Document:

Exhibit 10.5

 

BRADFORD BANK

STOCK-BASED DEFERRAL PLAN

 

1.             Purpose.

 

The Bradford Bank Stock-Based Deferral Plan
(the “Plan”) provides key executives and members of the Board of Directors of
Bradford Bank (the “Bank”) with the opportunity to elect to defer compensation
received from the Bank for their services and, thereby, accumulate additional
shares of the Bradford Bancorp common stock. The Plan is intended to constitute
a deferred compensation plan that satisfies the requirements of Section 409A
of the Internal Revenue Code of 1986, as amended (“Code”).

 

2.             Definitions.

 

As used in the Plan, the following terms have the
meanings indicated:

 

Board
means the Board of Directors of the Bank.

 

Change in Control is intended to have the same meaning as under Section 409A of the
Code and any regulations or guidance issued under such provision.

 

Code
means the Internal Revenue Code of 1986, as amended.

 

Committee means the [Compensation Committee]
of the Board.

 

Company means Bradford Bancorp.

 

Company Stock means the common stock of the Company.

 

 Deferred Stock Account means a bookkeeping account reflecting the
investment of a Participant’s deferred fees in Company Stock Units and any
adjustments thereto.

 

Director means a member of the Board of Directors of the Bank, the Company, or
any affiliate.

 

Effective Date means                           ,
2007.

 

Compensation means, for participating employee, the cash compensations paid by the
Bank or the Company for the performance of services and, for a Director, the
retainer fees and/or meeting fees payable in connection with his or her service
on the Board or the board of directors of the Company for any Plan Year.

 

Participant means an employee or Director who has been
designated as a Plan participant pursuant to Section 3 of the Plan.

 

Plan Year means the calendar year.

 

Separation from Service is intended to have the same meaning as under
Code section 409A and any regulations or guidance issued under such provision.

 

Stock Unit means a hypothetical share of Company Stock. Each Stock Unit held in a
Deferred Stock Account shall be deemed to have the same value, from time to
time, as a share of Company Stock.

 

 

Trust
means a trust created for the purposes specified in Section 10.

 

3.             Participation in the Plan.

 

The Board shall designate the officers and
Directors who shall be eligible to participate in the Plan as of the Effective
Date set forth in Appendix A hereto. Participation in the Plan shall commence
upon the submission of a timely deferral election form to the Committee in the
manner prescribed below.

 

4.             Fee Deferrals.

 

(a)                                  A Participant may elect to defer the payment
of Compensation (in increments of 1% up to 100%) that would otherwise be
payable during the Plan Year by completing a deferral election. A deferral
election must specify the applicable percentage of Compensation that the
Participant wishes to defer. A deferral election shall pertain to all
Compensation payable in cash during a Plan Year.

 

(b)                                 A deferral
election must be in writing and be delivered to the Bank prior to the start of
the Plan Year to which it pertains; provided, however, that a Participant who
first become eligible to participate in the Plan on or after the Effective Date
shall have 30 days to submit a deferral election covering Compensation payable
over the balance of the Plan Year. A deferral election shall be irrevocable and
may not be amended with respect to the Plan Year to which it pertains. A
deferral election may be made only for a single Plan Year or may be made
applicable to all future Plan Years until revoked. Any revocation or amendment
of a deferral election shall be effective as of the first day of the next Plan
Year after the revocation or amendment is made.

 

(c)                                  All amounts
deferred under the Plan shall be held as Stock Units. With respect to all
amounts for which a deferral election is made, the Company shall transfer such
amounts to the Trust as soon as is reasonably practicable after the time when
the Compensation otherwise would have been payable in cash to the Participant
or at such other times as the Committee, in its sole discretion, shall
determine. Thereafter, the trustee of the Trust shall determine the number of
Stock Units to be credited to an individual Participant’s Deferred Stock
Account by reference to the total number of shares of Company Stock acquired by
the Trust with the proceeds of each transfer and the proportion that the
Compensation included in such transfer bears to the total of all Compensation
transferred to the Trust.

 

5.             Stock Unit Accounting.

 

(a)                                  All Stock Units
credited to a Participant’s Deferred Stock Account shall be credited with
hypothetical cash dividends equal to the cash dividends that are declared and
paid on Company Stock. On each record date, the Bank shall determine the amount
of cash dividends to be paid per share of Company Stock. On the payment date of
such dividend, the Bank shall credit an equal amount of hypothetical cash
dividends to each Stock Unit. The hypothetical cash dividends shall be
converted into Stock Units by reference to the reinvestment of such dividends
by the trustee of the Trust as set forth in Section 7.

