Document:

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                                  EXHIBIT 10.1

                              EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of the      day of
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January, 2003, between Chesapeake Bank of Maryland (the "Bank"), a capital stock
federal savings bank chartered by the United States, and Banks of the
Chesapeake, Inc. (the "Company"), the holding company of the Bank (the Bank and
the Company collectively, the "Employer"), and R. THOMAS JEFFERSON, a resident
of the State of Maryland (the "Employee").

                                    RECITALS:

     The Employer desires to employ the Employee as the President and Chief
Executive Officer of the Employer and the Employee desires to accept such
employment.

     In consideration of the above premises and the mutual agreements
hereinafter set forth, the parties hereby agree as follows:

1. DEFINITIONS. Whenever used in this Agreement, the following terms and their
variant forms will have the meaning set forth below:

     1.1 "Agreement" means this Agreement and any exhibits incorporated herein
together with any amendments hereto made in the manner described in this
Agreement.

     1.2 "Affiliate" means any business entity which controls the Employer, is
controlled by or is under common control with the Employer.

     1.3 "Area" means the geographic area within a radius of 20 miles of any
office or facility maintained by the Employer. It is the express intent of the
parties that the Area as defined herein is the area where the Employee performs
or performed services on behalf of the Employer under this Agreement as of, or
within a reasonable time prior to, the termination of the Employee's employment
hereunder.

     1.4 "Board" means the board of directors of the Bank.

     1.5 "Business of the Employer" means the business conducted by the
Employer, which is community banking.

     1.6 "Cause" means, any of the following events or conduct preceding a
termination of employment initiated by the Employer:

          (a) any act that constitutes, on the part of the Employee, fraud or
     dishonesty toward the Employer;

          (b) the conviction of the Employee of a felony or crime involving
     moral turpitude;

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          (c) the Employee's entering into any transaction or contractual
     relationship with, or diversion of business opportunity from, the Employer
     (other than on behalf of the Employer or with the prior written consent of
     the Board); provided, however, that in the case of this Clause (c), such
     conduct will not constitute Cause unless the Board delivers to the Employee
     notice setting forth (1) the conduct deemed to qualify as Cause, (2)
     reasonable remedial action that might remedy such objection, and (3) a
     reasonable time (not less than thirty (30) days) within which the Employee
     may take such remedial action, and the Employee has not taken the specified
     remedial action with the specified reasonable time;

          (d) the Employee breaches the covenants contained in Sections 6, 7 or
     8 hereof;

          (e) conduct by the Employee that results in removal from the
     Employee's position as an officer or employee of the Employer pursuant to a
     written order by any regulatory agency with authority or jurisdiction over
     the Employer; or

     1.7 "Company Information" means Confidential Information and Trade Secrets.

     1.8 "Confidential Information" means data and information relating to the
business of the Employer (which does not rise to the status of a Trade Secret)
which is or has been disclosed to the Employee or of which the Employee became
aware as a consequence of or through the Employee's relationship to the Employer
and which has value to the Employer and is not generally known to its
competitors. Confidential Information does not include any data or information
that has been voluntarily disclosed to the public by the Employer (except where
such public disclosure has been made by the Employee without authorization) or
that has been independently developed and disclosed by others, or that otherwise
enters the public domain through lawful means.

     1.9 "Change in Control" means any one of the following events first to
occur after the completion of the initial public offering of the common stock of
the Company:

          (a) the acquisition by any person or persons acting in concert of the
     then outstanding voting securities of either the Bank or the Company, if,
     after the transaction, the acquiring person (or persons) owns, controls or
     holds with power to vote twenty-five percent (25%) or more of any class of
     voting securities of the Bank or the Company, as the case may be, or such
     other transaction as may be described under 12 C.F.R. Section 225.41(b)(1)
     or any successor thereto;

          (b) within any twelve-month period (beginning on or after the
     Effective Date) the persons who were directors of either the Bank or the
     Company immediately before the beginning of such twelve-month period (the
     "Incumbent Directors") cease to constitute at least a majority of such
     board of directors; provided that any director who was not a director as of
     the Effective Date will be deemed to be an Incumbent Director if that
     director was elected to such board of directors by, or on the
     recommendation of or with the approval of, at least two-thirds of the
     directors who then qualified as Incumbent Directors;

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          (c) the approval by the stockholders of either the Bank or the Company
     of a reorganization, merger or consolidation, with respect to which persons
     who were the stockholders of either the Bank or the Company, as the case
     may be, immediately prior to such reorganization, merger or consolidation
     do not, immediately thereafter, own more than fifty percent (50%) of the
     combined voting power entitled to vote in the election of directors of the
     reorganized, merged or consolidated company's then outstanding voting
     securities; or

          (d) the sale, transfer or assignment of all or substantially all of
     the assets of the Company or the Bank to any third party.

     1.10 "Effective Date" means         , 200  .
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     1.11 "Good Reason" means, any of the following events or conduct preceding
a termination of employment initiated by the Employee:

          (a) a material diminution in the powers, responsibilities or duties of
     the Employee hereunder or a material change as to whom Employee reports and
     who reports to Employee;

          (b) the failure of the Board to elect the Employee as the President
     and Chief Executive Officer of the Bank and the Company;

          (c) a material breach of the terms of this Agreement by the Employer;

          (d) the failure of the Board to nominate the Employee for re-election
     following expiration of each of the Employee's terms of service on the
     Board that arises during the Term (as defined below);

          (e) a change in the location of the principal office of Employee more
     than thirty five (35) miles from its existing location.

provided, however, that no termination of employment which is triggered by any
conduct or event described in this Section 1.11 shall not constitute a
termination of employment for Good Reason unless the Employee has first provided
the Employer with the opportunity to cure the event or conduct by giving the
Employer a written notice describing in sufficient detail the Employee's belief
that a Good Reason exists and the Employee defers resigning until the expiration
of a thirty (30) day cure period, beginning with the date such notice is
received by the Employer.

     1.12 "Permanent Disability" means the total inability of the Employee to
perform the Employee's duties under this Agreement for a period of ninety (90)
consecutive days as certified by a physician chosen by the Employer and
reasonably acceptable to the Employee.

     1.13 "Trade Secrets" means information including, but not limited to,
technical or nontechnical data, formulas, patterns, compilations, programs,
devices, methods, techniques,

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drawings, processes, financial data, financial plans, product plans or lists of
actual or potential customers or suppliers which:

          (a) derives economic value, actual or potential, from not being
     generally known to, and not being readily ascertainable by proper means by,
     other persons who can obtain economic value from its disclosure or use; and

          (b) is the subject of efforts that are reasonable under the
     circumstances to maintain its secrecy.

2. DUTIES.

     2.1 The Employee is employed as the President and Chief Executive Officer
of the Bank and the Company, subject to the direction of the Board or its
designee, must perform and discharge well and faithfully the duties which may be
assigned to him from time to time by the Employer in connection with the conduct
of its business. The duties and responsibilities of the Employee are set forth
on Exhibit A attached hereto.

     2.2 In addition to the duties and responsibilities specifically assigned to
the Employee pursuant to Section 2.1 hereof, the Employee must:

          (a) devote substantially all of the Employee's time, energy and skill
     during regular business hours to the performance of the duties of the
     Employee's employment (reasonable vacations and reasonable absences due to
     illness excepted) and faithfully and industriously perform such duties;

          (b) diligently follow and implement all management policies and
     decisions communicated to him by the Board; and

          (c) timely prepare and forward to the Board all reports and accounting
     as may be requested of the Employee.

     2.3 The Employee must devote the Employee's entire business, time,
attention and energies to the Business of the Employer and must not during the
Term of this Agreement be engaged (whether or not during normal business hours)
in any other business or professional activity, whether or not such activity is
pursued for gain, profit or other pecuniary advantage; but this will not be
construed as preventing the Employee from:

          (a) investing the Employee's personal assets in businesses which are
     not in competition with the Business of the Employer and which will not
     require any services on the part of the Employee in their operation or
     affairs and in which the Employee's participation is solely that of an
     investor;

          (b) purchasing securities in any corporation whose securities are
     regularly traded provided that such purchase will not result in him
     collectively owning beneficially at any time five percent (5%) or more of
     the equity securities of any business in competition with the Business of
     the Employer; and

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          (c) participating in civic and professional affairs and organizations
     and conferences, preparing or publishing papers or books or teaching so
     long as the Board approves of such activities prior to the Employee's
     engaging in them.

     2.4 Directorship. Employee will also be appointed to and serve as a member
of the Board of Directors of the Bank.

3. TERM AND TERMINATION.

     3.1 Term. The term of this Agreement will initially be set at three (3)
years commencing on the date hereof and will automatically renew each day after
the date hereof so that the term of this Agreement remains a three (3) year
term; provided however that the automatic renewals as set forth in this
paragraph 3.1 may be terminated by either party hereto giving notice to the
other party of such termination, in which event, the term will end on the third
anniversary of the thirtieth (30th) day following the date the written notice is
received (as so calculated, the "Term").

     3.2 Termination. The employment of the Employee under this Agreement may be
terminated prior to the expiration of the Term only as follows, subject to the
conditions set forth below:

          3.2.1 By the Employer:

               (a) for Cause at any time, upon written notice to the Employee,
          in which event the Employer will have no further obligation to the
          Employee except for the payment of any amounts due and owing under
          Section 4 on the effective date of the termination; or

               (b) without Cause or upon the Permanent Disability of Employee at
          any time, provided that the Employer gives the Employee sixty (60)
          days' prior written notice of its intent to terminate, in which event
          the Employer will be required to make the termination payments under
          Section 3.7.

          3.2.2 By the Employee:

               (a) for Good Reason at any time, in which event the Employer will
          be required to make the termination payments under Section 3.7; or

               (b) without Good Reason or upon the Permanent Disability of the
          Employee, provided that the Employee gives the Employer sixty (60)
          days' prior written notice of the Employee's intent to terminate, in
          which event the Employer will have no further obligation to the
          Employee except for future payment of any amounts due and owing under
          Section 4 on the effective date of the termination.

          3.2.3 By the Employee:

               (a) within six (6) months following a Change in Control; provided
          that the Employee gives at least thirty (30) days' prior written
          notice to the Employer of

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          the Employee's intention to terminate this Agreement with such
          resignation to be effective immediately, in which event the Employer
          will be required to make a termination payment under Section 3.7; or

               (b) prior to the date on which a Change in Control occurs if the
          Employee can demonstrate that a third party has taken steps reasonably
          calculated to effect a Change in Control or in connection with or
          anticipation of a Change in Control, in which event the Employer will
          be required to make a termination payment under Section 3.7.

          3.2.4 At any time upon mutual, written agreement of the parties, in
          which event the Employer will have no further obligation to the
          Employee except for the payment of any amounts due and owing under
          Section 4 on the effective date of termination unless otherwise set
          forth in the written agreement.

          3.2.5 Immediately upon the Employee's death, in which event the
          Employer will have no further obligation to the Employee except for
          the payment of any amounts due and owing under Section 4 on the
          effective date of termination.

     3.3 Effect of Termination. Termination of the employment of the Employee
pursuant to Section 3.2 will be without prejudice to any right or claim which
may have previously accrued to either the Employer or the Employee hereunder and
will not terminate, alter, supersede or otherwise affect the terms and covenants
and the rights and duties prescribed in this Agreement.

     3.4 Suspension With Pay. Nothing contained herein will preclude the
Employer from releasing the Employee of the Employee's normal duties and
suspending Employee, with pay, during the pendency of any investigation or
examination to determine whether or not Cause exists for termination of
employee.

     3.5 Suspension Without Pay. If Employee is suspended and/or temporarily
prohibited from participating in the conduct of the Employer's affairs by a
notice served under Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance
Act, the Employer's obligations under this Agreement will be suspended as of the
date of service thereof, unless stayed by appropriate proceedings. If the
charges in such notice are dismissed, the Employer may in its discretion:

          (a) pay Employee all or part of the compensation withheld while its
     contract obligations were suspended; and/or

          (b) reinstate (in whole or in part) any of its obligations which were
     suspended.

     3.6 Other Regulatory Requirements. If the Bank is in default, as defined in
Section (3)(x)(1) of the Federal Deposit Insurance Act, all obligations under
this Agreement will terminate as the date of such default, but no vested rights
of the Employee will be affected. Further, all obligations under this Agreement
will be terminated, except, to the extent determined that continuation of the
Agreement is necessary for the continued operation of the Bank:

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          (a) by the Director of the Office of Thrift Supervision (the
     "Director") or his or her designee, at the time the FDIC enters into an
     agreement to provide assistance to or on behalf of the Bank under the
     authority of the Federal Deposit Insurance Act; or

          (b) by the Director or his or her designee, at the time the Director
     or his or her designee approves a supervisory merger to resolve problems
     relating to the operation of the Bank or when the Bank is determined by the
     Director to be in an unsafe or unsound condition.

     3.7 Termination Payments. In the event this Agreement is terminated by the
Employer pursuant to Section 3.2.1(b) or by the Employee pursuant to Section
3.2.2(a) and a Change in Control has not occurred, then commencing with the
first payroll date immediately following the effective date of such termination,
the Employer will pay to the Employee as severance pay and liquidated damages an
amount equal to the Average Annual Compensation (as defined below) for a period
equal to the remaining Term. In the event a Change in Control has occurred or in
anticipation thereof and this Agreement is terminated by Employer or by Employee
pursuant to Section 3.2.3, the Employee shall be entitled to a lump sum payment
equal to 2.99 times his average annual compensation and shall be paid such lump
sum payment by Employer within 24 hours of the effective date of termination of
this Agreement as used herein, the term "Average Annual Compensation" means the
greater of (1) the Employee's Base Salary for the prior year, or (2) the average
of Base Salary and incentive bonus as described in Section 4.1(b) with respect
to the most recent three (3) consecutive twelve-month periods during which the
Employee was employed by the Employer (or if the Employer has been employed for
fewer periods, such lesser number of periods) immediately prior to the effective
date of the Agreement's termination that produced the highest average.

     Notwithstanding any other provisions to this Agreement to the contrary, if
the aggregate of the payments provided for in this Agreement and other payments
and benefits which the Employee has the right to receive from the Employer (the
"Total Payments") would constitute a "parachute payment," as defined in Section
280G(b)(2) of the Internal Revenue Code, the Employee shall receive the Total
Payments unless (a) the after-tax amount that would be retained by the Employee
(after taking into account all federal, state and local income taxes payable by
the Employee and the amount of any excise taxes payable by the Employee under
Section 4999 of the Internal Revenue Code that would be payable by the Employee
(the "Excise Taxes")) if the Employee were to receive the Total Payments has an
aggregate value less than (b) the after-tax amount that would be retained by the
Employee (after taking into account all federal, state and local income taxes
payable by the Employee) if the Employee were to receive the Total Payments
reduced to the largest amount as would result in no portion of the Total
Payments being subject to Excise Taxes (the "Reduced Payments"), in which case
the Employee shall be entitled only to the Reduced Payments. If the Employee is
to receive the Reduced Payments, the Employee shall be entitled to determine
which of the Total Payments, and the relative portions of each, are to be
reduced.

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4. COMPENSATION AND BENEFITS.

     4.1 Compensation. The Employee will receive the following salary and
benefits:

          (a) Base Salary. During the Term, the Employee will receive a base
     salary at the rate of $160,000 per annum, payable in substantially equal
     installments in accordance with the Bank's regular payroll practices ("Base
     Salary"). The Employee's Base Salary will be reviewed by the Board
     annually, and the Employee will be entitled to receive annually an increase
     in such amount, if any, as may be determined by the Board.

          (b) Incentive Compensation.

               (i) In addition to Employee's Base Salary under Section 4.1(a),
          within ninety (90) days following the end of each fiscal year of the
          Employer's operations, the Employer will pay the Employee a bonus as
          determined each year by the Compensation Committee of the Board
          provided certain performance criteria (to be determined annually by
          the Board) are satisfied.

               (ii) The Employee will also be entitled to participate in such
          other bonus, incentive and other executive compensation programs as
          are made available to senior management of the Employer from time to
          time.

     The bonus amounts which may be payable to the Employee pursuant to this
Section 4.1(b) is referred to herein as "Incentive Compensation".

     4.2 Compensation as a Director. The Employee will be compensated for
attendance at regular and special Board meetings at the rate established for
Board members.

     4.3 Automobile. The Bank will make available to the Employee an automobile
equivalent in value to the vehicle provided to Employee immediately prior to the
date of this Agreement to be utilized by Employee for business and personal use
as is customary for heads of financial institutions in the Area.

     4.4 Business Expenses; Memberships. The Employer specifically agrees to
reimburse the Employee for (a) reasonable business (including travel) expenses
incurred by the Employee in the performance of the Employee's duties hereunder,
as approved from time to time by the Board, and (b) the dues and business
related expenditures, including initiation fees, associated with membership in a
country club and in professional associations which are commensurate with the
Employee's position; provided, however, that the Employee must, as a condition
of reimbursement, submit verification of the nature and amount of such expenses
in accordance with reimbursement policies from time to time adopted by the
Employer and in sufficient detail to comply with rules and regulations
promulgated by the Internal Revenue Service.

     4.5 Vacation. On a non-cumulative basis the Employee will be entitled to
vacation in each year of this Agreement in accordance with the Bank's vacation
policy as then in effect, during which the Employee's Base Salary will be paid
in full.

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     4.6 Benefits. In addition to the Base Salary and Incentive Compensation,
the Employee will be entitled to such benefits as may be available from time to
time for executives of the Employer similarly situated to the Employee. All such
benefits will be awarded and administered in accordance with the Employer's
standard policies and practices. Such benefits may include, by way of example
only, profit-sharing plans, retirement, life and disability insurance benefits
and such other benefits as the Employer deems appropriate.

     4.7 Withholding. The Employer may deduct from each payment of compensation
hereunder all amounts required to be deducted and withheld in accordance with
applicable federal and state income, FICA and other withholding requirements.

5. COMPANY INFORMATION.

     5.1 Ownership of Information. All Company Information received or developed
by the Employee while employed by the Employer will remain the sole and
exclusive property of the Employer.

     5.2 Obligations of the Employee. The Employee agrees (a) to hold Company
Information in strictest confidence, and (b) not to use, duplicate, reproduce,
distribute, disclose or otherwise disseminate Company Information or any
physical embodiments thereof and may in no event take any action causing or fail
to take any action necessary in order to prevent any Company Information from
losing its character or ceasing to qualify as Confidential Information or a
Trade Secret. In the event that the Employee is required by law to disclose any
Company Information, the Employee will not make such disclosure unless (and then
only to the extent that) the Employee has been advised by the Company's legal
counsel that such disclosure is required by law and then only after prior
written notice is given to the Employer when the Employee becomes aware that
such disclosure has been requested and is required by law. This Section 5 will
survive the termination of this Agreement with respect to Confidential
Information for so long as it remains Confidential Information, but for no
longer than three (3) years following termination of this Agreement, and this
Section 5 will survive termination of this Agreement with respect to Trade
Secrets for so long as is permitted by the then-current Maryland Trade Secrets
Act.

     5.3 Delivery upon Request or Termination. Upon request by the Employer, and
in any event upon termination of employment with the Employer, the Employee will
promptly deliver to the Employer all property belonging to the Employer,
including without limitation, all Company Information then in the Employee's
possession or control.

6. NON-COMPETITION. The Employee agrees that during the Term hereunder and, in
the event of the Employee's termination of employment for any reason, thereafter
for a period equal to the greater of (a) six (6) months; or (b) the period
during which the Employee is to be paid monthly termination payments, if any, in
accordance with Section 3.7 hereof, the Employee will not (except on behalf of
or with the prior written consent of the Employer), within the Area, either
directly or indirectly, on the Employee's own behalf or in the service or on
behalf of others, as a principal, partner, officer, director, manager,
supervisor, administrator, consultant, executive employee or in any other
capacity which involves duties and responsibilities similar to

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those undertaken for the Employer, engage in any business which is the same as
or essentially the same as the Business of the Employer.

