FORM S-8

                       SECURITIES AND EXCHANGE COMMISSION

             REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

                        ANNAPOLIS NATIONAL BANCORP, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

            Maryland                                  52-1648903
--------------------------------------------------------------------------------
    (State or other jurisdiction of                (I.R.S. Employer
     incorporation or organization)                Identification No.)

      1000 Bestgate Road, Suite 400
      Annapolis, Maryland                                 21401
--------------------------------------------------------------------------------
 (Address of Principal Executive Offices)               (Zip Code)

                        Annapolis National Bancorp, Inc.
                            2000 Stock Incentive Plan
--------------------------------------------------------------------------------
                            (Full title of the plan)

                                Richard M. Lerner
                             Chief Executive Officer
                          1000 Bestgate Road, Suite 400
                            Annapolis, Maryland 21401
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                     (Name and address of agent for service)

                                 (410) 224-4455
--------------------------------------------------------------------------------
          (Telephone number, including area code, of agent for service)

                         CALCULATION OF REGISTRATION FEE
                                   Copies to:
                              J. Mark Poerio, Esq.
                     Paul, Hastings, Janofsky & Walker, LLP
                          1299 Pennsylvania Avenue, NW
                                   10th Floor
                              Washington, DC 20004
                                 (202) 508-9582

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
 Title of securities to be registered                            Proposed maximum           Proposed                Amount of
                                            Amount to be        offering price per           maximum               registration fee
                                           registered (1)              unit             aggregate offering
                                                                                              price

------------------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>                     <C>                     <C>                    <C>
Common stock, par value $0.01 per           200,000(2)              $ (3)                   $952,553               $238.14
share
</TABLE>


(1)   Together with an indeterminate number of additional shares that may be
      necessary to adjust the number of shares reserved for issuance pursuant to
      the Annapolis National Bancorp, Inc. 2000 Stock Incentive Plan as the
      result of stock splits, stock dividends or similar adjustments of the
      outstanding shares of common stock of Annapolis National Bancorp, Inc.
      pursuant to Rule 416 of the Securities Act of 1933, as amended.

(2)   Represents the total number of shares currently reserved or under the
      Annapolis National Bancorp, Inc 2000 Stock Incentive Plan.



<PAGE>



(3)   Under Rule 457(h)(l), the registration fee may be calculated for a stock
      option plan based upon the price at which the options may be exercised,
      and the price of the underlying securities for shares reserved for future
      grants. Of the total number of shares registered herein, 137,250 shares
      are subject to rights granted under the Registrant's 2000 Stock Incentive
      Plan at a weighted average exercise price equal to $4.54 per share
      ($623,115 in the aggregate), and 62,750 shares are available for future
      option grants under said plan and are being registered herein based on the
      average of the high and low selling prices per share of the Registrant's
      common stock on the Nasdaq SmallCap Market on April 6, 2001, which
      equaled $5.25 per share ($329,438 in the aggregate for all shares not
      presently subject to grants under the plan). Therefore, the total amount
      of the offering being registered herein is the sum of these aggregate
      amounts, or $952,553.

          PART I - INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS

Item 1.  Plan Information.

     The documents containing the information for Annapolis National Bancorp,
Inc. (the "Registrant") specified in this Item 1 will be sent or given to
directors and employees who have been awarded options under the Annapolis
National Bancorp, Inc. 2000 Stock Incentive Plan (the "Plan"). In accordance
with Section 10(a) of the Securities Act of 1933, as amended (the "Securities
Act") and Rules 424 and 428 promulgated under the Securities Act by the
Securities and Exchange Commission (the "Commission"), such documents are not
being filed with, or included in, this Registration Statement on Form S-8 (the
"Registration Statement").

Item 2.  Registrant Information and Employee Plan Annual Information.

     The documents containing the information specified in this Item 2 will be
sent or given to directors and employees who have been awarded options under the
Plan. In accordance with Section 10(a) of the Securities Act and Rules 424 and
428 thereunder, such documents are not being filed with, or included in, this
Registration Statement.

          PART II - INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

Item 3.  Incorporation of Documents by Reference.

     The following documents, which have been filed with the Commission by the
Registrant are incorporated by reference in this Registration Statement. The
information incorporated by reference is considered to be part of this
Registration Statement, and information that the Registrant files later with the
Commission will automatically update and supersede this information. The
Registrant incorporates by reference the documents listed below and any future
filings the Registrant makes with the Commission under Sections 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934 prior to the filing of a
post-effective amendment that indicates that all securities offered have been
sold or which deregisters all securities then remaining unsold. Such future
filings shall be deemed to be incorporated by reference in the Registration
Statement and to be part thereof from the date of filing of such document.

             (a) The Registrant's annual report on Form 10-KSB for the year
ended December 31, 2000, filed with the Commission by the Registrant on March
28, 2001.

             (b) None.

             (c) The description of the Registrant's common stock contained in
the Registrant's Registration Statement on Form 8-A, as filed with the
Commission on August 7, 1997 pursuant to Section 12 of the Securities Exchange
Act of 1934, as amended.

Item 4.  Description of Securities.

     Not applicable.



<PAGE>



Item 5.  Interests of Named Experts and Counsel.

     None

     The validity of the common stock has been passed upon by Paul, Hastings,
Janofsky & Walker LLP for the Registrant.

Item 6.  Indemnification of Directors and Officers.

     In accordance with Section 418 of the Maryland General Corporation Law,
Articles XII and XIII of the Registrant's Amended and Restated Certificate of
Incorporation eliminate, with certain exceptions, the Registrant's directors'
personal liability to the Registrant or its stockholders for monetary damages
for breach of fiduciary duty as a director. Articles XII and XIII of the
Registrant's Amended and Restated Certificate of Incorporation read as follows:

     ARTICLE XII The Corporation shall indemnify to the fullest extent
permissible under the Maryland General Corporation Law any individual who is or
was a director, officer, employee, or agent of the Corporation, and any
individual who serves or served at the Corporation's request as a director,
officer, partner, trustee, employee, or agent of another corporation,
partnership, joint venture, trust or other enterprise, in any proceeding in
which the individual is made a party as a result of his service in such
capacity. An individual will not be indemnified if it is proved that the act or
omission at issue was material to the cause of action adjudicated in the subject
proceeding and that (i) it was committed in bad faith, or (ii) it was the result
of active and deliberate dishonesty, or (iii) the individual actually received
an improper personal benefit in money, property, or services, or (iv) in the
case of a criminal proceeding, the individual had reasonable cause to believe
that the act or omission was unlawful.

     ARTICLE XIII Limitations on Liability of Officers and Directors. An officer
or director of the Corporation shall not be personally liable to the Corporation
or its shareholders for monetary damages for breach of their fiduciary duty as
an officer or director, unless: (i) it is proved that the individual officer or
director actually received an improper benefit or profit in money, property or
services from the Corporation; or (ii) a judgment or other final adjudication
adverse to the individual officer or director is entered in a proceeding based
on a finding in the proceeding that the individual's action, or failure to act,
was the result of active and deliberate dishonesty and was material to the cause
of action adjudicated in the proceeding. If the Maryland General Corporation Law
is amended to further eliminate or limit the personal liability of officers and
directors, then the liability of officers and directors of the Corporation shall
be eliminated or limited to the fullest extent permitted by the Maryland General
Corporation Law, as so amended. Any repeal or modification of the foregoing
paragraph by the shareholders of the Corporation shall not adversely affect any
right or protection of a director of the Corporation existing at the time of
such repeal or modification.

Item 7.  Exemption from Registration Claimed.

     Not applicable.



<PAGE>



Item 8.  Exhibits.

Exhibits

4.1         Annapolis National Bancorp, Inc. 2000 Stock Incentive Plan
            (the "Plan")

5.1         Opinion of Paul, Hastings, Janofsky & Walker LLP regarding
            the legality of the securities being registered by the
            Registrant.

23.1        Consent of Paul, Hastings, Janofsky & Walker LLP
            (contained in Exhibit 5.1 hereof)

23.2        Consent of Rowles and Company, LLP

23.3        Consent of Stegman & Company

24.1        Power of Attorney (contained in the signature page hereof)

99.1        Form of Stock Option Award associated with the Plan

99.2        Form of Restricted Stock Award associated with the Plan

99.3        Form of Deferred Share Award associated with the Plan

Item 9.  Undertakings.

     (a) The Registrant hereby undertakes:

             (1) To file, during any period in which it offers or sells
securities, a post-effective amendment to this Registration Statement to:

                  i) Include any prospectus required by Section 10(a)(3) of the
             Securities Act;

                  ii) Reflect in the prospectus any facts or events which,
             individually or in the aggregate, represent a fundamental change in
             the information set forth in the Registration Statement.
             Notwithstanding the foregoing, any increase or decrease in volume
             of securities offered (if the total dollar value of securities
             offered would not exceed that which was registered) and any
             deviation from the low or high end of the estimated maximum
             offering range may be reflected in the form of prospectus filed
             with the Commission pursuant to Rule 424(b) if, in the aggregate,
             the changes in volume and price represent no more than a 20% change
             in the maximum aggregate offering price set forth in the
             "Calculation of Registration Fee" table in the effective
             registration statement.

                  iii) Include any additional or changed material information on
             to the plan of distribution.

            (2) For determining any liability under the Securities Act, treat
       each such post-effective amendment as a new registration statement of the
       securities offered therein, and the offering of such securities at that
       time to be the initial bona fide offering thereof.

            (3) To file a post-effective amendment to remove from registration
       any of the securities being registered that remain unsold at the end of
       the offering.



<PAGE>



     (b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement 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.

     (c) 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 Commission such
indemnification is against public policy as expressed in the Securities 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.

                                   SIGNATURES

     Pursuant to 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 S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Annapolis, State of Maryland, on April , 2001.

                                           ANNAPOLIS NATIONAL BANCORP, INC.




                                           By:   /s/ Richard M. Lerner
                                               --------------------------
                                                 Richard M. Lerner
                                              Chief Executive Officer



                                POWER OF ATTORNEY

     Each person whose signature appears below constitutes and appoints Richard
M. Lerner as his or her true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for such person and in such person's
name, place and stead, in any and all capacities, to sign any or all amendments
(including post-effective amendments) to this Registration Statement (or any
registration statement for the same offering that is to be effective upon filing
pursuant to Rule 426(b) under the Securities Act of 1933) and to cause the same
to be filed, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby granting to said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite or desirable to be done in and about the premises,
as fully to all intents and purposes as the undersigned might or could do in
person, hereby ratifying and confirming all acts and things that said
attorney-in-fact and agent or his substitutes or substitute, may lawfully do or
cause to be done by virtue hereof.



<PAGE>



     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.


Signature                         Title                          Date
---------                         -----                          ----
/s/ Richard M. Lerner
--------------------------        President, Chief Executive     April 9, 2001
Richard M. Lerner                 Officer and Director

/s/ Margaret Theiss Faison
--------------------------        Chief Financial Officer        April 9, 2001
Margaret Theiss Faison

/s/ Rita D. Demma
-------------------------         Secretary                      April 9, 2001
Rita D. Demma

/s/ Albert Phillips
-------------------------         Director and Chairman of the   April 9, 2001
Albert Phillips                   Board

/s/ Mark H. Anders
-------------------------         Director                       April 9, 2001
Mark H. Anders

/s/ F. Carter Heim
-------------------------         Director                       April 9, 2001
F. Carter Heim

/s/ Dimitri P. Mallios
-------------------------         Director                       April 9, 2001
Dimitri P. Mallios

/s/ Ermis Sfakiyanudis
-------------------------         Director                       April 9, 2001
Ermis Sfakiyanudis

/s/ Lawrence W. Schwartz
-------------------------         Director                       April 9, 2001
Lawrence W. Schwartz

/s/ Lawrence E. Lerner
-------------------------         Director                       April 9, 2001
Lawrence E. Lerner

/s/ Stanley J. Klos, Jr.
-------------------------         Director                       April 9, 2001
Stanley J. Klos, Jr.






<PAGE>


                                  EXHIBIT INDEX

Exhibits

4.1         Annapolis National Bancorp, Inc. 2000 Stock Incentive Plan
            (the "Plan")

5.1         Opinion of Paul, Hastings, Janofsky & Walker LLP regarding
            the legality of the securities being registered by the
            Registrant.

23.1        Consent of Paul, Hastings, Janofsky & Walker LLP
            (contained in Exhibit 5.1 hereof)

23.2        Consent of Rowles and Company, LLP

23.3        Consent of Stegman & Company

24.1        Power of Attorney (contained in the signature page hereof)

99.1        Form of Stock Option Award associated with the Plan

99.2        Form of Restricted Stock Award associated with the Plan

99.3        Form of Deferred Share Award associated with the Plan



<PAGE>



                                   EXHIBIT 4.1


                        Annapolis National Bancorp, Inc.
                            2000 Stock Incentive Plan



<PAGE>


                        ANNAPOLIS NATIONAL BANCORP, INC.
                            2000 STOCK INCENTIVE PLAN


1.    Purpose

      The proper execution of the duties and  responsibilities of the directors,
executives,   and   employees  of  Annapolis   National   Bancorp,   Inc.   (the
"Corporation")  and its  subsidiaries is a vital factor in the continued  growth
and success of the Corporation.  Toward this end, it is necessary to attract and
retain  effective and capable  individuals to assume  positions that  contribute
materially to the successful  operation of the business of the  Corporation  and
its  subsidiaries.  It will  benefit  the  Corporation,  therefore,  to bind the
interests of these persons more closely to its own interests by offering them an
attractive  opportunity to acquire a proprietary interest in the Corporation and
thereby  provide  them with  added  incentive  to remain in the  service  of the
Corporation and its  subsidiaries  and to increase the prosperity,  growth,  and
earnings of the  Corporation.  This stock option plan is intended to serve these
purposes.

2.    Definitions

      The following terms wherever used herein shall have the meanings set forth
below.

          (a) The  term  "Awards"  shall  mean  Options,  Deferred  Shares,  and
              Restricted Share Awards, collectively.

          (b) The term "Board of Directors" shall mean the Board of Directors of
              the Corporation.

          (c) The term  "Change  in  Control  of the  Corporation"  shall mean a
              change  in  control  of a  nature  that  would be  required  to be
              reported in response  to Item 6(c) of Schedule  14A of  Regulation
              14A  promulgated  under  the  Exchange  Act,  whether  or not  the
              Corporation  is in fact  required  to comply  therewith,  provided
              that, without limitation, such a change in control shall be deemed
              to have  occurred  if (A) any  "person"  (as such  term is used in
              Section 13(d) and 14(d) of the Exchange Act), other than a trustee
              or other fiduciary  holding  securities  under an employee benefit
              plan  of  the  Corporation  or  any  of  its   subsidiaries  or  a
              corporation owned, directly or indirectly,  by the stockholders of
              the  Corporation  in  substantially  the same  proportions  as the
              ownership  of Common  Stock of the  Corporation,  and  other  than
              Lawrence E. Lerner or any member or members of this family,  is or
              becomes the "beneficial owner" (as defined in Rule 13d-3 under the
              Exchange  Act),  directly  or  indirectly,  of  securities  of the
              Corporation  representing 20% or more of the combined voting



<PAGE>



              power of the Corporation's then outstanding securities; (B) during
              any  period of two  consecutive  years (not  including  any period
              prior  to  the  adoption  of  the  Plan)  individuals  who  at the
              beginning of such period constitute the Board and any new director
              (other than a director designated by a person who has entered into
              an  agreement  with  the   Corporation  to  affect  a  transaction
              described in clauses (A) or (B) of this definition) whose election
              by the Board or  termination  for  election  by the  Corporation's
              stockholders  was approved by a vote of at least two-thirds of the
              directors  then still in office who either were  directors  at the
              beginning  of the  period  or whose  election  or  nomination  for
              election  was  previously  so  approved,  cause for any  reason to
              constitute  a majority of the Board;  (C) the  Corporation  enters
              into an agreement,  the  consummation of which would result in the
              occurrence  of a Change in  Control  of the  Corporation;  (D) the
              stockholders of the Corporation  approve a merger,  share exchange
              or consolidation  of the Corporation  with any other  corporation,
              other than a merger,  share exchange or  consolidation  that would
              result in the voting  securities of the  Corporation,  outstanding
              immediately prior thereto held by Lawrence E. Lerner or any member
              or  members  of his  family  continuing  to  represent  (either by
              remaining outstanding or by being converted into voting securities
              of the surviving entity) at least 50% of the combined voting power
              of the voting  securities  of the  Corporation  or such  surviving
              entity outstanding  immediately after such merger,  share exchange
              or consolidation, or the stockholders of the Corporation approve a
              plan of complete  liquidation of the Corporation or any agreements
              for  the  sale  of  disposition  by  the  Corporation  of  all  or
              substantially all the Corporation's assets.

          (d) The term "Code" shall mean the Internal  Revenue Code of 1986,  as
              amended, and any regulations promulgated thereunder.

          (e) The term "Committee" shall mean a committee to be appointed by the
              Board of  Directors  to consist of three or more  members,  all of
              whom are members of the Board of Directors  and are  "non-employee
              directors" within the meaning of Rule 16-3 under the Exchange Act.

          (f) The term "Common Stock" shall mean the shares of common stock, par
              value $0.01 per share, of the Corporation.

          (g) The term  "Corporation"  shall mean  Annapolis  National  Bancorp,
              Inc., a Maryland corporation.

          (h) The term "Deferred  Shares" shall mean Shares that the Company has
              credited,   pursuant  to   Paragraph  9  hereof,   to  a  deferred
              compensation account in the name of a Participant.



                                       2
<PAGE>




          (i) The term "Exchange Act" shall mean the Securities  Exchange Act of
              1934, as amended.

          (j) The term "Fair  Market  Value"  shall mean the then  current  fair
              market value of Common  Stock,  as determined in good faith by the
              Committee and in a manner  consistent  with the rules set forth in
              Treas. Reg. Section 20.2031-2.

          (k) The term  "Incentive  Stock Option"  shall mean an Option  granted
              pursuant  to the Plan that is  designated  as an  Incentive  Stock
              Option and which  satisfies the  requirements of Section 422(b) of
              the Code.

          (l) The term "Nonqualified  Stock Option" shall mean an Option granted
              pursuant to the Plan that is not an Incentive Stock Option.

          (m) The term  "Option" or "Stock  Option"  shall mean a right  granted
              pursuant to the Plan to purchase shares of Common Stock, and shall
              include the terms  Incentive Stock Option and  Nonqualified  Stock
              Option.

          (n) The term  "Option  Agreement"  shall  mean the  written  agreement
              representing  Options granted pursuant to the Plan as contemplated
              by Paragraph 7 of the Plan.

          (o) The term "Plan" shall mean the Annapolis  National  Bancorp,  Inc.
              2000 Stock Incentive Plan as approved by the Board of Directors on
              March 24, 2000, as the same may be amended from time to time.

          (p) The term "Restricted Share Award" shall mean a right granted under
              Section 10 of this Plan to receive Shares.

          (q) The term "subsidiary" or  "subsidiaries"  shall mean a corporation
              of  which  capital  stock  possessing  50% or  more  of the  total
              combined voting power of all classes of its capital stock entitled
              to vote  generally  in the  election of  directors is owned to the
              aggregate by the Corporation directly or indirectly through one or
              more subsidiaries.

3.    Effective Date of the Plan

      The Plans shall become effective upon stockholder approval,  provided that
such approval is received  before March 24, 2001, and provided  further that the
Board of Directors may grant Options  pursuant to the Plan prior to  stockholder
approval  if  such  Options  by  their  terms  are  contingent  upon  subsequent
stockholder approval of the Plan.



                                       3
<PAGE>



4.    Administration

          (a) The Plan shall be administered by the Committee, provided that the
          Board  may act in lieu  of the  Committee  on any  matter  within  the
          Committee's discretion or authority.

          (b) The  Committee  may  establish,  from time to time and at any time
          subject to the limitations of the Plan as set forth herein, such rules
          and  regulations  and amendments and  supplements  thereto as it deems
          necessary to comply with  applicable  law and  regulation  and for the
          proper  administration  of the Plan.  A majority of the members of the
          Committee  shall  constitute  a quorum.  The vote of a  majority  of a
          quorum shall constitute action by the Committee.

          (c) The  Committee  shall  from  time to time  submit  to the Board of
          Directors  for its  approval  the  names of those  executives  and key
          employees  who, in its  opinion,  should  receive  Options,  and shall
          recommend the numbers of shares on which Options  should be granted to
          each such person and the nature of the Options to be granted.

          (d)  Options  shall be  granted  by the  Committee  and  shall  become
          effective  only after  execution  of an Option  Agreement  between the
          Corporation and the Option holder.

          (e) The Commission's interpretation and construction of the provisions
          of the Plan and the rules and  regulations  adopted by the  Commission
          shall be final, unless otherwise determined by the Board of Directors.
          No member of the  Committee or the Board of Directors  shall be liable
          for my action or  determination  made, in respect of the Plan, in good
          faith.

5.    Participation in the Plan

          (a)  Participants  in the Plan shall be limited to the  employees  and
          directors  of the  Corporation  and  its  subsidiaries  who  shall  be
          designated by the Committee.

          (b) No member of the Board of Directors  who is also an officer of the
          Corporation shall be eligible to serve on the Committee.

6.    Stock Subject to the Plan

          (a) There shall be reserved for the granting of Awards pursuant to the
          Plan and for issuance and sale pursuant to such Awards  200,000 shares
          of Common  Stock.  To  determine  the number of shares of Common Stock
          available  at any time for the  granting  of  Awards,  there  shall be
          deducted from



                                       4
<PAGE>



          the total  number of reserved  shares of Common  Stock,  the number of
          shares of Common  Stock in respect of which  Awards have been  granted
          pursuant  to  the  Plan  that  are  still  outstanding  or  have  been
          exercised.  The shares of Common  Stock to be issued upon the exercise
          or vesting of Awards shall be made  available  from the authorized and
          unissued  shares of Common  Stock.  If for any reason shares of Common
          Stock as to which an Award has been  granted  cease to be  subject  to
          purchase or delivery to Award holders thereunder,  then such shares of
          Common  Stock again shall be available  for  issuance  pursuant to new
          Awards.

