after receiving the notice of appeal), the
Committee shall furnish to the Participant or Beneficiary and his
representative, if any, a written statement of the Committee’s final decision
with respect to his claim, including the reasons for such decision and the
particular Plan provisions upon which it is based.


SECTION
11


The Trust


Section
11.01                     Creation
of Trust Fund.


All amounts
received under the Plan from an Employer and investments shall be held in a
Trust Fund pursuant to the terms of this Plan and the Trust Agreement.  The benefits described in this Plan shall be
payable only from the assets of the Trust Fund. 
Neither the Bank, any other Employer, its board of directors or
trustees, its stockholders, its officers, its employees, the Committee, nor the
Trustee shall be liable for payment of any benefit under this Plan except from
the Trust Fund.


Section
11.02                     Company
Stock and Other Investments.


The Trust Fund
held by the Trustee shall be divided into Company Stock and investments other
than Company Stock.  The Trustee shall
have no investment responsibility for the portion of the Trust Fund consisting
of Company Stock, but shall accept any Employer contributions made in the form
of Company Stock, and shall acquire, sell, exchange, distribute, and otherwise
deal with and dispose of Company Stock in accordance with the instructions of
the Committee.



 30
 









Section
11.03                     Acquisition
of Company Stock.


From time to time
the Committee may, in its sole discretion, direct the Trustee to acquire
Company Stock from the issuing Employer or from shareholders, including
shareholders who are or have been Employees, Participants, or fiduciaries with
respect to the Plan.  The Trustee shall
pay for such Company Stock no more than its fair market value, which shall be
determined conclusively by the Committee pursuant to Section 9.03(d) of the
Plan.  The Committee may direct the
Trustee to finance the acquisition of Company Stock through an Acquisition Loan
subject to the provisions of Section 4.03 of the Plan.


Section
11.04                     Participants’
Option to Diversify.


The Committee
shall establish a procedure under which each Participant may, during the first
five years of a certain six-year period, elect to have up to 25 percent of the
value of his Accounts committed to alternative investment options within an “Investment
Fund.”  For the sixth year in this
period, the Participant may elect to have up to 50 percent of the value of his
Accounts committed to other investments. 
The six-year period shall begin with the Plan Year following the first
Plan Year in which the Participant has both reached age 55 and completed 10
years of participation in the Plan; a Participant’s election to diversify his
Accounts must be made within the 90-day period immediately following the last
day of each of the six Plan Years.  The
Committee shall see that the Investment Fund includes a sufficient number of
investment options to comply with Section 401(a)(28)(B) of the Code.  The Committee may, in its discretion, permit
a transfer of a portion of the Participant’s Accounts to the Bradford Bank
Retirement Plan in order to satisfy this Section 11.04, provided such
investments comply with Section 401(a)(28)(B) of the Code and such transfer is
not otherwise prohibited under the Code or ERISA.  The Trustee shall comply with any investment
directions received from Participants in accordance with the procedures adopted
from time to time by the Committee under this Section 11.04.


SECTION
12


Adoption,
Amendment and Termination


Section
12.01                     Adoption
of Plan by Other Employers.


With the consent
of the Bank, any entity may become a participating Employer under the Plan by:


(a)                                  taking
such action as shall be necessary to adopt the Plan;


(b)                                 becoming
a party to the Trust Agreement establishing the Trust Fund; and


(c)                                  executing
and delivering such instruments and taking such other action as may be
necessary or desirable to put the Plan into effect with respect to the entity’s
Employees.



 31
 









Section
12.02                     Adoption
of Plan by Successor.


In the event that
any Employer shall be reorganized by way of merger, consolidation, transfer of
assets or otherwise, so that an entity other than an Employer shall succeed to
all or substantially all of the Employer’s business, the successor entity may
be substituted for the Employer under the Plan by adopting the Plan and
becoming a party to the Trust Agreement. 
Contributions by the Employer shall be automatically suspended from the
effective date of any such reorganiza­tion until the date upon which the
substitution of the successor entity for the Employer under the Plan becomes
effective.  If, within 90 days following
the effective date of any such reorganization, the successor entity shall not
have elected to become a party to the Plan, or if the Employer shall adopt a
plan of complete liquidation other than in connection with a reorganization,
the Plan shall be automatically terminated with respect to Employees of the
Employer as of the close of business on the 90th day following the effective
date of the reorganization, or as of the close of business on the date of
adoption of a plan of complete liquidation, as the case may be.


Section
12.03       Plan Adoption Subject to
Qualification.


Notwithstanding
any other provision of the Plan, the adoption of the Plan and the execution of
the Trust Agreement are conditioned upon their being determined initially by
the Internal Revenue Service to meet the qualification requirements of Section
401(a) of the Code, so that the Employers may deduct currently for federal
income tax purposes their contributions to the Trust and so that the
Participants may exclude the contributions from their gross income and recognize
income only when they receive benefits. 
In the event that this Plan is held by the Internal Revenue Service not
to qualify initially under Section 401(a) of the Code, the Plan may be amended
retroactively to the earliest date permitted by the Code and the applicable
Treasury Regulations in order to secure qualification under Section 401(a) of
the Code.  If this Plan is held by the
Internal Revenue Service not to qualify initially under Section 401(a) of the Code
either as originally adopted or as amended, each Employer’s contributions to
the Trust under this Plan (including any earnings thereon) shall be returned to
it and this Plan shall be terminated.  In
the event that this Plan is amended after its initial qualification, and the
Plan, as amended, is held by the Internal Revenue Service not to qualify under
Section 401(a) of the Code, the amendment may be modified retroactively to the
earliest date permitted by the Code and the applicable Treasury Regulations in
order to secure approval of the amendment under Section 401(a) of the Code.


Section
12.04       Right to Amend or Terminate.


(a)                                  The
Bank intends to continue this Plan as a permanent program.  However, each participating Employer
separately reserves the right to suspend, supersede, or terminate the Plan at
any time and for any reason, as it applies to that Employer’s Employees, and
the Bank reserves the right to amend, suspend, supersede, merge, consolidate,
or terminate the Plan at any time and for any reason, as it applies to the
Employees of all Employers.