 

(b)                                 Stock Units may not be sold, assigned,
transferred, disposed of, pledged, hypothecated or otherwise encumbered.

 

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6.             Distribution of Accounts.

 

(a)                                  A Participant may elect the timing of
distributions from the Participant’s Deferred Stock Account. Distributions from
a Participant’s Deferred Stock Account shall commence at one of the following
specified events elected by the Participant:

 

(i)                                     the Participant’s Separation from Service for
any reason (including death); or

 

(ii)                                  a specified number of years between one year
and five years after the Participant’s Separation from Service.

 

In
addition, a Participant may make a separate election for distributions to
commence at a Change in Control.

 

(b)                                 If a Participant
does not make an election under subsection (a)(ii), distribution of the
Participant’s Deferred Stock Account shall commence at Separation from Service.
Prior to Separation from Service, a Participant who has previously elected
commencement at Separation from Service (or made no previous election) may make
one subsequent election. The subsequent election must be submitted at least
twelve months prior to Separation from Service and shall take effect twelve
months after the date on which it is submitted. The subsequent distribution
election must elect the specified time under subsection (a)(ii) as five
years after Separation from Service. The Committee may establish additional
procedures, conditions, and limitations relating to the submission of a
subsequent election.

 

(c)                                  A Participant’s Accounts shall be distributed
in a single lump sum payment, unless the Participant elects to receive a
distribution in equal annual installments over at least two and not more than
10 years.

 

(d)                                 Payment of Stock Units shall be made in whole
shares of Company Stock equal to the number of whole Stock Units. Fractional
shares shall be disregarded for distribution purposes.

 

7.             Trust.

 

(a)                                  As soon as practicable after the Effective
Date, the Bank shall establish a trust for the purposes set forth in this Plan.
The Bank from time to time transfer to the Trust cash in an amount equal to
Participant’s deferred Compensation for the purpose of acquiring shares of
Company Stock. In no event shall the Bank issue or contribute shares of Company
Stock directly to the Trust.

 

(b)                                 The Trust and its assets shall remain subject
to the claims of the Bank’s creditors. All benefit obligations under this Plan
shall be paid from the general assets of the Bank, which shall include the
assets of the Trust in the event of the Bank’s insolvency. Any interest that
the Participant may be deemed to have under this Plan may not be sold,
hypothecated or transferred (including, without limitation, transfer by gift),
except by will or the laws of descent and distribution. Shares issued to the
Trust shall be issued in the name of the trustee. The trustee shall invest all
cash dividends on Company Stock in additional shares of Company Stock. Unless
otherwise determined by the Committee, a Participant shall have the right to
direct the trustee as to the voting of the number of

 

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shares of Company Stock equal to the aggregate number of Stock Units in
the Participant’s Deferred Stock Account.

 

(c)                                  The
Bank shall bear all expenses associated with the acquisition of Company Stock
by the Trust and the maintenance of the Trust

 

8.             No Acceleration of Benefits.

 

Notwithstanding any other provision in this Plan to
the contrary, the time or schedule for any payment of a Participant’s Deferred
Stock Account under this Plan shall not be accelerated under any circumstances.

 

9.             Effect of Stock Dividends and
Other Changes to Company Stock.

 

In the event of a stock dividend, stock split or
combination of shares, recapitalization or merger in which the Company is the
surviving corporation or other change in the Company’s capital stock, the
number and kind of shares of Company Stock to be subject to the Plan and the
maximum number of shares which are authorized for distribution under the Plan
shall be appropriately adjusted by the Board, whose determination shall be
binding on all persons.

 

10.          Interpretation and
Administration of the Plan.

 

The Committee shall administer, construe and
interpret the Plan. Any decision of the Committee with respect to the Plan
shall be final, conclusive and binding upon all Participants. The Committee may
act by a majority of its members. The Committee may authorize any member of the
Committee or any officer of the Company to execute and deliver documents on
behalf of the Committee. The Committee may consult with counsel, who may be
counsel to the Bank, and shall not incur any liability for action taken in good
faith in reliance upon the advice of counsel. The Committee may designate an
officer of the Bank to be authorized to take or cause to be taken such actions
of a ministerial nature as necessary to effectuate the intent and purposes of
the Plan, including issuing Company Stock for the Plan, maintaining records of
the Plan, and arranging for distributions in accordance with this Plan
document. The Committee shall interpret this Plan for all purposes in
accordance with Code Section 409A and the regulations thereunder and any
provision of the Plan shall be deemed modified to the extent necessary to
comply with Code Section 409A and the regulations thereunder.