          (b)  Proceeds  from the  purchase  of shares of Common  Stock upon the
          exercise of Options granted pursuant to the Plan shall be used for the
          general business purposes of the Corporation.

          (c) In the event of the reorganization, recapitalization, stock split,
          stock  dividend,  combination  of  shares  of  Common  Stock,  merger,
          consolidation, share exchange acquisition of property of stock, or any
          change in the capital  structure  of the  Corporation,  the  Committee
          shall make such adjustments as may be equitable and appropriate in the
          number and kind of shares  reserved  for  purchases by  executives  or
          other key employees,  in the number,  kind and price of shares covered
          by Awards granted pursuant to the Plan and then outstanding.

7.    Terms and Conditions of Options

          (a) Each Option granted  pursuant to the Plan shall be evidenced by an
          Option  agreement in such form as the Committee  from time to time may
          determine.

          (b) The exercise  price per share for Options shall be  established by
          the Board of Directors upon the recommendation of the Committee at the
          time of the  grant of  Options  pursuant  to the Plan and shall not be
          less than the Fair Market Value of a share of Common Stock on the date
          on which the Option is  granted.  If the Board of  Directors  does not
          establish  a specific  exercise  price per share at the time of grant,
          the  exercise  price per share shall be equal to the Fair Market Value
          of a share of Common Stock on the date of grant of the Options.

          (c) Each  Option,  subject to the other  limitations  set forth in the
          Plan, may extend for a period of up to 10 years from the date on which
          it is granted.  The term of each  Option  shall be  determined  by the
          Board of Director at the time of grant of the Option, provided that if
          no term is  established  by the  Board  of  Directors  the term of the
          Option shall be 10 years from the date on which it is granted.



                                       5
<PAGE>



          (d) The Board of Directors upon  recommendation of the Committee,  may
          provide in the Option Agreement that the right to exercise each Option
          for the number of shares  subject to each Option  shall  vest,  in the
          Option  holder  over  such  period  of time as the  Committee,  in its
          direction, shall determine for each Option holder. Notwithstanding the
          foregoing,   each  Option  Agreement  shall  provide  that,  upon  the
          occurrence of a Change in Control of the Corporation, all Options then
          outstanding shall become immediately exercisable.

          (e) Options shall be nontransferable  and  nonassignable,  except that
          Options may be transferred by  testamentary  instrument or by the laws
          of descent and  distribution,  and  Nonqualified  Stock Options may be
          transferred  to  family  members  or  family  trusts,  subject  to the
          original terms of the Option.

          (f) Unless the Committee  specifies  otherwise in an Option agreement,
          upon  voluntary  or  involuntary  termination  of an  Option  holder's
          service with the  Corporation,  his Options and all rights  thereunder
          shall  terminate  effective  at the close of  business on the date the
          Option holder ceases to be a Director of regular,  full-time  employee
          of the  Corporation  or any of  its  subsidiaries,  except  (i) to the
          extent previously exercised and (ii) as provided in subparagraphs (g),
          (h) and (i) of this Paragraph 7.

          (g) In the event an Option  holder (i) takes a leave of  absence  from
          the Corporation or any of its  subsidiaries for personal reasons or as
          a result of entry into the armed forces of the United  States,  or any
          of the  departments  or agencies of the United States  government,  or
          (ii) terminates his employment,  or ceases  providing  services to the
          Corporation  or  any  of  its   subsidiaries,   by  reason  of  death,
          disability,  voluntary  termination with the consent of the Committee,
          or other  special  circumstances,  the Committee may consider his case
          and may take such action in respect of the related Option Agreement as
          it  may  deem   appropriate   under   the   circumstances,   including
          accelerating  the time previously  granted for Options to be exercised
          and extending the time  following the Option  holder's  termination of
          active  employment  or  service  during  which  the  Option  holder is
          entitled  to  purchase  the  shares of Common  Stock  subject  to such
          Options,  provided that in no event may any Option be exercised  after
          the expiration of the time of the Option.

          (h) If an Option  holder  dies  during the term of his Option  without
          having fully exercised this Option,  the executor or  administrator of
          his estate or the person who inherits the right to exercise the Option
          by bequest or inheritance shall have the right within two years of the
          Option holder's death to purchase the number of shares of Common Stock
          that the deceased  Option  holder was entitled to purchase at the date
          of his death, after which the Option shall



                                       6
<PAGE>



          lapse, provided that in no event may any Option be exercised after the
          expiration of the term of the Option.

          (i) If an Option holder terminates employment without his having fully
          exercised  his Option due to his  retirement  with the  consent of the
          Corporation,  then such  Option  holder  shall  have the right  within
          ninety (90) days of the Option  holder's  termination of employment or
          service  to  purchase  the  number of shares of Common  Stock that the
          Option holder was entitled to purchase at the date of his termination,
          after which the Option shall lapse,  provided that in no event may any
          Option be exercised  after the  expiration  of the term of the Option.
          The  Committee  may  cancel  the  Option  during the ninety day period
          referred  to  in  this  paragraph,   if  the  Participant  engages  in
          employment or activities  which, in the opinion of the Committee,  are
          contrary to the best interests of the Corporation. The Committee shall
          determine in each case whether a termination  of employment or service
          shall be considered a retirement with the consent of the  Corporation,
          and,  subject to  applicable  law,  whether a leave of  absence  shall
          constitute a termination of employment.  Any such determination of the
          Committee  shall be final  and  conclusive,  unless  overruled  by the
          Board.

          (j)  The  granting  of an  Option  pursuant  to  the  Plan  shall  not
          constitute or be evidence of any agreement or  understanding,  express
          or implied,  on the part of the Corporation or any of its subsidiaries
          to retain or employ the Option holder for any specified period.

          (k) In addition to the general terms and  conditions set forth in this
          Paragraph  7 in  respect  of  Options  granted  pursuant  to the Plan,
          Incentive Stock Options granted  pursuant to the Plan shall be subject
          to the following additional terms and conditions:

                (i)   "Incentive   Stock  Options"  shall  be  granted  only  to
                individuals  who,  at the  date  of  grant  of the  Option,  are
                employees of the Corporation or any of its subsidiaries;

                (ii) No  employee  who owns  beneficially  more  than 10% of the
                total  combined  voting  power  of all  classes  of stock of the
                Corporation  shall be eligible to be granted an "Incentive Stock
                Option;"

                (iii) The aggregate  fair market value  (determined  at the time
                the  Incentive  Stock Option is granted) of the shares of Common
                Stock  in  respect  of  which   "incentive  stock  options"  are
                exercisable  for the first time by the Option  holder during any
                calendar year (under all such plans of the  Corporation  and its
                subsidiaries) shall not exceed $100,000; and



                                       7
<PAGE>



                (iv) Any other terms and  conditions  specified  by the Board of
                Directors that are not inconsistent  with the Plan,  except that
                such  terms  and   conditions   must  be  consistent   with  the
                requirements  for "incentive stock options" under Section 422 of
                the Code.

8.    Methods of Exercise of Options

          (a) An Option holder (or other person or person,  if any,  entitled to
          exercise an Option  hereunder)  desiring to exercise an Option granted
          pursuant  to the Plan as to all or part of the shares of Common  Stock
          covered by the Option shall (i) notify the  Corporation  in writing as
          its principal  office at 1000  Bestgate  Road,  Suite 400,  Annapolis,
          Maryland  21401,  to that effect,  specifying  the number of shares of
          Common Stock to be purchased and the method of payment therefore,  and
          (ii) make  payment or  provision  for payment for the shares of Common
          Stock as purchased in accordance  with this  Paragraph 8. Such written
          notice  may be  given  by  means  of a  facsimile  transmission.  If a
          facsimile  transmission  is used,  the Option  holder  should mail the
          original  executed  copy  of the  written  notice  to the  Corporation
          promptly thereafter.

          (b) Payment or provision for payment shall be made as follows:

                (i) The Option  holder shall deliver to the  Corporation  at the
                address set forth in subparagraph 8(a) United States currency in
                an amount equal to the aggregate purchase price of the shares of
                Common Stock as to which such exercise relates; or

                (ii) The Option holder shall tender to the Corporation shares of
                Common Stock already  owned by the Option holder that,  together
                with any cash tendered therewith,  have no aggregate fair market
                value  (determined  based on the Fair Market Value of a share of
                Common  Stock on the date the notice  set forth in  subparagraph
                8(a) is  received  by the  Corporation)  equal to the  aggregate
                purchase  price of the  shares of Common  Stock as to which such
                exercise relates; or

                (iii) The Option  holder  shall  deliver to the  Corporation  an
                exercise  notice  together with  irrevocable  instructions  to a
                broker to deliver promptly to the Corporation the amount of sale
                or loan proceeds  necessary to pay the aggregate  purchase price
                of the shares of Common Stock as to which such exercise  relates
                and to sell  the  shares  of  Common  Stock  to be  issued  upon
                exercise  of the  Option and  deliver  the cash  proceeds,  less
                commission and brokerage fees to the



                                       8
<PAGE>



                Option holder or to deliver the remaining shares of Common Stock
                to the Option holder.

          Notwithstanding the foregoing provisions,  the Committee and the Board
          of Directors,  in granting Options pursuant to the Plan, may limit the
          methods in which an Option may be  exercised  by any  person  and,  in
          processing any purported exercise of an Option granted pursuant to the
          Plan,  may refuse to recognize the method of exercise  selected by the
          Option  holder  (other  than  the  method  of  exercise  set  forth in
          subparagraph 8(b)(i)).

          (c) In addition to the  alternative  methods of exercise  set forth in
          paragraph  8(b),  holders  of  Nonqualified  Stock  Options  shall  be
          entitled,  at or prior to the time the written notice  provided for in
          subparagraph  8(a) is delivered to the  Corporation,  to elect to have
          the  Corporation  withhold  from  the  shares  of  Common  Stock to be
          delivered upon exercise of the  Nonqualified  Stock Option that number
          of shares of Common Stock  (determined  based on the Fair Market Value
          of a share  of  Common  Stock  on the date  the  notice  set  forth in
          subparagraph 8(a) is received by the Corporation) necessary to satisfy
          any withholding taxes attributable to the exercise of the Nonqualified
          Stock  Option.  Alternatively,  such  holder of a  Nonqualified  Stock
          Option may elect to deliver  previously  owned  shares of Common Stock
          upon  exercise  of  the  Nonqualified  Stock  Option  to  satisfy  any
          withholding  taxes  attributable  to the exercise of the  Nonqualified
          Stock  Option.  If  the  Board  of  Directors  does  not  include  any
          provisions  relating to this  withholding  feature in its  resolutions
          granting the Nonqualified Stock Option or in the Option Agreement. The
          maximum  amount that an Option  holder may elect to have withheld from
          the shares of Common Stock otherwise  deliverable upon exercise or the
          maximum number of previously owned shares in Option holder may deliver
          shall  be  equal  to  the  minimum  federal  and  state   withholding.
          Notwithstanding the foregoing  provisions,  the Committee or the Board
          of Directors may include in the Option Agreement  relating to any such
          Nonqualified  Stock  Option  provisions  limiting or  eliminating  the
          Option  holder's  ability to pay his  withholding  tax obligation with
          shares of Common Stock;  or if no such  provisions are included in the
          Option Agreement,  but in the opinion of the Committee or the Board of
          Directors  such  withholding  would have an adverse tax or  accounting
          effect to the Corporation, at or prior to exercise of the Nonqualified
          Stock  Option the  Committee  or the Board of  Directors  may limit or
          eliminate  the  Option  holder's  ability to pay his  withholding  tax
          obligation with shares of Common Stock.  Notwithstanding the foregoing
          provisions, a holder of Nonqualified Stock Option may not elect any of
          the methods of satisfying his withholding tax obligation in respect of
          any exercise if, in the opinion of counsel to the  Corporation,  there
          is a  substantial  likelihood  that  the  election  or  timing  of the
          election  would



                                       9
<PAGE>



          subject the holder to a substantial risk of liability under Section 16
          of the Exchange Act.

          (d) An Option  holder at any time may elect in  writing  to abandon an
          Option  in  respect  of all or part of the  number of shares of Common
          Stock as to which the Option shall not have been exercised.

          (e) An Option holder shall have none of the rights of a stockholder of
          the Corporation until the shares of Common Stock covered by the Option
          are issued to him upon exercise of the Option.

9.    Deferred Shares

          (a)  Elections  to  Defer.  The  Committee  may at any time  allow any
          Participant  (or  Participants)  who  is a  member  of  the  Board  of
          Directors,  or a member  of a select  group of  management  or  highly
          compensated employees (within the meaning of the Employees' Retirement
          Income Security Act of 1973, with each such individual  being referred
          to herein  as a  "Participant")  may  irrevocably  elect,  on the form
          attached  hereto as  Exhibit A (the  "Election  Form"),  to forego the
          receipt  of  cash  compensation  and  in  lieu  thereof  to  have  the
          Corporation credit Deferred Shares to the Participant's Account with a
          Fair Market Value equal to the  compensation  deferred.  Each Election
          Form shall take effect five  business  days after its  delivery to the
          Committee,  unless in the meantime the Committee sends the Participant
          a  written  notice  explaining  why  the  Election  Form  is  invalid.
          Notwithstanding  the  foregoing  sentence,  Election  Forms  shall  be
          ineffective with respect to any compensation  that a Participant earns
          before the date on which the Committee receives the Election Form.

          (b) Vesting.  Deferred Shares shall be 100% vested at all times.

          (c)  Recordkeeping;  Cash Earnings on Deferred  Shares.  The Committee
          shall  establish  and  maintain  an  individual   account  (the  "Cash
          Account") in the name of each  Participant who files an Election Form.
          On the last day of each fiscal quarter,  the Corporation  shall credit
          to the  Participant's  Cash  Account  any cash  dividends  paid on the
          balance of Deferred Shares credited to the Participant's  Account.  On
          the last day of each fiscal  year of the  Corporation,  the  Committee
          shall  credit to the  Participant's  Account  Deferred  Shares  with a
          Market  Value equal to the balance of the  Participant's  Cash Account
          (without  regard  to  fractional  shares),  and  the  balance  of  the
          Participant's  Cash  Account  shall be reduced to zero.  The  Trustees
          shall hold each  Participant's  Deferred Shares until  distribution is
          required pursuant to subsection (d) hereof.



                                       10
<PAGE>



          (d) Distributions of Deferred Shares and Earnings.  The Trustees shall
          distribute a Participant's Deferred Shares in five substantially equal
          annual  installments  that are paid before the last day of each of the
          five fiscal years of the Corporation  that end after the date on which
          the   Participant's   Continuous   Service   terminates,   unless  the
          Participant has properly elected a different form of distribution,  on
          the form (the "Distribution Election Form") approved by the Committee,
          and the Committee has received the Participant's Distribution Election
          Form  either more than 90 days before a Change in Control or more than
          one year before the date on which the Participant's Continuous Service
          terminates for any reason. Fractional Shares shall not be distributed.

          (e) Hardship  Withdrawals.  Notwithstanding any other provision of the
          Plan or a  Participant's  Election Form, in the event the  Participant
          suffers an  unforeseeable  hardship within the  contemplation  of this
          Section,  the  Participant may apply to the Committee for an immediate
          distribution of all or a portion of his Deferred Shares.  The hardship
          must  result from a sudden and  unexpected  illness or accident of the
          Participant  or a  dependent  of the  Participant,  casualty  loss  of
          property,  or other  similar  conditions  beyond  the  control  of the
          Participant.  Examples of purposes which are not considered  hardships
          include  post-secondary  school  expenses  or the desire to purchase a
          residence.  In no event will a distribution  be made to the extent the
          hardship could be relieved  through  reimbursement  or compensation by
          insurance  or  otherwise,  or  by  liquidation  of  the  Participant's
          nonessential  assets to the extent such  liquidation  would not itself
          cause a severe  financial  hardship.  The  amount of any  distribution
          hereunder  shall be  limited to the amount  necessary  to relieve  the
          Participant's  financial  hardship.  The  determination  of  whether a
          Participant  has a qualifying  hardship and the amount which qualifies
          for  distribution,  if any, shall be made by the Committee in its sole
          discretion.  The  Committee  may  require  evidence of the purpose and
          amount  of the  need,  and may  establish  such  application  or other
          procedures as it deems appropriate.

          (e) Rights to Deferred Shares. A Participant may not assign his or her
          claim to Deferred  Shares during his or her lifetime.  A Participant's
          right to Deferred  Shares shall at all times  constitute  an unsecured
          promise of the Corporation to pay benefits as they come due. The right
          of the  Participant  or his or her  beneficiary  to  receive  benefits
          hereunder  shall be solely an  unsecured  claim  against  the  general
          assets of the  Corporation.  Neither  the  Participant  nor his or her
          beneficiary  shall have any claim  against  or rights in any  specific
          assets, shares, or other funds of the Corporation.



                                       11
<PAGE>



10.   Restricted Share Awards

          (a)  Grants.   The  Committee  shall  have  the  discretion  to  grant
          Restricted  Share  Awards to  Employees  and  members  of the Board of
          Directors.  As promptly as practicable  after a determination  is made
          that a  Restricted  Share  Award is to be made,  the  Committee  shall
          notify the  Participant  in  writing  of the grant of the  Award,  the
          number of Shares  covered by the  Award,  and the terms upon which the
          Shares  subject  to the  Award  may be  earned.  The date on which the
          Committee so notifies the Participant  shall be considered the date of
          grant of the  Restricted  Share Awards.  The Committee  shall maintain
          records as to all grants of Restricted Share Awards under the Plan.

          (b) Earning Shares. Unless the Committee  specifically  eliminates any
          vesting  schedule in an Agreement  granting a Restricted  Share Award,
          Shares  subject to Restricted  Share Awards shall be earned and become
          non-forfeitable by a Participant  according to the following schedule,
          provided the  Participant  is an Employee or Director on the scheduled
          vesting date:


                                          Vested Percentage
               Years of Service        (applied to Restricted
               ----------------               Shares)
                                              -------

                  Less than 1                     0%
                       1                         25%
                       2                         50%
                       3                         75%
                   4 or More                     100%

       Notwithstanding   the  foregoing  and  unless  otherwise  provided  in  a
   Participant's  Restricted Stock Award,  each Participant  shall become (100%)
   vested  immediately (i) upon termination of the Participant's  service due to
   the  Participant's  disability or death,  or (ii) upon a Change in Control of
   the Corporation.

    (c)Accrual  of  Dividends.  Whenever  Shares  are paid to a  Participant  or
    Beneficiary  under Section 11(d), such Participant or Beneficiary shall also
    be entitled to receive,  with respect to each Share paid, an amount equal to
    any cash  dividends  (including  special large and  nonrecurring  dividends,
    including   one  that  has  the  effect  of  a  return  of  capital  to  the
    Corporation's  stockholders) and a number of shares of Common Stock equal to
    any stock  dividends,  declared  and paid with  respect to a share of Common
    Stock  between the date the relevant  Restricted  Share Award was  initially
    granted to such  Participant and the date the Shares are being  distributed.
    There shall



                                       12
<PAGE>



    also be  distributed  an  appropriate  amount of net earnings,  if any, with
    respect to any cash dividends so paid out.

    (d)Distribution of Shares.

                (i) Timing of  Distributions:  General Rule. Except as otherwise
                expressly  stated in this Plan, the Committee  shall  distribute
                Shares and  accumulated  cash from dividends and interest to the
                Participant or his  Beneficiary,  as the case may be, as soon as
                practicable  after they have been earned.  No fractional  shares
                shall be distributed.

                (ii) Form of  Distribution.  The Committee shall  distribute all
                Shares,  together with any shares  representing stock dividends,
                in the form of Common Stock.  One share of Common Stock shall be
                given  for  each  Share  earned.   Payments   representing  cash
                dividends (and earnings thereon) shall be made in cash.

                (iii)  Withholding.  The Committee  shall withhold from any cash
                payment  made  under this Plan  sufficient  amounts to cover any
                applicable  withholding and employment  taxes, and if the amount
                of such cash  payment is not  sufficient,  the  Committee  shall
                require the  Participant  or Beneficiary to pay to the Committee
                the amount  required to be withheld as a condition of delivering
                the Shares.  The Committee  shall pay over to the Corporation or
                Affiliate  which employs or employed such  Participant  any such
                amount withheld from or paid by the Participant or Beneficiary.

                (iv)Regulatory   Exceptions.   No  Restricted  Shares  shall  be
                    distributed  unless and until all of the requirements of all
                    applicable  law  and  regulations   shall  have  been  fully
                    complied with, including the receipt of approval of the Plan
                    by the stockholders of the Corporation by such vote, if any,
                    as may be required by applicable law and regulations.

    (e)Voting  of Plan  Shares.  All  shares of Common  Stock  subject to Awards
    (whether or not subject to a  Restricted  Share Award) shall be voted by the
    Board in the manner directed by the Board.

    (f)Deferral  Elections.  At any time 12 months  prior to the date on which a
    Participant  becomes  vested in any shares  subject to his or her Restricted
    Share Award,  a Participant  who is a member of a select group of management
    or highly  compensated  employees  (within  the  meaning  of the  Employees'
    Retirement  Income Security Act of 1973) may irrevocably  elect, on the form
    (the "Election Form") approved by the Committee, to defer the receipt of all
    or a percentage  of the Shares that would  otherwise be  transferred  to the
    Participant upon the vesting of such



                                       13
<PAGE>



    Award.  If such an  election  is made,  the Shares  shall be credited to the
    Participant's  Account  as  Deferred  Shares on the date such  Shares  would
    otherwise have been distributed to the Participant.

