Document:

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                                                                   Exhibit 10.10

                              ANDOVER BANCORP, INC.

                            1995 STOCK INCENTIVE PLAN

1.   PURPOSE

     The name of the plan is the Andover Bancorp, Inc. 1995 Stock Incentive Plan
(the "Plan"). The purpose of the Plan is to encourage and enable the directors,
officers, employees and other key persons of Andover Bancorp, Inc. (the
"Corporation") or its Subsidiaries (as hereinafter defined), upon whose
judgment, initiative and efforts the Corporation largely depends for the
successful conduct of its business, to acquire a proprietary interest in the
Corporation. It is anticipated that providing such persons with a direct stake
in the Corporation's welfare will assure a closer identification of their
interests with those of the Corporation, thereby stimulating their efforts on
the Corporation's behalf and strengthening their desire to remain with the
Corporation. The Corporation intends that this purpose will be effected by the
granting of "incentive stock options" ("Incentive Options") as defined in
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
nonqualified stock options ("Non-qualified Options" and together with the
Incentive Options, the "Options"), stock appreciation rights and, in certain
cases, awards of shares of the Corporation's Common Stock, par value $.10 per
share (the "Common Stock") under the Plan. The term "Optionees" as used herein
means the persons to whom options are granted pursuant to the terms of the Plan.
The term "Subsidiaries" includes Andover Bank (the "Bank") and any other banking
institution, corporation or entity in which stock or other securities possessing
fifty percent (50%) or more of the total combined voting power of all classes of
securities is owned directly or indirectly by the Corporation.

2.   OPTIONS TO BE GRANTED AND ADMINISTRATION

     (a)  Options granted under the Plan may be either Incentive Options or
Non-qualified Options.

     (b)  The Plan shall be administered by a committee (the "Committee") of not
less than two directors of the Corporation appointed by the Board of Directors
of the Corporation. It is the intention of the Corporation that each member of
the Committee shall be a "disinterested person" as that term is defined and
interpreted pursuant to Rule 16b-3 or any successor rule thereto promulgated
under the Securities Exchange Act of 1934, as amended (the "1934 Act") and an
"outside director" within the meaning of Section 162(m) of the Code and the
regulations promulgated thereunder. Action by the Committee shall require the
affirmative vote of a majority of all its members.

     (c)  Subject to the terms and conditions of the Plan, the Committee shall
have the power:

          (i)  To determine from time to time the options or stock appreciation
               rights to be granted to eligible persons (except non-employee
               directors) under the Plan and to prescribe the terms and
               provisions (which need not be identical) of each option or stock
               appreciation rights granted under the Plan to such persons;

          (ii) To construe and interpret the Plan and options and stock
               appreciation rights granted thereunder and to establish, amend
               and revoke rules and regulations for administration of the Plan.
               In this connection, the Committee may correct any defect, supply
               any omission or reconcile any inconsistency in the Plan, or in
               any option agreement, in the manner and to the extent it shall
               deem necessary or expedient to make the Plan fully effective. All
               decisions and determinations by the Committee in the exercise of
               this power shall be final and binding upon the Corporation and
               Optionees; and

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            (iii) Generally, to exercise such powers and to perform such acts as
      are deemed necessary or expedient to promote the best interests of the
      Corporation with respect to the Plan.

3.    STOCK

      (a)   The stock subject to the options granted under the Plan and
available for award pursuant to the terms hereof may be shares of the
Corporation's authorized but unissued Common Stock, or shares of Common Stock
reacquired by the Corporation. Options may be granted and awards of shares of
Common Stock may be made under the Plan for up to such aggregate number of
shares of Common Stock as shall equal four and nine-tenths percent (4.9%) of the
greater of (i) the total number of shares of Common Stock outstanding as of the
date of adoption of the Plan or (ii) the total number of shares of Common Stock
outstanding as of December 31, 1995; provided, however, that the maximum number
of shares of Common Stock for which Incentive Options may be granted under the
Plan shall not exceed 225,000 shares of Common Stock (which number is subject to
adjustment as provided in Section 10 hereof).

