ABIGAIL ADAMS NATIONAL BANCORP INC, SB-2, 1996-06-03

ABIGAIL ADAMS NATIONAL BANCORP INC
SB-2, 1996-06-03
STATE COMMERCIAL BANKS

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<PAGE>

As filed with the Securities and Exchange Commission on June 3, 1996
Registration No. 333-

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM SB-2

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

ABIGAIL ADAMS NATIONAL BANCORP, INC.
(Name of Small Business Issuer in its Charter)

Delaware 6712 52-1508198
- ------------------ -------------- -------------------
(State or other (Primary Standard Industrial (I.R.S. employer
jurisdiction of Classification Code Number) identification no.)
incorporation or
organization)

1627 K Street, N.W., Washington, D.C. 20006; (202) 466-4090
--------------------------------------------------------------
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)

Barbara Davis Blum
President, Abigail Adams National Bancorp, Inc.
1627 K Street, N.W., Washington, D.C. 20006; (202) 466-4090
--------------------------------------------------------------
(Name, address, including zip code, and telephone number,
including area code, of agent for service)

With copies to:

Melissa Allison Warren, Esq. Linda M. Iannone, Esq.
Shapiro and Olander Manatt, Phelps & Phillips, LLP
36 S. Charles Street 1501 M Street, N.W.
20th Floor Suite 700
Baltimore, Maryland 21201 Washington, D.C. 20005
(410) 385-4265 (202) 463-4375

Approximate date of commencement of the proposed sale to public:
As soon as practicable after this Registration Statement becomes effective.
---------------------------------------------------------------------------

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for
the same offering. / / ______________

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ________________

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /

<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proposed Maximum
Title of Shares to be Offering Price Per Aggregate Offering Amount of Registration
Registered Amount to be Registered Share Price Fee
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock, 795,500 (2) $ 9.00 $7,159,500 $2,468.79
$.01 par value per share

Common Stock 795,500 N/A N/A N/A
Purchase Rights (3)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated pursuant to Rule 457 solely for purposes of calculating the
registration fee.

(2) Includes 100,500 shares of Common Stock which may be issued upon exercise
of the over-allotment option granted by the Company to the Underwriters.
See "Underwriting." Also includes 25,000 shares to be purchased by the
Company's Employee Stock Ownership Plan.

(3) The Common Stock Purchase Rights will be attached to and traded with shares
of the Common Stock of the Company.

The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commissioner, acting
pursuant to said Section 8(a), may determine.

<PAGE>

ABIGAIL ADAMS NATIONAL BANCORP, INC.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>

Item No. Designation in Form SB-2 In Prospectus
- ------- ------------------------ -------------
<S> <C> <C>
1. Front of the Registration Statement
and Outside Front Cover of Prospectus Outside Front Cover Page

Inside Front Cover and Outside Back Cover
2. Inside Front and Outside Back Cover Pages; Additional Information
Pages of Prospectus

3. Summary Information and Risk Factors Prospectus Summary; Risk Factors

4. Use of Proceeds Risk Factors: Use of Proceeds

Price Range of Common Stock and
5. Determination of Offering Price Dividend Policy; Underwriting

6. Dilution *

7. Selling Security Holders *

8. Plan of Distribution Underwriting

9. Legal Proceedings Business

10. Directors, Executive Officers, Management; Beneficial Ownership
Promoters and Control Persons of Shares

11. Security Ownership of Certain
Beneficial Owners and Management; Beneficial Ownership
Management of Shares

12. Description of Securities Prospectus Summery; Description
of Capital Stock

13. Interest of Named Experts and
Counsel Legal Matters; Experts

14. Disclosure of Commission Position *
on Indemnification for Securities
Act Liabilities

15. Organization Within Last Five Years *

16. Description of Business Prospectus Summary; Summary
Consolidated Financial Data; Risk Factors;
Use of Proceeds; Price Range of Common
Stock and Dividend Policy; Capitalization;
Selected Consolidated Financial Data;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Business; Management; Certain
Relationships and Related Transactions;
Supervision and Regulation; Description of
Capital Stock; Financial Statements

<PAGE>

17. Management's Discussion and Analysis Management's Discussion and
or Plan Operation Analysis of Financial Condition
and Results of Operations

18. Description of Property Prospectus Summary; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Business

19. Certain Relationships and Related Certain Relationships and Related
Transactions Transactions

20. Market for Common Equity and Related Outside Front Cover Page; Price Range of
Stockholder Matters Common Stock and Dividend Policy;
Description of Securities

21. Executive Compensation Management

22. Financial Statements Index to Financial Statements

23. Changes in and Disagreements with *
Accountants on Accounting and
Financial Disclosure
</TABLE>

*Text is omitted because response is negative or item is inapplicable.

<PAGE>

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.

<PAGE>

SUBJECT TO COMPLETION, DATED JUNE 3, 1996
[LOGO]
670,000 SHARES

ABIGAIL ADAMS NATIONAL BANCORP, INC.

COMMON STOCK

Abigail Adams National Bancorp, Inc. (the "Company") is offering 670,000
shares of its Common Stock, $.01 par value ("Common Stock"). Prior to this
Offering, the Company expects to issue a three-for-one stock split in the
form of a stock dividend. Unless otherwise indicated, all information in
this Prospectus gives effect to such transaction. On May 31, 1996, the
closing bid and asked prices for the Common Stock, as reported by the
National Quotation Bureau, were $8.04 and $9.00, respectively. The trading
market for the Common Stock is limited and sporadic. See "Price Range of
Common Stock and Dividend Policy." The Company has applied to have the
Common Stock included on the National Association of Securities Dealers
Automated Quotation National Market System ("NASDAQ/NMS") under the symbol
"AANB," which application is currently pending.

PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FACTORS SET FORTH ON
PAGE 7 UNDER "RISK FACTORS." THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS OR
DEPOSIT ACCOUNTS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
----------------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED ON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRE-
SENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Price to Public Underwriting Discounts
and Commissions (1) Proceeds to Company (2)
- ------------------------------------------------------------------------------------------------------------------------------------
<S>. . . . . . . <C> <C> <C>
Per Share. . . . $ $ $
- ------------------------------------------------------------------------------------------------------------------------------------
Total (3). . . . $ $ $
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) The Company has agreed to indemnify the Underwriters against certain
liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(2) Before deducting expenses of the offering estimated at $_________ payable
by the Company. See "Underwriting."
(3) The Company has granted the Underwriters an option, exercisable within 30
days after the date hereof, to purchase up to 100,500 additional shares of
Common Stock at the Price to Public per share, solely to cover over-
allotments, if any, on the same terms and conditions as the shares offered
hereby. If the Underwriters exercise such option in full, the total Price
to Public, Underwriting Discount and Proceeds to Company will be $_____,
$______ and $______, respectively. See "Underwriting."
----------------------------

The shares of Common Stock are offered by the several Underwriters subject
to prior sale, withdrawal, cancellation or modification of the offer without
notice, delivery to and acceptance by the Underwriters and certain other
conditions. It is expected that delivery of the certificates for the shares of
Common Stock will be made at the offices of Ferris, Baker Watts, Incorporated,
1720 Eye Street, N.W., Washington, D.C. or through the facilities of The
Depository Trust Company on or about ____________, 1996.

FERRIS, BAKER WATTS
Incorporated

THE DATE OF THIS PROSPECTUS IS , 1996
<PAGE>

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE SHARES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR OTHERWISE.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

ADDITIONAL INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy and information statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy and information statements and other information can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; and at
the Commission's Regional Offices located on the 13th Floor, 7 World Trade
Center, New York, New York 10048 and Suite 1400, 500 West Madison Street,
Chicago, Illinois 60661. Copies of such material may also be obtained at
prescribed rates from the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.

A registration statement on Form SB-2 relating to the Common Stock offered
hereby has been filed by the Company with the Commission (the "Registration
Statement"). This Prospectus does not contain all of the information set forth
in the Registration Statement and the exhibits and schedules thereto.
Statements contained in this Prospectus as to the contents of any contract or
any other document referred to are not necessarily complete and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference. Further information with respect to the Company
and the Common Stock offered hereby is included or incorporated by reference in
the Registration Statement and exhibits. A copy of the Registration Statement
may be inspected by anyone without charge and may be obtained at rates
prescribed by the Commission at the Public Reference Section of the Commission
located at 450 Fifth Street, N.W., Washington, D.C. 20549, the New York Regional
Office located at 7 World Trade Center, New York, New York 10048, and the
Chicago Regional Office located at 500 West Madison Street, Chicago, Illinois
60661.

Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for all purposes to the extent that a statement contained in this Prospectus or
in any other subsequently filed document which is also incorporated by reference
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus. The Company will provide without charge to each person to
whom a copy of this Prospectus is delivered, upon the written or oral request of
such person, a copy of any or all of the documents incorporated by reference
herein other than exhibits to such documents. Requests should be directed to
Abigail Adams National Bancorp, Inc., at its principal executive office, located
at 1627 K Street, N.W., Washington, D.C. 20006, Attention: Kimberly J. Levine,
Senior Vice President and Chief Financial Officer (telephone number (202) 466-
4090).

<PAGE>

PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED IN THIS
PROSPECTUS. EACH INVESTOR IS ENCOURAGED TO READ THIS PROSPECTUS IN ITS
ENTIRETY. UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS
ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION WILL NOT BE EXERCISED, AND
GIVES EFFECT TO (I) AN INCREASE IN THE NUMBER OF SHARES OF AUTHORIZED COMMON
STOCK OF THE COMPANY FROM 800,000 TO 5,000,000, AND (II) THE ISSUANCE BY THE
COMPANY OF A THREE-FOR-ONE STOCK SPLIT IN THE FORM OF A STOCK DIVIDEND OF TWO
SHARES OF COMMON STOCK FOR EACH SHARE OF COMMON STOCK ISSUED AND OUTSTANDING.
THESE TRANSACTIONS ARE EXPECTED TO OCCUR PRIOR TO THE DATE OF THE OFFERING.
INVESTORS SHOULD CAREFULLY CONSIDER THE INFORMATION SET FORTH UNDER THE HEADING
"RISK FACTORS."

THE COMPANY

Abigail Adams National Bancorp, Inc. (the "Company") is a bank holding
company which conducts business through its wholly-owned bank subsidiary, The
Adams National Bank (the "Bank"). The Bank serves the nation's capital through
three full-service offices located in Washington, D.C., with a fourth branch
expected to open in August 1996. At March 31, 1996, the Company had
consolidated assets of $88,889,000, deposits of $78,812,000 and stockholders'
equity of $6,789,000 and reported net income of $238,000 for the three months
then ended. The Company reported record net income of $959,000 for the year
ended December 31, 1995. The Bank exceeds all regulatory capital requirements.
See "Supervision and Regulation."

Founded in 1977, the Bank was the first federally-chartered bank in the
United States to be owned and managed by women. Originally named The Women's
National Bank, the Bank changed its name in 1986 to alter the perception that
the Bank existed exclusively to serve the needs of women. Based on assets and
deposits, the Bank is the largest women-controlled bank in the United States.

The Bank's customers include 26 Fortune 100 corporations which maintain
active relationships with the Bank, high net worth individuals, small to medium-
sized businesses, and nonprofit organizations. While providing financial
services to a wide ranging customer base, the Bank has established a profitable
niche assisting women, small businesses, minority-owned businesses and nonprofit
organizations. For the quarter ended March 31, 1996, the Company had a return
on average assets of 1.09%, following an annual return on average assets for
1995 of 1.17%. In its marketing efforts, the Bank actively targets its desired
customer base through various outreach programs, and by officers' and directors'
leadership in business and civic organizations.

Management believes that a large segment of its identified market has been
traditionally underserved by the banking community, and that above average risk
adjusted returns can be generated by those institutions with experience lending
to customers in this market. Commercial and real estate loans to small
businesses, professional corporations, and nonprofit organizations, which
account for approximately 52% of the Bank's total loan portfolio, produced an
average yield of 9.95% as of March 31, 1996, compared to 9.40% for the remainder
of the portfolio. In recognition of the Bank's continuing efforts to serve its
customer base, the Office of the Comptroller of the Currency ("OCC") awarded the
Bank a rating of "Outstanding" under the Community Reinvestment Act ("CRA").

The Company's strategy is to

- continue to increase profitability in its core banking franchise which
has steadily improved since 1992 as a result of continued emphasis on
secured commercial lending and an improvement in overall loan quality,

- target expansion opportunities in neighboring markets in Maryland and
Virginia either through opening new branches or acquiring branches,
banks or loan portfolios, and

<PAGE>

- continue to utilize state of the art technologies, such as the
Internet, PC banking for businesses and individuals, and telephone
banking, to improve access to targeted markets and to better serve
existing customers.

The Bank offers a full range of banking services to its customers from
checking and savings deposits to individualized cash management accounts. The
Bank's consumer and commercial products and services include the following:
demand, savings and time deposits; individual retirement and Keogh accounts;
collateralized repurchase agreements; commercial, industrial, consumer, real
estate and small business lending including installment loans, credit card
services, lines of credit and overdraft checking; safe deposit operations; and a
variety of additional services tailored to the needs of individual customers,
such as the acquisition of U.S. Treasury notes and bonds, the sale of travelers'
checks, money orders, cashiers' checks, direct deposit, custodial, cash
management and other special services.

The Company was incorporated in Delaware on July 22, 1981. The Company's
principal executive office is located at 1627 K Street, N.W. Washington, D.C.
20006, and its telephone number is (202) 466-4090.

THE OFFERING

Common Stock Offered . . . . . . . 670,000 shares

Common Stock Outstanding
After the Offering. . . . . . . . 1,549,532 shares(1)

Dividends on Shares of Common Stock Since October 1995, the Company has
paid three quarterly dividends on its
Common Stock. Future declarations of
dividends by the Board of Directors
will depend upon a number of factors.
The dividend for the first quarter of
1996 was $.083 per share. See "Price
Range of Common Stock and Dividend
Policy."

Proposed Use of Proceeds . . . . . The Company intends to use the net
proceeds of this Offering for future
expansion and acquisitions, a loan to
The Adams National Bank Employee Stock
Ownership Plan with 401(k) Provisions
("ESOP") for the purchase of up to
25,000 shares of Common Stock, loan
originations (which will reflect an
increase in the Bank's legal lending
limit as a result of the Offering),
working capital and general corporate
purposes. See "Use of Proceeds."

Proposed NASDAQ/NMS Symbol . . . . AANB

- -----------
(1) Including 25,000 shares to be issued by the Company and purchased by
the ESOP upon closing of the Offering.

<PAGE>

SUMMARY CONSOLIDATED FINANCIAL DATA

THE SUMMARY CONSOLIDATED FINANCIAL DATA SET FORTH BELOW GIVE EFFECT TO A
THREE-FOR-ONE STOCK SPLIT IN THE FORM OF A STOCK DIVIDEND, WHICH WILL TAKE
PLACE PRIOR TO THE DATE OF THE OFFERING, AND SHOULD BE READ IN CONJUNCTION
WITH, AND ARE QUALIFIED BY REFERENCE TO, THE CONSOLIDATED FINANCIAL
STATEMENTS OF THE COMPANY AND THE NOTES THERETO, AND "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS"
INCLUDED ELSEWHERE IN THIS PROSPECTUS.

At or for the Three Months
Ended March 31, At or for the Year Ended December 31,
-------------------------------------------------------------------------------------------
1996 1995 1995 1994 1993 1992
-------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net interest income . . . . . . . $ 1,093 $ 1,014 $ 4,167 $ 4,148 $ 4,005 $ 3,541
Provision for loan losses . . . . -- -- -- 221 175 237
Noninterest income . . . . . . . 184 191 841 790 885 1,045
Noninterest expense:
Core banking operations . . . . 901 928 3,679 3,855 3,570 3,610
Other(1) . . . . . . . . . . . . -- 23 102 1,046 534 137
-------- -------- -------- -------- --------- --------
Income (loss) before income
taxes and extraordinary item . 376 254 1,227 (184) 611 602
Applicable income tax expense . . 138 70 268 -- -- 213
-------- -------- -------- -------- --------- --------
Net income (loss) after taxes
and before extraordinary item . 238 184 959 (184) 611 389
Extraordinary item-utilization of
net operating loss carry-forward -- -- -- -- -- 213
-------- -------- -------- -------- --------- --------
Net income (loss)(2) . . . . . . . $ 238 $ 184 $ 959 $ (184) $ 611 $ 602
-------- -------- -------- -------- --------- --------
-------- -------- -------- -------- --------- --------

AVERAGE BALANCE SHEET DATA:
Loans, net . . . . . . . . . . . $ 59,687 $ 58,250 $ 59,019 $ 56,894 $ 46,499 $ 38,427
Total assets . . . . . . . . . . 87,682 81,321 82,294 81,949 72,994 72,110
Deposits . . . . . . . . . . . . 77,773 72,541 73,587 73,231 65,886 64,471
Stockholders' equity . . . . . . 6,727 5,877 6,176 5,843 5,643 5,058

PER SHARE DATA:
Net income (loss)(2) . . . . . . . $ 0.28 $ 0.22 $ 1.12 $ (0.22) $ 0.72 $ 0.70
Weighted average number of
common shares and common
share equivalents . . . . . . . 860,940 854,532 854,532 854,532 854,532 854,532
Book value(3) . . . . . . . . . . $ 7.95 $ 6.98 $ 7.75 $ 6.74 $ 7.05 $ 6.34
Dividends . . . . . . . . . . . . $ 0.083 -- $ 0.167 -- -- --

SELECTED PERFORMANCE RATIOS(4)(5)
Return on average assets . . . . 1.09% 0.92% 1.17% (0.22)% 0.84% 0.83%
Return on average stockholders'
equity . . . . . . . . . . . . 14.23% 12.71% 15.53% (3.15)% 10.83% 11.90%
Net interest margin(6). . . . . . 5.35% 5.39% 5.39% 5.42% 5.89% 5.33%
Dividend payout ratio . . . . . . 29.92% -- 14.85% -- -- --

CONSOLIDATED CAPITAL RATIOS:
Tier 1 risk-based . . . . . . . . 10.16% 9.79% 9.77% 9.40% 10.32% 11.61%
Total risk-based . . . . . . . . 11.46% 11.15% 11.06% 10.76% 11.78% 13.25%
Leverage(7) . . . . . . . . . . . 7.78% 7.41% 8.09% 7.13% 8.26% 7.51%
</TABLE>

5
<PAGE>

______________
(1) See "Management's Discussion and Analysis of Financial Condition and
Results of Operations-Other Expense."
(2) Excluding the effect of Noninterest expense-Other, and after giving
effect to available tax benefits, net income and net income per share
would have been as follows, for the respective periods indicated below:

<TABLE>
<CAPTION>
For the Three
Months Ended
March 31, For the Year Ended December 31,
------------- -------------------------------------
1996 1995 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Net Income $ 238 $ 167 $ 798 $ 528 $1,145 $ 739
Net income per share 0.28 0.20 0.93 0.62 1.34 0.86
</TABLE>

(3) All book value per share numbers are based on the number of shares
outstanding at period end.

(4) The Selected Performance Ratios for March 31, 1995 and 1996, respectively,
are computed on an annualized basis.

(5) Excluding the effect of Noninterest Expense-Other, and after giving
effect to available tax benefits, Selected Performance Ratios would
have been as follows, for the respective periods indicated below:

<TABLE>
<CAPTION>
For the Three
Months Ended
March 31, For the Year Ended December 31,
------------- -------------------------------------
1996 1995 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Return on average assets 1.09% 0.83% 0.97% 0.64% 1.57% 1.02%
Return on average stockholders' equity 14.23 11.53 12.92 9.04 20.29 14.61
Net interest margin 5.35 5.39 5.39 5.42 5.89 5.33
Dividend payout ratio 29.92 -- 17.85 -- -- --
</TABLE>

(6) No taxable equivalent adjustments are necessary because the Company had
no tax-exempt securities or loans.

(7) Based on annual average assets.

<PAGE>

RISK FACTORS

THE PURCHASE OF THE COMMON STOCK INVOLVES CERTAIN INVESTMENT RISKS. IN
DETERMINING WHETHER TO MAKE AN INVESTMENT IN THE COMMON STOCK, PROSPECTIVE
INVESTORS SHOULD CAREFULLY CONSIDER THE MATTERS SET FORTH BELOW, AS WELL AS THE
OTHER INFORMATION CONTAINED HEREIN.

REGIONAL ECONOMIC CONDITIONS

The Company's lending customers are concentrated in the Washington
metropolitan region. At March 31, 1996, $25,224,000 or 42% of the loan portfolio
consisted of commercial loans secured by real estate located in this region. In
the past, segments of the commercial real estate market in this region have
experienced deteriorating economic trends, including declining occupancy, rental
rates, and property values. In addition, a significant decline in federal
procurement during the last quarter of 1995, as a result of two government
shutdowns, has slowed job growth, home sales and retail purchases in the
Washington metropolitan region. At March 31, 1996, the Company's ratio of
nonperforming assets to total assets was 3.05% of which 91% is adequately
collateralized or guaranteed by the Small Business Administration ("SBA").

Future unfavorable economic conditions, including those resulting from
federal budget cutbacks, could result in provisions and writedowns, and
nonperforming assets, along with the cost of carrying such assets, could
increase. The scope of any provisions and writedowns cannot be estimated at
this time, due to the uncertainties associated with regional economic
conditions, and the extent to which provisions and write downs will be required
will be dependent upon actual future economic conditions and their effect on the
Company's borrowers.

RISK OF LOAN LOSSES

The risk of credit losses on loans varies with, among other things, general
economic conditions, the type of loan being made, the creditworthiness of the
borrower over the term of the loan and, in the case of a collateralized loan,
the value and marketability of the collateral for the loan. Management
maintains an allowance for loan losses based upon, among other things,
historical experience, an evaluation of economic conditions and regular reviews
of delinquencies and loan portfolio quality. Based upon such factors,
Management makes various assumptions and judgments about the ultimate
collectibility of the loan portfolio and provides an allowance for loan losses
based upon a percentage of the outstanding balances and for specific loans when
their ultimate collectibility is considered questionable. If Management's
assumptions and judgments prove to be incorrect and the allowance for loan
losses is inadequate to absorb future losses, or if the bank regulatory
authorities require the Bank to increase the allowance for loan losses, the
Bank's earnings could be significantly and adversely affected. Because certain
lending activities involve greater risks, the percentage applied to specific
loan types may vary. Commercial loans may involve greater risk than real estate
mortgage loans. As of March 31, 1996, the Bank had a total of $41,377,000 in
commercial loans and a total of $16,216,000 in real estate mortgages and
construction loans. Of this amount, $52,825,000 was either fully or partially
secured and $4,768,000 was unsecured.

As of March 31, 1996, the allowance for loan losses was $1,262,000,
which represented 2.10% of outstanding loans, net of unearned income. At
such date, the Company had nonaccrual loans totaling $1,463,000. The Bank
actively manages its nonperforming loans in an effort to minimize credit
losses and monitors its asset quality to maintain an adequate allowance for
credit losses. Although Management believes that its allowance for loan
losses is adequate, there can be no assurance that the allowance will prove
sufficient to cover future loan losses. Further, although Management uses
the best information available to make determinations with respect to the
allowance for loan losses, future adjustments may be necessary if economic
conditions differ substantially from the assumptions used or adverse
developments arise with respect to the Bank's nonperforming or performing
loans. Material additions to the Bank's allowance for loan losses would

<PAGE>

result in a decrease in the Bank's net income and its capital, and could have
a material adverse effect on the Company. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations-Asset Quality."

CONTROL OF THE COMPANY

As of May 10, 1996, a group of eight stockholders (which includes three
directors of the Company) would own, directly or indirectly, approximately
37% of the total outstanding shares of the Company's Common Stock, after
giving effect to the sale of 670,000 shares in this Offering and 25,000
shares to the ESOP. Under banking regulations, this group controls the
Company, and has significant influence over certain decisions, such as
mergers and acquisitions, and the election of the Board of Directors of the
Company. See "Beneficial Ownership of Shares."

LEGAL LENDING LIMITS; LENDING RISKS

At March 31, 1996, the legal lending limit of the Bank was approximately
$1,218,000 per customer. Accordingly, the size of the loans which the Bank can
offer to potential customers is less than the size of loans which many of the
Bank's larger competitors are able to offer, although the Bank is able to serve
customers' needs by participating loans with other financial institutions.
There is no assurance that the lending limit will increase in the future,
although increases are anticipated, or that the Bank will be successful in
attracting or maintaining larger volume customers. The risk of nonpayment (or
deferred payment) of loans is inherent to commercial banking. Moreover, the
Bank's marketing focus on individual customers and small to medium-sized
businesses may result in the assumption by the Bank of certain lending risks
that are different from those attendant to loans to larger companies.
Management of the Bank attempts to minimize the Bank's credit risk exposure
through obtaining third party or government guarantees, and through loan
application evaluation, approval, and monitoring procedures, but there can be no
assurance that such procedures will significantly reduce such lending risks.

IMPACT OF CHANGE OF OWNERSHIP STATUS

The Company qualifies for participation in federal and local government
programs that require funds to be deposited in minority or women-owned banks.
Some Fortune 500 companies also have banking relationships with the Company due
to corporate strategies that encourage business with such banks. As a result
of this Offering, less than 50% of the Common Stock may be held by women or
minorities and the Company's eligibility for participation in government and
corporate programs for minority and women-owned banks would be terminated.
Notwithstanding termination of these programs, the Company would continue to
maintain its commitment to the banking needs of women and minorities. At
March 31, 1996, the Company had deposits of $5,400,000, or 7% of total deposits,
and loans of $2,453,000, or 4% of total loans, directly resulting from its
participation in such programs. If these deposits and loans were withdrawn or
repaid and replaced with deposits and loans having a market rate of interest,
net income at March 31, 1996 would have been reduced by a range of
approximately $8,000 (assuming deposits are replaced at approximately the
same average cost and loans are replaced at the same rate, or prime) to
$20,000 (assuming Fortune 500 loans and deposits are not replaced and
remaining deposits are replaced at the same cost). The termination of the
Company's eligibility for participation in such programs also could
constitute an event of default under the lease for the Bank's branch in Union
Station. Although in management's opinion, a termination of the lease for the
Union Station branch would not have a significant financial impact upon the
Company, a termination of leases for the Bank's ATM's in Union Station could
adversely affect the Company's results of operations.

USE OF PROCEEDS

The use of proceeds of this Offering is subject to reallocation by the
Management of the Company. See "Use of Proceeds."

<PAGE>

LIMITED TRADING MARKET

Currently, approximately 68% of the outstanding shares of Common Stock is
owned by eight investors who purchased their shares as a group in 1995 from a
single investor and, as a consequence, there has been a very limited trading
market for the Common Stock. While there can be no assurance that an active
trading market will develop as a result of this Offering, the Company has
applied to have the Common Stock included on the NASDAQ/NMS, which application
is currently pending. See "Price Range of Common Stock and Dividend Policy" and
"Beneficial Ownership of Shares."

OFFERING PRICE NOT BASED SOLELY ON MARKET PRICES

The public offering price of the Common Stock has been determined by
negotiations between the Company and Representative of the several underwriters
based on certain factors including the current market for the Common Stock, an
evaluation of assets, earnings and other established criteria of value, as well
as the comparisons of the relationships between market prices and book values of
other financial institutions of a similar size and asset quality. Such decision
will not be solely based upon an actual trading market for the Common Stock;
accordingly, there can be no assurance that the Common Stock may be resold at or
above the offering price. See "Underwriting."

COMPETITION

The Company faces substantial competition for deposits and loans throughout
its market area. Competition for deposits comes primarily from other commercial
banks, savings associations, credit unions, money market and mutual funds and
other investment alternatives. Competition for loans comes primarily from other
commercial banks, savings associations, mortgage banking firms, credit unions
and other financial intermediaries. The Company faces competition for deposits
and loans throughout its market areas not only from local institutions but also
from out-of-state financial intermediaries which have opened loan production
offices or which solicit deposits in its market areas. Many of the financial
intermediaries operating in the Company's market area offer certain services,
such as trust, investment and international banking services, which the Company
does not offer. Additionally, banks with a larger capitalization and financial
intermediaries not subject to bank regulatory restrictions have larger lending
limits and are thereby able to serve the needs of larger customers. See
"Business-Competition."

DIVIDEND RESTRICTIONS

The Company's ability to pay cash dividends is limited by the provisions of
Delaware law which permit the payment of dividends from either surplus or
retained earnings. In addition, the ability of the Company to pay a cash
dividend depends upon the Bank's ability to pay a cash dividend to the Company.
The National Bank Act imposes limitations on the amount of dividends that a
national bank, such as the Bank, may pay without regulatory approval. Although
the Company intends to retain a portion of the net proceeds of the Offering for
working capital and possible future dividends, there can be no assurance that
the future operations of the Company or the Bank will result in sufficient
retained earnings to permit the payment of dividends. See "Use of Proceeds" and
"Price Range of Common Stock and Dividend Policy."

DEPENDENCE ON KEY PERSONNEL

The Company's future success depends on the continued contributions of
certain key management personnel, including Barbara Davis Blum, Chairwoman of
the Board of Directors, President and Chief Executive Officer. The Company has
entered into a two-year renewable employment agreement with Ms. Blum effective
February 20, 1996. The Company's continued growth and profitability depend
upon its ability to attract and

<PAGE>

retain skilled managerial, marketing and technical personnel. Competition for
qualified personnel in the banking industry is intense, and there can be no
assurance that the Company will be successful in attracting and retaining such
personnel. See "Management" and "Business-Competition" and "--Employees."

ANTI-TAKEOVER AND CHANGE IN CONTROL PROVISIONS

Pursuant to the Company's Certificate of Incorporation, the Company's Board
of Directors has the authority to issue shares of stock without any further vote
or action by the stockholders, subject to certain provisions of rules governing
companies whose stock is quoted on NASDAQ/NMS. The issuance of stock under
certain circumstances could have the effect of delaying or preventing a change
in control of the Company. In addition, the Company has adopted a Rights
Agreement which entitles each stockholder to purchase from the Company one share
of Common Stock at a price of $20.11 per share, subject to adjustment, upon
certain events involving a potential significant change in ownership of the
Company's Common Stock. The Rights Agreement also provides for the issuance to
the Company's stockholders of certain shares of common stock of an acquiring
company in the event that the Company is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power are sold. The Rights Agreement also may have the effect of delaying or
preventing a change in control of the Company. Finally, the Delaware General
Corporation Law establishes special requirements with respect to "business
combinations" between a Delaware corporation and an "interested stockholder."
These provisions of the Delaware General Corporation Law could have the effect
of delaying or preventing a change in control of the Company. See "Description
of Capital Stock-Common Stock," "--Common Stock Purchase Rights," and "--
Delaware Business Combination Law."

REGULATION

The operations of the Company and the Bank are and will be affected by
current and future legislation and by the policies established from time to time
by various federal and state regulatory authorities. The Bank is subject to
supervision and periodic examination by the Federal Deposit Insurance
Corporation ("FDIC"), the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), and the OCC. The Company is subject to supervision by
the Federal Reserve Board. Banking regulations, designed primarily for the
safety of depositors, may limit a financial institution's growth and the return
to its investors by restricting such activities as the payment of dividends,
mergers with or acquisitions by other institutions, investments, loans and
interest rates, interest rates paid on deposits, expansion of branch offices,
and providing securities or trust services. The Bank also is subject to
capitalization guidelines set forth in federal legislation, and could be subject
to enforcement actions to the extent that the Bank is found by regulatory
examiners to be undercapitalized. It is not possible to predict what changes,
if any, will be made to existing federal and state legislation and regulations
or the effect that such changes may have on the future business and earnings
prospects of the Company and the Bank. The cost of compliance with regulatory
requirements may adversely affect the Company's ability to operate profitably.
See "Supervision and Regulation."

MONETARY POLICY AND GENERAL ECONOMIC CONDITIONS

The operating and net income of the Bank and any banks acquired by the
Company in the future will depend to a great extent on "rate differentials,"
i.e., the difference between the income a bank receives from earning assets such
as loans, investment securities, and other assets, and the interest paid on
interest-bearing liabilities such as deposits. These rates are highly sensitive
to many factors that are beyond the control of the Company and the Bank,
including general economic conditions and the policies of various governmental
and regulatory authorities, in particular the Federal Reserve Board.

<PAGE>

USE OF PROCEEDS

The proceeds to the Company from the sale of 670,000 shares of Common Stock
offered hereby will be approximately $5,577,750 ($6,414,413 if the Underwriters'
over-allotment option is exercised in full), based upon the sale of the shares
offered hereby at an estimated public offering price per share of $9.00. The
Company intends to loan approximately $225,000 to the ESOP for the purpose of
funding the ESOP's purchase of up to 25,000 shares of the Company's Common Stock
upon closing of the Offering. The balance of the net proceeds will be used for
future expansion and acquisitions, originating loans reflecting an increase in
the Bank's legal lending limit, working capital and general corporate purposes
including the payment of dividends.

With respect to future acquisitions, the Company is regularly reviewing
potential acquisitions, although it has no current agreements, understandings or
commitments with respect to any material transactions. The foregoing represents
the Company's estimate of the allocation of the net proceeds of this Offering
based upon the current status of its business operations, its current plans and
current economic conditions. Future events, as well as changes in competitive
conditions affecting the Company's business, may make shifts in the allocation
of funds necessary or desirable. A change in the use of proceeds or timing of
such use will be at the Company's discretion. Pending longer-term deployment of
the net proceeds from this Offering, it is expected that the net proceeds will
be used to make short-term loans or invested in short-term, investment-grade,
interest bearing securities. See "Risk Factors-Use of Proceeds."

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

The Company's Common Stock has been traded in the over-the-counter
market, on the OTC Bulletin Board. Trading in the Company's Common Stock has
been limited and sporadic. Average monthly trading volume was 4,900 shares
in 1994, 21,175 shares in 1995 and 7,080 shares for the period from January
1, 1996 to May 24, 1996. In connection with this Offering, the Company has
applied to list the Common Stock on the NASDAQ/NMS under the symbol "AANB."
Although the Company believes that liquidity in the Common Stock will
increase after the Offering, no assurance can be given that a more active
trading market for the Common Stock will develop or that shares can be
resold, if at all, at a price in excess of the public offering price.

The most recent trade of the Common Stock, as reported by Ferris, Baker
Watts, Incorporated, was at $8.92 per share on May 31, 1996 for 600 shares of
Common Stock. This price is not necessarily indicative of the current market
price of the Common Stock. Based upon information provided by the National
Quotation Bureau, the bid prices for the Common Stock ranged from $3.83 to
$5.00 during 1994, from $5.00 to $8.17 during 1995, and from $7.83 to $8.67
for the period from January 1, 1996 through May 30, 1996. On May 31, 1996,
the closing bid and asked prices for the Common Stock, as reported by the
National Quotation Bureau, were $8.04 and $9.00, respectively.

The foregoing price and volume information has been adjusted to give
effect to the issuance by the Company of a three-for-one stock split in the
form of a stock dividend of two shares of Common Stock for each share issued
and outstanding. These prices reflect inter-dealer prices and do not include
retail mark-ups, mark-downs or commissions and may not have represented
actual transactions or the actual fair market value of the Common Stock at
the time of such transaction due to the infrequency of trades and the limited
market for the Common Stock.

During 1995, the Company declared two $.083 cash dividends on the Common
Stock for a total of $142,422. For the first quarter of 1996, the Company
declared a $.083 cash dividend, paid in April 1996. The Board of Directors has
adopted a policy pursuant to which the Board will consider the payment of a
dividend each quarter, giving due regard to numerous factors, including, but not
limited to, sufficiency of regulatory capital, applicable laws, investment
opportunities and general economic conditions. The Board is not obligated to
declare

<PAGE>

a dividend of any minimum amount or to declare a dividend at all. The Company's
ability to pay cash dividends is limited by the provisions of Delaware law,
which permit the payment of dividends from either surplus or retained earnings.
In addition, the ability of the Company to pay a cash dividend depends on the
Bank's ability to pay a cash dividend to the Company. The National Bank Act
imposes limitations on the amount of dividends that a national bank, such as the
Bank, may pay without prior regulatory approval. Generally, the amount is
limited to the Bank's current year's net earnings plus the retained net earnings
for the two preceding years. Notwithstanding these limitations, the Company
intends to retain a portion of the net proceeds of the Offering for working
capital and possible future dividends.

As of May 10, 1996, 854,532 shares of Common Stock were outstanding, held
by 578 stockholders of record.

<PAGE>

CAPITALIZATION

The following table sets forth the capitalization of the Company at March
31, 1996, and as adjusted to give effect to the receipt by the Company of
proceeds from the sale of the 670,000 shares of Common Stock offered hereby at
an estimated offering price of $9.00 per share and the sale by the Company of
25,000 shares to the ESOP at an estimated price of $9.00 per share. This table
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Consolidated Financial
Statements and Notes thereto included in this Prospectus.

MARCH 31, 1996(1)
--------------------------
ACTUAL AS ADJUSTED
----------- -----------
<S> <C> <C>
Long-term portion of capital note(2) $ 167,625 $ 167,625

Stockholders' equity:
Common Stock, $.01 par value;
5,000,000 shares authorized;
859,212 shares issued; 854,532 shares
outstanding; 1,554,212 shares issued
as adjusted; 1,549,532 shares
outstanding as adjusted(3) $ 8,592 $ 15,542

Additional paid-in capital 6,147,421 11,943,221

ESOP shares -- (225,000)

Retained earnings 698,652 698,652
Less: Treasury stock (28,710) (28,710)

Less: Unrealized loss on securities, net of taxes (36,670) (36,670)
----------- -----------
Total stockholders' equity $ 6,789,285 $ 12,367,035
----------- -----------
Total capitalization $ 6,956,910 $ 12,534,660
----------- -----------
----------- -----------
Book value per share $7.95 $ 7.98
</TABLE>

____________________
(1) Gives effect to (i) the proposed amendment of the Company's Certificate of
Incorporation to increase the authorized shares of Common Stock from
800,000 to 5,000,000 and reduce the par value of the Common Stock from
$10.00 to $.01 per share, and (ii) the issuance of a three-for-one stock
split in the form of a stock dividend. The information in this table
assumes that these corporate actions occurred as of March 31, 1996.

(2) The total outstanding principal amount of the capital note was repaid in
full on May 21, 1996.

(3) Does not include 91,416 shares issuable upon exercise of stock options
granted under the Company's stock option plans and a non-qualified stock
option agreement. See "Management-Executive Compensation."

13
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data for, and as of the end
of, each of the years in the four year period ended December 31, 1995 are
derived from the audited consolidated financial statements of the Company. The
following selected interim consolidated data for, and as of the end of, the
three month periods ended March 31, 1996 and 1995 have been derived from
unaudited financial statements of the Company, which, in the opinion of
Management, have been prepared on the same basis as the audited Consolidated
Financial Statements included herein, and reflect all adjustments, which are of
a normal recurring nature, necessary for a fair presentation of such data. The
results of the interim periods are not necessarily indicative of the results of
a full year. The selected consolidated financial data set forth below give
effect to a three-for-one stock split in the form of a stock dividend, which
will take place prior to the Offering, and should be read in conjunction with,
and are qualified by reference to, the Consolidated Financial Statements of the
Company and the Notes thereto, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
Prospectus.

AT OR FOR THE
THREE MONTHS ENDED
MARCH 31, AT OR FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1996 1995 1995 1994 1993 1992
-----------------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total interest income . . . . . . . . . . . . . $ 1,807 $ 1,670 $ 6,914 $ 6,082 $ 5,513 $ 5,420
Total interest expense. . . . . . . . . . . . . 714 656 2,747 1,934 1,508 1,879
-------- -------- -------- -------- -------- --------
Net interest income . . . . . . . . . . . . . . 1,093 1,014 4,167 4,148 4,005 3,541
Provision for loan losses . . . . . . . . . . . -- -- -- 221 175 237
-------- -------- -------- -------- -------- --------
Net interest income after provision for loan
losses. . . . . . . . . . . . . . . . . . . . 1,093 1,014 4,167 3,927 3,830 3,304
Noninterest income. . . . . . . . . . . . . . . 184 191 841 790 885 1,045
Noninterest expense:
Core banking operations . . . . . . . . . . . 901 928 3,679 3,855 3,570 3,610
Other(1). . . . . . . . . . . . . . . . . . . -- 23 102 1,046 534 137
-------- -------- -------- -------- -------- --------
Income (loss) before taxes and
extraordinary item. . . . . . . . . . . . . . 376 254 1,227 (184) 611 602
Applicable income tax expense . . . . . . . . . 138 70 268 -- -- 213
-------- -------- -------- -------- -------- --------
Income (loss) after taxes and before
extraordinary item. . . . . . . . . . . . . . 238 184 959 (184) 611 389
Extraordinary item - utilization of net
operating loss carry forward. . . . . . . . . -- -- -- -- -- 213
-------- -------- -------- -------- -------- --------
Net income (loss)(2). . . . . . . . . . . . . . $ 238 $ 184 $ 959 $ (184) $ 611 $ 602
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------

PER SHARE DATA:
Income (loss) before extraordinary item . . . . $ 0.28 $ 0.22 $ 1.12 $ (0.22) $ 0.72 $ 0.45
Extraordinary item. . . . . . . . . . . . . . . -- -- -- -- -- 0.25
-------- -------- -------- -------- -------- --------
Net income (loss)(2). . . . . . . . . . . . . . $ 0.28 $ 0.22 $ 1.12 $ (0.22) $ 0.72 $ 0.70
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Weighted average number of common
shares and common share equivalents . . . . . 860,940 854,532 854,532 854,532 854,532 854,532
Book value(3) . . . . . . . . . . . . . . . . . $ 7.95 $ 6.98 $ 7.75 $ 6.74 $ 7.05 $ 6.34
Dividends . . . . . . . . . . . . . . . . . . . $ 0.083 --- $ 0.167 -- -- --

<PAGE>

BALANCE SHEET DATA:
Cash and due from banks . . . . . . . . . . . . $ 4,478 $ 4,073 $ 4,953 $ 4,349 $ 3,718 $5,109
Short-term investments. . . . . . . . . . . . . 11,337 4,466 9,962 1,791 4,791 396
Securities available for sale . . . . . . . . . 4,998 5,521 5,508 6,009 11,005 7,604
Investment securities . . . . . . . . . . . . . 7,564 8,911 8,193 9,081 5,006 10,992
Loans held for sale . . . . . . . . . . . . . . -- -- -- -- 128 --
Loans . . . . . . . . . . . . . . . . . . . . . 60,215 58,920 63,592 60,729 54,750 43,459
Allowance for loan losses . . . . . . . . . . . (1,262) (1,290) (1,274) (1,289) (1,386) (1,320)
Bank premises and equipment . . . . . . . . . . 287 343 278 369 339 435
Other real estate . . . . . . . . . . . . . . . -- -- -- -- 728 733
Other assets. . . . . . . . . . . . . . . . . . 1,272 1,286 1,153 1,221 1,031 1,296
------ ------ ------- ------- ------- -------
Total assets. . . . . . . . . . . . . . . . . . $88,889 $82,230 $92,365 $82,260 $80,110 $68,704
------ ------ ------- ------- ------- -------
------ ------ ------- ------- ------- -------

Noninterest-bearing deposits. . . . . . . . . . $20,572 $16,798 $23,444 $19,677 $17,193 $15,796
Interest-bearing deposits . . . . . . . . . . . 58,240 58,118 59,619 55,616 55,263 45,051
------ ------ ------- ------- ------- -------
Total deposits. . . . . . . . . . . . . . . . . 78,812 74,916 83,063 75,293 72,456 60,847
Short-term borrowings . . . . . . . . . . . . . 2,233 548 1,786 361 195 1,595
Long-term debt - capital note . . . . . . . . . 168 261 186 261 317 355
Other liabilities . . . . . . . . . . . . . . . 887 542 711 583 1,115 491
------ ------ ------- ------- ------- -------
Total liabilities . . . . . . . . . . . . . . . 82,100 76,267 85,746 76,498 74,083 63,288
Stockholders'equity . . . . . . . . . . . . . . 6,789 5,963 6,619 5,762 6,027 5,416
------ ------ ------- ------- ------- -------
Total liabilities and stockholders' equity. . . $88,889 $82,230 $92,365 $82,260 $80,110 $68,704
------ ------ ------- ------- ------- -------
------ ------ ------- ------- ------- -------

SELECTED PERFORMANCE RATIOS(4)(5)
Return on average assets. . . . . . . . . . . . 1.09% 0.92% 1.17% (.22)% .84% .83%
Return on average stockholders'
equity. . . . . . . . . . . . . . . . . . . . 14.23% 12.71% 15.53% (3.15)% 10.83% 11.90%
Net interest margin (6) . . . . . . . . . . . . 5.35% 5.39% 5.39% 5.42% 5.89% 5.33%
Dividend payout ratio . . . . . . . . . . . . . 29.92% -- 14.85% -- -- --

CONSOLIDATED CAPITAL RATIOS:
Tier 1 risk-based . . . . . . . . . . . . . . . 10.16% 9.79% 9.77% 9.40% 10.32% 11.61%
Total risk-based. . . . . . . . . . . . . . . . 11.46% 11.15% 11.06% 10.76% 11.78% 13.25%
Leverage(7) . . . . . . . . . . . . . . . . . . 7.78% 7.41% 8.09% 7.13% 8.26% 7.51%
</TABLE>

______________
(1) See "Management's Discussion and Analysis of Financial Condition and
Results of Operations-Other Expense."
(2) Excluding the effect of Noninterest expense-Other, and after giving effect
to available tax benefits, net income and net income per share would have
been as follows, for the respective periods indicated below:

(3) All book value per share numbers are based on the number of shares
outstanding at period end.

(4) Excluding the effect of Noninterest Expense-Other, and after giving effect
to available tax benefits, Selected Performance Ratios would have been as
follows, for the respective periods indicated below:

<TABLE>
<CAPTION>
For the Three
Months Ended
March 31, For the Year Ended December 31,
------------- -------------------------------------
1996 1995 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Return on average assets 1.09% 0.83% 0.97% 0.64% 1.57% 1.02%
Return on average
stockholders' equity 14.23 11.53 12.92 9.04 20.29 14.61
Net interest margin 5.35 5.39 5.39 5.42 5.89 5.33
Dividend payout ratio 29.92 -- 17.85 -- -- --
</TABLE>

(5) The Selected Performance Ratios for March 31, 1995 and 1996, respectively,
are computed on an annualized basis.

(6) No taxable equivalent adjustments are necessary because the Company had no
tax exempt securities or loans.

(7) Based on annual average assets.

<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The year ended December 31, 1995 represented the Company's most successful
year. The Company reported record net income of $959,000, and assets increased
by $10,105,000 to $92,365,000, in 1995. For the three month period ended March
31, 1996, the Company had net income of $238,000, reflecting a 29% increase over
the $184,000 net income recorded for the comparable period in 1995.

The Company continues to maintain a "well capitalized" status with a total
risk-based capital ratio (total capital divided by assets weighted for risk
elements) of 11.46% and 11.06% at March 31, 1996 and December 31, 1995,
respectively. Of these ratios, Tier 1 capital at March 31, 1996 and December
31, 1995 represents 10.16% and 9.77%, respectively, while the leverage ratio
(based on annual average assets) is 7.78% and 8.09%, respectively.

The Company reported a net loss of $184,000 for the year ended December
31, 1994, due to legal and related expenses not incurred in connection with
core banking operations. See "Other Expense." If these items are excluded,
the Company would have been profitable for 1994 with net income after taxes
of $714,000. The $714,000 adjusted net income for 1994 assumes that the
valuation allowance on deferred tax assets was utilized in 1994 instead of
1995 thus resulting in a lower income tax expense for 1994. Had this actually
been the case, net income for 1995 would not have utilized the valuation
allowance on deferred tax assets and net income for 1995, adjusted for
$102,000 in costs incurred during the year to finalize the ownership issues,
would have been $805,000, reflecting an increase of 13% over 1994's adjusted
net income of $714,000. If these legal and related expenses not incurred in
connection with core banking operations, referred to above, were excluded
from each year's net income beginning in 1992 and the related tax benefits
are assumed to be utilized at the earliest available date, net income would
have been $798,000 and $528,000 in 1995 and 1994, respectively.

The following analysis of financial condition and results of operations
should be read in conjunction with the Company's Consolidated Financial
Statements and Notes thereto, appearing elsewhere in this Prospectus.