7. NON-SOLICITATION OF CUSTOMERS. The Employee agrees that during the Term
hereunder and, in the event of the Employee's termination of employment for any
reason, thereafter for a period equal to the greater of (a) twelve (12) months;
or (b) the period during which the Employee is to be paid monthly termination
payments, if any, in accordance with Section 3.7 hereof, the Employee will not
(except on behalf of or with the prior written consent of the Employer), within
the Area, on the Employee's own behalf or in the service or on behalf of others,
solicit, divert or appropriate or attempt to solicit, divert or appropriate,
directly or by assisting others, any business from any of the Employer's
customers, including actively sought prospective customers, with whom the
Employee has or had material contact during the last two (2) years of the
Employee's employment, for purposes of providing products or services that are
competitive with those provided by the Employer.

8. NON-SOLICITATION OF EMPLOYEES. The Employee agrees that during the Term
hereunder and, in the event of the Employee's termination of employment for any
reason, thereafter for a period equal to the greater of (a) twelve (12) months;
or (b) the period during which the Employee is to be paid monthly termination
payments, if any, in accordance with Section 3.7 hereof, the Employee will not,
except for Employee's Administrative Assistant, within the Area, on the
Employee's own behalf or in the service or on behalf of others, solicit, recruit
or hire away or attempt to solicit, recruit or hire away, directly or by
assisting others, any employee of the Employer or its Affiliates, whether or not
such employee is a full-time employee or a temporary employee of the Employer or
its Affiliates and whether or not such employment is pursuant to written
agreement and whether or not such employment is for a determined period or is at
will.

9. REMEDIES. The Employee agrees that the covenants contained in Sections 5
through 8 of this Agreement are of the essence of this Agreement; that each of
the covenants is reasonable and necessary to protect the business, interests and
properties of the Employer; and that irreparable loss and damage will be
suffered by the Employer should the Employee breach any of the covenants.
Therefore, the Employee agrees and consents that, in addition to all the
remedies provided by law or in equity, the Employer will be entitled to a
temporary restraining order and temporary and permanent injunctions to prevent a
breach or contemplated breach of any of the covenants. The Employer and the
Employee agree that all remedies available to the Employer or the Employee, as
applicable, will be cumulative.

10. SEVERABILITY. The parties agree that each of the provisions included in this
Agreement is separate, distinct and severable from the other provisions of this
Agreement and that the invalidity or unenforceability of any Agreement provision
will not affect the validity or enforceability of any other provision of this
Agreement. Further, if any provision of this Agreement is ruled invalid or
unenforceable by a court of competent jurisdiction because of a conflict between
the provision and any applicable law or public policy, the provision will be
redrawn to make the provision consistent with and valid and enforceable under
the law or public policy.

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11. NO SET-OFF BY THE EMPLOYEE. The existence of any claim, demand, action or
cause of action by the Employee against the Employer, or any Affiliate of the
Employer, whether predicated upon this Agreement or otherwise, will not
constitute a defense to the enforcement by the Employer of any of its rights
hereunder.

12. NOTICE. All notices and other communications required or permitted under
this Agreement will be in writing and, if mailed by prepaid first-class mail or
certified mail, return receipt requested, will be deemed to have been received
on the earlier of the date shown on the receipt or three (3) business days after
the postmarked date thereof. In addition, notices hereunder may be delivered by
hand, facsimile transmission or overnight courier, in which event the notice
will be deemed effective when delivered or transmitted. All notices and other
communications under this Agreement must be given to the parties hereto at the
following addresses:

               (i)  If to the Employer, to it at:

                    2001 E. Joppa Road
                    Baltimore, Maryland 21234-2896
                    Attn: Chairman of the Board

               (ii) If to the Employee, to the Employee at:

                    4417 Hershy Way
                    Baltimore, Maryland 21236

13. ASSIGNMENT. Neither party hereto may assign or delegate this Agreement or
any of its rights and obligations hereunder without the written consent of the
other party hereto.

14. WAIVER. A waiver by the Employer of any breach of this Agreement by the
Employee will not be effective unless in writing, and no waiver will operate or
be construed as a waiver of the same or another breach on a subsequent occasion.

15. ARBITRATION. Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, will be settled by binding arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association. The decision of the arbitration panel will be final and binding on
the parties, and judgment upon the award rendered by the arbitration panel may
be entered by any court having jurisdiction thereof.

16. ATTORNEYS' FEES. In the event that the parties have complied with this
Agreement with respect to arbitration of disputes and litigation ensues between
the parties concerning the enforcement of an arbitration award and the Employee
must employ separate legal counsel, the Employer shall advance to the Employee,
within thirty (30) days after receiving copies of invoices submitted by
Employee, any and all reasonable attorneys' fees and expenses incurred with
preparing, investigating and litigating such action, proceeding or suit. The
Employee must reimburse the Employer for any and all advances that exceed the
first $5,000 advanced to the Employee for such legal expenses only if and to the
extent that a final decision by a court of

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competent jurisdiction has determined that the Employee is not entitled to
receive any amounts due or to enforce any of the rights under this Agreement.

17. APPLICABLE LAW. This Agreement will be construed and enforced under and in
accordance with the laws of the State of Maryland. The parties agree that any
appropriate state court located in Baltimore County, Maryland, will have
jurisdiction of any case or controversy arising under or in connection with this
Agreement and will be a proper forum in which to adjudicate such case or
controversy. The parties consent to the jurisdiction of such courts.

18. INTERPRETATION. Words importing the singular form shall include the plural
and vice versa. The terms "herein", "hereunder", "hereby", "hereto", "hereof"
and any similar terms refer to this Agreement. Any captions, titles or headings
preceding the text of any article, section or subsection herein are solely for
convenience of reference and will not constitute part of this Agreement or
affect its meaning, construction or effect.

19. ENTIRE AGREEMENT. This Agreement embodies the entire and final agreement of
the parties on the subject matter stated in the Agreement. No amendment or
modification of this Agreement will be valid or binding upon the Employer or the
Employee unless made in writing and signed by both parties. All prior
understandings and agreements relating to the subject matter of this Agreement
are hereby expressly terminated.

20. RIGHTS OF THIRD PARTIES. Nothing herein expressed is intended to or will be
construed to confer upon or give to any person, firm or other entity, other than
the parties hereto and their permitted assigns, any rights or remedies under or
by reason of this Agreement.

21. SURVIVAL. The obligations of the Employee pursuant to Sections 5, 6, 7, 8
and 9 will survive the termination of the employment of the Employee hereunder
for the period designated under each of those respective sections.

22. JOINT AND SEVERAL. The obligation of the Bank and the Company to Employee
hereunder will be joint and several.

                                       12

<PAGE>

     IN WITNESS WHEREOF, the Employer and the Employee have executed and
delivered this Agreement as of the date first shown above.

                                              THE EMPLOYER:

                                              CHESAPEAKE BANK OF MARYLAND

                                              By:
                                                  ------------------------------
                                              Name: H. Allen Becker
                                              Title: Chairman

                                              BANKS OF THE CHESAPEAKE, INC.

                                              By:
                                                  ------------------------------
                                              Name: H. Allen Becker
                                              Title: Chairman

                                              THE EMPLOYEE:

                                              By:
                                                  ------------------------------
                                              Name: R. Thomas Jefferson

                                       13

<PAGE>

                                    Exhibit A

                           CHESAPEAKE BANK OF MARYLAND
                                 JOB DESCRIPTION

JOB TITLE:     PRESIDENT/CHIEF EXECUTIVE OFFICER
FSLA:          EXEMPT
REPORTS TO:    BOARD OF DIRECTORS

SUMMARY:

Plans, develops, and establishes policies and objectives of business
organization in accordance with Board directives and corporation charter by
performing the following duties personally or through subordinate managers.

ESSENTIAL DUTIES AND RESPONSIBILITIES: The primary duty and responsibility of
this position is quality service to both internal and external customers.
Specific duties are listed below. Other duties may be assigned.

Confers with corporate managers to plan business objectives, to develop
organizational policies, to coordinate functions and operations between
divisions and departments, and to establish responsibilities and procedures for
attaining objectives.

Provides leadership representations for the bank and holding company board of
directors and its committees. Contributes to the effective, profitable operation
of the corporation by participation in Liquidity and Asset/Liability Management,
Loan Committee, Public Relations /Marketing Committee, and Asset Review
Committee activities.

Ensures that the spirit and intent of regulatory and supervisory trusts and
concerns are met or exceeded.

Keeps the Board informed concerning major developments and consults with same
regarding major decisions affecting the bank or holding company.

Represents the bank and provides leadership in key community activities,
including business, charitable, civic, and social organizations to maintain a
proper responsible citizen stature for the bank.

Reviews activity reports and financial statements to determine progress and
status in attaining objectives and revises objectives and plans in accordance
with current conditions.

                                      A-1

<PAGE>

Directs and coordinates formulation of financial programs to provide funding for
new or continuing operations to maximize returns on investments and to increase
productivity.

Plans and develops labor and public relations policies designed to improve
company's image and relations with customers, employees, and the public.

Evaluates performance of executives for compliance with established policies and
objectives of bank.

SUPERVISORY RESPONSIBILITY:

Manages subordinate supervisors in the Lending/Deposit function, Finance and
Operations function, Human Resources, and Quality Services and Sales function.
Also, responsible for the direct supervision of the Corporate Secretary. Is
responsible for the overall direction, coordination, and evaluation of these
units.

Provides direct guidance on personnel activities which affect the key bank
management team, including salary administration, management incentive,
performance objectives, and compliance with established policies to ensure solid
team efforts toward the attainment of department, bank, and corporation goals.

Carries out supervisory responsibilities in accordance with the organization's
policies and applicable laws. Responsibilities include interviewing, hiring, and
training employees; planning, assigning, and directing work; appraising
performance; rewarding and disciplining employees; and addressing complaints and
resolving problems.

CRA REQUIREMENT:

Expected to understand the bank's obligations under the Community Reinvestment
Act and how to fulfill them. Expected to cooperate with and support the bank's
CRA program. Will be held accountable for any lack of cooperation that weakens
the bank's CRA performance, as reflected in internal audits, agency
examinations, and/or community projects.

PRODUCT AND KNOWLEDGE REQUIREMENT:

Should know and understand the products and services that are provided by
Chesapeake Bank of Maryland and give quality service at all times to our
customers.

QUALIFICATION REQUIREMENTS:

To perform this job successfully, an individual must be able to perform each
essential duty satisfactorily. The requirements listed below are representative
of the knowledge, skill, and/or

                                      A-2

<PAGE>

ability required. Reasonable accommodations may be made to enable individuals
with disabilities to perform the essential functions.

     EDUCATION AND/OR EXPERIENCE:

     College graduate and graduate of recognized graduate banking school or
     equivalent; ten years related experience and/or training; or equivalent
     combination of education and experience.

     LANGUAGE SKILLS:

     Ability to read, analyze, and interpret common technical journals,
     financial reports, and legal documents. Ability to respond to common
     inquiries or complaints from customers, regulatory agencies, or members of
     the community. A high level of interpersonal skills to effectively
     communicate policies, procedures, staff objectives, and information to top
     management, public groups, and/or boards of directors.

     ANALYTICAL SKILLS:

     A high level of analytical, mathematical and reasoning skills to assess and
     evaluate the operation of subordinate areas of responsibility, participate
     in establishing bank-wide financial goals, and draft operational reports to
     the board.

PHYSICAL DEMANDS:

Reasonable accommodations may be made to enable individuals with disabilities to
perform the essential functions.

WORK ENVIRONMENT:

Good. There is little discomfort from noise, heat, dust, or other adverse
factors.

PERFORMANCE EXPECTATIONS:

     ORGANIZATIONAL EXPECTATIONS:

     Understands that the position exists to ultimately serve the customer
     either directly or indirectly through assisting front-line personnel to
     answer customer inquiries quickly.

                                      A-3

<PAGE>

     Practices a high degree of professionalism and sets an example for others
     to follow.

     Demonstrates commitment to and understanding of continuous quality
     improvement. Uses creativity and initiative to recommend quality
     enhancements when relevant and appropriate.

     Has satisfactory attendance within policy guidelines and is punctual.

     Manages time effectively. Completes assigned duties within required
     deadlines.

     FINANCIAL EXPECTATIONS:

     Makes recommendations to the Board of Directors concerning budgetary needs
     of the bank.

     Within parameters of job, uses good judgment related to Bank income
     opportunities and expense control.

     Is financially responsible.

     RELATIONSHIP EXPECTATIONS:

     Conducts in-bank and public relationships in a manner that enhances the
     image and marketing efforts of the Bank.

     Participates in community organizations, activities, and projects.

     Contributes to an overall team effort by being an effective team player.

This job description is not intended to be and should not be construed as an
all-inclusive list of the responsibilities, skills, or working conditions
associated with the position. While this job description is intended to
accurately reflect the position's activities and requirements, management
reserves the right to modify, add, or remove duties and assign other duties as
necessary.

                                      A-4<PAGE>

                                  EXHIBIT 10.2

================================================================================

                          BANKS OF THE CHESAPEAKE, INC.

                     EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST

                          EFFECTIVE AS OF APRIL 1, 2002

================================================================================

<PAGE>

                                TABLE OF CONTENTS

ARTICLE I DEFINITIONS                                                          1

ARTICLE II TOP HEAVY RULES AND ADMINISTRATION                                  8

     2.1     TOP HEAVY PLAN REQUIREMENTS.......................................8
     2.2     DETERMINATION FOR TOP HEAVY STATUS................................8
     2.3     SPECIAL TOP HEAVY DEFINITION.....................................10
     2.4     POWERS AND RESPONSIBILITIES OF THE EMPLOYER......................12
     2.5     DESIGNATION OF ADMINISTRATIVE AUTHORITY..........................12
     2.6     ALLOCATION AND DELEGATION OF RESPONSIBILITIES....................12
     2.7     POWERS AND DUTIES OF THE ADMINISTRATOR...........................13
     2.8     RECORDS AND REPORTS..............................................14
     2.9     APPOINTMENT OF ADVISERS..........................................14
     2.10    INFORMATION FROM EMPLOYER........................................14
     2.11    PAYMENT OF EXPENSES..............................................14
     2.12    MAJORITY ACTIONS.................................................15
     2.13    CLAIMS PROCEDURE AND CLAIMS REVIEW PROCEDURES....................15

ARTICLE III ELIGIBILITY                                                       15

     3.1     CONDITIONS OF ELIGIBILITY........................................15
     3.2     DETERMINATION OF ELIGIBILITY.....................................15
     3.3     TERMINATION OF ELIGIBILITY.......................................16
     3.4     CLASSES OF EMPLOYEES.............................................16
     3.5     OMISSION OF ELIGIBLE EMPLOYEE....................................16
     3.6     INCLUSION OF INELIGIBLE EMPLOYEE.................................16
     3.7     MILITARY SERVICE.................................................16

ARTICLE IV CONTRIBUTION AND ALLOCATION                                        17

     4.1     FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION..................17
     4.2     TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION.......................17
     4.3     ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS.............17
     4.4     MAXIMUM ANNUAL ADDITIONS.........................................20
     4.5     ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS........................22
     4.6     DIRECTED INVESTMENT ACCOUNT......................................22

ARTICLE V FUNDING AND INVESTMENT POLICY                                       23

     5.1     INVESTMENT POLICY................................................23
     5.2     APPLICATION OF CASH..............................................24
     5.3     TRANSACTIONS INVOLVING COMPANY STOCK.............................24
     5.4     LOANS TO THE TRUST...............................................25

ARTICLE VI VALUATIONS                                                         26

     6.1     VALUATION OF THE TRUST FUND......................................26
     6.2     METHOD OF VALUATION..............................................26

ARTICLE VII DETERMINATION AND DISTRIBUTION OF BENEFITS                        27

                                        i

<PAGE>

     7.1     DETERMINATION OF BENEFITS UPON RETIREMENT........................27
     7.2     DETERMINATION OF BENEFITS UPON DEATH.............................27
     7.3     DETERMINATION OF BENEFITS IN EVENT OF DISABILITY.................29
     7.4     DETERMINATION OF BENEFITS UPON TERMINATION.......................29
     7.5     DISTRIBUTION OF BENEFITS.........................................32
     7.6     HOW PLAN BENEFIT WILL BE DISTRIBUTED.............................34
     7.7     DISTRIBUTION FOR MINOR BENEFICIARY...............................35
     7.8     LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN...................35
     7.9     RIGHTS OF FIRST REFUSAL..........................................36
     7.10    PUT OPTION.......................................................37
     7.11    NONTERMINABLE PROTECTIONS AND RIGHTS.............................38
     7.12    QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION..................38
     7.13    DIRECT ROLLOVER..................................................38

ARTICLE VIII TRUSTEE                                                          39

     8.1     RESPONSIBILITIES OF THE TRUSTEE..................................40
     8.2     INVESTMENT POWERS AND DUTIES OF THE TRUSTEE......................40
     8.3     OTHER POWERS OF THE TRUSTEE......................................41
     8.4     VOTING COMPANY STOCK.............................................43
     8.5     DUTIES OF THE TRUSTEE REGARDING PAYMENTS.........................45
     8.6     TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES....................45
     8.7     ANNUAL REPORT OF THE TRUSTEE.....................................46
     8.8     AUDIT............................................................46
     8.9     RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE...................47
     8.10    TRANSFER OF INTEREST.............................................48

ARTICLE IX AMENDMENT, TERMINATION AND MERGERS                                 48

     9.1     AMENDMENT........................................................48
     9.2     TERMINATION......................................................49
     9.3     MERGER OR CONSOLIDATION..........................................49

ARTICLE X MISCELLANEOUS                                                       49

     10.1    PARTICIPANT'S RIGHTS.............................................49
     10.2    ALIENATION.......................................................49
     10.3    CONSTRUCTION OF PLAN.............................................50
     10.4    GENDER AND NUMBER................................................50
     10.5    LEGAL ACTION.....................................................50
     10.6    PROHIBITION AGAINST DIVERSION OF FUNDS...........................51
     10.7    BONDING..........................................................51
     10.8    RECEIPT AND RELEASE FOR PAYMENTS.................................51
     10.9    ACTION BY THE EMPLOYER...........................................51
     10.10   NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY...............52
     10.11   HEADINGS.........................................................52
     10.13   UNIFORMITY.......................................................53

                                       ii

<PAGE>

                          BANKS OF THE CHESAPEAKE, INC.
                     EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST

     THIS AGREEMENT, hereby made and entered into this      day of
                                                       ----
                , 2003, by and between BANKS OF THE CHESAPEAKE, INC. and H.
----------------
ALLEN BECKER, R. THOMAS JEFFERSON and DONALD ALAN THORSON (herein referred to
collectively as the "Trustee").

                              W I T N E S S E T H:

     WHEREAS, the Employer desires to recognize the contribution made to its
successful operation by its Employees and to reward such contribution by means
of an employee stock ownership plan for the exclusive benefit of its eligible
Employees who shall qualify as Participants hereunder;

     WHEREAS, the Employer desires to adopt an employee stock ownership plan to
enable its eligible Employees to acquire a proprietary interest in the capital
stock of the Employer; and

     WHEREAS, the Plan reflects certain provisions of the Economic Growth and
Tax Relief Reconciliation Act of 2001 ("EGTRRA"), which provisions are intended
as good faith compliance with the requirements of EGTRRA and are to be construed
in accordance with EGTRRA and guidance issued thereunder.

     NOW, THEREFORE, effective as of April 1, 2002, (hereinafter called the
"Effective Date"), the Employer and Trustee hereby adopt the Banks of the
Chesapeake, Inc. Employee Stock Ownership Plan, consistent with Section
4975(e)(7) of the Internal Revenue Code, to provide as follows:

                                    ARTICLE I
                                   DEFINITIONS

     Whenever used herein, the masculine pronoun shall be deemed to include the
feminine, and the singular to include the plural, unless the context clearly
indicates otherwise and the following words and phrases shall, when used herein,
have the meanings set forth below:

     1.1 "Act" means the Employee Retirement Income Security Act of 1974, as it
may be amended from time to time.

     1.2 "Account" means, with respect to each Participant, the value of all
accounts maintained on behalf of a Participant, including the Company Stock
Account and the Other Investments Account.

                                        1

<PAGE>

     1.3 "Administrator" means the Administrative Committee designated by the
Employer pursuant to Section 2.4 to administer the Plan on behalf of the
Employer.