      (b)   Whenever any outstanding option under the Plan expires, is canceled
or is otherwise terminated (other than by exercise), the shares of Common Stock
allocable to the unexercised portion of such option may again be the subject of
options under the Plan, except for options surrendered as provided in Section 8
hereof.

      (c)   No more than 75,000 options or stock appreciation rights may be
granted to any one individual participant during one calendar year.

4.    DIRECTORS' FORMULA OPTION GRANTS

      Options shall be granted under this Section 4 only to members of the Board
of Directors of the Corporation and the Bank who are not officers or full-time
employees of the Corporation or any of its Subsidiaries (each, an "Eligible
Director").

      (a)   Awards. An option under which a total of 500 shares of Common Stock
may be acquired shall be granted, commencing with the 1995 Annual Meeting of
Stockholders, on the Friday following the annual meeting of the stockholders of
the Corporation to each Eligible Director who is an incumbent member of the
Board on that date. In the event the aggregate number of shares of Common Stock
authorized to be awarded under this Section 4 is insufficient to make such
awards in full, each Eligible Director shall be awarded options to acquire a
pro-rated portion of the available shares.

      (b)   Limitations on Awards. Notwithstanding the foregoing provisions of
this Section 4, no Eligible Director shall be eligible to receive any option
under this Section 4, if at the date of grant of such option such person
beneficially owns in excess of ten percent of the outstanding Common Stock of
the Corporation. No Eligible Director shall receive any option or other award
under this Plan except as provided under this Section 4.

      (c)   Expiration. Notwithstanding any other provision of the Plan or of
any option agreement, each option granted under this Section 4 shall expire on
the tenth anniversary of the date on which the option was granted, or, if
earlier, on the date the Optionee ceases to be a director of the Corporation for
any reason other than death, permanent disability or resignation.

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      (d)   Exercise.

            (i) Each option shall be exercisable, in whole or in part, and in
      one or more installments, at any time after six months from the date the
      option is granted, but not later than the date the option expires.

            (ii) In the event of death, permanent disability, or resignation,
      the option may be exercised by the Optionee (or, if he is not living, by
      his heirs, legatees or legal representatives) during its specified term
      within one year of the date of death, disability or resignation.

            (iii) In the event of a Change in Control of the Corporation (as
      defined in Section 7(d) below), all options outstanding as of the date of
      such Change in Control shall become immediately exercisable.

      (e)   Limitations on Amendment. The provisions of this Section 4 shall not
be amended more than once in any six-month period, other than to comport with
changes in the Code.

5.    ELIGIBILITY FOR DISCRETIONARY OPTION GRANTS

      (a)   Incentive Options may be granted only to officers and other
full-time employees of the Corporation or its Subsidiaries, including members of
the Board of Directors who are also employees of the Corporation or its
Subsidiaries. Non-qualified Options may be granted to officers and other
full-time employees of the Corporation, consultants or other key persons of the
Corporation or its Subsidiaries other than Eligible Directors.

      (b)   No person shall be eligible to receive any option under this Section
5 of the Plan, if at the date of grant such person beneficially owns in excess
of ten percent of the outstanding Common Stock of the Corporation.

      (c)   No person shall be eligible to receive Incentive Options to the
extent that the aggregate fair market value (determined as of the time the
option is granted) of the stock with respect to which incentive stock options
are exercisable for the first time by such individual (under all such plans of
the individual's employer corporation and its parent and subsidiary corporations
under Section 424 of the Code) during any calendar year shall exceed $100,000.
Any option granted in excess of the foregoing limitations shall be designated as
being a Non-qualified Option.