11.   Amendments and Discontinuance of the Plan

      The Board of  Directors  shall have the right at any time and from time to
time to amend, modify, or discontinue the Plan provided that, except as provided
in subparagraph 6(c), no such amendment,  modification, or discontinuance of the
Plan shall (i) revoke or alter the terms of any valid Option previously  granted
pursuant to the Plan,  (ii)  increase  the number of share of Common Stock to be
reserved for issuance and sale pursuant to Options granted pursuant to the Plan,
(iii)  decrease the exercise  price  determined  pursuant to the  provisions  of
subparagraph  7(b), or (iv) provide for Options  exercisable  more than 10 years
after the date granted.

12.   Plan Subject to Governmental Laws and Regulations

      The Plan and the grant of Awards  pursuant to the Plan shall be subject to
all applicable  governmental  laws and  regulations.  Notwithstanding  any other
provision of the Plan to the  contrary,  the Board of Directors  may in its sole
and  absolute  discretion  make such  changes in the Plan as may be  required to
conform the Plan to such laws and regulations.

13.   Duration of the Plan

      No  Option  shall be  granted  pursuant  to the Plan  after  the  close of
business on March 23, 2010.





                                       14




<PAGE>


                                   EXHIBIT 5.1


                Opinion of Paul, Hastings, Janofsky & Walker LLP
  regarding the legality of the securities being registered by the Registrant.


<PAGE>


                                 Law Offices of
                       Paul, Hastings, Janofsky & Walker LLP
                          1299 Pennsylvania Avenue, NW
                               Washington DC 20004
                            Telephone (202) 508-6000
                            Facsimile (202) 508-9700





                                             April 9, 2001


Board of Directors
Annapolis National Bancorp, Inc.
1000 Bestgate Road, Suite 400
Annapolis, Maryland  21401

      Re:   Registration Statement on Form S-8
            ----------------------------------

Dear Board Members:

     We  have  acted  as  counsel  to  Annapolis  National  Bancorp,  Inc.  (the
"Company") in connection with the preparation of the  Registration  Statement on
Form S-8 filed with the Securities and Exchange  Commission  (the  "Registration
Statement")  under the Securities  Act of 1933, as amended,  relating to 200,000
shares of common  stock,  par value $0.01 per share (the "Common  Stock") of the
Company which may be issued pursuant to the Company's 2000 Stock Incentive Plan,
as such numbers of shares may be increased in  accordance  with said plan in the
event of a merger, consolidation, reorganization, liquidation, recapitalization,
stock dividend, stock split, or similar event involving the Registrant. You have
requested  the opinion of this firm with respect to certain legal aspects of the
proposed offering.

     We have  examined  such  documents,  records  and matters of law as we have
deemed  necessary for purposes of this opinion and based thereon,  we are of the
opinion that the Common Stock when issued pursuant to and in accordance with the
terms of the Plan will be legally issued, fully paid, and nonassessable.

     We hereby  consent  to the  filing of this  opinion  as an  exhibit  to the
Registration Statement on Form S-8.

                                       Very truly yours,


                                          /s/ J. Mark Poerio
                                          J. Mark Poerio, Esq.
                                    for Paul, Hastings, Janofsky & Walker LLP



<PAGE>


                                  EXHIBIT 23.1


                Consent of Paul, Hastings, Janofsky & Walker, LLP
                        (contained in Exhibit 5.1 hereof)



<PAGE>


                                  EXHIBIT 23.2


                         Consent of Rowles & Company LLP



<PAGE>


                    CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS



Annapolis National Bancorp, Inc.
Annapolis, Maryland


     We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report, dated January 20, 2001, appearing in the
annual report on Form 10-KSB of Annapolis National Bancorp, Inc. and Subsidiary
for the year ended December 31, 1999 and 1998



                                                /s/  Rowles & Company, LLP
                                                ROWLES & COMPANY LLP

Baltimore, Maryland
April 2, 2001


<PAGE>


                                  EXHIBIT 23.3


                          Consent of Stegman & Company


<PAGE>



                         CONSENT OF INDEPENDENT AUDITORS



     We hereby consent to the incorporation by reference in this Form S-8 of
Annapolis National Bancorp, Inc. of our report dated January 26, 2001 relating
to the consolidated balance sheet of Annapolis National Bancorp, Inc. as of
December 31, 2000 and related statements of income, changes in stockholders'
equity and cash flows for the year then ended which are included in the 2000
Annual Report on Form 10-KSB.


Baltimore, Maryland
April 3, 2001

                                                /s/ Stegman & Company



<PAGE>



                                  EXHIBIT 99.1


                           Form of Stock Option Award
                            associated with the Plan


<PAGE>



                        Annapolis National Bancorp, Inc.
                            2000 Stock Incentive Plan
                         ------------------------------

                          Stock Option Award Agreement
                         ------------------------------


     You are hereby  awarded  the  following  stock  option  (the  "Option")  to
purchase  Common Stock of Annapolis  National  Bancorp,  Inc.  (the  "Company"),
subject  to the  terms  and  conditions  set forth in this  Stock  Option  Award
Agreement  (this  "Award") and in the Company's  2000 Stock  Incentive Plan (the
"Plan"),  which is attached hereto as Exhibit A.  Capitalized  terms used herein
and not otherwise  defined herein shall have the meanings given to such terms in
Exhibit A.

1. Variable Terms.  The Option shall be controlled by and interpreted  according
to the following terms:

            Name of Optionee:             _____________________________


            Type of Stock Option:         |_| Incentive Stock Option ("ISO")(1)

                                          |_| Nonqualified Stock Option


         Number of Shares subject to
         Award:                            _____________________________

         Option Exercise Price per         $                          (2)
         Share:                            _____________________________

         Date of Award:
                                           _____________________________

         Expiration Date:                 |_| 5 years after Date of Award(2)

                                          |_| 10 years after Date of Award



----------
1 ISOs may only be granted to employees.


2 ISO granted to an employee  who owns more than 10% of the voting  power of all
classes of stock of the Company  may not have a term  exceeding 5 years and must
have an  exercise  price  not less  than  110% of the fair  market  value of the
underlying shares on the grant date.




<PAGE>



            Vesting Schedule:

         --------------------------------------------------------------
                Vested Percentage               Years of Service
                                                after Award Date
         --------------------------------------------------------------
                        0%                        Less than 1
         --------------------------------------------------------------
                                                       1
         --------------------------------------------------------------
                                                       2
         --------------------------------------------------------------
                                                       3
         --------------------------------------------------------------
                                                       4
         --------------------------------------------------------------
                                                       5
         --------------------------------------------------------------

2. Term of Option.  The term of the Option will expire at 5:00 p.m.  (E.D.T.  or
E.S.T., as applicable) on the above-mentioned anniversary of the Date of Award.

3. Right to Exercise. The amount of Shares for which the Option may be exercised
is  cumulative;  that is, if the  Optionee  fails to exercise  all of the Shares
subject to the Option during any period set forth above, then any Shares subject
to the Option that were not exercised during such period may be exercised during
any subsequent period, until the termination of the Option pursuant to Section 2
of this Award and the terms of the Plan.

4.  Premature  Disposition  of an ISO. If the Option is an ISO and the  Optionee
sells or otherwise  disposes of Shares  acquired upon its exercise within 1 year
from the date such Shares were  acquired or 2 years from the Date of Award,  the
Optionee  agrees that the Optionee will deliver a written  report to the Company
within 10 days following the sale or other  disposition of such Shares detailing
the net proceeds of such sale or disposition.

5. Manner of Exercise of the Option. The Option shall be exercised in the manner
set forth in the Plan.

6.  Termination  of  Continuous  Service.  In all  events  where the  Optionee's
Continuous  Service to the  Company is  terminated,  the Option  (including  the
vesting periods set forth in the schedule above) shall be governed by the Plan.

7. Subject to Plan. This Option is subject to all of the terms and conditions of
the Plan, and by executing this Award, the Optionee agrees to be bound by all of
the  Plan's  terms and  conditions  as if it had been set out  verbatim  in this
Award. In addition,  the Optionee recognizes and agrees that all determinations,
interpretations  or other actions  respecting the Plan may be made by a majority
of the Board or of the Committee, and that such determinations,  interpretations
or other actions are final,  conclusive and binding upon all parties,  including
the Optionee, his or her heirs, and representatives.

8.  Designation  of  Beneficiary.   Notwithstanding  anything  to  the  contrary
contained  herein or in the Plan,  following  the  execution of this Award,  the
Optionee may expressly designate a beneficiary (the "Beneficiary") to his or her
interest  in the  Option  awarded  hereby.  The  Optionee  shall  designate  the
Beneficiary by completing  and executing a designation of beneficiary  agreement
substantially  in the form  attached  hereto as Exhibit B (the  "Designation  of



<PAGE>



Beneficiary")  and delivering an executed copy of the Designation of Beneficiary
to the Company.

9. Notices.  Any notice,  payment or  communication  required or permitted to be
given by any  provision of this Award shall be in writing and shall be delivered
personally or sent by certified  mail,  return receipt  requested,  addressed as
follows:  (i) if to the Company,  at 1000 Bestgate Road,  Suite 400,  Annapolis,
Maryland 21401  (attention:  2000 Stock  Incentive Plan  Committee);  (ii) if to
Optionee,  at the address set forth below his or her  signature on the signature
page  hereto.  Each party may,  from time to time,  by notice to the other party
hereto,  specify a new address for delivery of notices to such party  hereunder.
Any such notice  shall be deemed to be  delivered,  given,  and received for all
purposes as of the date such notice is received or properly mailed.

10. Binding Effect.  Except as otherwise  provided in this Award or in the Plan,
every  covenant,  term,  and  provision  of this Award shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs, legatees,
legal representatives, successors, transferees, and assigns.

11.  Headings.  Section  and  other  headings  contained  in this  Award are for
reference purposes only and are not intended to describe,  interpret,  define or
limit the scope or intent of this Award or any provision hereof.

12.  Severability.  Every provision of this Award and of the Plan is intended to
be  severable.  If any term hereof is illegal or invalid  for any  reason,  such
illegality  or  invalidity  shall not affect the  validity  or  legality  of the
remaining terms of this Award.

13.  Governing  Law. The laws of the State of Maryland shall govern the validity
of this Award,  the  construction of its terms,  and the  interpretation  of the
rights and duties of the parties hereto.

14.  Counterparts.  This Award may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute one and the same instrument.



<PAGE>



     BY  YOUR  SIGNATURE  BELOW,  along  with  the  signature  of the  Company's
representative,  you and the Company  agree that the Option is awarded under and
governed by the terms and conditions of this Award and the Plan.

                  Annapolis National Bancorp, Inc.


                  By: _________________________________   Date:_______________
                      An authorized member of the
                      Annapolis National Bancorp, Inc.
                      2000 Stock Incentive Plan Committee


               The  undersigned  Optionee hereby accepts the terms of this Award
               and the Plan.


                  By: _________________________________   Date:_______________
                  Name of Optionee
                  Address:
                  ---------------------------------------------------------

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

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



<PAGE>



                                    Exhibit A
                                  ------------

           Annapolis National Bancorp, Inc. 2000 Stock Incentive Plan



<PAGE>



                        ANNAPOLIS NATIONAL BANCORP, INC.
                            2000 STOCK INCENTIVE PLAN


1.    Purpose

      The proper execution of the duties and  responsibilities of the directors,
executives,   and   employees  of  Annapolis   National   Bancorp,   Inc.   (the
"Corporation")  and its  subsidiaries is a vital factor in the continued  growth
and success of the Corporation.  Toward this end, it is necessary to attract and
retain  effective and capable  individuals to assume  positions that  contribute
materially to the successful  operation of the business of the  Corporation  and
its  subsidiaries.  It will  benefit  the  Corporation,  therefore,  to bind the
interests of these persons more closely to its own interests by offering them an
attractive  opportunity to acquire a proprietary interest in the Corporation and
thereby  provide  them with  added  incentive  to remain in the  service  of the
Corporation and its  subsidiaries  and to increase the prosperity,  growth,  and
earnings of the  Corporation.  This stock option plan is intended to serve these
purposes.

2.    Definitions

      The following terms wherever used herein shall have the meanings set forth
below.

          (a) The  term  "Awards"  shall  mean  Options,  Deferred  Shares,  and
              Restricted Share Awards, collectively.

          (b) The term "Board of Directors" shall mean the Board of Directors of
              the Corporation.

          (c) The term  "Change  in  Control  of the  Corporation"  shall mean a
              change  in  control  of a  nature  that  would be  required  to be
              reported in response  to Item 6(c) of Schedule  14A of  Regulation
              14A  promulgated  under  the  Exchange  Act,  whether  or not  the
              Corporation  is in fact  required  to comply  therewith,  provided
              that, without limitation, such a change in control shall be deemed
              to have  occurred  if (A) any  "person"  (as such  term is used in
              Section 13(d) and 14(d) of the Exchange Act), other than a trustee
              or other fiduciary  holding  securities  under an employee benefit
              plan  of  the  Corporation  or  any  of  its   subsidiaries  or  a
              corporation owned, directly or indirectly,  by the stockholders of
              the  Corporation  in  substantially  the same  proportions  as the
              ownership  of Common  Stock of the  Corporation,  and  other  than
              Lawrence E. Lerner or any member or members of this family,  is or
              becomes the "beneficial owner" (as defined in Rule 13d-3 under the
              Exchange  Act),  directly  or  indirectly,  of  securities  of the
              Corporation  representing 20% or more of the combined voting



<PAGE>



              power of the Corporation's then outstanding securities; (B) during
              any  period of two  consecutive  years (not  including  any period
              prior  to  the  adoption  of  the  Plan)  individuals  who  at the
              beginning of such period constitute the Board and any new director
              (other than a director designated by a person who has entered into
              an  agreement  with  the   Corporation  to  affect  a  transaction
              described in clauses (A) or (B) of this definition) whose election
              by the Board or  termination  for  election  by the  Corporation's
              stockholders  was approved by a vote of at least two-thirds of the
              directors  then still in office who either were  directors  at the
              beginning  of the  period  or whose  election  or  nomination  for
              election  was  previously  so  approved,  cause for any  reason to
              constitute  a majority of the Board;  (C) the  Corporation  enters
              into an agreement,  the  consummation of which would result in the
              occurrence  of a Change in  Control  of the  Corporation;  (D) the
              stockholders of the Corporation  approve a merger,  share exchange
              or consolidation  of the Corporation  with any other  corporation,
              other than a merger,  share exchange or  consolidation  that would
              result in the voting  securities of the  Corporation,  outstanding
              immediately prior thereto held by Lawrence E. Lerner or any member
              or  members  of his  family  continuing  to  represent  (either by
              remaining outstanding or by being converted into voting securities
              of the surviving entity) at least 50% of the combined voting power
              of the voting  securities  of the  Corporation  or such  surviving
              entity outstanding  immediately after such merger,  share exchange
              or consolidation, or the stockholders of the Corporation approve a
              plan of complete  liquidation of the Corporation or any agreements
              for  the  sale  of  disposition  by  the  Corporation  of  all  or
              substantially all the Corporation's assets.

          (d) The term "Code" shall mean the Internal  Revenue Code of 1986,  as
              amended, and any regulations promulgated thereunder.

          (e) The term "Committee" shall mean a committee to be appointed by the
              Board of  Directors  to consist of three or more  members,  all of
              whom are members of the Board of Directors  and are  "non-employee
              directors" within the meaning of Rule 16-3 under the Exchange Act.

          (f) The term "Common Stock" shall mean the shares of common stock, par
              value $0.01 per share, of the Corporation.

          (g) The term  "Corporation"  shall mean  Annapolis  National  Bancorp,
              Inc., a Maryland corporation.

          (h) The term "Deferred  Shares" shall mean Shares that the Company has
              credited,   pursuant  to   Paragraph  9  hereof,   to  a  deferred
              compensation account in the name of a Participant.



                                       2
<PAGE>




          (i) The term "Exchange Act" shall mean the Securities  Exchange Act of
              1934, as amended.

          (j) The term "Fair  Market  Value"  shall mean the then  current  fair
              market value of Common  Stock,  as determined in good faith by the
              Committee and in a manner  consistent  with the rules set forth in
              Treas. Reg. Section 20.2031-2.

          (k) The term  "Incentive  Stock Option"  shall mean an Option  granted
              pursuant  to the Plan that is  designated  as an  Incentive  Stock
              Option and which  satisfies the  requirements of Section 422(b) of
              the Code.

          (l) The term "Nonqualified  Stock Option" shall mean an Option granted
              pursuant to the Plan that is not an Incentive Stock Option.

          (m) The term  "Option" or "Stock  Option"  shall mean a right  granted
              pursuant to the Plan to purchase shares of Common Stock, and shall
              include the terms  Incentive Stock Option and  Nonqualified  Stock
              Option.

          (n) The term  "Option  Agreement"  shall  mean the  written  agreement
              representing  Options granted pursuant to the Plan as contemplated
              by Paragraph 7 of the Plan.

          (o) The term "Plan" shall mean the Annapolis  National  Bancorp,  Inc.
              2000 Stock Incentive Plan as approved by the Board of Directors on
              March 24, 2000, as the same may be amended from time to time.

          (p) The term "Restricted Share Award" shall mean a right granted under
              Section 10 of this Plan to receive Shares.

          (q) The term "subsidiary" or  "subsidiaries"  shall mean a corporation
              of  which  capital  stock  possessing  50% or  more  of the  total
              combined voting power of all classes of its capital stock entitled
              to vote  generally  in the  election of  directors is owned to the
              aggregate by the Corporation directly or indirectly through one or
              more subsidiaries.

3.    Effective Date of the Plan

      The Plans shall become effective upon stockholder approval,  provided that
such approval is received  before March 24, 2001, and provided  further that the
Board of Directors may grant Options  pursuant to the Plan prior to  stockholder
approval  if  such  Options  by  their  terms  are  contingent  upon  subsequent
stockholder approval of the Plan.



                                       3
<PAGE>



4.    Administration

          (a) The Plan shall be administered by the Committee, provided that the
          Board  may act in lieu  of the  Committee  on any  matter  within  the
          Committee's discretion or authority.

          (b) The  Committee  may  establish,  from time to time and at any time
          subject to the limitations of the Plan as set forth herein, such rules
          and  regulations  and amendments and  supplements  thereto as it deems
          necessary to comply with  applicable  law and  regulation  and for the
          proper  administration  of the Plan.  A majority of the members of the
          Committee  shall  constitute  a quorum.  The vote of a  majority  of a
          quorum shall constitute action by the Committee.

          (c) The  Committee  shall  from  time to time  submit  to the Board of
          Directors  for its  approval  the  names of those  executives  and key
          employees  who, in its  opinion,  should  receive  Options,  and shall
          recommend the numbers of shares on which Options  should be granted to
          each such person and the nature of the Options to be granted.

          (d)  Options  shall be  granted  by the  Committee  and  shall  become
          effective  only after  execution  of an Option  Agreement  between the
          Corporation and the Option holder.

          (e) The Commission's interpretation and construction of the provisions
          of the Plan and the rules and  regulations  adopted by the  Commission
          shall be final, unless otherwise determined by the Board of Directors.
          No member of the  Committee or the Board of Directors  shall be liable
          for my action or  determination  made, in respect of the Plan, in good
          faith.

5.    Participation in the Plan

          (a)  Participants  in the Plan shall be limited to the  employees  and
          directors  of the  Corporation  and  its  subsidiaries  who  shall  be
          designated by the Committee.

          (b) No member of the Board of Directors  who is also an officer of the
          Corporation shall be eligible to serve on the Committee.

6.    Stock Subject to the Plan

          (a) There shall be reserved for the granting of Awards pursuant to the
          Plan and for issuance and sale pursuant to such Awards  200,000 shares
          of Common  Stock.  To  determine  the number of shares of Common Stock
          available  at any time for the  granting  of  Awards,  there  shall be
          deducted from



                                       4
<PAGE>



          the total  number of reserved  shares of Common  Stock,  the number of
          shares of Common  Stock in respect of which  Awards have been  granted
          pursuant  to  the  Plan  that  are  still  outstanding  or  have  been
          exercised.  The shares of Common  Stock to be issued upon the exercise
          or vesting of Awards shall be made  available  from the authorized and
          unissued  shares of Common  Stock.  If for any reason shares of Common
          Stock as to which an Award has been  granted  cease to be  subject  to
          purchase or delivery to Award holders thereunder,  then such shares of
          Common  Stock again shall be available  for  issuance  pursuant to new
          Awards.

          (b)  Proceeds  from the  purchase  of shares of Common  Stock upon the
          exercise of Options granted pursuant to the Plan shall be used for the
          general business purposes of the Corporation.

          (c) In the event of the reorganization, recapitalization, stock split,
          stock  dividend,  combination  of  shares  of  Common  Stock,  merger,
          consolidation, share exchange acquisition of property of stock, or any
          change in the capital  structure  of the  Corporation,  the  Committee
          shall make such adjustments as may be equitable and appropriate in the
          number and kind of shares  reserved  for  purchases by  executives  or
          other key employees,  in the number,  kind and price of shares covered
          by Awards granted pursuant to the Plan and then outstanding.

7.    Terms and Conditions of Options

          (a) Each Option granted  pursuant to the Plan shall be evidenced by an
          Option  agreement in such form as the Committee  from time to time may
          determine.