<PAGE>

DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY;
YIELDS AND RATES
For the Three Months Ended March 31, 1996 and the Years
Ended December 31, 1995, 1994 and 1993
(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED YEARS ENDED DECEMBER 31,
------------------------------- ----------------------------------
MARCH 31, 1996 1995
------------------------------- ----------------------------------
AVERAGE INCOME AVERAGE AVERAGE INCOME AVERAGE
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans(1) $ 60,960 $ 1,509 9.96% $ 60,318 $ 5,902 9.78%
Securities 12,612 182 5.80 14,367 859 5.98
Federal funds sold and resale agreements 8,103 109 5.41 2,235 130 5.82
Bankers' acceptances -- -- -- -- -- --
Interest-bearing deposits in other banks 488 7 5.77 433 23 5.31
-------- ------- -------- -------
Total interest-earning assets 82,163 1,807 8.85 77,353 6,914 8.94
Allowance for loan losses (1,273) (1,299)
Cash and due from banks 5,337 4,715
Bank premises and equipment 274 320
Other assets 1,181 1,205
-------- --------
Total assets $ 87,682 $ 82,294
-------- --------
-------- --------

LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Time deposits $ 27,787 272 3.94 $ 27,740 1,094 3.94
Certificates of deposit 28,440 410 5.80 27,300 1,544 5.66
Federal funds purchased and
repurchase agreements 2,244 29 5.20 1,600 89 5.56
Other short term borrowings -- -- -- 104 6 5.77
Long-term debt 186 3 6.49 233 14 6.01
-------- ------- -------- -------
Total interest-bearing liabilities 58,657 714 4.90 56,977 2,747 4.82
------- -------
Non interest-bearing liabilities:
Demand deposits 21,546 18,547
Other liabilities 752 594
Stockholders' equity 6,727 6,176
-------- --------
Total liabilities and
stockholders' equity $ 87,682 $ 82,294
-------- --------
-------- --------

Net interest income(2) $ 1,093 $ 4,167
------- -------
------- -------
Net interest spread 3.95% 4.12%
---- ----
---- ----
Net interest margin 5.35% 5.39%
---- ----
---- ----

YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------
1994 1993
------------------------------ ---------------------------------
AVERAGE INCOME AVERAGE AVERAGE INCOME AVERAGE
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans(1) $ 58,245 $ 5,100 8.76% $ 47,903 $ 4,412 9.21%
Securities 15,609 876 5.61 16,540 989 5.98
Federal funds sold and resale agreements 2,246 88 3.92 2,598 83 3.19
Bankers' acceptances -- -- -- 528 17 3.22
Interest-bearing deposits in other banks 491 18 3.67 406 12 2.96
-------- ------- -------- -------
Total interest-earning assets 76,591 6,082 7.94 67,975 5,513 8.11
Allowance for loan losses (1,351) (1,404)
Cash and due from banks 4,951 4,299
Bank premises and equipment 364 396
Other assets 1,394 1,728
-------- --------
Total assets $ 81,949 $ 72,994
-------- --------
-------- --------

LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Time deposits $ 28,556 839 2.94 $ 26,848 708 2.64
Certificates of deposit 25,798 1,017 3.94 23,351 763 3.27
Federal funds purchased and
repurchase agreements 1,549 57 3.68 465 17 3.66
Other short term borrowings 61 3 4.92 -- -- --
Long-term debt 299 18 6.02 340 20 5.88
-------- ------- -------- --------
Total interest-bearing liabilities 56,263 1,934 3.44 51,004 1,508 2.96
------- --------
Non interest-bearing liabilities:
Demand deposits 18,877 15,687
Other liabilities 966 660
Stockholders' equity 5,843 5,643
-------- --------
Total liabilities and
stockholders' equity $ 81,949 $ 72,994
-------- --------
-------- --------

Net interest income(2) $ 4,148 $ 4,005
------- -------
------- -------
Net interest spread 4.50% 5.15%
---- ----
---- ----
Net interest margin 5.42% 5.89%
---- ----
---- ----
</TABLE>

- ------------------------------
(1) Nonaccrual loans are included in the average loan balances. Interest
on loans includes fees of approximately $40,000, $152,000, $151,000
and $151,000 for March 31, 1996, December 31, 1995, 1994 and 1993,
respectively.

(2) No taxable equivalent adjustments are necessary because the Company
had no tax-exempt securities or loans during 1996, 1995, 1994 and
1993.

17
<PAGE>

ANALYSIS OF NET INTEREST INCOME

Net interest income, the most significant component of the Company's
earnings, increased by $80,000, or 8%, to $1,093,000 for the first three months
of 1996 as compared to $1,014,000 for the comparable 1995 period. Average
earning assets for the first quarter of 1996 of $82,163,000 increased by
$5,881,000, or 8%, over the comparable 1995 period. Increased net interest
income resulting from a 30% increase in demand deposit accounts for the first
quarter of 1996 as compared to 1995 more than offset the effects of a decline in
the average loan to deposit ratio of 78% for the first quarter of 1996 from 82%
for the comparable prior year period, as well as an increased cost of deposits.
These factors combined to produce a net interest spread (the difference between
the average interest rate earned on interest-earning assets and paid on
interest-bearing liabilities) of 3.95% and a net interest margin (net interest
income as a percentage of average interest-earning assets) of 5.35% for the
first quarter of 1996, reflecting decreases of 36 basis points and 4 basis
points, respectively, from the first quarter of 1995.

Net interest income increased by $19,000, or less than 1%, to $4,167,000 in
1995 as compared to $4,148,000 in 1994. This variance is consistent with the
1% increase in average earning assets during the same period. Although the mix
of earning assets during 1995 was more heavily weighted towards loans, thus
improving interest income, a 138 basis point increase in rates paid on deposits
for 1995 as compared to 1994 offset virtually all the positive variances
achieved in interest income.

Although the net interest spread decreased by 38 basis points from 4.50% in
1994 to 4.12% in 1995, a $762,000 increase in the level of earning assets
coupled with improvements in the mix of earning assets during the same period
caused net interest income to increase by $19,000. The net interest margin for
1995 declined to 5.39% from 5.42% for 1994. Loans, the highest yielding
component of earning assets, represented approximately 78% of total average
earning assets for 1995 as compared to approximately 76% for 1994.

Net interest income, increased by $143,000, or 4%, to $4,148,000 in 1994 as
compared to $4,005,000 in 1993. This positive variance is a direct result of
both the $8,616,000, or 13%, increase in average earning assets from 1993 to
1994 and the Company's efforts to realign its earning assets to maximize yield.
The increase in net interest income occurred despite an increase in the average
rate paid on interest-bearing liabilities and a decrease in the average rate
earned on interest-earning assets. As illustrated in the table entitled
"Distribution of Assets, Liabilities and Stockholders' Equity; Yields and
Rates," the rate paid on interest-bearing liabilities increased by 48 basis
points to 3.44%, while the yield on earning assets declined by 17 basis
points to 7.94% in 1994 as compared to 1993. A significant contributor to
the decline in earning asset yields was a more competitive loan pricing
strategy implemented during 1994, resulting in 22% average loan growth as
compared to 1993. In addition, during 1993, the Company recognized as
interest income approximately $125,000 in purchase discounts on the payoff of
a portion of the loans purchased from the FDIC. When this interest income is
excluded from 1993, the yield on earning assets for 1993 would have been
7.93% as compared to 7.94% for 1994.

Although the net interest spread decreased by 65 basis points from 5.15% in
1993 to 4.50% in 1994, an $8,616,000 increase in the level of earning assets
coupled with a lesser increase in the level of interest-bearing liabilities of
$5,259,000 caused net interest income to increase. Despite the improvement in
the mix of earning assets away from securities and short-term investments and
towards loans and the increase in net non interest-bearing sources of funds, the
net interest margin for 1994 declined to 5.42% from 5.89% for 1993. Loans in
1994 represented approximately 76% of total average earning assets as compared
to approximately 70% for the comparable 1993 period.

18
<PAGE>

INTEREST RATES AND INTEREST DIFFERENTIAL
ANALYSIS OF CHANGES IN NET INTEREST INCOME
(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1996 VERSUS
THREE MONTHS ENDED
MARCH 31, 1995 1995 VERSUS 1994 1994 VERSUS 1993
------------------------------ ---------------------------- ----------------------------
NET CHANGE PER: NET CHANGE PER: NET CHANGE PER:
INCREASE ---------------- INCREASE -------------- INCREASE --------------
(DECREASE)(1) RATE VOLUME (DECREASE)(1) RATE VOLUME (DECREASE)(1) RATE VOLUME
------------- ------- ------- ------------- ----- ------ ------------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income from:
Loans (2) $ 91 $ 57 $ 34 $802 $620 $182 $ 688 $(265) $953
Securities (46) (11) (35) (17) 53 (70) (113) (57) (56)
Federal funds sold and
securities purchased under
agreements to resell 90 (4) 94 42 43 (1) 5 16 (11)
Bankers acceptances -- -- -- -- -- -- (17) -- (17)
Interest-bearing deposits
in banks 1 1 -- 5 7 (2) 6 3 3
------------- ------- ------- ------------- ----- ------ ------------- ----- ------
Total interest income(3) 136 43 93 832 723 109 569 (303) 872

Interest expense on:
Time deposits(4) (12) 3 (15) 255 279 (24) 131 86 45
Certificates of deposit 73 48 25 527 468 59 254 174 80
Short-term borrowings (3) (4) 1 35 32 3 43 1 42
Long-term borrowings (1) -- (1) (4) -- (4) (2) -- (2)
------------- ------- ------- ------------- ----- ------ ------------- ----- ------
Total interest expense 57 47 10 813 779 34 426 261 165
------------- ------- ------- ------------- ----- ------ ------------- ----- ------
Net interest income(3) $ 79 $ (4) $ 83 $ 19 $(56) $ 75 $ 143 $(564) $707
------------- ------- ------- ------------- ----- ------ ------------- ----- ------
------------- ------- ------- ------------- ----- ------ ------------- ----- ------
</TABLE>

_________________________________
(1) Changes due to both rate and volume are allocated to rate.

(2) Interest on loans includes loan fees of approximately $40,000, $42,000,
$152,000, $151,000 and $151,000 for the periods ended March 31, 1996, 1995,
December 31, 1995, 1994 and 1993, respectively.

(3) No taxable equivalent adjustments are necessary because the Company had no
tax-exempt securities or loans during 1995, 1994 and 1993.

(4) Includes transaction accounts.

<PAGE>

OTHER INCOME

Total other income, which consists primarily of service charges on deposits
and other fee income, decreased by approximately $7,000, or 4%, to $184,000 for
the first three months of 1996 as compared to the comparable 1995 period due to
modest decreases in overdraft activity as well as decreases in ATM income.

Total other income increased by $51,000, or 6%, to $841,000 in 1995 as
compared to $790,000 in 1994. This increase is due to increases in ATM income
resulting from the installation of more efficient ATM equipment in the Company's
Union Station location, as well as the full year's effect of the addition of one
new ATM at that location in April 1994.

Total other income decreased by $95,000, or 11%, to $790,000 in 1994 as
compared to $885,000 in 1993, due in part to a decrease in gains on securities
transactions during 1994. During 1994, one security was sold for liquidity
purposes resulting in a nominal loss. This compares with the sale of one
security from the held for sale portfolio resulting in a gain in 1993 of
$24,000.

OTHER EXPENSE

Total other expense decreased by $50,000, or 5%, to $901,000 for the first
three months of 1996 as compared to the comparable 1995 period. Salaries and
benefits of $432,000 for the first quarter of 1996 increased by $18,000, or 4%,
over the first quarter of 1995, due primarily to normal merit increases. Net
occupancy expense of $172,000 for the first three months of 1996 reflects a
decrease of $14,000, or 7%, from one year earlier, due primarily to decreases in
rental operating costs and depreciation expense. Professional fees of $43,000
for the first three months of 1996 declined by $49,000 from one year earlier due
primarily to lower legal fees associated with loan and other corporate matters.
Data processing expense of $87,000 for the first quarter of 1996 increased by
$22,000, or 34%, over the prior year as a result of increased activity levels
and item charges as well as the introduction of new electronic services. Other
operating expense of $168,000 for the first three months of 1996 reflects a
decrease of $26,000, or 13%, over the prior year due primarily to decreased FDIC
deposit insurance premiums.

Total other expense decreased by $1,120,000, or 23%, to $3,781,000 in 1995
as compared to 1994. Salaries and benefits for 1995 increased by $38,000, or
2%, to $1,649,000 as compared to 1994, primarily due to normal merit increases.
Occupancy and equipment expense decreased by $52,000, or 7%, to $699,000 during
the same period, principally due to decreases in operating costs of the
Company's main office location which are passed through to the Company by the
landlord. Professional fees decreased by $534,000, or 60%, to $353,000. This
decrease is attributable to decreases in legal and other costs related to the
issue of the ownership of certain shares of the Company's Common Stock, the
expensing in 1994 of previously deferred professional fees related to the
Company's proposed 1994 securities offering, and decreases in legal fees related
to three employment related lawsuits which were concluded in 1994. Professional
fees for 1995 include costs of approximately $102,000 incurred to finalize the
issues surrounding the ownership of certain shares of the Company's Common
Stock. See "Beneficial Ownership of Shares" for a further discussion of issues
relating to the Company's ownership. Data processing expense increased by
$34,000, or 13%, to $300,000 in 1995 as compared to 1994. Other operating
expense decreased by $605,000 in 1995 as compared to 1994. Of this decrease,
$387,000 is attributable to expenses incurred in 1994 for two employment related
lawsuits settled in 1994. During 1995, the Bank also experienced an $87,000
decrease in total FDIC insurance premiums as a result of premium rate
reductions. The remainder of the decrease is due to savings in various office
operating expenses.

Total other expense increased by $797,000, or 19%, to $4,901,000 in 1994 as
compared to 1993. Salaries and benefits for 1994 increased by $47,000, or 3%,
to $1,611,000 as compared to 1993, primarily due to normal merit increases.
Occupancy and equipment expense increased by $76,000, or 11%, to $750,000 during

<PAGE>

the same period, principally due to increases in depreciation and amortization
expense on the new ATM equipment installed during 1994 coupled with increases in
operating costs of the Company's main office location. Professional fees
increased by $406,000, or 85%, to $887,000. Of this amount $645,000 is
attributable to legal fees related to three employment related lawsuits which
were concluded in 1994, legal and other costs related to the issue of
ownership of certain shares of the Company's Common Stock and the expensing
of previously deferred professional fees related to the Company's proposed
1994 securities offering. Data processing expense increased by $22,000, or
9%, to $266,000 in 1994 as compared to 1993. Other operating expense
increased by $246,000 in 1994 as compared to 1993. This increase is
primarily attributable to a $387,000 expense for two employment related
lawsuits settled in 1994 as compared to a $250,000 expense for a judgment for
damages and a reserve for legal fees associated with another employment
related lawsuit in 1993. All three of these employment suits were concluded
during 1994 with no further amounts owed. During 1994, the Bank also
experienced an increase in total FDIC insurance premiums due to increased
deposit levels.

INCOME TAX EXPENSE

Income tax expense of $138,000 for the first three months of 1996 reflects
an increase of $69,000 over the $70,000 income tax expense recorded one year
earlier due to an increase in the Company's effective tax rate to 37% from 27%
for the first quarter of 1995.

Income tax expense for the full year 1995 was recorded at a combined tax
rate of 22%, as the Company eliminated the remaining valuation allowance on
deferred tax assets during the year. See Note 8 of the Notes to Consolidated
Financial Statements.

There was no income tax expense recorded for 1994, as the Company reported
a loss for the year and under the criteria specified by generally accepted
accounting principles was not permitted to record a net tax benefit. See Note 8
of the Notes to Consolidated Financial Statements.

ANALYSIS OF LOANS

The loan portfolio at March 31, 1996 of $60,215,000 decreased by
$3,377,000, or approximately 5%, as compared to the December 31, 1995 balance of
$63,592,000 primarily due to normal fluctuations in the outstanding balance of
commercial loans issued under lines of credit. Loans outstanding on commercial
lines of credit were approximately 36% of the total committed line amount at
March 31, 1996 as compared to 52% at December 31, 1995. New loans, exclusive of
short-term loans and lines of credit, of $ 1,508,000 were originated in the
first quarter of 1996, however, loan principal payments of $1,376,000 offset the
majority of this increase. The loan to deposit ratio at March 31, 1996 was 76%
as compared to 77% at December 31, 1995. On average, the loan to deposit ratio
for the first quarter of 1996 was 78%.

The loan portfolio at December 31, 1995 increased by $2,863,000, or 5%, to
$63,592,000 from $60,729,000 reflected at December 31, 1994. The majority of
this growth was in commercial and residential real estate mortgages. On
average, the Company's loans increased by $2,073,000, or 4%, to $60,318,000 for
1995 from $58,245,000 for 1994. As a result of this loan growth, the average
loan to deposit ratio increased to 82% in 1995 from 80% in 1994 and 73% in 1993.
The loan to deposit ratio at December 31, 1995 was 77% as compared to 81% at
December 31, 1994 and 76% at December 31, 1993. The Company has a target loan
to deposit ratio of 80% based on quarterly averages. See "Liquidity and Capital
Resources" for a further discussion of this ratio.

<PAGE>

ANALYSIS OF LOANS BY CATEGORY
AT MARCH 31, 1996 AND DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)

DECEMBER 31,
MARCH 31, -----------------
1996 1995 1994
------- ------- -------
Commercial and industrial $41,377 $43,547 $42,961
Real estate - mortgages 15,302 14,151 11,074
Real estate - construction and development 914 2,618 3,237
Installment to individuals 2,978 3,652 3,816
------- ------- -------
60,571 63,968 61,088
Less: Deferred income and unearned discounts (356) (376) (359)
------- ------- -------
Total $60,215 $63,592 $60,729
------- ------- -------
------- ------- -------

ANALYSIS OF LOAN MATURITY AND INTEREST SENSITIVITY
AT MARCH 31, 1996 AND DECEMBER 31, 1995
(IN THOUSANDS)

MARCH 31, 1996 DECEMBER 31, 1995
---------------------------------- ----------------------------------
WITHIN 1 1 - 5 AFTER WITHIN 1 1 - 5 AFTER
YEAR (1) YEARS 5 YEARS TOTAL YEAR (1) YEARS 5 YEARS TOTAL
-------- ------- ------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Maturity of Loans(2)(3):
Commercial $13,374 $21,323 $6,680 $41,377 $15,311 $21,881 $6,355 $43,547
Real Estate - mortgage 2,398 8,512 4,392 15,302 1,615 8,335 4,201 14,151
Real Estate - construction 712 37 165 914 1,591 340 687 2,618
Installment 778 1,277 923 2,978 1,013 1,690 949 3,652
-------- ------- ------- ------- -------- ------- ------- -------
Total loans(4) $17,262 $31,149 $12,160 $60,571 $19,530 $32,246 $12,192 $63,968
-------- ------- ------- ------- -------- ------- ------- -------
-------- ------- ------- ------- -------- ------- ------- -------

Interest Rate Sensitivity of Loans:
With predetermined interest rates $3,594 $8,485 $837 $12,916 $3,520 $8,791 $780 $13,091
With floating or
adjustable interest rates 13,668 22,664 11,323 47,655 16,010 23,455 11,412 50,877
-------- ------- ------- ------- -------- ------- ------- -------
Total loans(4) $17,262 $31,149 $12,160 $60,571 $19,530 $32,246 $12,192 $63,968
-------- ------- ------- ------- -------- ------- ------- -------
-------- ------- ------- ------- -------- ------- ------- -------
</TABLE>
__________________________
(1) Includes demand loans, loans having no stated schedule of repayment and no
stated maturity, and overdrafts.

(2) Loan maturity is based upon individual loan contract terms. The Company has
not established a rollover policy. Each loan is reviewed on a case by case
basis with respect to renewal.

(3) The Company has no foreign loans.

(4) The above table does not include deferred income and unearned discounts
which total a credit balance of $355,873 and $375,344 at March 31, 1996 and
December 31, 1995, respectively.

<PAGE>

ANALYSIS OF LOAN CONCENTRATIONS BY INDUSTRY
AT MARCH 31, 1996 AND DECEMBER 31, 1995 AND 1994

MARCH 31, DECEMBER 31,
1996 1995 1994
--------- --------------
Service industry 35% 38% 34%
Real estate development/finance 33 32 32
Wholesale/retail 22 21 21
Other 10 9 13
---- ---- ----
Total 100% 100% 100%
---- ---- ----
---- ---- ----

ANALYSIS OF INVESTMENTS

The Company classifies its debt and marketable equity securities into one
of three categories: trading, available for sale, or held to maturity. See Note
1(c) of the Notes to Consolidated Financial Statements. The available for sale
portfolio exists to maintain adequate liquidity and to provide a base for
executing asset/liability management strategy. These securities may be sold in
response to changes in interest rates, restructuring of maturity distributions,
need for additional funds for loans, tax planning and regulatory needs, as well
as for other purposes. The value of securities recorded as available for sale
fluctuates based on changes in interest rates. Generally, an increase in
interest rates will result in a decline in the value of securities available for
sale, while a decline in interest rates will result in an increase in the value
of such securities. Therefore, the value of securities available for sale and
the Company's stockholders' equity is subject to fluctuation based on changes in
interest rates.

Securities available for sale totaling $2,000,000 matured during the first
three months of 1996 as compared to purchases of $1,530,000 during the same
period. These securities transactions coupled with scheduled amortization and
accretion for the first quarter accounted for the $510,000 decrease in the
available for sale portfolio to $4,998,000 at March 31, 1996 as compared to
$5,508,000 at December 31, 1995. Maturities totaling $1,650,000 in the
investment portfolio coupled with normal pay downs on mortgage-backed and other
amortizing securities, and offset by $994,000 in new purchases, accounted for
the $629,000 decrease in investment securities to $7,564,000 at March 31, 1996
as compared to $8,193,000 at December 31, 1995.

Investment securities and securities available for sale at December 31,
1995 totaled $13,701,000, a decrease of $1,389,000, or 9%, from one year
earlier, due principally to maturities and scheduled repayments. Of the
$13,701,000 outstanding at December 31, 1995, $5,508,000 was segregated in the
available for sale portfolio, with the remainder classified as held to maturity
investments. The $5,508,000 available for sale portfolio at December 31, 1995
decreased by $501,000 from $6,009,000 reported one year earlier. The investment
(held to maturity) portfolio at December 31, 1995 of $8,193,000 decreased by
$888,000 from $9,081,000 reported at December 31, 1994. Although no securities
were sold, scheduled maturities and repayments in both the available for sale
and held to maturity portfolios were used to fund increases in the loan
portfolio. See "Liquidity and Capital Resources" for a further analysis of
liquidity. On average for 1995, the combined investment and available for sale
securities portfolio of $14,367,000 decreased by $1,242,000, or 8%, from
$15,609,000 for 1994.

<PAGE>

Based on an evaluation of the existing and projected liquidity needs of the
Company, during the second quarter of 1994, the Company reclassified $3,500,000
in securities previously classified as available for sale to the held to
maturity portfolio, resulting in an unrealized loss, net of taxes, on the date
of transfer of approximately $86,000. This unrealized loss is recorded in
equity and amortized as a yield adjustment over the remaining terms of the
reclassified securities. This amortization of approximately $39,000, net of
taxes as of December 31, 1995, coupled with unrealized gains in the remaining
available for sale portfolio of $7,000, net of taxes, brought the equity balance
of unrealized loss on securities to $40,000, at December 31, 1995.

ANALYSIS OF SECURITIES PORTFOLIO
AT MARCH 31, 1996 AND DECEMBER 31, 1995
(IN THOUSANDS)

<TABLE>
<CAPTION>
MARCH 31, 1996
--------------------------------------------------------------------------------------
INVESTMENT SECURITIES SECURITIES AVAILABLE FOR SALE
------------------------------------------ -----------------------------------------
ADJUSTED MARKET AVERAGE ADJUSTED MARKET AVERAGE
COST BASIS(1) VALUE YIELD COST BASIS(1) VALUE YIELD
------------- ------ ------- ------------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury:
Within one year $ 500 $ 501 6.02% $1,500 $1,503 5.87%
------ ------ ------ ------

Obligations of other U.S.
Government agencies
and corporations(2):
Within one year 2,304 2,309 6.05 2,501 2,499 5.25
After one, but within five years 3,939 3,982 6.08 1,000 996 5.56
------ ------ ------ ------
Total 6,243 6,291 6.07 3,501 3,495 5.34
------ ------ ------ ------

Mortgage-backed securities(3):
Federal National Mortgage Association:
After one, but within five years 17 17 9.23 -- -- --
Federal Home Loan Mortgage Corporation:
After five, but within ten years 347 361 8.71 -- -- --
------ ------ ------ ------
Total 364 378 8.73 -- -- --
------ ------ ------ ------

Federal Reserve Bank stock 163 163 6.00 -- -- --
------ ------

Federal Home Loan Bank stock 282 282 7.25 -- -- --
------ ------ ------ ------

Corporate securities:
After ten years 12 12 -- -- -- --
------ ------ ------ ------

Total investment securities $7,564 $7,627 6.23% $5,001 $4,998 5.50%
------ ------ ---- ------ ------ ----
------ ------ ---- ------ ------ ----

DECEMBER 31, 1995
--------------------------------------------------------------------------------------
INVESTMENT SECURITIES SECURITIES AVAILABLE FOR SALE
------------------------------------------ -----------------------------------------
ADJUSTED MARKET AVERAGE ADJUSTED MARKET AVERAGE
COST BASIS(1) VALUE YIELD COST BASIS(1) VALUE YIELD
------------- ------ ------- ------------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury:
Within one year $1,499 $1,500 5.71% $1,996 $2,002 5.85%
------ ------ ------ ------

Obligations of other U.S.
Government agencies
and corporations(2):
Within one year 1,006 1,015 6.68 2,501 2,503 5.48
After one, but within five years 4,875 4,964 5.96 1,000 1,003 5.56
------ ------ ------ ------
Total 5,881 5,979 6.09 3,501 3.506 5.50
------ ------ ------ ------

Mortgage-backed securities(3):
Federal National Mortgage Association:
After one, but within five years 17 17 9.18 -- -- --
Federal Home Loan Mortgage Corporation:
After five, but within ten years 369 386 8.63 -- -- --
------ ------ ------ ------
Total 386 403 8.65 -- -- --
------ ------ ------ ------

Federal Reserve Bank stock 163 163 6.00 -- -- --
------ ------ ------ ------

Federal Home Loan Bank stock 252 252 7.25 -- -- --
------ ------ ------ ------

Corporate securities:
After ten years 12 12 -- -- -- --
------ ------ ------ ------

Total investment securities $8,193 $8,309 6.16% $5,497 $5,508 5.63%
------ ------ ---- ------ ------ ----
------ ------ ---- ------ ------ ----
</TABLE>

- --------------------------------------
(1) The adjusted cost basis of securities which were transferred from
available for sale to investment securities is shown net of unrealized
loss on the date of transfer.

(2) Includes obligations of quasi-government agencies and corporations.

(3) This reflects final maturity, although contractual maturity is not a
reliable indicator of expected life because borrowers have the right
to repay their obligations at any time. Monthly amortization prior to
the final maturity is not shown as it cannot be reasonably estimated.

For additional information about investment securities and securities
available for sale at December 31, 1995 and 1994, see Note 3 of the Notes to
Consolidated Financial Statements.

NONINTEREST-EARNING ASSETS

Cash and due from banks of $4,478,000 at March 31, 1996 decreased by
$475,000 from the December 31, 1995 balance of $4,953,000 due primarily to
variations in balances maintained at correspondent banks. This December 31,
1995 balance reflects an increase of $604,000, or 14%, from the $4,349,000
balance at December 31, 1994, and is primarily attributable to normal
fluctuations in cash reserve balances maintained at the Federal Reserve Bank.

<PAGE>

Bank premises and equipment of $278,000 at December 31, 1995 reflects a
decrease of $91,000, or 25%, from the $369,000 balance reported at December 31,
1994. This decrease is due to depreciation and amortization expense of $146,000
for the year, offset by equipment purchases of $55,000.

Other assets of $1,273,000 at March 31, 1996 reflects an increase of
$120,000, or 10%, from the $1,153,000 reported at December 31, 1995 due
principally to increases in deferred taxes. The December 31, 1995 balance
reflects a decrease of $68,000, or 6%, from the $1,221,000 balance reported
at December 31, 1994. This decrease is principally due to a $47,000 increase
in accrued interest receivable and $260,000 increase in deferred taxes,
offset by a $375,000 decrease in taxes receivable at December 31, 1995 as
compared with December 31, 1994.

DEPOSITS

Total deposits of $78,812,000 at March 31, 1996 decreased by $4,251,000, or
5%, from the December 31, 1995 balance of $83,063,000. The December 31, 1995
balance increased by $7,770,000, or 10%, from December 31, 1994, as discussed
below.

Fluctuations in demand deposits, Negotiable Order of Withdrawal, or "NOW"
accounts and money market accounts at March 31, 1996 as compared to December 31,
1995 are due to normal fluctuations in the balances of both personal and
commercial accounts. Demand deposits and money market accounts at December
31, 1995 increased over the balances one year earlier, principally due to
fluctuations in the balances of corporate and personal accounts. NOW
accounts of $7,343,000 at December 31, 1995 decreased by $3,038,000, or 29%,
over the $10,381,000 balance at December 31, 1994, due primarily to the
withdrawal of the deposit accounts of one large national organization, with a
corresponding effect on average balances, as well as fluctuations in the
balances of both individual and nonprofit customers.

Certificates of deposit at March 31, 1996 of $27,907,000 decreased by
$1,660,000 from the $29,567,000 balance at December 31, 1995, with certificates
of deposit $100,000 and over decreasing by $1,917,000 and certificates of
deposit under $100,000 increasing by $257,000. The decrease in certificates of
deposit $100,000 and over is primarily due to decreases in collateralized
government deposits.

Certificates of deposit of $100,000 or greater at December 31, 1995 of
$13,591,000 remained virtually unchanged from the $13,651,000 balance reported
one year earlier, despite the withdrawal of $5,000,000 of local government funds
which had been on deposit at December 31, 1994. These deposits had been
collateralized by U.S. Treasury and agency securities. Certificates of deposit
under $100,000 of $15,976,000 at December 31, 1995 increased by $3,469,000
during the same period. This increase is primarily attributable to
approximately $3,500,000 of brokered funds which were raised in the first
quarter of 1995. In addition, the Company continued to maintain $2,200,000 in
certificates of deposit under $100,000 issued during 1994 to custodial accounts
for pension funds.

<PAGE>

MATURITY DISTRIBUTION OF CERTIFICATES OF DEPOSIT $100,000 AND OVER
AT MARCH 31, 1996, DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, ----------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Within three months $ 6,468 $ 5,716 $ 9,260
After three months but within six months 1,347 4,772 1,767
After six months but within twelve months 2,158 1,403 2,422
After twelve months 1,700 1,700 202
------- ------- -------
Total $11,673 $13,591 $13,651
------- ------- -------
------- ------- -------
</TABLE>

AVERAGE DEPOSITS AND RATES
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND THE YEARS ENDED
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
THREE MONTHS ENDED -------------------------------------------------
MARCH 31, 1996 1995 1994
------------------ -------------------- -------------------
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE RATE BALANCE RATE BALANCE RATE
------- ---- ------- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C>
Interest-bearing demand accounts $ 7,652 2.42% $10,129 2.46% $11,470 2.31%
Savings deposits 1,314 2.66 1,160 2.68 1,185 2.46
Money Market deposit accounts 18,821 4.65 16,451 4.94 15,901 3.43
CD's $100,000 and over 12,108 5.70 12,672 5.51 14,252 3.68
Other time deposits 16,332 5.88 14,628 5.78 11,546 4.26
------- ------- --------
Total interest-bearing deposits 56,227 4.88 55,040 4.79 54,354 3.41
Non interest-bearing demand deposits 21,546 18,547 18,877
------- ------- --------

Total deposits $77,773 $73,587 $73,231
------- ------- --------
------- ------- --------
</TABLE>

SHORT-TERM BORROWINGS

Short-term borrowings were $2,233,000 at March 31, 1996 as compared to
$1,786,000 at December 31, 1995. Both balances consist entirely of
repurchase agreements with customers of the Company. This compares with
repurchase agreements outstanding at December 31, 1994 of $361,000. The
Company did not purchase any federal funds nor undertake any other short-term
borrowings during the first quarter of 1996. For additional information on
short-term borrowings as of December 31, 1995 and 1994, see Note 10 of the
Notes to Consolidated Financial Statements.

<PAGE>

ASSET QUALITY

LOAN PORTFOLIO AND ADEQUACY OF THE ALLOWANCE FOR LOAN LOSSES

The Company manages the risk characteristics of its loan portfolio through
various control processes, such as credit evaluation of individual borrowers,
establishment of lending limits to individuals and application of lending
procedures, such as the holding of adequate collateral and the maintenance of
compensating balances. Although credit policies are designed to minimize risk,
management recognizes that loan losses will occur and that the amount of these
losses will fluctuate depending on the risk characteristics of the loan
portfolio as well as general and regional economic conditions.

As a result of improvement in the quality of the loan portfolio over the
last few years as well as relatively low levels of net charge-offs, the Company
took no provision for loan losses in the first quarter of 1996 or in 1995 as
compared to $221,000 recorded in 1994.

While the Company continues to recognize the risk characteristics of the
loan portfolio, including specific reserves for problem credits and general
reserves for the overall loan portfolio, the Company deemed the allowance for
loan losses of $1,262,000 and $1,274,000 at March 31, 1996 and December 31,
1995, respectively, to be adequate. Although the dollar amount of the allowance
for loan losses of $1,274,000 at December 31, 1995 declined from the balance of
$1,290,000 one year earlier, as shown in the table entitled "Allocation of
Allowance for Loan Losses," the portion of the allowance for loan losses which
was not allocated to any particular component of the loan portfolio at March 31,
1996 increased by 26% to $319,000 from $253,000 at December 31, 1995, which
remained virtually unchanged from 1994 levels.

The allowance for loan losses as a percentage of outstanding loans at March
31, 1996 was 2.10%, as compared to 2.00% at December 31, 1995 and 2.12%
at December 31, 1994. The decrease in the ratio from December 31, 1994 to
December 31, 1995 is predominantly due to improvement in the quality of the loan
portfolio. See analysis of "Nonperforming Assets" for a further discussion of
asset quality. In assessing the adequacy of the allowance for loan losses,
Management primarily relies on its ongoing review of the loan portfolio, which
is undertaken both to determine whether there are probable losses which must be
written off and to assess the risk characteristics of the loan portfolio as a
whole. In addition to actual loss experience, Management considers factors such
as industry specific composition of the loan portfolio and the general and
regional economic conditions. This review takes into account the judgment of
the individual loan officer, senior management and the Board of Directors. The
Board of Directors reviews the Company's Classified and Criticized Loans
Quarterly Report and quarterly loan loss analyses. In addition, the Company's
review takes into account the judgment of the regulatory agencies that review
the loan portfolio as a part of the regular examination process. Such
regulatory agencies may require the Company to recognize additions to the
allowance based on their judgments about information available to them at the
time of their examination. The Company also has an independent loan review
performed by a consultant on an annual basis, which during 1994 and 1995 covered
a total of approximately 73% of the dollar volume of the loan portfolio, and
included 96% of the criticized and classified loans. While Management uses
available information to recognize losses on loans, future additions may be
necessary based on changes in economic conditions and other factors.

In reviewing the adequacy of the allowance for loan losses, the Company also
prepares a detailed migration analysis which measures the Company's historical
loss experience relative to the risk classifications within the individual loan
portfolio pools. This historical loss experience is then adjusted for external
factors such as trends in volumes and characteristics of loans, national and
local economic trends and management experience, among other factors, and is
applied to the current outstanding loan portfolio pools within each risk

<PAGE>

classification. Based on the results of this migration analysis, which
encompasses all of the factors previously used, Management makes a determination
as to the adequacy of the allowance for loan losses.

TRANSACTIONS IN THE ALLOWANCE FOR LOAN LOSSES FOR THE
THREE MONTHS ENDED MARCH 31, 1996 AND THE YEARS
ENDED DECEMBER 31, 1995, 1994 AND 1993

<TABLE>
<CAPTION>
THREE MONTHS YEARS ENDED DECEMBER 31,
ENDED MARCH 31, ----------------------------------------------------
1996 1995 1994 1993
-------------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
Balance at beginning of period $1,273,965 $1,289,562 $1,385,875 $1,320,487

Provision for loan losses -- -- 221,572 175,000

Recoveries 32,889 97,993 156,374 97,552
Loans charged off (45,182) (113,590) (474,259) (207,164)
---------- ---------- ---------- ----------
Net charge-offs (12,293) (15,597) (317,885) (109,612)
---------- ---------- ---------- ----------
Balance at end of period $1,261,672 $1,273,965 $1,289,562 $1,385,875
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>

ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
AT MARCH 31, 1996, DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS)

<TABLE>
<CAPTION>
MARCH 31, 1996 1995 1994 1993
---------------------- --------------------- ---------------------- -----------------------
RESERVE % OF LOANS RESERVE % OF LOANS RESERVE % OF LOANS RESERVE % OF LOANS
AMOUNT TO TOTAL LOANS AMOUNT TO TOTAL LOANS AMOUNT TO TOTAL LOANS AMOUNT TO TOTAL LOANS
------- -------------- ------ -------------- ------ -------------- -------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial $ 624 68.31% $ 658 68.08% $ 760 70.33% $ 843 66.80%
Real estate - mortgage 263 25.26 291 22.12 215 18.13 323 20.57
Real estate - construction 9 1.51 27 4.09 21 5.30 36 4.79
Installment 47 4.92 45 5.71 46 6.24 67 7.84
Unallocated 319 -- 253 -- 248 -- 117 --
------ ------ ------ ------ ------ ------ ------ ------
Total $1,262 100.00% $1,274 100.00% $1,290 100.00% $1,386 100.00%
------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------
</TABLE>

NONPERFORMING ASSETS

Nonperforming assets include nonaccrual loans, restructured loans, past due
loans and other real estate. See Note 1(d) of the Notes to Consolidated
Financial Statements.

Nonaccrual loans at March 31, 1996 of $1,463,000 decreased $98,000 from the
$1,561,000 reported at December 31, 1995, while restructured loans and loans
past due 90 days or more at March 31, 1996 of $1,241,000 and $4,000,
respectively, remained virtually unchanged from the $1,245,000 and $6,000,
respectively, reported at December 31, 1995. Nonaccrual loans at December 31,
1995 increased $317,000 from $1,244,000 at December 31, 1994, while
restructured loans decreased by $56,000 from $1,301,000 at December 31, 1994
and past due loans increased by $3,000 from $3,000 during the same period.
At March 31, 1996 and December 31, 1995, nonaccrual loans include $817,000
and $875,000, respectively, in loans guaranteed by the SBA for a total of
$691,000 and $743,000 respectively. Banking regulations require that the
full balance of these loans be placed on nonaccrual status, despite the SBA
guarantee on approximately 80% of the total loan amount. Subsequent to
March 31, 1996, the Company transferred $254,000 to other real estate from
loans previously recorded on nonaccrual status, reflecting real property
acquired in satisfaction of the loan balance.

ANALYSIS OF NONPERFORMING ASSETS
AT MARCH 31, 1996, DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)

<TABLE>
<CAPTION>
MARCH 31, AT DECEMBER 31,
--------- ---------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Nonaccrual loans:
Commercial $1,161 $1,244 $1,096
Real estate - mortgage 302 317 148
------ ------ ------
Total nonaccrual loans(1) 1,463 1,561 1,244

Past due loans:
Installment - individuals 4 6 3
------ ------ ------

Total past due loans 4 6 3

Restructured loans:
Commercial 1,241 1,245 1,301
------ ------ ------

Total restructured loans 1,241 1,245 1,301
------ ------ ------

<PAGE>

Total nonperforming assets $2,709 $2,812 $2,548
------ ------ ------
------ ------ ------
Total nonperforming assets exclusive of
SBA guaranteed balances $2,018 $2,070 $1,664
------ ------ ------
------ ------ ------

Ratio of nonperforming assets
to gross loans(2) 4.50% 4.42% 4.20%
Ratio of nonperforming assets to total
assets(2) 3.05% 3.04% 3.10%
Percentage of allowance for loan losses to
nonperforming assets(2) 46.58% 45.30% 50.61%
Ratio of net charge-offs to average loans .02% .03% .55%
</TABLE>

- ----------------------------
(1) Nonaccrual loans include $817,000, $875,000 and $1,013,000 in loans
guaranteed by the SBA at March 31, 1996, and December 31, 1995 and
1994, respectively. The outstanding balances of these loans are
guaranteed for 84.5%, or $691,000, 84.9%, or $743,000, and 87.3%,
or $884,000, respectively.

(2) Ratios include SBA guaranteed loan balances.

For additional information concerning nonaccrual, restructured and past due
loans as of December 31, 1995 and 1994, see Note 4 to the Notes to Consolidated
Financial Statements included herein.

<PAGE>

POTENTIAL PROBLEM LOANS

At March 31, 1996 and December 31, 1995, respectively, loans totaling
$685,000 and $618,000 were classified as potential problem loans which are not
reported in the table entitled "Analysis of Nonperforming Assets" as compared to
$1,742,000 at December 31, 1994. The loans are subject to management attention
as a result of financial difficulties of the borrowers, and their classification
is reviewed on a quarterly basis. Of the potential problem loans at March 31,
1996, 89% of the balance represents loans which are fully secured, with the
remaining 11%, or $73,000, guaranteed by the SBA for a total of $66,000. This
compares with potential problem loans at December 31, 1995, of $618,000, 98% of
which are partially to fully secured, with the remaining 2%, or $15,000,
guaranteed by the SBA.

Of the $1,742,000 in problem loans at December 31, 1994, $618,000 were
guaranteed by the SBA for a total of $503,000 and the majority of the remainder
were adequately collateralized.

IMPAIRED LOANS

At March 31, 1996 and December 31, 1995, respectively, loans totaling
$2,746,000 and $2,790,000 were classified as impaired loans, all of which are
reported above as nonaccrual, restructured or potential problem loans. For
additional information concerning impaired loans at December 31, 1995 and 1994,
see Notes 1(l) and 4 to the Notes to Consolidated Financial Statements
included herein.

<PAGE>

INTEREST SENSITIVITY MANAGEMENT

The sensitivity of net interest income to fluctuations in interest rates is
known as interest rate risk. Sensitivity arises when assets and liabilities are
not subject to rate repricing within the same period. As shown by the table
entitled "Analysis of Interest Rate Sensitivity," at March 31, 1996, interest
sensitive assets repricing within each period of less than one year ranges from
117% to 130% of interest sensitive liabilities repricing in the comparable
periods. When non-rate sensitive assets and liabilities are excluded, the
interest sensitive assets in each remaining period beyond one year exceed
interest sensitive liabilities repricing in the comparable periods. Management
of interest rate sensitivity is monitored by the Asset/Liability Investment
Committee of the Bank which meets monthly and includes members of the Bank's
Board of Directors as well as the Bank's officers.

The Committee considers, among other things, the sensitivity of major asset
and liability categories to anticipated interest rate changes. The Company does
not necessarily attempt to maintain a matched position for each time frame.
While interest sensitivity analysis is a useful tool for asset/liability
management, limitations exist which make it difficult to predict the Company's
net interest income solely on the basis of the interest sensitivity position.
For example, the relationship between interest rates earned on loans,
particularly the prime rate, and interest rates paid on deposits is not constant
over time. Despite these limitations, in an effort to better predict the effect
of possible interest rate changes on net interest income, the Company also
prepares an analysis of the effect on net interest income of interest rate
shocks of 1%, 2% and 3% in either direction. Based on the Company's interest
sensitivity position and the analyses performed of the effect of interest rate
movements at March 31, 1996, a rising interest rate environment will generally
tend to increase net interest income, while a declining interest rate
environment will generally tend to decrease net interest income.

ANALYSIS OF INTEREST RATE SENSITIVITY
MARCH 31, 1996
(IN THOUSANDS)

<TABLE>
<CAPTION>
TOTAL NON-RATE
0-90 91-180 181-365 RATE SENSITIVE &
DAYS DAYS DAYS SENSITIVE OVER 1 YEAR TOTAL
------- ------- ------- --------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans $27,616 $ 9,920 $ 8,885 $46,421 $13,794 $60,215
Securities(1) 4,032 1,196 1,710 6,938 5,624 12,562
Short-term investments 10,945 -- 392 11,337 -- 11,337
Non interest-earning assets -- -- -- -- 4,775 4,775
-------- -------- ------- ------- ------- -------
Total assets 42,593 11,116 10,987 64,696 24,193 $88,889
-------
-------
Interest-bearing liabilities:
Deposits(2) 33,630 5,336 14,090 53,056 5,184 $58,240
Short-term borrowings 2,233 -- -- 2,233 -- 2,233
Long-term debt 168 -- -- 168 -- 168
Non interest-bearing sources -- -- -- -- 28,248 28,248
-------- -------- ------- ------- ------- -------
Total liabilities and stockholders' equity 36,031 5,336 14,090 55,457 33,432 $88,889
-------
-------
Excess (deficiency) of interest sensitive
assets over like liabilities:
For the period $ 6,562 $ 5,780 $(3,103) $ 9,239 $(9,239)
Cumulative 6,562 12,342 9,239
Rate sensitive assets/
rate sensitive liabilities:
Cumulative 1.18x 1.30x 1.17x
</TABLE>

- ------------------------------
(1) Includes both investment securities and available for sale securities.

<PAGE>

(2) NOW and savings accounts are reflected in the 181-365 days
classification, based on the Company's evaluation of historical runoff
and interest sensitivity of these deposits.

LIQUIDITY AND CAPITAL RESOURCES

LIQUIDITY

Principal sources of liquidity are cash and unpledged assets that can be
readily converted into cash, including investment securities maturing within one
year, the available for sale securities portfolio and short-term loans. In
addition to $15,815,000 in cash and short-term investments at March 31, 1996,
the Company has a securities portfolio which can be pledged to raise additional
deposits and borrowings, if necessary. At March 31, 1996, the Company had
$1,486,000 in unpledged securities which were available for such use with an
additional $5,711,000 in securities which could be available for immediate use
at the Company's request without any change in the Company's deposit or
borrowing structure. As a percentage of total assets, the amount of these cash
equivalent assets at March 31, 1996 and December 31, 1995 was 26% and 21%,
respectively. Normal fluctuations in the deposit levels of some of the
Company's large corporate customers may result in corresponding fluctuations in
the Company's liquidity position (short-term investments). The Bank's liquidity
needs are mitigated by the sizeable base of relatively stable funds which
includes demand deposits, NOW and money market accounts, savings deposits and
nonbrokered certificates of deposit under $100,000 (excluding financial
institutions and custodial funds raised under deposit acquisition programs)
representing 77% and 76% of average total deposits at March 31, 1996 and
December 31, 1995, respectively. In addition, the Bank has unsecured lines of
credit from correspondent financial institutions which can provide up to an
additional $1,000,000 in liquidity as well as access to other collateralized
borrowing programs. Although the Bank maintained an average loan to deposit
ratio of 82% during 1995, the Bank has access to collateralized deposit programs
through U.S. government agencies which can be called upon to raise additional
deposits, thus lowering the loan to deposit ratio.

Through its membership in the Federal Home Loan Bank of Atlanta (the
"FHLB"), which serves as a reserve or central bank for member institutions
within its region, at March 31, 1996 the Bank is eligible to borrow up to
approximately $1,283,000 in funds from the FHLB collateralized by loans secured
by first liens on one-to-four family, multifamily and commercial properties as
well as investment securities. The Bank is eligible to increase the maximum
amount to be borrowed by $7,717,000 with the purchase of up to $1,696,000 in
additional stock in the FHLB. The Company has adequate resources to meet its
liquidity needs.

STOCKHOLDERS' EQUITY

Stockholders' equity at March 31, 1996 increased by $170,000 over the
balance at December 31, 1995 to $6,789,000 as a result of the Company's $238,000
net income for the three months ended March 31, 1996 and a $4,000 decrease in
unrealized loss on securities, net of taxes, partially offset by dividends
declared in the first quarter of 1996 of $71,000. Average stockholders' equity
as a percentage of average total assets for the first three months of 1996 was
7.67% as compared to 7.23% for the comparable prior year period.

Stockholders' equity at December 31, 1995 increased by $857,000 over the
prior year to $6,619,000 as a result of the Company's 1995 net income of
$959,000 and the $40,000 decrease in unrealized loss on securities, net of
taxes, partially offset by dividends paid of $142,000. Average stockholders'
equity as a percentage of average total assets for 1995 was 7.50% as compared to
7.13% for 1994.

<PAGE>

The tables below present the Company's and the Bank's capital positions
relative to their various minimum statutory and regulatory capital requirements
at March 31, 1996 and December 31, 1995. The Company and the Bank are
considered "well-capitalized" under regulatory guidelines. See "Supervision
and Regulation."