6.    TERMS OF THE DISCRETIONARY OPTION AGREEMENTS

      Each option granted pursuant to Section 5 shall be the subject of an
option agreement containing such provisions as the Committee shall from time to
time deem appropriate. Option agreements need not be identical, but each option
agreement by appropriate language shall include the substance of all of the
following provisions:

      (a)   Expiration. Notwithstanding any other provision of the Plan or of
any option agreement, each option shall expire on the date specified in the
option agreement, which date shall not be later than the tenth anniversary of
the date on which the option was granted.

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      (b)   Vesting, Exercise and Termination of Employment.

            (i) Each option shall become vested and exercisable in such
      installments (which need not be equal) and at such times as designated by
      the Committee. To the extent not exercised, installments shall accumulate
      and be exercisable, in whole or in part, at any time after becoming
      exercisable, but not later than the date the option expires. Each option
      and stock appreciation right shall provide that it may not be exercised,
      except as provided in Sections 6(b)(ii), 10(b) and 11, in whole or in
      part, until at least six months following the date of grant.

            (ii) In the event of a Change in Control of the Corporation (as
      defined in Section 7(d) below), all options outstanding as of the date of
      such Change in Control shall become immediately exercisable in full,
      notwithstanding any vesting or other provisions of the option agreement.

            (iii) The Committee may in its discretion specify, at the time an
      option is granted under the Plan or otherwise, a period or periods within
      which such option may be exercised following retirement of the Optionee or
      termination of the Optionee's employment with the Corporation or its
      Subsidiaries for any reason.

7.    RULES GOVERNING OPTIONS

      (a)   Minimum Shares Exercisable. The minimum number of shares with
respect to which an option may be exercised at any one time shall be 100 shares,
or such lesser number as is subject to exercise under the option at the time.

      (b)   Purchase Price. The purchase price per share of Common Stock under
each option shall be the fair market value of the Common Stock on the date the
option is granted. For the purposes of the Plan, the fair market value of the
Common Stock on such date shall be determined in good faith by the Committee;
provided, however, that (i) if the Common Stock is admitted to quotation on the
National Association of Securities Dealers Automated Quotation ("NASDAQ") System
on the date the option is granted, the fair market value shall not be less than
the average of the highest bid and lowest asked prices for the Common Stock on
NASDAQ reported for such date, or (ii) if the Common Stock is admitted to
trading on a national securities exchange or the NASDAQ National Market on the
date the option is granted, the fair market value shall not be less than the
closing price reported for the Common Stock on such exchange or market for such
date or, if no sales were reported, for the last date preceding such date for
which a sale was reported.

      (c)   Rights of Optionees. No Optionee shall be deemed for any purpose to
be the owner of any shares of Common Stock subject to any option unless and
until (i) the option shall have been exercised pursuant to the terms thereof,
(ii) the Corporation shall have issued and delivered the shares to the Optionee,
and (iii) the Optionee's name shall have been entered as a stockholder of record
on the books of the Corporation. Thereupon, the Optionee shall have full voting,
dividend and other ownership rights with respect to such shares of Common Stock.

      (d)   Change in Control. For purposes of the Plan, a "Change in Control"
shall be deemed to have occurred in either of the following events: (i) if there
has occurred a change in control which the Corporation would be required to
report in response to Item 1 of Form 8-K promulgated under the 1934 Act, or, if
such regulation is no longer in effect, any regulations promulgated by the
Securities and Exchange Commission pursuant to the 1934 Act which are intended
to serve similar purposes or (ii) when any "person" (as such term is used in
Sections 13(d) and 14(d)(2) of the 1934 Act) becomes a "beneficial owner" (as
such term is defined in Rule 13d-3 promulgated under the 1934 Act), directly or
indirectly, of

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securities of the Corporation or the Bank representing twenty-five percent (25%)
or more of the total number of votes that may be cast for the election of
directors of the Corporation, and in the case of either (i) or (ii) above, the
Board of Directors of the Corporation has not consented to such event by a
two-thirds vote of all of the members of the Board of Directors then in office
adopted prior to such event. In addition, a Change in Control shall be deemed to
have occurred if, as the result of, or in connection with, any tender or
exchange offer, merger or other business combination, sale of assets or
contested election, or any combination of the foregoing transactions, persons
who were directors of the Corporation before such transaction cease to
constitute a majority of the Board of Directors of the Corporation or of any
successor institution.