 32
 









(b)                               No
amendment, suspension, supersession, merger, consolidation, or termination of
the Plan shall reduce any Participant’s or Beneficiary’s proportionate interest
in the Trust Fund, or shall divert any portion of the Trust Fund to purposes
other than the exclusive benefit of the Participants and their Beneficiaries
prior to the satisfaction of all liabilities under the Plan.  Except as is required for purposes of
compliance with the Code or ERISA, neither the provisions of Section 5.04 relating
to the crediting of contributions, forfeitures and shares of Company Stock
released from the Loan Suspense Account, nor any other provision of the Plan
relating to the allocation of benefits to Participants, may be amended more
frequently than once every six months. 
Moreover, there shall not be any transfer of assets to a successor plan
or merger or consolidation with another plan unless, in the event of the
termination of the successor plan or the surviving plan immediately following
such transfer, merger, or consolidation, each participant or beneficiary would
be entitled to a benefit equal to or greater than the benefit he would have
been entitled to if the plan in which he was previously a participant or
beneficiary had terminated immediately prior to such transfer, merger, or
consolidation.  Following a termination
of this Plan by the Bank, the Trustee shall continue to administer the Trust
and pay benefits in accordance with the Plan and the Committee’s instructions.


(c)                                  In
the event of a Change in Control, the Plan shall be terminated and allocations
made to Participants in accordance with the provisions of Section 5.08 of the
Plan.


SECTION
13


General
Provisions


Section
13.01       Nonassignability of
Benefits.


The interests of
Participants and other persons entitled to benefits under the Plan shall not be
subject to the claims of their creditors and may not be voluntarily or
involuntarily assigned, alienated, pledged, encumbered, sold, or
transferred.  The prohibitions set forth
in this Section 13.01 shall also apply to any judgment, decree, or order
(including approval of a property or settlement agreement) which relates to the
provision of child support, alimony, or property rights to a present or former
spouse, child, or other dependent of a Participant pursuant to a domestic
relations order, unless such judgment, decree or order is determined to be a “qualified
domestic relations order” as defined in Section 414(p) of the Code.


Section
13.02       Limit of Employer Liability.


The liability of
the Employers with respect to Participants and other persons entitled to
benefits under the Plan shall be limited to making contributions to the Trust
from time to time, in accordance with Section 4 of the Plan.



 33
 









Section
13.03       Plan Expenses.


All expenses
incurred by the Committee or the Trustee in connection with administering the
Plan and Trust shall be paid by the Trustee from the Trust Fund to the extent
the expenses have not been paid or assumed by the Employer.


Section
13.04       Nondiversion of Assets.


Except as provided
in Sections 5.05 and 12.03 of the Plan, under no circumstances shall any
portion of the Trust Fund be diverted to or used for any purpose other than the
exclusive benefit of Participants and their Beneficiaries prior to the
satisfaction of all liabilities under the Plan.


Section
13.05       Separability of Provisions.


If any provision
of the Plan is held to be invalid or unenforceable, the other provisions of the
Plan shall not be affected but shall be applied as if the invalid or
unenforceable provision had not been included in the Plan.


Section
13.06       Service of Process.


The agent for the
service of process upon the Plan shall be the Chairman of the Board of the Bank
and the Trustee, or such other person as may be designated from time to time by
the Bank.


Section
13.07       Governing Law.


The Plan is
established under, and its validity, construction and effect shall be governed
by the laws of the State of Maryland, to the extent those laws are not
preempted by federal law, including the provisions of ERISA.


Section 13.08       Special Rules for Persons Subject to
Section 16(b) Requirements.


Notwithstanding
anything herein to the contrary, any former Participant who is subject to the
provisions of Section 16(b) of the Securities Exchange Act of 1934, who becomes
eligible to again participate in the Plan, may not become a Participant prior
to the date that is six months from the date such former Participant terminated
participation in the Plan.  In addition,
any person subject to the provisions of Section 16(b) of the Securities
Exchange Act of 1934 Act receiving a distribution of Company Stock from the
Plan must hold such Company Stock for a period of six months, commencing with
the date of distribution.  However, this
restriction will not apply to Company Stock distributions made in connection
with death, retirement, Disability or termination of employment, or made
pursuant to the terms of a qualified domestic relations order.



 34
 









Section
13.09                     Military
Service.


Notwithstanding
any other provision of this Plan to the contrary, contributions, benefits and
Service credit with respect to qualified military service will be provided in
accordance with Section 414(u) of the Code.


SECTION
14


Top-Heavy
Provisions


Section
14.01                     Top-Heavy
Provisions.


(i)                                     Key employee. 
Key employee means any employee or former employee (including any
deceased employee) who at any time during the Plan Year that includes the
Determination Date was an officer of the Employer having annual compensation
greater than $130,000 (as adjusted under Section 416(i)(1) of the Code for Plan
Years beginning after December 31, 2002), a 5% owner of the Employer or a 1%
owner of the Employer having annual compensation of more than $150,000.  For this purpose, annual compensation means compensation
within the meaning of Section 415(c)(3) of the Code.  The determination of who is a key employee
will be made in accordance with Section 416(i)(1) of the Code and the
applicable regulations and other guidance of general applicability issued thereunder.


(ii)                                  Determination of present
values and amounts.  This section (ii) shall apply for purposes of
determining the present values of accrued benefits and the amounts of account
balances of Participants as of the distribution date.


(A)                              Distributions during
year ending on the Determination Date.  The
present values of accrued benefits and the amounts of account balances of a
Participant as of the Determination Date shall be increased by the
distributions made with respect to the Participant under the Plan and any Plan
aggregated with the Plan under Section 416(g)(2) of the Code during the 1-year
period ending on the Determination Date. 
The preceding sentence shall also apply to distributions under a
terminated plan which, had it not been terminated, would have been aggregated
with the Plan under Section 416(g)(2)(A)(i) of the Code.  In the case of a distribution made for a
reason other than separation from service, death or disability, this provision
shall be applied by substituting “5-year period” for “1-year period”.