          (b) The exercise  price per share for Options shall be  established by
          the Board of Directors upon the recommendation of the Committee at the
          time of the  grant of  Options  pursuant  to the Plan and shall not be
          less than the Fair Market Value of a share of Common Stock on the date
          on which the Option is  granted.  If the Board of  Directors  does not
          establish  a specific  exercise  price per share at the time of grant,
          the  exercise  price per share shall be equal to the Fair Market Value
          of a share of Common Stock on the date of grant of the Options.

          (c) Each  Option,  subject to the other  limitations  set forth in the
          Plan, may extend for a period of up to 10 years from the date on which
          it is granted.  The term of each  Option  shall be  determined  by the
          Board of Director at the time of grant of the Option, provided that if
          no term is  established  by the  Board  of  Directors  the term of the
          Option shall be 10 years from the date on which it is granted.



                                       5
<PAGE>



          (d) The Board of Directors upon  recommendation of the Committee,  may
          provide in the Option Agreement that the right to exercise each Option
          for the number of shares  subject to each Option  shall  vest,  in the
          Option  holder  over  such  period  of time as the  Committee,  in its
          direction, shall determine for each Option holder. Notwithstanding the
          foregoing,   each  Option  Agreement  shall  provide  that,  upon  the
          occurrence of a Change in Control of the Corporation, all Options then
          outstanding shall become immediately exercisable.

          (e) Options shall be nontransferable  and  nonassignable,  except that
          Options may be transferred by  testamentary  instrument or by the laws
          of descent and  distribution,  and  Nonqualified  Stock Options may be
          transferred  to  family  members  or  family  trusts,  subject  to the
          original terms of the Option.

          (f) Unless the Committee  specifies  otherwise in an Option agreement,
          upon  voluntary  or  involuntary  termination  of an  Option  holder's
          service with the  Corporation,  his Options and all rights  thereunder
          shall  terminate  effective  at the close of  business on the date the
          Option holder ceases to be a Director of regular,  full-time  employee
          of the  Corporation  or any of  its  subsidiaries,  except  (i) to the
          extent previously exercised and (ii) as provided in subparagraphs (g),
          (h) and (i) of this Paragraph 7.

          (g) In the event an Option  holder (i) takes a leave of  absence  from
          the Corporation or any of its  subsidiaries for personal reasons or as
          a result of entry into the armed forces of the United  States,  or any
          of the  departments  or agencies of the United States  government,  or
          (ii) terminates his employment,  or ceases  providing  services to the
          Corporation  or  any  of  its   subsidiaries,   by  reason  of  death,
          disability,  voluntary  termination with the consent of the Committee,
          or other  special  circumstances,  the Committee may consider his case
          and may take such action in respect of the related Option Agreement as
          it  may  deem   appropriate   under   the   circumstances,   including
          accelerating  the time previously  granted for Options to be exercised
          and extending the time  following the Option  holder's  termination of
          active  employment  or  service  during  which  the  Option  holder is
          entitled  to  purchase  the  shares of Common  Stock  subject  to such
          Options,  provided that in no event may any Option be exercised  after
          the expiration of the time of the Option.

          (h) If an Option  holder  dies  during the term of his Option  without
          having fully exercised this Option,  the executor or  administrator of
          his estate or the person who inherits the right to exercise the Option
          by bequest or inheritance shall have the right within two years of the
          Option holder's death to purchase the number of shares of Common Stock
          that the deceased  Option  holder was entitled to purchase at the date
          of his death, after which the Option shall



                                       6
<PAGE>



          lapse, provided that in no event may any Option be exercised after the
          expiration of the term of the Option.

          (i) If an Option holder terminates employment without his having fully
          exercised  his Option due to his  retirement  with the  consent of the
          Corporation,  then such  Option  holder  shall  have the right  within
          ninety (90) days of the Option  holder's  termination of employment or
          service  to  purchase  the  number of shares of Common  Stock that the
          Option holder was entitled to purchase at the date of his termination,
          after which the Option shall lapse,  provided that in no event may any
          Option be exercised  after the  expiration  of the term of the Option.
          The  Committee  may  cancel  the  Option  during the ninety day period
          referred  to  in  this  paragraph,   if  the  Participant  engages  in
          employment or activities  which, in the opinion of the Committee,  are
          contrary to the best interests of the Corporation. The Committee shall
          determine in each case whether a termination  of employment or service
          shall be considered a retirement with the consent of the  Corporation,
          and,  subject to  applicable  law,  whether a leave of  absence  shall
          constitute a termination of employment.  Any such determination of the
          Committee  shall be final  and  conclusive,  unless  overruled  by the
          Board.

          (j)  The  granting  of an  Option  pursuant  to  the  Plan  shall  not
          constitute or be evidence of any agreement or  understanding,  express
          or implied,  on the part of the Corporation or any of its subsidiaries
          to retain or employ the Option holder for any specified period.

          (k) In addition to the general terms and  conditions set forth in this
          Paragraph  7 in  respect  of  Options  granted  pursuant  to the Plan,
          Incentive Stock Options granted  pursuant to the Plan shall be subject
          to the following additional terms and conditions:

                (i)   "Incentive   Stock  Options"  shall  be  granted  only  to
                individuals  who,  at the  date  of  grant  of the  Option,  are
                employees of the Corporation or any of its subsidiaries;

                (ii) No  employee  who owns  beneficially  more  than 10% of the
                total  combined  voting  power  of all  classes  of stock of the
                Corporation  shall be eligible to be granted an "Incentive Stock
                Option;"

                (iii) The aggregate  fair market value  (determined  at the time
                the  Incentive  Stock Option is granted) of the shares of Common
                Stock  in  respect  of  which   "incentive  stock  options"  are
                exercisable  for the first time by the Option  holder during any
                calendar year (under all such plans of the  Corporation  and its
                subsidiaries) shall not exceed $100,000; and



                                       7
<PAGE>



                (iv) Any other terms and  conditions  specified  by the Board of
                Directors that are not inconsistent  with the Plan,  except that
                such  terms  and   conditions   must  be  consistent   with  the
                requirements  for "incentive stock options" under Section 422 of
                the Code.

8.    Methods of Exercise of Options

          (a) An Option holder (or other person or person,  if any,  entitled to
          exercise an Option  hereunder)  desiring to exercise an Option granted
          pursuant  to the Plan as to all or part of the shares of Common  Stock
          covered by the Option shall (i) notify the  Corporation  in writing as
          its principal  office at 1000  Bestgate  Road,  Suite 400,  Annapolis,
          Maryland  21401,  to that effect,  specifying  the number of shares of
          Common Stock to be purchased and the method of payment therefore,  and
          (ii) make  payment or  provision  for payment for the shares of Common
          Stock as purchased in accordance  with this  Paragraph 8. Such written
          notice  may be  given  by  means  of a  facsimile  transmission.  If a
          facsimile  transmission  is used,  the Option  holder  should mail the
          original  executed  copy  of the  written  notice  to the  Corporation
          promptly thereafter.

          (b) Payment or provision for payment shall be made as follows:

                (i) The Option  holder shall deliver to the  Corporation  at the
                address set forth in subparagraph 8(a) United States currency in
                an amount equal to the aggregate purchase price of the shares of
                Common Stock as to which such exercise relates; or

                (ii) The Option holder shall tender to the Corporation shares of
                Common Stock already  owned by the Option holder that,  together
                with any cash tendered therewith,  have no aggregate fair market
                value  (determined  based on the Fair Market Value of a share of
                Common  Stock on the date the notice  set forth in  subparagraph
                8(a) is  received  by the  Corporation)  equal to the  aggregate
                purchase  price of the  shares of Common  Stock as to which such
                exercise relates; or

                (iii) The Option  holder  shall  deliver to the  Corporation  an
                exercise  notice  together with  irrevocable  instructions  to a
                broker to deliver promptly to the Corporation the amount of sale
                or loan proceeds  necessary to pay the aggregate  purchase price
                of the shares of Common Stock as to which such exercise  relates
                and to sell  the  shares  of  Common  Stock  to be  issued  upon
                exercise  of the  Option and  deliver  the cash  proceeds,  less
                commission and brokerage fees to the



                                       8
<PAGE>



                Option holder or to deliver the remaining shares of Common Stock
                to the Option holder.

          Notwithstanding the foregoing provisions,  the Committee and the Board
          of Directors,  in granting Options pursuant to the Plan, may limit the
          methods in which an Option may be  exercised  by any  person  and,  in
          processing any purported exercise of an Option granted pursuant to the
          Plan,  may refuse to recognize the method of exercise  selected by the
          Option  holder  (other  than  the  method  of  exercise  set  forth in
          subparagraph 8(b)(i)).

          (c) In addition to the  alternative  methods of exercise  set forth in
          paragraph  8(b),  holders  of  Nonqualified  Stock  Options  shall  be
          entitled,  at or prior to the time the written notice  provided for in
          subparagraph  8(a) is delivered to the  Corporation,  to elect to have
          the  Corporation  withhold  from  the  shares  of  Common  Stock to be
          delivered upon exercise of the  Nonqualified  Stock Option that number
          of shares of Common Stock  (determined  based on the Fair Market Value
          of a share  of  Common  Stock  on the date  the  notice  set  forth in
          subparagraph 8(a) is received by the Corporation) necessary to satisfy
          any withholding taxes attributable to the exercise of the Nonqualified
          Stock  Option.  Alternatively,  such  holder of a  Nonqualified  Stock
          Option may elect to deliver  previously  owned  shares of Common Stock
          upon  exercise  of  the  Nonqualified  Stock  Option  to  satisfy  any
          withholding  taxes  attributable  to the exercise of the  Nonqualified
          Stock  Option.  If  the  Board  of  Directors  does  not  include  any
          provisions  relating to this  withholding  feature in its  resolutions
          granting the Nonqualified Stock Option or in the Option Agreement. The
          maximum  amount that an Option  holder may elect to have withheld from
          the shares of Common Stock otherwise  deliverable upon exercise or the
          maximum number of previously owned shares in Option holder may deliver
          shall  be  equal  to  the  minimum  federal  and  state   withholding.
          Notwithstanding the foregoing  provisions,  the Committee or the Board
          of Directors may include in the Option Agreement  relating to any such
          Nonqualified  Stock  Option  provisions  limiting or  eliminating  the
          Option  holder's  ability to pay his  withholding  tax obligation with
          shares of Common Stock;  or if no such  provisions are included in the
          Option Agreement,  but in the opinion of the Committee or the Board of
          Directors  such  withholding  would have an adverse tax or  accounting
          effect to the Corporation, at or prior to exercise of the Nonqualified
          Stock  Option the  Committee  or the Board of  Directors  may limit or
          eliminate  the  Option  holder's  ability to pay his  withholding  tax
          obligation with shares of Common Stock.  Notwithstanding the foregoing
          provisions, a holder of Nonqualified Stock Option may not elect any of
          the methods of satisfying his withholding tax obligation in respect of
          any exercise if, in the opinion of counsel to the  Corporation,  there
          is a  substantial  likelihood  that  the  election  or  timing  of the
          election  would



                                       9
<PAGE>



          subject the holder to a substantial risk of liability under Section 16
          of the Exchange Act.

          (d) An Option  holder at any time may elect in  writing  to abandon an
          Option  in  respect  of all or part of the  number of shares of Common
          Stock as to which the Option shall not have been exercised.

          (e) An Option holder shall have none of the rights of a stockholder of
          the Corporation until the shares of Common Stock covered by the Option
          are issued to him upon exercise of the Option.

9.    Deferred Shares

          (a)  Elections  to  Defer.  The  Committee  may at any time  allow any
          Participant  (or  Participants)  who  is a  member  of  the  Board  of
          Directors,  or a member  of a select  group of  management  or  highly
          compensated employees (within the meaning of the Employees' Retirement
          Income Security Act of 1973, with each such individual  being referred
          to herein  as a  "Participant")  may  irrevocably  elect,  on the form
          attached  hereto as  Exhibit A (the  "Election  Form"),  to forego the
          receipt  of  cash  compensation  and  in  lieu  thereof  to  have  the
          Corporation credit Deferred Shares to the Participant's Account with a
          Fair Market Value equal to the  compensation  deferred.  Each Election
          Form shall take effect five  business  days after its  delivery to the
          Committee,  unless in the meantime the Committee sends the Participant
          a  written  notice  explaining  why  the  Election  Form  is  invalid.
          Notwithstanding  the  foregoing  sentence,  Election  Forms  shall  be
          ineffective with respect to any compensation  that a Participant earns
          before the date on which the Committee receives the Election Form.

          (b) Vesting.  Deferred Shares shall be 100% vested at all times.

          (c)  Recordkeeping;  Cash Earnings on Deferred  Shares.  The Committee
          shall  establish  and  maintain  an  individual   account  (the  "Cash
          Account") in the name of each  Participant who files an Election Form.
          On the last day of each fiscal quarter,  the Corporation  shall credit
          to the  Participant's  Cash  Account  any cash  dividends  paid on the
          balance of Deferred Shares credited to the Participant's  Account.  On
          the last day of each fiscal  year of the  Corporation,  the  Committee
          shall  credit to the  Participant's  Account  Deferred  Shares  with a
          Market  Value equal to the balance of the  Participant's  Cash Account
          (without  regard  to  fractional  shares),  and  the  balance  of  the
          Participant's  Cash  Account  shall be reduced to zero.  The  Trustees
          shall hold each  Participant's  Deferred Shares until  distribution is
          required pursuant to subsection (d) hereof.



                                       10
<PAGE>



          (d) Distributions of Deferred Shares and Earnings.  The Trustees shall
          distribute a Participant's Deferred Shares in five substantially equal
          annual  installments  that are paid before the last day of each of the
          five fiscal years of the Corporation  that end after the date on which
          the   Participant's   Continuous   Service   terminates,   unless  the
          Participant has properly elected a different form of distribution,  on
          the form (the "Distribution Election Form") approved by the Committee,
          and the Committee has received the Participant's Distribution Election
          Form  either more than 90 days before a Change in Control or more than
          one year before the date on which the Participant's Continuous Service
          terminates for any reason. Fractional Shares shall not be distributed.

          (e) Hardship  Withdrawals.  Notwithstanding any other provision of the
          Plan or a  Participant's  Election Form, in the event the  Participant
          suffers an  unforeseeable  hardship within the  contemplation  of this
          Section,  the  Participant may apply to the Committee for an immediate
          distribution of all or a portion of his Deferred Shares.  The hardship
          must  result from a sudden and  unexpected  illness or accident of the
          Participant  or a  dependent  of the  Participant,  casualty  loss  of
          property,  or other  similar  conditions  beyond  the  control  of the
          Participant.  Examples of purposes which are not considered  hardships
          include  post-secondary  school  expenses  or the desire to purchase a
          residence.  In no event will a distribution  be made to the extent the
          hardship could be relieved  through  reimbursement  or compensation by
          insurance  or  otherwise,  or  by  liquidation  of  the  Participant's
          nonessential  assets to the extent such  liquidation  would not itself
          cause a severe  financial  hardship.  The  amount of any  distribution
          hereunder  shall be  limited to the amount  necessary  to relieve  the
          Participant's  financial  hardship.  The  determination  of  whether a
          Participant  has a qualifying  hardship and the amount which qualifies
          for  distribution,  if any, shall be made by the Committee in its sole
          discretion.  The  Committee  may  require  evidence of the purpose and
          amount  of the  need,  and may  establish  such  application  or other
          procedures as it deems appropriate.

          (e) Rights to Deferred Shares. A Participant may not assign his or her
          claim to Deferred  Shares during his or her lifetime.  A Participant's
          right to Deferred  Shares shall at all times  constitute  an unsecured
          promise of the Corporation to pay benefits as they come due. The right
          of the  Participant  or his or her  beneficiary  to  receive  benefits
          hereunder  shall be solely an  unsecured  claim  against  the  general
          assets of the  Corporation.  Neither  the  Participant  nor his or her
          beneficiary  shall have any claim  against  or rights in any  specific
          assets, shares, or other funds of the Corporation.



                                       11
<PAGE>



10.   Restricted Share Awards

          (a)  Grants.   The  Committee  shall  have  the  discretion  to  grant
          Restricted  Share  Awards to  Employees  and  members  of the Board of
          Directors.  As promptly as practicable  after a determination  is made
          that a  Restricted  Share  Award is to be made,  the  Committee  shall
          notify the  Participant  in  writing  of the grant of the  Award,  the
          number of Shares  covered by the  Award,  and the terms upon which the
          Shares  subject  to the  Award  may be  earned.  The date on which the
          Committee so notifies the Participant  shall be considered the date of
          grant of the  Restricted  Share Awards.  The Committee  shall maintain
          records as to all grants of Restricted Share Awards under the Plan.

          (b) Earning Shares. Unless the Committee  specifically  eliminates any
          vesting  schedule in an Agreement  granting a Restricted  Share Award,
          Shares  subject to Restricted  Share Awards shall be earned and become
          non-forfeitable by a Participant  according to the following schedule,
          provided the  Participant  is an Employee or Director on the scheduled
          vesting date:


                                          Vested Percentage
               Years of Service        (applied to Restricted
               ----------------               Shares)
                                              -------

                  Less than 1                     0%
                       1                         25%
                       2                         50%
                       3                         75%
                   4 or More                     100%

       Notwithstanding   the  foregoing  and  unless  otherwise  provided  in  a
   Participant's  Restricted Stock Award,  each Participant  shall become (100%)
   vested  immediately (i) upon termination of the Participant's  service due to
   the  Participant's  disability or death,  or (ii) upon a Change in Control of
   the Corporation.

    (c)Accrual  of  Dividends.  Whenever  Shares  are paid to a  Participant  or
    Beneficiary  under Section 11(d), such Participant or Beneficiary shall also
    be entitled to receive,  with respect to each Share paid, an amount equal to
    any cash  dividends  (including  special large and  nonrecurring  dividends,
    including   one  that  has  the  effect  of  a  return  of  capital  to  the
    Corporation's  stockholders) and a number of shares of Common Stock equal to
    any stock  dividends,  declared  and paid with  respect to a share of Common
    Stock  between the date the relevant  Restricted  Share Award was  initially
    granted to such  Participant and the date the Shares are being  distributed.
    There shall



                                       12
<PAGE>



    also be  distributed  an  appropriate  amount of net earnings,  if any, with
    respect to any cash dividends so paid out.

    (d)Distribution of Shares.

                (i) Timing of  Distributions:  General Rule. Except as otherwise
                expressly  stated in this Plan, the Committee  shall  distribute
                Shares and  accumulated  cash from dividends and interest to the
                Participant or his  Beneficiary,  as the case may be, as soon as
                practicable  after they have been earned.  No fractional  shares
                shall be distributed.

                (ii) Form of  Distribution.  The Committee shall  distribute all
                Shares,  together with any shares  representing stock dividends,
                in the form of Common Stock.  One share of Common Stock shall be
                given  for  each  Share  earned.   Payments   representing  cash
                dividends (and earnings thereon) shall be made in cash.

                (iii)  Withholding.  The Committee  shall withhold from any cash
                payment  made  under this Plan  sufficient  amounts to cover any
                applicable  withholding and employment  taxes, and if the amount
                of such cash  payment is not  sufficient,  the  Committee  shall
                require the  Participant  or Beneficiary to pay to the Committee
                the amount  required to be withheld as a condition of delivering
                the Shares.  The Committee  shall pay over to the Corporation or
                Affiliate  which employs or employed such  Participant  any such
                amount withheld from or paid by the Participant or Beneficiary.

                (iv)Regulatory   Exceptions.   No  Restricted  Shares  shall  be
                    distributed  unless and until all of the requirements of all
                    applicable  law  and  regulations   shall  have  been  fully
                    complied with, including the receipt of approval of the Plan
                    by the stockholders of the Corporation by such vote, if any,
                    as may be required by applicable law and regulations.

    (e)Voting  of Plan  Shares.  All  shares of Common  Stock  subject to Awards
    (whether or not subject to a  Restricted  Share Award) shall be voted by the
    Board in the manner directed by the Board.

    (f)Deferral  Elections.  At any time 12 months  prior to the date on which a
    Participant  becomes  vested in any shares  subject to his or her Restricted
    Share Award,  a Participant  who is a member of a select group of management
    or highly  compensated  employees  (within  the  meaning  of the  Employees'
    Retirement  Income Security Act of 1973) may irrevocably  elect, on the form
    (the "Election Form") approved by the Committee, to defer the receipt of all
    or a percentage  of the Shares that would  otherwise be  transferred  to the
    Participant upon the vesting of such



                                       13
<PAGE>



    Award.  If such an  election  is made,  the Shares  shall be credited to the
    Participant's  Account  as  Deferred  Shares on the date such  Shares  would
    otherwise have been distributed to the Participant.

11.   Amendments and Discontinuance of the Plan

      The Board of  Directors  shall have the right at any time and from time to
time to amend, modify, or discontinue the Plan provided that, except as provided
in subparagraph 6(c), no such amendment,  modification, or discontinuance of the
Plan shall (i) revoke or alter the terms of any valid Option previously  granted
pursuant to the Plan,  (ii)  increase  the number of share of Common Stock to be
reserved for issuance and sale pursuant to Options granted pursuant to the Plan,
(iii)  decrease the exercise  price  determined  pursuant to the  provisions  of
subparagraph  7(b), or (iv) provide for Options  exercisable  more than 10 years
after the date granted.

12.   Plan Subject to Governmental Laws and Regulations

      The Plan and the grant of Awards  pursuant to the Plan shall be subject to
all applicable  governmental  laws and  regulations.  Notwithstanding  any other
provision of the Plan to the  contrary,  the Board of Directors  may in its sole
and  absolute  discretion  make such  changes in the Plan as may be  required to
conform the Plan to such laws and regulations.

13.   Duration of the Plan

      No  Option  shall be  granted  pursuant  to the Plan  after  the  close of
business on March 23, 2010.