      (e)   Transfer. No options or stock appreciation rights shall be
transferable by the Optionee other than by will or by the laws of descent and
distribution. Options and stock appreciation rights may be exercised during the
Optionee's lifetime only by the Optionee, his or her guardian or legal
representative.

      (f)   Subject to compliance with the Plan and the option agreement, any
option granted under the Plan may be exercised by the Optionee by delivering to
the Corporation on any business day a written notice specifying the number of
shares of Common Stock the Optionee then desires to purchase (the "Notice").

      (g)   Payment for the shares of Common Stock purchased pursuant to the
exercise of an option shall be made either (i) in cash, check or other
instrument acceptable to the Corporation equal to the option price for the
number of shares specified in the Notice (the "Total Option Price"), or (ii) if
authorized by the applicable option agreement, in shares of Common Stock of the
Corporation having a fair market value on the date of exercise, determined as
provided in Section 7(b) hereof, equal to or less than the Total Option Price,
plus cash in an amount equal to the excess, if any, of the Total Option Price
over the fair market value of such shares of Common Stock. In addition, payment
for the shares of Common Stock may be made, if permitted by the Corporation, by
the Optionee delivering the Notice to the Corporation together with irrevocable
instructions to a broker to promptly deliver to the Corporation the Total Option
Price in cash or by check or other instrument acceptable to the Corporation;
provided that in the event the Optionee chooses to pay the option purchase price
as so provided, the Optionee and the broker shall comply with such procedures
and enter into such agreements of indemnity and other agreements as the
Corporation shall prescribe as a condition of such payment procedure. Payment
instruments will be received subject to collection.

      The delivery of certificates representing shares of Common Stock to be
purchased pursuant to the exercise of an option will be contingent upon receipt
by the Corporation of the Total Option Price for such shares and the fulfillment
of any other applicable requirements (including payment of any amount required
to be withheld by the Corporation pursuant to any applicable law).

8.    STOCK APPRECIATION RIGHTS

      (a)   The Committee may, but shall not be obligated to, include stock
appreciation rights in tandem with any option granted under the Plan, on such
terms and conditions as it deems appropriate in each case. Such stock
appreciation rights shall permit the Optionee, at his or her election, to
surrender to the Corporation the right to exercise such option (or portion
thereof) in consideration for the payment by the Corporation of an amount equal
to the excess of the fair market value on the date of surrender, determined as
provided in Section 7(b) hereof, of the shares of Common Stock subject to such
option (or portion thereof) surrendered over the option exercise price of such
shares. Such payment may be made, at the discretion of the Committee, in shares
of Common Stock valued at the fair market value thereof on the date of such
surrender, determined as provided in Section 7(b) hereof, or in cash, or any
combination thereof.

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      (b)   Any election by an Optionee who is subject to Section 16(b) of the
1934 Act to exercise stock appreciation rights included in any option agreement
shall be made only during the period beginning on the third business day
following the date of release for publication of quarterly or annual financial
information and ending on the twelfth business day following such date, shall be
irrevocable, and shall be subject to the consent or disapproval of the
Committee. No stock appreciation right may be exercised within (i) one year from
the date of the Conversion, or (ii) six months from the date of grant thereof,
except as provided in Sections 6(b)(ii), 10(b) and 11 hereof.

      (c)   Any option surrendered as provided in this Section 8 shall be
cancelled by the Corporation and shall not be subject to further grant.

9.    DIRECTORS' STOCK AWARDS

      An Eligible Director may, pursuant to an irrevocable written election at
least six months before directors' fees would otherwise be paid, receive all or
a portion of such fees (including annual, per meeting and committee fees or
retainers) in shares of Common Stock, valued at fair market value (as determined
by the Committee in accordance with Section 7(b)) on the date the directors'
fees would otherwise be paid.