     1.4 "Affiliated Employer" means any corporation which is a member of a
controlled group of corporations (as defined in Code Section 414(b)) which
includes the Employer; any trade or business (whether or not incorporated) which
is under common control (as defined in Code Section 414(c)) with the Employer;
any organization (whether or not incorporated) which is a member of an
affiliated service group (as defined in Code Section 414(m)) which includes the
Employer; and any other entity required to be aggregated with the Employer
pursuant to Treasury Regulations under Code Section 414(o). Notwithstanding the
foregoing, for purposes of applying the limitations under Section 415 of the
Code and Section 4.4 of this Plan, the definition of Affiliated Employer shall
be expanded as provided in Code Section 415(h).

     1.5 "Anniversary Date" means March 31st (the last day of each Plan Year).

     1.6 "Beneficiary" means the person to whom the share of a deceased
Participant's Account is payable, subject to the restrictions of Sections 7.2
and 7.5.

     1.7 "Code" means the Internal Revenue Code of 1986, as amended from time to
time or any successor statute.

     1.8 "Company Stock" means shares of common stock issued by Banks of the
Chesapeake, Inc. which constitute "employer securities" under Section 409(l) of
the Code.

     1.9 "Company Stock Account" means the portion of the Account of a
Participant which is credited with the shares of Company Stock held under the
Plan.

     1.10 "Compensation" means a Participant's W-2 earnings paid during the Plan
Year, and includes salary reduction amounts under Code Sections 401(k), 125, and
132(f). For purposes of allocating the Employer's contribution for the Plan Year
in which a Participant begins or resumes participation, Compensation before such
participation began or resumed shall be included. For purposes of top-heavy
rules, Compensation includes amounts contributed to a qualified plan under a
salary reduction arrangement (including a cash-or-deferred arrangement).

          Compensation shall exclude the following:

          (1) distributions from a plan of deferred compensation whether or not
includable in the gross income of the Employee when distributed;

          (2) amounts realized from the exercise of a non-qualified stock
option, or when restricted stock (or property) held by an Employee becomes
freely transferable or is no longer subject to a substantial risk of forfeiture;

          (3) amounts realized from the sale, exchange or other disposition of
stock acquired under a qualified stock option; and

                                        2

<PAGE>

          (4) other amounts which receive special tax benefits, such as premiums
for group term life insurance (but only to the extent that the premiums are not
includable in the gross income of the Employee).

          The annual Compensation of each Participant taken into account under
the Plan for a Plan Year shall not exceed Two Hundred Thousand Dollars
($200,000). This limitation shall be adjusted by the Secretary of the Treasury
for cost-of-living increases in accordance with Code Section 401(a)(17)(B). If
the Plan determines Compensation on a period of time that contains fewer than
twelve (12) calendar months, then the annual Compensation limit is an amount
equal to the annual Compensation limit for the calendar year in which the
Compensation period begins multiplied by the ratio obtained by dividing the
number of full months in the period by twelve (12).

     1.11 "Current Obligations" means Trust obligations arising from extension
of credit to the Trust and payable in cash within (1) year from the date an
Employer contribution is due.

     1.12 "Employee" means any person who is employed by the Employer as an
employee, but excludes (a) any person who is an independent contractor,
notwithstanding any later reclassification of the individual as a common law
employee of the Employer by any court or governmental agency, (b) "leased
employees" within the meaning of Code Sections 414(n)(2) and 414(o)(2), (c)
employees whose employment is governed by the terms of a collective bargaining
agreement between employee representatives and the Employer under which
retirement benefits were the subject of good faith bargaining between the
parties, and (d) any person who is a nonresident alien.

     1.13 "Employer" means Banks of the Chesapeake, Inc., Chesapeake Bank of
Maryland, and any other Affiliated Employer which adopts this Plan with the
consent of the Board of Directors of Banks of the Chesapeake, Inc.. If more than
one entity shall become an Employer hereunder, then, unless the context requires
otherwise, whenever any act of the Employer is required or permitted hereunder,
such act shall be deemed to have been taken or performed if taken or performed
by the Employer first named above.

     1.14 "Entry Date" means each April 1st and October 1st.

     1.15 "ESOP" means an employee stock ownership plan and trust that meets the
requirements of Code Section 4975(e)(7) and Treasury Regulation Section
54.4975-11.

     1.16 "Exempt Loan" means a loan made to the Plan by a disqualified person,
or a loan to the Plan which is guaranteed by a disqualified person (as defined
in Section 5.4C), which loan or guaranty satisfies the requirements of Section
2550.408b-3 of the Department of Labor Regulations, Section 54.4975-7(b) of the
Treasury Regulations and Section 5.4 hereof.

     1.17 "Fiscal Year" means the Employer's accounting year of 12 months
commencing on April 1st of each year and ending the following March 31st.

                                        3

<PAGE>

     1.18 "Forfeiture" means that portion of a Participant's Account that is not
Vested, and occurs during any Plan Year in which the Participant terminates
service prior to his Retirement Date and receives as a distribution the entire
Vested portion of his Account. In addition, the term Forfeiture shall also
include amounts deemed to be Forfeitures pursuant to any other provision of this
Plan.

     1.19 "Former Participant" means a person who has been a Participant, but
who has ceased to be a Participant for any reason.

     1.20 "Highly Compensated Employee" means any Employee who performs services
for the Employer and who:

          (1) was a five-percent (5%) owner during the determination year or the
look-back year; or

          (2) for the look-back year, received Compensation from the Employer in
excess of Eighty Thousand Dollars ($80,000) (as adjusted pursuant to Section
415(d) of the Code) and, if elected by the Employer, was in the group consisting
of the top twenty percent (20%) of the highest paid Employees of the Employer.

          The "determination year" shall be the Plan Year. The "look-back year"
shall be the 12-month period immediate preceding the determination year. The
term Highly Compensated Employee includes highly compensated active employees
and highly compensated former employees. A "highly compensated former employee"
is any Employee who separated from service (or was deemed to have separated)
prior to the determination year, performs no service for the Employer during the
determination year, and was a highly compensated active employee for either the
separation year or any determination year ending on or after the Employee's
fifty-fifth (55th) birthday. The determination of who is a Highly Compensated
Employee will be made in accordance with Section 414(q) of the Code.

     1.21 "Hour of Service" means:

          (1) Each hour for which an Employee is directly or indirectly
compensated or entitled to compensation by the Employer for the performance of
duties during the applicable computation period.

          (2) Each hour for which an Employee is directly or indirectly
compensated or entitled to compensation by the Employer (irrespective of whether
the employment relationship has terminated) for reasons other than performance
of duties (such as vacation, holidays, sickness, jury duty, disability, lay-off,
military duty or leave of absence) during the applicable computation period.

          (3) Each hour for which back pay is awarded or agreed to by the
Employer without regard to mitigation of damages.

                                        4

<PAGE>

     The same Hours of Service shall not be credited both under (1) or (2), as
the case may be, and under (3). Hours under (3) will be credited to the Employee
for the computation period or periods to which the award or agreement pertains
rather than the computation period in which the award, agreement or payment is
made.

     Notwithstanding the above, (i) no more than 501 Hours of Service are
required to be credited to an Employee on account of any single continuous
period during which the Employee performs no duties (whether or not such period
occurs in a single computation period); (ii) an hour for which an Employee is
directly or indirectly paid, or entitled to payment, on account of a period
during which no duties are performed is not required to be credited to the
Employee if such payment is made or due under a plan maintained solely for the
purpose of complying with applicable worker's compensation, or unemployment
compensation or disability insurance laws; and (iii) Hours of Service are not
required to be credited for a payment which solely reimburses an Employee for
medical or medically related expenses incurred by the Employee.

     A payment shall be deemed to be made by or due from the Employer regardless
of whether such payment is made by or due from the Employer directly, or
indirectly through, among others, a trust fund, or insurer, to which the
Employer contributes or pays premiums and regardless of whether contributions
made or due to the trust fund, insurer, or other entity are for the benefit of
particular Employees or are on behalf of a group of Employees in the aggregate.

     An Hour of Service must be counted for the purpose of determining a Year of
Service, a year of participation for purposes of accrued benefits, a One-Year
Break in Service, and employment commencement date (or reemployment commencement
date). In addition, Hours of Service will be credited for employment with other
Affiliated Employers. The provisions of Department of Labor regulations
2530.200b-2(b) and (c) are incorporated herein by reference.

     1.22 "Investment Manager" means an entity that (1) has the power to manage,
acquire, or dispose of Plan assets and (2) acknowledges fiduciary responsibility
to the Plan in writing. Such entity must be a person, firm, or corporation
registered as an investment adviser under the Investment Advisers Act of 1940, a
bank (as defined in that Act), or an insurance company qualified to perform the
services described in clause (1).

     1.23 "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 (as defined in Section 2.3B) 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-
percent owner of the Employer, or a 1-percent 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.

     1.24 "Late Retirement Date" means the first day of the month coinciding
with or next following a Participant's actual Retirement Date after having
reached his Normal Retirement Date.

                                        5

<PAGE>

     1.25 "Non-Key Employee" means any Employee or former Employee (and his
Beneficiaries) who is not a Key Employee.

     1.26 "Normal Retirement Age" means the Participant's 65th birthday. A
Participant shall become fully Vested in his Participant's Account upon
attaining his Normal Retirement Age.

     1.27 "Normal Retirement Date" means the Anniversary Date coinciding with or
next following the date a Participant:

          (1) reaches his Normal Retirement Age; and

          (2) terminates employment with the Employer.

     1.28 "One-Year Break in Service" means the applicable computation period
during which an Employee has not completed more than 500 Hours of Service with
the Employer. Solely for the purpose of determining whether a Participant has
incurred a One-Year Break in Service, Hours of Service shall be recognized for
"authorized leaves of absence" and "maternity and paternity leaves of absence."
Years of Service and One-Year Breaks in Service shall be measured on the same
computation period.

          "Authorized leave of absence" means an unpaid, temporary cessation
from active employment with the Employer pursuant to an established
nondiscriminatory policy, whether occasioned by illness, military service, or
any other reason.

          A "maternity or paternity leave of absence" means an absence from work
for any period by reason of the Employee's pregnancy, birth of the Employee's
child, placement of a child with the Employee in connection with the adoption of
such child, or any absence for the purpose of caring for such child for a period
immediately following such birth or placement. For this purpose, Hours of
Service shall be credited for the computation period in which the absence from
work begins, only if credit therefore is necessary to prevent the Employee from
incurring a One-Year Break in Service, or, in any other case, in the immediately
following computation period. The Hours of Service credited for a "maternity or
paternity leave of absence" shall be those which would normally have been
credited but for such absence, or, in any case in which the Administrator is
unable to determine such hours normally credited, eight (8) Hours of Service per
day. The total Hours of Service required to be credited for a "maternity or
paternity leave of absence" shall not exceed 501.

     1.29 "Other Investments Account" means the portion of the Account of a
Participant which is credited with his share of the net gain (or loss) of the
Plan, Forfeitures and Employer contributions in other than Company Stock and
which is debited with payments made to pay for Company Stock.

     1.30 "Participant" means any Employee who participates in the Plan as
provided in Section 3.1, and has not for any reason become ineligible to
participate further in the Plan.

                                        6

<PAGE>

     1.31 "Plan" means the Banks of the Chesapeake, Inc. Employee Stock
Ownership Plan and Trust, and any amendments thereto.

     1.32 "Plan Year" means the Plan's accounting year of twelve (12) months
commencing on April 1st of each year and ending the following March 31st.

     1.33 "Retired Participant" means a person who has been a Participant, but
who has reached his Normal Retirement Date and has become entitled to retirement
benefits under the Plan.

     1.34 "Retirement Date" means the date as of which a Participant retires for
reasons other than Total and Permanent Disability, whether such retirement
occurs on a Participant's Normal Retirement Date or Late Retirement Date.

     1.35 "Super Top Heavy Plan" means a plan described in Section 2.2.

     1.36 "Terminated Participant" means a former Participant who has a Vested
Account in the Plan after his or her termination of employment with the Employer
and all Affiliates.

     1.37 "Top Heavy Plan" means a plan described in Section 2.2.

     1.38 "Top Heavy Plan Year" means a Plan Year during which the Plan is a Top
Heavy Plan.

     1.39 "Total and Permanent Disability" means a physical or mental condition
of a Participant resulting from bodily injury, disease, or mental disorder which
renders him incapable of continuing his usual and customary employment with the
Employer. The disability of a Participant shall be determined on the basis of an
award of total and permanent disability benefits by the Social Security
Administration.

     1.40 "Trust" means the trust established under this Agreement to hold the
assets of the Plan.

     1.41 "Trustee" means the person or entity named as trustee herein or in any
separate trust forming a part of this Plan, and any successors.

     1.42 "Trust Fund" means the assets of the Plan and Trust as the same shall
exist from time to time.

     1.43 "Unallocated Company Stock Suspense Account" means an account
containing Company Stock acquired with the proceeds of an Exempt Loan and which
has not been released from such account and allocated to the Participants'
Company Stock Accounts.

     1.44 "Vested" means the nonforfeitable portion of any account maintained on
behalf of a Participant.

                                        7

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     1.45 "Year of Service" means the computation period of twelve (12)
consecutive months, herein set forth, during which an Employee has at least
1,000 Hours of Service.

          For purposes of eligibility for participation, the initial computation
period shall begin with the date on which the Employee first performs an Hour of
Service. The participation computation period beginning after a One-Year Break
in Service shall be measured from the date on which an Employee again performs
an Hour of Service. In the event the Employee does not complete 1,000 Hours of
Service in the twelve month period measured from the date on which he performs
an Hour of Service, the participation computation period shall shift to the Plan
Year which includes the anniversary of the date on which the Employee first
performed an Hour of Service.

          For vesting and benefit accrual purposes, the computation period shall
be the Plan Year.

          Notwithstanding the foregoing, for any short Plan Year, the
determination of whether an Employee has completed a Year of Service shall be
made in accordance with Department of Labor regulation 2530.203-2(c). Years of
Service with any Affiliated Employer shall be recognized for vesting and
eligibility purposes only.

                                   ARTICLE II
                       TOP HEAVY RULES AND ADMINISTRATION

2.1  TOP HEAVY PLAN REQUIREMENTS.

          For any Top Heavy Plan Year, the provisions of Sections 2.2 and 2.3
will supersede any conflicting provisions in the Plan, and the Plan shall
provide (1) a minimum allocation to all Participants who are Non-Key Employees
meeting the requirements of Code Section 416(c), and (2) minimum vesting in
accordance with Code Section 416(b) of the Code and Section 7.4B(3) of this
Plan.

2.2  DETERMINATION FOR TOP HEAVY STATUS.

     A. TOP HEAVY PLAN. The Plan shall be a Top Heavy Plan for any Plan Year in
which, as of the Determination Date, any of the following conditions exists:

          (1) If the Top-Heavy Ratio for this Plan exceeds sixty percent (60%)
and this Plan is not part of any Required Aggregation Group or Permissive
Aggregation Group of plans;

          (2) If this Plan is a part of a Required Aggregation Group of plans
but not part of a Permissive Aggregation Group and the Top Heavy Ratio for the
Required Aggregation Group exceeds sixty percent (60%); or

                                        8

<PAGE>

          (3) If the Plan is a part of a Required Aggregation Group and part of
a Permissive Aggregation Group of plans and the Top Heavy Ratio for the
Permissive Aggregation Group exceeds sixty percent (60%).

     B. TOP HEAVY RATIO.

          (1) If the Employer maintains one or more defined contribution plans
(including any Simplified Employee Pension Plan) and the Employer has not
maintained any defined benefit plan which during the 5-year period ending on the
Determination Date(s) has or has had accrued benefits, the Top Heavy Ratio for
this Plan alone or for the Required or Permissive Aggregation Group as
appropriate is a fraction, the numerator of which is the sum of the Accounts of
all Key Employees as of the Determination Date(s) (including any part of any
Account balance distributed in the 5-year period ending on the Determination
Date(s)), and the denominator of which is the sum of all Accounts (including any
part of any Account balance distributed in the 5-year period ending on the
Determination Date(s)), both computed in accordance with Section 416 of the Code
and the regulations thereunder. Both the numerator and denominator of the Top
Heavy Ratio are increased to reflect any contribution not actually made as of
the Determination Date, but which is required to be taken into account on that
date under Section 416 of the Code.

          (2) If the Employer maintains one or more defined contribution plans
(including any Simplified Employee Pension Plan) and the Employer maintains or
has maintained one or more defined benefit plans which during the 5-year period
ending on the Determination Date(s) has or has had any accrued benefits, the Top
Heavy Ratio for any Required or Permissive Aggregation Group as appropriate is a
fraction, the numerator of which is the sum of Accounts under the aggregated
defined contribution plan or plans for all Key Employees, determined in
accordance with (1) above, and the Present Value of Accrued Benefits under the
aggregated defined benefit plan or plans for all Key Employees as of the
Determination Date(s), and the denominator of which is the sum of the Accounts
under the aggregated defined contribution plan or plans for all participants,
determined in accordance with (1) above, and the Present Value of Accrued
Benefits under the defined benefit plan or plans for all participants as of the
Determination Date(s), all determined in accordance with Section 416 of the Code
and the regulations thereunder. The accrued benefits under a defined benefit
plan in both the numerator and denominator of the Top Heavy Ratio are increased
for any distribution of an accrued benefit made in the 5-year period ending on
the Determination Date.

          (3) For purposes of (1) and (2) above, the value of Account balances
and the Present Value of Accrued Benefits will be determined as of the most
recent valuation date that falls within or ends with the 12-month period ending
on the Determination Date, except as provided in Section 416 of the Code for the
first and second plan years of a defined benefit plan. The Account balances and
accrued benefits of a Participant (1) who is not a Key Employee but who was a
Key Employee in a prior year, or (2) who has not been credited with at least one
Hour of Service with any Employer maintaining the Plan at any time during the
5-year period ending on the Determination Date will be disregarded. The
calculation of the Top Heavy Ratio, and the extent to which distributions,
rollovers and transfers are taken into account will be made in accordance with
Section 416 of the Code and the regulations thereunder. Deductible employee

                                        9

<PAGE>

contributions will not be taken into account for purposes of computing the Top
Heavy Ratio. When aggregating plans, the value of Account balances and accrued
benefits will be calculated with reference to the Determination Dates that fall
within the same calendar year.

          (4) Present values of accrued benefits and the amounts of account
balances of an Employee as of the Determination Date shall be increased by the
distributions made with respect to the Employee 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 provisions shall be applied by substituting "5-year
period" for "1-year period." 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.

     C. SUPER TOP HEAVY PLAN. The Plan shall be a Super Top Heavy Plan for any
Plan Year in which, as of the Determination Date, any of the following
conditions exists:

          (1) If the Top Heavy Ratio for this Plan exceeds ninety percent (90%)
and this Plan is not part of any Required Aggregation Group or Permissive
Aggregation Group of Plans; or

          (2) If this Plan is part of a Required Aggregation Group of plans but
not part of a Permissive Aggregation Group and the Top Heavy Ratio for the
Required Aggregation Group of plans exceeds ninety percent (90%); or

          (3) If this Plan is a part of a Required Aggregation Group and part of
a Permissive Aggregation Group of plans and the Top Heavy Ratio for the
Permissive Aggregation Group exceeds ninety percent (90%).

     D. DETERMINATION OF ACCRUED BENEFIT. Solely for the purpose of determining
if the Plan, or any other plan included in a Required Aggregation Group of which
this Plan is a part, is top heavy, the accrued benefit of a Participant, other
than a Key Employee, shall be determined (1) under the method, if any, that
uniformly applies for accrual purposes under all defined benefit plans
maintained by the Employer, or (2) if there is no such method, as if such
benefit accrued not more rapidly than the slowest accrual rate permitted under
the fractional accrual rate of Section 411(b)(1)(C) of the Code.

     E. DISREGARD OF CERTAIN PARTICIPANTS. In determining top-heavy status under
this Section 2.2, the value of Account balances and the Present Value of Accrued
Benefits of those Participants who have performed no service for the Employer
during the Plan Year shall be disregarded.

2.3  SPECIAL TOP HEAVY DEFINITION.

                                       10

<PAGE>

     A. AGGREGATION GROUP. "Aggregation Group" means either a Required
Aggregation Group or a Permissive Aggregation Group as hereinafter determined.

          (1) Required Aggregation Group: In determining a Required Aggregation
Group hereunder, (a) each qualified plan of the Employer in which at least one
Key Employee participates or participated at any time during the Determination
Period (regardless of whether the plan has terminated), and (b) each other
qualified plan of the Employer which enables any plan described in (a) to meet
the requirements of Code Section 401(a)(4) or 410 shall be aggregated. Such
group shall be known as a "Required Aggregation Group."