<TABLE>
<CAPTION>
Company Bank Minimum
----------------- ----------------- Capital
$ Amount Ratio $ Amount Ratio Requirements
-------- ----- -------- ----- ------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
March 31, 1996:
Leverage ratio(1) $6,826 7.78% $6,683 7.63% 4.0%
Tier 1 risk-based ratio(2) 6,826 10.16 6,683 9.96 4.0%
Total risk-based ratio(2) 7,695 11.46 7,552 11.26 8.0%

December 31, 1995:
Leverage ratio(1) $6,659 8.09 $6,405 7.79% 4.0%
Tier 1 risk-based ratio(2) 6,659 9.77 6,405 9.40 4.0%
Total risk-based ratio(2) 7,541 11.06 7,287 10.69 8.0%
</TABLE>

- ------------------------------
(1) Based on annual average assets
(2) Based on risk-adjusted assets

On May 21, 1996, the Bank paid off its $167,625 long-term capital note.
Because less than 20% of the note's balance was included in Tier 2 capital, the
effect of the repayment on the Company's and the Bank's capital ratios is not
significant.

During 1994, the Company's Board of Directors, on the recommendation of the
Special Committee adopted a Rights Agreement, the purpose of which was to
provide the Board of Directors with adequate time to respond effectively to a
takeover attempt and in a manner that would maximize the value of the Company
for all stockholders. For a further discussion of the Rights Agreement, see
"Beneficial Ownership of Shares," "Description of Capital Stock," and Note 17 to
the Notes to Consolidated Financial Statements included herein.

BUSINESS

GENERAL

Abigail Adams National Bancorp, Inc. (the "Company") is a bank holding
company which conducts business through its wholly-owned bank subsidiary, The
Adams National Bank (the "Bank"). The Bank serves the nation's capital through
three full-service offices located in Washington, with a fourth branch expected
to open in August 1996. At March 31, 1996, the Company had consolidated assets
of $88,889,000, deposits of $78,812,000 and stockholders' equity of $6,789,000,
and reported net income of $238,000 for the three months then ended. The
Company reported record net income of $959,000 for the year ended December 31,
1995. The Bank exceeds all regulatory capital requirements. See "Supervision
and Regulation."

<PAGE>

MARKET AREA

The Bank draws most of its customer deposits and conducts most of its
lending activities from and within the Washington metropolitan region, including
suburban Virginia and Maryland. The nation's capital attracts a significant
number of businesses of all sizes, professional corporations and national
nonprofit organizations. The Bank actively solicits banking relationships with
these firms and organizations, as well as their professional staff, and with the
significant population of high net worth individuals who live and work in the
region.

The Company seeks to identify acquisitions in neighboring markets in
Virginia and Maryland. These areas are experiencing growth in residential
communities and commercial sectors. Management expects that a strategic
acquisition in such market would contribute to the overall growth of the
Company.

SERVICES OF THE BANK

The Bank offers a full range of banking services to its customers. While
providing financial services to a wide-ranging customer base, including high net
worth individuals, Fortune 100 corporations, small to medium-sized businesses
and nonprofit and other organizations, the Bank remains committed to assisting
women and minorities with access to credit opportunities for career growth and
small business ownership.

The following types of services are offered by the Bank:

COMMERCIAL SERVICES

- Loans, including working capital loans and lines of credit, a wide
range of demand, term and time loans, and loans for real estate land
acquisition, development and construction, equipment, inventory and
accounts receivable financing.

- Cash management, including automatic overnight investment of funds.

- Collateralized repurchase agreements.

- Investments, including certificates of deposit.

- Direct deposit of payroll.

- Letters of credit.

- ExecuBanc Business Banking, a computer accessed banking service.

RETAIL SERVICES

- Transaction accounts, including checking and NOW accounts.

- Money market accounts.

- Overdraft checking.

- Certificates of deposit.

- Individual retirement accounts and Keogh accounts.

- Installment and home equity loans and lines of credit.

<PAGE>

- Residential construction and first mortgage loans.

- Direct deposit.

- 24-hour automated teller machines ("ATMs") with access to the MOST-
Registered Trademark- and CIRRUS-Registered Trademark- systems.

- 24-hour telephone banking.

- VISA-Registered Trademark- Credit card services.

- Traveler's checks, money orders, cashier's checks and safe deposit
boxes.

- Custodial services.

Commercial and consumer loans are made to corporations, partnerships and
individuals, primarily on a secured basis. Commercial lending focuses on
business, capital, renovation, inventory and real estate loans. Consumer
lending focuses on automobile, home equity and personal loans made on a direct,
secured basis. Real estate loans are originated for both commercial and
consumer purposes. Through its "Residential Express" program in affiliation
with Knutson Mortgage Corporation ("Knutson"), the Bank is able to offer a
variety of residential home mortgage loan products.

STRATEGY

MARKETING

In its marketing efforts, the Bank actively targets:

- High net worth individuals
- Fortune 100 companies
- Small businesses and professional corporations
- Nonprofit organizations
- Women and minorities

In addition, the Bank seeks opportunities to participate in significant
community development projects and to establish a presence in high traffic areas
of Washington. The Bank's participation in the syndicated loan for the
construction of the MCI Arena and the Bank's branch and ATM locations at Union
Station are examples of this strategy.

The Bank uses a variety of marketing strategies to attract and retain
customers. Strategies include publicity on regional radio and television,
targeted mailings to companies in select markets, referrals from existing
customers, cross-selling services to existing customers, and relationships
developed through officers' and directors' leadership in business, civic and
community organizations, as well as officers' and branch managers' loan
and deposit calling programs. Through personalized professional service and
competitive pricing, the Bank has been successful in attracting new
customers. As technological developments continue to become available to all
banks, large and small, the Bank can expand its marketing reach beyond its
branch network on a cost-effective basis by accessing customers through
technological means. The Bank is in the process of developing its own
electronic site (home page) on the Internet (World Wide Web). Management
believes that use of electronic media such as the Internet will allow the
Bank to further enhance its image in its target market and identify future
prospects for electronic and home banking services.

<PAGE>

ACQUISITION AND EXPANSION STRATEGY

The Company seeks to diversify both its market area and asset base while
increasing profitability through acquisitions and expansion. Management
believes that it possesses substantial expertise in lending to groups
traditionally underserved by the banking industry and that these capabilities
could be leveraged by making strategic acquisitions in the neighboring markets
of Maryland and Virginia.

In 1992, the Company initiated a strategy to expand through acquisition by
purchasing from the FDIC and the Resolution Trust Corporation insured deposits
and certain performing loans of financial institutions which were placed into
receivership in the Washington metropolitan region. The Company was the
successful bidder on three such purchases, one in each of 1992, 1993 and 1994.
In 1992, the Company purchased insured deposits and certain performing loans
from the FDIC, for a premium of $1,000. In addition, the Company was entitled
to any future recoveries received on loans charged off prior to the bid date for
the sale of the loans. As of December 31, 1995, $104,000 in recoveries on such
loans have been received. The Company also purchased certain performing loans
from the FDIC at discounted prices of 96.2% and 96.9% of the outstanding loan
amounts in 1993 and 1994, respectively.

Although the Company continues to explore acquisition opportunities in
Washington and suburban Maryland and Virginia, no banks have been identified as
probable merger or acquisition candidates. It is expected that additional
discussions will take place in the future as opportunities are presented.
However, no assurance can be given that any such merger or acquisition
candidates will be identified or that any merger or acquisition will be
consummated.

The Company also considers establishing branches as a means of expanding
its presence in current or new market areas and is presently reviewing potential
locations in Washington and suburban Maryland and Virginia. In March 1996, the
Company signed a lease to open a fourth branch in Washington. The Company will
also consider the expansion into other lines of business closely related to
banking if it believes these lines could be profitable without undue risk to the
Company and if the Company can be competitive.

OPERATIONS

The Company's strategy is to provide a high level of personalized service
and quality products to customers within the community it serves, through its
experienced staff. The Company uses technology to enhance its delivery systems.
It offers its retail customers 24-hour banking by touch tone phone, by means of
an interactive voice response system, and in 1996 it will offer customers the
ability to access account information, transfer funds and pay certain bills
by personal computer. The Company also maintains an integrated PC-based
server network system that provides immediate interaction among all operating
functions of the Bank, thereby enhancing internal communications and customer
service.

The Bank contracts with an outside firm to provide data processing and back
room operations. The state-of-the-art resources provided by this outside firm,
in conjunction with the Bank's internal data management system, enable the Bank
to provide a high level of customer service and to effectively manage its
growth.

LENDING ACTIVITIES

The Bank provides a range of commercial and retail lending services to
individuals, small to medium-sized businesses, professional corporations,
nonprofits and other organizations. These services include, but are not limited
to, commercial business loans, commercial and residential real estate loans,
renovation and mortgage loans, loan participations, consumer loans, revolving
lines of credit and letters of credit. Consumer lending focuses on automobile,
home equity and personal loans made on a direct, secured basis. Real estate
loans are

<PAGE>

originated for both commercial and consumer purposes, with a variety of
residential home mortgage loan products originated predominantly under the
Bank's Residential Express program. As of March 31, 1996, approximately 79% of
the Bank's total loan portfolio was comprised of loans with interest rates which
either float or generally adjust on an annual basis. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations-
Analysis of Loans."

The Bank aggressively markets its services to qualified lending customers
in both the commercial and consumer sectors, including small businesses and
nonprofit organizations. The Bank offers SBA-guaranteed loans which provide
better terms and more flexible repayment schedules than conventional financing.
Management believes that making such loans helps the local community and
provides the Bank with attractive returns with minimal risk, as the majority of
each loan is guaranteed by the SBA, and solid future lending relationships as
such businesses grow and prosper. As lending requirements of small businesses
grow to exceed the Bank's lending limit, the Bank has the ability to sell
participations in these larger loans to other financial institutions. The Bank
believes that such participations will help to preserve lending relationships
while providing a high level of customer service. As of March 31, 1996,
commercial and real estate SBA loans totaled $4,151,000.

The Bank provides financing to nonprofit organizations for construction and
renovation of local headquarters offices and other facilities, working capital
lines of credit and equipment financing. Current nonprofit customers of the
Bank include organizations which focus on issues relating to women's rights, the
environment, minority rights, Vietnam Veterans and AIDS treatment and education.
At March 31, 1996, commercial and real estate loans to these customers totaled
$4,689,000.

Commercial and real estate lending is performed by the Bank's Lending
Division, which is comprised of four loan officers, a credit analyst, a
collections staff person and an administrative assistant concentrating in loan
documentation. The Treasury Division includes the Loan Operations staff of two,
responsible for recording and processing new loans and loan payments and working
with the Lending Division, in order to ensure the timely receipt of all ongoing
loan documentation and the prompt reporting of any exceptions. Credit analysis
on loans is performed by individual loan officers, using a sophisticated credit
analysis computer program, which provides not only the flexibility necessary to
analyze loans but also the structure necessary to ensure that all documentation
requirements are appropriately met.

Policies and procedures have been established by the Bank to promote safe
and sound lending. Loan officers have individual lending authorities
established based on both their seniority and experience. Loans in excess of
individual officers' lending limits are presented to the Officers' Loan
Committee ("OLC"), which meets weekly, and is comprised of all loan officers and
the President of the Bank. While a maximum of two loan officers may pool their
loan authorities to approve a loan, most loans over $100,000 are brought to this
Committee. The OLC has authority to approve unsecured loans up to $250,000 and
secured loans up to $400,000. Loans over $250,000 on an unsecured basis and
over $400,000 on a secured basis are brought to the Executive Loan Committee
("ELC"), which meets approximately twice per month. The ELC is comprised of two
outside directors and the President of the Bank. In addition to approving new
loans, this Committee approves the restructuring of loans it originally
approved, reviews past due loans and approves charge-offs.

COMMERCIAL LENDING

The Bank provides a wide range of commercial business loans, including
lines of credit for working capital purposes and term loans for the acquisition
of equipment and other purposes. Collateral for these loans generally includes
accounts receivable, inventory, equipment and real estate. Terms of commercial
business loans generally range from three months to five years. These loans
often require that borrowers maintain certain levels of deposits with the Bank
as compensating balances. The primary repayment risk for commercial loans is
the

<PAGE>

failure of the business due to economic or financial factors. In most cases,
the Bank has collateralized these loans and/or taken personal guarantees to help
assure repayment. As of March 31, 1996, commercial loans totaled $41,377,000.

REAL ESTATE LENDING

The Bank originates residential mortgage loans through an affiliated loan
program with Knutson. A variety of fixed and variable rate loan products are
offered for varying terms through this program. Loan applications can be taken
by the Bank or through a 24 hour Knutson Hot Line. These loans are preapproved
by Knutson prior to funding by the Bank and are generally sold (inclusive of
servicing rights) to Knutson at the original principal amount within one to
three days of closing. The Bank has the option, however, of retaining these
loans for its own portfolio. While the Bank has a real estate mortgage
portfolio of $15,302,000 at March 31, 1996, these loans are predominantly
amortizing variable rate or annually repricing commercial or residential
investment mortgage loans with a maximum maturity of five years.

The majority of the $914,000 in loans classified as construction and
land development loans at March 31, 1996 in the Consolidated Financial
Statements, included elsewhere in this Prospectus, are primarily for
renovation of commercial properties.

CONSUMER LENDING

The Bank's consumer lending includes loans for motor vehicles, home
improvement, home equity and small personal credit lines. During 1994, the
Bank entered the credit card market by issuing its own VISA-Registered
Trademark- card at competitive rates and with no annual fee. The credit card
is offered to both new and existing customers as well as corporate accounts,
and provides various cardmember benefits, including frequent flyer miles.
Through its credit card services, the Bank hopes to increase profits and
augment its cross-selling opportunities by increasing its marketing base. As
of March 31, 1996, consumer loans totaled $2,978,000.

COMPETITION

The Bank faces substantial competition for deposits and loans throughout
its market area. The primary factors in competing for deposits are interest
rates, personalized services, the quality and range of financial services,
convenience of office locations and office hours. Competition for deposits
comes primarily from other commercial banks, savings associations, credit
unions, money market funds and other investment alternatives. The primary
factors in competing for loans are interest rates, loan origination fees, the
quality and range of lending services and personalized services. Competition
for loans comes primarily from other commercial banks, savings associations,
mortgage banking firms, credit unions and other financial intermediaries. The
Bank faces competition for deposits and loans throughout its market areas not
only from local institutions but also from out-of-state financial intermediaries
which have opened loan production offices or which solicit deposits in its
market areas. Many of the financial intermediaries operating in the Bank's
market areas offer certain services, such as trust, investment and international
banking services, which the Bank does not offer. Additionally, banks with
larger capitalization and financial intermediaries not subject to bank
regulatory restrictions have larger lending limits and are thereby able to serve
the needs of larger customers.

In order to compete with other financial services providers, the Bank
principally relies upon local promotional activities, personal relationships
established by officers, directors and employees with its customers, and
specialized services tailored to meet its customers' needs. In those instances
where the Bank is unable to accommodate a customer's needs, the Bank will
arrange for those services to be provided by its correspondents.

<PAGE>

EMPLOYEES

At March 31, 1996, the Company employed 36 people, 34 on a full time and 2
on a part time basis. The employees are not represented by a union and
management believes that its relations with its employees are good.

PROPERTIES

The principal executive offices of the Company and the main office of the
Bank are located in leased space at 1627 K Street, N.W., Washington, D.C.
20006. The Bank leases three other offices, located at 2905 M Street, N.W.,
Washington, D.C.; Union Station, 50 Massachusetts Avenue, N.E., Washington,
D.C.; and 1604 17th Street, N.W., Washington, D.C. An additional ATM was opened
in Union Station in 1989 and a third ATM was opened in Union Station in May
1994. Leases for these facilities expire as follows:

Location Expiration of Lease
-------- -------------------
1627 K Street, N.W. 2002
2905 M Street, N.W. Month-to-month term
50 Massachusetts Avenue, N.E. 1999
Union Station ATM 1999
Union Station ATM 1999
1604 17th Street, N.W. 2016

In 1995, the Company and the Bank incurred rental expense on leased real
estate of approximately $408,000. The Company considers all of the properties
leased by the Bank to be suitable and adequate for their intended purposes.

LEGAL PROCEEDINGS

Although the Bank, from time to time, is involved in various legal
proceedings in the normal course of business, there are no material legal
proceedings to which the Company or the Bank is a party or to which any of their
property is subject. For a discussion of certain legal proceedings in
connection with the Company's prior ownership, see "Beneficial Ownership of
Shares."

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The directors and executive officers of the Company are as follows:

Name Age Position with the Company
- ---- --- -------------------------
Barbara Davis Blum 56 Chairwoman of the Board, President and
Chief Executive Officer

Shireen L. Dodson 44 Director

Susan Hager 51 Director

Jeanne D. Hubbard 48 Director

<PAGE>

Clarence L. James, Jr. 62 Director

Steve Protulis 54 Director of the Bank

Marshall T. Reynolds 59 Director

Robert L. Shell, Jr. 52 Director

Dana B. Stebbins 49 Director

Susan J. Williams 55 Director

Kimberly J. Levine 39 Senior Vice President, Treasurer and
Chief Financial Officer

Thomas O. Griel 49 Senior Vice President, Lending, of the
Bank

BARBARA DAVIS BLUM has served as Chairwoman of the Board of the Company and
the Bank since March 1986, President and Chief Executive Officer of the Company
since 1985 and President and Chief Executive Officer of the Bank since 1983.
She also serves as Chairwoman of the Economic Development Finance Corporation, a
quasi-public economic development corporation for the benefit of District of
Columbia businesses; Chairwoman, Center for Policy Alternatives, a national
nonprofit organization; and a Director of Kaiser Permanente Health Care of the
Mid-Atlantic States. She is a director of the Greater Washington Board of
Trade; a Trustee of the Federal City Council; a member of the National Advisory
Council of the U.S. Small Business Administration; Senior Advisor, Commercial
Real Estate Women; and a Director of the Institute of American Indian Art, a
Presidential appointment requiring Senate confirmation. She was a founder of
Leadership Washington in 1985 and served as its Chairwoman in 1987. She also
served as 1995 and 1996 Greater Washington Area, United States Savings Bonds
Chairwoman. From 1981 to 1983, she served as President of Direction
International, an environmental consulting firm, and from 1977 to 1981 she
served as the Deputy Administrator of the U.S. Environmental Protection
Agency.

SHIREEN L. DODSON has served as the Assistant Director of Administration
and Planning for the Center for African American History and Culture (formerly
called the National African American Museum Project) of the Smithsonian
Institution since 1993. From 1985 to 1992, she served as Comptroller of the
Smithsonian Institution. She also served as the Commissioner of the District of
Columbia Minority Business Opportunity Commission from 1989 to 1992. She has
been President of the Coalition of 100 Black Women of D.C., Inc. and currently
serves on the Advisory Committee of that organization. She is also a member of
the Women's Advisory Board, Girl Scout Council of the National Capital. She is
Treasurer of the Washington D.C. Chamber of Commerce and has been a Director of
the Company since 1993 and a Director of the Bank since February 1992.

SUSAN HAGER has been the President of Hager Sharp, Inc., an issues oriented
communications firm, since 1973. She is also a Director of the Greater
Washington Board of Trade, Chairwoman of the Board of the Lab School of
Washington, a member of the National Advisory Council of the U.S. Small Business
Administration and a Trustee of the Federal City Council. She served as
President of National Small Business United, a national small business trade
association, and Chairwoman of the U.S. Department of the Treasury's Small
Business Advisory Council. She was a founder of the National Association of
Women Business Owners (NAWBO). She has been a Director of the Company and the
Bank since June 1992.

<PAGE>

JEANNE D. HUBBARD has served as a consultant to First Guaranty Bank,
Hammond, Louisiana, since 1993. From 1980 to 1993, Ms. Hubbard held a
variety of officer positions, including Vice President and Senior Commercial
Lender and Chairwoman of the Loan Committee and Asset/Liability Committee,
with First Bank of Ceredo, Ceredo, West Virginia. She served as President of
the C-K Rotary Club and Chairwoman of the Citizens Advisory Committee of the
United Way in Huntington, West Virginia. She has been a Director of the
Company and the Bank since October 1995.

CLARENCE L. JAMES, JR. joined the law firm of Manatt, Phelps & Phillips,
LLP, in 1995. From 1983 to 1995, he served as President and Chief Operating
Officer of The Keefe Company, a government relations and public affairs firm.
From 1981 to 1983, he was Vice President of Domestic Affairs and General
Counsel of The Keefe Company. Since 1990, he has also served as Chairman of
the Board of Douglas James Securities, Incorporated, a registered
broker-dealer and a member of the National Association of Securities Dealers,
Inc. He founded and is on the board of the Executive Leadership Council and
the Executive Leadership Foundation, an association of the top national
African American business leaders. From 1977 to 1981, he served as
Commissioner and Chairman of the Copyright Royalty Tribunal, a Presidential
appointment. From 1971 to 1977, he was Managing Partner of James, Moore,
Douglas & Co., LPA, a corporate, tax and land development law practice. He
has been a Director of the Company and the Bank since February 1993.

STEVE PROTULIS is the Executive Director of the National Council of
Senior Citizens ("NCSC"), a position he has held since August 1995. From
1988 to 1995, he coordinated senior efforts for the AFL-CIO COPE Department,
and was the national coordinator for various related support groups. Mr.
Protulis has two decades of experience working with the United Auto Workers
and various legislative efforts. He has been an executive board member of
NCSC since 1984, a member of the board of the Congressional Hispanic Caucus
Institute since 1991, and an executive board member of the National Council
on Aging since 1994. He has been a director of the Bank since September 1995.

MARSHALL T. REYNOLDS is the Chairman of the Board, President and Chief
Executive Officer of Champion Industries, Inc., a holding company for
commercial printing and office products companies, a position he has held
since 1992. He became Chairman of the Board of Premier Financial Bancorp in
the first quarter of 1996. He became Chairman of the Board of First Guaranty
Bank during the second quarter of 1996. From 1964 to 1993, Mr. Reynolds was
President and Manager of The Harrah and Reynolds Corporation (predecessor to
Champion Industries, Inc.). From 1983 to 1993, he was Chairman of the Board
of Banc One, West Virginia Corporation (formerly Key Centurion Bancshares,
Inc.). He has served as Chairman of United Way of the River Cities, Inc. and
Boys and Girls Clubs of Huntington. He has been a Director of the Company
and the Bank since November 1995.

ROBERT L. SHELL, JR., is the Chairman and Chief Executive Officer of
Guyan International, a privately held holding company for manufacturing and
service companies, a position he has held since 1985. Mr. Shell is also the
Chairman of Carolina Hose and Hydraulics, Standard Leasing Co. and Permco
Hydraulik AG. He has been a director of First State Bank of Sarasota since
February 1994. He is a member of the Huntington Boys and Girls Club, the
Cabell Huntington Hospital Foundation and the West Virginia Foundation for
Independent Colleges. He was formerly the Chairman of the Marshall Artists
Series. He has been a Director of the Company and the Bank since October
1995.

DANA B. STEBBINS is a partner in Wilkes, Artis, Hedrick & Lane, a law
firm located in Washington, D.C., where she has practiced since 1989. From
1983 to 1989, she was Special Counsel for Klimek, Kolodney & Casale, P.C.
From 1981 to 1983, she was Special Counsel for the U.S. House of
Representatives Committee on Small Business. From 1980 to 1982, she was
Special Assistant to the Associate Administrator of the U.S. Small Business
Administration. From 1978 to 1980, she was the Special Assistant and White
House Liaison to the Chairman of the Commodity Futures Trading Commission.
From 1977 to 1978, she was Advisor to the White

<PAGE>

House Office of Domestic and Urban Policy. She is currently President of the
Washington D.C. Chamber of Commerce, a Trustee of the Federal City Council and
is on the Board of the Greater Washington Boys and Girls Clubs, as well as the
Lab School of Washington. She has been a Director of the Company and the Bank
since March 1993.

SUSAN J. WILLIAMS is the President of Bracy Williams & Company, a
government and public affairs consulting firm, a position she has held since
1982. In 1986, she was a representative on the Southern Growth Policies Board
for the State of Virginia. From 1979 to 1981, Ms. Williams served as Assistant
Secretary for Governmental Affairs of the U.S. Department of Transportation and
from 1977 to 1979 she was Deputy Assistant Secretary for Governmental and Public
Affairs for that agency. She is the Chair-Elect of the Greater Washington Board
of Trade, having previously served as Secretary. She is also a Director of the
Henry L. Stimson Center and the American Institute for Public Service. She has
been a Director of the Company since October 1995 and the Bank since September
1994.

KIMBERLY J. LEVINE, CPA, has been Senior Vice President and Treasurer of
the Company and the Bank since 1988. From 1984 to 1987, she was Vice President
and Controller of the First American Bank, N.A. From 1979 to 1984, she was
Assistant Vice President of Suburban Bank in various accounting and reporting
positions. From 1977 to 1979, she was a Senior Accountant with Arthur Andersen
& Co. She formerly served as a member of the Corporate Reporting Task Force, a
combination public and private sector task force designed to address District of
Columbia government tax issues and has been an instructor for the American
Institute of Banking. Ms. Levine holds a Bachelors of Economics from the
Wharton School of Business of the University of Pennsylvania.

THOMAS O. GRIEL, CPA, has served as the Bank's Senior Vice President,
Lending since 1990. Prior to joining the Bank, Mr. Griel was a self-employed
business consultant from 1987 to 1990. He served as President and Chief
Executive Officer of McLachlen National Bank in Washington, D.C. from 1980 to
1987, and was a partner with Ross, Langan and McKendree, a certified public
accounting firm, from 1975 to 1980. He served as Corporate Controller for
Fairfax County National Bank from 1973 to 1974 and for Northern Virginia Bank
from 1974 to 1975. Prior to that time, he served as a national bank examiner
with the Office of the Comptroller of the Currency from 1969 to 1973. Mr.
Griel holds a Bachelors of Science degree from the University of Maryland.

DIRECTORS' COMPENSATION

During 1995, each director of the Company received $250 for each meeting of
the Board of Directors, $200 for each Executive Committee meeting and $100 for
all other committee meetings attended by such director.

EXECUTIVE COMPENSATION

The executive officers of the Company receive cash compensation from the
Bank in connection with their positions as executive officers of the Bank. The
Company does not separately compensate its executive officers with cash, but
does offer certain stock option compensation.

<PAGE>

The following table shows the cash compensation paid by the Bank during the
fiscal years ended December 31, 1995, 1994 and 1993 to the Chief Executive
Officer, who is the only executive officer of the Company whose cash
compensation exceeded $100,000, for services rendered during these years:

SUMMARY COMPENSATION TABLE

Annual Compensation
----------------------------
Other Annual
Year Salary Bonus/Other Compensation(1)
---- -------- ----------- ---------------
Barbara Davis Blum, 1995 $185,155 $ 0 $ 5,555
Chairwoman of the Board, 1994 185,155 0 5,183
President, Chief Executive 1993 173,040 0 4,271
Officer of the Company
and the Bank

__________________
(1) Represents the Bank's contribution to the former 401(k) Plan for the
account of Barbara Davis Blum. Ms. Blum received certain perquisites but
the cost of providing such perquisites did not exceed the lesser of $50,000
or 10% of her salary.

EMPLOYMENT AGREEMENT

On February 20, 1996, the Company and the Bank entered into an
employment agreement with Barbara Davis Blum providing for the employment by
the Company and the Bank of Ms. Blum as Chairwoman, President and Chief
Executive Officer of the Company and the Bank through February 20, 1998. The
agreement shall automatically be extended for an additional two-year period
unless, six months prior to the expiration date, the Boards of Directors of
the Company and the Bank determine in a duly adopted resolution that the
agreement should not be extended and so notify Ms. Blum. Under the terms of
the employment agreement, which was amended on March 29, 1996, Ms. Blum is
entitled to receive a base salary for 1996 of $194,413, all benefits
provided by any plan available by the Bank to its employees, certain
executive fringe benefits, annual or other bonuses at the sole discretion of
the Company's and the Bank's Boards.

Ms. Blum also was granted a nonqualified stock option (the "Option") to
purchase 75,000 shares of the Company's Common Stock. The Option vests
beginning in 1996 at an annual rate of 20% at the end of each year and is
exercisable for a period of 10 years from the date of grant at an exercise price
equal to $6.74 per share, which is 85% of the fair market value of the Company's
Common Stock on the date of grant. The Option shall become fully vested in the
event of a "Change in Control" (as defined in the employment agreement) or in
the event Ms. Blum's employment should terminate for any reason, and remain
exercisable for a period of two years. Ms. Blum was granted certain
registration rights in connection with the shares subject to the Option,
including "piggyback" rights for registration at the Company's expense, and one
"demand" right for registration at the Company's expense, each subject to
certain limitations.

The employment agreement provides that, in the event Ms. Blum shall resign
with 60 days notification, she shall be entitled to receive a cash payment
equal to the current year's salary then in effect. In addition, the agreement
provides that in the event of Ms. Blum's death, disability, termination without
just cause or termination without her written consent and for a reason other
than just cause in connection with or within 12 months after any Change in
Control, or upon the occurrence of certain other events in connection with a
Change in Control, she shall be entitled to receive a cash payment equal to two
times her base salary (in semi-monthly payments in the event of disability) and
the acceleration of the unvested portion of any stock options. In addition, she
shall be included to the full extent eligible in all plans providing benefits,
including group life insurance, disability insurance and pension programs for
executive employees of the Company during the term of the employment agreement
and for two years following her

<PAGE>

disability or termination without just cause or one year following her
voluntary termination. The change in control benefits are estimated to have
an aggregate value of approximately $499,000 at March 31, 1996. Ms. Blum has
agreed not to engage in the banking business elsewhere in the Washington or
Baltimore, Maryland metropolitan areas or to solicit the Bank's customers or
employees for a period of one year following the voluntary termination of her
employment.

NON-QUALIFIED STOCK OPTION PLAN

No options have been granted to date under the Company's Non-Qualified
Stock Option Plan (the "Plan"). A total of 90,000 shares of the Company's
Common Stock are authorized for issuance under the Plan, in which officers of
the Company and the Bank who have been employed for at least one year are
eligible to participate. The option exercise price of any options granted under
the Plan will equal 100% of the book value of the shares as of the date of
grant. Any options granted under the Plan will become exercisable on a
cumulative basis at a rate of 25% per year during the period of four years after
the grant; provided, however, that the first 25% will not become exercisable
until the expiration of six months after the date of grant.

EMPLOYEE INCENTIVE STOCK OPTION PLAN

On January 23, 1996, the Board of Directors of the Company approved a
qualified Employee Incentive Stock Option Plan (the "Employee Plan"). A total
of 9,987 shares of the Company's Common Stock are authorized for issuance under
the Employee Plan, in which key employees of the Company and the Bank are
eligible to participate. On January 23, 1996, all such options were granted at
an exercise price of 100% of fair value at the date of grant, or $7.93.
Options granted under the Employee Plan are immediately exercisable and expire
not later than ten years following the date of grant. The Employee Plan is
subject to shareholder approval, which will be sought at the next annual
meeting.

DIRECTORS STOCK OPTION PLAN

On January 23, 1996, the Board of Directors of the Company approved a
nonqualified Directors Stock Option Plan (the "Directors Plan"). A total of
6,429 shares of the Company's Common Stock are authorized for issuance under the
Directors Plan, in which all directors of the Company and the Bank in 1995 are
eligible to participate based upon the total months of 1995 Board service. On
January 23, 1996, all such options were granted at an exercise price of 85% of
fair value at the date of grant, or $6.74. Options granted under the Directors
Plan vest beginning in 1996 at an annual rate of 20% at the end of each year and
expire at the earlier of ten years following the date of grant or two years
after leaving the Board. The options shall become fully vested in the event of
a "Change in Control" (as defined in the Directors Stock Option Plan) or in the
event the Director leaves the Board. The Directors Plan is subject to
shareholder approval, which will be sought at the next annual meeting.

EMPLOYEE STOCK OWNERSHIP PLAN WITH 401(K) PROVISIONS

On April 16, 1996, the Company's and the Bank's Boards of Directors adopted
an employee stock ownership plan with 401(k) provisions ("ESOP"). The ESOP
replaced the Bank's former 401(k) Plan. Employees of the Bank who are at least
21 years of age and who have completed one year of service are eligible to
participate. The Company will submit an application to the Internal Revenue
Service for a letter of determination as to the tax-qualified status of the
ESOP. Although no assurances can be given, the Company expects the ESOP to
receive a favorable letter of determination. The ESOP may be amended or
terminated at any time by the Bank.

The ESOP is to be funded by contributions made by the Bank in cash or
shares of the Company's Common Stock. It is expected that the ESOP will borrow
funds from the Company in an amount sufficient to purchase up to 25,000 shares
of Common Stock. This loan will be secured by the shares of Common Stock
purchased and earnings

<PAGE>

thereon. Shares purchased with such loan proceeds will be held in a suspense
account for allocation, as the loan is repaid, among participants who are
eligible to share in the Bank's contribution for the year. Dividends paid on
allocated shares may be paid to participants or used to repay the ESOP loan.
Dividends on unallocated shares are expected to be used to repay the ESOP loan.

Participants may elect to contribute a percentage of their salary, which
amount may not be less than 1% nor more than 15% of the participant's annual
salary (up to $9,500 for 1996). In addition, the Bank may make a discretionary
matching contribution equal to one-half of the percentage of the amount of the
salary reduction elected by each participant (up to a maximum of 3%), which
percentage will be determined each year by the Bank, and an additional
discretionary contribution determined each year by the Bank. Contributions by
the Bank and shares released from the suspense account will be allocated among
participants on the basis of their annual wages subject to federal income tax
withholding, plus amounts withheld under certain qualified plans. Each
participant is immediately vested in his or her contributions and the Bank's
matching contributions. Each participant will begin to vest in his or her
interest in the Bank's discretionary contributions to the ESOP after three years
of service and will be fully vested upon seven years of service. Benefits are
payable upon a participant's retirement, death, disability, or separation from
service, in a single lump-sum payment or in installments. Distributions at
retirement will be in the form of cash or shares of Common Stock or both. In
addition, the participant or beneficiary has certain put rights in the event
that the Common Stock distributed cannot be readily sold.

The Trustee of the ESOP will vote all shares of Common Stock held by it as
a part of the ESOP assets, provided that a participant or beneficiary will be
entitled to direct the Trustee as to the manner in which voting rights are to be
exercised, with respect to shares of Common Stock allocated to the participant,
in connection with certain corporate transactions as described in the ESOP. The
Bank intends to appoint an unrelated corporate Trustee for the ESOP.

SEVERANCE AGREEMENTS

On April 7, 1994, the Board of Directors of the Bank approved severance
arrangements for seven key management officials. These arrangements were
incorporated into Severance Agreements, dated as of April 7, 1994 (the
"Severance Agreements").

The Severance Agreements provide that, in the event of a "Change in
Control" (as defined in the Severance Agreements), the officers will be entitled
to resign from the Bank within the one year period following a Change in Control
and receive a lump sum payment equal to one year's full base salary at the rate
applicable to the officer in effect at that time. The term Change in Control
does not include a transaction approved by a majority of the "Continuing
Directors" (as defined in the Severance Agreements) then in office. In
addition, an officer will be entitled to receive such severance payment in the
event the officer's employment with the Bank is "Terminated" (as defined in the
Severance Agreements) within the one year period following a Change in Control,
prior to the resignation of the officer. These benefits are estimated to have
an aggregate value of approximately $504,000 as of March 31, 1996 based on
current salary levels. Any severance payment payable under the Severance
Agreements will be reduced to the extent that any such payment constitutes an
"Excess Parachute Payment" as such term is defined in the Internal Revenue Code
of 1986, as amended. The Severance Agreements are binding on the Bank and its
successors.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Bank has had, and it is expected that it will have in the future,
banking transactions in the ordinary course of business with the Company's
directors, officers and their associates on substantially the same terms,
including interest rates, collateral and payment terms on extensions of credit,
as those prevailing at the same time for

<PAGE>

comparable transactions with others. In the opinion of Management these
transactions did not in 1995 involve more than a normal risk of collectibility
or present other unfavorable features.

As of May 10, 1996, the aggregate principal amount of indebtedness to
the Bank owed by officers and directors of the Company and their associates
on that date was approximately $413,000. The highest aggregate principal
amount owed during 1995 by all officers and directors of the Company and
their associates who were indebted to the Bank during the year was
approximately $1,001,000.

The Company has engaged in transactions in the ordinary course of business
with some of its directors, officers, principal stockholders and their
associates. Management believes that all such transactions are made on the same
terms as those prevailing at the time with other persons. During 1995, the
Company engaged Hager Sharp, Inc., of which Susan Hager, a director of the
Company, is President, to provide public relations services. For the fiscal
year ended December 31, 1995, the Company paid Hager Sharp, Inc. $15,000 for
such services.

BENEFICIAL OWNERSHIP OF SHARES

The following table sets forth information regarding the beneficial
ownership of the Common Stock as of May 10, 1996 by (i) each person or group
known by the Company to own beneficially more than 5% of the outstanding Common
Stock; (ii) each of the Company's directors; and (iii) all directors and
executive officers of the Company as a group. Unless otherwise noted below, the
persons named in the table have sole voting and sole investment powers with
respect to each of the shares reported as beneficially owned by such person.
<TABLE>
<CAPTION>

Before Offering After Offering(8)
------------------------------ ----------------------------
Beneficial Beneficial
Ownership of Percent of Ownership of Percent of
Name and Address Shares Class Owned Shares Class Owned
---------------- ------------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Shirley A. Reynolds 345,495(1)(2) 40.4% 345,495 22.3%
1130 13th Avenue
Huntington, West Virginia 25701

Barbara W. Beymer 81,000(1) 9.5% 81,000 5.2%
214 North Boulevard West
Huntington, West Virginia 25701

Deborah P. Wright 81,000(1)(3) 9.5% 81,000 5.2%
1517 Diederich Boulevard
Flatwoods, Kentucky 41139

<PAGE>

SAG, Corp. Money Purchase 60,483(4) 7.1% 60,483 3.9%
Plan and Trust (Pension),
Neal R. Gross, Trustee
Ava S. Gross, Trustee
4218 Lenore Lane, N.W.
Washington, D.C. 20008

Barbara Davis Blum 5,124(5) * 5,124 *

Shireen L. Dodson 300 * 300 *

Susan Hager 1,566 * 1,566 *

Jeanne D. Hubbard 4,500(1) * 4,500 *

Clarence L. James, Jr. 300 * 300 *

Marshall T. Reynolds 225,495(1)(2) 26.4% 225,495 14.6%

Robert L. Shell, Jr. 66,000(1)(6) 7.7% 66,000 4.3%

Dana B. Stebbins 300 * 300 *

Susan J. Williams 1,566 * 1,566 *

All directors and executive 306,963(7) 35.8% 306,963 19.8%
officers as a group (10 persons)
</TABLE>

_________________________

* Less than 1%.

(1) Based upon Amendment No. 1 to Schedule 13D dated July 21, 1995, Marshall T.
Reynolds, Shirley A. Reynolds, Robert L. Shell, Jr., Robert H. Beymer,
Barbara W. Beymer, Thomas W. Wright, Deborah P. Wright and Jeanne D.
Hubbard acquired 609,114 outstanding shares of the Company. Amendment No. 2
to Schedule 13D dated March 5, 1996 evidences the disposition of a total of
45,000 shares by Marshall T. Reynolds and Robert L. Shell, Jr. An
additional 13,881 shares were acquired by Mr. and Mrs. Reynolds, jointly,
in a tender offer which was completed on September 15, 1995.

(2) Marshall T. Reynolds and Shirley A. Reynolds share voting and dispositive
power with respect to 195,495 shares owned jointly. An additional 30,000
shares are held by a dependent child.

(3) Thomas W. Wright and Deborah P. Wright share voting and dispositive power
with respect to 21,000 shares owned jointly.

(4) Based upon a Schedule 13D dated September 18, 1995, Neal R. Gross and Ava
S. Gross share voting and dispositive power with respect to these shares.

(5) Includes options to purchase 2,268 shares granted to Ms. Blum under the
Employee Plan.

(6) Based upon Amendment No. 2 to Schedule 13D dated March 5, 1996, upon any
default under Robert L. Shell, Jr.'s loan agreement with Bank One, West
Virginia which extended financing for the purchase of Mr. Shell's shares,
Marshall T. Reynolds would be required to purchase the shares of the
Company's Common Stock attributed to Mr. Shell, increasing the number of
shares held with sole voting and dispositive power by Mr. Reynolds to
60,000 and reducing Mr. Shell's beneficial ownership to -0-. Mr. Shell's
shares include 6,000 shares transferred by gift to his wife.

<PAGE>

(7) Includes options to purchase 3,480 shares granted to all directors and
officers as a group.

(8) Assumes no shares are purchased in the Offering.

For several years, an issue existed regarding the ownership of 609,114
shares of the Company's Common Stock (on a post-split basis). Citibank, N.A.
("Citibank") held a security interest in 609,114 shares, representing
approximately 71% of the outstanding shares (the "Pledged Shares"). Beginning
in 1990, the Company and its advisors participated in various discussions with
Citibank and its advisors concerning the disposition by Citibank of the Pledged
Shares or a sale of the Company.

On April 12, 1994, the Company's Board of Directors, on the recommendation
of the Special Committee (a Board appointed Committee of Outside Directors
comprised of those of the Company's directors who were neither employees nor
significant stockholders of the Company), adopted a Rights Agreement, the
purpose of which was to provide the Board of Directors with adequate time to
respond effectively to a takeover attempt and in a manner that would maximize
the value of the Company for all shareholders. See "Description of Capital
Stock-Common Stock Purchase Rights."

On April 14, 1994, Citibank filed a complaint against the Company and each
of its directors in the Delaware Chancery Court seeking to enjoin the Company
from implementing the Rights Agreement or distributing the Rights. The
complaint alleged, among other things, that the Rights Agreement violated
Delaware law and that in adopting the Rights Agreement the directors of the
Company violated their fiduciary duty to all of the shareholders of the Company
and tortiously interfered with the consummation of Citibank's proposed sale of
the Pledged Shares to National Bankshares, Inc., a group with whom Citibank had
negotiated the sale of the Pledged Shares from 1992 through 1994 ("NBI"). On
June 24, 1994, the Company filed an answer to the complaint denying the
allegations and in a counterclaim against Citibank requested that the court
enter a judgment declaring the Rights Agreement valid and lawfully adopted under
Delaware law (collectively, the "Delaware Litigation").

On June 29, 1994, the Special Committee was advised by Baxter Fentriss and
Company (the Company's investment advisor) of a proposal received from Marshall
T. Reynolds to purchase the Pledged Shares from Citibank and to make an offer to
purchase up to the 245,418 shares of Common Stock that were not owned by
Citibank (the "Minority Shares"). On April 19, 1995, the Board of Directors of
the Company, on the recommendation of the Special Committee, authorized the
entry by the Company into an agreement with Mr. Reynolds (the "Reynolds
Agreement") pursuant to which he agreed that if his purchase of the Pledged
Shares from Citibank was completed, he would within 20 business days commence a
tender offer to purchase the Minority Shares at a price of $7.00 per share.
Under the Reynolds Agreement, Mr. Reynolds also agreed that until the Tender
Offer was completed neither he nor any assignee of his rights to purchase the
Pledged Shares would vote the Pledged Shares, without the consent of the
Company's Board of Directors, to change in any respect the composition of the
Company's Board of Directors. In consideration for the commitment of Reynolds
to undertake the Tender Offer, the Company agreed (i) to amend the Rights
Agreement to prevent the purchase by Mr. Reynolds of the Pledged Shares or the
Tender Offer from triggering the exercisability of the Rights, (ii) to take such
actions as were necessary to ensure that neither the purchase of the Pledged
Shares nor the Tender Offer would constitute a "Change in Control" under the
Bank's Severance Agreements with certain key officers and (iii) not to, or not
permit the Bank to (A) amend the Severance Agreements (except as described
above), (B) amend the Employment Agreement among the Company, the Bank and
Barbara Davis Blum (except that an extension of the termination date to a date
that is not more than 90 days following the completion of the purchase of the
Pledged Shares would be permitted), (C) issue any stock, or any options,
warrants or rights to purchase stock, or any long-term debt securities, (D)
enter into, or materially increase the level of contributions to, any pension,
retirement, stock option, profit sharing, deferred compensation, bonus, group
insurance or similar plan for directors, officers or employees, (E) other than
in the ordinary course of business, mortgage, pledge or dispose of any assets,
incur any indebtedness, increase the compensation or benefits payable to
directors, officers or employees, incur any material obligation, or enter into
any material contract, or (F) amend the

<PAGE>

Certificate of Incorporation or Bylaws of the Company or the Articles of
Association or Bylaws of the Bank. The foregoing restrictions were subject to
the exception that the Company or the Bank was permitted to adopt a stock option
plan for its directors and employees and during the first year of the plan issue
options to purchase shares of Common Stock not in excess of 2 1/2% of the total
number of shares outstanding.

On April 20, 1995, the Company amended the Rights Agreement to provide that
neither (i) the entry by Mr. Reynolds into an agreement with Citibank to
purchase the Pledged Shares or the purchase by Mr. Reynolds (or any of his
permitted assignees) of the Pledged Shares nor (ii) the announcement, conduct or
completion of the Tender Offer would trigger the exercisability of the Rights.

On April 21, 1995, Citibank and Mr. Reynolds entered into a Stock Purchase
Agreement pursuant to which Mr. Reynolds agreed to purchase the Pledged Shares
at a purchase price of $5.67 per share. The purchase was completed on July 21,
1995. In connection with the closing of the purchase of the Pledged Shares, the
Company, the Bank and each director of the Company (other than Richard Naing, a
former director of the Bank) delivered a release releasing Citibank and its
directors, officers, employees, agents and representatives from any and all
claims relating to actions taken by Citibank with respect to the Pledged Shares.
Correspondingly, Citibank delivered a release releasing the Company, the Bank
and each director (other than Mr. Naing who declined to deliver a release in
favor of Citibank), officer, employee, agent and representative of the Company
and the Bank from any and all claims relating to Citibank's efforts to dispose
of the Pledged Shares. In addition, the Company, the Bank and each director
(other than Mr. Naing) and executive officer of the Company delivered a release
releasing NBI and its directors, officers, employees, agents and representatives
from any and all claims relating to NBI's efforts to purchase the Pledged
Shares. Correspondingly, NBI delivered a release releasing the Company, the
Bank and each director, executive officer, employee, agent and representative of
the Company and the Bank (other than Mr. Naing who declined to deliver a release
in favor of NBI). On July 21, 1995, the Delaware Litigation was dismissed with
prejudice.

On August 16, 1995, Mr. Reynolds commenced his Tender Offer to purchase up
to 245,418 shares of Common Stock, consisting of the outstanding shares of
Common Stock that were not then owned by him or his associates at a price of
$7.00 per share net to seller in cash, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated August 16, 1995 and the
related Letter of Transmittal (which together constitute the "Tender Offer").
The Tender Offer was completed on September 15, 1995. A total of 13,881 shares
were tendered and acquired by Marshall T. Reynolds and Shirley A. Reynolds,
jointly.

SUPERVISION AND REGULATION

Bank holding companies and banks are extensively regulated under both
federal and state law. Set forth below is a summary description of certain
provisions of certain laws which relate to the regulation of the Company and the
Bank. The description does not purport to be complete and is qualified in its
entirety by reference to the applicable laws and regulations.

THE COMPANY

The Company, as a registered bank holding company, is subject to regulation
under the Bank Holding Company Act of 1956, as amended (the "BHCA"). The
Company is required to file quarterly reports and annual reports with the
Federal Reserve Board and such additional information as the Federal Reserve
Board may require pursuant to the BHCA. The Federal Reserve Board may conduct
examinations of the Company and its subsidiaries.

The Federal Reserve Board may require that the Company terminate an
activity or terminate control of or liquidate or divest certain subsidiaries or
affiliates when the Federal Reserve Board believes the activity or the control

49
<PAGE>

of the subsidiary or affiliate constitutes a significant risk to the financial
safety, soundness or stability of any of its banking subsidiaries. The Federal
Reserve Board also has the authority to regulate provisions of certain bank
holding company debt, including authority to impose interest ceilings and
reserve requirements on such debt. Under certain circumstances, the Company
must file written notice and obtain approval from the Federal Reserve Board
prior to purchasing or redeeming its equity securities.

Under the BHCA and regulations adopted by the Federal Reserve Board, a bank
holding company and its nonbanking subsidiaries are prohibited from requiring
certain tie-in arrangements in connection with any extension of credit, lease or
sale of property or furnishing of services. Further, the Company is required by
the Federal Reserve Board to maintain certain levels of capital.