10.   ADJUSTMENT UPON CHANGES IN CAPITALIZATION

      (a)   If the shares of the Corporation's Common Stock as a whole are
increased, decreased, changed into or exchanged for a different number or kind
of shares or securities of the Corporation, whether through merger,
consolidation, reorganization, recapitalization, reclassification, stock
dividend, stock split, combination of shares, exchange of shares, change in
corporate structure or the like, an appropriate and proportionate adjustment
shall be made in the number and kind of shares subject to the Plan, and in the
number, kind and per share exercise price of shares subject to unexercised
options or portions thereof granted prior to any such change. In the event of
any such adjustment in an outstanding option, the Optionee thereafter shall have
the right to purchase the number of shares under such option at the per share
price, as so adjusted, which the Optionee could purchase at the total purchase
price applicable to the option immediately prior to such adjustment.

      (b)   The Committee shall have the discretion and power in the case of any
event specified in Section 10(a) to determine and to make effective provision
for acceleration of the time or times at which any option or portion thereof
shall become exercisable. No fractional shares of Common Stock shall be issued
under the Plan on account of any adjustment specified herein.

      (c)   Adjustments under this Section 10 shall be determined by the
Committee and such determination shall be conclusive.

11.   EFFECT OF CERTAIN TRANSACTIONS

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      In the case of (i) the dissolution or liquidation of the Corporation, (ii)
a reorganization, merger or consolidation in which the Corporation is acquired
by another entity (other than a holding company formed by the Corporation) or in
which the Corporation is not the surviving entity, or (iii) the sale of all or
substantially all of the assets of the Corporation to another entity, the Plan
and the options issued hereunder shall terminate, unless provision is made in
connection with such transaction for the assumption of options theretofore
granted, or the substitution for such options of new options of the successor
entity or parent thereof, with appropriate adjustment as to the number and kind
of shares and the per share exercise prices, as provided in Section 10. In the
event of such termination, all outstanding options under the Plan shall be
exercisable in full for at least fifteen (15) days prior to the date of such
termination whether or not otherwise exercisable during such period.

12.   TAX WITHHOLDING

      (a)   Payment by Participant. Each participant shall, no later than the
date as of which the value of any award or grant hereunder or of any shares
issued upon the exercise of any option or stock appreciation right granted
hereunder, first becomes includable in the gross income of the participant for
federal income tax purposes (the "Tax Date"), pay to the Corporation, or make
arrangements satisfactory to the Corporation regarding payment of any federal,
state, or local taxes of any kind required by law to be withheld with respect to
such income.

      (b)   Payment in Shares. A participant may elect to have such tax
withholding obligation satisfied, in whole or in part, by (i) authorizing the
Corporation to withhold from shares to be issued to the participant a number of
shares with an aggregate fair market value (determined by the Committee in
accordance with Section 7(b) as of the date the withholding is effected) that
would satisfy the withholding amount due, or (ii) transferring to the
Corporation shares owned by the participant with an aggregate fair market value
(determined by the Committee in accordance with Section 7(b) as of the date the
withholding is effected) that would satisfy the withholding amount due. With
respect to any Optionee who is subject to Section 16(b) of the 1934 Act, the
following additional restrictions shall apply:

            (1) the election to satisfy tax withholding obligations in the
      manner permitted by this Section 12(b) shall be made either (A) during the
      period beginning on the third business day following the date of release
      for publication of quarterly or annual financial information and ending on
      the twelfth business day following such date, or (B) at least six months
      prior to the Tax Date;

            (2) such election shall be irrevocable;

            (3) such election shall be subject to the consent or disapproval of
      the Committee; and

            (4) the stock withheld to satisfy tax withholding must pertain to an
      option or stock appreciation right which has been held by the Optionee for
      at least six months from the date of grant.