 

11.          Term of the Plan.

 

The Plan shall become effective as of the Effective
Date and continue in effect unless terminated by action of the Board. Any
termination of the Plan by the Board shall not alter or impair any of the
rights or obligations for any benefit previously deferred under the Plan.

 

12.          Amendment of the Plan.

 

The Board may suspend or terminate the Plan or revise
or amend the Plan in any respect; provided, any amendment or termination of the
Plan shall not adversely affect a Participant with respect to any benefit
previously deferred under the Plan.

 

13.          Rights Under the Plan.

 

The Plan shall not constitute or be evidence of any
agreement or understanding, express or implied, that the Bank will retain any
Participant as an employee or director for any period of time.

 

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14.          Beneficiary.

 

A Participant may designate in a writing delivered to
the Committee, one or more beneficiaries (which may include a trust) to receive
any distributions under the Plan after the Participant’s death. If a
Participant fails to designate a beneficiary, or no designated beneficiary
survives the Participant, any payments to be made under the Plan after death
shall be made to the personal representative of the Participant’s estate.

 

15.          Notice.

 

All notices and other communications required or
permitted to be given under this Plan shall be in writing and shall be deemed
to have been duly given if delivered personally or mailed first class, postage
prepaid, as follows: (a) if to the Bank - at its principal business
address to the attention of the Chairman of the Committee; (b) if to any
Participant - at the home address of the Participant as reflected in the
records of the Bank at the time of sending the notice or other communication.

 

16.          Construction.

 

The Plan shall be construed and enforced according to
the laws of the State of                         ,
unless federal law applies. All transactions under this Plan shall also be
subject to compliance with applicable securities laws. Headings and captions
are for convenience only and have no substantive meaning. Reference to one
gender includes the other, and references to the singular and plural include
each other.

 

17.          Special
Transition Rule.

 

A Participant in the Company’s cash-based deferred
compensation plan(s) may elect, not later than 30 days after the Effective
Date, to effect a one-time transfer of amounts accrued on their behalf under
such plan to this Plan. All transferred amounts shall thereafter be treated in
the same manner as any other Compensation deferred under this Plan and shall,
for all purposes, be subject to the provisions of this Plan.

 

5Exhibit
10.6

 

FORM OF

BRADFORD
BANK

EMPLOYEE SEVERANCE COMPENSATION PLAN

 

A.                                    Purpose.

 

The primary purpose of the Bradford Bank Employee Severance Compensation
Plan (the “Plan”) is to ensure the successful continuation of the business of
Bradford Bank (the “Bank”) and the fair and equitable treatment of the Bank’s
employees following a Change in Control (as defined below).

 

B.            Covered Employees.

 

Subject to paragraph C below, any employee of the Bank with at least one year of service as of his or her
termination date shall be eligible to receive a Change in Control Severance
Benefit (as defined below) if, within the period beginning on the effective
date of a Change in Control and ending on the first anniversary of such date,
(i) the employee’s employment with the Bank is involuntarily terminated or (ii)
the employee terminates employment with the Bank voluntarily after being
offered continued employment in a position that is not a Comparable Position
(as defined below).

 

C.                                    Limitations on Eligibility
for Change in Control Severance Benefits or Management Restructuring Benefits.

 

(1)                                  No employee shall be eligible for a Change in
Control Severance Benefit if (a) his or her employment is terminated for “Cause,”
(b) he or she is offered a Comparable Position and declines to accept such
position, or (c) the employee is, at the time of termination of
employment, a party to an individual employment agreement or change in control
agreement with the Bank and/or Bradford Bancorp, Inc. (the “Company”).

 

(2)                                  For purposes of
this Plan, a termination of employment for “Cause” shall include termination
because of the employee’s personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule, or
regulation (other than traffic violations or similar offenses) or final
cease-and-desist order, or material breach of any provision of the Plan.

 

(3)                                  For purposes of this Plan, a “Comparable
Position” shall mean a position that would (a) provide the employee with
base compensation and benefits that are comparable in the aggregate to those
provided to the employee prior to the Change in Control; (b) provide the
employee with an opportunity for variable bonus compensation that is comparable
to the opportunity provided to the employee prior to the Change in Control; (c)
be in a location that would not require the employee to increase his or her
daily one way commuting distance by more than thirty-five (35) miles as compared
to the employee’s commuting distance immediately prior to the Change in
Control; and (d) have job skill requirements and duties that are comparable to
the requirements and duties of the position held by the employee prior to the
Change in Control.