(B)                                Participants not performing
services during the year ending on the Determination Date. 
The accrued benefits and accounts of any individual who has not
performed services for the Employer during the 1-year period ending on
the Determination Date shall not be taken into account.”



 35
 









Section
14.02                     Plan
Modifications Upon Becoming Top-Heavy.


(a)                                  Minimum Accruals. 
Section 5.04 of the Plan will be modified to provide that
the aggregate amount of Employer contributions allocated in each Plan Year to
the Accounts of each Participant who is a non-Key Employee (as defined under
Section 416(i)(1) of the Code), and who is employed by an Employer as of the
last day of the Plan Year, may not be less than the lesser of:


(i)                                     three
percent (3%) of his Compensation for the Plan Year; and


(ii)                                  a
percentage of his Compensation equal to the largest percentage obtained by
dividing the sum of the amount credited to the Accounts of any Key Employee by
that Key Employee’s Compensation.


(b)                                 The
preceding provision will remain in effect for the period in which the Plan is
top-heavy.  If, for any particular year
thereafter, the Plan is no longer top-heavy, the provisions contained in this
Section 14.02 shall cease to apply, except that any previously vested portion of
any Account balance shall remain nonforfeitable.



 36














 


FORM OF


TRUST AGREEMENT


BETWEEN


BRADFORD BANK


AND


[TRUSTEE]


FOR THE


BRADFORD BANK

EMPLOYEE STOCK OWNERSHIP PLAN TRUST


 


Effective
as of _________, 2007
















CONTENTS


	
  

  	
   

  	
   

  	
   

  	
  Page No.

  
	
  Section 1

  	
   

  	
  Creation of Trust

  	
   

  	
    1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 2

  	
   

  	
  Investment of Trust Fund and Administrative Powers of
  the Trustee

  	
   

  	
    2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 3

  	
   

  	
  Compensation and Indemnification of Trustee and Payment
  of Expenses and Taxes

  	
   

  	
    7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 4

  	
   

  	
  Records and Valuation

  	
   

  	
    8

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 5

  	
   

  	
  Instructions from Committee

  	
   

  	
    9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6

  	
   

  	
  Change of Trustee

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 7

  	
   

  	
  Miscellaneous

  	
   

  	
  10

  



 



 i















THIS
TRUST AGREEMENT (“Trust Agreement”) dated _____________,
2007, between BRADFORD BANK, with its
administrative office at 6900 York
Road, Baltimore, MD 21212 (hereinafter called the “Company”), and [TRUSTEE] with its administrative office at __________________________________
(hereinafter called the “Trustee”).


W I T N E S S E T H 
T H A T:


WHEREAS, the Company has approved and adopted an
employee stock ownership plan for the benefit of its employees, the Bradford
Bank Employee Stock Ownership Plan (hereinafter called the “Plan”); and


WHEREAS, the Company has authorized the execution of
this Trust Agreement and has appointed [_______________] as Trustee of the
Trust Fund created pursuant to the Plan; and


WHEREAS, [_________________________] has agreed to act
as Trustee and to hold and administer the assets of the Plan in accordance with
the terms of this Trust Agreement.


NOW, THEREFORE, the Company and the Trustee agree as
follows:


Section 1.  Creation
of Trust.


1.1           Trustee.  [______________________] shall serve as
Trustee of the Trust Fund created in accordance with and in furtherance of the
Plan, and shall serve as Trustee until their removal or resignation in
accordance with Section 6.


1.2           Trust
Fund.  The Trustee hereby agrees to
accept contributions from the Employer as defined in the Plan and amounts
transferred from other qualified retirement plans from time to time in
accordance with the terms of the Plan. 
All such property and contributions, together with income thereon and
increments thereto, shall constitute the “Trust Fund” to be held in accordance
with the terms of the Trust Agreement.


1.3           Incorporation
of Plan.  An instrument entitled “Bradford
Bank Employee Stock Ownership Plan” is incorporated herein by reference, and
this Trust Agreement shall be interpreted consistently with that Plan.  All words and phrases defined in that Plan
shall have the same meaning when used in this Trust Agreement.


1.4           Name.  The name of this trust shall be “Bradford
Bank Employee Stock Ownership Plan Trust.”


1.5           Nondiversion
of Assets.  In no event shall any
part of the corpus or income of the Trust Fund be used for, or diverted to,
purposes other than for the exclusive benefit of the Participants and their
Beneficiaries prior to the satisfaction of all liabilities under the Plan,
except to the extent that assets may be returned to the Employer in accordance
with the Plan where the Plan fails to qualify initially under Section 401(a) of
the Internal Revenue Code (the “Code”), or 



 1
 









where they are attributable to contributions made by
mistake of fact or in excess of the deductibility allowed under the Code.


Section 2.  Investment
of Trust Fund and Administrative Powers of the Trustee.


2.1           Stock and Other Investments.  The basic investment policy of the Plan shall
be to invest primarily in Stock of the Employer for the exclusive benefit of
the Participants and their Beneficiaries. 
The Committee shall have full and complete investment authority and
responsibility with respect to the purchase, retention, sale, exchange, and
pledge of Stock and the payment of Stock Obligations, and the Trustee shall not
deal in any way with Stock except in accordance with their obligations pursuant
to this Trust Agreement and the written instructions of the Committee.  The Trustee shall invest, or keep invested,
all or a portion of the Trust Fund in Stock, and shall pay Stock Obligations
out of assets of the Trust Fund, as instructed from time to time by the
Committee.  The Trustee shall invest any
balance of the Trust Fund (the “Investment Fund”) in such other property as the
Committee, in its sole discretion, shall deem advisable, subject to any
delegation of such investment responsibility pursuant to Section 2.2.  Nothing contained herein shall provide investment
discretion authority or any like kind responsibility in regard to the assets of
the Trust Fund.