13.   AMENDMENT OF THE PLAN

      The Board of Directors of the Corporation may amend the Plan at any time,
and from time to time, subject to any required regulatory approval and to the
limitation that, except as provided in Sections 10 and 11 hereof, no amendment
shall be effective unless approved by the stockholders of the Corporation in
accordance with applicable law and regulations at an annual or special meeting
held within twelve months before or after the date of adoption of such
amendment, where such amendment will:

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      (a)   increase the number of shares of Common Stock as to which options
may be granted or shares may be awarded under the Plan;

      (b)   change in substance Section 4 and 5 hereof relating to eligibility
to participate in the Plan;

      (c)   otherwise materially increase the benefits accruing to participants
under the Plan.

      Except as provided in Sections 10 and 11 hereof, rights and obligations
under any option granted before any amendment of the Plan shall not be altered
or impaired by such amendment, except with the consent of the Optionee.

14.   NONEXCLUSIVITY OF THE PLAN

      Neither the adoption of the Plan by the Board of Directors of the
Corporation nor the submission of the Plan to the stockholders of the
Corporation for approval shall be construed as creating any limitations on the
power of the Board of Directors of the Corporation to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting of stock options otherwise than under the Plan, and such arrangements
may be either applicable generally or only in specific cases. The Plan or the
granting of options or awarding of shares thereunder shall not be deemed to
confer upon any employee of the Corporation or its Subsidiaries any right to
continued employment.

15.   GOVERNMENT AND OTHER REGULATIONS; GOVERNING LAW

      (a)   The obligation (if any) of the Corporation to sell and deliver
shares of Common Stock with respect to options granted under the Plan and to
award shares under the Plan shall be subject to all applicable laws, rules and
regulations, including all applicable federal and state securities laws, and the
obtaining of all such approvals from governmental agencies as may be deemed
necessary or appropriate by the Committee.

      (b)   The Plan shall be governed by Massachusetts law, except to the
extent that such law is preempted by federal law.

16.   EFFECTIVE DATE OF PLAN; STOCKHOLDER APPROVAL

      The Plan shall become effective on February 16, 1995; provided, however,
that the Plan shall be subject to the approval of the Corporation's stockholders
in accordance with applicable laws and regulations at an annual or special
meeting held within twelve months of such effective date. No options granted
under the Plan prior to such stockholder approval may be exercised until such
approval has been obtained. No shares of Common Stock may be awarded in lieu of
directors' fees prior to such stockholder approval. No option may be granted
under the Plan after the tenth anniversary of the effective date of the Plan.

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                                                                   Exhibit 10.11

                    DEFERRED COMPENSATION PLAN FOR DIRECTORS
                  OF ANDOVER BANCORP, INC. AND ITS SUBSIDIARIES

      The Deferred Compensation Plan For Directors of Andover Bancorp. Inc. and
Its Subsidiaries, originally effective July 1, 1993, amended and restated
effective February 22, 1996, is hereby amended and restated as follows effective
November 1, 1996:

1.    Eligibility. Any member of the Board of Directors of Andover Bancorp, Inc.
      or any of its subsidiaries (each such entity being referred to herein as
      the "Corporation"} who is not an employee of Andover Bancorp, Inc. or any
      of its subsidiaries may elect to defer, in accordance with this Plan,
      payment of all or a portion of the compensation payable to him for service
      as such Director.

2.    Election to Defer. A Director's election to defer payments shall be made
      in writing and shall be effective upon receipt and acceptance by the
      Corporation. Except in the case of a newly elected Director who may file
      an election to defer within thirty (30) days of his election as Director,
      an election to defer shall be made no later than ten {10) days preceding
      commencement of a calendar year with respect to deferral of compensation
      to be earned in such year. Any election may be revoked in writing and
      shall be effective upon receipt by the Corporation, but only as to
      compensation to be earned at and after commencement of the next succeeding
      calendar month. Any election may be changed in writing and shall be
      effective upon receipt by the Corporation, but only as to compensation to
      be earned at and after commencement of the next succeeding calendar year.