The Company is required to obtain the prior approval of the Federal Reserve
Board for the acquisition of more than 5% of the outstanding shares of any class
of voting securities or substantially all of the assets of any bank or bank
holding company. Prior approval of the Federal Reserve Board is also required
for the merger or consolidation of the Company and another bank holding company.

The Company is prohibited by the BHCA, except in certain statutorily
prescribed instances, from acquiring direct or indirect ownership or control of
more than 5% of the outstanding voting shares of any company that is not a bank
or bank holding company and from engaging directly or indirectly in activities
other than those of banking, managing or controlling banks or furnishing
services to its subsidiaries. However, the Company, subject to the prior
approval of the Federal Reserve Board, may engage in any activities, or acquire
shares of companies engaged in activities that are deemed by the Federal Reserve
Board to be so closely related to banking or managing or controlling banks as to
be a proper incident thereto.

Under Federal Reserve Board regulations, a bank holding company is required
to serve as a source of financial and managerial strength to its subsidiary
banks and may not conduct its operations in an unsafe or unsound manner. In
addition, it is the Federal Reserve Board's policy that in serving as a source
of strength to its subsidiary banks, a bank holding company should stand ready
to use available resources to provide adequate capital funds to its subsidiary
banks during periods of financial stress or adversity and should maintain the
financial flexibility and capital-raising capacity to obtain additional
resources for assisting its subsidiary banks. A bank holding company's failure
to meet its obligations to serve as a source of strength to its subsidiary banks
will generally be considered by the Federal Reserve Board to be an unsafe and
unsound banking practice or a violation of the Federal Reserve Board's
regulations or both. This doctrine has become known as the "source of strength"
doctrine. The validity of the source of strength doctrine has been and is
likely to continue to be the subject of litigation until definitively resolved
by the courts or by Congress.

THE BANK

The Bank, as a national banking association, is subject to primary
supervision, examination and regulation by the OCC. If, as a result of an
examination of the Bank, the OCC should determine that the financial condition,
capital resources, asset quality, earnings prospects, management, liquidity or
other aspects of the Bank's operations are unsatisfactory or that the Bank or
its management is violating or has violated any law or regulation, various
remedies are available to the OCC. Such remedies include the power to enjoin
"unsafe or unsound practices," to require affirmative action to correct any
conditions resulting from any violation or practice, to issue an administrative
order that can be judicially enforced, to direct an increase in capital, to
restrict the growth of the Bank, to assess civil monetary penalties, and to
remove officers and directors. The FDIC has similar enforcement authority, in
addition to its authority to terminate a Bank's deposit insurance, in the
absence of action by the OCC and upon a finding that a Bank is in an unsafe or
unsound condition, is engaging in unsafe or unsound activities, or that its
conduct poses a risk to the deposit insurance fund or may prejudice the interest
of its depositors. The Bank is not subject to any such actions by the OCC or
the FDIC.

<PAGE>

The deposits of the Bank are insured by the FDIC in the manner and to the
extent provided by law. For this protection, the Bank pays a semiannual
statutory assessment. See "Premiums for Deposit Insurance." Various other
requirements and restrictions under the laws of the United States affect the
operations of the Bank. Federal statutes and regulations relate to many aspects
of the Bank's operations, including reserves against deposits, interest rates
payable on deposits, loans, investments, mergers and acquisitions, borrowings,
dividends, locations of branch offices, capital requirements and disclosure
obligations to depositors and borrowers. Further, the Bank is required to
maintain certain levels of capital. See "Capital Standards."

RESTRICTIONS ON TRANSFERS OF FUNDS TO THE COMPANY BY THE BANK

The Company is a legal entity separate and distinct from the Bank. The
Company's ability to pay cash dividends is limited by Delaware state law. In
addition, the prior approval of the OCC is required if the total of all
dividends declared by the Bank in any calendar year exceeds the Bank's net
profits (as defined) for that year combined with its retained net profits (as
defined) for the preceding two years, less any transfers to surplus.

The OCC also has authority to prohibit the Bank from engaging in activities
that, in the OCC's opinion, constitute unsafe or unsound practices in conducting
its business. It is possible, depending upon the financial condition of the
bank in question and other factors, that the OCC could assert that the payment
of dividends or other payments might, under some circumstances, be such an
unsafe or unsound practice. Further, the OCC and the Federal Reserve Board have
established guidelines with respect to the maintenance of appropriate levels of
capital by banks or bank holding companies under their jurisdiction. Compliance
with the standards set forth in such guidelines and the restrictions that are or
may be imposed under the prompt corrective action provisions of federal law
could limit the amount of dividends which the Bank or the Company may pay. See
"Prompt Corrective Regulatory Action and Other Enforcement Mechanisms" and
"Capital Standards" for a discussion of these additional restrictions on capital
distributions.

The Bank is subject to certain restrictions imposed by federal law on any
extensions of credit to, or the issuance of a guarantee or letter of credit on
behalf of, the Company or other affiliates, the purchase of or investments in
stock or other securities thereof, the taking of such securities as collateral
for loans and the purchase of assets of the Company or other affiliates. Such
restrictions prevent the Company and such other affiliates from borrowing from
the Bank unless the loans are secured by marketable obligations of designated
amounts. Further, such secured loans and investments by the Bank to or in the
Company or to or in any other affiliate is limited to 10% of the Bank's capital
and surplus (as defined by federal regulations) and such secured loans and
investments are limited, in the aggregate, to 20% of the Bank's capital and
surplus (as defined by federal regulations). Additional restrictions on
transactions with affiliates may be imposed on the Bank under the prompt
corrective action provisions of federal law. See "Prompt Corrective Action and
Other Enforcement Mechanisms."

CAPITAL STANDARDS

The Federal Reserve Board and the OCC have adopted risk-based minimum
capital guidelines intended to provide a measure of capital that reflects the
degree of risk associated with a banking organization's operations for both
transactions reported on the balance sheet as assets and transactions, such as
letters of credit and recourse arrangements, which are recorded as off balance
sheet items. Under these guidelines, nominal dollar amounts of assets and
credit equivalent amounts of off balance sheet items are multiplied by one of
several risk adjustment percentages, which range from 0% for assets with low
credit risk, such as certain U.S. Treasury securities, to 100% for assets with
relatively high credit risk, such as business loans.

A banking organization's risk-based capital ratios are obtained by dividing
its qualifying capital by its total risk adjusted assets. The regulators
measure risk-adjusted assets, which include off balance sheet items, against
both total qualifying capital (the sum of Tier 1 capital and limited amounts of
Tier 2 capital) and Tier 1 capital. Tier 1

<PAGE>

capital consists primarily of common stock, retained earnings, noncumulative
perpetual preferred stock (cumulative perpetual preferred stock for bank holding
companies) and minority interests in certain subsidiaries, less most intangible
assets. Tier 2 capital may consist of a limited amount of the allowance for
possible loan and lease losses, cumulative preferred stock, long term preferred
stock, eligible term subordinated debt and certain other instruments with some
characteristics of equity. The inclusion of elements of Tier 2 capital is
subject to certain other requirements and limitations of the federal banking
agencies. The federal banking agencies require a minimum ratio of qualifying
total capital to risk-adjusted assets of 8% and a minimum ratio of Tier 1
capital to risk-adjusted assets of 4%. In addition to the risk-based
guidelines, federal banking regulators require banking organizations to maintain
a minimum amount of Tier 1 capital to total assets, referred to as the leverage
ratio.

Only a well capitalized depository institution may accept brokered deposits
without prior regulatory approval. Under FDIC regulations, an institution is
generally considered "well capitalized" if it has a total risk-based capital
ratio of at least 10%, a Tier 1 risk-based capital ratio of at least 6%, and a
Tier 1 capital (leverage) ratio of at least 5%. Federal law generally requires
full-scope on-site annual examinations of all insured depository institutions by
the appropriate federal bank regulatory agency although the examination may
occur at longer intervals for small well-capitalized or state chartered banks.

Federally supervised banks and savings associations are currently required
to report deferred tax assets in accordance with SFAS No. 109. See Note 8 of
the Notes to Consolidated Financial Statements. The federal banking agencies
issued final rules, effective April 1, 1995, which limit the amount of deferred
tax assets that are allowable in computing an institution's regulatory capital.
The standard has been in effect on an interim basis since March 1993.

In August 1995, the federal banking agencies adopted final regulations
specifying that the agencies will include, in their evaluations of a bank's
capital adequacy, an assessment of the exposure to declines in the economic
value of the bank's capital due to changes in interest rates. The final
regulations, however, do not include a measurement framework for assessing the
level of a bank's exposure to interest rate risk, which is the subject of a
proposed policy statement issued by the federal banking agencies concurrently
with the final regulations. Because this proposal has only recently been
issued, the Bank currently is unable to predict the impact of the proposal on
the Bank if the policy statement is adopted as proposed.

Future changes in regulations or practices could further reduce the amount
of capital recognized for purposes of capital adequacy. Such a change could
affect the ability of the Bank to grow and could restrict the amount of profits,
if any, available for the payment of dividends.

PROMPT CORRECTIVE ACTION AND OTHER ENFORCEMENT MECHANISMS

Federal law requires each federal banking agency to take prompt corrective
action to resolve the problems of insured depository institutions, including but
not limited to those that fall below one or more prescribed minimum capital
ratios. The law requires each federal banking agency to promulgate regulations
defining the following five categories in which an insured depository
institution will be placed, based on the level of its capital ratios: well
capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized and critically undercapitalized. In September 1992, the
federal banking agencies issued uniform final regulations implementing the
prompt corrective action provisions of federal law.

An institution that, based upon its capital levels, is classified as "well
capitalized," "adequately capitalized" or "undercapitalized" may be treated as
though it were in the next lower capital category if the appropriate federal
banking agency, after notice and opportunity for hearing, determines that an
unsafe or unsound condition or an unsafe or unsound practice warrants such
treatment. At each successive lower capital category, an insured depository
institution is subject to more restrictions. The federal banking agencies,
however, may not treat an institution as "critically undercapitalized" unless
its capital ratio actually warrants such treatment.

<PAGE>

In addition to restrictions and sanctions imposed under the prompt
corrective action provisions, commercial banking organizations may be subject to
potential enforcement actions by the federal regulators for unsafe or unsound
practices in conducting their businesses or for violations of any law, rule,
regulation or any condition imposed in writing by the agency or any written
agreement with the agency. Enforcement actions may include the imposition of a
conservator or receiver, the issuance of a cease and desist order that can be
judicially enforced, the termination of insurance of deposits (in the case of a
depository institution), the imposition of civil money penalties, the issuance
of directives to increase capital, the issuance of formal and informal
agreements, the issuance of removal and prohibition orders against institution-
affiliated parties and the enforcement of such actions through injunctions or
restraining orders based upon a judicial determination that the agency would be
harmed if such equitable relief was not granted.

SAFETY AND SOUNDNESS STANDARDS

In July 1995, the federal banking agencies adopted final guidelines
establishing standards for safety and soundness. The guidelines set forth
operational and managerial standards relating to internal controls, information
systems and internal audit systems, loan documentation, credit underwriting,
interest rate exposure, asset growth and compensation, fees and benefits.
Guidelines for asset quality and earnings standards will be adopted in the
future. The guidelines establish the safety and soundness standards that the
agencies will use to identify and address problems at insured depository
institutions before capital becomes impaired. If an institution fails to comply
with a safety and soundness standard, the appropriate federal banking agency may
require the institution to submit a compliance plan. Failure to submit a
compliance plan or to implement an accepted plan may result in enforcement
action.

PREMIUMS FOR DEPOSIT INSURANCE

Federal law has established several mechanisms to increase funds to protect
deposits insured by the Bank Insurance Fund ("BIF") administered by the FDIC.
The FDIC is authorized to borrow up to $30 billion from the United States
Treasury; up to 90% of the fair market value of assets of institutions acquired
by the FDIC as receiver from the Federal Financing Bank; and from depository
institutions that are members of the BIF. Any borrowings not repaid by asset
sales are to be repaid through insurance premiums assessed to member
institutions. The result of these provisions is that the assessment rate on
deposits of BIF members could increase in the future. The FDIC also has
authority to impose special assessments against insured deposits.

The FDIC implemented a final risk-based assessment system, effective
January 1, 1994, under which an institution's premium assessment is based on the
probability that the deposit insurance fund will incur a loss with respect to
the institution, the likely amount of any such loss, and the revenue needs of
the deposit insurance fund. On August 8, 1995, the FDIC issued final
regulations adopting an assessment rate schedule for BIF members of 4 to 31
basis points effective on June 1, 1995. On November 14, 1995, the FDIC further
reduced deposit insurance premiums to a range of 0 to 27 basis points effective
for the semi-annual period beginning January 1, 1996.

Under the risk-based assessment system, a BIF member institution such as
the Bank is categorized into one of three capital categories (well capitalized,
adequately capitalized, and undercapitalized) and one of three categories based
on supervisory evaluations by its primary federal regulator (in the Bank's case,
the FDIC). The three supervisory categories are: financially sound with only a
few minor weaknesses (Group A), demonstrates weaknesses that could result in
significant deterioration (Group B), and poses a substantial probability of loss
(Group C). The capital ratios used by the FDIC to define well-capitalized,
adequately capitalized and undercapitalized are the same in the FDIC's prompt
corrective action regulations.

<PAGE>

INTERSTATE BANKING AND BRANCHING

In September 1994, the Riegel-Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "Interstate Act") became law. Under the Interstate
Act, beginning one year after the date of enactment, a bank holding company that
is adequately capitalized and managed may obtain approval under the BHCA to
acquire an existing bank located in another state without regard to state law.
A bank holding company would not be permitted to make such an acquisition if,
upon consummation, it would control (a) more than 10% of the total amount of
deposits of insured depository institutions in the United States or (b) 30% or
more of the deposits in the state in which the bank is located. A state may
limit the percentage of total deposits that may be held in that state by any one
bank or bank holding company if application of such limitation does not
discriminate against out-of-state banks. An out-of-state bank holding company
may not acquire a state bank in existence for less than a minimum length of time
that may be prescribed by state law except that a state may not impose more than
a five year existence requirement.

DESCRIPTION OF CAPITAL STOCK

Prior to this Offering, the Company intends to amend its Certificate of
Incorporation to increase its authorized shares of Common Stock from 800,000
to 5,000,000 shares and reduce the par value of the Common Stock from $10.00
to $.01 per share, and to issue a three-for-one stock split in the form of a
stock dividend. On a post-split basis, at May 10, 1996, 859,212 shares of
Common Stock were issued and 854,532 shares were outstanding and the Company
had approximately 578 stockholders. Upon completion of the Offering, the
issued and outstanding capital stock of the Company will consist of 1,549,532
shares of Common Stock (1,650,032 shares if the over-allotment option is
exercised in full).

COMMON STOCK

Each holder of the Common Stock is entitled to one vote for each share held
of record on each matter submitted to a vote of stockholders. Cumulative voting
in the election of directors is not permitted. As a result, the holders of more
than 50% of the outstanding shares have the power to elect all directors.

The holders of shares of Common Stock are entitled to receive dividends
when, as and if declared by the Board of Directors out of funds legally
available therefor and, in the event of the liquidation, dissolution or winding
up of the Company, to share ratably in all assets remaining after the payment of
liabilities. There are no preemptive or other subscription rights, conversion
rights, or redemption or sinking fund provisions with respect to shares of
Common Stock. All of the shares of Common Stock outstanding are legally issued,
fully paid and nonassessable.

COMMON STOCK PURCHASE RIGHTS

On April 12, 1994, the Company's Board of Directors declared a dividend of
one common share purchase right (a "Right") for each outstanding share of the
Company's Common Stock (the "Common Shares"). The dividend was paid on
April 25, 1994 (the "Record Date") to the shareholders of record on that date.
Each Right entitles the registered holder to purchase from the Company one
share of Common Stock of the Company, at a price of $20.11 per share (the
"Purchase Price"), subject to adjustment. The description and terms of the
Rights are set forth in a Rights Agreement, as amended on April 20, 1995 (the
"Rights Agreement"), between the Company and The First National Bank of
Maryland, as Rights Agent (the "Rights Agent").

Until the earliest to occur of (a) 10 days following a public announcement
that a person or group of affiliated or associated persons (an "Acquiring
Person") has acquired, or obtained the right to acquire, beneficial ownership or
record ownership of 25% or more of the outstanding Common Shares; (b) 10 days
following the commencement of, or announcement of an intention to make, a tender
offer or exchange offer the consummation of which would result

<PAGE>

in the beneficial ownership or record ownership by a person or group of 25% or
more of such outstanding Common Shares; or (c) the date a person or group of
affiliated or associated persons is or becomes the beneficial or record owner of
15% or more of the outstanding Common Shares and (i) the actions such person
proposes to take are likely to have a material adverse impact on the business or
prospects of the Company; (ii) such person intends to cause the Company to
repurchase the Common Shares owned by such person; (iii) such person exercises
or attempts to exercise a controlling influence over the Company; or (iv) such
person transfers all or a portion of such Common Shares in a manner that results
in a person owning 9.9% or more of the Common Shares (an "Adverse Person") (the
earliest of such dates being called the "Distribution Date"), the Rights will be
evidenced, with respect to any of the Common Share certificates outstanding as
of the Record Date, by such Common Share certificate with a copy of a Summary of
Rights attached thereto.

Notwithstanding the foregoing, the Rights Agreement, as amended on April
20, 1995, provides that neither (i) the entry by Mr. Reynolds into an agreement
with Citibank to purchase the Pledged Shares or the purchase by Mr. Reynolds (or
any of his permitted assignees) of the Pledged Shares nor (ii) the announcement,
conduct or completion of the Tender Offer would trigger the exercisability of
the Rights.

The Rights are not exercisable until the Distribution Date. The Rights
will expire on December 31, 2003 (the "Final Expiration Date"), unless the Final
Expiration Date is extended or unless the Rights are earlier redeemed by the
Company. At any time prior to the date a Person becomes an Acquiring Person or
an Adverse Person, the Board of Directors of the Company may redeem the Rights
in whole, but not in part, at a price of $.01 per Right (the "Redemption
Price"). Immediately upon any redemption of the Rights, the right to exercise
the Rights will terminate and the only right of the holders of Rights will be to
receive the Redemption Price. The terms of the Rights may be amended by the
Board of Directors of the Company without the consent of the holders of the
Rights, including an amendment to extend the Final Expiration Date and, provided
there is no Acquiring Person or Adverse Person, to extend the period during
which the Rights may be redeemed, except that from and after such time as any
person becomes an Acquiring Person or an Adverse Person no such amendment may
adversely affect the interests of the holders of the Rights.

In the event that the Company is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power are sold, each holder of a Right will thereafter have the right to
receive, upon the exercise thereof at the then current exercise price of the
Right, that number of shares of common stock of the acquiring company which at
the time of such transaction will have a market value of two times the exercise
price of the Right. In the event that any Person becomes an Acquiring Person or
an Adverse Person, each holder of a Right, other than Rights beneficially owned
by the Acquiring Person or Adverse Person (which will thereafter be void), will
thereafter have the right to receive upon exercise that number of Common Shares
having a market value of two times the exercise price of the Right, but in no
event will the purchase price per share be less than the par value of the Common
Shares.

DELAWARE BUSINESS COMBINATION LAW

Section 203 of the Delaware General Corporation Law prevents an "interested
stockholder" (defined in Section 203, generally, as a person owning 15% or more
of a corporation's outstanding voting stock), from engaging in a "business
combination" (as defined in Section 203) with a publicly-held Delaware
corporation for three years following the date such person became an interested
stockholder unless (i) before such person became an interested stockholder, the
board of directors of the corporation approved the transaction in which the
interested stockholder became such or approved the business combination
transaction, (ii) upon consummation of the transaction that resulted in the
interested stockholder's becoming an interested stockholder, the interested
stockholder owns at least 85% of the voting stock of the corporation outstanding
at the time the transaction commenced (excluding stock held by directors who are
also officers of the corporation and by associated stock plans that do not
provide associates with the rights to determine confidentially whether shares
held subject to the plan will be tendered in a tender or exchange

<PAGE>

offer) or (iii) following the transaction in which such person became an
interested stockholder, the business combination is approved by the board of
directors of the corporation and authorized at a meeting of stockholders by the
affirmative vote of the holders of two-thirds of the outstanding voting stock of
the corporation not owned by the interested stockholder.

TRANSFER AGENT

The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company, New York, New York.

UNDERWRITING

Subject to the terms and conditions set forth in the Underwriting
Agreement, the Company has agreed to sell to each of the Underwriters named
below, and each of the Underwriters, for whom Ferris, Baker Watts, Incorporated
is serving as Representative, has severally agreed to purchase, the number of
shares of Common Stock set forth opposite its name below:

NUMBER OF SHARES
UNDERWRITERS TO BE PURCHASED
------------ ----------------

Ferris, Baker Watts, Incorporated. . . . ----------------

Total. . . . . . . . . . . . . 670,000
-----------
-----------

The nature of the Underwriters' obligations under the Underwriting
Agreement is such that all shares of Common Stock offered, excluding shares
covered by the over-allotment option granted to the Underwriters, must be
purchased if any are purchased. The Underwriting Agreement provides that the
obligations of the several Underwriters to pay for and accept delivery of the
shares of Common Stock offered hereby are subject to the approval of certain
legal matters by counsel and to certain other conditions.

The Company has been advised by the Representative that the Underwriters
propose to offer the shares of Common Stock to the public initially at the price
set forth on the cover page of this Prospectus and to certain dealers at such
price less a concession not in excess of $___ per share. The Underwriters may
allow, and such dealers may reallow, a concession not in excess of $___ per
share to certain other dealers. The public offering price and concessions and
allowances to dealers may be changed by the Representative.

The Company has granted the Underwriters an option, exercisable within 30
days after the date of this Prospectus, to purchase up to an additional 100,500
shares of Common Stock to cover over-allotments, at the same price per share to
be paid by the Underwriters for the other shares offered hereby. If the
Underwriters purchase any such additional shares pursuant to this option, each
of the Underwriters will be committed to purchase such additional shares in
approximately the same proportion as set forth in the above table. The
Underwriters may purchase such shares only to cover over-allotments, if any, in
connection with the Offering made hereby.

The executive officers, directors and certain stockholders of the Company
have agreed that they will not offer, sell, contract to sell or grant an option
to purchase or otherwise dispose of any shares of the Company's Common Stock,
options or warrants to acquire shares of Common Stock or any securities
exercisable for or convertible into Common Stock owned by them, in the open
market or otherwise, for a period of 180 days from the date of this
Prospectus, without the prior written consent of the Representative. The
Company has agreed not to offer, sell or

<PAGE>

issue any shares of Common Stock, options or warrants to acquire Common Stock or
securities exercisable for or convertible into shares of Common Stock for a
period of 180 days after the date of this Prospectus, without the prior
written consent of the Representative, except that the Company may issue
securities pursuant to the Company's stock option plans and upon the exercise of
all outstanding stock options.

The Company and the Underwriters have agreed to indemnify each other
against certain liabilities, including liabilities under the Securities Act.

Prior to this Offering, the market for the Company's Common Stock has been
limited. The public offering price for the Common Stock was determined by
negotiation among the Company and the Representative of the Underwriters. The
material factors considered in determining the public offering price were the
current market for the Common Stock, an evaluation of assets, earnings and other
established criteria of value, as well as the comparisons of the relationships
between market prices and book values of financial institutions of a similar
size and quality.

The Representative intends to make a market in the securities of the
Company, as permitted by applicable laws and regulations. The Representative,
however, is not obligated to make a market in such securities and any such
market making may be discontinued at any time at the sole discretion of the
Representative.

In addition to the discounts and commissions that appear on the cover page
of this Prospectus, the Company will reimburse the Representative $85,000 for
expenses incurred by the Representative. The Company also paid a financial
advisory fee to the Representative of $25,000.

The Representative has informed the Company that it does not expect the
Underwriters to confirm sales of Common Stock offered by this Prospectus to any
accounts over which they exercise discretionary authority.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Shapiro and Olander, Baltimore, Maryland. Certain legal matters
related to the Offering will be passed upon for the Underwriters by Manatt,
Phelps & Phillips, LLP, Washington, D.C.

EXPERTS

The consolidated financial statements of Abigail Adams National Bancorp,
Inc. as of December 31, 1995 and 1994, and for each of the years in the three-
year period ended December 31, 1995, included herein have been included in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, and upon the authority of said firm as experts in accounting and
auditing.

57
<PAGE>
ABIGAIL ADAMS NATIONAL BANCORP, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

PAGE

Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . .F-2

Consolidated Balance Sheets as of March 31, 1996 (unaudited)
and as of December 31, 1995 and 1994 . . . . . . . . . . . . . . .F-3

Consolidated Statements of Operations for the three months ended
March 31, 1996 and 1995 (unaudited) and for the years ended
December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . .F-4

Consolidated Statements of Changes in Stockholders' Equity for
the three months ended March 31, 1996 (unaudited)
and for the years ended December 31, 1995, 1994 and 1993 . . . . . .F-6

Consolidated Statements of Cash Flows for the
three months ended March 31, 1996 and 1995 (unaudited)
and for the years ended December 31, 1995, 1994 and 1993 . . . . . .F-7

Notes to Consolidated Financial Statements at March 31, 1996
and 1995 (unaudited). . . . . . . . . . . . . . . . . . . . . . . . .F-9

Notes to Consolidated Financial Statements at December 31, 1995
and 1994. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-11

F-1

<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Abigail Adams National Bancorp, Inc.

We have audited the accompanying consolidated balance sheets of Abigail Adams
National Bancorp, Inc. and subsidiary as of December 31, 1995 and 1994, and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for each of the years in the three-year period ended December 31,
1995. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Abigail Adams
National Bancorp, Inc. and subsidiary as of December 31, 1995 and 1994 and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1995, in conformity with generally accepted
accounting principles.

/s/ KPMG Peat Marwick LLP

Washington, D.C.
January 26, 1996

F-2

<PAGE>

ABIGAIL ADAMS NATIONAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994 AND
MARCH 31, 1996 (UNAUDITED)

MARCH 31 DECEMBER 31
1996 1995 1994
--------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and due from banks (Note 2) $ 4,478,105 $ 4,953,200 $ 4,349,250
Short-term investments:
Federal funds sold 10,850,000 9,475,000 1,300,000
Interest-bearing deposits in other banks 486,715 486,715 490,715
---------- -------- ---------
Total short-term investments 11,336,715 9,961,715 1,790,715

Securities available for sale (Note 3) 4,997,870 5,508,406 6,009,025
Investment securities (market value of $7,626,518, $8,309,265
and $8,838,874 at March 31, 1996 and December 31, 1995
and 1994, respectively) (Note 3) 7,563,546 8,192,647 9,080,778
Loans (net of deferred fees and unearned
discounts) (Notes 4 and 10) 60,214,781 63,592,395 60,729,437
Less: Allowance for loan losses (Note 4) (1,261,672) (1,273,965) (1,289,562)
----------- ----------- -----------

Loans, net 58,953,109 62,318,430 59,439,875
---------- ---------- ----------

Bank premises and equipment, net (Note 5) 287,175 277,517 369,218
Other assets (Note 8) 1,272,692 1,152,761 1,221,580
--------- ---------- ----------

Total assets $ 88,889,212 $ 92,364,676 $ 82,260,441
------------ ------------- -------------
------------ ------------- -------------

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits (Notes 3 and 6):
Demand deposits $ 20,571,738 $ 23,443,937 $ 19,677,159
NOW accounts 6,877,672 7,343,282 10,381,478
Money market accounts 22,159,158 21,391,814 17,850,822
Savings accounts 1,296,342 1,317,226 1,225,538
Certificates of deposit of $100,000 or greater 11,673,224 13,590,946 13,651,233
Certificates of deposit less than $100,000 16,233,468 15,975,990 12,507,272
---------- ---------- ----------

Total deposits 78,811,602 83,063,195 75,293,502
---------- ---------- ----------

Short-term borrowings (Note 10) 2,233,030 1,785,402 360,708
Long-term debt -- capital note (Note 9) 167,625 186,250 260,750
Other liabilities 887,670 710,963 583,211
---------- ----------- ----------
Total liabilities 82,099,927 85,745,810 76,498,171
---------- ----------- ----------

Stockholders' equity (Notes 9 and 12):
Common stock, par value $10 per share, authorized
800,000 shares; issued 286,404 shares; outstanding
284,844 shares in 1996, 1995 and 1994 2,864,040 2,864,040 2,864,040
Additional paid-in capital 3,291,973 3,291,973 3,291,973
Retained earnings (deficit) 698,652 531,830 (284,646)
--------- --------- ---------
6,854,665 6,687,843 5,871,367
Less: Treasury stock, 1,560 shares at cost (28,710) (28,710) (28,710)
Less: Unrealized loss on securities, net of taxes (36,670) (40,267) (80,387)
------- --------- ---------

Total stockholders' equity 6,789,285 6,618,866 5,762,270
--------- --------- ---------

Total liabilities and stockholders' equity $ 88,889,212 $ 92,364,676 $ 82,260,441
------------ ------------- -------------
------------ ------------- -------------
</TABLE>

Commitments and contingent liabilities (Notes 7 and 11)
See accompanying notes to consolidated financial statements.

F-3

<PAGE>

ABIGAIL ADAMS NATIONAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
AND
THREE MONTH PERIODS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED)

MARCH 31, MARCH 31, DECEMBER 31,
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans (Note 4) $ 1,508,727 $ 1,418,178 $ 5,902,325 $ 5,100,609 $ 4,412,001

Interest on securities available/held for sale:
U.S. Treasury 26,562 45,956 175,979 220,986 238,443
Obligations of U.S. government agencies 47,311 41,289 128,954 173,619 251,849
------ ------ ------- -------- --------
Total interest on securities available/held
for sale 73,873 87,245 304,933 394,605 490,292

Interest and dividends on investment securities:
U.S. Treasury 7,489 18,004 69,417 45,055 --
Obligations of U.S. government agencies 85,593 98,325 413,396 373,813 379,806
Mortgage-backed securities 8,128 12,491 38,539 50,862 85,919
Other securities 7,036 11,496 32,460 11,774 32,549
----- ------ -------- -------- --------
Total interest and dividends on investment
securities 108,246 140,316 553,812 481,504 498,274

Interest on short-term investments:
Federal funds sold 109,238 18,904 130,069 87,954 83,108
Bankers' acceptances -- -- -- -- 16,820
Deposits with other banks 6,866 5,837 22,920 18,025 12,573
-------- -------- -------- -------- --------
Total interest on short-term investments 116,104 24,741 152,989 105,979 112,501
-------- -------- -------- -------- --------
Total interest income 1,806,950 1,670,480 6,914,059 6,082,697 5,513,068
--------- --------- --------- --------- ---------

INTEREST EXPENSE:
Interest on deposits (Note 6):
NOW accounts 46,064 70,655 249,377 264,771 256,815
Money market accounts 217,388 205,839 812,916 544,798 418,340
Savings accounts 8,686 7,719 31,060 29,125 32,961
Certificates of deposit:
$100,000 or greater 171,469 178,362 698,356 525,099 421,563
Less than $100,000 238,675 158,990 845,681 492,134 341,275
------- ------- --------- --------- ---------
Total interest on deposits 682,282 621,565 2,637,390 1,855,927 1,470,954

Interest on short-term borrowings:
Federal funds purchased and
repurchase agreements 28,447 26,147 88,871 57,131 16,502
Other short-term borrowings -- 5,113 6,364 3,382 --
------ ------ ------- ------- -------
Total interest on short-term borrowings 28,447 31,260 95,235 60,513 16,502

Interest on capital note (Note 9) 2,794 3,911 13,969 18,028 20,445
------- ------- -------- -------- --------

Total interest expense 713,523 656,736 2,746,594 1,934,468 1,507,901
------- ------- --------- --------- ---------
Net interest income 1,093,427 1,013,744 4,167,465 4,148,229 4,005,167
Provision for loan losses (Note 4) -- -- -- 221,572 175,000
--------- --------- --------- --------- ---------
Net interest income after provision for
loan losses 1,093,427 1,013,744 4,167,465 3,926,657 3,830,167
--------- --------- --------- --------- ---------
</TABLE>

(CONTINUED)

F-4

<PAGE>
ABIGAIL ADAMS NATIONAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
AND
THREE MONTH PERIODS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED)

MARCH 31, MARCH 31, DECEMBER 31,
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
OTHER INCOME:
Service charges on deposit accounts 172,269 179,753 737,059 696,829 669,242
Other income 12,150 11,878 103,712 93,837 191,040
Gain (loss) on securities transactions -- -- -- (281) 24,495
------- ------- -------- -------- --------
Total other income 184,419 191,631 840,771 790,385 884,777
------- ------- ------- -------- --------

OTHER EXPENSE:
Salaries and employee benefits 431,691 414,145 1,649,071 1,611,127 1,564,364
Occupancy and equipment expense
(Notes 5 and 7) 171,724 185,494 698,570 750,359 674,341
Professional fees 42,617 92,419 353,205 887,347 480,860
Data processing fees 86,879 64,632 299,580 265,897 243,742
Other operating expense (Note 16) 168,423 194,586 781,000 1,386,444 1,140,578
------- ------- --------- --------- ---------

Total other expense 901,334 951,276 3,781,426 4,901,174 4,103,885
------- ------- --------- --------- ---------

Income (loss) before taxes 376,512 254,099 1,226,810 (184,132) 611,059
Applicable income tax expense (Note 8) 138,479 69,877 267,912 -- --
------- ------- --------- ------- -------

NET INCOME (LOSS) $238,033 $ 184,222 $ 958,898 $ (184,132) $ 611,059
-------- --------- ---------- ---------- ----------
-------- --------- ---------- ---------- ----------

NET INCOME (LOSS) PER COMMON SHARE $ 0.83 $ 0.65 $ 3.37 $ (0.65) $ 2.15
-------- --------- ---------- ---------- ----------
-------- --------- ---------- ---------- ----------

</TABLE>

See accompanying notes to consolidated financial statements.

F-5

<PAGE>
ABIGAIL ADAMS NATIONAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
AND
THREE MONTH PERIOD ENDED MARCH 31, 1996 (UNAUDITED)

ADDITIONAL RETAINED UNREALIZED
COMMON PAID-IN EARNINGS TREASURY LOSS ON
STOCK CAPITAL (DEFICIT) STOCK SECURITIES TOTAL
---------- ---------- --------- -------- ---------- ----------

<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1993 $ 2,864,040 $ 3,291,973 $ (711,573) $ (28,710) $ --- $ 5,415,730
Net income --- --- 611,059 --- --- 611,059
------ ------ --------- ------ ------ ---------

Balance at December 31, 1993 2,864,040 3,291,973 (100,514) (28,710) --- 6,026,789
Net loss --- --- (184,132) --- --- (184,132)
Unrealized loss on securities,
net of taxes --- --- --- --- (80,387) (80,387)
------ ------ ------ ------ ------ ------

Balance at December 31, 1994 2,864,040 3,291,973 (284,646) (28,710) (80,387) 5,762,270
Net income --- --- 958,898 --- --- 958,898
Dividends declared --- --- (142,422) --- --- (142,422)
Unrealized gain on securities,
net of taxes --- --- --- --- 40,120 40,120
------ ------ ------ ------ -------- -------
Balance at December 31,1995 $ 2,864,040 $ 3,291,973 $ 531,830 $ (28,710) $ (40,267) $ 6,618,866
Net Income --- --- 238,033 --- --- 238,033
Dividend declared --- --- (71,211) --- --- (71,211)
Unrealized gain on securities,
net of taxes --- --- --- --- 3,597 3,597
------ ------ ------ ------ -------- ---------

Balance, March 31, 1996 (unaudited) $ 2,864,040 $ 3,291,973 $ 698,652 $ (28,710) $ (36,670) $ 6,789,285
----------- ----------- ----------- ---------- --------- -----------
----------- ----------- ----------- ---------- --------- -----------

</TABLE>

See accompanying notes to consolidated financial statements.

F-6

<PAGE>
ABIGAIL ADAMS NATIONAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
AND
THREE MONTH PERIODS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED)

MARCH 31, MARCH 31, DECEMBER 31,
1996 1995 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)

OPERATING ACTIVITIES
Net income (loss) $ 238,033 $184,222 $ 958,898 $ (184,132) $ 611,059
Adjustments to reconcile net income (loss) to
net cash provided (used) by operating activities:
Provision for loan and other real estate losses -- -- -- 221,572 179,775
Depreciation, amortization and retirement
of bank premises and equipment 28,237 40,617 146,084 154,177 140,159
Loss (gain) on sale of securities -- -- -- 281 (24,495)
Loss on sale of other real estate -- -- -- 11,516 --
Accretion of loan discounts (9,083) (5,774) (106,116) (6,549) (184,412)
Amortization and accretion of discounts and
premiums on securities (1,553) 7,698 19,097 33,226 61,779
Benefit (provision) for deferred income taxes (94,576) (44,734) (300,227) 254,046 (356,630)
Decrease (increase) in other assets (119,930) (64,679) 369,045 (444,958) 621,994
Increase (decrease) in other liabilities 268,750 (21,725) (11,874) (476,874) 684,933
-------- -------- ---------- --------- ---------
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES 309,878 95,625 1,074,907 (437,695) 1,734,162
------- -------- ---------- --------- ---------

INVESTING ACTIVITIES
Proceeds from repayment and maturity
of investment securities 1,650,000 150,000 1,888,400 800,000 5,314,450
Proceeds from maturity of securities
available/held for sale 2,000,000 2,088,400 10,000,000 6,750,000 3,950,000
Proceeds from repayment of mortgage-
backed securities 22,094 28,583 126,951 258,705 647,776
Proceeds from sale of securities -- 449,718 1,524,495
Purchase of investment securities (1,024,775) -- (1,092,225) (1,758,334) --
Purchase of securities available/held for sale (1,500,000) (1,588,400) (9,485,625) (5,747,500) (8,889,403)
Net decrease (increase) in interest-bearing deposits
in other banks -- -- 4,000 -- (94,715)
Principal collected on loans 1,375,823 4,140,085 14,072,132 10,402,119 13,616,541
Loans originated (1,507,667) (2,729,731) (12,771,600) (16,665,764) (18,254,957)
Loans purchased from FDIC as receiver
for other banks -- -- -- (493,086) (6,418,028)
Net decrease (increase) in short-term loans (155,889) (24,031) (96,137) (160,958) (9,000)
Net decrease (increase) in lines of credit 3,662,138 443,475 (3,936,146) 754,607 (339,495)
Purchase of bank premises and equipment (37,895) (14,156) (54,383) (184,284) (44,499)
Proceeds from disposition of other real estate -- -- -- 716,984 --
--------- --------- ----------- ----------- -----------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES 4,483,829 2,494,225 (1,344,633) (4,877,793) (8,996,835)
--------- --------- ----------- ----------- -----------
</TABLE>

(CONTINUED)

F-7

<PAGE>

<S> <C> <C> <C> <C> <C>
FINANCING ACTIVITIES
Net increase (decrease) in transaction
and savings deposits (2,591,348) (3,077,684) 4,361,262 2,948,474 3,949,010
Proceeds from issuance of time deposits 3,463,596 13,860,339 40,745,855 34,897,519 45,663,732
Payments for maturing time deposits (5,123,841) (11,160,540) (37,337,424) (35,008,768) (38,003,294)
Net increase (decrease) in short-term
borrowings 447,627 187,197 1,424,694 165,818 (1,400,110)
Payments on long-term debt (18,625) -- (74,500) (56,250) (38,000)
Cash dividends paid to common stockholders (71,211) -- (71,211) -- --
---------- ----------- ----------- ----------- -----------
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES (3,893,802) (190,688) 9,048,676 2,946,793 10,171,338
---------- ----------- ----------- ----------- -----------

INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 899,905 2,399,162 8,778,950 (2,368,695) 2,908,665
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 14,428,200 5,649,250 5,649,250 8,017,945 5,109,280
---------- --------- ---------- --------- ---------
CASH AND CASH EQUIVALENTS AT END
OF YEAR $ 15,328,105 $ 8,048,412 $ 14,428,200 $ 5,649,250 $ 8,017,945
------------ ----------- ------------ ----------- -----------
------------ ----------- ------------ ----------- -----------

Supplementary disclosures:

Interest paid on deposits and borrowings $ 781,883 $ 629,244 $ 2,711,626 $ 1,924,179 $ 1,401,879
------------ ----------- ------------- ------------ ------------
------------ ----------- ------------- ------------ ------------

Income taxes paid $ 95,500 $ 0 $ 327,593 $ 511,250 $ 8,000
------------ ----------- ------------- ------------ ------------
------------ ----------- ------------- ------------ ------------

Securities transferred to investment
securities $ -- $ -- $ -- $ 3,500,000 $ --
------------ ----------- ------------ ------------ ------------
------------ ----------- ------------ ------------ ------------

</TABLE>

See accompanying notes to consolidated financial statements.

F-8

<PAGE>

ABIGAIL ADAMS NATIONAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995
(UNAUDITED)

1. The unaudited information at and for the three months ended March 31,
1996 and 1995 furnished herein reflects all adjustments which are, in
the opinion of management, necessary to a fair statement of the
results for the interim periods presented. All adjustments are of a
normal and recurring nature.

2. CONTINGENT LIABILITIES

Under the tems of an employment agreement with the President and Chief
Executive Officer of the Company and the Bank, the Company is
obligated to make payments to her under certain conditions,
totaling approximately $499,000 in the event her employment is
terminated.

Under the terms of severance agreements with seven key management
officials of the Bank, the Bank is obligated to make payments totaling
$504,000 under certain conditions in the event of a change in control
of the Company or the Bank.

The Company maintains directors' and officers' liability insurance in
the amount of $2,000,000, subject to certain exclusions. In addition,
according to the by-laws, the Company is obligated to indemnify any
director or officer for losses incurred to the full extent authorized
or permitted by Delaware general corporation law.

3. SHAREHOLDER RIGHTS PLAN

On April 12, 1994, the Board of Directors of the Company adopted a
Rights Agreement ("Rights Agreement"), which was amended April 20,
1995. Pursuant to the Rights Agreement, the Board of Directors of the
Company declared a dividend of one share purchase right for each share
of the Company's common stock outstanding on April 25, 1994 ("Right").
Among other things, each Right entitles the holder to purchase one
share of the Company's common stock at an exercise price of $60.33.

Subject to certain exceptions, the Rights will be exercisable if a
person or group of persons acquires 25% or more of the Company's
common stock ("Acquiring Person"), or announces a tender offer, the
consummation of which would result in ownership by a person or group
of persons of 25% or more of the common stock, or if the Board
determines that a person or group of persons holding 15% or more of
the Company's common stock is an Adverse Person, as defined in the
Rights Agreement.

Upon the occurrence of one of the triggering events, all holders of
Rights, except the Acquiring Person or Adverse Person, would be
entitled to purchase the Company's common stock at 50% of the market
price. If the Company is acquired in a merger or business
combination, each holder of a Right would be entitled to purchase
common stock of the Acquiring Person at a similar discount.

The Board of Directors may redeem the Rights for $0.01 per share or
amend the Plan at any time before a person becomes an Acquiring
Person. The Rights expire on December 31, 2003.

4. EMPLOYEE BENEFITS

The Company has adopted a Nonqualified Stock Option Plan for certain
officers and key employees and has reserved 30,000 shares of common
stock for options to be granted under the plan. No options have been
granted to date.

F-9

<PAGE>

Shares subject to options under these plans may be authorized but
unissued shares or treasury shares. Options under the Directors Plan
are granted at a price not less than 85% of the fair market value of
the Company's common stock on the date of grant. The options vest
beginning in 1996 at an annual rate of 20% at the end of each year
and become fully vested in the event of a Change in Control, as
defined in the Directors Plan, or in the event that the Director
leaves the Board. Options under the Employee Plan are granted at a
price of 100% of the fair market value of the Company's common stock
on the date of grant and are immediately exercisable. Options under
both plans expire not later than ten years after the date of grant.
Options for a total of 5,472 shares of common stock available for
grant under the above Plans were granted at a price of $20.21 for
directors and $23.78 for employees. No options have been exercised
under these plans.

On March 29, 1996, the Company granted the President and Chief
Executive Officer a nonqualified stock option to purchase 25,000
shares at a price equal to 85% of the fair market value of the
Company's common stock on the date of grant ($20.21). The option
vests beginning in 1996 at an annual rate of 20% at the end of each
year and becomes fully vested in the event of a Change in Control as
defined in the Agreement, or in the event that she leaves the Company
or the Bank.

On April 16, 1996, the Company and the Bank adopted an employee stock
ownership plan ("ESOP") with 401(k) provisions, replacing the Bank's
former 401(k) Plan. Participants may elect to contribute to the ESOP
a portion of their salary, which may not be less than 1% nor more than
15%, of their annual salary (up to $9,500 for 1996). In addition, the
Bank may make a discretionary matching contribution equal to one-half
of the percentage amount of the salary reduction elected by each
participant (up to a maximum of 3%), which percentage will be
determined each year by the Bank, and an additional discretionary
contribution determined each year by the Bank. Employee contributions
and the employer's matching contributions immediately vest.
Employer's discretionary contibutions are vested as follows: 0% for
less than three years of service; 20% for three years of service; 40%
for four years of service; 60% for five years of service; 80% for six
years of service; and 100% for seven or more years of service.

5. NET INCOME (LOSS) PER SHARE

Net income (loss) per common share is calculated by dividing net
income (loss) by the weighted average number of common shares and
common share equivalents outstanding during the period, 286,980
and 284,844 for the three months ended March 31, 1996 and 1995,
respectively, and 284,844 for the years ended December 31, 1995,
1994 and 1993. Common share equivalents include stock options.

F-10

<PAGE>

ABIGAIL ADAMS NATIONAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Abigail Adams National Bancorp, Inc. (the "Company") and its wholly-owned
subsidiary, The Adams National Bank (the "Bank"), prepare their financial
statements on the accrual basis and in conformity with generally accepted
accounting principles. The more significant accounting policies are
explained below. As used herein, the term the Company includes the Bank
unless the context otherwise requires.

(a) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and the Bank. All significant intercompany accounts and
transactions have been eliminated in consolidation.

(b) CASH AND CASH EQUIVALENTS
The Company has defined cash and cash equivalents as those amounts
included in cash and due from banks and Federal funds sold.

(c) SECURITIES
Management determines the appropriate classifications of securities
at the time of purchase. Securities which the Company has the
ability and the intent to hold until maturity are classified as
investment securities and reported at amortized cost. Securities
bought and held principally for the purpose of selling them in the
near term are classified as trading and reported at fair market
value with unrealized gains and losses included in earnings.
Securities which are not classified as trading or held to maturity
are classified as available for sale and are reported at fair value
with unrealized gains and losses reported as a separate component
of stockholders' equity. The unrealized loss on securities
recognized had the effect of decreasing the Company's stockholders'
equity by approximately $40,000, and $80,000, net of tax, at
December 31, 1995 and 1994, respectively. The Company does not
maintain a trading account.

Premiums and discounts are amortized using a method which
approximates the interest method over the term of the security.

(d) LOANS
Loans are stated at unpaid principal amount, net of unearned
discount and deferred loan fees and costs.

The Company discontinues the accrual of interest when the timely
collection of principal or interest is doubtful. Interest accruals
are resumed on such loans when they are brought fully current with
respect to interest and principal or when, in the judgment of
management, the loans have demonstrated a new period of performance
and are estimated to be fully collectible as to both principal and
interest.

(e) ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is a current estimate of the
anticipated losses in the present loan portfolio. The allowance is
increased by provisions charged to operating expenses and decreased
by loan charge-offs, net of recoveries. The allowance for loan
losses is based on management's evaluation of several factors,
including loan loss experience, composition and volume of the loan
portfolio, overall portfolio quality, review of specific problem
loans and current economic trends and specific conditions that may
effect the borrower's ability to pay. In addition, various
regulatory agencies, as an integral part of their examination
process, periodically review the Company's allowance for loan
losses. Such agencies may require the Company to recognize
additions to the allowance based on their judgments about
information available to them at the time of their examination.
Management believes that the current allowance for loan losses is
adequate to absorb losses that are inherent in the current loan
portfolio.

F-11

<PAGE>

(f) LOAN ORIGINATION FEES AND COSTS
All fee income received from loan origination and purchases as well
as costs directly attributable to the loan origination are
deferred. The net deferred fees are amortized into interest income
on loans as a yield adjustment over the estimated life of the loan.
Deferred fees and costs are not amortized during periods in which
interest income is not being recognized because of concerns about
the realization of loan principal or interest. Discounts obtained
on loans purchased from the FDIC as receiver for other banks are
considered credit discounts and are not amortized into income until
such time as a periodic credit evaluation deems that the discount,
or a portion thereof, is no longer necessary or until such time as
the loans have paid off. If the credit evaluation deems all or
some of the discount is no longer necessary, it is then amortized
into interest on loans as a yield adjustment over the remaining
estimated life of the loan.