               In the case of a Required Aggregation Group, each plan in the
group will be considered a Top Heavy Plan if the Required Aggregation Group is a
Top Heavy Group. No plan in the Required Aggregation Group will be considered a
Top Heavy Plan if the Required Aggregation Group is not a Top Heavy Group.

          (2) Permissive Aggregation Group: The Employer may also include any
other plan not required to be included in the Required Aggregation Group,
provided the resulting group, taken as a whole, would continue to satisfy the
provisions of Code Section 401(a)(4) or 410. Such group shall be known as a
"Permissive Aggregation Group."

               In the case of a Permissive Aggregation Group, only a plan that
is part of the Required Aggregation Group will be considered a Top Heavy Plan if
the Permissive Aggregation Group is a Top Heavy Group. No plan in the Permissive
Aggregation Group will be considered a Top Heavy Plan if the Permissive
Aggregation Group is not a Top Heavy Group.

          (3) Only those plans of the Employer in which the Determination Dates
fall within the same calendar year shall be aggregated in order to determine
whether such plans are Top Heavy Plans.

     B. DETERMINATION DATE. "Determination Date" means the last day of the
preceding Plan Year.

     C. PRESENT VALUE OF ACCRUED BENEFIT. A Participant's "Present Value of
Accrued Benefit" under a defined benefit plan shall be as determined under the
provisions of such defined benefit plan.

     D. TOP HEAVY GROUP. "Top Heavy Group" means an Aggregation Group in which,
as of the Determination Date, the sum of (1) the Present Value of Accrued
Benefits of Key Employees under all defined benefit plans included in the group,
and (2) the Aggregate Accounts of Key Employees under all defined contribution
plans included in the group, exceeds sixty percent (60%) of a similar sum
determined for all Participants.

     E. VALUATION DATE. For purposes of computing the Top Heavy Ratio, the
"Valuation Date" shall be the last day of each Plan Year.

                                       11

<PAGE>

     F. TOP HEAVY PLAN YEAR. "Top Heavy Plan Year" means a particular Plan Year
during which the Plan is a Top Heavy Plan.

2.4  POWERS AND RESPONSIBILITIES OF THE EMPLOYER.

     A. APPOINTMENT AND REMOVAL. The Employer shall be empowered to appoint and
remove the Trustee and the Administrator from time to time as it deems necessary
for the proper administration of the Plan to assure that the Plan is being
operated for the exclusive benefit of the Participants and their Beneficiaries
in accordance with the terms of the Plan, the Code, and the Act.

     B. FUNDING POLICY AND METHOD. The Employer shall establish a "funding
policy and method," i.e., it shall determine whether the Plan has a short run
need for liquidity (e.g., to pay benefits) or whether liquidity is a long run
goal and investment growth (and stability of same) is a more current need, or
shall appoint a qualified person to do so. The Employer or its delegate shall
communicate such needs and goals to the Trustee, who shall coordinate such Plan
needs with its investment policy. The communication of such a "funding policy
and method" shall not, however, constitute a directive to the Trustee as to
investment of the Trust Funds. Such "funding policy and method" shall be
consistent with the objectives of this Plan and with the requirements of Title I
of the Act.

     C. INVESTMENT MANAGER. The Employer shall periodically review the
performance of any fiduciary or other person to whom duties have been delegated
or allocated by it under the provisions of this Plan or pursuant to procedures
established hereunder. This requirement may be satisfied by formal periodic
review by the Employer or by a qualified person specifically designated by the
Employer, through day-to-day conduct and evaluation, or through other
appropriate ways.

     D. PERFORMANCE REVIEW. The Employer will furnish Plan fiduciaries and
Participants with notices and information statements when voting rights must be
exercised pursuant to Section 8.4.

2.5  DESIGNATION OF ADMINISTRATIVE AUTHORITY.

     The Board of Directors of the Employer may appoint an Administrative
Committee to serve as Administrator and generally operate the Plan.
Administrative Committee members, if appointed, shall serve at the pleasure of
the Board of Directors of the Employer, and without compensation.

     The Employer, upon the resignation or removal of a member of the
Administrative Committee, shall promptly designate in writing a successor to
this position. In the event there are no members of the Administrative
Committee, the Employer will function as the Administrator.

2.6  ALLOCATION AND DELEGATION OF RESPONSIBILITIES.

                                       12

<PAGE>

     If more than one person is appointed as Administrator, the responsibilities
of each Administrator may be specified by the Employer and accepted in writing
by each Administrator. In the event that no such delegation is made by the
Employer, the Administrators may allocate the responsibilities among themselves,
in which event the Administrators shall notify the Employer and the Trustee in
writing of such action and specify the responsibilities of each Administrator.
The Trustee thereafter shall accept and rely upon any documents executed by the
appropriate Administrator until such time as the Employer or the Administrators
file with the Trustee a written revocation of such designation.

2.7  POWERS AND DUTIES OF THE ADMINISTRATOR.

     The primary responsibility of the Administrator is to administer the Plan
for the exclusive benefit of the Participants and their Beneficiaries, subject
to the specific terms of the Plan. The Administrator shall administer the Plan
in accordance with its terms and shall have the power and discretion to construe
the terms of the Plan and to determine all questions arising in connection with
the administration, interpretation, and application of the Plan. Any such
determination by the Administrator shall be conclusive and binding upon all
persons. The Administrator may establish procedures, correct any defect, supply
any information, or reconcile any inconsistency in such manner and to such
extent as shall be deemed necessary or advisable to carry out the purpose of the
Plan; provided, however, that any procedure, discretionary act, interpretation
or construction shall be done in a nondiscriminatory manner based upon uniform
principles consistently applied and shall be consistent with the intent that the
Plan shall continue to be deemed a qualified plan under the terms of Code
Section 401(a), and shall comply with the terms of the Act and all regulations
issued pursuant thereto. The Administrator shall have all powers necessary or
appropriate to accomplish his duties under this Plan.

     The Administrator shall be charged with the duties of the general
administration of the Plan, including, but not limited to, the following:

          (a) the discretion to determine all questions relating to the
eligibility of Employees to participate or remain a Participant hereunder and to
receive benefits under the Plan;

          (b) to compute, certify, and direct the Trustee with respect to the
amount and the kind of benefits to which any Participant shall be entitled
hereunder;

          (c) to authorize and direct the Trustee with respect to all
nondiscretionary or otherwise directed disbursements from the Trust;

          (d) to maintain all necessary records for the administration of the
Plan;

          (e) to interpret the provisions of the Plan and to make and publish
such rules for regulation of the Plan as are consistent with the terms hereof;

          (f) to compute and certify to the Employer and to the Trustee from
time to time the sums of money necessary or desirable to be contributed to the
Plan;

                                       13

<PAGE>

          (g) to consult with the Employer and the Trustee regarding the short
and long-term liquidity needs of the Plan in order that the Trustee can exercise
any investment discretion in a manner designed to accomplish specific
objectives;

          (h) to establish and communicate to Participants a procedure and
method to insure that each Participant will vote Company Stock allocated to such
Participant's Company Stock Account; and

          (i) to assist any Participant regarding his rights, benefits, or
elections available under the Plan.

2.8  RECORDS AND REPORTS.

     The Administrator shall keep a record of all actions taken and shall keep
all other books of account, records, and other data that may be necessary for
proper administration of the Plan and shall be responsible for supplying all
information and reports to the Internal Revenue Service, Department of Labor,
Participants, Beneficiaries and others as required by law.

2.9  APPOINTMENT OF ADVISERS.

     The Administrator, or the Trustee with the consent of the Administrator,
may appoint counsel, specialists, advisers, and other persons as the
Administrator or the Trustee deems necessary or desirable in connection with the
administration of this Plan.

2.10 INFORMATION FROM EMPLOYER.

     To enable the Administrator to perform his functions, the Employer shall
supply full and timely information to the Administrator on all matters relating
to the Compensation of all Participants, their Hours of Service, their Years of
Service, their retirement, death, disability, or termination of employment, and
such other pertinent facts as the Administrator may require; and the
Administrator shall advise the Trustee of such of the foregoing facts as may be
pertinent to the Trustee's duties under the Plan. The Administrator may rely
upon such information as is supplied by the Employer and shall have no duty or
responsibility to verify such information.

2.11 PAYMENT OF EXPENSES.

     All reasonable expenses of administration may be paid out of the Trust Fund
unless paid by the Employer. The Employer may, however, pay all or any portion
of such expenses directly. In the event that the Trust Fund does not have assets
(other than Company Stock) sufficient to pay any such expenses, the
Administrator shall request that such expenses be paid by the Employer.
Brokerage commissions, transfer taxes and other changes ordinarily incurred in
the purchase or sale of securities that are paid or incurred by the Trustee with
respect to a purchase or sale of Company Stock shall constitute an additional
cost of purchase or a reduction in the sale proceeds of such Company Stock, as
the case may be, and not an expense hereunder. Notwithstanding anything herein
to the contrary, no brokerage commissions shall be paid from

                                       14

<PAGE>

the Trust Fund with respect to transactions between the Employer (or an
Affiliate) and the Trust Fund involve a purchase or sale of Company Stock.

2.12 MAJORITY ACTIONS.

     Except where there has been an allocation and delegation of administrative
authority pursuant to Section 2.6, if there shall be more than one
Administrator, they shall act by a majority of their number, but may authorize
one or more of them to sign all papers on their behalf. An individual who is a
member of the Administrative Committee and who is also a Participant shall not
vote on any question relating specifically to himself unless he is the sole
Administrator.

     The Administrator shall designate a Chairman and a Secretary from its
members. The Chairperson or the Secretary shall be authorized to execute any
Certificate or other written direction on behalf of the Administrator. The
Secretary shall keep a record of the Administrator's proceedings and of all
relevant dates, records and documents pertaining to the administration of the
Plan.

2.13 CLAIMS PROCEDURE AND CLAIMS REVIEW PROCEDURES.

     The Employer will adopt and communicate to the Participant a claims
procedure and a claims review procedure that are consistent with the
requirements of Section 503 of the Act and its related rules and regulations.

                                   ARTICLE III
                                   ELIGIBILITY

3.1  CONDITIONS OF ELIGIBILITY.

     Each Employee who completed one (1) Year of Service and attained age 21 as
of the Effective Date shall become a Participant on the Effective Date, provided
that he is an Employee on the Effective Date. Each other Employee who completes
one (1) Year of Service and attains age 21 shall become a Participant as of the
Entry Date immediately following the date such requirements are met.
Notwithstanding the foregoing, an Employee who is on an approved leave of
absence shall not become a Participant until his approved leave of absence ends.

3.2  DETERMINATION OF ELIGIBILITY.

     The Administrator shall determine the eligibility of each Employee for
participation in the Plan based upon information furnished by the Employer. Such
determination shall be conclusive and binding upon all persons, as long as the
same is made pursuant to the Plan and the Act.

                                       15

<PAGE>

3.3  TERMINATION OF ELIGIBILITY.

     A Participant shall cease to be eligible to participate in the Plan on the
date he separates from service. In the event a Participant shall go from
classification as an eligible Employee to a noneligible Employee, such Former
Participant shall continue to vest in his Account in the Plan for each Year of
Service completed while a noneligible Employee. Additionally, his Account shall
continue to share in earnings of the Fund.

3.4  CLASSES OF EMPLOYEES.

     A. CHANGE FROM ELIGIBLE TO INELIGIBLE CLASS. If a Participant becomes
ineligible to participate because he is no longer an eligible Employee, but he
has not separated from service, he shall participate immediately upon his
becoming an eligible Employee. If he separates from service, his eligibility to
participate shall be determined under Section 3.3.

     B. CHANGE FROM INELIGIBLE TO ELIGIBLE CLASS. In the event an Employee who
is not an eligible Employee becomes an eligible Employee, such Employee will
participate immediately if such Employee has satisfied the minimum age and
service requirements, if applicable, and would have otherwise previously become
a Participant.

3.5  OMISSION OF ELIGIBLE EMPLOYEE.

     If, in any Plan Year, any Employee who should be included as a Participant
in the Plan is erroneously omitted and discovery of such omission is not made
until after a contribution by the Employer for the year has been made, the
Employer shall make a subsequent contribution with respect to the omitted
Employee in the amount which the said Employer would have contributed with
respect to him had he not been omitted. Such contribution shall be made
regardless of whether or not it is deductible in whole or in part in any taxable
year under applicable provisions of the Code.

3.6  INCLUSION OF INELIGIBLE EMPLOYEE.

     If, in any Plan Year, any person who should not have been included as a
Participant in the Plan is erroneously included and discovery of such incorrect
inclusion is not made until after a contribution for the year has been made, the
Employer shall not be entitled to recover the contribution made with respect to
the ineligible person regardless of whether or not a deduction is allowable with
respect to such contribution. In such event, the amount contributed with respect
to the ineligible person shall constitute a Forfeiture for the Plan Year in
which the discovery is made.

3.7  MILITARY SERVICE.

     Notwithstanding anything herein to the contrary, contributions, benefits
and service credit with respect to qualified military service shall be provided
in accordance with Code Section 414(u).

                                       16

<PAGE>

                                   ARTICLE IV
                           CONTRIBUTION AND ALLOCATION

4.1  FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION.

     For each Plan Year, the Employer shall contribute to the Plan a
discretionary amount, which amount shall be deemed the Employer's contribution.
Notwithstanding the foregoing, however, the Employer's contributions for any
Plan Year shall not exceed the maximum amount allowable as a deduction to the
Employer under the provisions of Code Section 404. All contributions by the
Employer shall be made in cash or in Company Stock. The Employer shall not make
a contribution if it exceeds the amount which is deductible under Code Section
404, except to the extent necessary to provide the top heavy minimum allocations
under Section 4.3G.

4.2  TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION.

     Employer contributions shall be paid in cash or in Company Stock as the
Employer may from time to time determine. Company Stock shall be valued at its
then fair market value. The Employer shall generally pay to the Trustee its
contribution to the Plan for each Plan Year, within the time prescribed by law,
including extensions of time, for the filing of the Employer's federal income
tax return for the Fiscal Year.

4.3  ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS.

     A. ACCOUNT. The Administrator shall establish and maintain an account in
the name of each Participant to which the Administrator shall credit as of each
Anniversary Date all amounts allocated to each such Participant as set forth
herein.

     B. ALLOCATION OF CONTRIBUTIONS. The Employer shall provide the
Administrator with all information to make a proper allocation of the Employer's
contributions for each Plan Year. Within a reasonable period of time after the
date of receipt by the Administrator of such information, the Administrator
shall allocate such contribution to each Participant's Account in the following
manner:

          (1) The Employer's contribution shall be allocated to all Participants
in the same proportion that each Participant's Compensation for the Plan Year
bears to the total Compensation of all Participants eligible for an allocation
for such year.

          (2) The Employer contribution under Section 4.1 shall be allocated
only among the Participants who complete at least 1,000 Hours of Service during
the Plan Year and are employed by the Employer on the last day of the Plan Year.
The preceding two requirements are waived in the Plan Year in which a
Participant retires after having attained the Normal Retirement Age, becomes
Totally and Permanently Disabled, or dies. Notwithstanding the above, for any
Top Heavy Plan Year a Participant shall share in the Employer's Contribution
under Section 4.1 for such year as required pursuant to Section 4.3G.

                                       17

<PAGE>

          (3) If the allocation of Employer contributions for a Plan Year would
result in an allocation to Highly Compensated Employees of more than one-third
of the Employer contributions which are deductible under Code Section 404(a)(9)
for the Plan Year, the allocation amounts to all Highly Compensated Employees
shall be reduced in proportion to their respective Compensation for the Plan
Year, and the allocation to Participants other than Highly Compensated Employees
shall be increased in proportion to their respective Compensation for the Plan
Year, by such amount as necessary to result in the final allocation to the
Highly Compensated Employees of Employer contributions which are deductible
under Code Section 404(a)(9) being equal to one-third of the total allocation of
such Employer contributions to all persons eligible to share in the allocations
of said Plan year.

     C. COMPANY STOCK ACCOUNT. The Company Stock Account and the Other
Investments Account of each Participant shall be credited as of each Anniversary
Date with Forfeitures of Company Stock and his allocable share of Company Stock
(including fractional shares) purchased and paid for by the Plan or contributed
in kind by the Employer. Stock dividends on Company Stock held in his Company
Stock Account shall be credited to his Company Stock Account when paid. Cash
dividends on Company Stock held in his Company Stock Account shall, unless
determined otherwise by the Administrator, be used to repay an Exempt Loan;
provided, however, that when cash dividends are used to repay an Exempt Loan,
Company Stock shall be released from the Unallocated Company Stock Suspense
Account and allocated to the Participant's Company Stock Account pursuant to
Section 4.3E and, provided further, that Company Stock allocated to the
Participant's Company Stock Account shall have a fair market value not less than
the amount of cash dividends which would have been allocated to such
Participant's Other Investments Account for the year. If the Administrator
elects not to use such dividend to repay an Exempt Loan, the Administrator shall
direct the Trustee to credit such dividends to the Participant's Other
Investments Account.

          Company Stock acquired by the Plan with the proceeds of an Exempt Loan
shall only be allocated to each Participant's Company Stock Account upon release
from the Unallocated Company Stock Suspense Account as provided in Section 4.3E
herein. Company Stock acquired with the proceeds of an Exempt Loan shall be an
asset of the Trust Fund and maintained in the Unallocated Company Stock Suspense
Account until released from such account in accordance with the terms of this
Plan.

     D. ALLOCATION OF EARNINGS OR LOSSES.

          (1) The net income (or loss) of the Trust for each Plan Year will be
determined as of the Anniversary Date. Prior to the allocation of Employer
contributions and Forfeitures for the Plan Year, each Participant's share of any
net income (or loss) will be allocated to his Account in the ratio that the his
Account balance on the preceding Anniversary Date (reduced by any distributions
during the Plan Year) bears to the sum of such Account balances for all
Participants as of that date. The net income (or loss) of the Trust includes the
increase (or decrease) in the fair market value of Trust assets, interest
income, dividends (to the extent not used to repay an Exempt Loan) and other
income and gains (or losses) attributable to

                                       18

<PAGE>

Trust assets since the preceding Anniversary Date, reduced by any expenses
charged to the Trust assets for that Plan Year.

          Notwithstanding the foregoing, Trust income attributable to any gain
from the sale of shares of Company Stock in the Unallocated Company Stock
Suspense Account shall be allocated to each Participant's Other Investments
Account in the proportion that such Participant's Compensation for the Plan Year
bears to the total Compensation of all Participants for that Plan Year. For
purposes of the preceding sentence, gain from the sale of shares of Company
Stock means the excess of the proceeds from such sale over the amount thereof
that was used to repay the Exempt Loan as provided in Section 5.4B(9).

          (2) Earnings or losses do not include the interest paid under any
installment contract for the purchase of Company Stock by the Trust Fund or on
any loan used by the Trust Fund to purchase Company Stock; all income received
by the Trust Fund from Company Stock acquired with the proceeds of an Exempt
Loan may, at the discretion of the Administrator, be used to repay such loan.

     E. SPECIAL RULES FOR COMPANY STOCK. All Company Stock acquired by the Plan
with the proceeds of an Exempt Loan shall be added to and maintained in the
Unallocated Company Stock Suspense Account. Such Company Stock shall be released
and withdrawn from that account as if all Company Stock in that account were
encumbered. For each Plan Year during the duration of the loan, the number of
shares of Company Stock released shall equal the number of encumbered shares
held immediately before release for the current Plan Year multiplied by a
fraction, the numerator of which is the amount of principal and interest paid
for the Plan Year and the denominator of which is the sum of the numerator plus
the principal and interest to be paid for all future Plan Years. As of each
Anniversary Date, the Plan must consistently allocate to each Participant's
Account, in the same manner as Employer discretionary contributions pursuant to
Section 4.1 are allocated, non-monetary units (shares and fractional shares of
Company Stock) representing each Participant's interest in Company Stock
withdrawn from the Unallocated Company Stock Suspense Account. However, Company
Stock released from the Unallocated Company Stock Suspense Account with cash
dividends pursuant to Section 4.3C shall be allocated to each Participant's
Company Stock Account in the same proportion that each such Participant's number
of shares of Company Stock sharing in such cash dividends bears to the total
number of shares of all Participants' Company Stock sharing in such cash
dividends. Income earned with respect to Company Stock in the Unallocated
Company Stock Suspense Account shall be used, at the discretion of the
Administrator, to repay the Exempt Loan used to purchase such Company Stock.
Company Stock released from the Unallocated Company Stock Suspense Account with
such income, and any income which is not so used, shall be allocated as of each
Anniversary Date or other valuation date in the same proportion that each
Participant's and Former Participant's Accounts after the allocation of any
earnings or losses pursuant to Section 4.3D bear to the total of all
Participants' and Former Participants' Accounts after the allocation of any
earnings or losses pursuant to Section 4.3D.