3.    Crediting of Interest. The Corporation shall maintain a book account to
      which the deferred compensation of each Director participating in this
      Plan shall be credited as of the end of each calendar month after such
      compensation is earned. As of the end of each calendar month, the
      Corporation shall also credit each deferred compensation account with
      interest on the amount then standing in the account, exclusive of any
      deferred compensation credited to the account as of such date. The rate to
      be used for this purpose shall be the maximum interest yield paid by
      Andover Bank with respect to its 36-month term deposit accounts, or if
      there shall be no 36-month term deposit accounts, at the maximum interest
      yield paid on the term deposit account of such duration as most closely
      approximates 36 months.

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4.    Stock Units.

      (a) In lieu of receiving interest credit each month, a Director may elect
      to convert the amounts in his deferred compensation account (and any
      future deferrals) into stock units equivalent in value to shares of common
      stock of Andover Bancorp, Inc. ("Stock"). Such an election must be made in
      writing. A Director may revoke his election and elect to receive interest
      credit pursuant to Paragraph 3 above with respect to future deferred
      compensation.

      (b) The conversion of deferred compensation into stock units will be made
      on the basis of the fair market value of the Stock on the date of
      conversion, or the date the compensation would otherwise be paid, which
      ever is applicable. For this purpose, fair market value of the Stock on
      any given date shall mean the closing price reported for the Stock on the
      NASDAQ National Market on such date or, if no sales were reported on such
      date, for the last date preceding such date for which a sale was reported.

      (c) During the term of the deferral, each Director's account of stock
      units will be credited with additional units to reflect any payment of
      dividends (other than dividends payable only in shares of Stock}. Each
      account will be credited with a number of whole and fractional shares of
      stock units determined by multiplying the dividend value per share of
      stock by the number of units in the account on the record date and
      dividing the result by the fair market value of the Stock (as defined in
      Paragraph 4(b) above) on the record date.

      (d) In the event of a stock dividend, stock split or similar change in
      capitalization affecting the Stock, appropriate adjustments shall be made
      in the number of stock units credited to each Director's account.

5.    Time and Method of Payment.

      (a) Amounts credited to a Director's deferred compensation account shall
      be paid, or commenced to be paid. on the January 15 coincident with or
      next following the date on which the Director ceases to be a member of the
      Board of Directors of the Corporation for any reason whatsoever. In the
      case of semi-annual installments, payments shall also be made on each July
      15.

      (b) Payments of deferred compensation may be made either in a single lump
      sum or in annual, or semi-annual, installments over a period of ten (10)
      years, as the Director may have irrevocably specified before the
      compensation is earned. In the absence of an effective election, payment
      shall be made in a single lump sum. In the case of installment payments,
      interest or dividend equivalent shall continue to be credited in
      accordance with Paragraph 3 or 4 during the payment period. The amount of
      each installment payment shall be equal to the amount credited to the
      deferred compensation account as of the preceding June 30 or December 31,
      as the case may be divided by the number of,

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      payments remaining to be made, including the current payment. On or after
      the date which is the later of six months from the effective date of this
      amendment or the date this amendment is approved by shareholders of
      Andover Bancorp, Inc., payments from each Director's deferred compensation
      account of stock units shall be payable only in the form of whole shares
      of Stock, with any fractional share payable in cash.

      (c) Elections by a Director of a method of payment under sub-paragraph (b)
      shall be made in writing, effective upon receipt and acceptance by the
      Corporation, and applicable only to compensation to be earned after the
      effective date of the election. Such elections may also be changed by a
      Director, subject to the same restrictions.

      (d) Payments of deferred compensation shall be made as they become due to
      the Directors if then living, otherwise to a beneficiary or beneficiaries
      designated by the Director in writing to the Corporation prior to the
      Director's death, or failing such designation, the Director's estate.