In connection with instructions to acquire Stock, the
Trustee may purchase newly issued or outstanding Stock from the Employer or any
other holders of Stock, including Participants, Beneficiaries, and Plan
fiduciaries.  All purchases and sales of
Stock shall be made by the Trustee at fair market value as determined by the
Committee in good faith and in accordance with any applicable requirements under
the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).  Such purchases may be made with assets of the
Trust Fund, with funds borrowed for this purpose (with or without guarantees of
repayment to the lender by the Employer), or by any combination of the
foregoing.


Notwithstanding any other provision of this Trust
Agreement or the Plan, neither the Committee nor the Trustee shall make any
purchase, sale, exchange, investment, pledge, valuation, or loan, or take any
other action involving those assets for which they are responsible which (i) is
inconsistent with the policy of the Plan and Trust, (ii) is inconsistent with
the prudence and diversification requirements set forth in Sections
404(a)(1)(B) and (C) of ERISA (to the extent such requirements apply to an
employee stock ownership plan and trust), (iii) is prohibited by Section 406 or
407 of ERISA, or (iv) would impair the qualification of the Plan or the
exemption of the Trust under Sections 401 and 501, respectively, of the Code.


2.2           Delegation of Investment
Responsibility.  The Committee may,
by written notice and in accordance with the Plan, direct the Trustee to
segregate any portion or all of the Investment Fund into one or more separate
accounts for each of which full investment responsibility will be delegated to
an investment manager appointed in such notice pursuant to Section 402(c)(3) of
ERISA (hereinafter a “Manager”).  For any
separate account where the Trustee is to maintain custody of the assets, the
Trustee and the Manager shall agree upon procedures for the transmittal of
investment instructions from the Manager to the Trustee, and the Trustee may
provide the Manager with such documents as may be necessary to authorize the
Manager to effect transactions directly on behalf of the segregated account.



 2
 









Further, the
Committee may, by written notice and in accordance with the Plan, direct the
Trustee to segregate any portion or all of the Investment Fund into one or more
separate accounts for each of which full investment responsibility will be
delegated to an insurance company through one or more group annuity contracts,
deposit administration contracts, or similar contracts, which may provide for
investments in any commingled separate accounts established under such
contracts.  An insurance company shall be
a Manager with respect to any amounts held under such a contract except to the
extent the insurer’s assets are not deemed assets of the Plan and Trust Fund
pursuant to Section 401(b)(2) of ERISA. 
The allocation of amounts held under such a contract among the insurer’s
general account and one or more individual or commingled separate accounts
shall be determined by the Committee except as otherwise agreed by the
Committee and the insurer.


Any Manager shall
have all of the powers given to the Trustee pursuant to Section 2.3 with
respect to the portion of the Trust Fund committed to its investment discretion
and control.  The Trustee shall be
responsible for the safekeeping of any assets which remain in their custody,
but in no event shall the Trustee be under any duty to question or make any
inquiry or suggestion regarding the action or inaction of a Manager or an
insurer or the advisability of acquiring, retaining, or disposing of any asset
of a segregated account.  The Employer
shall indemnify and hold the Trustee harmless from any and all costs, damages,
expenses, and liabilities which the Trustee may incur by reason of any action
taken or omitted to be taken by the Trustee upon directions from the Committee,
a Manager, or an insurer pursuant to this Section 2.2.


2.3           Trustee Powers.  In addition to and not by way of limitation
upon the fiduciary powers granted to it by law, the Trustee shall have the
following specific powers, subject to the limitations set forth in Section 2.1:


2.3-1  to receive, hold, manage, invest and reinvest
the money or other property which constitutes the Trust Fund, without
distinction between principal and income;


2.3-2  to hold funds uninvested temporarily,
provided it is a period of time that is not unreasonable, without liability for
interest thereon, and to deposit funds in one or more savings or similar
accounts with any banks and savings and loan associations which are insured by
an instrumentality of the federal government, including the Trustee if it is
such an institution;


2.3-3  at the direction of the Committee, to invest
or reinvest the whole or any portion of the money or other property which
constitutes the Trust Fund in such common or preferred stocks, investment trust
shares, mutual funds, commingled trust funds, partnership interests, bonds,
notes, or other evidences of indebtedness, and real and personal property as
the Trustee in their absolute judgment and discretion may deem to be for the
best interests of the Trust Fund, regardless of nondiversification to the
extent that such nondiversification is clearly prudent, and regardless of
whether any such investment or property is authorized by law regarding the
investment of trust funds, of a wasting asset nature, temporarily nonincome
producing, or within or without the United States;


2.3-4  to invest in common and preferred stocks,
bonds, notes, or other obligations of any corporation or business enterprise in
which an Employer or its owners may own an interest;



 3
 









2.3-5  at the direction of the Committee, to
exchange any investment or property, real or personal, for other investments or
properties at such time and upon such terms as the Trustee shall deem proper;


2.3-6  at the direction of the Committee, to sell,
transfer, convey or otherwise dispose of any investment or property, real or
personal, for cash or on credit, in such manner and upon such terms and
conditions as the Trustee shall deem advisable, and no person dealing with the
Trustee shall be under any duty to inquire as to the validity, expediency, or
propriety of any such sale or as to the application of the purchase money paid
to the Trustee;


2.3-7  to hold any investment or property in the
name of the Trustee, with or without the designation of any fiduciary capacity,
or in the name of a nominee, or unregistered, or in such other form that title
may pass by delivery; provided, however, that the Trustee’s records always show
that such investment or property belongs to the Trust Fund and the Trustee
shall not be relieved hereby of its responsibility to maintain safe custody of
such investment or property;


2.3-8  to organize one or more corporations to hold,
manage, or liquidate any property, including real estate, owned or acquired by
the Trust Fund if in the sole discretion of the Trustee the organization of
such corporation or corporations is for the best interests of the Trust and the
Plan Participants and Beneficiaries;