     F. ALLOCATION OF FORFEITURES. As of each Anniversary Date, any amounts
which became Forfeitures since the last Anniversary Date shall be allocated to
Participants' Accounts in the same manner as Employer contributions. In the
event the allocation of

                                       19

<PAGE>

Forfeitures provided herein shall cause the "annual addition" (as defined in
Section 4.4) to any Participant's Account to exceed the amount allowable by the
Code, the excess shall be reallocated in accordance with Section 4.5.

     G. SPECIAL RULES FOR TOP HEAVY PLAN YEARS. For any Top Heavy Plan Year,
Non-Key Employees not otherwise eligible to share in the allocation of
contributions and Forfeitures as provided above, shall receive the minimum
allocation provided in this section if they are employed by the Employer on the
last day of the Plan Year.

          (1) For any Top Heavy Plan Year, the sum of the Employer's
contributions and Forfeitures allocated to the Participant's Account of each
Non-Key Employee shall be equal to at least three percent (3%) of such Non-Key
Employee's Compensation. However, if (a) the sum of the Employer's contributions
and Forfeitures allocated to the Participant's Account of each Key Employee for
such Top Heavy Plan Year is less than three percent (3%) of each Key Employee's
Compensation and (b) this Plan is not required to be included in an Aggregation
Group to enable a defined benefit plan to meet the requirements of Code Section
401(a)(4) or 410, the sum of the Employer's contributions and Forfeitures
allocated to the Participant's Account of each Non-Key Employee shall be equal
to the largest percentage allocated to the Participant's Account of any Key
Employee.

          (2) For purposes of the minimum allocations set forth above, the
percentage allocated to the Participant's Account of any Key Employee shall be
equal to the ratio of the sum of the Employer's contributions and Forfeitures
allocated on behalf of such Key Employee divided by the Compensation for such
Key Employee.

          (3) However, no such minimum allocation shall be required in this Plan
for any Non-Key Employee who participates in another defined contribution plan
subject to Code Section 412 providing such benefits included with this Plan in a
Required Aggregation Group.

          (4) The Employer may meet the minimum allocation requirement in
another plan (including another plan that consists solely of a cash or deferred
arrangement which meets the requirements of Section 401(k)(12) of the Code and
matching contributions with respect to which the requirements of Section
401(m)(11) of the Code are met).

4.4  MAXIMUM ANNUAL ADDITIONS.

     A. MAXIMUM ANNUAL ADDITION. Notwithstanding the foregoing, the maximum
"annual additions" credited to a Participant's Account for each "limitation
year" shall equal the lesser of: (1) $40,000 or (2) one hundred percent (100%)
of Compensation. For any short "limitation year," the dollar limitation in (1)
above shall be reduced by a fraction, the numerator of which is the number of
full months in the short "limitation year" and the denominator of which is
twelve (12).

          For purposes of Code Section 415, "annual additions" means the sum
credited to a Participant's accounts for any "limitation year" of (1) Employer
contributions, (2) Forfeitures, (3) amounts allocated to an individual medical
account, as defined in Code Section 415(1)(2)

                                       20

<PAGE>

which is part of a pension or annuity plan maintained by the Employer and (4)
amounts derived from contributions paid or accrued which are attributable to
post-retirement medical benefits allocated to the separate account of a key
employee (as defined in Code Section 419A(d)(3)) under a welfare benefit plan
(as defined in Code Section 419(e)) maintained by the Employer. Except, however,
the Compensation percentage limitation referred to above shall not apply to: (1)
any contribution for medical benefits (within the meaning of Code Section
419A(f)(2)) after separation from service which is otherwise treated as an
"annual addition," or (2) any amount otherwise treated as an "annual addition"
under Code Section 415(1)(1). If shares of Company Stock are released from the
Unallocated Company Stock Suspense Account and allocated to the Participants'
Accounts because Employer contributions are used to pay principal or interest on
an Exempt Loan, the annual additions with respect to such contributions shall be
the lesser of (a) the amount of such contributions or (b) the fair market value
of such shares as of the date allocated to the Accounts; provided that Employer
contributions applied to the payment of interest on an Exempt Loan shall not be
taken into account to the extent as provided below in this Section 4.4A.

          For purposes of Code Section 415, the following are not "annual
additions": (1) the transfer of funds from one qualified plan to another, (2)
provided no more than one-third of the Employer contributions for the year are
allocated to Participants who are Highly Compensated Employees, Forfeitures of
Company Stock purchased with the proceeds of an Exempt Loan and Employer
contributions applied to the payment of interest on an Exempt Loan, and (3) any
allocation attributable to proceeds from the sale of Company Stock by the Trust
or to appreciation (realized or unrealized) in the fair market value of Company
Stock. In addition, the rollover contributions are not Employee contributions
for the purposes of this Section.

     B. LIMITATION YEAR. For purposes of Code Section 415, the "limitation year"
shall be the Plan Year.

     C. ANNUAL ADJUSTMENTS. The dollar limitation stated in paragraph A above
shall be adjusted annually as provided in Code Section 415(d) pursuant to
Treasury Regulations. The adjusted limitation is effective as of January 1st of
each calendar year and is applicable to "limitation years" ending with or within
that calendar year.

     D. CONTROLLED GROUP. All qualified defined benefit plans (whether
terminated or not) ever maintained by the Employer shall be treated as one
defined benefit plan, and all qualified defined contribution plans (whether
terminated or not) ever maintained by the Employer shall be treated as one
defined contribution plan.

     E. INCORPORATION. Notwithstanding anything contained in this Section to the
contrary, the limitations, adjustments and other requirements prescribed in this
Section shall at all times comply with the provisions of Code Section 415 and
the Treasury Regulations thereunder, the terms of which are specifically
incorporated herein by reference.

                                       21

<PAGE>

4.5  ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS.

     A. REASONABLE ERRORS. If, as a result of the allocation of Forfeitures, a
reasonable error in estimating a Participant's Compensation, or other facts and
circumstances to which Treasury Regulation Section 1.415-6(b)(6) shall be
applicable, the "annual additions" under this Plan would cause the maximum
"annual additions" to be exceeded for any Participant, the Administrator shall
(1) return any voluntary Employee contributions credited for the "limitation
year" to the extent that the return would reduce the "excess amount" in the
Participant's accounts, (2) hold any "excess amount" remaining after the return
of any elective deferrals or voluntary Employee contributions in a "Section 415
suspense account", (3) use the "Section 415 suspense account" in the next
"limitation year" (and succeeding "limitation years" if necessary) to reduce
Employer contributions for that Participant if that Participant is covered by
the Plan as of the end of the "limitation year," or if the Participant is not so
covered, allocate and reallocate the "Section 415 suspense account" in the next
"limitation year" (and succeeding "limitation years" if necessary) to all
Participants in the Plan before any Employer contributions which would
constitute "annual additions" are made to the Plan for such "limitation year",
and (4) reduce Employer contributions to the Plan for such "limitation year" by
the amount of the "Section 415 suspense account" allocated and reallocated
during such "limitation year."

     B. DEFINITIONS.

          (1) For purposes of this Article, "excess amount" for any Participant
for a "limitation year" shall mean the excess, if any, of (a) the "annual
additions" which would be credited to his account under the terms of the Plan
without regard to the limitations of Code Section 415 over (b) the maximum
"annual additions" determined pursuant to Section 4.4.

          (2) For purposes of this Section, "Section 415 suspense account" shall
mean an unallocated account equal to the sum of "excess amounts" for all
Participants in the Plan during the "limitation year." The "Section 415 suspense
account" shall not share in any earnings or losses of the Trust Fund.

4.6  DIRECTED INVESTMENT ACCOUNT.

     A. PARTICIPANT ELECTION. Each "Qualified Participant" may make certain
elections within ninety (90) days after the close of each Plan Year during the
"Qualified Election Period" with regard to twenty-five (25%) percent of the
total number of shares of Company Stock acquired by or contributed to the Plan
that have ever been allocated to such "Qualified Participant's" Company Stock
Account (reduced by the number of shares of Company Stock previously invested
pursuant to a prior election). In the case of the election year in which the
Participant can make his last election, the preceding sentence shall be applied
by substituting "fifty (50%) percent" for "twenty-five (25%) percent."

          (1) A "Qualified Participant" may make one or more of the following
elections with regard to the twenty-five (25%) percent of his Company Stock
Account:

                                       22

<PAGE>

               (i) Request a distribution in cash or Company Stock of the
portion of his Company Stock Account covered by the election within ninety (90)
days after the last day of the period during which the election can be made; or

               (ii) Subject to Section 5.3, transfer in cash the portion of his
Account covered by the election to the Chesapeake Federal Savings & Loan
Association 401(k) Plan or to another tax-qualified retirement plan of the
Employer which, in either case, permits participant-directed investment among at
least three (3) diversified investment funds, none of which invests in Company
Stock to a substantial degree.

          Any such distribution of Company Stock shall be subject to Section
7.10.

          (2) Notwithstanding the above, if the fair market value (determined
pursuant to Section 6.1 at the Plan valuation date immediately preceding the
first day on which a "Qualified Participant" is eligible to make an election) of
Company Stock acquired by or contributed to the Plan and allocated to a
"Qualified Participant's" Company Stock Account is $500 or less, then such
Company Stock shall not be subject to this Section. For purposes of determining
whether the fair market value exceeds $500, Company Stock held in accounts of
all ESOPs and tax credit employee stock ownership plans (as defined in Code
Section 409(a)) maintained by the Employer or any Affiliated Employer shall be
considered as held by the Plan.

     B. DEFINITIONS. For the purposes of this Section the following definitions
shall apply:

          (1) "Qualified Participant" means any Participant or Former
Participant who has completed ten (10) Years of Service as a Participant and who
has attained age 55.

          (2) "Qualified Election Period" means the six (6) Plan Year period
beginning with the first Plan Year in which the Participant first became a
"Qualified Participant."

                                    ARTICLE V
           FUNDING AND INVESTMENT POLICYFUNDING AND INVESTMENT POLICY

5.1  INVESTMENT POLICY.

     A. GENERAL. The Plan is designed to invest primarily in Company Stock. The
Trustee may invest funds under the Plan in other property described in the Trust
or the Trustee may hold such funds in cash or cash equivalents.

     B. ROHIBITIONS.

          (1) The Plan may not obligate itself to acquire Company Stock from a
particular holder thereof at an indefinite time determined upon the happening of
an event such as the death of the holder.

                                       23

<PAGE>

          (2) The Plan may not obligate itself to acquire Company Stock under a
put option binding upon the Plan. However, at the time a put option is
exercised, the Plan may be given an option to assume the rights and obligations
of the Employer under a put option binding upon the Employer.

          (3) All purchases of Company Stock shall be made at a price which, in
the judgment of the Trustee, does not exceed the fair market value thereof. All
sales of Company Stock shall be made at a price which, in the judgment of the
Administrator, is not less than the fair market value thereof. The valuation
rules set forth in Article VI shall be applicable.

5.2  APPLICATION OF CASH.

     Employer contributions in cash and other cash received by the Trust Fund
shall first be applied to pay any Current Obligations of the Trust Fund.

5.3  TRANSACTIONS INVOLVING COMPANY STOCK.

     A. GENERAL. No portion of the Trust Fund attributable to (or allocable in
lieu of) Company Stock acquired by the Plan in a sale to which Code Section 1042
applies may accrue or be allocated directly or indirectly under any plan
maintained by the Employer meeting the requirements of Code Section 401(a):

          (1) during the "Nonallocation Period", for the benefit of (i) any
taxpayer who makes an election under Code Section 1042(a) with respect to
Company Stock, (ii) any individual who is related to the taxpayer (within the
meaning of Code Section 267(b)), or

          (2) for the benefit of any other person who owns (after application of
Code Section 318(a) applied without regard to the employee trust exception in
Code Section 318(a)(2)(B)(i)) more than 25 percent of (i) any class of
outstanding stock of the Employer or Affiliated Employer which issued such
Company Stock, or (ii) the total value of any class of outstanding stock of the
Employer or Affiliated Employer.

     B. EXCEPTIONS. Except, however, subparagraph A(l)(ii) above shall not apply
to lineal descendants of the taxpayer, provided that the aggregate amount
allocated to the benefit of all such lineal descendants during the
"Nonallocation Period" does not exceed more than five (5) percent of the Company
Stock (or amounts allocated in lieu thereof) held by the Plan which are
attributable to a sale to the Plan by any person related to such descendants
(within the meaning of Code Section 267(c)(4)) in a transaction to which Code
Section 1042 is applied.

     C. RULES. A person shall be treated as failing to meet the stock ownership
limitation under paragraph A(2) above if such person fails such limitation:

          (1) at any time during the one (1) year period ending on the date of
sale of Company Stock to the Plan, or

                                       24

<PAGE>

          (2) on the date as of which Company Stock is allocated to Participants
in the Plan.

     D. DEFINITIONS. For purposes of this Section, "Nonallocation Period" means
the period beginning on the date of the sale of the Company Stock and ending on
the later of:

          (1) the date which is ten (10) years after the date of sale, or

          (2) the date of the Plan allocation attributable to the final payment
of the Exempt Loan incurred in connection with such sale.

5.4  LOANS TO THE TRUST.

     A. AVAILABILITY OF LOANS. The Plan may borrow money for any lawful purpose,
provided the proceeds of an Exempt Loan are used within a reasonable time after
receipt only for any or all of the following purposes:

          (1) To acquire Company Stock;

          (2) To repay such loan; or

          (3) To repay a prior Exempt Loan.

     B. LOAN RULES. All loans to the Trust which are made or guaranteed by a
disqualified person must satisfy all requirements applicable to Exempt Loans
including but not limited to the following:

          (1) The loan must be at a reasonable rate of interest;

          (2) Any collateral pledged to the creditor by the Plan shall consist
only of the Company Stock purchased with the borrowed funds;

          (3) Under the terms of the loan, any pledge of Company Stock shall
provide for the release of shares so pledged in the same manner as the release
of shares from the Unallocated Company Stock Suspense Account as provided in
Section 4.3E;

          (4) Under the terms of the loan, the creditor shall have no recourse
against the Plan except with respect to such collateral, earnings attributable
to such collateral, Employer contributions (other than contributions of Company
Stock) that are made to meet Current Obligations and earnings attributable to
such collateral and contributions;

          (5) The loan must be for a specific term and may not be payable at the
demand of any person, except in the case of default;

          (6) In the event of default upon an Exempt Loan, the value of the
Trust Fund transferred in satisfaction of the Exempt Loan shall not exceed the
amount of default. If the

                                       25

<PAGE>

lender is a disqualified person, an Exempt Loan shall provide for a transfer of
Trust Funds upon default only upon and to the extent of the failure of the Plan
to meet the payment schedule of the Exempt Loan;

          (7) If the Employer is the lender of an Exempt Loan, Employer
contributions to the Plan may be paid in the form of cancellation of
indebtedness under such Exempt Loan pursuant to notice by the Employer to the
Trustee; and

          (8) Exempt Loan payments during a Plan Year must not exceed an amount
equal to: (i) the sum, over all Plan Years, of all contributions and cash
dividends paid by the Employer to the Plan with respect to such Exempt Loan and
earnings on such Employer contributions and cash dividends, less (ii) the sum of
the Exempt Loan payments in all preceding Plan Years. A separate accounting
shall be maintained for such Employer contributions, cash dividends and earnings
until the Exempt Loan is repaid.

          (9) Exempt Loan payments may be made from the proceeds arising from
the sale of Company Stock in the Unallocated Company Stock Suspense Account in
connection with a corporate merger, consolidation, sale of substantially all of
the Employer's assets, termination of the Plan, or any other transaction which
does not violate Section 4975(e)(7) of the Code and the Treasury Regulations
thereunder.

     C. DEFINITIONS. For purposes of this Section, the term "disqualified
person" means a person described in Code Section 4975(e)(2), including but not
limited to (i) a person who is a fiduciary, (ii) a person providing services to
the Plan, (iii) an Employer any of whose Employees are covered by the Plan, (iv)
an employee organization any of whose members are covered by the Plan, (v) an
owner, direct or indirect, of 50% or more of the total combined voting power of
all classes of voting stock or of the total value of all classes of the stock of
the Employer or employee organization described in this Section 5.4C, or (iv) an
officer, director, 10% or more shareholder, or a Highly Compensated Employee of
a person or entity described in clause (iii), (iv) or (v).

                                   ARTICLE VI
                                   VALUATIONS

6.1  VALUATION OF THE TRUST FUND.

     The Administrator shall direct the Trustee, as of each Anniversary Date,
and at such other date or dates deemed necessary by the Administrator, herein
called the "valuation date," to determine the net worth of the assets comprising
the Trust Fund as it exists on the "valuation date." In determining such net
worth, the Trustee shall value the assets comprising the Trust Fund at their
fair market value as of the "valuation date" and shall deduct all expenses for
which the Trustee has not yet obtained reimbursement from the Employer or the
Trust Fund.

6.2  METHOD OF VALUATION.

                                       26

<PAGE>

     Valuations must be made in good faith and based on all relevant factors for
determining the fair market value of securities. In the case of a transaction
between a Plan and a disqualified person, value must be determined as of the
date of the transaction. For all other Plan purposes, value must be determined
as of the most recent "valuation date" under the Plan. An independent appraisal
will not in itself be a good faith determination of value in the case of a
transaction between the Plan and a disqualified person. However, in other cases,
a determination of fair market value based on at least an annual appraisal
independently arrived at by a person who customarily makes such appraisals and
who is independent of any party to the transaction will be deemed to be a good
faith determination of value. Company Stock not readily tradable on an
established securities market shall be valued by an independent appraiser
meeting requirements similar to the requirements of the Treasury Regulations
prescribed under Code Section 170(a)(1).

     If the Company Stock is publicly traded, the fair market value of the
Company Stock for purposes of this Plan shall be the price most recently bid or
asked, as appropriate, or paid for Company Stock listed on any exchanged, quoted
through a national securities exchange or association, traded in the
over-the-counter market or reported by any other commercial service. The term
"publicly traded" refers to a security that is listed on a national securities
exchange registered under section 6 of the Securities Exchange Act of 1934 (15
U.S.C. 78f) or that is quoted on a system sponsored by a national securities
association registered under section 15A(b) of the Securities Exchange Act (15
U.S.C. 78o).

                                   ARTICLE VII
                   DETERMINATION AND DISTRIBUTION OF BENEFITS

7.1  DETERMINATION OF BENEFITS UPON RETIREMENT.

     Every Participant may terminate his employment with the Employer and retire
for the purposes hereof on his Normal Retirement Date. Upon such Normal
Retirement Date, all amounts credited to such Participant's Account as of a
coincident or subsequent valuation date shall become distributable to him,
subject to the requirements of Section 7.5G. However, a Participant may postpone
the termination of his employment with the Employer to a later date, in which
event the participation of such Participant in the Plan, including the right to
receive allocations pursuant to Section 4.3, shall continue until his Late
Retirement Date. Upon a Participant's Normal Retirement Date or Late Retirement
Date, the Trustee shall distribute all amounts credited to such Participant's
Account in accordance with Sections 7.5 and 7.6, and such distribution shall
commence as soon as administratively feasible after the close of the Plan Year
containing the Participant's Normal Retirement Date or Late Retirement Date.