 

 

D.            Definitions of Change in
Control.

 

 For purposes of this Plan, “Change in
Control” means the occurrence of any one of the following events:

 

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

 

(2)                                  Acquisition
of Significant Share Ownership:   A
report on Schedule 13D or another form or schedule (other than Schedule 13G) is
filed or required to be filed under Sections 13(d) or 14(d) of the Securities
Exchange Act of 1934, if the schedule discloses that the filing person or
persons acting in concert has or have become the beneficial owner(s) of 25% or
more of a class of the Company’s voting securities, but this clause (2) shall
not apply to beneficial ownership of Company voting shares held in a fiduciary
capacity by an entity of which the Company directly or indirectly beneficially
owns 50% or more of its outstanding voting securities;

 

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

 

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

 

E.             Determination of the Change
in Control Severance Benefit.

 

(1)                                  The Change in Control Severance Benefit
payable to an eligible employee under this Plan shall be determined under the
following schedule:

 

(a)                                  An eligible employee who does
not receive a benefit pursuant to paragraph (b) of this Section shall receive a
Change in Control Severance Benefit equal to the product of (i) the employee’s
years of service from his or her hire date (including partial years) through
the termination date and (ii) an amount equal to two (2) weeks of the employee’s
Base Compensation (as defined below). A “year of service” shall mean each
12-month period of service following an employee’s hire date determined without
regard the number of hours worked during such period(s). The minimum payment to
an eligible employee under this paragraph shall be an amount equal to two (2)
weeks of Base Compensation and the maximum payment to an eligible employee
shall be an amount equal to six (6) months of Base Compensation.

 

2

 

(b)                                 An
eligible employee-officer designated by the Board of Directors prior to a
Change in Control shall receive a Change
in Control Severance Benefit equal to twelve (12) months of Base
Compensation.

 

(c)                                  The
Change in Control Severance Benefit shall be paid in a lump sum not later than
five (5) business days after the date of the employee’s termination of
employment.

 

(2)                                  For purpose of determinations
under this paragraph E, “Base Compensation” shall mean:

 

(a)                                  For salaried employees, the
employee’s annual base salary at the rate in effect on his or her termination
date or, if greater, the rate in effect on the date immediately preceding the
Change in Control.

 

(b)                                 For employees whose
compensation is determined in whole or in part on the basis of commission
income, the employee’s base salary at termination (or, if greater, the employee’s
base salary on the date immediately preceding the effective date of the Change
in Control), if any, plus the commissions earned by the employee in the twelve
(12) full calendar months preceding his or her termination date (or, if
greater, the commissions earned in the twelve (12) full calendar months
immediately preceding the effective date of the Change in Control).

 

(c)                                  For hourly employees, the
employee’s total hourly wages for the twelve (12) full calendar months
preceding his or her termination date or, if greater, the twelve (12) full
calendar months preceding the effective date of the Change in Control.

 

F.             Withholding.

 

All payments will be subject
to customary withholding for federal, state and local tax purposes.

 

G.            Parachute Payment.

 

Notwithstanding anything
in this Plan to the contrary, if a Change in Control Severance Benefit to an
employee who is a “Disqualified Individual” shall be in an amount which
includes an “Excess Parachute Payment,” taking into account payments under this
Plan and otherwise, the benefit payable under this Plan shall be reduced to the
maximum amount which does not include an Excess Parachute Payment. The terms “Disqualified
Individual” and “Excess Parachute Payment” shall have the same meanings as
under Section 280G of the Internal Revenue Code of 1986, as amended, or any
successor provision thereto.

 

H.            Administration.

 

The
Plan is administered by the Board, which shall have the discretion to interpret
the terms of the Plan and to make all determinations about eligibility and
payment of benefits. All decisions of the Board, any action taken by the Board
with respect to the Plan and within the powers granted to the Board under the
Plan, and any interpretation by the Board of any term or condition of the Plan,
are conclusive and binding on all persons, and will be given the maximum
possible deference allowed by law. The Board may delegate and reallocate any
authority and responsibility with respect to the Plan.

 

3

 

I.              Source
of Payments.

 

Unless otherwise determined by the Board, all payments and benefits
provided under this Agreement shall be paid solely by the Bank. Notwithstanding
anything in this Agreement to the contrary, no provision of this Agreement
shall be construed so as to result in the duplication of any payment or
benefit.

 

J.             Inalienability.

 

In no event may any Employee sell, transfer, anticipate, assign or
otherwise dispose of any right or interest under the Plan. At no time will any
such right or interest be subject to the claims of creditors, nor liable to
attachment, execution or other legal process.