2.3-9  to extend the time for payment of, to modify,
to renew, or to release security from any mortgage, note or other evidence of
indebtedness, or to take advantage of or waive any default; to foreclose
mortgages and bid on property under foreclosure or to take title to property by
conveyance in lieu of foreclosure, either with or without the payment of
additional consideration;


2.3-10  to vote in person or by proxy all stocks and
other securities having voting privileges; to exercise or refrain from
exercising any option or privilege with respect to stocks and other securities,
including any right or privilege to subscribe for or otherwise to acquire stocks
and other securities; or to sell any such right or privilege; to assent to and
join in any plan of refinance, merger, consolidation, reorganization or
liquidation of any corporation or other enterprise in which this Trust may have
an interest, to deposit stocks and other securities with any committee formed
to effectuate the same, to pay any expense incidental thereto, to exchange
stocks and other securities for those which may be issued pursuant to any such
plan, and to retain as an investment the stocks and other securities received
by the Trustee; and to deposit any investment in a voting trust;
notwithstanding the preceding, Participants and Beneficiaries shall be entitled
to direct the manner in which stock allocated to their respective accounts are
to be voted on all matters.  All stock
which has been allocated to Participants’ Accounts for which the Trustee has
received no written direction and all unallocated Employer securities will be
voted by the Trustee in direct proportion to any Participant’s directions
received and solely in the interest of the Participants and Beneficiaries.  Whenever such voting rights are to be
exercised, the Employer, the Committee and the Trustee shall see that all
Participants and Beneficiaries are provided with adequate opportunity to
deliver their instructions to the Trustee regarding voting of stock allocated
to their accounts.  The instructions of
the Participants with respect to the voting of allocated shares hereunder shall
be confidential;



 4
 









2.3-11  to
abandon any property, real or personal, which the Trustee shall consider to be
worthless or not of sufficient value to warrant its keeping or protecting; to
abstain from the payment of taxes, water rents, assessments, repairs,
maintenance, and upkeep of any such property; to permit any such property to be
lost by tax sale or other proceedings, and to convey any such property for a
nominal consideration or without consideration;


2.3-12  to
borrow money from the Employer or from others (including the Trustee), and to
enter into installment contracts, for the purchase of Stock upon such terms and
conditions and at such reasonable rates of interest as the Committee may deem
to be advisable, to issue its promissory notes as Trustee to evidence such
debt, to secure the payment of such notes by pledging any property of the Trust
Fund, and to authorize the holders of any such notes to pledge them to secure
obligations of the holders and in connection therewith to repledge any assets
of the Trust as security therefor; provided that, with respect to any extension
of credit to the Trust involving, as a lender or guarantor, the Employer or
other “disqualified person” within the meaning of Section 4975(e)(2) of the
Code —


(a)                                  each
loan or installment contract is primarily for the benefit of Participants and
Beneficiaries of the Plan;


(b)                                 any
interest on a loan or installment contract does not exceed a reasonable rate;


(c)                                  the
proceeds of any loan shall be used only to acquire Stock, to repay the loan, or
to repay a previous loan meeting these conditions, and the subject of any
installment contract shall be only the Trust’s purchase of Stock;


(d)                                 any
collateral pledged to a creditor by the Trustee shall consist only of
qualifying employer securities as that term is defined under Section 4975(e)(8)
of the Code and the creditor shall have no recourse against the Trust Fund
except with respect to the collateral (although the creditor may have recourse
against an Employer as guarantor);


(e)                                  payments
with respect to a loan or installment contract shall be made only from those
amounts contributed by the Employer to the Trust Fund, from amounts earned on
such contributions, and from cash dividends received on unallocated Stock held
by the Trust as collateral for such an obligation; and


(f)                                    upon
the payment of any portion of balance due on a loan or upon any installment
payment, a proportionate part of any qualified employer securities originally
pledged as collateral for such indebtedness shall be released from encumbrance
in accordance with Section 4.2 of the Plan and the Committee shall at least
annually advise the Trustee of the number of shares of Stock so released and
the proper allocation of such shares under the terms of the Plan;


2.3-13  to
manage and operate any real property which shall at any time constitute an
asset of the Trust Fund; to make repairs, alterations, and improvements
thereto; to insure such property against loss by fire or other casualty; to
lease or grant options for the sale of such property, which lease or option may
be for a period of time which may extend beyond the life of this Trust; and to
take any other action or enter into any other contract respecting such property
which is consistent with the best interests of the Trust;



 5
 









2.3-14  to pay
any and all reasonable and normal expenses incurred in connection with the
exercise of any power, right, authority or discretion granted herein, and, upon
prior notice to the Company, to employ and compensate agents, investment
counsel, custodians, actuaries, attorneys, and accountants in such connection;


2.3-15  to
employ and consult with any legal counsel, who also may be counsel to an
Employer or the Administrator, with respect to the meaning or construction of
this Trust Agreement, the extent of the Trustee’s obligations and duties
hereunder, and whether the Trustee should take or decline to take a particular
action hereunder, and the Trustee shall be fully protected with respect to any
action taken or omitted by such Trustee in good faith pursuant to such advice;


2.3-16  to defend
any action or proceeding instituted against the Trust Fund, to institute any
action on behalf of the Trust Fund, and to compromise or submit to arbitration
any dispute concerning the Trust Fund;


2.3-17  to make,
execute, acknowledge and deliver any and all documents of transfer and
conveyance and any and all other instruments that may be necessary or
appropriate to carry out the powers herein granted;


2.3-18  to
commingle the Trust Fund created pursuant hereto, in whole or in part, in a
single trust with all or any portion of any other trust fund, assigning an
undivided interest to each such commingled trust fund, provided that such
commingled trust is itself exempt from taxation pursuant to Section 501(a) of
the Code, or its successor Section; and provided further that the trust
agreement governing such commingled trust shall be deemed incorporated by
reference in the Plan;


2.3-19  where
two or more trusts governed by this Trust Agreement have an undivided interest
in any property, to credit the income from such property to such trusts in
proportion to their undivided interests, and when non pro rata distributions of
property or money are made from such trusts, to make appropriate adjustments to
the undivided fractional interests of such trusts;