7.2  DETERMINATION OF BENEFITS UPON DEATH.

     A. DEATH OF PARTICIPANT OR FORMER PARTICIPANT BEFORE RETIREMENT OR
TERMINATION. Upon the death of a Participant or Former Participant before his
Retirement Date or other termination of his employment, all amounts credited to
such Participant's or Former Participant's Account shall become fully Vested. If
elected, distribution of the Participant's or Former Participant's Account shall
commence as soon as administratively feasible after the close of the Plan Year
in which such Participant's death occurs. As soon as

                                       27

<PAGE>

administratively feasible after the end of the Plan Year containing the date of
death, the Administrator shall direct the Trustee, in accordance with the
provisions of Sections 7.5 and 7.6, to distribute the value of the deceased
Participant's accounts as of the valuation date immediately preceding the actual
distribution to the Participant's or Former Participant's spouse if living, or
if there is no spouse then living, or the surviving spouse consents according to
7.2D and E, to any surviving Beneficiary designated by the Participant or Former
Participant or, if none, to such Participant or Former Participant's estate.

     B. DEATH OF TERMINATED PARTICIPANT. Upon the death of a Terminated
Participant, the Administrator shall direct the Trustee, in accordance with the
provisions of Sections 7.5 and 7.6, to distribute any remaining Vested amounts
credited to the accounts of a deceased Terminated Participant to such Terminated
Participant's Beneficiary. The payout shall equal the value of the Account as of
the valuation date immediately preceding the actual date of distribution.

     C. PROOF OF DEATH. The Administrator may require such proper proof of death
and such evidence of the right of any person to receive payment of the value of
the account of a deceased Participant, Former Participant or Terminated
Participant as the Administrator may deem desirable. The Administrator's
determination of death and of the right of any person to receive payment shall
be conclusive.

     D. REQUIRED BENEFICIARY. The Beneficiary of the death benefit payable
pursuant to this Section shall be the Participant's spouse. Except, however, the
Participant may designate a Beneficiary other than his spouse if:

          (1) the spouse has waived the right to be the Participant's
Beneficiary, or

          (2) the Participant is legally separated or has been abandoned (within
the meaning of local law) and the Participant has a court order to such effect
(and there is no "qualified domestic relations order" as defined in Code Section
414(p) which provides otherwise), or

          (3) the Participant has no spouse, or

          (4) the spouse cannot be located.

          In such event, the designation of a Beneficiary shall be made on a
form satisfactory to the Administrator. A Participant may at any time revoke his
designation of a Beneficiary or change his Beneficiary by filing written notice
of such revocation or change with the Administrator. However, the Participant's
spouse must again consent in writing to any change in Beneficiary unless the
original consent acknowledged that the spouse had the right to limit consent
only to a specific Beneficiary and that the spouse voluntarily elected to
relinquish such right. In the event no valid designation of Beneficiary exists
at the time of the Participant's death, the death benefit shall be payable to
his estate.

                                       28

<PAGE>

     E. SPOUSAL WAIVER. Any consent by the Participant's spouse to waive any
rights to the death benefit must be in writing, must acknowledge the effect of
such waiver, and be witnessed by a Plan representative or a notary public.
Further, the spouse's consent must be irrevocable and must acknowledge the
specific nonspouse Beneficiary.

7.3  DETERMINATION OF BENEFITS IN EVENT OF DISABILITY.

     In the event of a Participant's Total and Permanent Disability prior to his
Retirement Date or other termination of his employment, all amounts credited to
such Participant's Account shall become fully Vested. As soon as
administratively feasible after the close of the Plan Year containing the date
of the Participant's Total and Permanent Disability, the Trustee, in accordance
with the provisions of Sections 7.5 and 7.6, shall distribute to such
Participant all amounts credited to such Participant's Account as though he had
retired. Such distribution shall be based on amounts credited to the Account of
the Participant as of the valuation date immediately preceding the actual date
of distribution.

7.4  DETERMINATION OF BENEFITS UPON TERMINATION.

     A. DISTRIBUTION.

          (1) General Rules.

               (i) The value of the Terminated Participant's Account as of the
valuation date immediately preceding the actual date of distribution shall be
used for distribution purposes.

               (ii) Distribution to a Participant shall not include any Company
Stock acquired with the proceeds of an Exempt Loan until the close of the Plan
Year in which such loan is repaid in full. Any distribution under this paragraph
shall be made in a manner which is consistent with and satisfies the provisions
of Sections 7.5 and 7.6, including, but not limited to, all notice and consent
requirements of Code Section 411(a)(11) and the Treasury Regulations thereunder.

               (iii) A Terminated Participant's Vested Account may not be paid
without his written consent if the present value exceeds Five Thousand Dollars
($5,000).

          (2) Timing of Distribution.

               (i) Subject to Section 7.4A(1)(ii), distribution of funds due to
a Terminated Participant shall be paid pursuant to Section 7.5A, commencing as
soon as administratively feasible following the Anniversary Date which
immediately follows a One-Year Break in Service (unless he is reemployed by the
Employer).

               (ii) Subject to Section 7.4A(1)(ii), if the value of a Terminated
Participant's Vested Account does not exceed Five Thousand Dollars ($5,000), the
Administrator shall direct the Trustee to cause the entire Vested Account to be
paid to such Participant in a

                                       29

<PAGE>

single lump sum and such distribution shall be made as soon as administratively
feasible after the end of the Plan Year containing the termination date. For
purposes of this Section, if the value of the Participant's Vested benefit is
zero, the Employee shall be deemed to have received an immediate distribution of
such Account.

     B. VESTING.

          (1) General Rules. The Vested portion of any Participant's Account
shall be a percentage of the total amount credited to his Participant's Account
determined on the basis of the Participant's number of Years of Service
according to the following schedule:

          Vesting Schedule

Years of Service   Percentage Vested
----------------   -----------------
Less than 5                0%
5                        100%

          (2) Special Rule. Notwithstanding the foregoing, a Participant shall
become 100% Vested in his Account (without regard to his Years of Service) if
any of the following events occur while he is employed by the Employer:

               (i) he reaches his Normal Retirement Age;

               (ii) he incurs a Total and Permanent Disability; or

               (iii) he dies.

          (3) Notwithstanding anything contained in the Plan to the contrary, in
any Top Heavy Plan Year, a Participant's interest in his Account shall not vest
at any rate which is slower than the following schedule, effective as of the
first day of that Plan Year:

Years of Service   Percentage Vested
----------------   -----------------
Less than 3                0%
3 or more                100%

The schedule set forth above in this Section 7.4B(3) shall be inapplicable to a
Participant who has failed to perform an Hour of Service after the Determination
Date on which the Plan has become a Top-Heavy Plan. When the Plan ceases to be a
Top-Heavy Plan, the schedule set forth above in this Section 7.4B(3) shall cease
to apply; provided however, that the provisions of Section 7.4C dealing with the
changes in the vesting schedule shall apply.

                                       30

<PAGE>

     C. NO REDUCTION OF ACCRUED BENEFIT. The computation of a Participant's
nonforfeitable percentage of his interest in the Plan shall not be reduced as
the result of any direct or indirect amendment to this Plan. The Plan shall be
treated as having been amended if the Plan provides for an automatic change in
vesting due to a change in top heavy status. In the event that the Plan is
amended to change or modify any vesting schedule, a Participant with at least
three (3) Years of Service as of the expiration date of the election period may
elect to have his nonforfeitable percentage computed under the Plan without
regard to such amendment. If a Participant fails to make such election, then
such Participant shall be subject to the new vesting schedule. The Participant's
election period shall commence on the adoption date of the amendment and shall
end 60 days after the latest of:

          (1) the adoption date of the amendment,

          (2) the effective date of the amendment, or

          (3) the date the Participant receives written notice of the amendment
from the Employer or Administrator.

     D. ACCOUNT RESTORATION UPON REEMPLOYMENT. If a Terminated Participant
receives or is deemed to receive a distribution pursuant to Section 7.4, and the
Employee resumes employment covered under this Plan, the Employee's Account
balance will be restored to the amount on the date of distribution if the
Terminated Participant repays to the Plan the full amount of his distribution
before the earlier of five (5) years after the first date on which the
Terminated Participant is subsequently reemployed by the Employer, or the date
he incurs five (5) consecutive One-Year Breaks in Service after the
distribution. The Participant's Account shall be restored by crediting the
amount of his repayment plus any amount actually forfeited by him (which shall
be credited out of current Forfeitures). If the repayment and current
Forfeitures are insufficient to restore the Participant's Account, the Employer
shall make an additional contribution sufficient to do so.

          If a Terminated Participant is reemployed after a One-Year Break in
Service has occurred, the Years of Service shall include Years of Service prior
to his One-Year Break in Service subject to the following rules:

          (l) If any Terminated Participant shall be reemployed by the Employer
before a One-Year Break in Service occurs, he shall continue to participate in
the Plan in the same manner as if such termination had not occurred.

          (2) If any Terminated Participant is reemployed after a One-Year Break
in Service has occurred, Years of Service shall include Years of Service prior
to his One-Year Break in Service subject to the following rules:

               (i) If a Terminated Participant has a One-Year Break in Service,
his pre-break and post-break service shall be used for computing Years of
Service for vesting purposes only after he has been employed for one (1) Year of
Service following the date of his reemployment with the Employer;

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<PAGE>

               (ii) Any Terminated Participant who under the Plan does not have
a nonforfeitable right to any interest in the Plan resulting from Employer
contributions shall lose credits otherwise allowable under (i) above if his
consecutive One-Year Breaks in Service equal or exceed the greater of (A) five
(5) or (B) the aggregate number of his pre-break Years of Service; and

               (iii) After five (5) consecutive One-Year Breaks in Service, a
Terminated Participant's Vested Account balance attributable to pre-break
service shall not be increased as a result of post-break service.

7.5  DISTRIBUTION OF BENEFITS.

     A. FORM OF DISTRIBUTION. Subject to Section 7.5E, a Participant (or a
deceased Participant's Beneficiary) shall receive payments in annual
installments over a five (5) year period, unless the Participant (or deceased
Participant's Beneficiary) elects to receive such payments over a longer period
of time. In the case of a Participant with an Account attributable to Company
Stock in excess of $800,000, the five (5) year period shall be extended one (1)
additional year (but not more than five (5) additional years) for each $160,000
or fraction thereof by which such balance exceeds $800,000. The dollar limits
shall be adjusted after 2002 at the same time and in the same manner as provided
in Code Section 415(d).

     B. PARTICIPANT CONSENT. Any distribution to a Participant who has a Vested
Account of $5,000.00 or more shall require such Participant's consent if such
distribution commences prior to his Normal Retirement Age. With regard to this
required consent:

          (1) The Participant must be informed of his right to defer receipt of
the distribution. If a Participant fails to consent, it shall be deemed an
election to defer the commencement of payment of any benefit. However, any
election to defer the receipt of benefits shall not apply with respect to
distributions which are required under Section 7.5E.

          (2) Notice of the rights specified under this paragraph shall be
provided no more than 90 days before the first day on which all events have
occurred which entitle the Participant to such benefit.

          (3) Written consent of the Participant to the distribution must not be
made before the Participant receives the notice and must not be made more than
90 days before the first day on which all events have occurred which entitle the
Participant to such benefit.

          (4) No consent shall be valid if a significant detriment is imposed
under the Plan on any Participant who does not consent to the distribution.

          If a distribution is one to which Code Sections 401(a) (11) and 417 do
not apply, such distribution may commence less than 30 days after the notice
required under Treasury Regulation Section 1.401(a)-ll(c) is given, provided
that: (1) the Administrator clearly informs the Participant that the Participant
has a right to a period of at least 30 days after receiving the

                                       32

<PAGE>

notice to consider the decision of whether or not to elect a distribution (and,
if applicable, a particular distribution option), and (2) the Participant, after
receiving the notice, affirmatively elects a distribution.

     C. CASH DIVIDENDS. Notwithstanding anything herein to the contrary, the
Administrator, in his sole discretion, may direct that cash dividends on shares
of Company Stock allocable to Participants', Former Participants', or Terminated
Participants' Company Stock Accounts be distributed to such Participants, Former
Participants, or Terminated Participants within 90 days after the close of the
Plan Year in which the dividends are paid. Such distributions (if any) may be
limited to Participants and Former Participants, may be limited to dividends on
shares of Vested Company Stock or may be applicable to Cash Dividends on all
shares allocated in Participant's, Terminated Participant's and Former
Participant's Company Stock Accounts.

     D. POST EMPLOYMENT TREATMENT. Any part of a Terminated Participant's
Account which is retained in the Plan after the Anniversary Date on which his
employment ends will continue to be treated as a Company Stock Account or as an
Other Investments Account as provided in Article IV. However, neither account
will be credited with any further Employer contributions or Forfeitures.

     E. MINIMUM DISTRIBUTION RULES. Notwithstanding any provision in the Plan to
the contrary, the distribution of a Participant's benefits shall be made in
accordance with the following requirements and shall otherwise comply with Code
Section 401(a)(9) and the Treasury Regulations thereunder, the provisions of
which are incorporated herein by reference:

          (1) The Participant's Account shall be distributed beginning not later
than his Required Beginning Date (as defined in (2) below) over a period not
extending beyond the life expectancy of the Participant or, if elected by the
Participant, the joint life and last survivor expectancy of the Participant and
his Beneficiary.

          (2) For purposes of this subsection, the term "Required Beginning
Date" is defined as follows:

               (i) With respect to a 5% owner, the Required Beginning Date shall
be the April 1st following the calendar year in which the Participant reaches
age 70 1/2, regardless of whether the Participant elected to delay the payment
until he retires.

               (ii) With respect to a non-5% owner, the Required Beginning Date
is April 1st after the later of (A) the calendar year in which the Participant
attained age 70 1/2 or (B) the earlier of the calendar year in which the
Participant retires or the calendar year with or within which ends the Plan Year
in which the Participant becomes a 5% owner.

               (iii) A Participant shall be a 5% owner for purposes of this
subsection if such Participant is a 5% owner within the meaning of Code Section
416(i) at any time during the Plan Year ending with or within the calendar year
in which such owner attains age 66 1/2 or any subsequent Plan Year.

                                       33

<PAGE>

     F. DEATH BENEFITS. Notwithstanding any provision in the Plan to the
contrary, distributions upon the death of a Participant shall be made in
accordance with the following requirements and shall otherwise comply with Code
Section 401(a)(9) and the regulations thereunder. If it is determined pursuant
to regulations that the distribution of a Participant's interest has begun and
the Participant dies before his entire interest has been distributed to him, the
remaining portion of such interest shall be distributed at least as rapidly as
under the method of distribution as of his date of death. If a Participant dies
before he has begun to receive any distributions of his interest under the Plan
or before distributions are deemed to have begun pursuant to regulations, then
his death benefit shall be distributed to his Beneficiaries by December 31st of
the calendar year in which the fifth anniversary of his date of death occurs.

     G. TIMING OF DISTRIBUTIONS. Except as limited by Sections 7.4, 7.5, and
7.6, whenever the Trustee is to make a distribution or to commence a series of
payments on or as of an Anniversary Date, the distribution or series of payments
may be made or begun on such date or as soon thereafter as is practicable.
However, unless a Terminated Participant elects in writing to defer the receipt
of benefits, the payment of benefits shall begin not later than the 60th day
after the close of the Plan Year in which the latest of the following events
occurs:

          (1) the date on which the Participant attains the earlier of age 65 or
the Normal Retirement Age specified herein;

          (2) the 10th anniversary of the year in which the Participant
commenced participation in the Plan; or

          (3) the date the Participant terminates his service with the Employer.

     H. MULTIPLE DISTRIBUTIONS. In the event a Participant retires, dies or
incurs a Total and Permanent Disability during a Plan Year, the Participant
shall be eligible to receive an allocation of the Employer contribution made for
that Plan Year pursuant to Section 4.1. In the event the Participant has
received a distribution of his Account when the Employer contribution is
awarded, the Participant shall be entitled to an additional distribution to be
made as soon as administratively feasible after the close of the Plan Year.

7.6  HOW PLAN BENEFIT WILL BE DISTRIBUTED.

     A. MEDIUM OF DISTRIBUTION. Distribution of a Participant's Account may be
made in cash or Company Stock or both, provided, however, that if a Participant
or Beneficiary so demands, such benefit shall be distributed only in the form of
Company Stock. Prior to making a distribution of benefits, the Administrator
shall advise the Participant or his Beneficiary, in writing, of the right to
demand that benefits be distributed solely in Company Stock. In the absence of
an affirmative request by a Participant to have a distribution paid in Company
Stock, all distributions shall be paid in cash.

     B. DISTRIBUTIONS IN STOCK. If a Participant or Beneficiary demands that
benefits be distributed solely in Company Stock, distribution of a Participant's
benefit will be

                                       34

<PAGE>

made entirely in whole shares or other units of Company Stock. Any balance in a
Participant's Other Investments Account will be applied to acquire the maximum
number of whole shares or other units of Company Stock at the then fair market
value. Any fractional unit value unexpended will be distributed in cash. If
Company Stock is not available for purchase by the Trustee, then the Trustee
shall hold such balance until Company Stock is acquired and then make such
distribution, subject to Sections 7.5E and 7.5G.

     C. AUTHORITY TO MAKE DISTRIBUTIONS. The Trustee will make distributions
from the Trust only on instructions from the Administrator.

     D. BY-LAWS. Notwithstanding anything contained herein to the contrary, if
the Employer's charter or by-laws restrict ownership of substantially all shares
of Company Stock to Employees and the Trust Fund, as described in Code Section
409(h), the Administrator shall distribute a Participant's Account entirely in
cash without granting the Participant the right to demand distribution in shares
of Company Stock.

     E.RESTRICTIONS. Except as otherwise provided herein, Company Stock
distributed by the Trustee may be restricted as to sale or transfer by the
by-laws or articles of incorporation of the Employer, provided restrictions are
applicable to all Company Stock of the same class. If a Participant is required
to offer the sale of his Company Stock to the Employer before offering to sell
his Company Stock to a third party, in no event may the Employer pay a price
less than that offered to the distributee by another potential buyer making a
bona fide offer and in no event shall the Trustee pay a price less than the fair
market value of the Company Stock.

     F. RULES WITH MULTIPLE CLASSES OF STOCK. If Company Stock acquired with the
proceeds of an Exempt Loan (described in Section 5.4 hereof) is available for
distribution and consists of more than one class, a Participant or his
Beneficiary must receive substantially the same proportion of each such class.

7.7  DISTRIBUTION FOR MINOR BENEFICIARY.

     In the event a distribution is to be made to a minor, then the
Administrator may direct that such distribution be paid to the legal guardian,
or if none, to a parent of such Beneficiary or a responsible adult with whom the
Beneficiary maintains his residence, or to the custodian for such Beneficiary
under the Uniform Gift to Minors Act or Gift to Minors Act, if such is permitted
by the laws of the state in which said Beneficiary resides. Such a payment to
the legal guardian, custodian or parent of a minor Beneficiary shall fully
discharge the Trustee, Employer, and Plan from further liability on account
thereof.

7.8 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN.

     In the event that all, or any portion, of the distribution payable to a
Participant or his Beneficiary hereunder shall, after the expiration of five (5)
years after it shall become payable, remain unpaid solely by reason of the
inability of the Administrator, after sending a registered letter, return
receipt requested, to the last known address, and after further diligent effort,
to

                                       35

<PAGE>

ascertain the whereabouts of such Participant or his Beneficiary, the amount so
distributable shall be treated as a Forfeiture pursuant to the Plan. In the
event a Participant or Beneficiary is located subsequent to his benefit being
reallocated, such benefit shall be restored.

7.9  RIGHTS OF FIRST REFUSAL.

     A. NOTICE OF OFFER. If any Participant, his Beneficiary or any other person
to whom shares of Company Stock are distributed from the Plan (the "Selling
Participant") shall, at any time, desire to sell some or all of such shares (the
"Offered Shares") to a third party (the "Third Party"), the Selling Participant
shall give written notice of such desire to the Employer and the Administrator,
which notice shall contain the number of shares offered for sale, the proposed
terms of the sale and the names and addresses of both the Selling Participant
and Third Party. Both the Trust Fund and the Employer shall each have the right
of first refusal for a period of fourteen (14) days from the date the Selling
Participant gives such written notice to the Employer and the Administrator
(such fourteen (14) day period to run concurrently against the Trust Fund and
the Employer) to acquire the Offered Shares. As between the Trust Fund and the
Employer, the Trust Fund shall have priority to acquire the shares pursuant to
the right of first refusal. The selling price and terms shall be the same as
offered by the Third Party.