(g) DEPRECIATION
Depreciation of Bank premises and equipment is computed over the
estimated useful lives of the respective assets, ranging from three
to five years, on the straight-line basis. Leasehold improvements
are amortized on a straight-line basis over the estimated useful
lives of the respective assets or the terms of the respective
leases, whichever is shorter. Expenditures for major renewals and
betterments of Bank premises and equipment are capitalized at cost
and those for maintenance and repairs are charged to expense as
incurred.

(h) OTHER REAL ESTATE
Other real estate includes assets that have been acquired in
satisfaction of debt ("assets owned") and in-substance
foreclosures. Other real estate is recorded at the lower of cost
or fair value. Any valuation adjustments required at the date of
transfer are charged to the allowance for loan losses. Subsequent
to acquisition, other real estate is carried at the lower of its
cost basis at foreclosure or fair value less estimated selling
costs, based upon periodic evaluations.

(i) INCOME TAXES
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.

(j) NET INCOME (LOSS) PER SHARE
Net income (loss) per common share is calculated by dividing net
income (loss) by the weighted average number of common shares
outstanding during the year, 284,844 in 1995, 1994 and 1993.

(k) FAIR VALUE DISCLOSURES
In December, 1991 the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 107, "Disclosures
About Fair Value of Financial Instruments" (SFAS No. 107). SFAS
No. 107 requires entities to disclose the fair value of financial
instruments, both assets and liabilities recognized and not
recognized in the statement of financial position, for which it is
practical to estimate fair value. SFAS No. 107 is effective for
the Company at December 31, 1995. The fair value of the Company's
financial instruments is reported in Note 18.

(l) ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 114, "Accounting by Creditors
for Impairment of a Loan" (SFAS No. 114) and Statement of Financial
Accounting Standards No. 118, "Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosures" (SFAS
No. 118) which amended SFAS No. 114. SFAS No. 114 and SFAS No. 118
require creditors to measure impaired loans in one of three ways:
the present value of expected future cash flows discounted at the
loan's effective interest rate, the loan's observable market price
or the fair value of the underlying collateral. If the measure of
the impaired loan is less than the recorded investment in the loan,
the creditor shall recognize the impairment by creating a valuation
allowance with a corresponding charge to expense. SFAS No. 114 and
SFAS No. 118 were adopted by the Company as of January 1, 1995.
The adoption of SFAS No. 114 and SFAS No. 118 did not have a
material impact on the Company.

F-12

<PAGE>

(m) DERIVATIVE FINANCIAL INSTRUMENTS
In October 1994, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 119, "Disclosure
about Derivative Financial Instruments and Fair Value of Financial
Instruments" (SFAS No. 119). SFAS No. 119 requires entities to
disclose the amount, nature and terms of all derivative financial
instruments, such as futures, forward, swap or option contracts, or
other financial instruments with similar characteristics, and to
separately disclose certain information about these instruments
which are held or issued for trading purposes and those which are
held or issued for purposes other than trading. SFAS No. 119 was
adopted as of January 1, 1995.

(n) ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of" (SFAS No. 121). SFAS No. 121 requires that
assets to be held and used be evaluated for impairment whenever
events or circumstances indicate that the carrying value may not be
recoverable. SFAS No. 121 also requires that assets to be disposed
of be reported at the lower of cost or fair value less selling
costs. Implementation of SFAS No. 121 is not expected to have a
material impact on the results of operations or financial position.
SFAS No. 121 is effective for the Company as of January 1, 1996.

(o) ACCOUNTING FOR MORTGAGE SERVICING RIGHTS
In May 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 122, "Accounting
for Mortgage Servicing Rights" (SFAS No. 122). SFAS No. 122
provides accounting for mortgage servicers that sell or securitize
loans and retain servicing rights. SFAS No. 122 is effective as of
January 1, 1996. The Company does not sell or securitize mortgage
loans and therefore the implementation of SFAS No. 122 will not
have a material impact.

(p) ACCOUNTING FOR STOCK BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting
for Stock Based Compensation" (SFAS No. 123). SFAS No. 123 allows
companies either to continue to account for stock-based employee
compensation plans under existing accounting standards or to adopt
a fair-value-based method of accounting as defined in the new
standard. The Company will follow the existing accounting
standards for these plans, but will provide pro-forma disclosure of
net income and earnings per share as if the expense provisions of
SFAS No. 123 had been adopted.

(q) RISKS AND UNCERTAINTIES
The Company is subject to competition from other financial
institutions, and is also subject to the regulations of certain
federal agencies and undergoes periodic examination by those
regulatory authorities.

The financial statements have been prepared in conformity with
generally accepted accounting principles. In preparing the
financial statements, management is required to make estimates and
assumptions that affect the reported amounts of assets and
liabilities as of the date of the balance sheet and revenues and
expenses for the period. Actual results could differ significantly
from those estimates.

Material estimates that are particularly susceptible to significant
change in the near-term relate to the determination of the
allowance for loan losses and the valuation of real estate acquired
in connection with foreclosures or in satisfaction of loans. In
connection with the determination of the allowances for loans
losses and other real estate, management periodically obtains
independent appraisals for significant properties.

(r) RECLASSIFICATIONS
Certain reclassifications have been made to amounts previously
reported in 1994 and 1993 to conform with the 1995 presentation.

2. RESTRICTIONS ON CASH BALANCES
Included in cash and due from banks are balances maintained within the
Company to satisfy legally required reserves and to compensate for services
provided from correspondent banks. Balances maintained totaled $1,475,000
and $1,526,000 at December 31, 1995 and 1994, respectively. There were no
other withdrawal, usage restrictions or legally required compensating
balances at December 31, 1995 or 1994.

F-13

<PAGE>

3. SECURITIES
Investment securities at December 31, 1995 and 1994 are summarized as
follows:

1995
------------------------------------------------------------------
GROSS GROSS
ADJUSTED UNREALIZED UNREALIZED MARKET
COST BASIS GAINS LOSSES VALUE
---------- ---------- ---------- ------
<S> <C> <C> <C> <C>
U.S. Treasury:
Within one year $ 1,499,200 $ 1,581 $ -- $ 1,500,781
------------- ----------- ---------- -------------
Total 1,499,200 1,581 -- 1,500,781
------------- ----------- ---------- -------------

Obligations of U.S. government
agencies and corporations:
Within one year 1,005,685 9,627 -- 1,015,312
After one, but within five years 4,875,445 90,630 2,500 4,963,575
---------- -------- --------- ----------
Total 5,881,130 100,257 2,500 5,978,887
---------- -------- -------- ----------

Mortgage-backed securities:
Federal National Mortgage Association:
After one, but within five years 16,961 343 -- 17,304
Federal Home Loan Mortgage Corp.:
After five but within ten years 368,656 16,937 -- 385,593
--------- ------- --------- ---------
Total 385,617 17,280 -- 402,897
--------- ------- --------- ---------

Corporate securities (1) 12,500 -- -- 12,500
--------- ------- --------- ---------
Federal Reserve Bank Stock (1) 162,700 -- -- 162,700
--------- ------- --------- ---------
Federal Home Loan Bank Stock (1) 251,500 -- -- 251,500
--------- ------- --------- ---------
Total investment securities $ 8,192,647 $ 119,118 $ 2,500 $ 8,309,265
------------ --------- --------- ------------
------------ --------- --------- ------------
</TABLE>

1994
----------------------------------------------------------------
GROSS GROSS
ADJUSTED UNREALIZED UNREALIZED MARKET
COST BASIS GAINS LOSSES VALUE
---------- ---------- ---------- --------
<S> <C> <C> <C> <C>
U.S. Treasury:
Within one year $ 987,423 $ -- $ 15,861 $ 971,562
After one, but within five years 496,767 -- 9,111 487,656
---------- ----------- --------- ----------
Total 1,484,190 -- 24,972 1,459,218
---------- ----------- --------- ----------

Obligations of U.S. government
agencies and corporations:
After one, but within five years 6,657,520 -- 215,935 6,441,585
---------- ---------- --------- ----------
Total 6,657,520 -- 215,935 6,441,585
---------- ---------- --------- ----------

Mortgage-backed securities:
Federal National Mortgage Association:
After one, but within five years 30,076 577 -- 30,653
Federal Home Loan Mortgage Corp.:
After five but within ten years 482,292 952 2,526 480,718
---------- --------- --------- ----------
Total 512,368 1,529 2,526 511,371
---------- --------- --------- ----------

Corporate securities (1) 12,500 -- -- 12,500
---------- --------- --------- ----------
Federal Reserve Bank Stock (1) 162,700 -- -- 162,700
---------- --------- --------- ----------
Federal Home Loan Bank Stock (1) 251,500 -- -- 251,500
---------- --------- --------- ----------
Total investment securities $9,080,778 $ 1,529 $ 243,433 $8,838,874
---------- --------- --------- ----------
---------- --------- --------- ----------

</TABLE>

(1) Corporate securities and Federal Reserve Bank and Federal Home Loan Bank
Stocks have no stated maturities.

F-14
<PAGE>

Securities available for sale at December 31, 1995 and 1994 are summarized
below:

1995
-------------------------------------------------------
GROSS GROSS
ADJUSTED UNREALIZED UNREALIZED MARKET
COST BASIS GAINS LOSSES VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury:
Within one year $1,995,654 $6,220 $ -- $2,001,874
---------- ---------- ---------- ----------
Total 1,995,654 6,220 -- 2,001,874
---------- ---------- ---------- ----------

Obligations of U.S. government
agencies and corporations:
Within one year 2,501,562 1,249 -- 2,502,811
After one, but within five years 1,000,000 3,721 -- 1,003,721
---------- ---------- ---------- ----------
Total 3,501,562 4,970 -- 3,506,532
---------- ---------- ---------- ----------
Total securities available for sale $5,497,216 $11,190 $ -- $5,508,406
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------

<CAPTION>
1994
-------------------------------------------------------
GROSS GROSS
ADJUSTED UNREALIZED UNREALIZED MARKET
COST BASIS GAINS LOSSES VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury:
Within one year $3,024,521 $ -- $7,646 $3,016,875
---------- ---------- ---------- ----------
Total 3,024,521 -- 7,646 3,016,875
---------- ---------- ---------- ----------

Obligations of U.S. government
agencies and corporations:
Within one year 2,998,757 -- 6,607 2,992,150
---------- ---------- ---------- ----------
Total 2,998,757 -- 6,607 2,992,150
---------- ---------- ---------- ----------
Total securities available for sale $6,023,278 $ -- $14,253 $6,009,025
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>

Securities in the amount of approximately $8,616,000 and $11,925,000 were
pledged to collateralize public deposits and repurchase agreements at
December 31, 1995 and 1994, respectively.

The Company had no securities exempt from federal taxation during 1995 and
1994 or any securities whose book value as to any single issuer exceeded
10% of stockholders' equity.

4. LOANS

Loans at December 31, 1995 and 1994 are summarized as follows:

1995 1994
----------- -----------
Commercial and industrial $43,547,303 $42,960,687
Real estate - mortgages 14,150,578 11,074,167
Real estate - construction
and development 2,617,836 3,237,156
Installment to individuals 3,652,022 3,816,083
----------- -----------
63,967,739 61,088,093
Less: Deferred income and
unearned discounts (375,344) (358,656)
----------- -----------
Total $63,592,395 $60,729,437
----------- -----------
----------- -----------

F-15

<PAGE>

Loan concentrations at December 31, 1995 and 1994 are summarized as
follows:

1995 1994
---- ----
Service industry 38% 34%
Real estate development/finance 32% 32%
Wholesale/retail 21% 21%
Other 9% 13%
---- ----
Total 100% 100%
---- ----
---- ----

A substantial portion, $41,418,000, or approximately 65%, at December 31,
1995, and $41,862,000, or approximately 69%, at December 31, 1994, of the
Company's loans are secured by real estate in the Washington, D.C.
metropolitan area. Accordingly, the ultimate collectibility of a
substantial portion of the Company's loan portfolio is susceptible to
changes in market conditions in the Washington metropolitan area.

Transactions in the allowance for loan losses for the years ended December
31, 1995 and 1994 are summarized as follows:

1995 1994 1993
----------- ----------- ----------
Balance at January 1 $ 1,289,562 $ 1,385,875 $1,320,487

Provision for loan losses -- 221,572 175,000

Recoveries 97,993 156,374 97,552
Loans charged off (113,590) (474,259) (207,164)
----------- ----------- ----------
Net charge-offs (15,597) (317,885) (109,612)
----------- ----------- ----------

Balance at December 31 $ 1,273,965 $ 1,289,562 $1,385,875
----------- ----------- ----------
----------- ----------- ----------

Included in the accompanying consolidated balance sheets are certain loans
that are accounted for on a nonaccrual basis. These nonaccrual loans
totaled approximately $1,561,000, $1,244,000 and $1,733,000 at December
31, 1995, 1994 and 1993, respectively. Had the loans been current in
accordance with their original terms, gross interest income for these loans
would have been $212,000, $150,000 and $154,000 in 1995, 1994 and 1993,
respectively. Actual recorded interest income on these loans was $40,000,
$53,000 and $82,000 in 1995, 1994 and 1993, respectively. Nonaccrual loans
include $875,000, $1,013,000 and $1,151,000 in loans guaranteed by the U.S.
Small Business Administration at December 31, 1995, 1994 and 1993,
respectively. These loans are guaranteed for an average of 84.9% of the
outstanding balance, or $743,000, 87.3% of the outstanding balance, or
$884,000, and 77.4% of the outstanding balance, or $891,000 at December
31, 1995, 1994 and 1993, respectively. Also included in the accompanying
consolidated balance sheets are $1,245,000, $1,301,000 and $1,502,000 in
loans at December 31, 1995, 1994 and 1993, respectively, restructured due
to a deterioration in the financial condition of the borrowers. Actual
interest income recorded subsequent to the date of restructuring on loans
reported as restructured at each year-end was $124,000, $110,000 and
$148,000 in 1995, 1994 and 1993, respectively. As of year-end 1995, 1994
and 1993, these loans were performing in accordance with the restructured
terms. Nonaccrual loans at December 31, 1995 and 1994 include $0 and
$826,000 in loans which were reported as restructured as of the prior year-
end. The Company had no commitments to lend additional funds to any of the
borrowers whose loans are recorded as nonaccrual or restructured at
December 31, 1995, 1994 and 1993. At December 31, 1995, 1994 and 1993, the
Company had $6,000, $3,000 and $89,000, respectively, in loans greater than
90 days delinquent which were still accruing. These loans consisted
primarily of loans which were both adequately secured and in the process of
collection.

At December 31, 1995, the recorded investment in impaired loans was
$2,790,000, substantially all of which are on nonaccrual status or are
reported as restructured loans. Included in this amount is $1,631,000 of
impaired loans for which the related impairment allowance is $416,000 and
$1,037,000 of loans that do not have an impairment allowance. The average
recorded investment in impaired loans during 1995 was $2,918,000. The
amount of interest income recognized on impaired loans during the

F-16

<PAGE>

year ended December 31, 1995 has been disclosed above in the discussion of
nonaccrual and restructured loans. The allowance for credit losses
contains additional amounts for impaired loans as deemed necessary to
maintain allowances at levels considered adequate by management.

The Company has engaged in banking transactions in the ordinary course of
business with some of its directors, officers, principal shareholders and
their associates. Management believes that all loans or commitments to
extend loans and the payment of overdrafts included in such transactions
are made on the same terms, including interest rates and collateral, as
those prevailing at the time of comparable loans with other persons and do
not involve more than the normal risk of collectibility. At December 31,
1995 and 1994, none of these loans are either reported as nonaccrual,
restructured or classified. The aggregate amount of loans to related
parties for the years ended December 31, 1995 and 1994 was as follows:

1995 1994
---------- ----------
Balance at January 1 $ 726,153 $ 472,447

Additions 481,774 668,102
Repayments (675,350) (260,594)
Terminations -- (153,802)
---------- ----------
Balance at December 31 $ 532,577 $ 726,153
---------- ----------
---------- ----------

5. BANK PREMISES AND EQUIPMENT
Bank premises and equipment at December 31, 1995 and 1994 is summarized as
follows:

1995 1994
----------- -----------
Furniture, fixtures and equipment $ 1,351,454 $ 1,311,979
Leasehold improvements 692,936 678,028
----------- -----------
Total, at cost 2,044,390 1,990,007
Less: Accumulated depreciation
and amortization (1,766,873) (1,620,789)
----------- -----------
Total, net $ 277,517 $ 369,218
----------- -----------
----------- -----------

Amounts charged to operating expenses for depreciation and amortization
aggregated approximately $146,000, $154,000 and $140,000 in 1995, 1994 and
1993, respectively.

6. INTEREST-BEARING DEPOSITS
Related party deposits totaled approximately $2,481,000 and $610,000 at
December 31, 1995 and 1994, respectively. In management's opinion, rates
paid on these deposits, where applicable, are available to others at the
same terms.

At December 31, 1995 and 1994, brokered deposits totaled approximately
$7,190,000 and $3,135,000, respectively.

7. LEASING ARRANGEMENTS
The Company leases its main office space under two leases which expire in
2002. The Company also leases space for two branch offices and two
automated teller machines. The lease on the M Street branch expires in
1996, and the leases on the Union Station branch and the two automated
teller machines expire in 1999. All leases are classified as operating
leases.

F-17

<PAGE>

The following is a schedule of future minimum payments under operating
leases that have initial or remaining noncancelable lease terms in excess
of one year as of December 31, 1995:

LEASE
PAYMENTS
---------
1996 $ 398,114
1997 386,340
1998 383,676
1999 324,756
2000 322,742
2001 and thereafter 591,694

Rental expense in 1995, 1994 and 1993 was approximately $408,000, $452,000,
$392,000, respectively.

8. INCOME TAXES
Income tax expense attributable to income from continuing operations for
1995, 1994 and 1993 consists of:

1995 1994 1993
--------- ---------- --------
Current:
Federal $ 428,452 $ (167,026) $289,174
District of Columbia 139,687 (87,020) 67,456
--------- ---------- --------
568,139 (254,046) 356,630
--------- ---------- --------
Deferred:
Federal (160,540) 167,026 (289,174)
District of Columbia (139,687) 87,020 (67,456)
--------- ---------- --------

(300,227) 254,046 (356,630)
--------- ---------- --------
Total:
Federal 267,912 -- --
District of Columbia -- -- --
--------- ---------- --------

$ 267,912 $ -- $ --
--------- ---------- --------
--------- ---------- --------

Income tax expense differed from the amounts computed by applying the U.S.
Federal income tax rate of 34 percent to pretax income from continuing
operations as a result of the following:
<TABLE>
<CAPTION>

1995 1994 1993
------------------- ------------------- -------------------
AMOUNT % AMOUNT % AMOUNT %
--------- ------ --------- ------ --------- ------
<S> <C> <C> <C> <C> <C> <C>
Tax expense at statutory rate $417,116 34.0% $(62,605) (34.0)% $207,760 34.0%
Increase (decrease) in taxes
resulting from District of
Columbia franchise tax, net
of Federal tax effect 124,952 10.2 (31,583) (17.2) 16,708 2.7
Other 37,235 3.0 2,550 1.4 -- --
Change in beginning of year
valuation allowance (311,391) (25.4) 91,638 49.8 (224,468) (36.7)
--------- ------ --------- ------ --------- ------
$267,912 21.8% $ -- 0.0% $ -- 0.0%
--------- ------ --------- ------ --------- ------
--------- ------ --------- ------ --------- ------
</TABLE>

F-18

<PAGE>

The significant components of deferred income tax expense attributable to
income from continuing operations for the year ended December 31, 1995 and
1994 are as follows:

1995 1994
---------- --------
<S> <C> <C>
Deferred tax benefit (exclusive of the
effects of other components listed below) $ 11,164 $162,409
Increase (decrease) in beginning of the year
balance of the valuation allowance
for deferred tax assets (311,391) 91,637
---------- --------
$(300,227) $254,046
---------- --------
---------- --------
</TABLE>

The following is a summary of the tax effects of temporary differences that
give rise to significant portions of the deferred tax assets and deferred
tax liabilities at December 31, 1995 and 1994:

1995 1994
--------- ---------
<S> <C> <C>
Deferred tax assets:
Book allowance for loan losses $519,332 $ 525,690
Interest income on nonaccrual loans,
due to accrual for tax purposes 51,401 51,401
Deferred loan fees, due to cash basis
for tax purposes 76,344 97,136
Furniture and equipment, principally due to
differences in depreciation 101,962 91,266
Unrealized losses on securities 26,778 55,298
Compensated absences, principally due to
cash basis for financial reporting purposes 8,184 7,005
Other -- 20,401
--------- ---------
Total gross deferred tax assets 784,001 848,197
Less: Valuation allowance -- (311,391)
--------- ---------
Net deferred tax assets 784,001 536,806

Deferred tax liabilities:
Tax allowance for loan losses (321,737) (332,806)
Prepaid expenses due to cash basis for tax purposes (19,513) (20,987)
--------- ---------
Total gross deferred tax liabilities (341,250) (353,793)
--------- ---------
Net deferred tax assets $ 442,751 $ 183,013
--------- ---------
--------- ---------
</TABLE>

The Company had established a valuation allowance through December 31, 1994
for the excess of deferred tax assets over taxes paid in the carryback
years and future reversals of certain existing taxable temporary
differences. As of December 31, 1995, all deferred tax assets were
recoverable through taxes paid in the carryback years and therefore no
valuation allowance was required.

At December 31, 1995, the Company had utilized all of its available
financial statement net operating loss carryforwards. Deferred income tax
assets at December 31, 1995 and 1994 were $442,751 and $183,013,
respectively, and are included in other assets in the accompanying
financial statements. Also included in other assets at December 31, 1995
and 1994, were current tax receivables of $54,000 and $429,000,
respectively.

9. LONG-TERM DEBT -- CAPITAL NOTE
On February 2, 1988, the Bank renegotiated its subordinated capital note
agreement with Minbanc Capital Corp. The principal balance of this note
shall be repaid in 16 quarterly installments of $9,500 each commencing on
September 30, 1990 through June 30, 1994 and thereafter 16 quarterly
installments of $18,625 through the note's maturity on June 30, 1998. The
rate of interest payable on the principal balance of this note was
initially fixed at 6.50%. On June 30, 1989 and annually thereafter, the
interest rate adjusts to the equivalent of 2% under the rate of the most
recently auctioned ten year United States Treasury Note. The note carries
a minimum rate of 6.00% and a maximum rate of 12% per annum. As of
December 31, 1995, the note carried an interest rate of 6.00%. Annual
principal maturities as of December 31, 1995 are as follows:

1996 $ 74,500
1997 74,500
1998 37,250
--------
$186,250
--------
--------

F-19

<PAGE>

The note agreement restricts the total cash dividends which may be paid by
the Bank in any twelve calendar month period to 25% of net operating
income.

10. SHORT-TERM BORROWINGS
Short-term borrowings consist primarily of Federal funds purchased and
securities sold under repurchase agreements. Federal funds purchased
represent overnight funds, while securities sold under repurchase
agreements generally involve the receipt of immediately available funds
which mature in one business day or roll over under a continuing contract.

The balance of securities sold under repurchase agreements at December 31,
1995 and 1994 of $1,785,402 and $360,708, respectively, represents funds
received by the Company for securities sold to customers of the Company, at
the customer's request, which mature in one business day but roll over
under a continuing contract. In accordance with these contracts, the
underlying securities sold are U.S. Treasuries or government agencies which
are segregated from the Company's other investment securities in the Bank's
Federal Reserve Bank account. The book value of the underlying securities
sold under these repurchase agreements at December 31, 1995 and 1994 was
approximately $2,060,000 and $1,196,000, respectively. The market value of
these same securities at December 31, 1995 and 1994 was $2,094,000 and
$1,159,000, respectively. At maturity, the same security is repurchased by
the Company.

Repurchase agreements are entered into with related parties in the normal
course of business. At December 31, 1995, such related party repurchase
agreements totalled approximately $500,000. In management's opinion, rates
paid on these repurchase agreements are available to others at the same
terms.

In the normal course of business, there are securities sold under
repurchase agreements that the Company initiates with correspondent banks
for liquidity purposes. As with the customer repurchase agreements, these
contracts generally involve the receipt of immediately available funds
which mature in one business day or roll over under a continuing contract,
however, the underlying securities sold are transferred to the
correspondent bank's Federal Reserve Bank account until maturity. At
maturity, the same security is repurchased by the Company.

Other short-term borrowings during 1995 and 1994 consist of borrowings from
the Federal Home Loan Bank of Atlanta ("FHLB") for liquidity purposes.
Borrowings are collateralized by loans secured by first liens on one to
four family, multifamily and commercial mortgages as well as investment
securities. Although no FHLB borrowings are outstanding at December 31,
1995 and 1994, the outstanding balance of loans pledged at December 31,
1995 and 1994 to collateralize future borrowings from the FHLB were
$3,194,000 and $2,719,000. The collateral value of the loans pledged at
December 31, 1995 and 1994 was $2,127,000 and $2,150,000, respectively.

F-20

<PAGE>

Short-term borrowings for 1995 and 1994 are summarized below:
<TABLE>
<CAPTION>

1995 1994
---- ----
<S> <C> <C>
FEDERAL FUNDS PURCHASED
Balance at end of year $ -- $ --
Daily average balance outstanding during year 89,114 63,219
Maximum balance outstanding as of any month-end during year 850,000 1,000,000
Daily average interest rate during year 5.34% 4.68%

SECURITIES SOLD UNDER REPURCHASE AGREEMENTS
Balance at end of year $1,785,402 $ 360,708
Daily average balance outstanding during year 1,510,954 1,484,991
Maximum balance outstanding as of any month-end during year 3,217,340 3,987,421
Daily average interest rate during year 5.57% 3.65%
Average interest rate on balance at end of year 4.92% --

OTHER SHORT-TERM BORROWINGS
Balance at end of year $ -- $ --
Daily average balance outstanding during year 103,493 61,370
Maximum balance outstanding as of any month-end during year 1,200,000 1,100,000
Daily average interest rate during year 6.15% 5.56%
</TABLE>

11. COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business, there are various outstanding commitments
and contingent liabilities such as commitments to extend credit that are
not reflected in the accompanying consolidated financial statements. No
material losses are anticipated as a result of these transactions. At
December 31, 1995 and 1994, the Company had outstanding letters of credit
aggregating approximately $706,000 and $474,000, commitments to originate
variable rate loans aggregating approximately $13,867,000 and $13,315,000,
and commitments to originate fixed rate loans aggregating approximately
$1,410,000 and $452,000, respectively.

Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of the commitments
are expected to expire without being drawn upon, the total commitment
amounts do not necessarily represent future cash requirements. The Company
evaluates each customer's creditworthiness on a case by case basis. The
amount of collateral obtained if deemed necessary by the Company upon
extension of credit is based on management's credit evaluation. Collateral
held varies but may include accounts receivable, inventory, property, plant
and equipment, and residential and income-producing commercial properties.

Standby letters of credit are conditional commitments issued by the Company
to guarantee the performance of a customer to a third party. Those
guarantees are primarily issued to support lease and security deposits and
private borrowing arrangements. The credit risk involved in issuing
letters of credit is essentially the same as that involved in extending
loan facilities to customers. The Company holds cash, marketable
securities and other collateral supporting those commitments for which
collateral is deemed necessary. The portion of letters of credit which are
collateralized was 100% at December 31, 1995 and 1994.

Under the terms of an employment agreement with the President and Chief
Executive Officer of the Company and the Bank, the Company is obligated to
make payments to her under certain conditions, in the event her employment
is terminated.

Under the terms of severance agreements with seven key management officials
of the Bank, the Bank is obligated to make payments totaling $504,000 under
certain conditions in the event of a change in control of the Company or
the Bank.

The Company maintains directors' and officers' liability insurance in the
amount of $2,000,000, subject to certain exclusions. In addition,
according to the by-laws, the Company is obligated to indemnify any
director or officer for losses incurred to the full extent authorized or
permitted by Delaware general corporation law.

F-21

<PAGE>

12. RESTRICTIONS ON DIVIDEND PAYMENTS AND LOANS BY AFFILIATED BANK
Any dividends payable by the Company are dependent on dividends payable
from the Bank to the Company. Federal banking laws restrict the total
dividend payments that a national banking association may make during any
calendar year to the total net income of the bank for current year plus
retained net income for the preceding two years, except with the prior
written approval of the Office of the Comptroller of the Currency. As a
result of additional dividend restrictions referred to in Note 9 above, the
Bank is restricted from making dividend payments in excess of 25% of net
operating income in any twelve calendar month period. The Federal Reserve
Board has issued a statement effective November 14, 1985 which indicates
that dividends should only be paid out of net income available to common
shareholders over the past year. Restrictions are also imposed upon the
ability of the Bank to make loans to the Company, purchase stock in the
Company or use the Company's securities as collateral for indebtedness of
the Bank.

13. PARENT COMPANY INFORMATION
On April 1, 1982, the Company acquired, through merger, all of the
outstanding shares of the Bank, becoming the parent and sole stockholder.
The earnings (losses) of the Bank are recorded by the Company using the
equity method of accounting. Earnings (losses) are recorded as an increase
(decrease) in the Company's investment, and dividends declared by the Bank
are recorded as reductions in the Company's investment in the Bank.

F-22

<PAGE>

CONDENSED BALANCE SHEETS

DECEMBER 31,
------------------------
1995 1994
---------- ----------
<S> <C> <C>
ASSETS
Due from banks and interest-bearing balances with subsidiary bank $ 248,797 $ 169,768
Investment in subsidiary bank 6,364,594 5,684,937
Dividend receivable from subsidiary bank 71,211 --
Other assets 8,459 4,438
---------- ----------
Total assets $6,693,061 $5,859,143
---------- ----------
---------- ----------

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Other liabilities $74,195 $96,873
Stockholders' equity:
Common stock, par value $10 per share, authorized 800,000
shares; issued 286,404 shares; outstanding 284,844 shares
in 1995 and 1994 2,864,040 2,864,040
Additional paid-in capital 3,291,973 3,291,973
Retained earnings (deficit) 491,563 (365,033)
---------- ----------
6,647,576 5,790,980
Less: Treasury Stock, 1,560 shares at cost (28,710) (28,710)
---------- ----------
Total stockholders' equity 6,618,866 5,762,270
---------- ----------
Total liabilities and stockholders' equity $6,693,061 $5,859,143
---------- ----------
---------- ----------
</TABLE>

CONDENSED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1995 1994 1993
---------- ---------- --------
<S> <C> <C> <C>
INCOME:
Dividends from subsidiary bank $213,633 -- --
Interest earned on balances with subsidiary bank 4,906 6,162 7,004
Interest on securities available for sale -- 7,518 8,722
Interest on other -- (281) 6,750
Management fees earned from subsidiary bank 444 31,880 12,649
---------- ---------- --------

Total income 218,983 45,279 35,125

EXPENSES:
Professional fees 125,569 433,641 32,882
Organizational and other 75,046 157,315 109,854
---------- ---------- --------

Total expenses 200,615 590,956 142,736

Income (loss) before taxes and equity
in undistributed net income of subsidiary 18,368 (545,677) (107,611)
Applicable income tax benefit 300,993 -- --
---------- ---------- --------

Income (loss) before equity
in undistributed net income of subsidiary 319,361 (545,677) (107,611)

Equity in undistributed net income of subsidiary 639,537 361,545 718,670
---------- ---------- --------
NET INCOME (LOSS) $958,898 $(184,132) $611,059
---------- ---------- --------
---------- ---------- --------
</TABLE>

F-23

<PAGE>

CONDENSED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1995 1994 1993
---------- ---------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $958,898 $(184,132) $611,059
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Equity in undistributed loss (net income) of subsidiary (639,537) (361,545) (718,670)
Dividends declared from subsidiary bank not received (71,211)
Other, net (97,910) 94,102 (1,064)
---------- ---------- --------

NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 150,240 (451,575) (108,675)

INVESTING ACTIVITIES
Proceeds from maturity of securities available for sale -- 450,000 --
Proceeds from maturity of investment securities -- -- 900,000
Purchase of securities -- -- (900,000)
---------- ---------- --------

NET CASH PROVIDED BY INVESTING ACTIVITIES -- 450,000 --

FINANCING ACTIVITIES
Cash dividends paid to stockholders (71,211) -- --
---------- ---------- --------

NET CASH USED BY FINANCING ACTIVITIES (71,211) -- --
---------- ---------- --------

INCREASE (DECREASE) IN CASH 79,029 (1,575) (108,675)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 169,768 171,343 280,018
---------- ---------- --------

CASH AND CASH EQUIVALENTS AT END OF YEAR $248,797 $169,768 $171,343
---------- ---------- --------
---------- ---------- --------
</TABLE>

14. FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT

Regulations implementing the prompt corrective action provisions of the
Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA)
became effective on December 19, 1992. FDICIA requires the regulators to
stratify institutions into five quality tiers based upon their respective
capital strengths and to increase progressively the degree of regulation
over the weaker institutions, limits the pass-through deposit insurance
treatment of certain types of accounts, adopts a "Truth in Savings"
program, calls for the adoption of risk-based premiums on deposit insurance
and requires banks to observe insider credit underwriting procedures no
less strict than those applied to comparable noninsider transactions.

The prompt corrective action regulations define specific capital categories
based on an institution's capital ratios. The capital categories, in
declining order, are "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" and "critically
undercapitalized." Institutions categorized as "undercapitalized" or below
are subject to certain restrictions, including the requirement to file a
capital plan with its primary federal regulator, prohibitions on the
payment of dividends and management fees, restrictions on executive
compensation and increased supervisory monitoring, among other things.
Other restrictions may be imposed on the institution either by its primary
federal regulator or by the FDIC, including requirements to raise
additional capital, sell assets or sell the entire institution. Once an
institution becomes "critically undercapitalized" it is generally placed in
receivership or conservatorship within 90 days.

To be considered "well capitalized," an institution must generally have a
leverage ratio of at least 5%, a Tier 1 risk-based capital ratio of at
least 6% and a total risk-based capital ratio of at least 10%. At December
31, 1995 and 1994, both the Company and the Bank were considered "well
capitalized."

F-24

<PAGE>

15. EMPLOYEE BENEFITS

The Company has adopted a Nonqualified Stock Option Plan for certain
officers and key employees and has reserved 30,000 shares of common stock
for options to be granted under the plan. No options have been granted to
date.

The Company has a 401(k) plan covering all full-time employees. The
Company made contributions to the plan of $34,000, $40,000 and $24,000 in
1995, 1994 and 1993, respectively. These amounts are included in salaries
and employee benefits in the accompanying consolidated statements of
operations.

On January 23, 1996, the Company adopted a nonqualified Directors Stock
Option Plan (the "Directors Plan") and a qualified Employee Incentive Stock
Option Plan covering key employees (the "Employee Plan"), subject to
shareholder approval. Shares subject to options under these plans may be
authorized but unissued shares or treasury shares. Options under the
Directors Plan are granted at a price not less than 85% of the fair market
value of the Company's common stock on the date of grant. The options vest
beginning in 1996 at an annual rate of 20% at the end of each year and
become fully vested in the event of a Change in Control, as defined in the
Directors Plan, or in the event that the Director leaves the Board.
Options under the Employee Plan are granted at a price of 100% of the fair
market value of the Company's common stock on the date of grant and are
immediately exercisable. Options under both plans expire not later than
ten years after the date of grant. Options for a total of 5,472 shares of
common stock available for grant under the above Plans were granted at a
price of $20.21 for directors and $23.78 for employees. No options have
been exercised under these plans.

16. OTHER OPERATING EXPENSE

Other operating expenses for 1995, 1994 and 1993 are summarized as follows:

1995 1994 1993
-------- ---------- ----------
FDIC insurance premiums $ 84,607 $171,582 $154,107
Courier service and bank security 149,689 148,884 131,229
Stationery and office supplies 75,585 103,017 71,542
Employment litigation expense -- 387,000 250,000
Other 471,119 575,961 533,700
-------- ---------- ----------
Total other operating expense $781,000 $1,386,444 $1,140,578
-------- ---------- ----------
-------- ---------- ----------

The Company has engaged in transactions in the ordinary course of business
with some of its directors, officers, principal stockholders and their
associates. Management believes that all such transactions are made on the
same terms as those prevailing at the time with other persons. The
Company expended $15,000, $32,000 and $27,000 during 1995, 1994 and 1993,
respectively, to such related parties in connection with public relations
activities. The Company expended $17,000 to such related parties for legal
services during 1995.

17. SHAREHOLDER RIGHTS PLAN

On April 12, 1994, the Board of Directors of the Company adopted a Rights
Agreement ("Rights Agreement"), which was amended April 20, 1995. Pursuant
to the Rights Agreement, the Board of Directors of the Company declared a
dividend of one share purchase right for each share of the Company's common
stock outstanding on April 25, 1994 ("Right"). Among other things, each
Right entitles the holder to purchase one share of the Company's common
stock at an exercise price of $60.33.

Subject to certain exceptions, the Rights will be exercisable if a person
or group of persons acquires 25% or more of the Company's common stock
("Acquiring Person"), or announces a tender offer, the consummation of
which would result in ownership by a person or group of persons of 25% or
more of the common stock, or if the Board determines that a person or group
of persons holding 15% or more of the Company's common stock is an Adverse
Person, as defined in the Rights Agreement.

F-25

<PAGE>

Upon the occurrence of one of the triggering events, all holders of Rights,
except the Acquiring Person or Adverse Person, would be entitled to
purchase the Company's common stock at 50% of the market price. If the
Company is acquired in a merger or business combination, each holder of a
Right would be entitled to purchase common stock of the Acquiring Person at
a similar discount.

The Board of Directors may redeem the Rights for $0.01 per share or amend
the Plan at any time before a person becomes an Acquiring Person. The
Rights expire on December 31, 2003.

18. FAIR VALUE OF FINANCIAL INSTRUMENTS

During 1995, the Company adopted Statement of Financial Accounting
Standards No. 107, "Disclosures about Fair Value of Financial Instruments"
(SFAS No. 107), which requires the disclosure of fair value information
about financial instruments, whether or not recognized in the balance
sheet, for which it is practicable to estimate that value. Quoted market
prices, when available, are used as the measure of fair value. In cases
where quoted market prices are not available, fair values are based on
present value estimates or other valuation techniques. These derived fair
values are estimates at a specific point in time and are significantly
affected by assumptions used, principally the timing of future cash flows
and the discount rate. Because assumptions are inherently subjective in
nature, the estimated fair values cannot be substantiated by comparison to
independent market quotes and, in many cases, the estimated fair values
would not necessarily be realized in an immediate sale or settlement of the
instrument. The disclosure requirements of SFAS No. 107 exclude certain
financial instruments and all nonfinancial instruments. The estimated fair
values presented do not give effect to the values associated with the
Company's banking business, existing customer relationships, branch
network, property or equipment. Also, under SFAS No. 107, the fair value
of noninterest bearing demand deposits, savings and NOW accounts and money
market deposit accounts is equal to the carrying amount because these
deposits have no stated maturity. This approach to estimating fair value
excludes the significant benefit that results from the low-cost funding
provided by such deposit liabilities, as compared to alternative sources of
funding. Accordingly, the aggregate fair value amounts presented do not
represent management's estimation of the underlying value of the Company.

SFAS No. 119 amended SFAS No. 107 for disclosure purposes. The amendments
require that the disclosures distinguish between financial instruments held
for trading purposes, measured at fair value with gains and losses
recognized in earnings, and financial instruments held or issued for
purposes other than trading. The fair value of derivative financial
instruments must be disclosed separately from non-derivative financial
instruments. The Company does not hold any financial instruments for
trading purposes and does not have any material derivative financial
instruments.

The following are the estimated fair values of the Company's financial
instruments at December 31, 1995 followed by a general description of the
methods and assumptions used to estimate such fair values.

CARRYING ESTIMATED
AMOUNT VALUE
----------- -----------
FINANCIAL ASSETS:
Cash $ 4,953,200 $ 4,953,200
Short-term investments 9,961,715 9,961,715
Securities available for sale 5,508,406 5,508,406
Investment securities 8,192,647 8,309,265
Loans 63,592,395
Less: Allowance for loan losses (1,273,965)
-----------
Net loans 62,318,430 62,145,121

FINANCIAL LIABILITIES:
Noninterest-bearing deposits 23,443,937 23,443,937
Interest-bearing deposits
with no stated maturity 30,052,322 30,052,322
Time deposits 29,566,936 29,101,285
Short-term borrowings 1,785,402 1,785,402
Long-term debt 186,250 186,250

F-26

<PAGE>

The following methods and assumptions were used by the Company in
estimating the fair value of its financial instruments:

CASH AND DUE FROM BANKS. The carrying amounts reported in the balance
sheet approximate fair value due to the short-term nature of these
assets.

SHORT-TERM INVESTMENTS. The carrying amounts of short-term
investments on the balance sheet with maturities of 90 days or less
approximate fair value. For short-term investments with maturities
of greater than 90 days, fair value estimates are based on market
quotes for similar instruments adjusted for such differences between
the quoted instruments and the instruments being valued as to maturity
and credit quality.

SECURITIES AVAILABLE FOR SALE AND INVESTMENT SECURITIES. The
estimated fair values of securities by type are based on quoted market
prices, when available. If a quoted market price is not available,
fair value is estimated using quoted market prices for similar
securities.

LOANS. Fair values are estimated for portfolios of loans with similar
financial characteristics. Loans are classified by variable rate,
fixed rate and loans which reprice on a predetermined schedule. Non-
variable rate loans are further classified by general purpose within
the commercial, real estate and consumer portfolios. Loans are
further classified by performing or nonperforming loans.

For performing variable-rate loans which reprice immediately as market
rates change, the carrying amounts approximate fair value.
Additionally, most variable rate lines of credit, which comprise more
than half of the variable loan portfolio, are reviewed and extended on
at least an annual basis. At the time of that review, these loans are
repriced to reflect the current credit risk inherent in these loans.
For performing fixed-rate loans and loans which reprice on a pre-
determined schedule, fair values are estimated by discounting the
expected cash flows up to and including the date of repricing, if
applicable, by a discount rate that reflects the interest rate and
credit risk inherent in the loan. The estimated maturity of these
loans reflects both contractual maturity and management's assessment
of prepayments, economic condition, and other factors that may affect
the maturity of the portfolio. The discount rate is based on the rate
that would be currently offered for loans with similar terms to
borrowers of similar credit quality.

Nonperforming loans are included in each of the loan portfolios
previously described. The fair value of nonperforming loans is
estimated in a manner which approximates discounting the expected
return of principal over the period of time the Company anticipates
receiving principal payments on the loan at a discount rate which is
reflective of the higher risk surrounding these assets compared to a
performing loan.

DEPOSITS. The fair value of deposits with no stated maturity, such as
noninterest-bearing deposits, NOW accounts, savings and money market
deposit accounts, is the amount payable on demand as of year-end. For
time deposits, fair value is estimated by discounting the contractual
cash flows using a discount rate equal to the incremental deposit rate
for similar remaining maturities.

SHORT-TERM BORROWINGS. The carrying values of federal funds
purchased, securities sold under agreements to repurchase and other
short-term borrowings approximate fair values.

LONG-TERM DEBT. The fair values of long-term debt and other
borrowings are estimated by discounting the contractual cash flows for
each instrument. The discount rate applied is based on the current
incremental borrowing rates for similar arrangements with similar
maturities.

COMMITMENTS TO EXTEND CREDIT AND LETTERS OF CREDIT. The Company has
commitments to extend credit of $15,277,000 and letters of credit of
$706,000. Pricing of these financial instruments is based on the
credit quality and relationship, fees, interest rates, probability of
funding, compensating balance and other covenant requirements. Non-
credit card commitments generally have fixed expiration dates, are
variable rate and contain termination and other clauses which provide
for relief from funding in the event that there is a significant
deterioration in the credit quality of the customer. Many loan
commitments are expected to, and typically do, expire without being
drawn upon. Approximately 85% of the Company's commitments to lend
expire within one year. The rates and terms of the Company's
commitments to lend and letters of credit are competitive with others
in the markets in which the Company operates. Carrying amounts which
are comprised of the unamortized fee income and, where necessary,
reserves for any expected credit losses from these financial
instruments, are immaterial.

F-27

<PAGE>

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER
THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS, AND IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN SO AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY, ANY
OF THESE SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO ITS DATE.

TABLE OF CONTENTS
PAGE

ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
PRICE RANGE OF COMMON STOCK
AND DIVIDEND POLICY. . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
SELECTED CONSOLIDATED FINANCIAL
DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . .16
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
BENEFICIAL OWNERSHIP OF SHARES . . . . . . . . . . . . . . . . . . . . . . . .46
SUPERVISION AND REGULATION . . . . . . . . . . . . . . . . . . . . . . . . . .49
DESCRIPTION OF CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . .54
UNDERWRITING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57
INDEX TO CONSOLIDATED
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1

670,000 SHARES

[LOGO]

ABIGAIL ADAMS
NATIONAL BANCORP, INC.

COMMON STOCK

----------
PROSPECTUS
----------

FERRIS, BAKER WATTS
Incorporated

, 1996

<PAGE>

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 102(b)(7) of the Delaware General Corporation Law, as amended,
permits Delaware corporations to include in their certificates of incorporation
a provision limiting director's liability for monetary damages for breach of the
duty of care. Section 145 of the Delaware General Corporation Law gives
Delaware corporations the power to indemnify each of the present and former
officers or directors under certain circumstances, if such person acted in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the corporation.

Article FOURTEENTH of the Company's Certificate of Incorporation, as
amended, limits the liability of the Company's directors to the Company or its
shareholders for monetary damages for certain breaches of fiduciary duty arising
out of certain aspects of the director's conduct. Article XI of the Company's
By-laws permits indemnification of officers and directors to the fullest extent
permitted by law.

The Company maintains directors' and officers' liability insurance in the
amount of $2,000,000.

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

Estimated expenses payable by the Company in connection with the sale of
the securities offered hereby is as follows:

SEC registration fee . . . . . . . . . . . . . . . . . $2,468.79
NASD Filing Fee. . . . . . . . . . . . . . . . . . . . 1,215.95
NASDAQ National Market System Fee. . . . . . . . . . . 12,747.66
Accounting fees and expenses . . . . . . . . . . . . . *
Legal fees and expenses. . . . . . . . . . . . . . . . *
Blue Sky fees and expenses . . . . . . . . . . . . . . *
Transfer agent's fee . . . . . . . . . . . . . . . . . *
Printing and engraving . . . . . . . . . . . . . . . . *
Underwriters' Expenses . . . . . . . . . . . . . . . . 85,000
Miscellaneous. . . . . . . . . . . . . . . . . . . . . *
---------
Total . . . . . . . . . . . . . . . . . . . . . . $ *
---------
---------

* To be filed by amendment.

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.

(1) On February 20, 1996, the Company and the Bank entered into an
Employment Agreement with Barbara Davis Blum which, among other things,
granted a non-qualified stock option (the "Option") to Ms. Blum to purchase
75,000 shares of the Company's Common Stock. The Option vests beginning in
1996 at an annual rate of 20% at the end of each year and is exercisable
for a period of ten (10) years from the date of grant at an exercise price
of $6.74 per share, which is equal to 85% of the fair market value of the
Company's common stock on the date of the grant. Subject to certain
limitations, Ms. Blum has "piggyback" rights, and one "demand" right, for
registration of shares subject to the Option. The Company has not issued
any shares of common stock pursuant to the exercise of the Option.

<PAGE>

(2) On January 23, 1996, a total of 9,987 shares of the Company's Common
Stock were authorized for issuance pursuant to a grant of options under the
Employee Incentive Stock Option Plan, in which key employees of the Company
and the Bank are eligible to participate. The options were granted at an
exercise price of 100% of fair value at the date of the grant or Seven
Dollars and Ninety-Three Cents ($7.93) per share. Options granted under
this plan are immediately exercisable and expire not later than ten (10)
years following the date of the grant. The Company has not issued any
shares of Common Stock pursuant to the exercise of these options.

(3) On January 23, 1996, a total of 6,429 shares of the Company's Common
Stock which were authorized for issuance pursuant to a grant of options
under the Non-Qualified Directors Stock Option Plan in which all Directors
on the Company and Banks' Boards in 1995 were eligible. The options were
granted at an exercise price of 85% of fair value at the date of the grant
or Six Dollars and Seventy-Four Cents ($6.74) per share. Options granted
under this plan vest beginning in 1996 at an annual rate of 20% at the end
of each year and expire at the earlier of 10 years following the date of
grant or two years after leaving the Board. The Company has not issued any
shares of Common Stock pursuant to the exercise of these options.