2.3-20  to
invest all or any portion of the Trust Fund in one or more group annuity
contracts, deposit administration contracts, and other such contracts with
insurance companies, including any commingled separate accounts established
under such contracts;


2.3-21 
generally, with respect to all cash, stocks and other securities, and
property, both real and personal, received or held in the Trust Fund by the
Trustee, to exercise all the same rights and powers as are or may be lawfully
exercised by persons owning cash, or stocks and other securities, or such
property in their own right; and to do all other acts, whether or not expressly
authorized, which it may deem necessary or proper for the protection of the
Trust Fund; and


2.3-22  whenever
more than two persons shall qualify to act as co-Trustee, to exercise and
perform every power (including discretionary powers), authority or duty by the
concurrence 



 6
 









of a majority of them the same effect as if all had
joined therein, except that the unanimous vote of such persons shall be
necessary to determine the number (one or more) and identity of persons who may
sign checks, make withdrawals from financial institutions, have access to safe
deposit boxes, or direct the sale of trust assets and the disposition of the
proceeds.


2.4           Brokerage.  If permitted in writing by the Committee the
Trustee shall have the power and authority, to be exercised in their sole
discretion at any time and from time to time, to issue and place orders for the
purchase or sale of securities with qualified brokers and dealers.  Such orders may be placed with such qualified
brokers and/or dealers who also provide investment information or other
research or statistical services to the Trustee in its capacity as a fiduciary
or investment manager for other clients.


Section 3.  Compensation and Indemnification of
Trustee and Payment of Expenses and Taxes.


3.1           Fees and Expenses from Fund.  In consideration for rendering services
pursuant to this Trust Agreement the Trustee shall be paid fees in accordance with
the Trustee’s fee schedule as in effect from time to time.  Fee changes resulting in fee increases shall
be effective upon not less than 30 days’ notice to the Company.  In addition, the Trustee shall be reimbursed
for any reasonable expenses, including reasonable attorneys’ fees, incurred in
the administration of the Trust created hereby. 
Fees and expenses shall be allocated to Participants’ Accounts, if any,
unless paid directly by the Employer. 
All compensation and expenses of the Trustee shall be paid out of the
Trust Fund or by the Employer as specified in the Plan.  If and to the extent the Trust Fund shall not
be sufficient, such compensation and expenses shall be paid by the Employer
upon demand.  If payment is due but not
paid by the Employer, such amount shall be paid 
from the assets of the Trust Fund. 
The Trustee is hereby empowered to withdraw all such compensation and
expenses which are 60 days past due from the Trust Fund, and, in furtherance
thereof, liquidate any assets of the Trust Fund, without further authorization
or direction from or by any person. 
Notwithstanding the foregoing, in the event any officer or director of
Bradford Bank serves as trustee of the Plan, no compensation shall be paid to
the officer or director in exchange for his or her services as trustee.


3.2           Indemnification.  Notwithstanding any other provision of this
Trust Agreement, any individual designated as a trustee hereunder shall be
indemnified and held harmless by the Employer to the fullest extent permitted by
law against any and all costs, damages, expenses and liabilities including, but
not limited to attorneys’ fees and disbursements reasonably incurred by or
imposed upon such individual in connection with any claim made against him or
in which he may be involved by reason of his being, or having been, a trustee
hereunder, to the extent such amounts are not satisfied by insurance maintained
by the Employer, except liability which is adjudicated to have resulted from
the gross negligence or willful misconduct of the Trustee by reason of any
action so taken.  Further, any corporate
trustee and its officers, directors and agents may be indemnified and held
harmless by the Employer to the fullest extent permitted by law against any and
all costs, damages, expenses and liabilities including, but not limited to,
attorneys’ fees and disbursements reasonably incurred by or imposed upon such
persons and/or corporation in connection with any claim made against it or them
or in which such persons and/or corporation may be involved by reason of its
being, or having been, a trustee hereunder as 



 7
 









may be agreed between the Employer and such trustee,
except liability which is adjudicated to have resulted from the gross
negligence or willful misconduct of the Trustee by reason of any action so
taken.


3.3           Expenses.  All expenses of administering the Trust and
the Plan, whether incurred by the Trustee or the Committee, shall be paid by
the Trustee from the Trust Fund to the extent such expenses shall not have been
assumed by the Employer.


3.4           Taxes.  All taxes that may be levied or assessed upon
or in respect of the Trust Fund shall be paid from the Trust Fund.  The Trustee shall notify the Committee of any
proposed or final assessments of taxes and may assume that any such taxes are
lawfully levied or assessed unless the Committee advises it in writing to the
contrary within fifteen days after receiving the above notice from the
Trustee.  In such case, the Trustee, if
requested by the Committee in writing, shall contest the validity of such taxes
in any manner deemed appropriate by the Committee; the Employer may itself
contest the validity of any such taxes, in which case the Committee shall so
notify the Trustee and the Trustee shall have no responsibility or liability
respecting such contest.  If either party
to this Agreement contests any such proposed levy or assessments, the other
party shall provide such information and cooperation as the party conducting
the contest shall reasonably request.


Section 4.  Records
and Valuation.


4.1           Records.  The Trustee, and any investment manager
appointed pursuant to Section 2.2, shall maintain accurate and detailed records
and accounts of all investments, receipts, disbursements and other transactions
made by it with respect to the Trust Fund, and all accounts, books and records
relating thereto shall be open at all reasonable time to inspection and audit
by the Committee and the Employer.


4.2           Valuation.  From time to time upon the request of the
Committee, but at least annually as of the last day of each Plan Year, the
Trustee shall prepare a balance sheet of the Investment Fund in accordance with
the Plan and shall deliver copies of the balance sheet to the Committee and the
Employer.