                                       14

<PAGE>



                                  EXHIBIT 99.2

                         Form of Restricted Stock Award
                            associated with the Plan


<PAGE>




                        Annapolis National Bancorp, Inc.
                            2000 Stock Incentive Plan
                         ------------------------------

                        Restricted Stock Award Agreement
                         ------------------------------

     Annapolis  National Bancorp,  Inc. (the "Company") hereby grants, as of the
Award  Date set  forth  below in  Section  1 hereto  (the  "Award  Date"),  this
restricted  stock award (this  "Award")  to the  Participant  named in Section 1
hereto pursuant to the Company's 2000 Stock  Incentive Plan (the "Plan"),  which
is attached hereto as Exhibit A.

     The  Participant  recognizes  that this Award is compensatory in nature and
accordingly subject to taxation as gross income under Section 83 of the Internal
Revenue Code of 1986, as that Section may be amended and  interpreted  from time
to time. The Participant  further recognizes that, unless the election described
in Section 5 is made,  taxation will occur whenever shares subject to this Award
(the "Restricted Shares") are delivered to the Participant.

     Capitalized  terms used  herein and not  otherwise  defined  shall have the
meanings given to such terms in Exhibit A.

1. Variable Terms.  This Award shall be controlled by and interpreted  according
to the following terms:


Name of Participant:                            _________________________

Award Date:                                     _________________________

Number of Restricted Shares Awarded to
Participant:                                    _________________________

Purchase Price of Restricted Shares (if         $
applicable):                                    _________________________


2. Vesting Schedule.  Subject to Sections 3 and 5 hereof,  the Participant shall
become vested in the Restricted  Shares and the  Restricted  Shares shall become
nonforfeitable according to the following schedule:

         ---------------------------------------------------------
              Vested Percentage            Years of Service
                                           after Award Date
         ---------------------------------------------------------
                     0%                      Less than 1
         ---------------------------------------------------------
                                                  1
         ---------------------------------------------------------
                                                  2
         ---------------------------------------------------------
                                                  3
         ---------------------------------------------------------
                                                  4
         ---------------------------------------------------------
                                                  5
         ---------------------------------------------------------



<PAGE>



3. Restriction Period. The term "Restriction  Period" means that period from the
Award  Date  until the first to occur of (i) the  Participant's  termination  of
service,  (ii) the  Participant's  completion of four years of service after the
Award  Date,  or (iii) a Change in Control of the  Corporation.  Any  Restricted
Shares in which the  Participant  does not earn a vested  interest  during  this
period shall be forfeited at the end of the last day of the Restricted Period.

4.  Certain Tax  Matters.  Set forth below is a brief  summary of certain of the
federal income tax consequences of the Participant's receipt of this Award. THIS
SUMMARY IS PURPOSELY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO
CHANGE OR DIFFERENT INTERPRETATION.  ACCORDINGLY, THE PARTICIPANT SHOULD CONSULT
A TAX ADVISOR BEFORE ACCEPTING THIS GRANT.

     The Participant  acknowledges having been advised by the Company that he or
she will generally recognize income in an amount equal to the excess of the Fair
Market Value of the Restricted  Shares over the purchase price (if any) for such
Restricted  Shares  (as set forth in  Section 1 hereto).  The  Participant  will
recognize this income at the time the Restricted Shares become vested,  measured
with reference to the Fair Market Value of the  Restricted  Shares at such time,
unless,  pursuant to Section  83(b) of the  Internal  Revenue  Code (and similar
state tax provisions, if applicable), within thirty (30) days of the Award Date,
an  election  is filed by the  Participant  with the  Company  and the  Internal
Revenue Service in  substantially  the form attached hereto as Exhibit B and, if
necessary,  the proper state authorities,  to be taxed currently with respect to
the excess amount described in the first sentence of this paragraph.

     THE  PARTICIPANT  HEREBY  ASSUMES  ALL THE  RESPONSIBILITY  FOR FILING SUCH
ELECTION,  AND FOR PAYING ANY TAXES  RESULTING FROM RECEIPT OF THIS AWARD,  SUCH
ELECTION OR ANY RESTRICTED SHARES BECOMING VESTED SHARES HEREUNDER.

5.  Termination  of  Continuous  Service.  In  all  events  where  Participant's
Continuous Service to the Company is terminated, the effect on the Award granted
hereunder shall be governed by the Plan.

6. Voting and  Dividend  Rights.  With  respect to the  Restricted  Shares,  the
Company  has the right to vote such  Restricted  Shares  during the  Restriction
Period,  and  shall  accumulate  dividends  as they  are  accrue  in the form of
additional  Restricted  Shares that then have a fair  market  value equal to the
dividend accrued.

7.  Delivery  of   Restricted   Certificates   Following  End  of   Restriction.
Notwithstanding  anything to the contrary  contained herein or in the Plan, upon
the lapse and release from  restriction of the Restricted  Shares,  certificates
for such Shares shall be delivered to the  Participant  within 30 days after the
last day of the Restriction Period.

8.  Nontransferability.  Any Restricted Shares awarded under this Award shall be
subject to the restrictions on transferability as specified in the Plan.

9. Subject to Plan.  This Award is subject to all of the terms and conditions of
the Plan, and by executing this Award, the Participant acknowledges receipt of a
copy of the Plan and hereby



<PAGE>



accepts and agrees to be bound by all of its terms and  conditions  as if it had
been set out verbatim in this Award. In addition, the Participant recognizes and
agrees that all determinations,  interpretations or other actions respecting the
Plan may be made by a majority of the Board or of the  Committee,  and that such
determinations,  interpretations  or other  actions  are final,  conclusive  and
binding  upon all  parties,  including  the  Participant,  his or her  heirs and
representatives.

10.  Designation  of  Beneficiary.  Notwithstanding  anything  to  the  contrary
contained  herein or in the Plan,  following  the  execution of this Award,  the
Participant may expressly  designate a beneficiary (the "Beneficiary") to his or
her  interest in the Award  granted  under this  Award.  The  Participant  shall
designate  the   Beneficiary  by  completing  and  executing  a  designation  of
beneficiary  agreement  substantially  in the form attached  hereto as Exhibit C
(the  "Designation  of  Beneficiary")  and  delivering  an executed  copy of the
Designation of Beneficiary to the Company at its main office.

11. Notices.  Any notice,  payment or communication  required or permitted to be
given by any  provision of this Award shall be in writing and shall be delivered
personally or sent by certified  mail,  return receipt  requested,  addressed as
follows:  (i) if to the Company,  at 1000 Bestgate Road,  Suite 400,  Annapolis,
Maryland 21401  (attention:  2000 Stock  Incentive Plan  Committee);  (ii) if to
Participant,  at the address set forth on the signature page hereto.  Each party
may,  from time to time,  by notice to the  other  party  hereto,  specify a new
address for delivery of notices to such party  hereunder.  Any such notice shall
be deemed to be delivered,  given,  and received for all purposes as of the date
such notice is received or properly mailed.

12. Binding Effect.  Except as otherwise  provided in this Award or in the Plan,
every  covenant,  term,  and  provision  of this Award shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs, legatees,
legal representatives, successors, transferees, and assigns.

13.  Headings.  Section  and  other  headings  contained  in this  Award are for
reference purposes only and are not intended to describe,  interpret,  define or
limit the scope or intent of this Award or any provision hereof.

14. Severability.  Every provision of this Award is intended to be severable. If
any term  hereof is  illegal or  invalid  for any  reason,  such  illegality  or
invalidity  shall not affect the validity or legality of the remaining  terms of
this Award.

15.  Governing  Law. The laws of the State of Maryland shall govern the validity
of this Award,  the  construction of its terms,  and the  interpretation  of the
rights and duties of the parties hereto.

16.  Counterparts.  This Award may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute one and the same instrument.



<PAGE>


     IN WITNESS  WHEREOF,  the parties  hereto have caused this Award to be duly
executed on the day and year first indicated above.

            ANNAPOLIS NATIONAL BANCORP, INC.


            By: _________________________________   Date:_______________
                An authorized member of the
                Annapolis National Bancorp, Inc.
                2000 Stock Incentive Plan Committee


            The  undersigned   Participant  hereby  accepts  the  terms  of this
            Award and the Plan.

            By: _________________________________   Date:_______________

            Name of Participant:_________________________________________

            Social Security Number:______________________________________

            Address:

            _________________________________________________________

            _________________________________________________________

            _________________________________________________________



                                       4
<PAGE>




                                    Exhibit A
                                  ------------

           Annapolis National Bancorp, Inc. 2000 Stock Incentive Plan



<PAGE>



                        ANNAPOLIS NATIONAL BANCORP, INC.
                            2000 STOCK INCENTIVE PLAN


1.    Purpose

      The proper execution of the duties and  responsibilities of the directors,
executives,   and   employees  of  Annapolis   National   Bancorp,   Inc.   (the
"Corporation")  and its  subsidiaries is a vital factor in the continued  growth
and success of the Corporation.  Toward this end, it is necessary to attract and
retain  effective and capable  individuals to assume  positions that  contribute
materially to the successful  operation of the business of the  Corporation  and
its  subsidiaries.  It will  benefit  the  Corporation,  therefore,  to bind the
interests of these persons more closely to its own interests by offering them an
attractive  opportunity to acquire a proprietary interest in the Corporation and
thereby  provide  them with  added  incentive  to remain in the  service  of the
Corporation and its  subsidiaries  and to increase the prosperity,  growth,  and
earnings of the  Corporation.  This stock option plan is intended to serve these
purposes.

2.    Definitions

      The following terms wherever used herein shall have the meanings set forth
below.

          (a) The  term  "Awards"  shall  mean  Options,  Deferred  Shares,  and
              Restricted Share Awards, collectively.

          (b) The term "Board of Directors" shall mean the Board of Directors of
              the Corporation.

          (c) The term  "Change  in  Control  of the  Corporation"  shall mean a
              change  in  control  of a  nature  that  would be  required  to be
              reported in response  to Item 6(c) of Schedule  14A of  Regulation
              14A  promulgated  under  the  Exchange  Act,  whether  or not  the
              Corporation  is in fact  required  to comply  therewith,  provided
              that, without limitation, such a change in control shall be deemed
              to have  occurred  if (A) any  "person"  (as such  term is used in
              Section 13(d) and 14(d) of the Exchange Act), other than a trustee
              or other fiduciary  holding  securities  under an employee benefit
              plan  of  the  Corporation  or  any  of  its   subsidiaries  or  a
              corporation owned, directly or indirectly,  by the stockholders of
              the  Corporation  in  substantially  the same  proportions  as the
              ownership  of Common  Stock of the  Corporation,  and  other  than
              Lawrence E. Lerner or any member or members of this family,  is or
              becomes the "beneficial owner" (as defined in Rule 13d-3 under the
              Exchange  Act),  directly  or  indirectly,  of  securities  of the
              Corporation  representing 20% or more of the combined voting



<PAGE>



              power of the Corporation's then outstanding securities; (B) during
              any  period of two  consecutive  years (not  including  any period
              prior  to  the  adoption  of  the  Plan)  individuals  who  at the
              beginning of such period constitute the Board and any new director
              (other than a director designated by a person who has entered into
              an  agreement  with  the   Corporation  to  affect  a  transaction
              described in clauses (A) or (B) of this definition) whose election
              by the Board or  termination  for  election  by the  Corporation's
              stockholders  was approved by a vote of at least two-thirds of the
              directors  then still in office who either were  directors  at the
              beginning  of the  period  or whose  election  or  nomination  for
              election  was  previously  so  approved,  cause for any  reason to
              constitute  a majority of the Board;  (C) the  Corporation  enters
              into an agreement,  the  consummation of which would result in the
              occurrence  of a Change in  Control  of the  Corporation;  (D) the
              stockholders of the Corporation  approve a merger,  share exchange
              or consolidation  of the Corporation  with any other  corporation,
              other than a merger,  share exchange or  consolidation  that would
              result in the voting  securities of the  Corporation,  outstanding
              immediately prior thereto held by Lawrence E. Lerner or any member
              or  members  of his  family  continuing  to  represent  (either by
              remaining outstanding or by being converted into voting securities
              of the surviving entity) at least 50% of the combined voting power
              of the voting  securities  of the  Corporation  or such  surviving
              entity outstanding  immediately after such merger,  share exchange
              or consolidation, or the stockholders of the Corporation approve a
              plan of complete  liquidation of the Corporation or any agreements
              for  the  sale  of  disposition  by  the  Corporation  of  all  or
              substantially all the Corporation's assets.

          (d) The term "Code" shall mean the Internal  Revenue Code of 1986,  as
              amended, and any regulations promulgated thereunder.

          (e) The term "Committee" shall mean a committee to be appointed by the
              Board of  Directors  to consist of three or more  members,  all of
              whom are members of the Board of Directors  and are  "non-employee
              directors" within the meaning of Rule 16-3 under the Exchange Act.

          (f) The term "Common Stock" shall mean the shares of common stock, par
              value $0.01 per share, of the Corporation.

          (g) The term  "Corporation"  shall mean  Annapolis  National  Bancorp,
              Inc., a Maryland corporation.

          (h) The term "Deferred  Shares" shall mean Shares that the Company has
              credited,   pursuant  to   Paragraph  9  hereof,   to  a  deferred
              compensation account in the name of a Participant.



                                       2
<PAGE>




          (i) The term "Exchange Act" shall mean the Securities  Exchange Act of
              1934, as amended.

          (j) The term "Fair  Market  Value"  shall mean the then  current  fair
              market value of Common  Stock,  as determined in good faith by the
              Committee and in a manner  consistent  with the rules set forth in
              Treas. Reg. Section 20.2031-2.

          (k) The term  "Incentive  Stock Option"  shall mean an Option  granted
              pursuant  to the Plan that is  designated  as an  Incentive  Stock
              Option and which  satisfies the  requirements of Section 422(b) of
              the Code.

          (l) The term "Nonqualified  Stock Option" shall mean an Option granted
              pursuant to the Plan that is not an Incentive Stock Option.

          (m) The term  "Option" or "Stock  Option"  shall mean a right  granted
              pursuant to the Plan to purchase shares of Common Stock, and shall
              include the terms  Incentive Stock Option and  Nonqualified  Stock
              Option.

          (n) The term  "Option  Agreement"  shall  mean the  written  agreement
              representing  Options granted pursuant to the Plan as contemplated
              by Paragraph 7 of the Plan.

          (o) The term "Plan" shall mean the Annapolis  National  Bancorp,  Inc.
              2000 Stock Incentive Plan as approved by the Board of Directors on
              March 24, 2000, as the same may be amended from time to time.

          (p) The term "Restricted Share Award" shall mean a right granted under
              Section 10 of this Plan to receive Shares.

          (q) The term "subsidiary" or  "subsidiaries"  shall mean a corporation
              of  which  capital  stock  possessing  50% or  more  of the  total
              combined voting power of all classes of its capital stock entitled
              to vote  generally  in the  election of  directors is owned to the
              aggregate by the Corporation directly or indirectly through one or
              more subsidiaries.

3.    Effective Date of the Plan

      The Plans shall become effective upon stockholder approval,  provided that
such approval is received  before March 24, 2001, and provided  further that the
Board of Directors may grant Options  pursuant to the Plan prior to  stockholder
approval  if  such  Options  by  their  terms  are  contingent  upon  subsequent
stockholder approval of the Plan.



                                       3
<PAGE>



4.    Administration

          (a) The Plan shall be administered by the Committee, provided that the
          Board  may act in lieu  of the  Committee  on any  matter  within  the
          Committee's discretion or authority.

          (b) The  Committee  may  establish,  from time to time and at any time
          subject to the limitations of the Plan as set forth herein, such rules
          and  regulations  and amendments and  supplements  thereto as it deems
          necessary to comply with  applicable  law and  regulation  and for the
          proper  administration  of the Plan.  A majority of the members of the
          Committee  shall  constitute  a quorum.  The vote of a  majority  of a
          quorum shall constitute action by the Committee.

          (c) The  Committee  shall  from  time to time  submit  to the Board of
          Directors  for its  approval  the  names of those  executives  and key
          employees  who, in its  opinion,  should  receive  Options,  and shall
          recommend the numbers of shares on which Options  should be granted to
          each such person and the nature of the Options to be granted.

          (d)  Options  shall be  granted  by the  Committee  and  shall  become
          effective  only after  execution  of an Option  Agreement  between the
          Corporation and the Option holder.

          (e) The Commission's interpretation and construction of the provisions
          of the Plan and the rules and  regulations  adopted by the  Commission
          shall be final, unless otherwise determined by the Board of Directors.
          No member of the  Committee or the Board of Directors  shall be liable
          for my action or  determination  made, in respect of the Plan, in good
          faith.

5.    Participation in the Plan

          (a)  Participants  in the Plan shall be limited to the  employees  and
          directors  of the  Corporation  and  its  subsidiaries  who  shall  be
          designated by the Committee.

          (b) No member of the Board of Directors  who is also an officer of the
          Corporation shall be eligible to serve on the Committee.

6.    Stock Subject to the Plan

          (a) There shall be reserved for the granting of Awards pursuant to the
          Plan and for issuance and sale pursuant to such Awards  200,000 shares
          of Common  Stock.  To  determine  the number of shares of Common Stock
          available  at any time for the  granting  of  Awards,  there  shall be
          deducted from



                                       4
<PAGE>



          the total  number of reserved  shares of Common  Stock,  the number of
          shares of Common  Stock in respect of which  Awards have been  granted
          pursuant  to  the  Plan  that  are  still  outstanding  or  have  been
          exercised.  The shares of Common  Stock to be issued upon the exercise
          or vesting of Awards shall be made  available  from the authorized and
          unissued  shares of Common  Stock.  If for any reason shares of Common
          Stock as to which an Award has been  granted  cease to be  subject  to
          purchase or delivery to Award holders thereunder,  then such shares of
          Common  Stock again shall be available  for  issuance  pursuant to new
          Awards.

          (b)  Proceeds  from the  purchase  of shares of Common  Stock upon the
          exercise of Options granted pursuant to the Plan shall be used for the
          general business purposes of the Corporation.

          (c) In the event of the reorganization, recapitalization, stock split,
          stock  dividend,  combination  of  shares  of  Common  Stock,  merger,
          consolidation, share exchange acquisition of property of stock, or any
          change in the capital  structure  of the  Corporation,  the  Committee
          shall make such adjustments as may be equitable and appropriate in the
          number and kind of shares  reserved  for  purchases by  executives  or
          other key employees,  in the number,  kind and price of shares covered
          by Awards granted pursuant to the Plan and then outstanding.

7.    Terms and Conditions of Options

          (a) Each Option granted  pursuant to the Plan shall be evidenced by an
          Option  agreement in such form as the Committee  from time to time may
          determine.

          (b) The exercise  price per share for Options shall be  established by
          the Board of Directors upon the recommendation of the Committee at the
          time of the  grant of  Options  pursuant  to the Plan and shall not be
          less than the Fair Market Value of a share of Common Stock on the date
          on which the Option is  granted.  If the Board of  Directors  does not
          establish  a specific  exercise  price per share at the time of grant,
          the  exercise  price per share shall be equal to the Fair Market Value
          of a share of Common Stock on the date of grant of the Options.

          (c) Each  Option,  subject to the other  limitations  set forth in the
          Plan, may extend for a period of up to 10 years from the date on which
          it is granted.  The term of each  Option  shall be  determined  by the
          Board of Director at the time of grant of the Option, provided that if
          no term is  established  by the  Board  of  Directors  the term of the
          Option shall be 10 years from the date on which it is granted.



                                       5
<PAGE>



          (d) The Board of Directors upon  recommendation of the Committee,  may
          provide in the Option Agreement that the right to exercise each Option
          for the number of shares  subject to each Option  shall  vest,  in the
          Option  holder  over  such  period  of time as the  Committee,  in its
          direction, shall determine for each Option holder. Notwithstanding the
          foregoing,   each  Option  Agreement  shall  provide  that,  upon  the
          occurrence of a Change in Control of the Corporation, all Options then
          outstanding shall become immediately exercisable.

          (e) Options shall be nontransferable  and  nonassignable,  except that
          Options may be transferred by  testamentary  instrument or by the laws
          of descent and  distribution,  and  Nonqualified  Stock Options may be
          transferred  to  family  members  or  family  trusts,  subject  to the
          original terms of the Option.

          (f) Unless the Committee  specifies  otherwise in an Option agreement,
          upon  voluntary  or  involuntary  termination  of an  Option  holder's
          service with the  Corporation,  his Options and all rights  thereunder
          shall  terminate  effective  at the close of  business on the date the
          Option holder ceases to be a Director of regular,  full-time  employee
          of the  Corporation  or any of  its  subsidiaries,  except  (i) to the
          extent previously exercised and (ii) as provided in subparagraphs (g),
          (h) and (i) of this Paragraph 7.

          (g) In the event an Option  holder (i) takes a leave of  absence  from
          the Corporation or any of its  subsidiaries for personal reasons or as
          a result of entry into the armed forces of the United  States,  or any
          of the  departments  or agencies of the United States  government,  or
          (ii) terminates his employment,  or ceases  providing  services to the
          Corporation  or  any  of  its   subsidiaries,   by  reason  of  death,
          disability,  voluntary  termination with the consent of the Committee,
          or other  special  circumstances,  the Committee may consider his case
          and may take such action in respect of the related Option Agreement as
          it  may  deem   appropriate   under   the   circumstances,   including
          accelerating  the time previously  granted for Options to be exercised
          and extending the time  following the Option  holder's  termination of
          active  employment  or  service  during  which  the  Option  holder is
          entitled  to  purchase  the  shares of Common  Stock  subject  to such
          Options,  provided that in no event may any Option be exercised  after
          the expiration of the time of the Option.