 

K.            Governing Law.

 

The
provisions of the Plan will be construed, administered and enforced in
accordance with the laws of the State of Maryland, except to the extent that
federal law applies.

 

L.            Severability.

 

If
any provision of the Plan is held invalid or unenforceable, its invalidity or
unenforceability will not affect any other provision of the Plan, and the Plan
will be construed and enforced as if such provision had not been included.

 

M.           No
Employment Rights.

 

Neither
the establishment nor the terms of this Plan shall be held or construed to
confer upon any employee the right to a continuation of employment by the Bank,
nor constitute a contract of employment, express or implied. The Bank reserves
the right to dismiss or otherwise deal with any employee to the same extent and
on the same basis as though this Plan had not been adopted. Nothing in this
Plan is intended to alter the at-will status of the Bank’s employees, it being
understood that, except to the extent otherwise expressly set forth to the
contrary in an individual employment-related agreement, the employment of any
employee may be terminated at any time by either the Bank or the employee with
or without cause.

 

N.            Amendment and
Termination.

 

The
Plan may be terminated or amended in any respect by resolution adopted by a
majority of the Board, unless a Change in Control has previously occurred. If a
Change in Control occurs, the Plan no longer shall be subject to amendment,
change, substitution, deletion, revocation or termination in any respect
whatsoever. The form of any proper amendment or termination of the Plan shall
be a written instrument signed by a duly authorized officer or officers of the
Bank, certifying that the amendment or termination has been approved by the
Board. A proper amendment of the Plan automatically shall effect a
corresponding amendment to each Participant’s rights hereunder. A proper
termination of the Plan automatically shall effect a termination of all
employees’ rights and benefits hereunder.

 

O.            Required Provisions.

 

(1)                                  In
the event any of the provisions of this Section
P are in conflict with the terms of this Plan, this Section P shall prevail.

 

4

 

(2)                                  The
Bank’s Board of Directors may terminate an employee’s employment at any time,
but any termination by the Bank, other than termination for Cause, shall not
prejudice an employee’s right to compensation or other benefits under this Plan.
An employee shall not have the right to receive compensation or other benefits
for any period after Termination for Cause.

 

(3)                                  If an employee is suspended from office
and/or temporarily prohibited from participating in the conduct of the Bank’s
affairs by a notice served under Section 8(e)(3) or 8(g)(1) of the Federal
Deposit Insurance Act, 12 U.S.C. §1818(e)(3) or (g)(1); the Bank’s obligations
under this Plan shall be suspended as of the date of service, unless stayed by
appropriate proceedings. If the charges in the notice are dismissed, the Bank
may in its discretion:  (i) pay the
employee all or part of the compensation withheld while their contract
obligations were suspended; and (ii) reinstate (in whole or in part) any of the
obligations which were suspended.

 

(4)                                  If
an employee is removed and/or permanently prohibited from participating in the
conduct of the Bank’s affairs by an order issued under Section 8(e)(4) or
8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. §1818(e)(4) or (g)(1),
all obligations of the Bank under this Plan shall terminate as of the effective
date of the order, but vested rights of the contracting parties shall not be
affected.

 

(5)                                  If
the Bank is in default as defined in Section 3(x)(1) of the Federal Deposit
Insurance Act, 12 U.S.C. §1813(x)(1) all obligations under this Plan shall
terminate as of the date of default, but this paragraph shall not affect any
vested rights of the contracting parties.

 

(6)                                  All
obligations under this Plan shall be terminated, except to the extent
determined that continuation of the Plan is necessary for the continued
operation of the Bank:  (i) by the
Director of the Office of Thrift Supervision (OTS), or his designee, at the
time the Federal Deposit Insurance Corporation (FDIC) enters into an agreement
to provide assistance to or on behalf of the Bank under the authority contained
in Section 13(c) of the Federal Deposit Insurance Act, 12 U.S.C. §1823(c); or
(ii) by the Director of the OTS (or his designee) at the time the Director (or
his designee) approves a supervisory merger to resolve problems related to the
operations of the Bank or when the Bank is determined by the Director to be in
an unsafe or unsound condition. Any rights of the parties that have already
vested, however, shall not be affected by such action.

 

(7)                                  Any
payments made to employees pursuant to this Plan, or otherwise, are subject to
and conditioned upon their compliance with 12 U.S.C. §1828(k) and FDIC
regulation 12 C.F.R. Part 359, Golden Parachute and Indemnification Payments.

 

5

 

This
plan has been approved and adopted by the Board of Directors of the Bank and is
effective as of [date].

 

	
   

  	
  BRADFORD BANK

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Attest:

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  For the Entire Board of Directors

  
				

 

6

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