4.3           Discharge
of Trustee.  Ninety days after the
filing of any balance sheet under Section 4.2 or any accounting under Section
6, the Trustee shall be forever released and discharged from any liability or
accountability other than for gross negligence or wilful misconduct on the part
of the Trustee to anyone with respect to the transactions shown or reflected in
such balance sheet or accounting, except with respect to any acts or
transactions as to which the Committee, within such ninety-day period, files
written objections with the Trustee.  The
written approval of the Committee of any balance sheet or accounting so filed
by the Trustee, or the Committee’s failure to file written objections within
ninety days, shall be a settlement of such balance sheet or accounting as
against all persons, and shall forever release and discharge the Trustee from
any liability of accountability to anyone with respect to the transactions
shown or reflected in such balance sheet or accounting other than liability
arising out of the Trustee’s gross negligence or wilful misconduct.  If a statement of objections is filed by the
Committee and the Committee is satisfied that its objections should be
withdrawn or if the 



 8
 









balance sheet or accounting is adjusted to its
satisfaction, the Committee shall indicate its approval of the balance sheet or
accounting in a written statement filed with the Trustee and the Trustee shall
be forever released and discharged from any liability of accountability to
anyone in accordance with the immediately preceding sentence.  If an objection is not settled by the
Committee and the Trustee, the Trustee may start a proceeding for a judicial
settlement of the balance sheet or accounting in any court of competent
jurisdictions; the only parties that need be joined in such a proceeding are
the Trustee, the Committee, the Employer and any other parties whose
participation is required by law.


4.4           Right
to Judicial Settlement.  Nothing in
this Agreement shall prevent the Trustee from having its account settled by a
court of competent jurisdiction at any time. 
The only parties that need be joined in any such proceeding are the
Employer, the Committee, the Trustee and any other parties whose participation
is required by law.


Section 5.  Instructions
from Committee.


5.1           Certification
of Members of the Committee.  From time
to time the Company shall certify to the Trustee in writing the names of the
individuals comprising the Committee and shall furnish to the Trustee specimens
of their signatures and the signatures of their agents, if any.  The Trustee shall be entitled to presume that
the identities of such individuals and their agents are unchanged until it
receives a certification from the Company notifying it of any changes.


5.2           Instructions
to Trustee.


(a)  The Trustee
shall pay benefits and administrative expenses under the Plan only when it
receives (and in accordance with) written instructions of the Committee
indicating the amount of the payment and the name and address of the recipient
in accordance with the terms of the Plan. 
The Trustee need not inquire into whether any payment the Committee
instructs the Trustee to make is consistent with the terms of the Plan or
applicable law or otherwise proper.  Any
payment made by the Trustee in accordance with such instructions shall be a
complete discharge and acquaintance to the Trustee.  If the Committee advises the Trustee that
benefits have become payable with respect to a Participant’s interest in the
Trust Fund but does not instruct the Trustee as to the manner of payment, the
Trustee shall hold the Participant’s interest in the Trust until the Trustee
receives written instructions from the Committee as to the manner of
payment.  The Trustee shall not pay
benefits from the Trust Fund without such instructions, even though it may be
informed from other sources, including, without limitation, a Participant or
Beneficiary, that benefits are payable under the Plan.  The Trustee shall have no responsibility to
determine when, to whom or in what amount benefits and expenses are payable
under the Plan.  Further, the Trustee
shall have no power, authority or duty to interpret the Plan or inquire into
the decisions or determinations of the Committee, or to question the
instructions given to it by the Committee. 
If the Committee so directs, the Trustee shall segregate amounts payable
with respect to the interest in the Plan of any Participant and administer them
separately from the rest of the Trust Fund in accordance with the Committee’s
instructions.



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(b)  The Trustee
may require the Committee to certify in writing that any payment of benefits or
expenses it instructs the Trustee to make pursuant to Section 5.2(a) above
is:  (i) in accordance with the terms of
the Plan and/or (ii) one which the Committee is authorized by the Plan and any
other applicable instruments to direct and/or (iii) made for the exclusive
purpose of providing benefits to Participants and Beneficiaries, or defraying
reasonable expenses of Plan administration and/or (iv) not made to a party in
interest (within the meaning of ERISA Section 3(14)), and/or (v) not a
prohibited transaction (within the meaning of Code Section 4975 and ERISA
Section 406).  If the Trustee requests,
instructions to pay benefits shall be made by the Committee on forms prepared
by the Trustee to include any or all of the above representations.  The Trustee shall be fully protected in
relying on the truth of any such representation by the Committee and shall have
no duty to investigate whether such representations are correct or to see to
the application of any amounts paid to and received by the recipient.


5.3           Plan
Change.  In the event of an
amendment, merger, division, or termination of the Plan, the Trustee shall
continue to disburse funds and to take other proper actions in accordance with
the instructions of the Committee.


Section 6.  Change
of Trustee.


The Company may at any time remove any person or
entity serving as a Trustee hereunder by giving to such person or entity
written notice of removal and, if applicable, the name and address of the
successor trustee.  Any person or entity
serving as a Trustee hereunder may resign at any time by giving written notice
to the Company.  Any such removal or
resignation shall take effect within 30 days after notice has been given by the
Trustee or by the Company, as the case may be. 
Within those 30 days, the removed or resigned Trustee shall transfer,
pay over and deliver any portion of the Trust Fund in its possession or control
(less an appropriate reserve for any unpaid fees, expenses, and liabilities)
and all pertinent records to the successor or remaining trustee; provided,
however, that any assets which are invested in a collective fund or in some
other manner which prevents their immediate transfer shall be transferred and
delivered to the successor trustee as soon as may be practicable.  Thereafter, the removed or resigned Trustee
shall have no liability for the Trust Fund or for its administration by the
successor or remaining trustee, but shall render an accounting to the Committee
of its administration of the Trust Fund through the date on which its
Trusteeship shall have been terminated. 
The Company may also, upon 30 days’ notice to each person currently
serving as a trustee, appoint one or more persons to serve as co-Trustee
hereunder.


Section 7.  Miscellaneous.