          (h) If an Option  holder  dies  during the term of his Option  without
          having fully exercised this Option,  the executor or  administrator of
          his estate or the person who inherits the right to exercise the Option
          by bequest or inheritance shall have the right within two years of the
          Option holder's death to purchase the number of shares of Common Stock
          that the deceased  Option  holder was entitled to purchase at the date
          of his death, after which the Option shall



                                       6
<PAGE>



          lapse, provided that in no event may any Option be exercised after the
          expiration of the term of the Option.

          (i) If an Option holder terminates employment without his having fully
          exercised  his Option due to his  retirement  with the  consent of the
          Corporation,  then such  Option  holder  shall  have the right  within
          ninety (90) days of the Option  holder's  termination of employment or
          service  to  purchase  the  number of shares of Common  Stock that the
          Option holder was entitled to purchase at the date of his termination,
          after which the Option shall lapse,  provided that in no event may any
          Option be exercised  after the  expiration  of the term of the Option.
          The  Committee  may  cancel  the  Option  during the ninety day period
          referred  to  in  this  paragraph,   if  the  Participant  engages  in
          employment or activities  which, in the opinion of the Committee,  are
          contrary to the best interests of the Corporation. The Committee shall
          determine in each case whether a termination  of employment or service
          shall be considered a retirement with the consent of the  Corporation,
          and,  subject to  applicable  law,  whether a leave of  absence  shall
          constitute a termination of employment.  Any such determination of the
          Committee  shall be final  and  conclusive,  unless  overruled  by the
          Board.

          (j)  The  granting  of an  Option  pursuant  to  the  Plan  shall  not
          constitute or be evidence of any agreement or  understanding,  express
          or implied,  on the part of the Corporation or any of its subsidiaries
          to retain or employ the Option holder for any specified period.

          (k) In addition to the general terms and  conditions set forth in this
          Paragraph  7 in  respect  of  Options  granted  pursuant  to the Plan,
          Incentive Stock Options granted  pursuant to the Plan shall be subject
          to the following additional terms and conditions:

                (i)   "Incentive   Stock  Options"  shall  be  granted  only  to
                individuals  who,  at the  date  of  grant  of the  Option,  are
                employees of the Corporation or any of its subsidiaries;

                (ii) No  employee  who owns  beneficially  more  than 10% of the
                total  combined  voting  power  of all  classes  of stock of the
                Corporation  shall be eligible to be granted an "Incentive Stock
                Option;"

                (iii) The aggregate  fair market value  (determined  at the time
                the  Incentive  Stock Option is granted) of the shares of Common
                Stock  in  respect  of  which   "incentive  stock  options"  are
                exercisable  for the first time by the Option  holder during any
                calendar year (under all such plans of the  Corporation  and its
                subsidiaries) shall not exceed $100,000; and



                                       7
<PAGE>



                (iv) Any other terms and  conditions  specified  by the Board of
                Directors that are not inconsistent  with the Plan,  except that
                such  terms  and   conditions   must  be  consistent   with  the
                requirements  for "incentive stock options" under Section 422 of
                the Code.

8.    Methods of Exercise of Options

          (a) An Option holder (or other person or person,  if any,  entitled to
          exercise an Option  hereunder)  desiring to exercise an Option granted
          pursuant  to the Plan as to all or part of the shares of Common  Stock
          covered by the Option shall (i) notify the  Corporation  in writing as
          its principal  office at 1000  Bestgate  Road,  Suite 400,  Annapolis,
          Maryland  21401,  to that effect,  specifying  the number of shares of
          Common Stock to be purchased and the method of payment therefore,  and
          (ii) make  payment or  provision  for payment for the shares of Common
          Stock as purchased in accordance  with this  Paragraph 8. Such written
          notice  may be  given  by  means  of a  facsimile  transmission.  If a
          facsimile  transmission  is used,  the Option  holder  should mail the
          original  executed  copy  of the  written  notice  to the  Corporation
          promptly thereafter.

          (b) Payment or provision for payment shall be made as follows:

                (i) The Option  holder shall deliver to the  Corporation  at the
                address set forth in subparagraph 8(a) United States currency in
                an amount equal to the aggregate purchase price of the shares of
                Common Stock as to which such exercise relates; or

                (ii) The Option holder shall tender to the Corporation shares of
                Common Stock already  owned by the Option holder that,  together
                with any cash tendered therewith,  have no aggregate fair market
                value  (determined  based on the Fair Market Value of a share of
                Common  Stock on the date the notice  set forth in  subparagraph
                8(a) is  received  by the  Corporation)  equal to the  aggregate
                purchase  price of the  shares of Common  Stock as to which such
                exercise relates; or

                (iii) The Option  holder  shall  deliver to the  Corporation  an
                exercise  notice  together with  irrevocable  instructions  to a
                broker to deliver promptly to the Corporation the amount of sale
                or loan proceeds  necessary to pay the aggregate  purchase price
                of the shares of Common Stock as to which such exercise  relates
                and to sell  the  shares  of  Common  Stock  to be  issued  upon
                exercise  of the  Option and  deliver  the cash  proceeds,  less
                commission and brokerage fees to the



                                       8
<PAGE>



                Option holder or to deliver the remaining shares of Common Stock
                to the Option holder.

          Notwithstanding the foregoing provisions,  the Committee and the Board
          of Directors,  in granting Options pursuant to the Plan, may limit the
          methods in which an Option may be  exercised  by any  person  and,  in
          processing any purported exercise of an Option granted pursuant to the
          Plan,  may refuse to recognize the method of exercise  selected by the
          Option  holder  (other  than  the  method  of  exercise  set  forth in
          subparagraph 8(b)(i)).

          (c) In addition to the  alternative  methods of exercise  set forth in
          paragraph  8(b),  holders  of  Nonqualified  Stock  Options  shall  be
          entitled,  at or prior to the time the written notice  provided for in
          subparagraph  8(a) is delivered to the  Corporation,  to elect to have
          the  Corporation  withhold  from  the  shares  of  Common  Stock to be
          delivered upon exercise of the  Nonqualified  Stock Option that number
          of shares of Common Stock  (determined  based on the Fair Market Value
          of a share  of  Common  Stock  on the date  the  notice  set  forth in
          subparagraph 8(a) is received by the Corporation) necessary to satisfy
          any withholding taxes attributable to the exercise of the Nonqualified
          Stock  Option.  Alternatively,  such  holder of a  Nonqualified  Stock
          Option may elect to deliver  previously  owned  shares of Common Stock
          upon  exercise  of  the  Nonqualified  Stock  Option  to  satisfy  any
          withholding  taxes  attributable  to the exercise of the  Nonqualified
          Stock  Option.  If  the  Board  of  Directors  does  not  include  any
          provisions  relating to this  withholding  feature in its  resolutions
          granting the Nonqualified Stock Option or in the Option Agreement. The
          maximum  amount that an Option  holder may elect to have withheld from
          the shares of Common Stock otherwise  deliverable upon exercise or the
          maximum number of previously owned shares in Option holder may deliver
          shall  be  equal  to  the  minimum  federal  and  state   withholding.
          Notwithstanding the foregoing  provisions,  the Committee or the Board
          of Directors may include in the Option Agreement  relating to any such
          Nonqualified  Stock  Option  provisions  limiting or  eliminating  the
          Option  holder's  ability to pay his  withholding  tax obligation with
          shares of Common Stock;  or if no such  provisions are included in the
          Option Agreement,  but in the opinion of the Committee or the Board of
          Directors  such  withholding  would have an adverse tax or  accounting
          effect to the Corporation, at or prior to exercise of the Nonqualified
          Stock  Option the  Committee  or the Board of  Directors  may limit or
          eliminate  the  Option  holder's  ability to pay his  withholding  tax
          obligation with shares of Common Stock.  Notwithstanding the foregoing
          provisions, a holder of Nonqualified Stock Option may not elect any of
          the methods of satisfying his withholding tax obligation in respect of
          any exercise if, in the opinion of counsel to the  Corporation,  there
          is a  substantial  likelihood  that  the  election  or  timing  of the
          election  would



                                       9
<PAGE>



          subject the holder to a substantial risk of liability under Section 16
          of the Exchange Act.

          (d) An Option  holder at any time may elect in  writing  to abandon an
          Option  in  respect  of all or part of the  number of shares of Common
          Stock as to which the Option shall not have been exercised.

          (e) An Option holder shall have none of the rights of a stockholder of
          the Corporation until the shares of Common Stock covered by the Option
          are issued to him upon exercise of the Option.

9.    Deferred Shares

          (a)  Elections  to  Defer.  The  Committee  may at any time  allow any
          Participant  (or  Participants)  who  is a  member  of  the  Board  of
          Directors,  or a member  of a select  group of  management  or  highly
          compensated employees (within the meaning of the Employees' Retirement
          Income Security Act of 1973, with each such individual  being referred
          to herein  as a  "Participant")  may  irrevocably  elect,  on the form
          attached  hereto as  Exhibit A (the  "Election  Form"),  to forego the
          receipt  of  cash  compensation  and  in  lieu  thereof  to  have  the
          Corporation credit Deferred Shares to the Participant's Account with a
          Fair Market Value equal to the  compensation  deferred.  Each Election
          Form shall take effect five  business  days after its  delivery to the
          Committee,  unless in the meantime the Committee sends the Participant
          a  written  notice  explaining  why  the  Election  Form  is  invalid.
          Notwithstanding  the  foregoing  sentence,  Election  Forms  shall  be
          ineffective with respect to any compensation  that a Participant earns
          before the date on which the Committee receives the Election Form.

          (b) Vesting.  Deferred Shares shall be 100% vested at all times.

          (c)  Recordkeeping;  Cash Earnings on Deferred  Shares.  The Committee
          shall  establish  and  maintain  an  individual   account  (the  "Cash
          Account") in the name of each  Participant who files an Election Form.
          On the last day of each fiscal quarter,  the Corporation  shall credit
          to the  Participant's  Cash  Account  any cash  dividends  paid on the
          balance of Deferred Shares credited to the Participant's  Account.  On
          the last day of each fiscal  year of the  Corporation,  the  Committee
          shall  credit to the  Participant's  Account  Deferred  Shares  with a
          Market  Value equal to the balance of the  Participant's  Cash Account
          (without  regard  to  fractional  shares),  and  the  balance  of  the
          Participant's  Cash  Account  shall be reduced to zero.  The  Trustees
          shall hold each  Participant's  Deferred Shares until  distribution is
          required pursuant to subsection (d) hereof.



                                       10
<PAGE>



          (d) Distributions of Deferred Shares and Earnings.  The Trustees shall
          distribute a Participant's Deferred Shares in five substantially equal
          annual  installments  that are paid before the last day of each of the
          five fiscal years of the Corporation  that end after the date on which
          the   Participant's   Continuous   Service   terminates,   unless  the
          Participant has properly elected a different form of distribution,  on
          the form (the "Distribution Election Form") approved by the Committee,
          and the Committee has received the Participant's Distribution Election
          Form  either more than 90 days before a Change in Control or more than
          one year before the date on which the Participant's Continuous Service
          terminates for any reason. Fractional Shares shall not be distributed.

          (e) Hardship  Withdrawals.  Notwithstanding any other provision of the
          Plan or a  Participant's  Election Form, in the event the  Participant
          suffers an  unforeseeable  hardship within the  contemplation  of this
          Section,  the  Participant may apply to the Committee for an immediate
          distribution of all or a portion of his Deferred Shares.  The hardship
          must  result from a sudden and  unexpected  illness or accident of the
          Participant  or a  dependent  of the  Participant,  casualty  loss  of
          property,  or other  similar  conditions  beyond  the  control  of the
          Participant.  Examples of purposes which are not considered  hardships
          include  post-secondary  school  expenses  or the desire to purchase a
          residence.  In no event will a distribution  be made to the extent the
          hardship could be relieved  through  reimbursement  or compensation by
          insurance  or  otherwise,  or  by  liquidation  of  the  Participant's
          nonessential  assets to the extent such  liquidation  would not itself
          cause a severe  financial  hardship.  The  amount of any  distribution
          hereunder  shall be  limited to the amount  necessary  to relieve  the
          Participant's  financial  hardship.  The  determination  of  whether a
          Participant  has a qualifying  hardship and the amount which qualifies
          for  distribution,  if any, shall be made by the Committee in its sole
          discretion.  The  Committee  may  require  evidence of the purpose and
          amount  of the  need,  and may  establish  such  application  or other
          procedures as it deems appropriate.

          (e) Rights to Deferred Shares. A Participant may not assign his or her
          claim to Deferred  Shares during his or her lifetime.  A Participant's
          right to Deferred  Shares shall at all times  constitute  an unsecured
          promise of the Corporation to pay benefits as they come due. The right
          of the  Participant  or his or her  beneficiary  to  receive  benefits
          hereunder  shall be solely an  unsecured  claim  against  the  general
          assets of the  Corporation.  Neither  the  Participant  nor his or her
          beneficiary  shall have any claim  against  or rights in any  specific
          assets, shares, or other funds of the Corporation.



                                       11
<PAGE>



10.   Restricted Share Awards

          (a)  Grants.   The  Committee  shall  have  the  discretion  to  grant
          Restricted  Share  Awards to  Employees  and  members  of the Board of
          Directors.  As promptly as practicable  after a determination  is made
          that a  Restricted  Share  Award is to be made,  the  Committee  shall
          notify the  Participant  in  writing  of the grant of the  Award,  the
          number of Shares  covered by the  Award,  and the terms upon which the
          Shares  subject  to the  Award  may be  earned.  The date on which the
          Committee so notifies the Participant  shall be considered the date of
          grant of the  Restricted  Share Awards.  The Committee  shall maintain
          records as to all grants of Restricted Share Awards under the Plan.

          (b) Earning Shares. Unless the Committee  specifically  eliminates any
          vesting  schedule in an Agreement  granting a Restricted  Share Award,
          Shares  subject to Restricted  Share Awards shall be earned and become
          non-forfeitable by a Participant  according to the following schedule,
          provided the  Participant  is an Employee or Director on the scheduled
          vesting date:


                                          Vested Percentage
               Years of Service        (applied to Restricted
               ----------------               Shares)
                                              -------

                  Less than 1                     0%
                       1                         25%
                       2                         50%
                       3                         75%
                   4 or More                     100%

       Notwithstanding   the  foregoing  and  unless  otherwise  provided  in  a
   Participant's  Restricted Stock Award,  each Participant  shall become (100%)
   vested  immediately (i) upon termination of the Participant's  service due to
   the  Participant's  disability or death,  or (ii) upon a Change in Control of
   the Corporation.

    (c)Accrual  of  Dividends.  Whenever  Shares  are paid to a  Participant  or
    Beneficiary  under Section 11(d), such Participant or Beneficiary shall also
    be entitled to receive,  with respect to each Share paid, an amount equal to
    any cash  dividends  (including  special large and  nonrecurring  dividends,
    including   one  that  has  the  effect  of  a  return  of  capital  to  the
    Corporation's  stockholders) and a number of shares of Common Stock equal to
    any stock  dividends,  declared  and paid with  respect to a share of Common
    Stock  between the date the relevant  Restricted  Share Award was  initially
    granted to such  Participant and the date the Shares are being  distributed.
    There shall



                                       12
<PAGE>



    also be  distributed  an  appropriate  amount of net earnings,  if any, with
    respect to any cash dividends so paid out.

    (d)Distribution of Shares.

                (i) Timing of  Distributions:  General Rule. Except as otherwise
                expressly  stated in this Plan, the Committee  shall  distribute
                Shares and  accumulated  cash from dividends and interest to the
                Participant or his  Beneficiary,  as the case may be, as soon as
                practicable  after they have been earned.  No fractional  shares
                shall be distributed.

                (ii) Form of  Distribution.  The Committee shall  distribute all
                Shares,  together with any shares  representing stock dividends,
                in the form of Common Stock.  One share of Common Stock shall be
                given  for  each  Share  earned.   Payments   representing  cash
                dividends (and earnings thereon) shall be made in cash.

                (iii)  Withholding.  The Committee  shall withhold from any cash
                payment  made  under this Plan  sufficient  amounts to cover any
                applicable  withholding and employment  taxes, and if the amount
                of such cash  payment is not  sufficient,  the  Committee  shall
                require the  Participant  or Beneficiary to pay to the Committee
                the amount  required to be withheld as a condition of delivering
                the Shares.  The Committee  shall pay over to the Corporation or
                Affiliate  which employs or employed such  Participant  any such
                amount withheld from or paid by the Participant or Beneficiary.

                (iv)Regulatory   Exceptions.   No  Restricted  Shares  shall  be
                    distributed  unless and until all of the requirements of all
                    applicable  law  and  regulations   shall  have  been  fully
                    complied with, including the receipt of approval of the Plan
                    by the stockholders of the Corporation by such vote, if any,
                    as may be required by applicable law and regulations.

    (e)Voting  of Plan  Shares.  All  shares of Common  Stock  subject to Awards
    (whether or not subject to a  Restricted  Share Award) shall be voted by the
    Board in the manner directed by the Board.

    (f)Deferral  Elections.  At any time 12 months  prior to the date on which a
    Participant  becomes  vested in any shares  subject to his or her Restricted
    Share Award,  a Participant  who is a member of a select group of management
    or highly  compensated  employees  (within  the  meaning  of the  Employees'
    Retirement  Income Security Act of 1973) may irrevocably  elect, on the form
    (the "Election Form") approved by the Committee, to defer the receipt of all
    or a percentage  of the Shares that would  otherwise be  transferred  to the
    Participant upon the vesting of such



                                       13
<PAGE>



    Award.  If such an  election  is made,  the Shares  shall be credited to the
    Participant's  Account  as  Deferred  Shares on the date such  Shares  would
    otherwise have been distributed to the Participant.

11.   Amendments and Discontinuance of the Plan

      The Board of  Directors  shall have the right at any time and from time to
time to amend, modify, or discontinue the Plan provided that, except as provided
in subparagraph 6(c), no such amendment,  modification, or discontinuance of the
Plan shall (i) revoke or alter the terms of any valid Option previously  granted
pursuant to the Plan,  (ii)  increase  the number of share of Common Stock to be
reserved for issuance and sale pursuant to Options granted pursuant to the Plan,
(iii)  decrease the exercise  price  determined  pursuant to the  provisions  of
subparagraph  7(b), or (iv) provide for Options  exercisable  more than 10 years
after the date granted.

12.   Plan Subject to Governmental Laws and Regulations

      The Plan and the grant of Awards  pursuant to the Plan shall be subject to
all applicable  governmental  laws and  regulations.  Notwithstanding  any other
provision of the Plan to the  contrary,  the Board of Directors  may in its sole
and  absolute  discretion  make such  changes in the Plan as may be  required to
conform the Plan to such laws and regulations.

13.   Duration of the Plan

      No  Option  shall be  granted  pursuant  to the Plan  after  the  close of
business on March 23, 2010.





                                       14



<PAGE>


                                  EXHIBIT 99.3


                          Form of Deferred Share Award
                            associated with the Plan

<PAGE>





                        Annapolis National Bancorp, Inc.
                            2000 Stock Incentive Plan
                         ------------------------------

                              Deferred Share Award
                         ------------------------------

     Annapolis  National  Bancorp,  Inc. (the "Company") hereby agrees to permit
the  Participant  named in Section 1 below to irrevocably  elect pursuant to the
Company's 2000 Stock  Incentive Plan (the "Plan"),  which is attached  hereto as
Exhibit A (1) to forego the receipt of cash  compensation and in lieu thereof to
have the Company credit  Deferred  Shares to an account payable on the Company's
financial  statements.  Those  Deferred  Shares a Fair Market Value equal to the
compensation  deferred by the  Participant.  In addition,  this  Participant may
elect to defer the receipt of all or a percentage of shares that would otherwise
be  transferred  to the  Participant  upon the vesting of an award of Restricted
Shares and to have the Company  credit the  Participant's  Account with Deferred
Shares equal to the number of Restricted  Shares being deferred pursuant to this
Agreement (the "Agreement").

     The Participant  recognizes that the receipt of the Deferred Shares in lieu
of  compensation  or the  receipt of all or a  percentage  of shares  that would
otherwise  be  transferred  to the  Participant  upon the vesting of an award of
Restricted Shares is compensatory in nature and accordingly  subject to taxation
as gross income under  Section 83 of the Internal  Revenue Code of 1986, as that
Section  may be  amended  and  interpreted  from time to time.  The  Participant
further  recognizes  that,  unless the election is made,  described in Section 5
taxation  will occur  whenever  shares  subject  to this Award (the  "Restricted
Shares") are delivered to the Participant.

     Capitalized  terms used  herein and not  otherwise  defined  shall have the
meanings given to such terms in Exhibit A.

1. Variable Terms.  This Award shall be controlled by and interpreted  according
to the following terms:


Name of Participant:               ________________________________

Date of this Deferred Share
Election:                          ________________________________

Compensation to be deferred:       |_| _____% of any regular
                                   salary or board fees

                                   |_| _____% of any cash bonus

                                   |_| _____% of any Restricted
                                      Shares that would otherwise
                                      vest.



<PAGE>



2. Vesting Schedule.  Deferred Shares shall be one hundred percent (100%) vested
at all times.

3.  Certain Tax  Matters.  Set forth below is a brief  summary of certain of the
federal income tax consequences of the Participant's receipt of Deferred Shares.
THIS  SUMMARY IS  PURPOSELY  INCOMPLETE,  AND THE TAX LAWS AND  REGULATIONS  ARE
SUBJECT TO CHANGE OR  DIFFERENT  INTERPRETATION.  ACCORDINGLY,  THE  PARTICIPANT
SHOULD CONSULT A TAX ADVISOR BEFORE ACCEPTING THIS GRANT.