      (e) Notwithstanding any provision hereof to the contrary, if a Director.
      or after a Director's death the Director's beneficiary, believes he is
      suffering from financial hardship, an application may be made to the Board
      of Directors of the Corporation for an acceleration of payments from the
      deferred compensation account of the Director. A "financial hardship"
      shall mean a need for financial assistance due to the occurrence of an
      unanticipated emergency caused by an event beyond the Director's control.
      The need for financial assistance must be such that the Director, any
      member of the Director's immediate family or, after the Director's death,
      a designated beneficiary will be subject to substantial hardship if the
      acceleration is not permitted. If the Board of Directors of the
      Corporation determines, in its sole discretion, that a hardship exists,
      the Corporation may accelerate payment to the Director or the designated
      beneficiary of only so much of the deferred compensation account as the
      Board of Directors of the Corporation may determine is required to
      alleviate such hardship, and the deferred compensation account shall be
      charged with said amount upon payment.

6.    Limitation on Rights of Directors. No action taken pursuant to this Plan
      shall create or be deemed to create a trust or fiduciary relationship of
      any kind between the Corporation and the Directors. Although the
      Corporation shall have no obligation to establish any separate fund,
      reserve, or to invest in any specific asset to provide security with
      respect to any deferred amounts during the deferral period, the
      Corporation may elect to do so and, in such event, the Directors shall not
      have any interest in such assets and all such assets shall continue for
      all purposes to be a part of the general assets of the Corporation, with
      title to the beneficial ownership of such

<PAGE>   4

      assets remaining at all times in the Corporation. Each Director, his legal
      representative, or any of his beneficiaries shall not have any right,
      other than the right of an unsecured general creditor of the Corporation,
      in respect to the deferred compensation account established hereunder, and
      such persons shall have no property interest in any specific assets of the
      Corporation.

7.    Nonforfeitable. The right of each Director to the payment of deferred
      compensation under this Plan shall be nonforfeitable and no action or
      failure to act by the Director, the Corporation, or any other person,
      shall deprive the Director of, or excuse the Corporation from its
      obligations to pay, the amounts due hereunder.

8.    Witholding Tax. The Corporation shall have the right to deduct from all
      deferred amounts or payments hereunder any federal or state taxes required
      by law to be withheld with respect to such deferred amounts or payments.

9.    Non-Assignable. The deferred compensation payable under this Plan shall
      not be subject to alienation, assignment, garnishment, execution, or levy
      of any kind and any attempt to cause any compensation to be so subjected
      shall not be recognized.

10.   Termination and Amendment. This Plan may be amended at any time or may be
      terminated, in whole or in part. at any time, and from time to time, by
      Andover Bancorp, Inc. The foregoing provisions of this Paragraph
      notwithstanding, no amendment or termination of this Plan shall, without
      the consent of a Director, adversely affect the amounts payable hereunder
      on account of compensation deferred prior to the effective date of such
      amendment or termination.

11.   Notices. All notices, elections, or designations by a Director to the
      Corporation shall be delivered in person or by registered mail, postage
      prepaid, and noted to be brought to the attention of the Treasurer,
      Andover Bancorp, Inc.

12.   Governing Law. This Plan, and all actions taken hereunder, shall be
      governed by and construed in accordance with the laws of the State of
      Massachusetts, except as such laws may be superseded by any applicable
      federal law.

<PAGE>   5

13.   Shares Issuable. The aggregate maximum number of shares of Stock reserved
      and available for issuance under the Plan shall be 50,000, subject to
      appropriate adjustments in the event of a stock dividend, stock split, or
      similar change in capitalization affecting the Stock. Shares subject to
      the Plan are authorized but unissued shares or Treasury shares.
      Notwithstanding the foregoing, no shares of Stock may be issued under the
      Plan until the amendment and restatement of this Plan has been approved by
      the affirmative votes of the holders of a majority of the shares of Stock
      of Andover Bancorp, Inc. present, or represented, and entitled to vote at
      a meeting of shareholders.

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