The share amounts set forth above give effect to the Company's three-for-
one stock split in the form of a stock dividend to be issued prior to the
effective date of this registration statement. With respect to the grant of
stock options described in paragraph 1 through 3, an exemption from registration
was unnecessary in that none of the transactions involved a "sale" of securities
as such term is used in Section 2(3) of the Securities Act.

ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) EXHIBITS.

EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------

1.1 Form of Underwriting Agreement*

3.1 Certificate of Incorporation of the Company, as amended (1)

3.1.1 Certificate of Amendment of Certificate of Incorporation of the
Company*

3.2 By-laws of the Company, as amended(1)

4.1.1 Rights Agreement dated as of April 12, 1994, between the Company
and The First National Bank of Maryland, as Rights Agent (Right
Certificate attached as Exhibit A to Rights Agreement and Summary
of Rights to Purchase Common Shares attached as Exhibit B to
Rights Agreement) (2)

4.1.2 First Amendment to Rights Agreement (3)

5 Opinion of Shapiro and Olander*

10.1 Subordinated Note Agreement dated February 2, 1988 between The
Adams National Bank and Minbanc Capital Corp. (4)

10.2.1 Non-qualified Stock Option Plan, as amended (5)

II-2

<PAGE>

10.2.2 Employee Incentive Stock Option Plan and Agreement(6)

10.2.3 Directors Stock Option Plan and Agreement(7)

10.2.4 Non-Qualified Stock Option Agreement(8)

10.3 Employment Agreement dated February 20, 1996 between the Company,
The Adams National Bank and Barbara Davis Blum, as amended on
March 29, 1996(9)

10.4 Lease Agreement dated November 1, 1992 between Chase Manhattan
Bank, N.A. as Trustee for Account Number p99904 and The Adams
National Bank (10)

10.5 Lease Agreement dated November 1, 1992 between Chase Manhattan
Bank, N.A. as Trustee for Account Number p99904 and The Adams
National Bank (11)

10.6 Lease Agreement dated April 21, 1988 between Union Station Joint
Venture, Ltd. and The Adams National Bank (12)

10.7.1 Lease Agreement dated April 21, 1989, as amended on August 1,
1989 between Union Station Joint Venture, Ltd. and The Adams
National Bank (13)

10.7.2 Amendment dated December 20, 1993 to Lease Agreement dated April
21, 1989, as amended on August 1, 1989 between Union Station
Joint Venture, Ltd. and The Adams National Bank (14)

10.8 Lease Agreement dated December 20, 1993 between Union Station
Joint Venture, Ltd. and The Adams National Bank (15)

10.9 Sublease Agreement dated September 1, 1981, as amended September
1, 1984, between 2909 M Associates and The Adams National Bank
(16)

10.10 Lease Agreement dated March 6, 1996 between The Adams National
Bank and 1604 17th Street Limited Partners (17)

10.11 Information Technology Services Agreement between Electronic Data
Systems Corporation and The Adams National Bank (18)

10.12 Special Program Financial Services Agreement dated December 30,
1993 between IBAA Bancard, Inc. and The Adams National Bank (19)

10.13 Deposit Insurance Transfer and Asset Purchase Agreement dated as
of May 1, 1992 by and among the Federal Deposit Insurance
Corporation as Receiver of Metropolitan Bank, N.A., the Federal
Deposit Insurance Corporation and The Adams National Bank (20)

10.14 Asset Pool Proposal Form and the Asset Pool Sale Agreement dated
as of July 6, 1993 by and among the Federal Deposit Insurance
Corporation as Receiver of City National Bank, the Federal
Deposit Insurance Corporation and The Adams National Bank (21)

10.15 Severance Agreement between the Bank and Alexander Beltran dated
as of April 7, 1994 (22)

II-3

<PAGE>

10.16 Severance Agreement between the Bank and Devin Blum dated as of
April 7, 1994 (23)

10.17 Severance Agreement between the Bank and Thomas O. Griel dated as
of April 7, 1994 (24)

10.18 Severance Agreement between the Bank and Joyce R. Hertz dated as
of April 7, 1994 (25)

10.19 Severance Agreement between the Bank and Kimberly J. Levine dated
as of April 7, 1994 (26)

10.20 Severance Agreement between the Bank and Melrose Nathan dated as
of April 7, 1994 (27)

10.21 Severance Agreement between the Bank and Bijan Partovi dated as
of April 7, 1994 (28)

10.22 Agreement, dated as of April 20, 1995, between the Company and
Marshall T. Reynolds (29)

10.23 The Adams National Bank Employee Stock Ownership Plan with 401(k)
Provisions

21 Subsidiaries of the Registrant (30)

23.1 Consent of Shapiro and Olander (included in Exhibit 5)*

23.2 Consent of KPMG Peat Marwick LLP

24 Powers of Attorney (included on Pages II-7 and II-8)

- ------------------------------

* To be filed by amendment.

(1) Incorporated by reference to Exhibit 3 of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1987.

(2) Incorporated by reference to Exhibits 1-3 of the Company's Registration
Statement on Form 8-A dated April 12, 1994.

(3) Incorporated by reference to Exhibit 4 of the Company's Registration
Statement on Form 8-A/A dated April 21, 1995.

(4) Incorporated by reference to Exhibit 10(a) of the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1987.

(5) Incorporated by reference to Exhibit 10(b) of the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1987 and
Exhibit 10(i) of the Company's Annual Report on Form 10-K for fiscal
year ended December 31, 1989.

(6) Incorporated by reference to Exhibit 10.2.2 of the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1995.

(7) Incorporated by reference to Exhibit 10.2.3 of the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1995.

(8) Incorporated by reference to Exhibit 10.2.4 of the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1995.

II-4

<PAGE>

(9) Incorporated by reference to Exhibit 10.3 of the Company's Annual Report
on Form 10-KSB for the fiscal year ended December 31, 1995.

(10) Incorporated by reference to Exhibit 10(d) of the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1992.

(11) Incorporated by reference to Exhibit 10(e) of the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1992.

(12) Incorporated by reference to Exhibit 10(f) of the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1988.

(13) Incorporated by reference to Exhibit 10(g) of the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1989.

(14) Incorporated by reference to Exhibit 10.7.2 of the Company's Annual
Report on Form 10-k for the fiscal year ended December 31, 1993.

(15) Incorporated by reference to Exhibit 10.8 of the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1993.

(16) Incorporated by reference to Exhibit 10.9 of the Company's Annual Report
on Form 10-KSB for the fiscal year ended December 31, 1994.

(17) Incorporated by reference to Exhibit 10.10 of the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1995.

(18) Incorporated by reference to Exhibit 10(j) of the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1992.

(19) Incorporated by reference to Exhibit 10.11 of the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1994.

(20) Incorporated by reference to Exhibit 10 of the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1992.

(21) Incorporated by reference to Exhibit 10 of the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1993.

(22) Incorporated by reference to Exhibit 10.1 of the Company's Current
Report on Form 8-K dated April 27, 1994 (earliest event reported April
7, 1994).

(23) Incorporated by reference to Exhibit 10.2 of the Company's Current
Report on Form 8-K dated April 27, 1994 (earliest event reported April
7, 1994).

(24) Incorporated by reference to Exhibit 10.3 of the Company's Current
Report on Form 8-K dated April 27, 1994 (earliest event reported April
7, 1994).

(25) Incorporated by reference to Exhibit 10.4 of the Company's Current
Report on Form 8-K dated April 27, 1994 (earliest event reported April
7, 1994).

II-5

<PAGE>

(26) Incorporated by reference to Exhibit 10.5 of the Company's Current
Report on Form 8-K dated April 27, 1994 (earliest event reported April
7, 1994).

(27) Incorporated by reference to Exhibit 10.6 of the Company's Current
Report on Form 8-K dated April 27, 1994 (earliest event reported April
7, 1994).

(28) Incorporated by reference to Exhibit 10.7 of the Company's Current
Report on Form 8-K dated April 27, 1994 (earliest event reported April
7, 1994).

(29) Incorporated by reference to Exhibit 5 of the Company's Registration
Statement on Form 8-A/A dated April 21, 1995.

(30) Incorporated by reference to Exhibit 22 of the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1987.

(b) FINANCIAL STATEMENT SCHEDULES.

Schedules have been omitted because they are not applicable or not
required or because the required information is included in the consolidated
financial statements or notes thereto.

ITEM 28. UNDERTAKINGS.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of a registration statement in reliance upon Rule 430A and contained
in the form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of the registration statement as of the time it was declared
effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

(3) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

II-6

<PAGE>

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and has authorized this registration
statement to be signed on its behalf by the undersigned, in the District of
Columbia on June 3, 1996.

ABIGAIL ADAMS NATIONAL BANCORP, INC.

By: /s/ Barbara Davis Blum
--------------------------------
Barbara Davis Blum
President, Chief Executive Officer
and Chairwoman of the Board

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints each of Barbara Davis Blum and Kimberly
J. Levine as his or her true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him or her and in his or her name,
place and stead, in any and all capacities, to sign any and all amendments to
this Registration Statement, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto each of said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing necessary or
advisable to be done in connection therewith, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitutes, may
lawfully do or cause to be done by virtue thereof. This power of attorney may
be executed in counterparts.

In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.

Signature Title Date
- --------- ----- ----

/s/ Barbara Davis Blum President, Chief Executive June 3, 1996
- ------------------------------ Officer and Chairwoman of
Barbara Davis Blum the Board of Directors
(Principal executive
officer)

II-7

<PAGE>

/s/ Shireen L. Dodson Director June 3, 1996
- ------------------------------
Shireen L. Dodson

/s/ Susan Hager Director June 3, 1996
- ------------------------------
Susan Hager

/s/ Jeanne D. Hubbard Director June 3, 1996
- ------------------------------
Jeanne D. Hubbard

/s/ Clarence L. James, Jr. Director June 3, 1996
- ------------------------------
Clarence L. James, Jr.

/s/ Kimberly J. Levine Vice President, June 3, 1996
- ------------------------------ Treasurer and Chief
Kimberly J. Levine Financial Officer
(Principal accounting
and financial officer)

/s/ Marshall T. Reynolds Director June 3, 1996
- ------------------------------
Marshall T. Reynolds

/s/ Robert L. Shell, Jr. Director June 3, 1996
- ------------------------------
Robert L. Shell, Jr.

/s/ Dana B. Stebbins Director June 3, 1996
- ------------------------------
Dana B. Stebbins

/s/ Susan J. Williams Director June 3, 1996
- ------------------------------
Susan J. Williams

II-8

<PAGE>

THE ADAMS NATIONAL BANK
EMPLOYEE STOCK OWNERSHIP PLAN
WITH 401(K) PROVISIONS

<PAGE>

TABLE OF CONTENTS

ARTICLE I

DEFINITIONS

ARTICLE II

TOP HEAVY AND ADMINISTRATION

2.1 TOP HEAVY PLAN REQUIREMENTS . . . . . . . . . . . . . . . . . . . 19

2.2 DETERMINATION OF TOP HEAVY STATUS . . . . . . . . . . . . . . . . 19

2.3 POWERS AND RESPONSIBILITIES OF THE EMPLOYER . . . . . . . . . . . 23

2.4 DESIGNATION OF ADMINISTRATIVE AUTHORITY . . . . . . . . . . . . . 23

2.5 ALLOCATION AND DELEGATION OF RESPONSIBILITIES . . . . . . . . . . 24

2.6 POWERS AND DUTIES OF THE ADMINISTRATOR. . . . . . . . . . . . . . 24

2.7 RECORDS AND REPORTS . . . . . . . . . . . . . . . . . . . . . . . 26

2.8 APPOINTMENT OF ADVISERS . . . . . . . . . . . . . . . . . . . . . 26

2.9 INFORMATION FROM EMPLOYER . . . . . . . . . . . . . . . . . . . . 26

2.10 PAYMENT OF EXPENSES . . . . . . . . . . . . . . . . . . . . . . . 26

2.11 MAJORITY ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . 26

2.12 CLAIMS PROCEDURE. . . . . . . . . . . . . . . . . . . . . . . . . 26

2.13 CLAIMS REVIEW PROCEDURE . . . . . . . . . . . . . . . . . . . . . 27

ARTICLE III
ELIGIBILITY

3.1 CONDITIONS OF ELIGIBILITY . . . . . . . . . . . . . . . . . . . . 28

3.2 APPLICATION FOR PARTICIPATION . . . . . . . . . . . . . . . . . . 28

3.3 EFFECTIVE DATE OF PARTICIPATION . . . . . . . . . . . . . . . . . 28

3.4 DETERMINATION OF ELIGIBILITY. . . . . . . . . . . . . . . . . . . 28

3.5 TERMINATION OF ELIGIBILITY. . . . . . . . . . . . . . . . . . . . 28

3.6 OMISSION OF ELIGIBLE EMPLOYEE . . . . . . . . . . . . . . . . . . 29

<PAGE>

3.7 INCLUSION OF INELIGIBLE EMPLOYEE. . . . . . . . . . . . . . . . . 29

3.8 ELECTION NOT TO PARTICIPATE . . . . . . . . . . . . . . . . . . . 29

ARTICLE IV

CONTRIBUTION AND ALLOCATION

4.1 FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION . . . . . . . . . 30

4.2 PARTICIPANT'S SALARY REDUCTION ELECTION . . . . . . . . . . . . . 30

4.3 TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION. . . . . . . . . . . . 34

4.4 ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS. . . . . . . 35

4.5 ACTUAL DEFERRAL PERCENTAGE TESTS. . . . . . . . . . . . . . . . . 41

4.6 ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS. . . . . . . . . . 43

4.7 ACTUAL CONTRIBUTION PERCENTAGE TESTS. . . . . . . . . . . . . . . 45

4.8 ADJUSTMENT TO ACTUAL CONTRIBUTION PERCENTAGE TESTS. . . . . . . . 48

4.9 MAXIMUM ANNUAL ADDITIONS. . . . . . . . . . . . . . . . . . . . . 50

4.10 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS . . . . . . . . . . . . 55

4.11 TRANSFERS FROM QUALIFIED PLANS. . . . . . . . . . . . . . . . . . 56

4.12 DIRECTED INVESTMENT ACCOUNT . . . . . . . . . . . . . . . . . . . 58

ARTICLE V

FUNDING AND INVESTMENT POLICY

5.1 INVESTMENT POLICY . . . . . . . . . . . . . . . . . . . . . . . . 59

5.2 APPLICATION OF CASH . . . . . . . . . . . . . . . . . . . . . . . 60

5.3 TRANSACTIONS INVOLVING COMPANY STOCK. . . . . . . . . . . . . . . 60

5.4 LOANS TO THE TRUST. . . . . . . . . . . . . . . . . . . . . . . . 62

<PAGE>

ARTICLE VI

VALUATIONS

6.1 VALUATION OF THE TRUST FUND . . . . . . . . . . . . . . . . . . . 63

6.2 METHOD OF VALUATION . . . . . . . . . . . . . . . . . . . . . . . 63

ARTICLE VII

DETERMINATION AND DISTRIBUTION OF BENEFITS

7.1 DETERMINATION OF BENEFITS UPON RETIREMENT . . . . . . . . . . . . 64

7.2 DETERMINATION OF BENEFITS UPON DEATH. . . . . . . . . . . . . . . 64

7.3 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY. . . . . . . . . 66

7.4 DETERMINATION OF BENEFITS UPON TERMINATION. . . . . . . . . . . . 66

7.5 DISTRIBUTION OF BENEFITS. . . . . . . . . . . . . . . . . . . . . 70

7.6 HOW PLAN BENEFIT WILL BE DISTRIBUTED. . . . . . . . . . . . . . . 75

7.7 DISTRIBUTION FOR MINOR BENEFICIARY. . . . . . . . . . . . . . . . 76

7.8 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN. . . . . . . . . . 76

7.9 RIGHT OF FIRST REFUSALS . . . . . . . . . . . . . . . . . . . . . 76

7.10 STOCK CERTIFICATE LEGEND. . . . . . . . . . . . . . . . . . . . . 78

7.11 PUT OPTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

7.12 NONTERMINABLE PROTECTIONS AND RIGHTS. . . . . . . . . . . . . . . 80

7.13 PRE-RETIREMENT DISTRIBUTION . . . . . . . . . . . . . . . . . . . 81

7.14 ADVANCE DISTRIBUTION FOR HARDSHIP . . . . . . . . . . . . . . . . 81

7.15 QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION . . . . . . . . . 83

ARTICLE VIII

TRUSTEE

8.1 BASIC RESPONSIBILITIES OF THE TRUSTEE . . . . . . . . . . . . . . 83

8.2 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE . . . . . . . . . . . 84

8.3 OTHER POWERS OF THE TRUSTEE . . . . . . . . . . . . . . . . . . . 84

<PAGE>

8.4 LOANS TO PARTICIPANTS . . . . . . . . . . . . . . . . . . . . . . 88

8.5 VOTING COMPANY STOCK. . . . . . . . . . . . . . . . . . . . . . . 89

8.6 DUTIES OF THE TRUSTEE REGARDING PAYMENTS. . . . . . . . . . . . . 90

8.7 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES . . . . . . . . . . 91

8.8 ANNUAL REPORT OF THE TRUSTEE. . . . . . . . . . . . . . . . . . . 91

8.9 AUDIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

8.10 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE. . . . . . . . . . 93

8.11 TRANSFER OF INTEREST. . . . . . . . . . . . . . . . . . . . . . . 94

8.12 DIRECT ROLLOVER . . . . . . . . . . . . . . . . . . . . . . . . . 94

ARTICLE IX

AMENDMENT, TERMINATION AND MERGERS

9.1 AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95

9.2 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 96

9.3 MERGER OR CONSOLIDATION . . . . . . . . . . . . . . . . . . . . . 96

ARTICLE X

MISCELLANEOUS

10.1 PARTICIPANT'S RIGHTS. . . . . . . . . . . . . . . . . . . . . . . 97

10.2 ALIENATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

10.3 CONSTRUCTION OF PLAN. . . . . . . . . . . . . . . . . . . . . . . 98

10.4 GENDER AND NUMBER . . . . . . . . . . . . . . . . . . . . . . . . 98

10.5 LEGAL ACTION. . . . . . . . . . . . . . . . . . . . . . . . . . . 98

10.6 PROHIBITION AGAINST DIVERSION OF FUNDS. . . . . . . . . . . . . . 98

10.7 BONDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99

10.8 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE. . . . . . . . . . . . 99

10.9 INSURER'S PROTECTIVE CLAUSE . . . . . . . . . . . . . . . . . . . 99

10.10 RECEIPT AND RELEASE FOR PAYMENTS. . . . . . . . . . . . . . . . . 100

<PAGE>

10.11 ACTION BY THE EMPLOYER. . . . . . . . . . . . . . . . . . . . . . 100

10.12 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY. . . . . . . . 100

10.13 HEADINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101

10.14 APPROVAL BY INTERNAL REVENUE SERVICE. . . . . . . . . . . . . . . 101

10.15 UNIFORMITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 101

10.16 SECURITIES AND EXCHANGE COMMISSION APPROVAL . . . . . . . . . . . 102

<PAGE>

THE ADAMS NATIONAL BANK
EMPLOYEE STOCK OWNERSHIP PLAN
WITH 401(K) PROVISIONS

THIS AGREEMENT, hereby made and entered into this __________ day of
_________________________, 19____, by and between The Adams National Bank
(herein referred to as the "Employer") and Steven N. Cohen and Kimberly J.
Levine (herein referred to as the "Trustee").

W I T N E S S E T H:

WHEREAS, the Employer heretofore established a Profit Sharing Plan
effective January 1, 1992 (hereinafter called the "Effective Date"), known as
The Adams National Bank 401(k) Plan and which Plan shall hereinafter be known as
The Adams National Bank Employee Stock Ownership Plan with 401(k) Provisions in
recognition of the contribution made to its successful operation by its
employees and for the exclusive benefit of its eligible employees; and

WHEREAS, under the terms of the Profit Sharing Plan, the Employer has
the ability to amend the Profit Sharing Plan, provided the Trustee joins in such
amendment if the provisions of the Profit Sharing Plan affecting the Trustee are
amended; and

WHEREAS, the Employer desires to amend the Profit Sharing Plan to
enable its eligible employees to acquire a proprietary interest in capital stock
of the Employer; and

WHEREAS, contributions to the Plan will be made by the Employer and
such contributions made to the trust will be invested primarily in the capital
stock of the Employer;

NOW, THEREFORE, effective January 1, 1996, except as otherwise
provided, the Employer and the Trustee in accordance with the provisions of the
Profit Sharing Plan pertaining to amendments thereof, hereby modify, amend and
restate the Profit Sharing Plan in its entirety as an Employee Stock Ownership
Plan (ESOP) as defined in Section 4975(e)(7) of the Internal Revenue Code, known
as The Adams National Bank Employee Stock Ownership Plan with 401(k) Provisions
(hereinafter referred to as the "Plan"), to provide as follows:

ARTICLE I
DEFINITIONS

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

1.2 "Administrator" means the person or entity designated by the Employer
pursuant to Section 2.4 to administer the Plan on behalf of the Employer.

<PAGE>

1.3 "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 Regulations under Code Section 414(o).

1.4 "Aggregate Account" means, with respect to each Participant, the value
of all accounts maintained on behalf of a Participant, whether attributable to
Employer or Employee contributions, subject to the provisions of Section 2.2.

1.5 "Anniversary Date" means December 31st.

1.6 "Beneficiary" means the person to whom the share of a deceased
Participant's total 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 or replaced
from time to time.

1.8 "Company Stock" means common stock issued by the Employer (or by a
corporation which is a member of the controlled group of corporations of which
the Employer is a member) which is readily tradeable on an established
securities market. If there is no common stock which meets the foregoing
requirement, the term "Company Stock" means common stock issued by the Employer
(or by a corporation which is a member of the same controlled group) having a
combination of voting power and dividend rights equal to or in excess of:
(A) that class of common stock of the Employer (or of any other such
corporation) having the greatest voting power, and (B) that class of common
stock of the Employer (or of any other such corporation) having the greatest
dividend rights. Noncallable preferred stock shall be deemed to be "Company
Stock" if such stock is convertible at any time into stock which constitutes
"Company Stock" hereunder and if such conversion is at a conversion price which
(as of the date of the acquisition by the Trust) is reasonable. For purposes of
the preceding sentence, pursuant to Regulations, preferred stock shall be
treated as noncallable if after the call there will be a reasonable opportunity
for a conversion which meets the requirements of the preceding sentence.

1.9 "Company Stock Account" means the account of a Participant which is
credited with the shares of Company Stock purchased and paid for by the Trust
Fund or contributed to the Trust Fund.

<PAGE>

A separate accounting shall be maintained with respect to that portion
of the Company Stock Account attributable to Elective Contributions and
Non-Elective Contributions.

1.10 "Compensation" with respect to any Participant means such
Participant's wages as defined in Code Section 3401(a) and all other payments of
compensation by the Employer (in the course of the Employer's trade or business)
for a Plan Year for which the Employer is required to furnish the Participant a
written statement under Code Sections 6041(d), 6051(a)(3) and 6052. Compensation
must be determined without regard to any rules under Code Section 3401(a) that
limit the remuneration included in wages based on the nature or location of the
employment or the services performed (such as the exception for agricultural
labor in Code Section 3401(a)(2)).

For purposes of this Section, the determination of Compensation shall
be made by:

(a) including amounts which are contributed by the Employer
pursuant to a salary reduction agreement and which are not includible
in the gross income of the Participant under Code Sections 125,
402(e)(3), 402(h)(1)(B), 403(b) or 457, and Employee contributions
described in Code Section 414(h)(2) that are treated as Employer
contributions.

For a Participant's initial year of participation, Compensation shall
be recognized as of such Employee's effective date of participation pursuant to
Section 3.3.

Compensation in excess of $200,000 shall be disregarded. Such amount
shall be adjusted at the same time and in such manner as permitted under Code
Section 415(d), except that the dollar increase in effect on January 1 of any
calendar year shall be effective for the Plan Year beginning with or within such
calendar year and the first adjustment to the $200,000 limitation shall be
effective on January 1, 1990. For any short Plan Year the Compensation limit
shall be an amount equal to the Compensation limit for the calendar year in
which the Plan Year begins multiplied by the ratio obtained by dividing the
number of full months in the short Plan Year by twelve (12). In applying this
limitation, the family group of a Highly Compensated Participant who is subject
to the Family Member aggregation rules of Code Section 414(q)(6) because such
Participant is either a "five percent owner" of the Employer or one of the ten
(10) Highly Compensated Employees paid the greatest "415 Compensation" during
the year, shall be treated as a single Participant, except that for this purpose
Family Members shall include only the affected Participant's spouse and any
lineal descendants who have not attained age nineteen (19) before the close of
the year. If, as a result of the application of such rules the adjusted $200,000
limitation is exceeded, then the limitation shall be prorated among the affected
Family Members in

<PAGE>

proportion to each such Family Member's Compensation prior to the application of
this limitation, or the limitation shall be adjusted in accordance with any
other method permitted by Regulation.

In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan Years
beginning on or after January 1, 1994, the annual Compensation of each Employee
taken into account under the Plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost of living in accordance
with Code Section 401(a)(17)(B). The cost of living adjustment in effect for a
calendar year applies to any period, not exceeding 12 months, over which
Compensation is determined (determination period) beginning in such calendar
year. If a determination period consists of fewer than 12 months, the OBRA '93
annual compensation limit will be multiplied by a fraction, the numerator of
which is the number of months in the determination period, and the denominator
of which is 12.

For Plan Years beginning on or after January 1, 1994, any reference in
this Plan to the limitation under Code Section 401(a)(17) shall mean the OBRA
'93 annual compensation limit set forth in this provision.

If Compensation for any prior determination period is taken into
account in determining an Employee's benefits accruing in the current Plan Year,
the Compensation for that prior determination period is subject to the OBRA '93
annual compensation limit in effect for that prior determination period. For
this purpose, for determination periods beginning before the first day of the
first Plan Year beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.

If, as a result of such rules, the maximum "annual addition" limit of
Section 4.9(a) would be exceeded for one or more of the affected Family Members,
the prorated Compensation of all affected Family Members shall be adjusted to
avoid or reduce any excess. The prorated Compensation of any affected Family
Member whose allocation would exceed the limit shall be adjusted downward to the
level needed to provide an allocation equal to such limit. The prorated
Compensation of affected Family Members not affected by such limit shall then be
adjusted upward on a pro rata basis not to exceed each such affected Family
Member's Compensation as determined prior to application of the Family Member
rule. The resulting allocation shall not exceed such individual's maximum
"annual addition" limit. If, after these adjustments, an "excess amount" still
results, such "excess amount" shall be disposed of in the manner described in
Section 4.10(a) pro rata among all affected Family Members.

If, in connection with the adoption of this amendment and restatement,
the definition of Compensation has been

<PAGE>

modified, then, for Plan Years prior to the Plan Year which includes the
adoption date of this amendment and restatement, Compensation means compensation
determined pursuant to the Plan then in effect.

1.11 "Contract" or "Policy" means any life insurance policy, retirement
income or annuity policy, or annuity contract (group or individual) issued
pursuant to the terms of the Plan.

1.12 "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.

1.13 "Deferred Compensation" with respect to any Participant means the
amount of the Participant's total Compensation which has been contributed to the
Plan in accordance with the Participant's deferral election pursuant to Section
4.2 excluding any such amounts distributed as excess "annual additions" pursuant
to Section 4.10(a).

1.14 "Early Retirement Date" means any Anniversary Date (prior to the
Normal Retirement Date) coinciding with or following the date on which a
Participant or Former Participant attains age 55 and has completed at least 10
Years of Service with the Employer (Early Retirement Age). A Participant shall
become fully Vested upon satisfying this requirement if still employed at his
Early Retirement Age.

A Former Participant who terminates employment after satisfying the
service requirement for Early Retirement and who thereafter reaches the age
requirement contained herein shall be entitled to receive his benefits under
this Plan.

1.15 "Elective Contribution" means the Employer's contributions to the Plan
of Deferred Compensation excluding any such amounts distributed as excess
"annual additions" pursuant to Section 4.10(a). In addition, any Employer
Qualified Non-Elective Contribution made pursuant to Section 4.6 shall be
considered an Elective Contribution for purposes of the Plan. Any such
contributions deemed to be Elective Contributions shall be subject to the
requirements of Sections 4.2(b) and 4.2(c) and shall further be required to
satisfy the discrimination requirements of Regulation 1.401(k)-1(b)(5), the
provisions of which are specifically incorporated herein by reference.

1.16 "Eligible Employee" means any Employee.

Employees of Affiliated Employers shall not be eligible to participate
in this Plan unless such Affiliated Employers have specifically adopted this
Plan in writing.

1.17 "Employee" means any person who is employed by the Employer or
Affiliated Employer, but excludes any person who is an independent contractor.
Employee shall include Leased

<PAGE>

Employees within the meaning of Code Sections 414(n)(2) and 414(o)(2) unless
such Leased Employees are covered by a plan described in Code Section 414(n)(5)
and such Leased Employees do not constitute more than 20% of the recipient's
non-highly compensated work force.

1.18 "Employer" means The Adams National Bank and any successor which shall
maintain this Plan; and any predecessor which has maintained this Plan. The
Employer is a with principal offices in the District of Columbia.

1.19 "Excess Aggregate Contributions" means, with respect to any Plan Year,
the excess of the aggregate amount of the Employer matching contributions made
pursuant to Section 4.1(b) and any qualified non-elective contributions or
elective deferrals taken into account pursuant to Section 4.7(c) on behalf of
Highly Compensated Participants for such Plan Year, over the maximum amount of
such contributions permitted under the limitations of Section 4.7(a).

1.20 "Excess Contributions" means, with respect to a Plan Year, the excess
of Elective Contributions made on behalf of Highly Compensated Participants for
the Plan Year over the maximum amount of such contributions permitted under
Section 4.5(a). Excess Contributions shall be treated as an "annual addition"
pursuant to Section 4.9(b).

1.21 "Excess Deferred Compensation" means, with respect to any taxable year
of a Participant, the excess of the aggregate amount of such Participant's
Deferred Compensation and the elective deferrals pursuant to Section 4.2(f)
actually made on behalf of such Participant for such taxable year, over the
dollar limitation provided for in Code Section 402(g), which is incorporated
herein by reference. Excess Deferred Compensation shall be treated as an "annual
addition" pursuant to Section 4.9(b) when contributed to the Plan unless
distributed to the affected Participant not later than the first April 15th
following the close of the Participant's taxable year. Additionally, for
purposes of Sections 2.2 and 4.4(i), Excess Deferred Compensation shall continue
to be treated as Employer contributions even if distributed pursuant to Section
4.2(f). However, Excess Deferred Compensation of Non-Highly Compensated
Participants is not taken into account for purposes of Section 4.5(a) to the
extent such Excess Deferred Compensation occurs pursuant to Section 4.2(d).

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

1.23 "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 and which
satisfies the requirements of Section 2550.408b-3 of the Department of Labor
Regulations,

<PAGE>

Section 54.4975-7(b) of the Treasury Regulations and Section 5.4 hereof.

1.24 "Family Member" means, with respect to an affected Participant, such
Participant's spouse and such Participant's lineal descendants and ascendants
and their spouses, all as described in Code Section 414(q)(6)(B).

1.25 "Fiduciary" means any person who (a) exercises any discretionary
authority or discretionary control respecting management of the Plan or
exercises any authority or control respecting management or disposition of its
assets, (b) renders investment advice for a fee or other compensation, direct or
indirect, with respect to any monies or other property of the Plan or has any
authority or responsibility to do so, or (c) has any discretionary authority or
discretionary responsibility in the administration of the Plan, including, but
not limited to, the Trustee, the Employer and its representative body, and the
Administrator.

1.26 "Fiscal Year" means the Employer's accounting year of 12 months
commencing on January 1st of each year and ending the following December 31st.

1.27 "Forfeiture" means that portion of a Participant's Account that is not
Vested, and occurs on the last day of the Plan Year in which the Participant
incurs five (5) consecutive 1-Year Breaks in Service. In addition, the term
Forfeiture shall also include amounts deemed to be Forfeitures pursuant to any
other provision of this Plan.

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

1.29 "415 Compensation" with respect to any Participant means such
Participant's wages as defined in Code Section 3401(a) and all other payments of
compensation by the Employer (in the course of the Employer's trade or business)
for a Plan Year for which the Employer is required to furnish the Participant a
written statement under Code Sections 6041(d), 6051(a)(3) and 6052. "415
Compensation" must be determined without regard to any rules under Code Section
3401(a) that limit the remuneration included in wages based on the nature or
location of the employment or the services performed (such as the exception for
agricultural labor in Code Section 3401(a)(2)).

If, in connection with the adoption of this amendment and restatement,
the definition of "415 Compensation" has been modified, then, for Plan Years
prior to the Plan Year which includes the adoption date of this amendment and
restatement, "415 Compensation" means compensation determined pursuant to the
Plan then in effect.

<PAGE>

1.30 "414(s) Compensation" with respect to any Participant means such
Participant's "415 Compensation" paid during a Plan Year. The amount of "414(s)
Compensation" with respect to any Participant shall include "414(s)
Compensation" for the entire twelve (12) month period ending on the last day of
such Plan Year, except that "414(s) Compensation" shall only be recognized for
that portion of the Plan Year during which an Employee was a Participant in the
Plan.

For purposes of this Section, the determination of "414(s)
Compensation" shall be made by including amounts which are contributed by the
Employer pursuant to a salary reduction agreement and which are not includible
in the gross income of the Participant under Code Sections 125, 402(e)(3),
402(h)(1)(B), 403(b) or 457, and Employee contributions described in Code
Section 414(h)(2) that are treated as Employer contributions.

"414(s) Compensation" in excess of $200,000 shall be disregarded. Such
amount shall be adjusted at the same time and in such manner as permitted under
Code Section 415(d), except that the dollar increase in effect on January 1 of
any calendar year shall be effective for the Plan Year beginning with or within
such calendar year and the first adjustment to the $200,000 limitation shall be
effective on January 1, 1990. For any short Plan Year the "414(s) Compensation"
limit shall be an amount equal to the "414(s) Compensation" limit for the
calendar year in which the Plan Year begins multiplied by the ratio obtained by
dividing the number of full months in the short Plan Year by twelve (12). In
applying this limitation, the family group of a Highly Compensated Participant
who is subject to the Family Member aggregation rules of Code Section 414(q)(6)
because such Participant is either a "five percent owner" of the Employer or one
of the ten (10) Highly Compensated Employees paid the greatest "415
Compensation" during the year, shall be treated as a single Participant, except
that for this purpose Family Members shall include only the affected
Participant's spouse and any lineal descendants who have not attained age
nineteen (19) before the close of the year.

<PAGE>

If, in connection with the adoption of this amendment and restatement,
the definition of "414(s) Compensation" has been modified, then, for Plan Years
prior to the Plan Year which includes the adoption date of this amendment and
restatement, "414(s) Compensation" means compensation determined pursuant to the
Plan then in effect.

1.31 "Highly Compensated Employee" means an Employee described in Code
Section 414(q) and the Regulations thereunder, and generally means an Employee
who performed services for the Employer during the "determination year" and is
in one or more of the following groups:

(a) Employees who at any time during the "determination year" or
"look-back year" were "five percent owners" as defined in Section
1.37(c).

(b) Employees who received "415 Compensation" during the
"look-back year" from the Employer in excess of $75,000.

(c) Employees who received "415 Compensation" during the
"look-back year" from the Employer in excess of $50,000 and were in
the Top Paid Group of Employees for the Plan Year.

(d) Employees who during the "look-back year" were officers of
the Employer (as that term is defined within the meaning of the
Regulations under Code Section 416) and received "415 Compensation"
during the "look-back year" from the Employer greater than 50 percent
of the limit in effect under Code Section 415(b)(1)(A) for any such
Plan Year. The number of officers shall be limited to the lesser of
(i) 50 employees; or (ii) the greater of 3 employees or 10 percent of
all employees. For the purpose of determining the number of officers,
Employees described in Section 1.61(a), (b), (c) and (d) shall be
excluded, but such Employees shall still be considered for the purpose
of identifying the particular Employees who are

<PAGE>

officers. If the Employer does not have at least one officer whose
annual "415 Compensation" is in excess of 50 percent of the Code
Section 415(b)(1)(A) limit, then the highest paid officer of the
Employer will be treated as a Highly Compensated Employee.

(e) Employees who are in the group consisting of the 100
Employees paid the greatest "415 Compensation" during the
"determination year" and are also described in (b), (c) or (d) above
when these paragraphs are modified to substitute "determination year"
for "look-back year."

The "determination year" shall be the Plan Year for which testing is
being performed, and the "look-back year" shall be the immediately preceding
twelve-month period.

For purposes of this Section, the determination of "415 Compensation"
shall be made by including amounts which are contributed by the Employer
pursuant to a salary reduction agreement and which are not includible in the
gross income of the Participant under Code Sections 125, 402(e)(3),
402(h)(1)(B), 403(b) or 457, and Employee contributions described in Code
Section 414(h)(2) that are treated as Employer contributions. Additionally, the
dollar threshold amounts specified in (b) and (c) above shall be adjusted at
such time and in such manner as is provided in Regulations. In the case of such
an adjustment, the dollar limits which shall be applied are those for the
calendar year in which the "determination year" or "look-back year" begins.

In determining who is a Highly Compensated Employee, Employees who are
non-resident aliens and who received no earned income (within the meaning of
Code Section 911(d)(2)) from the Employer constituting United States source
income within the meaning of Code Section 861(a)(3) shall not be treated as
Employees. Additionally, all Affiliated Employers shall be taken into account as
a single employer and Leased Employees within the meaning of Code Sections
414(n)(2) and 414(o)(2) shall be considered Employees unless such Leased
Employees are covered by a plan described in Code Section 414(n)(5) and are not
covered in any qualified plan maintained by the Employer. The exclusion of
Leased Employees for this purpose shall be applied on a uniform and consistent
basis for all of the Employer's retirement plans. Highly Compensated Former
Employees shall be treated as Highly Compensated Employees without regard to
whether they performed services during the "determination year."

1.32 "Highly Compensated Former Employee" means a former Employee who had a
separation year prior to the "determination year" and was a Highly Compensated
Employee in the year of separation from service or in any "determination year"
after attaining age 55. Notwithstanding the foregoing, an Employee who separated
from service prior to 1987 will be treated as a Highly

<PAGE>

Compensated Former Employee only if during the separation year (or year
preceding the separation year) or any year after the Employee attains age 55 (or
the last year ending before the Employee's 55th birthday), the Employee either
received "415 Compensation" in excess of $50,000 or was a "five percent owner."
For purposes of this Section, "determination year," "415 Compensation" and "five
percent owner" shall be determined in accordance with Section 1.31. Highly
Compensated Former Employees shall be treated as Highly Compensated Employees.
The method set forth in this Section for determining who is a "Highly
Compensated Former Employee" shall be applied on a uniform and consistent basis
for all purposes for which the Code Section 414(q) definition is applicable.

1.33 "Highly Compensated Participant" means any Highly Compensated Employee
who is eligible to participate in the Plan.

1.34 "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. These hours 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.
The same Hours of Service shall not be credited both under (1) or (2), as the
case may be, and under (3).

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.

For purposes of this Section, 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

<PAGE>

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
1-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.

1.35 "Income" means the income or losses allocable to Excess Deferred
Compensation which amount shall be allocated in the same manner as income or
losses are allocated pursuant to Section 4.4(d).

1.36 "Investment Manager" means an entity that (a) has the power to manage,
acquire, or dispose of Plan assets and (b) 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, or an insurance company.

1.37 "Key Employee" means an Employee as defined in Code Section 416(i) and
the Regulations thereunder. Generally, any Employee or former Employee (as well
as each of his Beneficiaries) is considered a Key Employee if he, at any time
during the Plan Year that contains the "Determination Date" or any of the
preceding four (4) Plan Years, has been included in one of the following
categories:

(a) an officer of the Employer (as that term is defined within
the meaning of the Regulations under Code Section 416) having annual
"415 Compensation" greater than 50 percent of the amount in effect
under Code Section 415(b)(1)(A) for any such Plan Year.

(b) one of the ten employees having annual "415 Compensation"
from the Employer for a Plan Year greater than the dollar limitation
in effect under Code Section 415(c)(1)(A) for the calendar year in
which such Plan Year ends and owning (or considered as owning within
the meaning of Code Section 318) both more than one-half percent
interest and the largest interests in the Employer.

(c) a "five percent owner" of the Employer. "Five percent owner"
means any person who owns (or is considered as owning within the
meaning of Code Section 318) more than five percent (5%) of the
outstanding stock of the Employer or stock possessing more than

<PAGE>

five percent (5%) of the total combined voting power of all stock of
the Employer or, in the case of an unincorporated business, any person
who owns more than five percent (5%) of the capital or profits
interest in the Employer. In determining percentage ownership
hereunder, employers that would otherwise be aggregated under Code
Sections 414(b), (c), (m) and (o) shall be treated as separate
employers.

(d) a "one percent owner" of the Employer having an annual "415
Compensation" from the Employer of more than $150,000. "One percent
owner" means any person who owns (or is considered as owning within
the meaning of Code Section 318) more than one percent (1%) of the
outstanding stock of the Employer or stock possessing more than one
percent (1%) of the total combined voting power of all stock of the
Employer or, in the case of an unincorporated business, any person who
owns more than one percent (1%) of the capital or profits interest in
the Employer. In determining percentage ownership hereunder, employers
that would otherwise be aggregated under Code Sections 414(b), (c),
(m) and (o) shall be treated as separate employers. However, in
determining whether an individual has "415 Compensation" of more than
$150,000, "415 Compensation" from each employer required to be
aggregated under Code Sections 414(b), (c), (m) and (o) shall be taken
into account.

1.38 "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.

1.39 "Leased Employee" means any person (other than an Employee of the
recipient) who pursuant to an agreement between the recipient and any other
person ("leasing organization") has performed services for the recipient (or for
the recipient and related persons determined in accordance with Code Section
414(n)(6)) on a substantially full time basis for a period of at least one year,
and such services are of a type historically performed by employees in the
business field of the recipient employer. Contributions or benefits provided a
Leased Employee by the leasing organization which are attributable to services
performed for the recipient employer shall be treated as provided by the
recipient employer. A Leased Employee shall not be considered an Employee of the
recipient:

<PAGE>

(a) if such employee is covered by a money purchase pension plan
providing:

(1) a non-integrated employer contribution rate of at least 10%
of compensation, as defined in Code Section 415(c)(3), but
including amounts which are contributed by the Employer pursuant
to a salary reduction agreement and which are not includible in
the gross income of the Participant under Code Sections 125,
402(e)(3), 402(h)(1)(B), 403(b) or 457, and Employee
contributions described in Code Section 414(h)(2) that are
treated as Employer contributions.

(2) immediate participation; and

(3) full and immediate vesting; and

(f) if Leased Employees do not constitute more than 20% of the
recipient's non-highly compensated work force.

1.40 "Non-Elective Contribution" means the Employer's contributions to the
Plan excluding, however, contributions made pursuant to the Participant's
deferral election provided for in Section 4.2 and any Qualified Non-Elective
Contribution.

1.41 "Non-Highly Compensated Participant" means any Participant who is
neither a Highly Compensated Employee nor a Family Member.

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

1.43 "Normal Retirement Age" means the Participant's 65th birthday, or his
5th anniversary of joining the Plan, if later. A Participant shall become fully
Vested in his Participant's Account upon attaining his Normal Retirement Age.

1.44 "Normal Retirement Date" means the first day of the month coinciding
with or next following the Participant's Normal Retirement Age.

1.45 "1-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. Further, solely for the purpose of determining whether a
Participant has incurred a 1-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 1-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

<PAGE>

pursuant to an established nondiscriminatory policy, whether occasioned by
illness, military service, or any other reason.

A "maternity or paternity leave of absence" means, for Plan Years
beginning after December 31, 1984, 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 1-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.

1.46 "Other Investments Account" means 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.

A separate accounting shall be maintained with respect to that portion
of the Other Investments Account attributable to Elective Contributions and
Non-Elective Contributions.

1.47 "Participant" means any Eligible Employee who participates in the Plan
as provided in Sections 3.2 and 3.3, and has not for any reason become
ineligible to participate further in the Plan.

1.48 "Participant's Account" means the account established and maintained
by the Administrator for each Participant with respect to his total interest in
the Plan and Trust resulting from the Employer's Non-Elective Contributions.

A separate accounting shall be maintained with respect to that portion
of the Participant's Account attributable to Employer matching contributions
made pursuant to Section 4.1(b) and Employer discretionary contributions made
pursuant to Section 4.1(c).

1.49 "Participant's Combined Account" means the total aggregate amount of
each Participant's Elective Account and Participant's Account.

1.50 "Participant's Elective Account" means the account established and
maintained by the Administrator for each

<PAGE>

Participant with respect to his total interest in the Plan and Trust resulting
from the Employer's Elective Contributions. A separate accounting shall be
maintained with respect to that portion of the Participant's Elective Account
attributable to Elective Contributions pursuant to Section 4.2 and any Employer
Qualified Non-Elective Contributions.

1.51 "Plan" means this instrument, including all amendments thereto.

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

1.53 "Qualified Non-Elective Contribution" means the Employer's
contributions to the Plan that are made pursuant to Section 4.6. Such
contributions shall be considered an Elective Contribution for the purposes of
the Plan and used to satisfy the "Actual Deferral Percentage" tests.

In addition, the Employer's contributions to the Plan that are made
pursuant to Section 4.8(h) which are used to satisfy the "Actual Contribution
Percentage" tests shall be considered Qualified Non-Elective Contributions and
be subject to the provisions of Sections 4.2(b) and 4.2(c).

1.54 "Regulation" means the Income Tax Regulations as promulgated by the
Secretary of the Treasury or his delegate, and as amended from time to time.

1.55 "Retired Participant" means a person who has been a Participant, but
who has become entitled to retirement benefits under the Plan.

1.56 "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, Early or Late Retirement Date
(see Section 7.1).

1.57 "Super Top Heavy Plan" means a plan described in Section 2.2(b).

1.58 "Terminated Participant" means a person who has been a Participant,
but whose employment has been terminated other than by death, Total and
Permanent Disability or retirement.

1.59 "Top Heavy Plan" means a plan described in Section 2.2(a).

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

<PAGE>

1.61 "Top Paid Group" means the top 20 percent of Employees who performed
services for the Employer during the applicable year, ranked according to the
amount of "415 Compensation" (determined for this purpose in accordance with
Section 1.31) received from the Employer during such year. All Affiliated
Employers shall be taken into account as a single employer, and Leased Employees
within the meaning of Code Sections 414(n)(2) and 414(o)(2) shall be considered
Employees unless such Leased Employees are covered by a plan described in Code
Section 414(n)(5) and are not covered in any qualified plan maintained by the
Employer. Employees who are non-resident aliens and who received no earned
income (within the meaning of Code Section 911(d)(2)) from the Employer
constituting United States source income within the meaning of Code Section
861(a)(3) shall not be treated as Employees. Additionally, for the purpose of
determining the number of active Employees in any year, the following additional
Employees shall also be excluded; however, such Employees shall still be
considered for the purpose of identifying the particular Employees in the Top
Paid Group:

(a) Employees with less than six (6) months of service;

(b) Employees who normally work less than 17 1/2 hours per week;

(d) Employees who have not yet attained age 21.

In addition, if 90 percent or more of the Employees of the Employer
are covered under agreements the Secretary of Labor finds to be collective
bargaining agreements between Employee representatives and the Employer, and the
Plan covers only Employees who are not covered under such agreements, then
Employees covered by such agreements shall be excluded from both the total
number of active Employees as well as from the identification of particular
Employees in the Top Paid Group.

The foregoing exclusions set forth in this Section shall be applied on
a uniform and consistent basis for all purposes for which the Code Section
414(q) definition is applicable.

1.62 "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 by a licensed
physician chosen by the Administrator. The determination shall be applied
uniformly to all Participants.

<PAGE>

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

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

1.65 "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.

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

1.67 "Year of Service" means the computation period of twelve (12)
consecutive months, herein set forth, during which an Employee has at least 1000
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 1-Year Break in
Service shall be measured from the date on which an Employee again 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. An Employee who is credited with the required
Hours of Service in both the initial computation period (or the computation
period beginning after a 1-Year Break in Service) and the Plan Year which
includes the anniversary of the date on which the Employee first performed an
Hour of Service, shall be credited with two (2) Years of Service for purposes of
eligibility to participate.

For vesting purposes, the computation period shall be the Plan Year,
including periods prior to the Effective Date of the Plan.

For all other 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.