     The Participant  acknowledges having been advised by the Company that he or
she shall recognize  ordinary income in an amount equal to the Fair Market Value
of any Deferred  Shares that are  transferred to the Participant as unrestricted
Shares.  The  Participant  will  recognize  this income at the time the Deferred
Shares are transferred to him or her.

     THE PARTICIPANT  HEREBY ASSUMES ALL THE RESPONSIBILITY FOR PAYING ANY TAXES
RESULTING FROM RECEIPT OF THE DEFERRED SHARES.

4.  Termination  of  Continuous  Service.  In  all  events  where  Participant's
Continuous Service to the Company is terminated,  the receipt of Deferred Shares
shall be governed by the Plan.

5. Dividend and Voting Rights.  With respect to the Deferred Shares, the Company
has the right to vote such  Deferred  Shares and at the end of each  fiscal year
shall credit the Participant's  Account with additional Deferred Shares having a
Market Value equal to any cash dividends  accrued on previously  Deferred Shares
during the fiscal year.

6. Lapse of  Restriction.  Notwithstanding  anything to the  contrary  contained
herein  or in the  Plan,  upon the lapse and  release  from  restriction  of any
Deferred  Shares  that  are  Restricted  Shares,  an  entry  shall  be  made  in
Participant's Account evidencing the lapse and release from restriction.

7. Distribution of Deferred Shares. Deferred Shares shall be distributed in five
substantially  equal  annual  installments  that are paid before the last day of
each of the five  fiscal  years of the  Corporation  that end  after the date on
which the Participant's  Continuous Service  terminates,  unless the Participant
has properly  elected a different form of distribution  either at least one year
before terminating  Continuous  Service, or more than 90 days before a Change in
Control; subject to all applicable laws and regulations.

8.  Hardship  Withdrawals.  A  Participant  may  apply to the  Committee  for an
immediate  distribution  of all or a portion  of his or her  Deferred  Shares in
accordance with the terms of the Plan.

9. Rights to Deferred  Shares.  A participant may not assign his or her claim to
Deferred Shares during his or her lifetime.  A Participant's rights at all times
shall be governed by the Plan.

10. Subject to Plan. The election to receive  Deferred  Shares is subject to all
of the terms and  conditions  of the Plan.  By  executing  this  Agreement,  the
Participant  acknowledges  receipt of a copy of the Plan and hereby  accepts and
agrees to be bound by all of its terms and  conditions as if it had been set out
verbatim in this Agreement.  In addition,  the Participant recognizes and



<PAGE>



agrees that all determinations,  interpretations or other actions respecting the
Plan may be made by a majority of the Board or of the  Committee,  and that such
determinations,  interpretations  or other  actions  are final,  conclusive  and
binding  upon all  parties,  including  the  Participant,  his or her  heirs and
representatives.

11.  Designation  of  Beneficiary.  Notwithstanding  anything  to  the  contrary
contained  herein or in the Plan,  following  the  execution of this Award,  the
Participant may expressly  designate a beneficiary (the "Beneficiary") to his or
her  interest in the Award  granted  under this  Award.  The  Participant  shall
designate  the   Beneficiary  by  completing  and  executing  a  designation  of
beneficiary  agreement  substantially  in the form attached  hereto as Exhibit B
(the  "Designation  of  Beneficiary")  and  delivering  an executed  copy of the
Designation of Beneficiary to the Company at its main office.

12. Notices.  Any notice,  payment or communication  required or permitted to be
given by any  provision  of this  Agreement  shall be in  writing  and  shall be
delivered  personally  or sent by  certified  mail,  return  receipt  requested,
addressed as follows:  (i) if to the Company,  at 1000 Bestgate Road, Suite 400,
Annapolis, Maryland 21401 (attention: 2000 Stock Incentive Plan Committee); (ii)
if to Participant,  at the address set forth on the signature page hereto.  Each
party may, from time to time, by notice to the other party hereto, specify a new
address for delivery of notices to such party  hereunder.  Any such notice shall
be deemed to be delivered,  given,  and received for all purposes as of the date
such notice is received or properly mailed.

13.  Binding  Effect.  Except as otherwise  provided in this Agreement or in the
Plan,  every  covenant,  term, and provision of this Agreement  shall be binding
upon and inure to the benefit of the parties hereto and their respective  heirs,
legatees, legal representatives, successors, transferees, and assigns.

14.  Headings.  Section and other  headings  contained in this Agreement are for
reference purposes only and are not intended to describe,  interpret,  define or
limit the scope or intent of this Agreement or any provision hereof.

15. Severability. Every provision of this Agreement is intended to be severable.
If any term  hereof is illegal or invalid  for any reason,  such  illegality  or
invalidity  shall not affect the validity or legality of the remaining  terms of
this Agreement.

16.  Governing  Law. The laws of the State of Maryland shall govern the validity
of this Agreement,  the construction of its terms, and the interpretation of the
rights and duties of the parties hereto.

17.  Counterparts.  This  Agreement  may be executed  by the  parties  hereto in
separate counterparts,  each of which when so executed and delivered shall be an
original,  but all such counterparts shall together  constitute one and the same
instrument.



<PAGE>



IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be duly
executed on the day and year first indicated above.

            ANNAPOLIS NATIONAL BANCORP, INC.


            By: _________________________________   Date:_______________
                An authorized member of the
                Annapolis National Bancorp, Inc.
                2000 Stock Incentive Plan Committee



            The  undersigned  Participant  hereby  accepts  the  terms  of  this
Agreement and the Plan.

            By: _________________________________   Date:_______________

            Name of Participant:_________________________________________

            Social Security Number:______________________________________

            Address:

            _________________________________________________________

            _________________________________________________________

            _________________________________________________________



<PAGE>


                                    Exhibit A
                                    ---------

                        ANNAPOLIS NATIONAL BANCORP, INC.
                            2000 STOCK INCENTIVE PLAN


<PAGE>


                        ANNAPOLIS NATIONAL BANCORP, INC.
                            2000 STOCK INCENTIVE PLAN


1.    Purpose

      The proper execution of the duties and  responsibilities of the directors,
executives,   and   employees  of  Annapolis   National   Bancorp,   Inc.   (the
"Corporation")  and its  subsidiaries is a vital factor in the continued  growth
and success of the Corporation.  Toward this end, it is necessary to attract and
retain  effective and capable  individuals to assume  positions that  contribute
materially to the successful  operation of the business of the  Corporation  and
its  subsidiaries.  It will  benefit  the  Corporation,  therefore,  to bind the
interests of these persons more closely to its own interests by offering them an
attractive  opportunity to acquire a proprietary interest in the Corporation and
thereby  provide  them with  added  incentive  to remain in the  service  of the
Corporation and its  subsidiaries  and to increase the prosperity,  growth,  and
earnings of the  Corporation.  This stock option plan is intended to serve these
purposes.

2.    Definitions

      The following terms wherever used herein shall have the meanings set forth
below.

          (a) The  term  "Awards"  shall  mean  Options,  Deferred  Shares,  and
              Restricted Share Awards, collectively.

          (b) The term "Board of Directors" shall mean the Board of Directors of
              the Corporation.

          (c) The term  "Change  in  Control  of the  Corporation"  shall mean a
              change  in  control  of a  nature  that  would be  required  to be
              reported in response  to Item 6(c) of Schedule  14A of  Regulation
              14A  promulgated  under  the  Exchange  Act,  whether  or not  the
              Corporation  is in fact  required  to comply  therewith,  provided
              that, without limitation, such a change in control shall be deemed
              to have  occurred  if (A) any  "person"  (as such  term is used in
              Section 13(d) and 14(d) of the Exchange Act), other than a trustee
              or other fiduciary  holding  securities  under an employee benefit
              plan  of  the  Corporation  or  any  of  its   subsidiaries  or  a
              corporation owned, directly or indirectly,  by the stockholders of
              the  Corporation  in  substantially  the same  proportions  as the
              ownership  of Common  Stock of the  Corporation,  and  other  than
              Lawrence E. Lerner or any member or members of this family,  is or
              becomes the "beneficial owner" (as defined in Rule 13d-3 under the
              Exchange  Act),  directly  or  indirectly,  of  securities  of the
              Corporation  representing 20% or more of the combined voting



<PAGE>



              power of the Corporation's then outstanding securities; (B) during
              any  period of two  consecutive  years (not  including  any period
              prior  to  the  adoption  of  the  Plan)  individuals  who  at the
              beginning of such period constitute the Board and any new director
              (other than a director designated by a person who has entered into
              an  agreement  with  the   Corporation  to  affect  a  transaction
              described in clauses (A) or (B) of this definition) whose election
              by the Board or  termination  for  election  by the  Corporation's
              stockholders  was approved by a vote of at least two-thirds of the
              directors  then still in office who either were  directors  at the
              beginning  of the  period  or whose  election  or  nomination  for
              election  was  previously  so  approved,  cause for any  reason to
              constitute  a majority of the Board;  (C) the  Corporation  enters
              into an agreement,  the  consummation of which would result in the
              occurrence  of a Change in  Control  of the  Corporation;  (D) the
              stockholders of the Corporation  approve a merger,  share exchange
              or consolidation  of the Corporation  with any other  corporation,
              other than a merger,  share exchange or  consolidation  that would
              result in the voting  securities of the  Corporation,  outstanding
              immediately prior thereto held by Lawrence E. Lerner or any member
              or  members  of his  family  continuing  to  represent  (either by
              remaining outstanding or by being converted into voting securities
              of the surviving entity) at least 50% of the combined voting power
              of the voting  securities  of the  Corporation  or such  surviving
              entity outstanding  immediately after such merger,  share exchange
              or consolidation, or the stockholders of the Corporation approve a
              plan of complete  liquidation of the Corporation or any agreements
              for  the  sale  of  disposition  by  the  Corporation  of  all  or
              substantially all the Corporation's assets.

          (d) The term "Code" shall mean the Internal  Revenue Code of 1986,  as
              amended, and any regulations promulgated thereunder.

          (e) The term "Committee" shall mean a committee to be appointed by the
              Board of  Directors  to consist of three or more  members,  all of
              whom are members of the Board of Directors  and are  "non-employee
              directors" within the meaning of Rule 16-3 under the Exchange Act.

          (f) The term "Common Stock" shall mean the shares of common stock, par
              value $0.01 per share, of the Corporation.

          (g) The term  "Corporation"  shall mean  Annapolis  National  Bancorp,
              Inc., a Maryland corporation.

          (h) The term "Deferred  Shares" shall mean Shares that the Company has
              credited,   pursuant  to   Paragraph  9  hereof,   to  a  deferred
              compensation account in the name of a Participant.



                                       2
<PAGE>




          (i) The term "Exchange Act" shall mean the Securities  Exchange Act of
              1934, as amended.

          (j) The term "Fair  Market  Value"  shall mean the then  current  fair
              market value of Common  Stock,  as determined in good faith by the
              Committee and in a manner  consistent  with the rules set forth in
              Treas. Reg. Section 20.2031-2.

          (k) The term  "Incentive  Stock Option"  shall mean an Option  granted
              pursuant  to the Plan that is  designated  as an  Incentive  Stock
              Option and which  satisfies the  requirements of Section 422(b) of
              the Code.

          (l) The term "Nonqualified  Stock Option" shall mean an Option granted
              pursuant to the Plan that is not an Incentive Stock Option.

          (m) The term  "Option" or "Stock  Option"  shall mean a right  granted
              pursuant to the Plan to purchase shares of Common Stock, and shall
              include the terms  Incentive Stock Option and  Nonqualified  Stock
              Option.

          (n) The term  "Option  Agreement"  shall  mean the  written  agreement
              representing  Options granted pursuant to the Plan as contemplated
              by Paragraph 7 of the Plan.

          (o) The term "Plan" shall mean the Annapolis  National  Bancorp,  Inc.
              2000 Stock Incentive Plan as approved by the Board of Directors on
              March 24, 2000, as the same may be amended from time to time.

          (p) The term "Restricted Share Award" shall mean a right granted under
              Section 10 of this Plan to receive Shares.

          (q) The term "subsidiary" or  "subsidiaries"  shall mean a corporation
              of  which  capital  stock  possessing  50% or  more  of the  total
              combined voting power of all classes of its capital stock entitled
              to vote  generally  in the  election of  directors is owned to the
              aggregate by the Corporation directly or indirectly through one or
              more subsidiaries.

3.    Effective Date of the Plan

      The Plans shall become effective upon stockholder approval,  provided that
such approval is received  before March 24, 2001, and provided  further that the
Board of Directors may grant Options  pursuant to the Plan prior to  stockholder
approval  if  such  Options  by  their  terms  are  contingent  upon  subsequent
stockholder approval of the Plan.



                                       3
<PAGE>



4.    Administration

          (a) The Plan shall be administered by the Committee, provided that the
          Board  may act in lieu  of the  Committee  on any  matter  within  the
          Committee's discretion or authority.

          (b) The  Committee  may  establish,  from time to time and at any time
          subject to the limitations of the Plan as set forth herein, such rules
          and  regulations  and amendments and  supplements  thereto as it deems
          necessary to comply with  applicable  law and  regulation  and for the
          proper  administration  of the Plan.  A majority of the members of the
          Committee  shall  constitute  a quorum.  The vote of a  majority  of a
          quorum shall constitute action by the Committee.

          (c) The  Committee  shall  from  time to time  submit  to the Board of
          Directors  for its  approval  the  names of those  executives  and key
          employees  who, in its  opinion,  should  receive  Options,  and shall
          recommend the numbers of shares on which Options  should be granted to
          each such person and the nature of the Options to be granted.

          (d)  Options  shall be  granted  by the  Committee  and  shall  become
          effective  only after  execution  of an Option  Agreement  between the
          Corporation and the Option holder.

          (e) The Commission's interpretation and construction of the provisions
          of the Plan and the rules and  regulations  adopted by the  Commission
          shall be final, unless otherwise determined by the Board of Directors.
          No member of the  Committee or the Board of Directors  shall be liable
          for my action or  determination  made, in respect of the Plan, in good
          faith.

5.    Participation in the Plan

          (a)  Participants  in the Plan shall be limited to the  employees  and
          directors  of the  Corporation  and  its  subsidiaries  who  shall  be
          designated by the Committee.

          (b) No member of the Board of Directors  who is also an officer of the
          Corporation shall be eligible to serve on the Committee.

6.    Stock Subject to the Plan

          (a) There shall be reserved for the granting of Awards pursuant to the
          Plan and for issuance and sale pursuant to such Awards  200,000 shares
          of Common  Stock.  To  determine  the number of shares of Common Stock
          available  at any time for the  granting  of  Awards,  there  shall be
          deducted from



                                       4
<PAGE>



          the total  number of reserved  shares of Common  Stock,  the number of
          shares of Common  Stock in respect of which  Awards have been  granted
          pursuant  to  the  Plan  that  are  still  outstanding  or  have  been
          exercised.  The shares of Common  Stock to be issued upon the exercise
          or vesting of Awards shall be made  available  from the authorized and
          unissued  shares of Common  Stock.  If for any reason shares of Common
          Stock as to which an Award has been  granted  cease to be  subject  to
          purchase or delivery to Award holders thereunder,  then such shares of
          Common  Stock again shall be available  for  issuance  pursuant to new
          Awards.

          (b)  Proceeds  from the  purchase  of shares of Common  Stock upon the
          exercise of Options granted pursuant to the Plan shall be used for the
          general business purposes of the Corporation.

          (c) In the event of the reorganization, recapitalization, stock split,
          stock  dividend,  combination  of  shares  of  Common  Stock,  merger,
          consolidation, share exchange acquisition of property of stock, or any
          change in the capital  structure  of the  Corporation,  the  Committee
          shall make such adjustments as may be equitable and appropriate in the
          number and kind of shares  reserved  for  purchases by  executives  or
          other key employees,  in the number,  kind and price of shares covered
          by Awards granted pursuant to the Plan and then outstanding.

7.    Terms and Conditions of Options

          (a) Each Option granted  pursuant to the Plan shall be evidenced by an
          Option  agreement in such form as the Committee  from time to time may
          determine.

          (b) The exercise  price per share for Options shall be  established by
          the Board of Directors upon the recommendation of the Committee at the
          time of the  grant of  Options  pursuant  to the Plan and shall not be
          less than the Fair Market Value of a share of Common Stock on the date
          on which the Option is  granted.  If the Board of  Directors  does not
          establish  a specific  exercise  price per share at the time of grant,
          the  exercise  price per share shall be equal to the Fair Market Value
          of a share of Common Stock on the date of grant of the Options.

          (c) Each  Option,  subject to the other  limitations  set forth in the
          Plan, may extend for a period of up to 10 years from the date on which
          it is granted.  The term of each  Option  shall be  determined  by the
          Board of Director at the time of grant of the Option, provided that if
          no term is  established  by the  Board  of  Directors  the term of the
          Option shall be 10 years from the date on which it is granted.



                                       5
<PAGE>



          (d) The Board of Directors upon  recommendation of the Committee,  may
          provide in the Option Agreement that the right to exercise each Option
          for the number of shares  subject to each Option  shall  vest,  in the
          Option  holder  over  such  period  of time as the  Committee,  in its
          direction, shall determine for each Option holder. Notwithstanding the
          foregoing,   each  Option  Agreement  shall  provide  that,  upon  the
          occurrence of a Change in Control of the Corporation, all Options then
          outstanding shall become immediately exercisable.

          (e) Options shall be nontransferable  and  nonassignable,  except that
          Options may be transferred by  testamentary  instrument or by the laws
          of descent and  distribution,  and  Nonqualified  Stock Options may be
          transferred  to  family  members  or  family  trusts,  subject  to the
          original terms of the Option.

          (f) Unless the Committee  specifies  otherwise in an Option agreement,
          upon  voluntary  or  involuntary  termination  of an  Option  holder's
          service with the  Corporation,  his Options and all rights  thereunder
          shall  terminate  effective  at the close of  business on the date the
          Option holder ceases to be a Director of regular,  full-time  employee
          of the  Corporation  or any of  its  subsidiaries,  except  (i) to the
          extent previously exercised and (ii) as provided in subparagraphs (g),
          (h) and (i) of this Paragraph 7.

          (g) In the event an Option  holder (i) takes a leave of  absence  from
          the Corporation or any of its  subsidiaries for personal reasons or as
          a result of entry into the armed forces of the United  States,  or any
          of the  departments  or agencies of the United States  government,  or
          (ii) terminates his employment,  or ceases  providing  services to the
          Corporation  or  any  of  its   subsidiaries,   by  reason  of  death,
          disability,  voluntary  termination with the consent of the Committee,
          or other  special  circumstances,  the Committee may consider his case
          and may take such action in respect of the related Option Agreement as
          it  may  deem   appropriate   under   the   circumstances,   including
          accelerating  the time previously  granted for Options to be exercised
          and extending the time  following the Option  holder's  termination of
          active  employment  or  service  during  which  the  Option  holder is
          entitled  to  purchase  the  shares of Common  Stock  subject  to such
          Options,  provided that in no event may any Option be exercised  after
          the expiration of the time of the Option.

          (h) If an Option  holder  dies  during the term of his Option  without
          having fully exercised this Option,  the executor or  administrator of
          his estate or the person who inherits the right to exercise the Option
          by bequest or inheritance shall have the right within two years of the
          Option holder's death to purchase the number of shares of Common Stock
          that the deceased  Option  holder was entitled to purchase at the date
          of his death, after which the Option shall



                                       6
<PAGE>



          lapse, provided that in no event may any Option be exercised after the
          expiration of the term of the Option.

          (i) If an Option holder terminates employment without his having fully
          exercised  his Option due to his  retirement  with the  consent of the
          Corporation,  then such  Option  holder  shall  have the right  within
          ninety (90) days of the Option  holder's  termination of employment or
          service  to  purchase  the  number of shares of Common  Stock that the
          Option holder was entitled to purchase at the date of his termination,
          after which the Option shall lapse,  provided that in no event may any
          Option be exercised  after the  expiration  of the term of the Option.
          The  Committee  may  cancel  the  Option  during the ninety day period
          referred  to  in  this  paragraph,   if  the  Participant  engages  in
          employment or activities  which, in the opinion of the Committee,  are
          contrary to the best interests of the Corporation. The Committee shall
          determine in each case whether a termination  of employment or service
          shall be considered a retirement with the consent of the  Corporation,
          and,  subject to  applicable  law,  whether a leave of  absence  shall
          constitute a termination of employment.  Any such determination of the
          Committee  shall be final  and  conclusive,  unless  overruled  by the
          Board.

          (j)  The  granting  of an  Option  pursuant  to  the  Plan  shall  not
          constitute or be evidence of any agreement or  understanding,  express
          or implied,  on the part of the Corporation or any of its subsidiaries
          to retain or employ the Option holder for any specified period.

          (k) In addition to the general terms and  conditions set forth in this
          Paragraph  7 in  respect  of  Options  granted  pursuant  to the Plan,
          Incentive Stock Options granted  pursuant to the Plan shall be subject
          to the following additional terms and conditions:

                (i)   "Incentive   Stock  Options"  shall  be  granted  only  to
                individuals  who,  at the  date  of  grant  of the  Option,  are
                employees of the Corporation or any of its subsidiaries;

                (ii) No  employee  who owns  beneficially  more  than 10% of the
                total  combined  voting  power  of all  classes  of stock of the
                Corporation  shall be eligible to be granted an "Incentive Stock
                Option;"

                (iii) The aggregate  fair market value  (determined  at the time
                the  Incentive  Stock Option is granted) of the shares of Common
                Stock  in  respect  of  which   "incentive  stock  options"  are
                exercisable  for the first time by the Option  holder during any
                calendar year (under all such plans of the  Corporation  and its
                subsidiaries) shall not exceed $100,000; and



                                       7
<PAGE>



                (iv) Any other terms and  conditions  specified  by the Board of
                Directors that are not inconsistent  with the Plan,  except that
                such  terms  and   conditions   must  be  consistent   with  the
                requirements  for "incentive stock options" under Section 422 of
                the Code.