     B. SALE TO THIRD PARTY. If the Trust Fund and the Employer do not exercise
their right of first refusal within the required fourteen (14) day period
provided above, the Selling Participant shall have the right, at any time
following the expiration of such fourteen (14) day period, to dispose of the
Offered Shares to the Third Party; provided, however, that (i) no disposition
shall be made to the Third Party on terms more favorable to the Third Party than
those set forth in the written notice delivered by the Selling Participant
above, and (ii) if such disposition shall not be made to a third party on the
terms offered to the Employer and the Trust Fund, the offered Shares shall again
be subject to the right of first refusal set forth above.

     C. CLOSING. The closing pursuant to the exercise of the right of first
refusal under Section 7.9A above shall take place at such place agreed upon
between the Administrator and the Selling Participant, but not later than ten
(10) days after the Employer or the Trust Fund shall have notified the Selling
Participant of the exercise of the right of first refusal. At such closing, the
Selling Participant shall deliver certificates representing the Offered Shares
duly endorsed in blank for transfer, or with stock powers attached duly executed
in blank with all required transfer tax stamps attached or provided for, and the
Employer or the Trust Fund shall deliver the purchase price, or an appropriate
portion thereof, to the Selling Participant.

     D. EXCEPTIONS. Except as provided in this paragraph, no Company Stock
acquired with the proceeds of an Exempt Loan complying with the requirements of
Section 5.4 hereof shall be subject to a right of first refusal. Company Stock
acquired with the proceeds of an Exempt Loan, which is distributed to a
Participant or Beneficiary, shall be subject to the right of first refusal
provided for in paragraph A of this Section only so long as the Company Stock is
not publicly traded. The term "publicly traded" refers to a security listed on a
national securities exchange registered under Section 6 of the Securities
Exchange Act of 1934 (15 U.S.C. 78f) or that is quoted on a system sponsored by
a national securities association registered under Section 15A(b) of the
Securities Exchange Act (15 U.S.C. 78o). In addition, in the case of Company

                                       36

<PAGE>

Stock which was acquired with the proceeds of a loan described in Section 5.4,
the selling price and other terms under the right must not be less favorable to
the seller than the greater of the value of the security determined under
Section 6.2, or the purchase price and other terms offered by a buyer (other
than the Employer or the Trust Fund), making a good faith offer to purchase the
security. The right of first refusal must lapse no later than fourteen (14) days
after the security holder gives notice to the holder of the right that an offer
by a third party to purchase the security has been made. The right of first
refusal shall comply with the provisions of paragraphs A, B and C of this
Section, except to the extent those provisions may conflict with the provisions
of this paragraph.

     E. STOCK CERTIFICATE LEGEND. To the extent necessary to comply with federal
or state securities law, certificates for shares distributed pursuant to the
Plan shall contain a legend indicating the applicable rights of first refusal
under this Section 7.9 and the following legend:

     "The securities represented by this stock certification have not been
     registered under the Securities Act of 1933, (the "Act") or applicable
     state securities law (the "State Acts"), and shall not be sold, pledged,
     hypothecated, donated, or otherwise transferred (whether or not for
     consideration ) by the holder unless (1) there is an effective registration
     statement under the Securities Act of 1933 covering the stock; or (2) in
     the opinion of counsel satisfactory to the corporation, such registration
     is not required; or (3) the holder has furnished a "no-action" letter from
     the staff of the Securities and Exchange Commission satisfactory to the
     corporation that such registration is not required."

7.10 PUT OPTION.

     A. COMPANY STOCK NOT ACQUIRED BY EXEMPT LOAN. If Company Stock which was
not acquired with the proceeds of an Exempt Loan is distributed to a Participant
and such Company Stock is not readily tradable on an established securities
market, a Participant has a right to require the Employer to repurchase the
Company Stock distributed to such Participant under a fair valuation formula.
Such Stock shall be subject to the provisions of Section 7.10C.

     B. COMPANY STOCK ACQUIRED BY EXEMPT LOAN. Company Stock which is acquired
with the proceeds of an Exempt Loan and which is not publicly traded when
distributed, or if it is subject to a trading limitation when distributed, must
be subject to a put option (except as provided in Section 7.10D). For purposes
of this paragraph, a "trading limitation" on a Company Stock is a restriction
under any federal or state securities law or any regulation thereunder, or an
agreement (not prohibited by Section 7.11) affecting the Company Stock which
would make the Company Stock not as freely tradable as stock not subject to such
restriction.

     C. PUT OPTION. The Employer shall provide a "put option" to any Participant
or Beneficiary who receives a distribution of Company Stock. The put option
shall permit the

                                       37

<PAGE>

Participant or Beneficiary to sell such Company Stock to the Employer at any
time during two option periods, at the then fair market value. The first put
option period shall be for at least 60 days beginning on the date of
distribution. The second put option period shall be for at least 60 days
beginning after the new determination of fair market value (and notice to the
Participant thereof) in the following Plan Year. The Employer may allow the
Administrator to direct the Trustees to purchase shares of Company Stock
tendered to the Employer under a put option. The payment for any Company Stock
sold under a put option shall be made within 30 days if the shares were
distributed as part of an installment distribution. If the shares were
distributed in a lump sum distribution, payment shall commence within 30 days
and may be made in a lump sum payment or in substantially equal, annual
installments over a period not exceeding five years, with adequate security
provided and interest payable at a reasonable rate on any unpaid installment
balance (as determined by the Employer or the Administrator) and without penalty
for any prepayment of such installments.

     D. EXEMPTION FROM PUT OPTION. Notwithstanding anything herein to the
contrary, in the event the Employer maintaining the Plan is a bank (as defined
in Code Section 581) which is prohibited by law from redeeming or purchasing its
own securities, the put option under this Section 7.10 shall not apply if the
Participants are entitled to receive their benefits in cash.

7.11 NONTERMINABLE PROTECTIONS AND RIGHTS.

     No Company Stock, except as provided in Section 7.10B, acquired with the
proceeds of an Exempt Loan described in Section 5.4 hereof may be subject to a
put, call, or other option, or buy-sell or similar arrangement when held by and
when distributed from the Trust Fund, whether or not the Plan is then an ESOP.
The protections and rights granted in Sections 7.9 and 7.10 are nonterminable,
and such protections and rights shall continue to exist under the terms of this
Plan so long as any Company Stock acquired with the proceeds of a loan described
in Section 5.4 hereof is held by the Trust Fund or by any Participant or other
person for whose benefit such protections and rights have been created, and
neither the repayment of such loan nor the failure of the Plan to be an ESOP,
nor an amendment of the Plan shall cause a termination of such protections and
rights.

7.12 QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION.

     All rights and benefits, including elections, provided to a Participant in
this Plan shall be subject to the rights afforded to any "alternate payee" under
a "qualified domestic relations order." Furthermore, a distribution to an
"alternate payee" shall be permitted if such distribution is authorized by a
"qualified domestic relations order," even if the affected Participant has not
separated from service and has not reached the "earliest retirement age" under
the Plan. For the purposes of this Section, "alternate payee," "qualified
domestic relations order" and "earliest retirement age" shall have the meaning
set forth under Code Section 414(p).

7.13 DIRECT ROLLOVER.

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<PAGE>

     A. GENERAL RULE. Notwithstanding any provision of the Plan to the contrary
that would otherwise limit a Distributee's election under this Section, a
Distributee may elect, at the time and in the manner prescribed by the
Administrator, to have any portion of an Eligible Rollover Distribution paid
directly to an Eligible Retirement Plan specified by the Distributee in a Direct
Rollover.

     B. DEFINITIONS. For purposes of this Section the following definitions
shall apply:

          (1) An "Eligible Rollover Distribution" is any distribution of all or
any portion of the balance to the credit of the Distributee, except that an
Eligible Rollover Distribution does not include: any distribution that is one of
a series of substantially equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the Distributee or the joint
lives (or joint life expectancies) of the Distributee and the Distributee's
designated beneficiary, or for a specified period of ten years or more; any
distribution to the extent such distribution is required under Code Section
401(a)(9); and the portion of any distribution that is not includable in gross
income (determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities) and hardship withdrawals as
defined in Code Section 401(k)(2)(B)(i)(IV) which are attributable to the
Participant's elective contributions under Treasury Regulation section
1.401(k)-1(d)(2)(ii).

          (2) An "Eligible Retirement Plan" is an individual retirement account
described in Code Section 408(a), an individual retirement annuity described in
Code Section 408(b), an annuity plan described in Code Section 403(a), or a
qualified trust described in Code Section 401(a), that accepts the Distributee's
Eligible Rollover Distribution. However, in the case of an Eligible Rollover
Distribution to the surviving spouse, an Eligible Retirement Plan is an
individual retirement account or individual retirement annuity. 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 and 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 relations order, as defined in
Section 414(p) of the Code.

          (3) A "Distributee" includes an Employee or former Employee. In
addition, the Employee's or former Employee's surviving spouse and the
Employee's or former Employee's spouse or former spouse who is the alternate
payee under a qualified domestic relations order, as defined in Code Section
414(p), are Distributees with regard to the interest of the spouse or former
spouse.

          (4) A "Direct Rollover" is a payment by the plan to the Eligible
Retirement Plan specified by the Distributee.

                                  ARTICLE VIII
                                     TRUSTEE

                                       39

<PAGE>

8.1  RESPONSIBILITIES OF THE TRUSTEE.

     A. GENERAL RESPONSIBILITIES. The Trustee shall have the following
categories of responsibilities:

          (1) Consistent with the "funding policy and method" determined by the
Employer, to invest, manage, and control the Plan assets subject, however, to
the direction of an Investment Manager if the Trustee should appoint such
manager as to all or a portion of the assets of the Plan; and

          (2) At the direction of the Administrator, to pay benefits required
under the Plan to be paid to Participants, or, in the event of their death, to
their Beneficiaries; and

          (3) To maintain records of receipts and disbursements and furnish to
the Employer and/or Administrator for each Plan Year a written annual report per
Section 8.7.

     B. AUTHORIZATION. If there shall be more than one Trustee, they shall act
by a majority of their number, but may authorize one or more of them to sign
papers on their behalf.

8.2  INVESTMENT POWERS AND DUTIES OF THE TRUSTEE.

     A. IN GENERAL. Consistent with the definition of the term "Employee Stock
Ownership Plan" at Section 4975(e) of the Code, the Trustee shall invest and
reinvest the Trust Fund primarily in Company Stock, unless the Trustee concludes
that it would be imprudent to do so. The Trustee shall invest and reinvest the
Trust Fund to keep the Trust Fund invested without distinction between principal
and income and in such securities or property, real or personal, wherever
situated, as the Trustee shall deem advisable, including, but not limited to,
stocks, common or preferred, bonds and other evidences of indebtedness or
ownership, and real estate or any interest therein. The Trustee shall at all
times in making investments of the Trust Fund consider, among other factors, the
short and long-term financial needs of the Plan on the basis of information
furnished by the Employer. In making such investments, the Trustee shall not be
restricted to securities or other property of the character expressly authorized
by the applicable law for trust investments; however, the Trustee shall give due
regard to any limitations imposed by the Code or the Act so that at all times
the Plan may qualify as an Employee Stock Ownership Plan and Trust.

     B. USE OF TRUST COMPANY. The Trustee may employ a bank or trust company
pursuant to the terms of its usual and customary bank agency agreement, under
which the duties of such bank or trust company shall be of a custodial, clerical
and record-keeping nature.

     C. REGISTRATION. In the event the Trustee invests any part of the Trust
Fund, pursuant to the directions of the Administrator, in any shares of stock
issued by the Employer, and the Administrator thereafter directs the Trustee to
dispose of such investment, or any part thereof, under circumstances which, in
the opinion of counsel for the Trustee, require registration of the securities
under the Securities Act of 1933 and/or qualification of the securities under
the

                                       40

<PAGE>

Blue Sky laws of any state or states, then the Employer at its own expense, will
take or cause to be taken any and all such action as may be necessary or
appropriate to effect such registration and/or qualification.

8.3  OTHER POWERS OF THE TRUSTEE.

     A. IN GENERAL. The Trustee, in addition to all powers and authorities under
common law, statutory authority, including the Act, and other provisions of the
Plan, shall have the following powers and authorities, to be exercised in the
Trustee's sole discretion:

          (1) To purchase, or subscribe for, any securities or other property
and to retain the same. In conjunction with the purchase of securities, margin
accounts may be opened and maintained;

          (2) To sell, exchange, convey, transfer, grant options to purchase, or
otherwise dispose of any securities or other property held by the Trustee, by
private contract or at public auction. No person dealing with the Trustee shall
be bound to see to the application of the purchase money or to inquire into the
validity, expediency, or propriety of any such sale or other disposition, with
or without advertisement;

          (3) To vote upon any stocks, bonds, or other securities; to give
general or special proxies or powers of attorney with or without power of
substitution; to exercise any conversion privileges, subscription rights or
other options, and to make any payments incidental thereto; to oppose, or to
consent to, or otherwise participate in, corporate reorganizations or other
changes affecting corporate securities, and to delegate discretionary powers,
and to pay any assessments or charges in connection therewith; and generally to
exercise any of the powers of an owner with respect to stocks, bonds,
securities, or other property;

          (4) To cause any securities or other property to be registered in the
Trustee's own name or in the name of one or more of the Trustee's nominees, and
to hold any investments in bearer form, but the books and records of the Trustee
shall at all times show that all such investments are part of the Trust Fund;

          (5) To borrow or raise money for the purposes of the Plan in such
amount, and upon such terms and conditions, as the Trustee shall deem advisable;
and for any sum so borrowed, to issue a promissory note as Trustee, and to
secure the repayment thereof by pledging all, or any part, of the Trust Fund;
and no person lending money to the Trustee shall be bound to see to the
application of the money lent or to inquire into the validity, expediency, or
propriety of any borrowing;

          (6) To keep such portion of the Trust Fund in cash or cash balances as
the Trustee may, from time to time, deem to be in the best interests of the
Plan, without liability for interest thereon;

                                       41

<PAGE>

          (7) To accept and retain for such time as the Trustee may deem
advisable any securities or other property received or acquired as Trustee
hereunder, whether or not such securities or other property would normally be
purchased as investments hereunder;

          (8) 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;

          (9) To settle, compromise, or submit to arbitration any claims, debts,
or damages due or owing to or from the Plan, to commence or defend suits or
legal or administrative proceedings, and to represent the Plan in all suits and
legal and administrative proceedings;

          (10) To employ suitable agents and counsel and to pay their reasonable
expenses and compensation, and such agent or counsel may or may not be agent or
counsel for the Employer;

          (11) To invest funds of the Trust in time deposits or savings accounts
bearing a reasonable rate of interest in the Trustee's bank;

          (12) To invest in Treasury Bills and other forms of United States
government obligations;

          (13) To invest in shares of investment companies registered under the
Investment Company Act of 1940;

          (14) To deposit monies in federally insured savings accounts or
certificates of deposit in banks or savings and loan associations;

          (15) To vote Company Stock as provided in Section 8.4;

          (16) To consent to or otherwise participate in reorganizations,
recapitalizations, consolidations, mergers and similar transactions with respect
to Company Stock or any other securities and to pay any assessments or charges
in connection therewith;

          (17) To deposit such Company Stock (but only if such deposit does not
violate the provisions of the Plan) or other securities in any voting trust, or
with any protective or like committee, or with a trustee or with depositories
designated thereby;

          (18) To sell or exercise any options, subscription rights and
conversion privileges and to make any payments incidental thereto;

          (19) To exercise any of the powers of an owner, with respect to such
Company Stock and other securities or other property comprising the Trust Fund.
The Administrator, with the Trustee's approval, may authorize the Trustee to act
on any administrative matter or class of

                                       42

<PAGE>

matters with respect to which direction or instruction to the Trustee by the
Administrator is called for hereunder without specific direction or other
instruction from the Administrator;

          (20) To sell, purchase and acquire put or call options if the options
are traded on and purchased through a national securities exchange registered
under the Securities Exchange Act of 1934, as amended, or, if the options are
not traded on a national securities exchange, are guaranteed by a member firm of
the New York Stock Exchange;

          (21) To do all such acts and exercise all such rights and privileges,
although not specifically mentioned herein, as the Trustee may deem necessary to
carry out the purposes of the Plan.

     B. PROHIBITION. The Trustee shall not take any action which would
jeopardize the Plan's status as an ESOP.

     C. EXECUTION AUTHORITY. In the event there are two or more Trustees, they
shall act by a consensus, but may authorize whichever Trustee is available to
sign all papers on their behalf.

8.4  VOTING COMPANY STOCK.

     Shares of Company Stock in the Trust shall be voted by the Trustee as the
Trustee deems prudent, without soliciting direction from Participants or
Beneficiaries, to the fullest extent permitted by Section 409(e) of the Code.
Shares of Company Stock in the Trust shall be voted by the Trustee in accordance
with directions from each Participant or Beneficiary, who shall be entitled to
direct the voting (only to the extent required by Code Section 409(e)(3)) of all
shares of Company Stock then allocated to his Company Stock Account. Each
Participant or Beneficiary shall be furnished with copies of the notice of each
shareholders' meeting and the proxy or other materials provided to Employer
shareholders, together with a form on which voting directions may be given. Any
allocated Company Stock with respect to which voting directions are not timely
given shall be voted by the Trustee. Shares of Company Stock held by the Trust
which are not then allocated to Participants' Company Stock Accounts shall be
voted in the manner determined by the Trustee. Nothing in this Plan shall confer
upon any person any voting rights with respect to shares of Company Stock that
is not provided for under the Articles of Incorporation of the issuer thereof
and the laws of the state of incorporation of such issuer.

     For purposes of voting shares of Company Stock, as directed by the
Participants and/or Beneficiaries, pursuant to this Section and Section 409(e)
of the Code, the following procedures shall apply:

     A. The Administrator shall provide the following information and/or
documents to each Participant with a Company Stock Account:

          (1) the number of shares of Company Stock allocated to such
Participant's Company Stock Account,

                                       43

<PAGE>

          (2) a ballot identifying the Participant and each proposed action for
or against which the Participant is entitled to direct the Trustee to vote,

          (3) a return envelope addressed to the Trustee,

          (4) a copy of all information that is provided to shareholders of
Company Stock,

          (5) unless the Trustee concludes that such information is not
appropriate, such other information that the Administrator reasonably believes
is necessary to enable the Participant to make an informed choice of the manner
in which to direct the Trustee to vote the number of shares of Company Stock
allocated to the Participant's Company Stock Account,

          (6) the date by which the Participant must return the ballot to the
Trustee with the Participant's direction in order for the Participant to
exercise his right to direct the Trustee to vote the number of shares and any
fractional share allocated to that Participant's Company Stock Account.

     B. The Administrator shall provide the Trustee with the following:

          (1) the names, addresses and social security numbers of all
Participants that have a Company Stock Account,

          (2) the number of shares and any fractional share allocated to each
Participant Company Stock Account, and

          (3) a copy of all information and/or documents provided to
Participants pursuant to Section 8.4A.

     C. The Trustee shall develop and implement such procedures as it deems
necessary or appropriate to safeguard the confidentiality of all information
relating to the exercise of voting rights passed through to the Participant
pursuant to this Section 8.4.

     D. Based on the ballots received from the Participants by the date
specified in subsection 8.4A. above, and the number of shares and any fractional
share allocated to each Participant Company Stock Account, the Trustee shall
determine the aggregate number of shares and any fractional share as to which
the Trustee is directed to vote for or against each proposed action. The shares
as to which the Trustee is directed to vote for or against a proposed action
shall be designated as Directed Shares. Any shares and fractional shares
allocated to Participants who do not return their ballots to the Trustee by the
specified date shall be designated as Undirected Shares.

     E. The Trustee shall vote the Directed Shares for or against each proposed
action as directed by the Participants. In the event that the aggregate of
Directed Shares for or against a proposed action includes a fractional share,
the Trustee shall treat such fractional shares as follows: A fractional share
constituting less than one-half of one share shall be disregarded; a

                                       44

<PAGE>

fractional share constituting one-half or more of one share shall be treated as
a full share.

     F. The Trustee shall vote the Undirected Shares with respect to a proposed
action in the manner that the Trustee determines to be in the best interest of
Participants (within the meaning of Section 404(a) of the Act). In the event
that the aggregate of the Undirected Shares includes a fractional share, then
the Trustee shall treat such fractional share as follows: A fractional share
constituting less than one-half of one share shall be disregarded; a fractional
share constituting one-half or more of one share shall be treated as a full
share.