<PAGE>

ARTICLE II
TOP HEAVY AND ADMINISTRATION

2.1 TOP HEAVY PLAN REQUIREMENTS

For any Top Heavy Plan Year, the Plan shall provide the special
vesting requirements of Code Section 416(b) pursuant to Section 7.4 of the Plan
and the special minimum allocation requirements of Code Section 416(c) pursuant
to Section 4.4 of the Plan.

2.2 DETERMINATION OF TOP HEAVY STATUS

(a) This Plan shall be a Top Heavy Plan for any Plan Year in
which, as of the Determination Date, (1) the Present Value of Accrued
Benefits of Key Employees and (2) the sum of the Aggregate Accounts of
Key Employees under this Plan and all plans of an Aggregation Group,
exceeds sixty percent (60%) of the Present Value of Accrued Benefits
and the Aggregate Accounts of all Key and Non-Key Employees under this
Plan and all plans of an Aggregation Group.

If any Participant is a Non-Key Employee for any Plan Year,
but such Participant was a Key Employee for any prior Plan Year, such
Participant's Present Value of Accrued Benefit and/or Aggregate
Account balance shall not be taken into account for purposes of
determining whether this Plan is a Top Heavy or Super Top Heavy Plan
(or whether any Aggregation Group which includes this Plan is a Top
Heavy Group). In addition, if a Participant or Former Participant has
not performed any services for any Employer maintaining the Plan at
any time during the five year period ending on the Determination Date,
any accrued benefit for such Participant or Former Participant shall
not be taken into account for the purposes of determining whether this
Plan is a Top Heavy or Super Top Heavy Plan.

(b) This Plan shall be a Super Top Heavy Plan for any Plan Year
in which, as of the Determination Date, (1) the Present Value of
Accrued Benefits of Key Employees and (2) the sum of the Aggregate
Accounts of Key Employees under this Plan and all plans of an
Aggregation Group, exceeds ninety percent (90%) of the Present Value
of Accrued Benefits and the Aggregate Accounts of all Key and Non-Key
Employees under this Plan and all plans of an Aggregation Group.

(1) his Participant's Combined Account balance as of the most
recent valuation occurring within

<PAGE>

a twelve (12) month period ending on the Determination Date;

(2) an adjustment for any contributions due as of the
Determination Date. Such adjustment shall be the amount of any
contributions actually made after the valuation date but due on
or before the Determination Date, except for the first Plan Year
when such adjustment shall also reflect the amount of any
contributions made after the Determination Date that are
allocated as of a date in that first Plan Year.

(3) any Plan distributions made within the Plan Year that
includes the Determination Date or within the four (4) preceding
Plan Years. However, in the case of distributions made after the
valuation date and prior to the Determination Date, such
distributions are not included as distributions for top heavy
purposes to the extent that such distributions are already
included in the Participant's Aggregate Account balance as of
the valuation date. Notwithstanding anything herein to the
contrary, all distributions, including distributions made prior
to January 1, 1984, and distributions under a terminated plan
which if it had not been terminated would have been required to
be included in an Aggregation Group, will be counted. Further,
distributions from the Plan (including the cash value of life
insurance policies) of a Participant's account balance because
of death shall be treated as a distribution for the purposes of
this paragraph.

(4) any Employee contributions, whether voluntary or mandatory.
However, amounts attributable to tax deductible qualified
voluntary employee contributions shall not be considered to be a
part of the Participant's Aggregate Account balance.

(5) with respect to unrelated rollovers and plan-to-plan
transfers (ones which are both initiated by the Employee and
made from a plan maintained by one employer to a plan maintained
by another employer), if this Plan provides the rollovers or
plan-to-plan transfers, it shall always consider such rollovers
or plan-to-plan transfers as a distribution for the purposes of
this Section. If this Plan is the plan accepting such rollovers
or plan-to-plan transfers, it shall not consider such rollovers
or plan-to-plan

<PAGE>

transfers as part of the Participant's Aggregate Account
balance.

(6) with respect to related rollovers and plan-to-plan
transfers (ones either not initiated by the Employee or made to
a plan maintained by the same employer), if this Plan provides
the rollover or plan-to-plan transfer, it shall not be counted
as a distribution for purposes of this Section. If this Plan is
the plan accepting such rollover or plan-to-plan transfer, it
shall consider such rollover or plan-to-plan transfer as part
of the Participant's Aggregate Account balance irrespective of
the date on which such rollover or plan-to-plan transfer is
accepted.

(7) For the purposes of determining whether two employers are
to be treated as the same employer in (5) and (6) above, all
employers aggregated under Code Section 414(b), (c), (m) and (o)
are treated as the same employer.

(d) "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, each plan of the Employer in which
a Key Employee is a participant in the Plan Year containing the
Determination Date or any of the four preceding Plan Years, and
each other plan of the Employer which enables any plan in which
a Key Employee participates to meet the requirements of Code
Sections 401(a)(4) or 410, will be required to 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 Sections
401(a)(4) and 410. Such group shall be known as a Permissive
Aggregation Group.

<PAGE>

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.

(4) An Aggregation Group shall include any terminated plan of
the Employer if it was maintained within the last five (5) years
ending on the Determination Date.

(e) "Determination Date" means (a) the last day of the
preceding Plan Year, or (b) in the case of the first Plan Year, the
last day of such Plan Year.

(f) Present Value of Accrued Benefit: In the case of a defined
benefit plan, the Present Value of Accrued Benefit for a Participant
other than a Key Employee, shall be as determined using the single
accrual method used for all plans of the Employer and Affiliated
Employers, or if no such single method exists, using a method which
results in benefits accruing not more rapidly than the slowest accrual
rate permitted under Code Section 411(b)(1)(C). The determination of
the Present Value of Accrued Benefit shall 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 Code
Section 416 and the Regulations thereunder for the first and second
plan years of a defined benefit plan.

(g) "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.

<PAGE>

2.3 POWERS AND RESPONSIBILITIES OF THE EMPLOYER

(a) 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) 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) 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) The Employer will furnish Plan Fiduciaries and Participants
with notices and information statements when voting rights must be
exercised pursuant to Section 8.5.

2.4 DESIGNATION OF ADMINISTRATIVE AUTHORITY

The Employer shall appoint one or more Administrators. Any person,
including, but not limited to, the Employees of the Employer, shall be eligible
to serve as an Administrator. Any person so appointed shall signify his
acceptance by filing written acceptance with the Employer. An Administrator may
resign by delivering his written resignation to the Employer or be removed by
the Employer by delivery of written notice of removal, to take effect at a date
specified therein, or upon delivery to the Administrator if no date is
specified.

<PAGE>

The Employer, upon the resignation or removal of an Administrator,
shall promptly designate in writing a successor to this position. If the
Employer does not appoint an Administrator, the Employer will function as the
Administrator.

2.5 ALLOCATION AND DELEGATION OF RESPONSIBILITIES

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.

2.6 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;

<PAGE>

(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;

(3) to determine the size and type of any Contract to be
purchased from any insurer, and to designate the insurer from which
such Contract shall be purchased;

(g) 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;

(h) 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;

(i) to prepare and implement a procedure to notify Eligible
Employees that they may elect to have a portion of their Compensation
deferred or paid to them in cash;

(j) to establish and communicate to Participants a procedure,
which includes at least three (3) investment options pursuant to
Regulations, for allowing each Participant to direct the Trustee as to
the investment of his Company Stock Account pursuant to Section 4.12;

(k) 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 pursuant to
Section 8.5;

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

<PAGE>

2.7 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.

2.8 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.

2.9 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.

2.10 PAYMENT OF EXPENSES

All expenses of administration may be paid out of the Trust Fund
unless paid by the Employer. Such expenses shall include any expenses incident
to the functioning of the Administrator, including, but not limited to, fees of
accountants, counsel, and other specialists and their agents, and other costs of
administering the Plan. Until paid, the expenses shall constitute a liability of
the Trust Fund.

2.11 MAJORITY ACTIONS

Except where there has been an allocation and delegation of
administrative authority pursuant to Section 2.5, 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.

2.12 CLAIMS PROCEDURE

Claims for benefits under the Plan may be filed in writing with the
Administrator. Written notice of the disposition of a claim shall be furnished
to the claimant within 90 days

<PAGE>

after the application is filed. In the event the claim is denied, the reasons
for the denial shall be specifically set forth in the notice in language
calculated to be understood by the claimant, pertinent provisions of the Plan
shall be cited, and, where appropriate, an explanation as to how the claimant
can perfect the claim will be provided. In addition, the claimant shall be
furnished with an explanation of the Plan's claims review procedure.

2.13 CLAIMS REVIEW PROCEDURE

Any Employee, former Employee, or Beneficiary of either, who has been
denied a benefit by a decision of the Administrator pursuant to Section 2.12
shall be entitled to request the Administrator to give further consideration to
his claim by filing with the Administrator (on a form which may be obtained from
the Administrator) a request for a hearing. Such request, together with a
written statement of the reasons why the claimant believes his claim should be
allowed, shall be filed with the Administrator no later than 60 days after
receipt of the written notification provided for in Section 2.12. The
Administrator shall then conduct a hearing within the next 60 days, at which the
claimant may be represented by an attorney or any other representative of his
choosing and at which the claimant shall have an opportunity to submit written
and oral evidence and arguments in support of his claim. At the hearing (or
prior thereto upon 5 business days written notice to the Administrator) the
claimant or his representative shall have an opportunity to review all documents
in the possession of the Administrator which are pertinent to the claim at issue
and its disallowance. Either the claimant or the Administrator may cause a court
reporter to attend the hearing and record the proceedings. In such event, a
complete written transcript of the proceedings shall be furnished to both
parties by the court reporter. The full expense of any such court reporter and
such transcripts shall be borne by the party causing the court reporter to
attend the hearing. A final decision as to the allowance of the claim shall be
made by the Administrator within 60 days of receipt of the appeal (unless there
has been an extension of 60 days due to special circumstances, provided the
delay and the special circumstances occasioning it are communicated to the
claimant within the 60 day period). Such communication shall be written in a
manner calculated to be understood by the claimant and shall include specific
reasons for the decision and specific references to the pertinent Plan
provisions on which the decision is based.

<PAGE>

ARTICLE III
ELIGIBILITY

3.1 CONDITIONS OF ELIGIBILITY

Any Eligible Employee who has completed one (1) Year of Service and
has attained age 21 shall be eligible to participate hereunder as of the date he
has satisfied such requirements. However, any Employee who was a Participant in
the Plan prior to the effective date of this amendment and restatement shall
continue to participate in the Plan. The Employer shall give each prospective
Eligible Employee written notice of his eligibility to participate in the Plan
prior to the close of the Plan Year in which he first becomes an Eligible
Employee.

3.2 APPLICATION FOR PARTICIPATION

In order to become a Participant hereunder, each Eligible Employee
shall make application to the Employer for participation in the Plan and agree
to the terms hereof. Upon the acceptance of any benefits under this Plan, such
Employee shall automatically be deemed to have made application and shall be
bound by the terms and conditions of the Plan and all amendments hereto.

3.3 EFFECTIVE DATE OF PARTICIPATION

An Eligible Employee shall become a Participant effective as of the
earlier of the first day of the Plan Year or the first day of the seventh month
of such Plan Year coinciding with or next following the date such Employee met
the eligibility requirements of Section 3.1, provided said Employee was still
employed as of such date (or if not employed on such date, as of the date of
rehire if a 1-Year Break in Service has not occurred).

3.4 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. Such determination shall be
subject to review per Section 2.13.

3.5 TERMINATION OF ELIGIBILITY

(a) In the event a Participant shall go from a classification
of an Eligible Employee to an ineligible Employee, such Former
Participant shall continue to vest in his interest in the Plan for
each Year of Service completed while a noneligible Employee, until
such time as his Participant's Account shall be forfeited or
distributed pursuant to the terms of the

<PAGE>

Plan. Additionally, his interest in the Plan shall continue to share in the
earnings of the Trust Fund.

(b) In the event a Participant is no longer a member of an
eligible class of Employees and becomes ineligible to participate but
has not incurred a 1-Year Break in Service, such Employee will
participate immediately upon returning to an eligible class of
Employees. If such Participant incurs a 1-Year Break in Service,
eligibility will be determined under the break in service rules of the
Plan.

3.6 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 his 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.

3.7 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
(except for Deferred Compensation which shall be distributed to the ineligible
person) for the Plan Year in which the discovery is made.

3.8 ELECTION NOT TO PARTICIPATE

An Employee may, subject to the approval of the Employer, elect
voluntarily not to participate in the Plan. The election not to participate must
be communicated to the Employer, in writing, at least thirty (30) days before
the beginning of a Plan Year.

<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) The amount of the total salary reduction elections of all
Participants made pursuant to Section 4.2(a), which amount shall be
deemed an Employer's Elective Contribution.

(b) On behalf of each Participant who is eligible to share in
matching contributions for the Plan Year, a discretionary matching
contribution equal to a percentage of each such Participant's Deferred
Compensation, the exact percentage to be determined each year by the
Employer, which amount shall be deemed an Employer's Non-Elective
Contribution.

(d) 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,
Company Stock or in such property as is acceptable to the Trustee.

(e) Except, however, to the extent necessary to provide the top
heavy minimum allocations, the Employer shall make a contribution even
if it exceeds the amount which is deductible under Code Section 404.

4.2 PARTICIPANT'S SALARY REDUCTION ELECTION

(a) Each Participant may elect to defer from 1% to 15% of his
Compensation which would have been received in the Plan Year, but for
the deferral election. A deferral election (or modification of an
earlier election) may not be made with respect to Compensation which
is currently available on or before the date the Participant executed
such election.

The amount by which Compensation is reduced shall be that
Participant's Deferred Compensation and be treated as an Employer
Elective Contribution and allocated to that Participant's Elective
Account.

<PAGE>

(b) The balance in each Participant's Elective Account shall be
fully Vested at all times and shall not be subject to Forfeiture for
any reason.

(1) a Participant's termination of employment, Total and
Permanent Disability, or death;

(2) a Participant's attainment of age 59 1/2;

(3) the termination of the Plan without the establishment or
existence of a "successor plan," as that term is described in
Regulation 1.401(k)-1(d)(3);

(4) the date of disposition by the Employer to an entity that
is not an Affiliated Employer of substantially all of the assets
(within the meaning of Code Section 409(d)(2)) used in a trade
or business of such corporation if such corporation continues to
maintain this Plan after the disposition with respect to a
Participant who continues employment with the corporation
acquiring such assets;

(5) the date of disposition by the Employer or an Affiliated
Employer who maintains the Plan of its interest in a subsidiary
(within the meaning of Code Section 409(d)(3)) to an entity
which is not an Affiliated Employer but only with respect to a
Participant who continues employment with such subsidiary; or

(6) the proven financial hardship of a Participant, subject to
the limitations of Section 7.14.

(d) For each Plan Year, a Participant's Deferred Compensation
made under this Plan and all other plans, contracts or arrangements of
the Employer maintaining this Plan shall not exceed, during any
taxable year of the Participant, the limitation imposed by Code
Section 402(g), as in effect at the beginning of such taxable year. If
such dollar limitation is exceeded, a Participant will be deemed to
have notified the Administrator of such excess amount which shall be
distributed in a manner consistent with Section 4.2(f). The dollar
limitation shall be adjusted annually pursuant to the method provided
in Code Section 415(d) in accordance with Regulations.

<PAGE>

(e) In the event a Participant has received a hardship
distribution from his Participant's Elective Account pursuant to
Section 7.14 or pursuant to Regulation 1.401(k)-1(d)(2)(iv)(B) from
any other plan maintained by the Employer, then such Participant shall
not be permitted to elect to have Deferred Compensation contributed to
the Plan on his behalf for a period of twelve (12) months following
the receipt of the distribution. Furthermore, the dollar limitation
under Code Section 402(g) shall be reduced, with respect to the
Participant's taxable year following the taxable year in which the
hardship distribution was made, by the amount of such Participant's
Deferred Compensation, if any, pursuant to this Plan (and any other
plan maintained by the Employer) for the taxable year of the hardship
distribution.

(f) If a Participant's Deferred Compensation under this Plan
together with any elective deferrals (as defined in Regulation
1.402(g)-1(b)) under another qualified cash or deferred arrangement
(as defined in Code Section 401(k)), a simplified employee pension (as
defined in Code Section 408(k)), a salary reduction arrangement
(within the meaning of Code Section 3121(a)(5)(D)), a deferred
compensation plan under Code Section 457, or a trust described in Code
Section 501(c)(18) cumulatively exceed the limitation imposed by Code
Section 402(g) (as adjusted annually in accordance with the method
provided in Code Section 415(d) pursuant to Regulations) for such
Participant's taxable year, the Participant may, not later than
March 1 following the close of the Participant's taxable year, notify
the Administrator in writing of such excess and request that his
Deferred Compensation under this Plan be reduced by an amount
specified by the Participant. In such event, the Administrator may
direct the Trustee to distribute such excess amount (and any Income
allocable to such excess amount) to the Participant not later than the
first April 15th following the close of the Participant's taxable
year. Distributions in accordance with this paragraph may be made for
any taxable year of the Participant which begins after December 31,
1986. Any distribution of less than the entire amount of Excess
Deferred Compensation and Income shall be treated as a pro rata
distribution of Excess Deferred Compensation and Income. The amount
distributed shall not exceed the Participant's Deferred Compensation
under the Plan for the taxable year. Any distribution on or before the
last day of the Participant's taxable year must satisfy each of the
following conditions:

<PAGE>

(1) the distribution must be made after the date on which the
Plan received the Excess Deferred Compensation;

(2) the Participant shall designate the distribution as Excess
Deferred Compensation; and

(3) the Plan must designate the distribution as a distribution
of Excess Deferred Compensation.

Matching contributions which relate to Excess Deferred
Compensation which is distributed pursuant to this Section 4.2(f)
shall be forfeited.

(g) Notwithstanding Section 4.2(f) above, a Participant's
Excess Deferred Compensation shall be reduced, but not below zero, by
any distribution of Excess Contributions pursuant to Section 4.6(a)
for the Plan Year beginning with or within the taxable year of the
Participant.

(h) At Normal Retirement Date, or such other date when the
Participant shall be entitled to receive benefits, the fair market
value of the Participant's Elective Account shall be used to provide
additional benefits to the Participant or his Beneficiary.

(i) All amounts allocated to a Participant's Elective Account
may be treated as a Directed Investment Account pursuant to Section
4.12.

(j) Employer Elective Contributions made pursuant to this
Section may be segregated into a separate account for each Participant
in a federally insured savings account, certificate of deposit in a
bank or savings and loan association, money market certificate, or
other short-term debt security acceptable to the Trustee until such
time as the allocations pursuant to Section 4.4 have been made.

(k) The Employer and the Administrator shall implement the
salary reduction elections provided for herein in accordance with the
following:

(1) A Participant may commence making elective deferrals to the
Plan only after first satisfying the eligibility and
participation requirements specified in Article III. However,
the Participant must make his initial salary deferral election
within a reasonable time, not to exceed thirty (30) days, after
entering the Plan pursuant to Section 3.3. If the Participant
fails to make an initial salary deferral election within such
time, then such Participant may

<PAGE>

thereafter make an election in accordance with the rules
governing modifications. The Participant shall make such an
election by entering into a written salary reduction agreement
with the Employer and filing such agreement with the
Administrator. Such election shall initially be effective
beginning with the pay period following the acceptance of the
salary reduction agreement by the Administrator, shall not have
retroactive effect and shall remain in force until revoked.

(2) A Participant may modify a prior election during the Plan
Year and concurrently make a new election by filing a written
notice with the Administrator within a reasonable time before
the pay period for which such modification is to be effective.
However, modifications to a salary deferral election shall only
be permitted semi-annually, during election periods established
by the Administrator prior to the first day of a Plan Year and
the first day of the seventh month of a Plan Year. Any
modification shall not have retroactive effect and shall remain
in force until revoked.

(3) A Participant may elect to prospectively revoke his salary
reduction agreement in its entirety at any time during the Plan
Year by providing the Administrator with thirty (30) days
written notice of such revocation (or upon such shorter notice
period as may be acceptable to the Administrator). Such
revocation shall become effective as of the beginning of the
first pay period coincident with or next following the
expiration of the notice period. Furthermore, the termination of
the Participant's employment, or the cessation of participation
for any reason, shall be deemed to revoke any salary reduction
agreement then in effect, effective immediately following the
close of the pay period within which such termination or
cessation occurs.

4.3 TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION

Employer contributions will be paid in cash, Company Stock or other
property as the Employer may from time to time determine. Company Stock and
other property will be valued at their 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.

<PAGE>

However, Employer Elective Contributions accumulated through payroll
deductions shall be paid to the Trustee as of the earliest date on which such
contributions can reasonably be segregated from the Employer's general assets,
but in any event within ninety (90) days from the date on which such amounts
would otherwise have been payable to the Participant in cash. The provisions of
Department of Labor regulations 2510.3-102 are incorporated herein by reference.
Furthermore, any additional Employer contributions which are allocable to the
Participant's Elective Account for a Plan Year shall be paid to the Plan no
later than the twelve-month period immediately following the close of such Plan
Year.

4.4 ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS

(a) 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) The Employer shall provide the Administrator with all
information required by the Administrator 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 as follows:

(1) With respect to the Employer's Elective Contribution made
pursuant to Section 4.1(a), to each Participant's Elective
Account in an amount equal to each such Participant's Deferred
Compensation for the year.

(2) With respect to the Employer's Non-Elective Contribution
made pursuant to Section 4.1(b), to each Participant's Account
in accordance with Section 4.1(b).

Any Participant actively employed during the Plan Year shall be
eligible to share in the matching contribution for the Plan
Year.

(3) With respect to the Employer's Non-Elective Contribution
made pursuant to Section 4.1(c), to each Participant's Account
in the same proportion that each such Participant's Compensation
for the year bears to the total Compensation of all Participants
for such year.

Only Participants who are actively employed on the last day of
the Plan Year or who complete more than 500 Hours of Service
during the Plan

<PAGE>

Year prior to terminating employment shall be eligible to share
in the discretionary contribution for the year. In determining
whether a Participant has completed more than 500 Hours of
Service during a short Plan Year, the number of the Hours of
Service required shall be proportionately reduced based on the
number of full months in the short Plan Year.

(c) The Company Stock 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, in
the sole discretion of the Administrator, either be credited to his
Other Investments Account when paid or 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 4.4(e) 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.

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 4.4(e) 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.

(d) As of each Anniversary Date or other valuation date, before
allocation of one-half of the Employer contributions for the entire
Plan Year and after allocation of Forfeitures, any earnings or losses
(net appreciation or net depreciation) of the Trust Fund shall be
allocated in the same proportion that each Participant's and Former
Participant's nonsegregated accounts (other than each Participant's
Company Stock Account) bear to the total of all Participants' and
Former Participants' nonsegregated accounts (other than Participants'
Company Stock Accounts) as of such date.

<PAGE>

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, nor does it include income received by the Trust Fund with
respect to Company Stock acquired with the proceeds of an Exempt Loan;
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.

Participants' transfers from other qualified plans
deposited in the general Trust Fund shall share in any earnings and
losses (net appreciation or net depreciation) of the Trust Fund in the
same manner provided above. Each segregated account maintained on
behalf of a Participant shall be credited or charged with its separate
earnings and losses.

(e) All Company Stock acquired by the Plan with the proceeds of
an Exempt Loan must 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(c) 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 4.4(c) 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

<PAGE>

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 nonsegregated accounts
after the allocation of any earnings or losses pursuant to Section
4.4(d) bear to the total of all Participants' and Former Participants'
nonsegregated accounts after the allocation of any earnings or losses
pursuant to Section 4.4(d).

(f) As of each Anniversary Date any amounts which became
Forfeitures since the last Anniversary Date shall be allocated to
Participants' Accounts and used to reduce the contribution of the
Employer hereunder for the Plan Year in which such Forfeitures occur
in the following manner:

(1) Forfeitures attributable to Employer matching contributions
made pursuant to Section 4.1(b) shall be used to reduce the
Employer's contribution for the Plan Year in which such
Forfeitures occur.

(2) Forfeitures attributable to Employer discretionary
contributions made pursuant to Section 4.1(c) shall be added to
the Employer's discretionary contribution for the Plan Year in
which such Forfeitures occur and allocated among the
Participants' Accounts in the same manner as the Employer's
discretionary contributions.

Provided, however, that in the event the allocation of
Forfeitures provided herein shall cause the "annual addition" (as
defined in Section 4.9) to any Participant's Account to exceed the
amount allowable by the Code, the excess shall be reallocated in
accordance with Section 4.10.

(g) 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 for in Section 4.4(i) if eligible pursuant to the provisions
of Section 4.4(k).

(h) Participants who are not actively employed on the last day
of the Plan Year due to Retirement (Early, Normal or Late), Total and
Permanent Disability or death shall share in the allocation of
contributions and Forfeitures for that Plan Year only if otherwise
eligible in accordance with this Section.

(i) Minimum Allocations Required for Top Heavy Plan Years:
Notwithstanding the foregoing, for any Top

<PAGE>

Heavy Plan Year, the sum of the Employer's contributions and
Forfeitures allocated to the Participant's Combined Account of each
Non-Key Employee shall be equal to at least three percent (3%) of such
Non-Key Employee's "415 Compensation" (reduced by contributions and
forfeitures, if any, allocated to each Non-Key Employee in any defined
contribution plan included with this plan in a Required Aggregation
Group). However, if (1) the sum of the Employer's contributions and
Forfeitures allocated to the Participant's Combined Account of each
Key Employee for such Top Heavy Plan Year is less than three percent
(3%) of each Key Employee's "415 Compensation" and (2) 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 Combined Account of each
Non-Key Employee shall be equal to the largest percentage allocated to
the Participant's Combined Account of any Key Employee. However, in
determining whether a Non-Key Employee has received the required
minimum allocation, such Non-Key Employee's Deferred Compensation and
matching contributions needed to satisfy the "Actual Contribution
Percentage" tests pursuant to Section 4.7(a) shall not be taken into
account.

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.

(j) For purposes of the minimum allocations set forth above,
the percentage allocated to the Participant's Combined 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 "415 Compensation" for such Key Employee.

(k) For any Top Heavy Plan Year, the minimum allocations set
forth above shall be allocated to the Participant's Combined Account
of all Non-Key Employees who are Participants and who are employed by
the Employer on the last day of the Plan Year, including Non-Key
Employees who have (1) failed to complete a Year of Service; and
(2) declined to make mandatory contributions (if required) or, in the
case of a cash or deferred arrangement, elective contributions to the
Plan.

<PAGE>

(l) For the purposes of this Section, "415 Compensation" shall
be limited to $200,000. Such amount shall be adjusted at the same time
and in the same manner as permitted under Code Section 415(d), except
that the dollar increase in effect on January 1 of any calendar year
shall be effective for the Plan Year beginning with or within such
calendar year and the first adjustment to the $200,000 limitation
shall be effective on January 1, 1990. For any short Plan Year the
"415 Compensation" limit shall be an amount equal to the "415
Compensation" limit for the calendar year in which the Plan Year
begins multiplied by the ratio obtained by dividing the number of full
months in the short Plan Year by twelve (12).

In addition to other applicable limitations set forth in
the Plan, and notwithstanding any other provision of the Plan to the
contrary, for Plan Years beginning on or after January 1, 1994, the
annual Compensation of each Employee taken into account under the Plan
shall not exceed the OBRA '93 annual compensation limit. The OBRA '93
annual compensation limit is $150,000, as adjusted by the Commissioner
for increases in the cost of living in accordance with Code Section
401(a)(17)(B). The cost of living adjustment in effect for a calendar
year applies to any period, not exceeding 12 months, over which
Compensation is determined (determination period) beginning in such
calendar year. If a determination period consists of fewer than 12
months, the OBRA '93 annual compensation limit will be multiplied by a
fraction, the numerator of which is the number of months in the
determination period, and the denominator of which is 12.

For Plan Years beginning on or after January 1, 1994, any
reference in this Plan to the limitation under Code Section 401(a)(17)
shall mean the OBRA '93 annual compensation limit set forth in this
provision.

If Compensation for any prior determination period is taken
into account in determining an Employee's benefits accruing in the
current Plan Year, the Compensation for that prior determination
period is subject to the OBRA '93 annual compensation limit in effect
for that prior determination period. For this purpose, for
determination periods beginning before the first day of the first Plan
Year beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.

(m) Notwithstanding anything herein to the contrary,
Participants who terminated employment for any reason during the Plan
Year shall share in the salary reduction contributions made by the
Employer for

<PAGE>

the year of termination without regard to the Hours of Service
credited.

(n) If a Former Participant is reemployed after five (5)
consecutive 1-Year Breaks in Service, then separate accounts shall be
maintained as follows:

(1) one account for nonforfeitable benefits attributable to
pre-break service; and

(2) one account representing his status in the Plan
attributable to post-break service.

4.5 ACTUAL DEFERRAL PERCENTAGE TESTS

(a) Maximum Annual Allocation: For each Plan Year, the annual
allocation derived from Employer Elective Contributions to a
Participant's Elective Account shall satisfy one of the following
tests:

(1) The "Actual Deferral Percentage" for the Highly Compensated
Participant group shall not be more than the "Actual Deferral
Percentage" of the Non-Highly Compensated Participant group
multiplied by 1.25, or

(2) The excess of the "Actual Deferral Percentage" for the
Highly Compensated Participant group over the "Actual Deferral
Percentage" for the Non-Highly Compensated Participant group
shall not be more than two percentage points. Additionally, the
"Actual Deferral Percentage" for the Highly Compensated
Participant group shall not exceed the "Actual Deferral
Percentage" for the Non-Highly Compensated Participant group
multiplied by 2. The provisions of Code Section 401(k)(3) and
Regulation 1.401(k)-1(b) are incorporated herein by reference.

However, in order to prevent the multiple use of the alternative
method described in (2) above and in Code Section 401(m)(9)(A),
any Highly Compensated Participant eligible to make elective
deferrals pursuant to Section 4.2 and to make Employee
contributions or to receive matching contributions under this
Plan or under any other plan maintained by the Employer or an
Affiliated Employer shall have his actual contribution ratio
reduced pursuant to Regulation 1.401(m)-2, the provisions of
which are incorporated herein by reference.

<PAGE>

(b) For the purposes of this Section "Actual Deferral
Percentage" means, with respect to the Highly Compensated Participant
group and Non-Highly Compensated Participant group for a Plan Year,
the average of the ratios, calculated separately for each Participant
in such group, of the amount of Employer Elective Contributions
allocated to each Participant's Elective Account for such Plan Year,
to such Participant's "414(s) Compensation" for such Plan Year. The
actual deferral ratio for each Participant and the "Actual Deferral
Percentage" for each group shall be calculated to the nearest
one-hundredth of one percent. Employer Elective Contributions
allocated to each Non-Highly Compensated Participant's Elective
Account shall be reduced by Excess Deferred Compensation to the extent
such excess amounts are made under this Plan or any other plan
maintained by the Employer.

(c) For the purpose of determining the actual deferral ratio of
a Highly Compensated Employee who is subject to the Family Member
aggregation rules of Code Section 414(q)(6) because such Participant
is either a "five percent owner" of the Employer or one of the ten
(10) Highly Compensated Employees paid the greatest "415 Compensation"
during the year, the following shall apply:

(1) The combined actual deferral ratio for the family group
(which shall be treated as one Highly Compensated Participant)
shall be determined by aggregating Employer Elective
Contributions and "414(s) Compensation" of all eligible Family
Members (including Highly Compensated Participants). However, in
applying the $200,000 limit to "414(s) Compensation," Family
Members shall include only the affected Employee's spouse and
any lineal descendants who have not attained age 19 before the
close of the Plan Year.

(2) The Employer Elective Contributions and "414(s)
Compensation" of all Family Members shall be disregarded for
purposes of determining the "Actual Deferral Percentage" of the
Non-Highly Compensated Participant group except to the extent
taken into account in paragraph (1) above.

(3) If a Participant is required to be aggregated as a member
of more than one family group in a plan, all Participants who
are members of those family groups that include the Participant
are aggregated as one family group in accordance with paragraphs
(1) and (2) above.

<PAGE>

(d) For the purposes of Sections 4.5(a) and 4.6, a Highly
Compensated Participant and a Non-Highly Compensated Participant shall
include any Employee eligible to make a deferral election pursuant to
Section 4.2, whether or not such deferral election was made or
suspended pursuant to Section 4.2.

(e) For the purposes of this Section and Code Sections
401(a)(4), 410(b) and 401(k), if two or more plans which include cash
or deferred arrangements are considered one plan for the purposes of
Code Section 401(a)(4) or 410(b) (other than Code Section
410(b)(2)(A)(ii)), the cash or deferred arrangements included in such
plans shall be treated as one arrangement. In addition, two or more
cash or deferred arrangements may be considered as a single
arrangement for purposes of determining whether or not such
arrangements satisfy Code Sections 401(a)(4), 410(b) and 401(k). In
such a case, the cash or deferred arrangements included in such plans
and the plans including such arrangements shall be treated as one
arrangement and as one plan for purposes of this Section and Code
Sections 401(a)(4), 410(b) and 401(k). Plans may be aggregated under
this paragraph (e) only if they have the same plan year.

Notwithstanding the above, this Plan may not be combined
with any other plan for purposes of determining whether this Plan or
any other plan satisfies this Section and Code Sections 401(a)(4),
410(b) and 401(k).

(f) For the purposes of this Section, if a Highly Compensated
Participant is a Participant under two or more cash or deferred
arrangements of the Employer or an Affiliated Employer, all such cash
or deferred arrangements shall be treated as one cash or deferred
arrangement for the purpose of determining the actual deferral ratio
with respect to such Highly Compensated Participant. However, no such
aggregation of cash or deferred arrangements is required.

4.6 ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS

In the event that the initial allocations of the Employer's Elective
Contributions made pursuant to Section 4.4 do not satisfy one of the tests set
forth in Section 4.5(a), the Administrator shall adjust Excess Contributions
pursuant to the options set forth below:

(a) On or before the fifteenth day of the third month following
the end of each Plan Year, the Highly Compensated Participant having
the highest actual deferral ratio shall have his portion of Excess

<PAGE>

Contributions distributed to him until one of the tests set forth in
Section 4.5(a) is satisfied, or until his actual deferral ratio equals
the actual deferral ratio of the Highly Compensated Participant having
the second highest actual deferral ratio. This process shall continue
until one of the tests set forth in Section 4.5(a) is satisfied. For
each Highly Compensated Participant, the amount of Excess
Contributions is equal to the Elective Contributions on behalf of such
Highly Compensated Participant (determined prior to the application of
this paragraph) minus the amount determined by multiplying the Highly
Compensated Participant's actual deferral ratio (determined after
application of this paragraph) by his "414(s) Compensation." However,
in determining the amount of Excess Contributions to be distributed
with respect to an affected Highly Compensated Participant as
determined herein, such amount shall be reduced by any Excess Deferred
Compensation previously distributed to such affected Highly
Compensated Participant for his taxable year ending with or within
such Plan Year.

(1) With respect to the distribution of Excess Contributions
pursuant to (a) above, such distribution:

(i) may be postponed but not later than the close of the
Plan Year following the Plan Year to which they are
allocable;

(ii) shall cause matching contributions which relate to
such Deferred Compensation to be forfeited;

(iii) shall be adjusted for Income; and

(iv) shall be designated by the Employer as a
distribution of Excess Contributions (and Income).

(2) Any distribution of less than the entire amount of Excess
Contributions shall be treated as a pro rata distribution of
Excess Contributions and Income.

(3) The determination and correction of Excess Contributions of
a Highly Compensated Participant whose actual deferral ratio is
determined under the family aggregation rules shall be
accomplished by reducing the actual deferral ratio as required
herein, and the Excess Contributions for the family unit shall
then be allocated among the Family Members in proportion to the
Elective Contributions of each Family

<PAGE>

Member that were combined to determine the group actual deferral
ratio.

(b) Within twelve (12) months after the end of the Plan Year,
the Employer may make a special Qualified Non-Elective Contribution on
behalf of Non-Highly Compensated Participants in an amount sufficient
to satisfy one of the tests set forth in Section 4.5(a). Such
contribution shall be allocated to the Participant's Elective Account
of each Non-Highly Compensated Participant in the same proportion that
each Non-Highly Compensated Participant's Compensation for the year
bears to the total Compensation of all Non-Highly Compensated
Participants.

(c) If during a Plan Year the projected aggregate amount of
Elective Contributions to be allocated to all Highly Compensated
Participants under this Plan would, by virtue of the tests set forth
in Section 4.5(a), cause the Plan to fail such tests, then the
Administrator may automatically reduce proportionately or in the order
provided in Section 4.6(a) each affected Highly Compensated
Participant's deferral election made pursuant to Section 4.2 by an
amount necessary to satisfy one of the tests set forth in Section
4.5(a).

4.7 ACTUAL CONTRIBUTION PERCENTAGE TESTS

(a) The "Actual Contribution Percentage" for the Highly
Compensated Participant group shall not exceed the greater of:

(1) 125 percent of such percentage for the Non-Highly
Compensated Participant group; or

(2) the lesser of 200 percent of such percentage for the
Non-Highly Compensated Participant group, or such percentage for
the Non-Highly Compensated Participant group plus 2 percentage
points. However, to prevent the multiple use of the alternative
method described in this paragraph and Code Section
401(m)(9)(A), any Highly Compensated Participant eligible to
make elective deferrals pursuant to Section 4.2 or any other
cash or deferred arrangement maintained by the Employer or an
Affiliated Employer and to make Employee contributions or to
receive matching contributions under this Plan or under any
other plan maintained by the Employer or an Affiliated Employer
shall have his actual contribution ratio reduced pursuant to
Regulation 1.401(m)-2. The provisions of Code Section 401(m) and
Regulations

<PAGE>

1.401(m)-1(b) and 1.401(m)-2 are incorporated herein by
reference.

(b) For the purposes of this Section and Section 4.8, "Actual
Contribution Percentage" for a Plan Year means, with respect to the
Highly Compensated Participant group and Non-Highly Compensated
Participant group, the average of the ratios (calculated separately
for each Participant in each group) of:

(1) the sum of Employer matching contributions made pursuant to
Section 4.1(b) on behalf of each such Participant for such Plan
Year; to

(2) the Participant's "414(s) Compensation" for such Plan Year.

(c) For purposes of determining the "Actual Contribution
Percentage" and the amount of Excess Aggregate Contributions pursuant
to Section 4.8(d), only Employer matching contributions (excluding
Employer matching contributions forfeited pursuant to Sections 4.2(f)
and 4.6(a)(1) or forfeited pursuant to Section 4.8(a)) contributed to
the Plan prior to the end of the succeeding Plan Year shall be
considered. In addition, the Administrator may elect to take into
account, with respect to Employees eligible to have Employer matching
contributions pursuant to Section 4.1(b) allocated to their accounts,
elective deferrals (as defined in Regulation 1.402(g)-1(b)) and
qualified non-elective contributions (as defined in Code Section
401(m)(4)(C)) contributed to any plan maintained by the Employer. Such
elective deferrals and qualified non-elective contributions shall be
treated as Employer matching contributions subject to Regulation
1.401(m)-1(b)(5) which is incorporated herein by reference. However,
the Plan Year must be the same as the plan year of the plan to which
the elective deferrals and the qualified non-elective contributions
are made.

(d) For the purpose of determining the actual contribution
ratio of a Highly Compensated Employee who is subject to the Family
Member aggregation rules of Code Section 414(q)(6) because such
Employee is either a "five percent owner" of the Employer or one of
the ten (10) Highly Compensated Employees paid the greatest "415
Compensation" during the year, the following shall apply:

(1) The combined actual contribution ratio for the family group
(which shall be treated as one Highly Compensated Participant)
shall be

<PAGE>

determined by aggregating Employer matching contributions made
pursuant to Section 4.1(b) and "414(s) Compensation" of all
eligible Family Members (including Highly Compensated
Participants). However, in applying the $200,000 limit to
"414(s) Compensation", Family Members shall include only the
affected Employee's spouse and any lineal descendants who have
not attained age 19 before the close of the Plan Year.

(2) The Employer matching contributions made pursuant to
Section 4.1(b) and "414(s) Compensation" of all Family Members
shall be disregarded for purposes of determining the "Actual
Contribution Percentage" of the Non-Highly Compensated
Participant group except to the extent taken into account in
paragraph (1) above.

(e) For purposes of this Section and Code Sections 401(a)(4),
410(b) and 401(m), if two or more plans of the Employer to which
matching contributions, Employee contributions, or both, are made are
treated as one plan for purposes of Code Sections 401(a)(4) or 410(b)
(other than the average benefits test under Code Section
410(b)(2)(A)(ii)), such plans shall be treated as one plan. In
addition, two or more plans of the Employer to which matching
contributions, Employee contributions, or both, are made may be
considered as a single plan for purposes of determining whether or not
such plans satisfy Code Sections 401(a)(4), 410(b) and 401(m). In such
a case, the aggregated plans must satisfy this Section and Code
Sections 401(a)(4), 410(b) and 401(m) as though such aggregated plans
were a single plan.

Notwithstanding the above, this Plan may not be aggregated
with any other plan for purposes of determining whether this Plan or
any other plan satisfies this Section and Code Sections 401(a)(4),
410(b) and 401(m).

(f) If a Highly Compensated Participant is a Participant under
two or more plans which are maintained by the Employer or an
Affiliated Employer to which matching contributions, Employee
contributions, or both, are made, all such contributions on behalf of

<PAGE>

such Highly Compensated Participant shall be aggregated for purposes
of determining such Highly Compensated Participant's actual
contribution ratio. However, for Plan Years beginning after
December 31, 1988, no such aggregation is permitted.

(g) For purposes of Sections 4.7(a) and 4.8, a Highly
Compensated Participant and Non-Highly Compensated Participant shall
include any Employee eligible to have Employer matching contributions
pursuant to Section 4.1(b) (whether or not a deferral election was
made or suspended pursuant to Section 4.2(e)) allocated to his account
for the Plan Year.

4.8 ADJUSTMENT TO ACTUAL CONTRIBUTION PERCENTAGE TESTS

(a) In the event that the "Actual Contribution Percentage" for
the Highly Compensated Participant group exceeds the "Actual
Contribution Percentage" for the Non-Highly Compensated Participant
group pursuant to Section 4.7(a), the Administrator (on or before the
fifteenth day of the third month following the end of the Plan Year,
but in no event later than the close of the following Plan Year) shall
direct the Trustee to distribute to the Highly Compensated Participant
having the highest actual contribution ratio, his Vested portion of
Excess Aggregate Contributions (and Income allocable to such
contributions) and, if forfeitable, forfeit such non-Vested Excess
Aggregate Contributions attributable to Employer matching
contributions (and Income allocable to such forfeitures) until either
one of the tests set forth in Section 4.7(a) is satisfied, or until
his actual contribution ratio equals the actual contribution ratio of
the Highly Compensated Participant having the second highest actual
contribution ratio. This process shall continue until one of the tests
set forth in Section 4.7(a) is satisfied.

If the correction of Excess Aggregate Contributions
attributable to Employer matching contributions is not in proportion
to the Vested and non-Vested portion of such contributions, then the
Vested portion of the Participant's Account attributable to Employer
matching contributions after the correction shall be subject to
Section 7.5(k).

(b) Any distribution and/or Forfeiture of less than the entire
amount of Excess Aggregate Contributions (and Income) shall be treated
as a pro rata distribution and/or Forfeiture of Excess Aggregate
Contributions and Income. Distribution of Excess Aggregate
Contributions shall be designated by the Employer as a distribution of
Excess Aggregate

<PAGE>

Contributions (and Income). Forfeitures of Excess Aggregate
Contributions shall be treated in accordance with Section 4.4.

(c) Excess Aggregate Contributions, including forfeited
matching contributions, shall be treated as Employer contributions for
purposes of Code Sections 404 and 415 even if distributed from the
Plan.

Forfeited matching contributions that are reallocated to
Participants' Accounts for the Plan Year in which the forfeiture
occurs shall be treated as an "annual addition" pursuant to Section
4.9(b) for the Participants to whose Accounts they are reallocated and
for the Participants from whose Accounts they are forfeited.

(d) For each Highly Compensated Participant, the amount of
Excess Aggregate Contributions is equal to the Employer matching
contributions made pursuant to Section 4.1(b) and any qualified
non-elective contributions or elective deferrals taken into account
pursuant to Section 4.7(c) on behalf of the Highly Compensated
Participant (determined prior to the application of this paragraph)
minus the amount determined by multiplying the Highly Compensated
Participant's actual contribution ratio (determined after application
of this paragraph) by his "414(s) Compensation." The actual
contribution ratio must be rounded to the nearest one-hundredth of one
percent. In no case shall the amount of Excess Aggregate Contribution
with respect to any Highly Compensated Participant exceed the amount
of Employer matching contributions made pursuant to Section 4.1(b) and
any qualified non-elective contributions or elective deferrals taken
into account pursuant to Section 4.7(c) on behalf of such Highly
Compensated Participant for such Plan Year.

(e) The determination of the amount of Excess Aggregate
Contributions with respect to any Plan Year shall be made after first
determining the Excess Contributions, if any, to be treated as
voluntary Employee contributions due to recharacterization for the
plan year of any other qualified cash or deferred arrangement (as
defined in Code Section 401(k)) maintained by the Employer that ends
with or within the Plan Year.

(f) If the determination and correction of Excess Aggregate
Contributions of a Highly Compensated Participant whose actual
contribution ratio is determined under the family aggregation rules,
then the actual contribution ratio shall be reduced and the

<PAGE>

Excess Aggregate Contributions for the family unit shall be allocated
among the Family Members in proportion to the sum of Employer matching
contributions made pursuant to Section 4.1(b) and any qualified
non-elective contributions or elective deferrals taken into account
pursuant to Section 4.7(c) of each Family Member that were combined to
determine the group actual contribution ratio.

(g) If during a Plan Year the projected aggregate amount of
Employer matching contributions to be allocated to all Highly
Compensated Participants under this Plan would, by virtue of the tests
set forth in Section 4.7(a), cause the Plan to fail such tests, then
the Administrator may automatically reduce proportionately or in the
order provided in Section 4.8(a) each affected Highly Compensated
Participant's projected share of such contributions by an amount
necessary to satisfy one of the tests set forth in Section 4.7(a).

(h) Notwithstanding the above, within twelve (12) months after
the end of the Plan Year, the Employer may make a special Qualified
Non-Elective Contribution on behalf of Non-Highly Compensated
Participants in an amount sufficient to satisfy one of the tests set
forth in Section 4.7(a). Such contribution shall be allocated to the
Participant's Elective Account of each Non-Highly Compensated
Participant in the same proportion that each Non-Highly Compensated
Participant's Compensation for the year bears to the total
Compensation of all Non-Highly Compensated Participants. A separate
accounting shall be maintained for the purpose of excluding such
contributions from the "Actual Deferral Percentage" tests pursuant to
Section 4.5(a).

4.9 MAXIMUM ANNUAL ADDITIONS

(a) Notwithstanding the foregoing, the maximum "annual
additions" credited to a Participant's accounts for any "limitation
year" shall equal the lesser of: (1) $30,000 (or, if greater,
one-fourth of the dollar limitation in effect under Code Section
415(b)(1)(A)) or (2) twenty-five percent (25%) of the Participant's
"415 Compensation" for such "limitation year." 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).

(b) For purposes of applying the limitations of Code Section
415, "annual additions" means the sum

<PAGE>

credited to a Participant's accounts for any "limitation year" of
(1) Employer contributions, (2) Employee contributions,
(3) forfeitures, (4) amounts allocated, after March 31, 1984, to an
individual medical account, as defined in Code Section 415(l)(2) which
is part of a pension or annuity plan maintained by the Employer and
(5) amounts derived from contributions paid or accrued after
December 31, 1985, in taxable years ending after such date, 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 "415
Compensation" percentage limitation referred to in paragraph (a)(2)
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(l)(1).

(c) For purposes of applying the limitations of Code Section
415, the following are not "annual additions": (1) the transfer of
funds from one qualified plan to another and (2) provided no more than
one-third of the Employer contributions for the year are allocated to
Highly Compensated Participants, 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. In
addition, the following are not Employee contributions for the
purposes of Section 4.9(b)(2): (1) rollover contributions (as defined
in Code Sections 402(a)(5), 403(a)(4), 403(b)(8) and 408(d)(3));
(2) repayments of loans made to a Participant from the Plan;
(3) repayments of distributions received by an Employee pursuant to
Code Section 411(a)(7)(B) (cash-outs); (4) repayments of distributions
received by an Employee pursuant to Code Section 411(a)(3)(D)
(mandatory contributions); and (5) Employee contributions to a
simplified employee pension excludable from gross income under Code
Section 408(k)(6).