7.1           Right
to Amend.  This Trust Agreement may
be amended from time to time by an instrument executed by the Company;
provided, however, that any amendment affecting the powers, duties or
liabilities of the Trustee must be approved by the Trustee, and provided,
further, that no amendment may divert any portion of the Trust Fund to purposes
other than the exclusive benefit of the Participants and their Beneficiaries
prior to the satisfaction of all liabilities for benefits.  Any amendment shall apply to the Trust Fund
as constituted at the time of the amendment as well as to that portion of the
Trust Fund which is subsequently acquired.



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7.2           Compliance
with ERISA.  In the exercise of its
powers and the performance of its duties, the Trustee shall act in good faith
and in accordance with the applicable requirements under ERISA.  Except as may be otherwise required by ERISA,
the Trustee shall not be required to furnish any bond in any jurisdiction for
the performance of their duties and, if a bond is required despite this
provision, no surety shall be required on it.


7.3           Nonresponsibility
for Funding.  The Trustee shall be
under no duty to enforce the payment of any contributions and shall not be
responsible for the adequacy of the Trust Fund to satisfy any obligations for
benefits, expenses, and liabilities under the Plan.


7.4           Reports.  The Trustees shall file any report which they
are required by law to file with any governmental authority with respect to
this Trust, and the Committee shall furnish to the Trustee whatever information
is necessary to prepare the report.


7.5           Dealings
with the Trustee.  Persons dealing
with the Trustee, including, but not limited to, banks, brokers, dealers, and
insurers, shall be under no obligation to inquire concerning the validity of
anything which the Trustee purports to do, nor need any person see to the
proper application of any money paid or any property transferred upon the order
of the Trustee or to inquire into the Trustee’s authority as to any
transaction.


7.6           Limitation
Upon Responsibilities.  The Trustee
shall have no responsibilities with respect to the Plan or Trust other than
those specifically enumerated or explicitly allocated to it under this Trust
Agreement or the provisions of ERISA. 
All other responsibilities are retained and shall be performed by one or
more of the Employer, the Committee, and such advisors or agents as they choose
to engage.


The Trustee may execute any of the trusts or powers
hereof and perform any of its duties by or through attorneys, agents, receivers
or employees and shall not be answerable for the conduct of the same if chosen
with reasonable care and shall be entitled to advice of counsel concerning all
matters of trust hereof and the duties hereunder, and may in all cases pay such
reasonable compensation to all such attorneys, agents, receivers and employees
as may reasonably be employed in connection with the trusts hereof.  The Trustee may act upon the opinion or
advice of any attorney (who may be the attorney for the Trustee or attorney for
the Committee), approved by the Trustee in the exercise of reasonable
care.  The Trustee shall not be
responsible for any loss or damage resulting from any action or non-action in
good faith in reliance upon such opinion or advice.


The Trustee shall be protected in acting upon any
notice, request, consent, certificate, order, affidavit, letter, telegram or
other paper or document believed to be genuine and correct and to have been
signed or sent by the proper person or persons, and the Trustee shall be under
no duty to make any investigation or inquiry as to any statement contained in
any such writing but may accept the same as conclusive evidence of the truth
and accuracy of the statements therein contained.


The Trustee shall not be liable for other than their
gross negligence or willful misconduct. 
Except in the case of gross negligence or wilful misconduct on the part
of the Trustee, the 



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Trustee in its corporate capacity shall not be liable
for claims of any persons in any manner regarding the Plan; such claims shall
be limited to the Trust Fund.  Unless the
Trustee participates knowingly in, or knowingly undertakes to conceal, an act
or omission of the Committee or any other fiduciary, knowing such act or
omission to be a breach of fiduciary responsibility, the Trustee shall be under
no liability for any loss of any kind which may result by reason of such act or
omission.


Before taking any action hereunder at the request or
direction of the Committee, the Trustee may require that indemnity in form and
amount satisfactory to the Trustee be furnished for the reimbursement of any
and all costs and expenses to which they may be put including, without
limitation, reasonable attorneys’ fees and to protect them against all
liability, except liability which is adjudicated to have resulted from the
gross negligence or willful misconduct of the Trustee by reason of any action
so taken.


No provision of this Trust Agreement shall require the
Trustee to expend or risk their own funds or otherwise incur any financial
liability in the performance of any of their duties hereunder, or in the
exercise of any of their rights or powers, if they shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity
against such risk or liability is not reasonably assured to them.


7.7           Qualification
of the Plan and Trust.  The Trustee
shall be fully protected in assuming that the Plan and Trust meet the
requirements of Code Sections 401 and 501, respectively, and all the applicable
provisions of ERISA, unless they are advised to the contrary in writing by the
Committee or a governmental agency.


7.8           Party
in Interest Information.  The
Employer shall provide the Trustee with such information concerning the
relationship between any person or organization and the Plan as the Trustee
reasonably requests in order to determine whether such person or organization
is a party in interest with respect to the Plan within the meaning of ERISA
Section 3(14).


7.9           Disputes.  If a dispute arises as to the payment of any
funds or delivery of any assets by the Trustee, the Trustee may withhold such
payment or delivery until the dispute is determined by a court of competent
jurisdiction or finally settled in writing by the parties concerned.


7.10         Successor
Trustee.  This Trust Agreement shall apply
to any person who shall be appointed to succeed the person currently appointed
as the Trustee; and any reference herein to the Trustee shall be deemed to
include any one or more individuals or corporations or any combination thereof
who or which have at any time acted as a co-trustee or as the sole trustee.


7.11         Governing
State Law.  This Trust Agreement
shall be interpreted in accordance with the laws of the State of Maryland to
the extent those laws may be applicable under the provisions of ERISA.



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IN WITNESS WHEREOF, the parties hereto have executed
this Trust Agreement as of the day and year first above written.


	
  ATTEST:

  	
   

  	
  BRADFORD BANK

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Dallas R. Arthur

  
	
   

  	
   

  	
   

  	
  For the Entire Board of Directors

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ATTEST:

  	
   

  	
   

  	
  [_______________________]

  
	
   

  	
   

  	
   

  	
  as TRUSTEE

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  



 



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