8.5  DUTIES OF THE TRUSTEE REGARDING PAYMENTS.

     A. DISTRIBUTIONS. The Trustee shall make distributions from the Trust Fund
at such times and in such numbers of shares or other units of Company Stock and
amounts of cash to or for the benefit of the person entitled thereto under the
Plan as the Administrator directs in writing. Any undistributed part of a
Participant's interest in his accounts shall be retained in the Trust Fund until
the Administrator directs its distribution. Where distribution is directed in
Company Stock, the Trustee shall cause an appropriate certificate to be issued
to the person entitled thereto and mailed to the address furnished it by the
Administrator. Any portion of a Participant's Account to be distributed in cash
shall be paid by the Trustee mailing its check to the same person at the same
address. If a dispute arises as to who is entitled to or should receive any
benefit or payment, the Trustee may withhold or cause to be withheld such
payment until the dispute has been resolved.

     B. PAYMENTS. As directed by the Administrator, the Trustee shall make
payments out of the Trust Fund. Such directions or instructions need not specify
the purpose of the payments so directed and the Trustee shall not be responsible
in any way respecting the purpose or propriety of such payments except as
mandated by the Act.

     C. MISSING PAYEES. In the event that any distribution or payment directed
by the Administrator shall be mailed by the Trustee to the person specified in
such direction at the latest address of such person filed with the
Administrator, and shall be returned to the Trustee because such person cannot
be located at such address, the Trustee shall promptly notify the Administrator
of such return. Upon the expiration of sixty (60) days after such notification,
such direction shall become void and unless and until a further direction by the
Administrator is received by the Trustee with respect to such distribution or
payment, the Trustee shall thereafter continue to administer the Trust as if
such direction had not been made by the Administrator. The Trustee shall not be
obligated to search for or ascertain the whereabouts of any such person.

8.6  TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES.

     The Trustee shall be paid such reasonable compensation as shall from time
to time be agreed upon in writing by the Employer and the Trustee. An individual
serving as Trustee who already receives full-time pay from the Employer shall
not receive compensation from the Plan. In addition, the Trustee shall be
reimbursed for any reasonable expenses, including reasonable counsel fees
incurred by it as Trustee. Such compensation and expenses shall be paid from the
Trust Fund unless paid or advanced by the Employer. All taxes of any kind and
all kinds

                                       45

<PAGE>

whatsoever that may be levied or assessed under existing or future laws upon, or
in respect of, the Trust Fund or the income thereof, shall be paid from the
Trust Fund. In the event that the Trust Fund does not have assets (other than
Company Stock) sufficient to pay expenses, the Trustee shall request that such
expenses be paid by the Employer. The right of the Trustee to be reimbursed for
reasonable expenses shall extend to a Trustee who has resigned or has been
removed, to the extent that such reasonable expenses are or have been incurred
(whether before or after resignation or removal) in connection with the
appropriate discharge of a Trustee's fiduciary responsibilities under the terms
of the Plan or applicable law.

8.7  ANNUAL REPORT OF THE TRUSTEE.

     A. GENERAL REQUIREMENTS. Within a reasonable period of time after the later
of the Anniversary Date or receipt of the Employer's contribution for each Plan
Year, the Trustee shall furnish to the Employer and Administrator a written
statement of account with respect to the Plan Year for which such contribution
was made setting forth:

          (1) the net income, or loss, of the Trust Fund;

          (2) the gains, or losses, realized by the Trust Fund upon sales or
other disposition of the assets;

          (3) the increase, or decrease, in the value of the Trust Fund;

          (4) all payments and distributions made from the Trust Fund; and

          (5) such further information as the Trustee and/or Administrator deems
appropriate.

     B. EMPLOYER ACKNOWLEDGEMENT. The Employer, forthwith upon its receipt of
each such statement of account, shall acknowledge receipt thereof in writing and
advise the Trustee and/or Administrator of its approval or disapproval thereof.
Failure by the Employer to disapprove any such statement of account within
thirty (30) days after its receipt thereof shall be deemed an approval thereof.
The approval by the Employer of any statement of account shall be binding as to
all matters embraced therein as between the Employer and the Trustee to the same
extent as if the account of the Trustee had been settled by judgment or decree
in an action for a judicial settlement of its account in a court of competent
jurisdiction in which the Trustee, the Employer and all persons having or
claiming an interest in the Plan were parties; provided, however, that nothing
herein contained shall deprive the Trustee of its right to have its accounts
judicially settled if the Trustee so desires.

8.8  AUDIT.

     A. USE OF ACCOUNTANTS. If an audit of the Plan's records shall be required
by the Act and the regulations thereunder for any Plan Year, the Administrator
shall direct the Trustee to engage on behalf of all Participants an independent
qualified public accountant for that purpose. Such accountant shall, after an
audit of the books and records of the Plan in

                                       46

<PAGE>

accordance with generally accepted auditing standards, within a reasonable
period after the close of the Plan Year, furnish to the Administrator and the
Trustee a report of his audit setting forth his opinion as to whether any
statements, schedules or lists that are required by Act Section 103 or the
Secretary of Labor to be filed with the Plan's annual report, are presented
fairly in conformity with generally accepted accounting principles applied
consistently. All auditing and accounting fees shall be an expense of and may,
at the election of the Administrator, be paid from the Trust Fund.

     B. ACTIONS REQUIRED BY BANK/INSURANCE COMPANY. If some or all of the
information necessary to enable the Administrator to comply with Act Section 103
is maintained by a bank, insurance company, or similar institution, regulated
and supervised and subject to periodic examination by a state or federal agency,
it shall transmit and certify the accuracy of that information to the
Administrator as provided in Act Section 103(b) within one hundred twenty (120)
days after the end of the Plan Year or by such other date as may be prescribed
under regulations of the Secretary of Labor.

8.9  RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE.

     A. WRITTEN NOTICE. The Trustee may resign at any time by delivering to the
Employer, at least thirty (30) days before its effective date, a written notice
of his resignation.

     B. REMOVAL. The Employer may remove the Trustee by mailing by registered or
certified mail, addressed to such Trustee at his last known address, at least
thirty (30) days before its effective date, a written notice of his removal.

     C. APPOINTMENT OF SUCCESSOR. Upon the death, resignation, incapacity, or
removal of any Trustee, a successor may be appointed by the Employer; and such
successor, upon accepting such appointment in writing and delivering same to the
Employer, shall, without further act, become vested with all the estate, rights,
powers, discretions, and duties of his predecessor with like respect as if he
were originally named as a Trustee herein. Until such a successor is appointed,
the remaining Trustee or Trustees shall have full authority to act under the
terms of the Plan.

     D. AUTOMATIC SUCCESSOR. The Employer may designate one or more successors
prior to the death, resignation, incapacity, or removal of a Trustee. In the
event a successor is so designated by the Employer and accepts such designation,
the successor shall, without further act, become vested with all the estate,
rights, powers, discretions, and duties of his predecessor with the like effect
as if he were originally named as Trustee herein immediately upon the death,
resignation, incapacity, or removal of his predecessor.

     E. STATEMENT OF ACCOUNT. Whenever any Trustee hereunder ceases to serve as
such, he shall furnish to the Employer and Administrator a written statement of
account with respect to the portion of the Plan Year during which he served as
Trustee. This statement shall be either (i) included as part of the annual
statement of account for the Plan Year required under Section 8.7 or (ii) set
forth in a special statement. Any such special statement of account should be
rendered to the Employer no later than the due date of the annual statement of
account for the

                                       47

<PAGE>

Plan Year. The procedures set forth in Section 8.7 for the approval by the
Employer of annual statements of account shall apply to any special statement of
account rendered hereunder and approval by the Employer of any such special
statement in the manner provided in Section 8.7 shall have the same effect upon
the statement as the Employer's approval of an annual statement of account. No
successor to the Trustee shall have any duty or responsibility to investigate
the acts or transactions of any predecessor who has rendered all statements of
account required by Section 8.7 and this subparagraph.

8.10 TRANSFER OF INTEREST.

     Notwithstanding any other provision contained in this Plan, the Trustee at
the direction of the Administrator shall transfer the Vested Account, if any, of
such Participant in his account to another trust forming part of a pension,
profit sharing or stock bonus plan maintained by such Participant's new employer
and represented by such employer in writing as meeting the requirements of Code
Section 401(a), provided that the trust to which such transfers are made permits
the transfer to be made.

                                   ARTICLE IX
                       AMENDMENT, TERMINATION AND MERGERS

9.1  AMENDMENT.

     A. GENERAL. The Employer shall have the right at any time to amend the
Plan, subject to the limitations of this Section. Any such amendment shall be
adopted by formal action of the Employer's Board of Directors and executed by an
officer authorized to act on behalf of the Employer. However, any amendment
which affects the rights, duties or responsibilities of the Trustee and
Administrator may only be made with the Trustee's and Administrator's written
consent. Any such amendment shall become effective as provided therein upon its
execution. The Trustee shall not be required to execute any such amendment
unless the Trust provisions contained herein are a part of the Plan and the
amendment affects the duties of the Trustee hereunder.

     B. PROHIBITED AMENDMENT.

          (1) No amendment to the Plan shall be effective if it authorizes or
permits any part of the Trust Fund (other than such part as is required to pay
taxes and administration expenses) to be used for or diverted to any purpose
other than for the exclusive benefit of the Participants or their Beneficiaries
or estates; or causes any reduction in the amount credited to the account of any
Participant; or causes or permits any portion of the Trust Fund to revert to or
become property of the Employer.

          (2) Except as permitted by Code Section 411(d)(6)(C) or by Treasury
Regulations, no Plan amendment or transaction having the effect of a Plan
amendment (such as a merger, plan transfer or similar transaction) shall be
effective to the extent it eliminates or reduces any "Section 411(d)(6)
protected benefit" or adds or modifies conditions relating to

                                       48

<PAGE>

"Section 411(d)(6) protected benefits" the result of which is a further
restriction on such benefit unless such protected benefits are preserved with
respect to benefits accrued as of the later of the adoption date or effective
date of the amendment. "Section 411(d)(6) protected benefits" are benefits
described in Code Section 411(d)(6)(A), early retirement benefits and
retirement-type subsidies, and optional forms of benefit.

          (3) No such amendment shall have the effect of terminating the
protections and rights set forth in Section 7.11, unless such termination shall
then be permitted under the applicable provisions of the Code and Treasury
Regulations; such a termination is currently expressly prohibited by Treasury
Regulation 54.4975-ll(a)(3)(ii).

9.2  TERMINATION.

     The Employer shall have the right at any time to terminate the Plan by
delivering to the Trustee and Administrator written notice of such termination.
Upon any full or partial termination, all amounts credited to the affected
Participants' Accounts shall become 100% Vested and shall not thereafter be
subject to forfeiture, and all unallocated amounts shall be allocated to the
accounts of all Participants in accordance with the provisions hereof. Upon the
full termination of the Plan, the Employer shall direct the distribution of the
assets of the Trust Fund to Participants in a manner which is consistent with
and satisfies the provisions of Sections 7.5 and 7.6. Except as permitted by
Code Section 411(d)(6)(C) or by Treasury Regulations, the termination of the
Plan shall not result in the reduction of "Section 411(d)(6) protected benefits"
in accordance with Section 9.1.

9.3  MERGER OR CONSOLIDATION.

     The Plan and Trust may be merged or consolidated with, or its assets and/or
liabilities may be transferred to any other plan and trust only if the benefits
which would be received by a Participant of this Plan, in the event of a
termination of the plan immediately after such transfer, merger or
consolidation, are at least equal to the benefits the Participant would have
received if the Plan had terminated immediately before the transfer, merger or
consolidation.

                                    ARTICLE X
                                  MISCELLANEOUS

10.1 PARTICIPANT'S RIGHTS.

     The Plan shall not be deemed to constitute a contract between the Employer
and any Participant or to be a consideration or an inducement for the employment
of any Participant or Employee. Nothing contained in this Plan shall be deemed
to give any Participant or Employee the right to be retained in the service of
the Employer or to interfere with the right of the Employer to discharge any
Participant or Employee at any time regardless of the effect which such
discharge shall have upon him as a Participant of this Plan.

10.2 ALIENATION.

                                       49

<PAGE>

     Subject to Code Section 401(a)(13)(C), no benefit which shall be payable
out of the Trust Fund to any person (including a Participant or his Beneficiary)
shall be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, or charge, and any attempt to anticipate,
alienate, sell, transfer, assign, pledge, encumber, or charge the same shall be
void; and no such benefit shall in any manner be liable for, or subject to, the
debts, contracts, liabilities, engagements, or torts of any such person, nor
shall it be subject to attachment or legal process for or against such person,
and the same shall not be recognized by the Trustee, except to such extent as
may be required by law.

     This provision shall not apply to a "qualified domestic relations order"
defined in Code Section 414(p), and those other domestic relations orders
permitted to be so treated by the Administrator under the provisions of the
Retirement Equity Act of 1984. The Administrator shall establish a written
procedure to determine the qualified status of domestic relations orders and to
administer distributions under such qualified orders. Further, to the extent
provided under a "qualified domestic relations order," a former spouse of a
Participant shall be treated as the spouse or surviving spouse for all purposes
under the Plan.

10.3 CONSTRUCTION OF PLAN.

     This Plan and Trust shall be construed and enforced according to the Act
and the laws of the State of Maryland, other than its laws respecting choice of
law, to the extent not preempted by the Act.

10.4 GENDER AND NUMBER.

     Wherever any words are used herein in the masculine, feminine or neuter
gender, they shall be construed as though they were also used in another gender
in all cases where they would so apply, and whenever any words are used herein
in the singular or plural form, they shall be construed as though they were also
used in the other form in all cases where they would so apply.

10.5 LEGAL ACTION.

     In the event any claim, suit, or proceeding is brought regarding the Trust
and/or Plan established hereunder to which the Trustee or the Administrator may
be a party alleging a breach of any responsibility, obligation, or duty by the
Trustee or Administrator, they shall be entitled to be reimbursed from the Trust
Fund for reasonable costs, attorney's fees, and other reasonable expenses
pertaining thereto incurred by them for which they have become liable (unless
such fees or expenses are paid by the Employer in accordance with the provisions
of Section 8.6).

     Any fees or expenses associated with any other claim, suit, or proceeding
which is brought regarding the Trust and/or Plan established hereunder to which
the Trustee or the Administrator is a party shall be paid or reimbursed in
accordance with the provisions of Section 8.6.

                                       50

<PAGE>

10.6 PROHIBITION AGAINST DIVERSION OF FUNDS.

     A. EXCLUSIVE BENEFIT. Except as provided below and otherwise specifically
permitted by law, it shall be impossible by operation of the Plan or of the
Trust, by termination of either, by power of revocation or amendment, by the
happening of any contingency, by collateral arrangement or by any other means,
for any part of the corpus or income of any trust fund maintained pursuant to
the Plan or any funds contributed thereto to be used for, or diverted to,
purposes other than the exclusive benefit of Participants, Retired Participants,
or their Beneficiaries.

     B. RETURN OF EXCESSIVE CONTRIBUTION. In the event the Employer shall make
an excessive contribution under a mistake of fact pursuant to Act Section
403(c)(2)(A), the Employer may demand repayment of such excessive contribution
at any time within one (1) year following the time of payment and the Trustees
shall return such amount to the Employer within the one (1) year period.
Earnings of the Plan attributable to the excess contributions may not be
returned to the Employer but any losses attributable thereto must reduce the
amount so returned.

10.7 BONDING.

     Every Fiduciary, except a bank or an insurance company, unless exempted by
the Act and regulations thereunder, shall be bonded in an amount not less than
10% of the amount of the funds such Fiduciary handles; provided, however, that
the minimum bond shall be $1,000 and the maximum bond, $500,000. The amount of
funds handled shall be determined at the beginning of each Plan Year by the
amount of funds handled by such person, group, or class to be covered and their
predecessors, if any, during the preceding Plan Year, or if there is no
preceding Plan Year, then by the amount of the funds to be handled during the
then current year. The bond shall provide protection to the Plan against any
loss by reason of acts of fraud or dishonesty by the Fiduciary alone or in
connivance with others. The surety shall be a corporate surety company (as such
term is used in Act Section 412(a)(2)), and the bond shall be in a form approved
by the Secretary of Labor. Notwithstanding anything in the Plan to the contrary,
the cost of such bonds shall be an expense of and may, at the election of the
Administrator, be paid from the Trust Fund or by the Employer.

10.8 RECEIPT AND RELEASE FOR PAYMENTS.

     Any payment to any Participant, his legal representative, Beneficiary, or
to any guardian or committee appointed for such Participant or Beneficiary in
accordance with the provisions of the Plan, shall, to the extent thereof, be in
full satisfaction of all claims hereunder against the Trustee and the Employer,
either of whom may require such Participant, legal representative, Beneficiary,
guardian or committee, as a condition precedent to-such payment, to execute a
receipt and release thereof in such form as shall be determined by the Trustee
or Employer.

10.9 ACTION BY THE EMPLOYER.

     Whenever the Employer under the terms of the Plan is permitted or required
to do or perform any act or matter or thing, it shall be done and performed by a
person duly authorized by

                                       51

<PAGE>

its legally constituted authority.

10.10 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY.

     The "named fiduciaries" of this Plan are (1) the Employer, (2) the
Administrator (3) the Trustee, and (4) the Investment Manager. The named
fiduciaries shall have only those specific powers, duties, responsibilities, and
obligations as are specifically given them under the Plan. In general, the
Employer shall have the sole responsibility for making the contributions
provided for under Section 4.1; and shall have the sole authority to appoint and
remove the Trustee and the Administrator; to formulate the Plan's "funding
policy and method"; and to amend or terminate, in whole or in part, the Plan.
The Administrator shall have the sole responsibility for the administration of
the Plan, which responsibility is specifically described in the Plan. The
Trustee shall have the sole responsibility of management of the assets held
under the Trust, except those assets, the management of which has been assigned
to an Investment Manager, who shall be solely responsible for the management of
the assets assigned to it, all as specifically provided in the Plan.

     Each named fiduciary warrants that any directions given, information
furnished, or action taken by it shall be in accordance with the provisions of
the Plan, authorizing or providing for such direction, information or action.
Furthermore, each named fiduciary may rely upon any such direction, information
or action of another named fiduciary as being proper under the Plan, and is not
required under the Plan to inquire into the propriety of any such direction,
information or action. It is intended under the Plan that each named fiduciary
shall be responsible for the proper exercise of its own powers, duties,
responsibilities and obligations under the Plan. No named fiduciary shall
guarantee the Trust Fund in any manner against investment loss or depreciation
in asset value. Any person or group may serve in more than one Fiduciary
capacity. In the furtherance of their responsibilities hereunder, the "named
fiduciaries" shall be empowered to interpret the Plan and Trust and to resolve
ambiguities, inconsistencies and omissions, which findings shall be binding,
final and conclusive.

10.11 HEADINGS.

     The headings and subheadings of this Plan have been inserted for
convenience of reference and are to be ignored in any construction of the
provisions hereof.

10.12 APPROVAL BY INTERNAL REVENUE SERVICE.

     Notwithstanding any provisions to the contrary, any contribution by the
Employer to the Trust Fund is conditioned upon the deductibility of the
contribution by the Employer under the Code and, to the extent any such
deduction is disallowed, the Employer may, within one (1) year following the
disallowance of the deduction, demand repayment of such disallowed contribution
and the Trustee shall return such contribution within one (1) year following the
disallowance. Earnings of the Plan attributable to the excess contribution may
not be returned to the Employer, but any losses attributable thereto must reduce
the amount so returned.

                                       52

<PAGE>

10.13 UNIFORMITY.

     All provisions of this Plan shall be interpreted and applied in a uniform,
nondiscriminatory manner. In the event of any conflict between the terms of this
Plan and any contract purchased hereunder, the Plan provisions shall control.

     IN WITNESS WHEREOF, this Plan has been executed the day and year first
above written.

ATTEST:                                   BANKS OF THE CHESAPEAKE, INC.

                                          By:
----------------------------------            ----------------------------------

WITNESS:

----------------------------------        --------------------------------------
                                          H. Allen Becker, Trustee

WITNESS:

----------------------------------        --------------------------------------
                                          R. Thomas Jefferson, Trustee

WITNESS:

----------------------------------        --------------------------------------
                                          Donald Alan Thorson, Trustee

                                       53

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