(d) For purposes of applying the limitations of Code Section
415, the "limitation year" shall be the Plan Year.

(e) The dollar limitation under Code Section 415(b)(1)(A)
stated in paragraph (a)(1) above shall be adjusted annually as
provided in Code Section 415(d) pursuant to the Regulations. The
adjusted limitation is effective as of January 1st of each calendar
year and

<PAGE>

is applicable to "limitation years" ending with or within that
calendar year.

(f) For the purpose of this Section, 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.

(g) For the purpose of this Section, if the Employer is a
member of a controlled group of corporations, trades or businesses
under common control (as defined by Code Section 1563(a) or Code
Section 414(b) and (c) as modified by Code Section 415(h)), is a
member of an affiliated service group (as defined by Code Section
414(m)), or is a member of a group of entities required to be
aggregated pursuant to Regulations under Code Section 414(o), all
Employees of such Employers shall be considered to be employed by a
single Employer.

(h) For the purpose of this Section, if this Plan is a Code
Section 413(c) plan, all Employers of a Participant who maintain this
Plan will be considered to be a single Employer.

(i)(1) If a Participant participates in more than one defined
contribution plan maintained by the Employer which have different
Anniversary Dates, the maximum "annual additions" under this Plan
shall equal the maximum "annual additions" for the "limitation year"
minus any "annual additions" previously credited to such Participant's
accounts during the "limitation year."

(2) If a Participant participates in both a defined
contribution plan subject to Code Section 412 and a defined
contribution plan not subject to Code Section 412 maintained by
the Employer which have the same Anniversary Date, "annual
additions" will be credited to the Participant's accounts under
the defined contribution plan subject to Code Section 412 prior
to crediting "annual additions" to the Participant's accounts
under the defined contribution plan not subject to Code Section
412.

(3) If a Participant participates in more than one defined
contribution plan not subject to Code Section 412 maintained by
the Employer which have the same Anniversary Date, the maximum
"annual additions" under this Plan shall equal the

<PAGE>

product of (A) the maximum "annual additions" for the
"limitation year" minus any "annual additions" previously
credited under subparagraphs (1) or (2) above, multiplied by
(B) a fraction (i) the numerator of which is the "annual
additions" which would be credited to such Participant's
accounts under this Plan without regard to the limitations of
Code Section 415 and (ii) the denominator of which is such
"annual additions" for all plans described in this subparagraph.

(j) If an Employee is (or has been) a Participant in one or
more defined benefit plans and one or more defined contribution plans
maintained by the Employer, the sum of the defined benefit plan
fraction and the defined contribution plan fraction for any
"limitation year" may not exceed 1.0.

(k) The defined benefit plan fraction for any "limitation year"
is a fraction, the numerator of which is the sum of the Participant's
projected annual benefits under all the defined benefit plans (whether
or not terminated) maintained by the Employer, and the denominator of
which is the lesser of 125 percent of the dollar limitation determined
for the "limitation year" under Code Sections 415(b) and (d) or 140
percent of the highest average compensation, including any adjustments
under Code Section 415(b).

Notwithstanding the above, if the Participant was a
Participant as of the first day of the first "limitation year"
beginning after December 31, 1986, in one or more defined benefit
plans maintained by the Employer which were in existence on May 6,
1986, the denominator of this fraction will not be less than 125
percent of the sum of the annual benefits under such plans which the
Participant had accrued as of the close of the last "limitation year"
beginning before January 1, 1987, disregarding any changes in the
terms and conditions of the plan after May 5, 1986. The preceding
sentence applies only if the defined benefit plans individually and in
the aggregate satisfied the requirements of Code Section 415 for all
"limitation years" beginning before January 1, 1987.

(l) The defined contribution plan fraction for any "limitation
year" is a fraction, the numerator of which is the sum of the annual
additions to the Participant's Account under all the defined
contribution plans (whether or not terminated) maintained by the
Employer for the current and all prior "limitation years" (including
the annual additions attributable to the Participant's

<PAGE>

nondeductible Employee contributions to all defined benefit plans,
whether or not terminated, maintained by the Employer, and the annual
additions attributable to all welfare benefit funds, as defined in
Code Section 419(e), and individual medical accounts, as defined in
Code Section 415(l)(2), maintained by the Employer), and the
denominator of which is the sum of the maximum aggregate amounts for
the current and all prior "limitation years" of service with the
Employer (regardless of whether a defined contribution plan was
maintained by the Employer). The maximum aggregate amount in any
"limitation year" is the lesser of 125 percent of the dollar
limitation determined under Code Sections 415(b) and (d) in effect
under Code Section 415(c)(1)(A) or 35 percent of the Participant's
Compensation for such year.

If the Employee was a Participant as of the end of the
first day of the first "limitation year" beginning after December 31,
1986, in one or more defined contribution plans maintained by the
Employer which were in existence on May 6, 1986, the numerator of this
fraction will be adjusted if the sum of this fraction and the defined
benefit fraction would otherwise exceed 1.0 under the terms of this
Plan. Under the adjustment, an amount equal to the product of (1) the
excess of the sum of the fractions over 1.0 times (2) the denominator
of this fraction, will be permanently subtracted from the numerator of
this fraction. The adjustment is calculated using the fractions as
they would be computed as of the end of the last "limitation year"
beginning before January 1, 1987, and disregarding any changes in the
terms and conditions of the Plan made after May 5, 1986, but using the
Code Section 415 limitation applicable to the first "limitation year"
beginning on or after January 1, 1987. The annual addition for any
"limitation year" beginning before January 1, 1987 shall not be
recomputed to treat all Employee contributions as annual additions.

(m) Notwithstanding the foregoing, for any "limitation year" in
which the Plan is a Top Heavy Plan, 100 percent shall be substituted
for 125 percent in Sections 4.9(k) and 4.9(l) unless the extra minimum
allocation is being provided pursuant to Section 4.4. However, for any
"limitation year" in which the Plan is a Super Top Heavy Plan, 100
percent shall be substituted for 125 percent in any event.

(n) 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

<PAGE>

415 and the Regulations thereunder, the terms of which are
specifically incorporated herein by reference.

4.10 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS

(a) If, as a result of the allocation of Forfeitures, a
reasonable error in estimating a Participant's Compensation, a
reasonable error in determining the amount of elective deferrals
(within the meaning of Code Section 402(g)(3)) that may be made with
respect to any Participant under the limits of Section 4.9 or other
facts and circumstances to which Regulation 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) distribute any elective deferrals (within the
meaning of Code Section 402(g)(3)) or 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 or Employee
contributions which would constitute "annual additions" are made to
the Plan for such "limitation year" (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) For purposes of this Article, "excess amount" for any
Participant for a "limitation year" shall mean the excess, if any, of
(1) 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 (2) the maximum "annual additions" determined
pursuant to Section 4.9.

(c) 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.

<PAGE>

4.11 TRANSFERS FROM QUALIFIED PLANS

(a) With the consent of the Administrator, amounts may be
transferred from other qualified plans by Employees, provided that the
trust from which such funds are transferred permits the transfer to be
made and the transfer will not jeopardize the tax exempt status of the
Plan or Trust or create adverse tax consequences for the Employer. The
amounts transferred shall be set up in a separate account herein
referred to as a "Participant's Rollover Account." Such account shall
be fully Vested at all times and shall not be subject to Forfeiture
for any reason.

(b) Amounts in a Participant's Rollover Account shall be held
by the Trustee pursuant to the provisions of this Plan and may not be
withdrawn by, or distributed to the Participant, in whole or in part,
except as provided in paragraphs (c) and (d) of this Section.

(c) Except as permitted by Regulations (including Regulation
1.411(d)-4), amounts attributable to elective contributions (as
defined in Regulation 1.401(k)-1(g)(3)), including amounts treated as
elective contributions, which are transferred from another qualified
plan in a plan-to-plan transfer shall be subject to the distribution
limitations provided for in Regulation 1.401(k)-1(d).

(d) At Normal Retirement Date, or such other date when the
Participant or his Beneficiary shall be entitled to receive benefits,
the fair market value of the Participant's Rollover Account shall be
used to provide additional benefits to the Participant or his
Beneficiary. Any distributions of amounts held in a Participant's
Rollover Account shall be made in a manner which is consistent with
and satisfies the provisions of Section 7.5, including, but not
limited to, all notice and consent requirements of Code Section
411(a)(11) and the Regulations thereunder. Furthermore, such amounts
shall be considered as part of a Participant's benefit in determining
whether an involuntary cash-out of benefits without Participant
consent may be made.

(e) The Administrator may direct that employee transfers made
after a valuation date be segregated into a separate account for each
Participant in a federally insured savings account, certificate of
deposit in a bank or savings and loan association, money market
certificate, or other short term debt security acceptable to the
Trustee until such time as

<PAGE>

the allocations pursuant to this Plan have been made, at which time
they may remain segregated or be invested as part of the general Trust
Fund, to be determined by the Administrator.

(f) All amounts allocated to a Participant's Rollover Account
may be treated as a Directed Investment Account pursuant to Section
4.12.

(g) For purposes of this Section, the term "qualified plan"
shall mean any tax qualified plan under Code Section 401(a). The term
"amounts transferred from other qualified plans" shall mean:
(i) amounts transferred to this Plan directly from another qualified
plan; (ii) distributions from another qualified plan which are
eligible rollover distributions and which are either transferred by
the Employee to this Plan within sixty (60) days following his receipt
thereof or are transferred pursuant to a direct rollover;
(iii) amounts transferred to this Plan from a conduit individual
retirement account provided that the conduit individual retirement
account has no assets other than assets which (A) were previously
distributed to the Employee by another qualified plan as a lump-sum
distribution (B) were eligible for tax-free rollover to a qualified
plan and (C) were deposited in such conduit individual retirement
account within sixty (60) days of receipt thereof and other than
earnings on said assets; and (iv) amounts distributed to the Employee
from a conduit individual retirement account meeting the requirements
of clause (iii) above, and transferred by the Employee to this Plan
within sixty (60) days of his receipt thereof from such conduit
individual retirement account.

(h) Prior to accepting any transfers to which this Section
applies, the Administrator may require the Employee to establish that
the amounts to be transferred to this Plan meet the requirements of
this Section and may also require the Employee to provide an opinion
of counsel satisfactory to the Employer that the amounts to be
transferred meet the requirements of this Section.

(i) This Plan shall not accept any direct or indirect transfers
(as that term is defined and interpreted under Code Section 401(a)(11)
and the Regulations thereunder) from a defined benefit plan, money
purchase plan (including a target benefit plan), stock bonus or profit
sharing plan which would otherwise have provided for a life annuity
form of payment to the Participant.

<PAGE>

(j) Notwithstanding anything herein to the contrary, a transfer
directly to this Plan from another qualified plan (or a transaction
having the effect of such a transfer) shall only be permitted if it
will not result in the elimination or reduction of any "Section
411(d)(6) protected benefit" as described in Section 9.1.

4.12 DIRECTED INVESTMENT ACCOUNT

(a) The Administrator, subject to subparagraph (b) below, may
determine that all Participants be permitted to direct the Trustee as
to the investment of all or a portion of the Vested interest in any
one or more of their individual account balances. If such
authorization is given, Participants may, subject to a procedure
established by the Administrator and applied in a uniform
nondiscriminatory manner, direct the Trustee in writing to invest the
Vested portion of their account in specific assets, specific funds or
other investments permitted under the Plan and the directed investment
procedure. That portion of the Vested account of any Participant so
directing will thereupon be considered a Directed Investment Account,
which shall not share in Trust Fund earnings.

(b) Each "Qualified Participant" may elect within ninety (90)
days after the close of each Plan Year during the "Qualified Election
Period" to direct the Trustee in writing as to the investment of 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 "50 percent" for "25 percent". If the "Qualified
Participant" elects to direct the Trustee as to the investment of his
Company Stock Account, such direction shall be effective no later than
180 days after the close of the Plan Year to which such direction
applies. In lieu of directing the Trustee as to the investment of his
Company Stock Account, the "Qualified Participant" may elect 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. Any
such distribution of Company Stock shall be subject to Section 7.11.

Notwithstanding the above, if the fair market value
(determined pursuant to Section 6.1 at the

<PAGE>

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 paragraph. For
purposes of determining whether the fair market value exceeds $500,
Company Stock held in accounts of all employee stock ownership plans
(as defined in Code Section 4975(e)(7)) 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.

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

(2) "Qualified Election Period" means the six (6) Plan Year
period beginning with the later of (i) the first Plan Year in
which the Participant first became a "Qualified Participant", or
(ii) the first Plan Year beginning after December 31, 1986.

(d) A separate Directed Investment Account shall be established
for each Participant who has directed an investment. Transfers between
the Participant's regular account and his Directed Investment Account
shall be charged and credited as the case may be to each account. The
Directed Investment Account shall not share in Trust Fund earnings,
but it shall be charged or credited as appropriate with the net
earnings, gains, losses and expenses as well as any appreciation or
depreciation in market value during each Plan Year attributable to
such account.

ARTICLE V
FUNDING AND INVESTMENT POLICY

5.1 INVESTMENT POLICY

(a) The Plan is designed to invest primarily in Company Stock.

(b) With due regard to subparagraph (a) above, the
Administrator may also direct the Trustee to invest funds under the
Plan in other property described in the Trust or in life insurance
policies to the extent

<PAGE>

permitted by subparagraph (c) below, or the Trustee may hold such
funds in cash or cash equivalents.

(c) With due regard to subparagraph (a) above, the
Administrator may also direct the Trustee to invest funds under the
Plan in insurance policies on the life of any "keyman" Employee. The
proceeds of a "keyman" insurance policy may not be used for the
repayment of any indebtedness owed by the Plan which is secured by
Company Stock. In the event any "keyman" insurance is purchased by the
Trustee, the premiums paid thereon during any Plan Year, net of any
policy dividends and increases in cash surrender values, shall be
treated as the cost of Plan investment and any death benefit or cash
surrender value received shall be treated as proceeds from an
investment of the Plan.

(d) 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.

(e) 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.

(f) All purchases of Company Stock shall be made at a price
which, in the judgment of the Administrator, 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) 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

<PAGE>

(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) Except, however, subparagraph (a)(1)(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) 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

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

(d) 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

<PAGE>

(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) 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.

(3) To repay a prior Exempt Loan.

(b) 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 on a pro-rata
basis pursuant to Section 4.4(e);

(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 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 lender is a
disqualified person, an Exempt Loan shall provide for a transfer
of Trust Funds upon default only

<PAGE>

upon and to the extent of the failure of the Plan to meet the
payment schedule of the Exempt Loan;

(7) Exempt Loan payments during a Plan Year must not exceed an
amount equal to: (A) 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 (B) 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.

(c) For purposes of this Section, the term "disqualified
person" means a person who is a Fiduciary, a person providing services
to the Plan, an Employer any of whose Employees are covered by the
Plan, an employee organization any of whose members are covered by the
Plan, 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, or an officer, director, 10% or
more shareholder, or a highly compensated Employee.

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 "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

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

<PAGE>

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 tradeable on an established securities market shall be valued by an
independent appraiser meeting requirements similar to the requirements of the
Regulations prescribed under Code Section 170(a)(1).

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 or Early Retirement
Date. 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 4.4, shall continue until his Late Retirement Date. Upon a Participant's
Retirement Date or attainment of his Normal Retirement Date without termination
of employment with the Employer, or as soon thereafter as is practicable, the
Trustee shall distribute all amounts credited to such Participant's Combined
Account in accordance with Sections 7.5 and 7.6.

7.2 DETERMINATION OF BENEFITS UPON DEATH

(a) Upon the death of a Participant before his Retirement Date
or other termination of his employment, all amounts credited to such
Participant's Combined Account shall become fully Vested. If elected,
distribution of the Participant's Combined Account shall commence not
later than one (1) year after the close of the Plan Year in which such
Participant's death occurs. 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 to the
Participant's Beneficiary.

(b) Upon the death of a Former 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 Former Participant to such
Former Participant's Beneficiary.

(c) Any security interest held by the Plan by reason of an
outstanding loan to the Participant or Former Participant shall be
taken into account in determining the amount of the death benefit.

<PAGE>

(d) 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 or Former 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.

(e) 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.

(f) 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.

<PAGE>

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 Combined Account shall become fully Vested. In
the event of a 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 Combined Account as
though he had retired. If such Participant elects, distribution shall commence
not later than one (1) year after the close of the Plan Year in which Total and
Permanent Disability occurs.

7.4 DETERMINATION OF BENEFITS UPON TERMINATION

(a) On or before the Anniversary Date coinciding with or
subsequent to the termination of a Participant's employment for any
reason other than death, Total and Permanent Disability or retirement,
the Administrator may direct the Trustee to segregate the amount of
the Vested portion of such Terminated Participant's Combined Account
and invest the aggregate amount thereof in a separate, federally
insured savings account, certificate of deposit, common or collective
trust fund of a bank or a deferred annuity. In the event the Vested
portion of a Participant's Combined Account is not segregated, the
amount shall remain in a separate account for the Terminated
Participant and share in allocations pursuant to Section 4.4 until
such time as a distribution is made to the Terminated Participant.

If a portion of a Participant's Account is forfeited,
Company Stock allocated to the Participant's Company Stock Account
must be forfeited only after the Participant's Other Investments
Account has been depleted. If interest in more than one class of
Company Stock has been allocated to a Participant's Account, the
Participant must be treated as forfeiting the same proportion of each
such class.

Distribution of the funds due to a Terminated Participant
shall be made on the occurrence of an event which would result in the
distribution had the Terminated Participant remained in the employ of
the Employer (upon the Participant's death, Total and Permanent
Disability, Early or Normal Retirement). However, at the election of
the Participant, the Administrator shall direct the Trustee to cause
the entire Vested portion of the Terminated Participant's Combined
Account to be payable to such Terminated Participant on or after the
Anniversary Date coinciding with or next following termination of
employment.

<PAGE>

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 Regulations thereunder.

If the value of a Terminated Participant's Vested benefit
derived from Employer and Employee contributions does not exceed
$3,500 and has never exceeded $3,500 at the time of any prior
distribution, the Administrator shall direct the Trustee to cause the
entire Vested benefit to be paid to such Participant in a single lump
sum.

(b) 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

Less than 3 0 %
3 20 %
4 40 %
5 60 %
6 80 %
7 100 %

(c) Notwithstanding the vesting schedule provided for in
paragraph (b) above, for any Top Heavy Plan Year, the Vested portion
of the Participant's Account of any Participant who has an Hour of
Service after the Plan becomes top heavy 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

Less than 2 0 %
2 20 %
3 40 %
4 60 %
5 80 %
6 100 %

67
<PAGE>

If in any subsequent Plan Year, the Plan ceases to be a Top
Heavy Plan, the Administrator shall revert to the vesting schedule in
effect before this Plan became a Top Heavy Plan. Any such reversion
shall be treated as a Plan amendment pursuant to the terms of the
Plan.

(d) Notwithstanding the vesting schedule above, the Vested
percentage of a Participant's Account shall not be less than the
Vested percentage attained as of the later of the effective date or
adoption date of this amendment and restatement.

(e) Notwithstanding the vesting schedule above, upon the
complete discontinuance of the Employer's contributions to the Plan or
upon any full or partial termination of the Plan, all amounts credited
to the account of any affected Participant shall become 100% Vested
and shall not thereafter be subject to Forfeiture.

(f) 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. For this
purpose, 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.

(g)(1) If any Former Participant shall be reemployed by the
Employer before a 1-Year Break in Service occurs, he shall continue to
participate in the Plan in the same manner as if such termination had
not occurred.

<PAGE>

(2) If any Former Participant is reemployed after a 1-Year
Break in Service has occurred, Years of Service shall include
Years of Service prior to his 1-Year Break in Service subject to
the following rules:

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

(ii) Any Former 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
1-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;

(iii) After five (5) consecutive 1-Year Breaks in Service,
a Former Participant's Vested Account balance attributable
to pre-break service shall not be increased as a result of
post-break service;

(iv) If a Former Participant who has not had his Years of
Service before a 1-Year Break in Service disregarded
pursuant to (ii) above completes one (1) Year of Service
for eligibility purposes following his reemployment with
the Employer, he shall participate in the Plan
retroactively from his date of reemployment;

(v) If a Former Participant who has not had his Years of
Service before a 1-Year Break in Service disregarded
pursuant to (ii) above completes a Year of Service (a
1-Year Break in Service previously occurred, but employment
had not terminated), he shall participate in the Plan
retroactively from the first day of the Plan Year during
which he completes one (1) Year of Service.

<PAGE>

7.5 DISTRIBUTION OF BENEFITS

(a) The Administrator, pursuant to the election of the
Participant (or if no election has been made prior to the
Participant's death, by his Beneficiary), shall direct the Trustee to
distribute to a Participant or his Beneficiary any amount to which he
is entitled under the Plan in one or more of the following methods:

(1) One lump-sum payment;

(2) Payments over a period certain in monthly, quarterly,
semiannual, or annual installments. The period over which such
payment is to be made shall not extend beyond the earlier of the
Participant's life expectancy (or the life expectancy of the
Participant and his designated Beneficiary) or the limited
distribution period provided for in Section 7.5(b).

(b) Unless the Participant elects in writing a longer
distribution period, distributions to a Participant or his Beneficiary
attributable to Company Stock shall be in substantially equal monthly,
quarterly, semiannual, or annual installments over a period not longer
than five (5) years. In the case of a Participant with an account
balance attributable to Company Stock in excess of $500,000, the five
(5) year period shall be extended one (1) additional year (but not
more than five (5) additional years) for each $100,000 or fraction
thereof by which such balance exceeds $500,000. The dollar limits
shall be adjusted at the same time and in the same manner as provided
in Code Section 415(d).

(c) Any distribution to a Participant who has a benefit which
exceeds, or has ever exceeded, $3,500 at the time of any prior
distribution shall require such Participant's consent if such
distribution commences prior to the later of his Normal Retirement Age
or age 62. 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 7.5(f).

(2) Notice of the rights specified under this paragraph shall
be provided no less than 30 days and no more than 90 days before
the first day on

<PAGE>

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 Regulation 1.411(a)-11(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 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.

(d) 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' or Former
Participants' Company Stock Accounts be distributed to such
Participants or Former Participants within 90 days after the close of
the Plan Year in which the dividends are paid.

(e) Any part of a Participant's benefit which is retained in
the Plan after the Anniversary Date on which his participation ends
will continue to be treated as a Company Stock Account or as an Other
Investments Account (subject to Section 7.4(a)) as provided in Article
IV. However, neither account will be credited with any further
Employer contributions or Forfeitures.

(f) 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 Regulations thereunder (including
Regulation 1.401(a)(9)-2), the provisions of which are incorporated
herein by reference:

<PAGE>

(1) A Participant's benefits shall be distributed to him not
later than April 1st of the calendar year following the later of
(i) the calendar year in which the Participant attains age
70 1/2 or (ii) the calendar year in which the Participant
retires, provided, however, that this clause (ii) shall not
apply in the case of a Participant who is a "five (5) percent
owner" at any time during the five (5) Plan Year period ending
in the calendar year in which he attains age 70 1/2 or, in the
case of a Participant who becomes a "five (5) percent owner"
during any subsequent Plan Year, clause (ii) shall no longer
apply and the required beginning date shall be the April 1st of
the calendar year following the calendar year in which such
subsequent Plan Year ends. Alternatively, distributions to a
Participant must begin no later than the applicable April 1st as
determined under the preceding sentence and must be made over a
period certain measured by the life expectancy of the
Participant (or the life expectancies of the Participant and his
designated Beneficiary) in accordance with Regulations.
Notwithstanding the foregoing, clause (ii) above shall not apply
to any Participant unless the Participant had attained age
70 1/2 before January 1, 1988 and was not a "five (5) percent
owner" at any time during the Plan Year ending with or within
the calendar year in which the Participant attained age 66 1/2
or any subsequent Plan Year.

(2) Distributions to a Participant and his Beneficiaries shall
only be made in accordance with the incidental death benefit
requirements of Code Section 401(a)(9)(G) and the Regulations
thereunder.

(g) 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 selected pursuant to Section 7.5 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

<PAGE>

Beneficiaries by December 31st of the calendar year in which the fifth
anniversary of his date of death occurs.

However, the 5-year distribution requirement of the
preceding paragraph shall not apply to any portion of the deceased
Participant's interest which is payable to or for the benefit of a
designated Beneficiary. In such event, such portion may, at the
election of the Participant (or the Participant's designated
Beneficiary), be distributed over a period not extending beyond the
life expectancy of such designated Beneficiary provided such
distribution begins not later than December 31st of the calendar year
immediately following the calendar year in which the Participant died.
However, in the event the Participant's spouse (determined as of the
date of the Participant's death) is his Beneficiary, the requirement
that distributions commence within one year of a Participant's death
shall not apply. In lieu thereof, distributions must commence on or
before the later of: (1) December 31st of the calendar year
immediately following the calendar year in which the Participant died;
or (2) December 31st of the calendar year in which the Participant
would have attained age 70 1/2. If the surviving spouse dies before
distributions to such spouse begin, then the 5-year distribution
requirement of this Section shall apply as if the spouse was the
Participant.

(h) For purposes of Section 7.5(g), the election by a
designated Beneficiary to be excepted from the 5-year distribution
requirement must be made no later than December 31st of the calendar
year following the calendar year of the Participant's death. Except,
however, with respect to a designated Beneficiary who is the
Participant's surviving spouse, the election must be made by the
earlier of: (1) December 31st of the calendar year immediately
following the calendar year in which the Participant died or, if
later, the calendar year in which the Participant would have attained
age 70 1/2; or (2) December 31st of the calendar year which contains
the fifth anniversary of the date of the Participant's death. An
election by a designated Beneficiary must be in writing and shall be
irrevocable as of the last day of the election period stated herein.
In the absence of an election by the Participant or a designated
Beneficiary, the 5-year distribution requirement shall apply.

(i) For purposes of this Section, the life expectancy of a
Participant and a Participant's spouse may, at the election of the
Participant or the Participant's spouse, be redetermined in accordance

<PAGE>

with Regulations. The election, once made, shall be irrevocable. If no
election is made by the time distributions must commence, then the
life expectancy of the Participant and the Participant's spouse shall
not be subject to recalculation. Life expectancy and joint and last
survivor expectancy shall be computed using the return multiples in
Tables V and VI of Regulation 1.72-9.

(j) Except as limited by Sections 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 Former Participant elects in writing to
defer the receipt of benefits (such election may not result in a death
benefit that is more than incidental), 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.

(k) If a distribution is made at a time when a Participant is
not fully Vested in his Participant's Account and the Participant may
increase the Vested percentage in such account:

(1) a separate account shall be established for the
Participant's interest in the Plan as of the time of the
distribution; and

(2) at any relevant time, the Participant's Vested portion of
the separate account shall be equal to an amount ("X")
determined by the formula:

X equals P(AB plus (R x D)) - (R x D)

For purposes of applying the formula: P is the Vested percentage
at the relevant time, AB is the account balance at the relevant
time, D is the amount of distribution, and R is the ratio of the

<PAGE>

account balance at the relevant time to the account balance
after distribution.

7.6 HOW PLAN BENEFIT WILL BE DISTRIBUTED

(a) Distribution of a Participant's benefit may be made in cash
or Company Stock or both, provided, however, that if a Participant or
Beneficiary so demands, such benefit (other than Company Stock
reinvested pursuant to Section 4.12(b)) 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.

(b) If a Participant or Beneficiary demands that benefits be
distributed solely in Company Stock, distribution of a Participant's
benefit will be 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 for distribution 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
7.5(j) and 7.5(f).

(d) 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)(2), the Administrator shall
distribute a Participant's Combined Account entirely in cash without
granting the Participant the right to demand distribution in shares of
Company Stock.

(e) 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

<PAGE>

price less than the fair market value of the Company Stock.

(f) 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, at the later of the
Participant's attainment of age 62 or his Normal Retirement Age, 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 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 RIGHT OF FIRST REFUSALS

(a) 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

<PAGE>

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) 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) The closing pursuant to the exercise of the right of first
refusal under Section 7.9(a) 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) Except as provided in this paragraph (d), 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 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)

<PAGE>

of the Securities Exchange Act (15 U.S.C. 780). In addition, in the
case of Company 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.

7.10 STOCK CERTIFICATE LEGEND

Certificates for shares distributed pursuant to the Plan shall contain
the following legend:

"The shares represented by this certificate are transferable only upon
compliance with the terms of THE ADAMS NATIONAL BANK EMPLOYEE STOCK OWNERSHIP
PLAN WITH 401(K) PROVISIONS effective as of January 1, 1996, which grants to The
Adams National Bank a right of first refusal, a copy of said Plan being on file
in the office of the Company."

7.11 PUT OPTION

(a) 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 tradeable 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
7.11(c).

(b) 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. 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 7.12) affecting the Company Stock which
would make the Company Stock not as freely tradeable as stock not
subject to such restriction.

<PAGE>

(c) The put option must be exercisable only by a Participant,
by the Participant's donees, or by a person (including an estate or
its distributee) to whom the Company Stock passes by reason of a
Participant's death. (Under this paragraph Participant or Former
Participant means a Participant or Former Participant and the
beneficiaries of the Participant or Former Participant under the
Plan.) The put option must permit a Participant to put the Company
Stock to the Employer. Under no circumstances may the put option bind
the Plan. However, it shall grant the Plan an option to assume the
rights and obligations of the Employer at the time that the put option
is exercised. If it is known at the time a loan is made that Federal
or State law will be violated by the Employer's honoring such put
option, the put option must permit the Company Stock to be put, in a
manner consistent with such law, to a third party (e.g., an affiliate
of the Employer or a shareholder other than the Plan) that has
substantial net worth at the time the loan is made and whose net worth
is reasonably expected to remain substantial.

The put option shall commence as of the day following the
date the Company Stock is distributed to the Former Participant and
end 60 days thereafter and if not exercised within such 60-day period,
an additional 60-day option shall commence on the first day of the
fifth month of the Plan Year next following the date the stock was
distributed to the Former Participant (or such other 60-day period as
provided in regulations promulgated by the Secretary of the Treasury).
However, in the case of Company Stock that is publicly traded without
restrictions when distributed but ceases to be so traded within either
of the 60-day periods described herein after distribution, the
Employer must notify each holder of such Company Stock in writing on
or before the tenth day after the date the Company Stock ceases to be
so traded that for the remainder of the applicable 60-day period the
Company Stock is subject to the put option. The number of days between
the tenth day and the date on which notice is actually given, if later
than the tenth day, must be added to the duration of the put option.
The notice must inform distributees of the term of the put options
that they are to hold. The terms must satisfy the requirements of this
paragraph.

The put option is exercised by the holder notifying the
Employer in writing that the put option is being exercised; the notice
shall state the name and address of the holder and the number of
shares to be sold. The period during which a put option is exercisable
does not include any time when a distributee is unable to exercise it
because the party

<PAGE>

bound by the put option is prohibited from honoring it by applicable
Federal or State law. The price at which a put option must be
exercisable is the value of the Company Stock determined in accordance
with Section 6.2. Payment under the put option involving a "Total
Distribution" shall be paid in substantially equal monthly, quarterly,
semiannual or annual installments over a period certain beginning not
later than thirty (30) days after the exercise of the put option and
not extending beyond (5) years. The deferral of payment is reasonable
if adequate security and a reasonable interest rate on the unpaid
amounts are provided. The amount to be paid under the put option
involving installment distributions must be paid not later than thirty
(30) days after the exercise of the put option. Payment under a put
option must not be restricted by the provisions of a loan or any other
arrangement, including the terms of the Employer's articles of
incorporation, unless so required by applicable state law.

For purposes of this Section, "Total Distribution" means a
distribution to a Participant or his Beneficiary within one taxable
year of the entire Vested Participant's Combined Account.

(d) An arrangement involving the Plan that creates a put option
must not provide for the issuance of put options other than as
provided under this Section. The Plan (and the Trust Fund) must not
otherwise 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.

7.12 NONTERMINABLE PROTECTIONS AND RIGHTS

No Company Stock, except as provided in Section 4.4(o) and Section
7.11(b), acquired with the proceeds of a 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 this Section
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 said
protections and rights.

<PAGE>

7.13 PRE-RETIREMENT DISTRIBUTION

At such time as a Participant shall have attained the age of 59 1/2
years, the Administrator, at the election of the Participant, shall direct the
Trustee to distribute all or a portion of the amount then credited to the
accounts maintained on behalf of the Participant. However, no distribution from
the Participant's Account shall occur prior to 100% vesting. In the event that
the Administrator makes such a distribution, the Participant shall continue to
be eligible to participate in the Plan on the same basis as any other Employee.
Any distribution made pursuant to this Section shall be made in a manner
consistent with Sections 7.5 and 7.6, including, but not limited to, all notice
and consent requirements of Code Section 411(a)(11) and the Regulations
thereunder.

Notwithstanding the above, pre-retirement distributions from a
Participant's Elective Account shall not be permitted prior to the Participant
attaining age 59 1/2 except as otherwise permitted under the terms of the Plan.

7.14 ADVANCE DISTRIBUTION FOR HARDSHIP

(a) The Administrator, at the election of the Participant,
shall direct the Trustee to distribute to any Participant in any one
Plan Year up to the lesser of 100% of his Participant's Elective
Account valued as of the last Anniversary Date or other valuation date
or the amount necessary to satisfy the immediate and heavy financial
need of the Participant. Any distribution made pursuant to this
Section shall be deemed to be made as of the first day of the Plan
Year or, if later, the valuation date immediately preceding the date
of distribution, and the Participant's Elective Account shall be
reduced accordingly. Withdrawal under this Section shall be authorized
only if the distribution is on account of:

(1) Expenses for medical care described in Code Section 213(d)
previously incurred by the Participant, his spouse, or any of
his dependents (as defined in Code Section 152) or necessary for
these persons to obtain medical care;

(2) The costs directly related to the purchase of a principal
residence for the Participant (excluding mortgage payments);

(3) Payment of tuition and related educational fees for the
next twelve (12) months of post-secondary education for the
Participant, his spouse, children, or dependents; or

<PAGE>

(4) Payments necessary to prevent the eviction of the
Participant from his principal residence or foreclosure on the
mortgage of the Participant's principal residence.

(b) No distribution shall be made pursuant to this Section
unless the Administrator, based upon the Participant's representation
and such other facts as are known to the Administrator, determines
that all of the following conditions are satisfied:

(1) The distribution is not in excess of the amount of the
immediate and heavy financial need of the Participant. The
amount of the immediate and heavy financial need may include any
amounts necessary to pay any federal, state, or local income
taxes or penalties reasonably anticipated to result from the
distribution;

(2) The Participant has obtained all distributions, other than
hardship distributions, and all nontaxable (at the time of the
loan) loans currently available under all plans maintained by
the Employer;

(3) The Plan, and all other plans maintained by the Employer,
provide that the Participant's elective deferrals and voluntary
Employee contributions will be suspended for at least twelve
(12) months after receipt of the hardship distribution or, the
Participant, pursuant to a legally enforceable agreement, will
suspend his elective deferrals and voluntary Employee
contributions to the Plan and all other plans maintained by the
Employer for at least twelve (12) months after receipt of the
hardship distribution; and

(4) The Plan, and all other plans maintained by the Employer,
provide that the Participant may not make elective deferrals for
the Participant's taxable year immediately following the taxable
year of the hardship distribution in excess of the applicable
limit under Code Section 402(g) for such next taxable year less
the amount of such Participant's elective deferrals for the
taxable year of the hardship distribution.

(c) Notwithstanding the above, distributions from the
Participant's Elective Account pursuant to this Section shall be
limited, as of the date of distribution, to the Participant's Elective
Account as of the end of the last Plan Year ending before July 1,
1989, plus the total Participant's Deferred

<PAGE>

Compensation after such date, reduced by the amount of any previous
distributions pursuant to this Section and Section 7.13.

(d) Any distribution made pursuant to this Section 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 Regulations
thereunder.

7.15 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).

ARTICLE VIII
TRUSTEE

8.1 BASIC RESPONSIBILITIES OF THE TRUSTEE

The Trustee shall have the following categories of responsibilities:

(a) 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;

(b) 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;

(c) 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 8.8; and

(d) 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.

<PAGE>

8.2 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE

(a) 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) 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) 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 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

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:

(a) 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;

<PAGE>

(b) 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;

(c) 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;

(d) 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;

(e) 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;

(f) 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;

(g) 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;

(h) To make, execute, acknowledge, and deliver any and all
documents of transfer and conveyance and

<PAGE>

any and all other instruments that may be necessary or appropriate to
carry out the powers herein granted;

(i) 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;

(j) 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;

(k) To apply for and procure from responsible insurance
companies, to be selected by the Administrator, as an investment of
the Trust Fund such annuity, or other Contracts (on the life of any
Participant) as the Administrator shall deem proper; to exercise, at
any time or from time to time, whatever rights and privileges may be
granted under such annuity, or other Contracts; to collect, receive,
and settle for the proceeds of all such annuity or other Contracts as
and when entitled to do so under the provisions thereof;

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

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

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

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

(p) To vote Company Stock as provided in Section 8.5;

(q) 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;

(r) To deposit such Company Stock (but only if such deposit
does not violate the provisions of Section 8.5 hereof) or other
securities in any voting trust, or

<PAGE>

with any protective or like committee, or with a trustee or with
depositories designated thereby;

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

(t) 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
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;

(u) 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;

(v) 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.

(w) Directed Investment Account. The powers granted to the
Trustee shall be exercised in the sole fiduciary discretion of the
Trustee. However, pursuant to Section 4.12, each Participant is
authorized and empowered, in his sole and absolute discretion, to give
directions to the Trustee pursuant to the procedure established by the
Administrator and in such form as the Trustee may require concerning
the investment of the Participant's Directed Investment Account. The
Trustee shall comply as promptly as practicable with directions given
by the Participant hereunder. The Trustee may refuse to comply with
any direction from the Participant in the event the Trustee, in its
sole and absolute discretion, deems such directions improper by virtue
of applicable law. The Trustee shall not be responsible or liable for
any loss or expense which may result from the Trustee's refusal or
failure to comply with any directions from the Participant. Any costs
and expenses related to compliance with the Participant's directions
shall be borne by the Participant's Directed Investment Account.

<PAGE>

8.4 LOANS TO PARTICIPANTS

(a) The Trustee may, in the Trustee's discretion, make loans to
Participants and Beneficiaries under the following circumstances:
(1) loans shall be made available to all Participants and
Beneficiaries on a reasonably equivalent basis; (2) loans shall not be
made available to Highly Compensated Employees in an amount greater
than the amount made available to other Participants and
Beneficiaries; (3) loans shall bear a reasonable rate of interest;
(4) loans shall be adequately secured; and (5) shall provide for
repayment over a reasonable period of time.

(b) Loans made pursuant to this Section (when added to the
outstanding balance of all other loans made by the Plan to the
Participant) shall be limited to the lesser of:

(1) $50,000 reduced by the excess (if any) of the highest
outstanding balance of loans from the Plan to the Participant
during the one year period ending on the day before the date on
which such loan is made, over the outstanding balance of loans
from the Plan to the Participant on the date on which such loan
was made, or

(2) one-half (1/2) of the present value of the non-forfeitable
accrued benefit of the Participant under the Plan.

For purposes of this limit, all plans of the Employer shall
be considered one plan.

(c) Loans shall provide for level amortization with payments to
be made not less frequently than quarterly over a period not to exceed
five (5) years. However, loans used to acquire any dwelling unit
which, within a reasonable time, is to be used (determined at the time
the loan is made) as a principal residence of the Participant shall
provide for periodic repayment over a reasonable period of time that
may exceed five (5) years.

(d) Any loans granted or renewed shall be made pursuant to a
Participant loan program. Such loan program shall be established in
writing and must include, but need not be limited to, the following:

(1) the identity of the person or positions authorized to
administer the Participant loan program;

<PAGE>

(2) a procedure for applying for loans;

(3) the basis on which loans will be approved or denied;

(4) limitations, if any, on the types and amounts of loans
offered;

(5) the procedure under the program for determining a
reasonable rate of interest;

(6) the types of collateral which may secure a Participant
loan; and

(1) the events constituting default and the steps that will be
taken to preserve Plan assets.

Such Participant loan program shall be contained in a
separate written document which, when properly executed, is hereby
incorporated by reference and made a part of the Plan. Furthermore,
such Participant loan program may be modified or amended in writing
from time to time without the necessity of amending this Section.

8.5 VOTING COMPANY STOCK

The Trustee shall vote all Company Stock held by it as part of the
Plan assets. Provided, however, that if any agreement entered into by the Trust
provides for voting of any shares of Company Stock pledged as security for any
obligation of the Plan, then such shares of Company Stock shall be voted in
accordance with such agreement. If the Trustee does not timely receive voting
directions from a Participant or Beneficiary with respect to any Company Stock
allocated to that Participant's or Beneficiary's Company Stock Account, the
Trustee shall vote on such Company Stock.

Notwithstanding the foregoing, if the Employer has a
registration-type class of securities or, with respect to Company Stock
acquired by, or transferred to, the Plan in connection with a securities
acquisition loan (as defined in Code Section 133(b)) after July 10, 1989,
each Participant or Beneficiary shall be entitled to direct the Trustee as to
the manner in which the Company Stock which is entitled to vote and which is
allocated to the Company Stock Account of such Participant or Beneficiary is
to be voted. If the Employer does not have a registration-type class of
securities, with respect to Company Stock other than Company Stock acquired
by, or transferred to, the Plan in connection with a securities acquisition
loan (as defined in Code Section 133(b)) after July 10, 1989, each
Participant or Beneficiary in the Plan shall be entitled to direct the
Trustee as to the manner in which voting rights on shares of Company Stock
which are allocated to the Company Stock Account of such

<PAGE>

Participant or Beneficiary are to be exercised with respect to any corporate
matter which involves the voting of such shares with respect to the approval
or disapproval of any corporate merger or consolidation, recapitalization,
reclassification, liquidation, dissolution, sale of substantially all assets
of a trade or business, or such similar transaction as prescribed in
Regulations. For purposes of this Section the term "registration-type class
of securities" means: (A) a class of securities required to be registered
under Section 12 of the Securities Exchange Act of 1934; and (B) a class of
securities which would be required to be so registered except for the
exemption from registration provided in subsection (g)(2)(H) of such Section
12.

If the Employer does not have a registration-type class of securities
and the by-laws of the Employer require the Plan to vote an issue in a manner
that reflects a one-man, one-vote philosophy, each Participant or Beneficiary
shall be entitled to cast one vote on an issue and the Trustee shall vote the
shares held by the Plan in proportion to the results of the votes cast on the
issue by the Participants and Beneficiaries.

8.6 DUTIES OF THE TRUSTEE REGARDING PAYMENTS

(a) 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 Combined 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) 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.

<PAGE>

(c) 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.

8.7 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 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.

8.8 ANNUAL REPORT OF THE TRUSTEE

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:

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

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

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

(e) such further information as the Trustee and/or
Administrator deems appropriate. The Employer,

<PAGE>

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.

8.9 AUDIT

(a) 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 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) 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.

<PAGE>

8.10 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE

(a) 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) 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) 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) 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.

(P) 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 8.8 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 Plan Year. The
procedures set forth in Section 8.8 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 8.8 shall have the
same effect upon the statement as the Employer's approval of an annual
statement of account. No successor to the

<PAGE>

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 8.8 and this subparagraph.

8.11 TRANSFER OF INTEREST

Notwithstanding any other provision contained in this Plan, the
Trustee at the direction of the Administrator shall transfer the Vested
interest, 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 said 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.

8.12 DIRECT ROLLOVER

(a) 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 Plan 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) 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
includible in gross income (determined without regard to the
exclusion for net unrealized appreciation with respect to
employer securities).

(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

<PAGE>

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.

(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 IX
AMENDMENT, TERMINATION AND MERGERS

9.1 AMENDMENT

(a) 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) 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.

<PAGE>

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 "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.

In addition, no such amendment shall have the effect of
terminating the protections and rights set forth in Section 7.12,
unless such termination shall then be permitted under the applicable
provisions of the Code and Regulations; such a termination is
currently expressly prohibited by Regulation 54.4975-11(a)(3)(ii).

9.2 TERMINATION

(a) 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' Combined Accounts shall become
100% Vested as provided in Section 7.4 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.

(b) 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
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(c).

9.3 MERGER OR CONSOLIDATION

This 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, and such transfer, merger or

<PAGE>

consolidation does not otherwise result in the elimination or reduction of
any "Section 411(d)(6) protected benefits" in accordance with Section 9.1(c).

ARTICLE X
MISCELLANEOUS

10.1 PARTICIPANT'S RIGHTS

This 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

(a) Subject to the exceptions provided below, 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.

(b) This provision shall not apply to the extent a Participant
or Beneficiary is indebted to the Plan, as a result of a loan from the
Plan. At the time a distribution is to be made to or for a
Participant's or Beneficiary's benefit, such proportion of the amount
distributed as shall equal such loan indebtedness shall be paid by the
Trustee to the Trustee or the Administrator, at the direction of the
Administrator, to apply against or discharge such loan indebtedness.
Prior to making a payment, however, the Participant or Beneficiary
must be given written notice by the Administrator that such loan
indebtedness is to be so paid in whole or part from his Participant's
Combined Account. If the Participant or Beneficiary does not agree
that the loan indebtedness is a valid claim against his Vested
Participant's Combined Account, he shall be entitled to a review of
the validity of the

<PAGE>

claim in accordance with procedures provided in Sections 2.12 and
2.13.

(c) 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 District of Columbia, 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, and such claim, suit, or proceeding is resolved in
favor of the Trustee or Administrator, they shall be entitled to be reimbursed
from the Trust Fund for any and all costs, attorney's fees, and other expenses
pertaining thereto incurred by them for which they shall have become liable.

10.6 PROHIBITION AGAINST DIVERSION OF FUNDS

(a) 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,

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purposes other than the exclusive benefit of Participants, Retired
Participants, or their Beneficiaries.

(b) 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 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE

Neither the Employer nor the Trustee, nor their successors, shall be
responsible for the validity of any Contract issued hereunder or for the failure
on the part of the insurer to make payments provided by any such Contract, or
for the action of any person which may delay payment or render a Contract null
and void or unenforceable in whole or in part.

10.9 INSURER'S PROTECTIVE CLAUSE

Any insurer who shall issue Contracts hereunder shall not have any
responsibility for the validity of this Plan or for the tax or legal aspects of
this Plan. The insurer shall be protected and held harmless in acting in
accordance with any written direction of the Trustee, and shall have no duty to
see to the application of any funds paid to the Trustee, nor be

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required to question any actions directed by the Trustee. Regardless of any
provision of this Plan, the insurer shall not be required to take or permit any
action or allow any benefit or privilege contrary to the terms of any Contract
which it issues hereunder, or the rules of the insurer.

10.10 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.

10.11 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 its legally constituted authority.

10.12 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY

The "named Fiduciaries" of this Plan are (1) the Employer, (2) the
Administrator and (3) the Trustee. 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

100

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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.

10.13 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.

10.14 APPROVAL BY INTERNAL REVENUE SERVICE

(a) Notwithstanding anything herein to the contrary,
contributions to this Plan are conditioned upon the initial
qualification of the Plan under Code Section 401. If the Plan receives
an adverse determination with respect to its initial qualification,
then the Plan may return such contributions to the Employer within one
year after such determination, provided the application for the
determination is made by the time prescribed by law for filing the
Employer's return for the taxable year in which the Plan was adopted,
or such later date as the Secretary of the Treasury may prescribe.

(b) Notwithstanding any provisions to the contrary, except
Sections 3.6, 3.7, and 4.1(e), 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.

10.15 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.

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10.16 SECURITIES AND EXCHANGE COMMISSION APPROVAL

The Employer may request an interpretative letter from the Securities
and Exchange Commission stating that the transfers of Company Stock contemplated
hereunder do not involve transactions requiring a registration of such Company
Stock under the Securities Act of 1933. In the event that a favorable
interpretative letter is not obtained, the Employer reserves the right to amend
the Plan and Trust retroactively to their Effective Dates in order to obtain a
favorable interpretative letter or to terminate the Plan.

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

Signed, sealed, and delivered
in the presence of:

The Adams National Bank

______________________________ By__________________________
EMPLOYER

______________________________
WITNESSES AS TO EMPLOYER

ATTEST______________________

______________________________ _______________________(SEAL)
TRUSTEE

______________________________
WITNESSES AS TO TRUSTEE

______________________________ _______________________(SEAL)
TRUSTEE

______________________________
WITNESSES AS TO TRUSTEE

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Exhibit 23.2

The Board of Directors
Abigail Adams National Bancorp, Inc.

We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in the prospectus.

KPMG Peat Marwick LLP

Washington, D.C.
June 3, 1996