8.    Methods of Exercise of Options

          (a) An Option holder (or other person or person,  if any,  entitled to
          exercise an Option  hereunder)  desiring to exercise an Option granted
          pursuant  to the Plan as to all or part of the shares of Common  Stock
          covered by the Option shall (i) notify the  Corporation  in writing as
          its principal  office at 1000  Bestgate  Road,  Suite 400,  Annapolis,
          Maryland  21401,  to that effect,  specifying  the number of shares of
          Common Stock to be purchased and the method of payment therefore,  and
          (ii) make  payment or  provision  for payment for the shares of Common
          Stock as purchased in accordance  with this  Paragraph 8. Such written
          notice  may be  given  by  means  of a  facsimile  transmission.  If a
          facsimile  transmission  is used,  the Option  holder  should mail the
          original  executed  copy  of the  written  notice  to the  Corporation
          promptly thereafter.

          (b) Payment or provision for payment shall be made as follows:

                (i) The Option  holder shall deliver to the  Corporation  at the
                address set forth in subparagraph 8(a) United States currency in
                an amount equal to the aggregate purchase price of the shares of
                Common Stock as to which such exercise relates; or

                (ii) The Option holder shall tender to the Corporation shares of
                Common Stock already  owned by the Option holder that,  together
                with any cash tendered therewith,  have no aggregate fair market
                value  (determined  based on the Fair Market Value of a share of
                Common  Stock on the date the notice  set forth in  subparagraph
                8(a) is  received  by the  Corporation)  equal to the  aggregate
                purchase  price of the  shares of Common  Stock as to which such
                exercise relates; or

                (iii) The Option  holder  shall  deliver to the  Corporation  an
                exercise  notice  together with  irrevocable  instructions  to a
                broker to deliver promptly to the Corporation the amount of sale
                or loan proceeds  necessary to pay the aggregate  purchase price
                of the shares of Common Stock as to which such exercise  relates
                and to sell  the  shares  of  Common  Stock  to be  issued  upon
                exercise  of the  Option and  deliver  the cash  proceeds,  less
                commission and brokerage fees to the



                                       8
<PAGE>



                Option holder or to deliver the remaining shares of Common Stock
                to the Option holder.

          Notwithstanding the foregoing provisions,  the Committee and the Board
          of Directors,  in granting Options pursuant to the Plan, may limit the
          methods in which an Option may be  exercised  by any  person  and,  in
          processing any purported exercise of an Option granted pursuant to the
          Plan,  may refuse to recognize the method of exercise  selected by the
          Option  holder  (other  than  the  method  of  exercise  set  forth in
          subparagraph 8(b)(i)).

          (c) In addition to the  alternative  methods of exercise  set forth in
          paragraph  8(b),  holders  of  Nonqualified  Stock  Options  shall  be
          entitled,  at or prior to the time the written notice  provided for in
          subparagraph  8(a) is delivered to the  Corporation,  to elect to have
          the  Corporation  withhold  from  the  shares  of  Common  Stock to be
          delivered upon exercise of the  Nonqualified  Stock Option that number
          of shares of Common Stock  (determined  based on the Fair Market Value
          of a share  of  Common  Stock  on the date  the  notice  set  forth in
          subparagraph 8(a) is received by the Corporation) necessary to satisfy
          any withholding taxes attributable to the exercise of the Nonqualified
          Stock  Option.  Alternatively,  such  holder of a  Nonqualified  Stock
          Option may elect to deliver  previously  owned  shares of Common Stock
          upon  exercise  of  the  Nonqualified  Stock  Option  to  satisfy  any
          withholding  taxes  attributable  to the exercise of the  Nonqualified
          Stock  Option.  If  the  Board  of  Directors  does  not  include  any
          provisions  relating to this  withholding  feature in its  resolutions
          granting the Nonqualified Stock Option or in the Option Agreement. The
          maximum  amount that an Option  holder may elect to have withheld from
          the shares of Common Stock otherwise  deliverable upon exercise or the
          maximum number of previously owned shares in Option holder may deliver
          shall  be  equal  to  the  minimum  federal  and  state   withholding.
          Notwithstanding the foregoing  provisions,  the Committee or the Board
          of Directors may include in the Option Agreement  relating to any such
          Nonqualified  Stock  Option  provisions  limiting or  eliminating  the
          Option  holder's  ability to pay his  withholding  tax obligation with
          shares of Common Stock;  or if no such  provisions are included in the
          Option Agreement,  but in the opinion of the Committee or the Board of
          Directors  such  withholding  would have an adverse tax or  accounting
          effect to the Corporation, at or prior to exercise of the Nonqualified
          Stock  Option the  Committee  or the Board of  Directors  may limit or
          eliminate  the  Option  holder's  ability to pay his  withholding  tax
          obligation with shares of Common Stock.  Notwithstanding the foregoing
          provisions, a holder of Nonqualified Stock Option may not elect any of
          the methods of satisfying his withholding tax obligation in respect of
          any exercise if, in the opinion of counsel to the  Corporation,  there
          is a  substantial  likelihood  that  the  election  or  timing  of the
          election  would



                                       9
<PAGE>



          subject the holder to a substantial risk of liability under Section 16
          of the Exchange Act.

          (d) An Option  holder at any time may elect in  writing  to abandon an
          Option  in  respect  of all or part of the  number of shares of Common
          Stock as to which the Option shall not have been exercised.

          (e) An Option holder shall have none of the rights of a stockholder of
          the Corporation until the shares of Common Stock covered by the Option
          are issued to him upon exercise of the Option.

9.    Deferred Shares

          (a)  Elections  to  Defer.  The  Committee  may at any time  allow any
          Participant  (or  Participants)  who  is a  member  of  the  Board  of
          Directors,  or a member  of a select  group of  management  or  highly
          compensated employees (within the meaning of the Employees' Retirement
          Income Security Act of 1973, with each such individual  being referred
          to herein  as a  "Participant")  may  irrevocably  elect,  on the form
          attached  hereto as  Exhibit A (the  "Election  Form"),  to forego the
          receipt  of  cash  compensation  and  in  lieu  thereof  to  have  the
          Corporation credit Deferred Shares to the Participant's Account with a
          Fair Market Value equal to the  compensation  deferred.  Each Election
          Form shall take effect five  business  days after its  delivery to the
          Committee,  unless in the meantime the Committee sends the Participant
          a  written  notice  explaining  why  the  Election  Form  is  invalid.
          Notwithstanding  the  foregoing  sentence,  Election  Forms  shall  be
          ineffective with respect to any compensation  that a Participant earns
          before the date on which the Committee receives the Election Form.

          (b) Vesting.  Deferred Shares shall be 100% vested at all times.

          (c)  Recordkeeping;  Cash Earnings on Deferred  Shares.  The Committee
          shall  establish  and  maintain  an  individual   account  (the  "Cash
          Account") in the name of each  Participant who files an Election Form.
          On the last day of each fiscal quarter,  the Corporation  shall credit
          to the  Participant's  Cash  Account  any cash  dividends  paid on the
          balance of Deferred Shares credited to the Participant's  Account.  On
          the last day of each fiscal  year of the  Corporation,  the  Committee
          shall  credit to the  Participant's  Account  Deferred  Shares  with a
          Market  Value equal to the balance of the  Participant's  Cash Account
          (without  regard  to  fractional  shares),  and  the  balance  of  the
          Participant's  Cash  Account  shall be reduced to zero.  The  Trustees
          shall hold each  Participant's  Deferred Shares until  distribution is
          required pursuant to subsection (d) hereof.



                                       10
<PAGE>



          (d) Distributions of Deferred Shares and Earnings.  The Trustees shall
          distribute a Participant's Deferred Shares in five substantially equal
          annual  installments  that are paid before the last day of each of the
          five fiscal years of the Corporation  that end after the date on which
          the   Participant's   Continuous   Service   terminates,   unless  the
          Participant has properly elected a different form of distribution,  on
          the form (the "Distribution Election Form") approved by the Committee,
          and the Committee has received the Participant's Distribution Election
          Form  either more than 90 days before a Change in Control or more than
          one year before the date on which the Participant's Continuous Service
          terminates for any reason. Fractional Shares shall not be distributed.

          (e) Hardship  Withdrawals.  Notwithstanding any other provision of the
          Plan or a  Participant's  Election Form, in the event the  Participant
          suffers an  unforeseeable  hardship within the  contemplation  of this
          Section,  the  Participant may apply to the Committee for an immediate
          distribution of all or a portion of his Deferred Shares.  The hardship
          must  result from a sudden and  unexpected  illness or accident of the
          Participant  or a  dependent  of the  Participant,  casualty  loss  of
          property,  or other  similar  conditions  beyond  the  control  of the
          Participant.  Examples of purposes which are not considered  hardships
          include  post-secondary  school  expenses  or the desire to purchase a
          residence.  In no event will a distribution  be made to the extent the
          hardship could be relieved  through  reimbursement  or compensation by
          insurance  or  otherwise,  or  by  liquidation  of  the  Participant's
          nonessential  assets to the extent such  liquidation  would not itself
          cause a severe  financial  hardship.  The  amount of any  distribution
          hereunder  shall be  limited to the amount  necessary  to relieve  the
          Participant's  financial  hardship.  The  determination  of  whether a
          Participant  has a qualifying  hardship and the amount which qualifies
          for  distribution,  if any, shall be made by the Committee in its sole
          discretion.  The  Committee  may  require  evidence of the purpose and
          amount  of the  need,  and may  establish  such  application  or other
          procedures as it deems appropriate.

          (e) Rights to Deferred Shares. A Participant may not assign his or her
          claim to Deferred  Shares during his or her lifetime.  A Participant's
          right to Deferred  Shares shall at all times  constitute  an unsecured
          promise of the Corporation to pay benefits as they come due. The right
          of the  Participant  or his or her  beneficiary  to  receive  benefits
          hereunder  shall be solely an  unsecured  claim  against  the  general
          assets of the  Corporation.  Neither  the  Participant  nor his or her
          beneficiary  shall have any claim  against  or rights in any  specific
          assets, shares, or other funds of the Corporation.



                                       11
<PAGE>



10.   Restricted Share Awards

          (a)  Grants.   The  Committee  shall  have  the  discretion  to  grant
          Restricted  Share  Awards to  Employees  and  members  of the Board of
          Directors.  As promptly as practicable  after a determination  is made
          that a  Restricted  Share  Award is to be made,  the  Committee  shall
          notify the  Participant  in  writing  of the grant of the  Award,  the
          number of Shares  covered by the  Award,  and the terms upon which the
          Shares  subject  to the  Award  may be  earned.  The date on which the
          Committee so notifies the Participant  shall be considered the date of
          grant of the  Restricted  Share Awards.  The Committee  shall maintain
          records as to all grants of Restricted Share Awards under the Plan.

          (b) Earning Shares. Unless the Committee  specifically  eliminates any
          vesting  schedule in an Agreement  granting a Restricted  Share Award,
          Shares  subject to Restricted  Share Awards shall be earned and become
          non-forfeitable by a Participant  according to the following schedule,
          provided the  Participant  is an Employee or Director on the scheduled
          vesting date:


                                          Vested Percentage
               Years of Service        (applied to Restricted
               ----------------               Shares)
                                              -------

                  Less than 1                     0%
                       1                         25%
                       2                         50%
                       3                         75%
                   4 or More                     100%

       Notwithstanding   the  foregoing  and  unless  otherwise  provided  in  a
   Participant's  Restricted Stock Award,  each Participant  shall become (100%)
   vested  immediately (i) upon termination of the Participant's  service due to
   the  Participant's  disability or death,  or (ii) upon a Change in Control of
   the Corporation.

    (c)Accrual  of  Dividends.  Whenever  Shares  are paid to a  Participant  or
    Beneficiary  under Section 11(d), such Participant or Beneficiary shall also
    be entitled to receive,  with respect to each Share paid, an amount equal to
    any cash  dividends  (including  special large and  nonrecurring  dividends,
    including   one  that  has  the  effect  of  a  return  of  capital  to  the
    Corporation's  stockholders) and a number of shares of Common Stock equal to
    any stock  dividends,  declared  and paid with  respect to a share of Common
    Stock  between the date the relevant  Restricted  Share Award was  initially
    granted to such  Participant and the date the Shares are being  distributed.
    There shall



                                       12
<PAGE>



    also be  distributed  an  appropriate  amount of net earnings,  if any, with
    respect to any cash dividends so paid out.

    (d)Distribution of Shares.

                (i) Timing of  Distributions:  General Rule. Except as otherwise
                expressly  stated in this Plan, the Committee  shall  distribute
                Shares and  accumulated  cash from dividends and interest to the
                Participant or his  Beneficiary,  as the case may be, as soon as
                practicable  after they have been earned.  No fractional  shares
                shall be distributed.

                (ii) Form of  Distribution.  The Committee shall  distribute all
                Shares,  together with any shares  representing stock dividends,
                in the form of Common Stock.  One share of Common Stock shall be
                given  for  each  Share  earned.   Payments   representing  cash
                dividends (and earnings thereon) shall be made in cash.

                (iii)  Withholding.  The Committee  shall withhold from any cash
                payment  made  under this Plan  sufficient  amounts to cover any
                applicable  withholding and employment  taxes, and if the amount
                of such cash  payment is not  sufficient,  the  Committee  shall
                require the  Participant  or Beneficiary to pay to the Committee
                the amount  required to be withheld as a condition of delivering
                the Shares.  The Committee  shall pay over to the Corporation or
                Affiliate  which employs or employed such  Participant  any such
                amount withheld from or paid by the Participant or Beneficiary.

                (iv)Regulatory   Exceptions.   No  Restricted  Shares  shall  be
                    distributed  unless and until all of the requirements of all
                    applicable  law  and  regulations   shall  have  been  fully
                    complied with, including the receipt of approval of the Plan
                    by the stockholders of the Corporation by such vote, if any,
                    as may be required by applicable law and regulations.

    (e)Voting  of Plan  Shares.  All  shares of Common  Stock  subject to Awards
    (whether or not subject to a  Restricted  Share Award) shall be voted by the
    Board in the manner directed by the Board.

    (f)Deferral  Elections.  At any time 12 months  prior to the date on which a
    Participant  becomes  vested in any shares  subject to his or her Restricted
    Share Award,  a Participant  who is a member of a select group of management
    or highly  compensated  employees  (within  the  meaning  of the  Employees'
    Retirement  Income Security Act of 1973) may irrevocably  elect, on the form
    (the "Election Form") approved by the Committee, to defer the receipt of all
    or a percentage  of the Shares that would  otherwise be  transferred  to the
    Participant upon the vesting of such



                                       13
<PAGE>



    Award.  If such an  election  is made,  the Shares  shall be credited to the
    Participant's  Account  as  Deferred  Shares on the date such  Shares  would
    otherwise have been distributed to the Participant.

11.   Amendments and Discontinuance of the Plan

      The Board of  Directors  shall have the right at any time and from time to
time to amend, modify, or discontinue the Plan provided that, except as provided
in subparagraph 6(c), no such amendment,  modification, or discontinuance of the
Plan shall (i) revoke or alter the terms of any valid Option previously  granted
pursuant to the Plan,  (ii)  increase  the number of share of Common Stock to be
reserved for issuance and sale pursuant to Options granted pursuant to the Plan,
(iii)  decrease the exercise  price  determined  pursuant to the  provisions  of
subparagraph  7(b), or (iv) provide for Options  exercisable  more than 10 years
after the date granted.

12.   Plan Subject to Governmental Laws and Regulations

      The Plan and the grant of Awards  pursuant to the Plan shall be subject to
all applicable  governmental  laws and  regulations.  Notwithstanding  any other
provision of the Plan to the  contrary,  the Board of Directors  may in its sole
and  absolute  discretion  make such  changes in the Plan as may be  required to
conform the Plan to such laws and regulations.

13.   Duration of the Plan

      No  Option  shall be  granted  pursuant  to the Plan  after  the  close of
business on March 23, 2010.





                                       14



<PAGE>



                                    Exhibit B
                                    ---------
                           Designation of Beneficiary


     In connection  with the Deferred  Share  Agreement  (the  "Deferred  Shares
Agreement")  entered  into on ________,  2000,  between the  Annapolis  National
Bancorp, Inc. (the "Company") and _________________________________________,  an
individual  residing at  _________________________________________________  (the
"Participant"),  the Participant hereby designates the person specified below as
the  beneficiary  of the  Participant's  interest in ______  Deferred  Shares of
Common Stock of the Company awarded  pursuant to the Deferred Shares  Agreement.
This  designation  shall  remain in  effect  until  revoked  in  writing  by the
Participant.


               Name of Beneficiary:    __________________________


               Address:                __________________________

                                       __________________________

                                       __________________________


               Social Security No.:    __________________________


     The Participant  understands that this designation  operates to entitle the
above-named beneficiary to the rights conferred by the Deferred Shares Agreement
from the date this form is  delivered  to the  Company  until  such date as this
designation is revoked in writing by the  Participant,  including by delivery to
the Company of a written designation of beneficiary  executed by the Participant
on a later date.


                                         Date:   ______________________________

                                           By:   ______________________________
                                                 [Participant Name]


Sworn to before me this

___ day of __________, _____.


_________________________
Notary Public

County of _______________

State of _________________
[{"type": "S-8", "sequence": "1", "filename": "annapolis-s8.txt", "secsgml_size_bytes": 222584}]
{"company-data": {"conformed-name": "ANNAPOLIS NATIONAL BANCORP INC", "cik": "0001041429", "assigned-sic": "6021", "irs-number": "521648903", "state-of-incorporation": "MD", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "S-8", "act": "33", "file-number": "333-58658", "film-number": "1599982"}, "business-address": {"street1": "180 ADMIRAL COCHRANE DRIVE SUITE 300", "city": "ANNAPOLIS", "state": "MD", "zip": "21401", "phone": "4102244455"}, "mail-address": {"street1": "180 ADMIRAL COCHRANE DRIVE SUITE 300", "city": "ANNAPOLIS", "state": "MD", "zip": "21401"}}
FORM S-8

                       SECURITIES AND EXCHANGE COMMISSION

             REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

                        ANNAPOLIS NATIONAL BANCORP, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

            Maryland                                  52-1648903
--------------------------------------------------------------------------------
    (State or other jurisdiction of                (I.R.S. Employer
     incorporation or organization)                Identification No.)

      1000 Bestgate Road, Suite 400
      Annapolis, Maryland                                 21401
--------------------------------------------------------------------------------
 (Address of Principal Executive Offices)               (Zip Code)

                        Annapolis National Bancorp, Inc.
                            2000 Stock Incentive Plan
--------------------------------------------------------------------------------
                            (Full title of the plan)

                                Richard M. Lerner
                             Chief Executive Officer
                          1000 Bestgate Road, Suite 400
                            Annapolis, Maryland 21401
--------------------------------------------------------------------------------
                     (Name and address of agent for service)

                                 (410) 224-4455
--------------------------------------------------------------------------------
          (Telephone number, including area code, of agent for service)

                         CALCULATION OF REGISTRATION FEE
                                   Copies to:
                              J. Mark Poerio, Esq.
                     Paul, Hastings, Janofsky & Walker, LLP
                          1299 Pennsylvania Avenue, NW
                                   10th Floor
                              Washington, DC 20004
                                 (202) 508-9582
------------------------------------------------------------------------------------------------------------------------------------
 Title of securities to be registered                            Proposed maximum           Proposed                Amount of
                                            Amount to be        offering price per           maximum               registration fee
                                           registered (1)              unit             aggregate offering
                                                                                              price

------------------------------------------------------------------------------------------------------------------------------------
Common stock, par value $0.01 per           200,000(2)              $ (3)                   $952,553               $238.14
share
(1)   Together with an indeterminate number of additional shares that may be
      necessary to adjust the number of shares reserved for issuance pursuant to
      the Annapolis National Bancorp, Inc. 2000 Stock Incentive Plan as the
      result of stock splits, stock dividends or similar adjustments of the
      outstanding shares of common stock of Annapolis National Bancorp, Inc.
      pursuant to Rule 416 of the Securities Act of 1933, as amended.

(2)   Represents the total number of shares currently reserved or under the
      Annapolis National Bancorp, Inc 2000 Stock Incentive Plan.
(3)   Under Rule 457(h)(l), the registration fee may be calculated for a stock
      option plan based upon the price at which the options may be exercised,
      and the price of the underlying securities for shares reserved for future
      grants. Of the total number of shares registered herein, 137,250 shares
      are subject to rights granted under the Registrant's 2000 Stock Incentive
      Plan at a weighted average exercise price equal to $4.54 per share
      ($623,115 in the aggregate), and 62,750 shares are available for future
      option grants under said plan and are being registered herein based on the
      average of the high and low selling prices per share of the Registrant's
      common stock on the Nasdaq SmallCap Market on April 6, 2001, which
      equaled $5.25 per share ($329,438 in the aggregate for all shares not
      presently subject to grants under the plan). Therefore, the total amount
      of the offering being registered herein is the sum of these aggregate
      amounts, or $952,553.

          PART I - INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS

Item 1.  Plan Information.

     The documents containing the information for Annapolis National Bancorp,
Inc. (the "Registrant") specified in this Item 1 will be sent or given to
directors and employees who have been awarded options under the Annapolis
National Bancorp, Inc. 2000 Stock Incentive Plan (the "Plan"). In accordance
with Section 10(a) of the Securities Act of 1933, as amended (the "Securities
Act") and Rules 424 and 428 promulgated under the Securities Act by the
Securities and Exchange Commission (the "Commission"), such documents are not
being filed with, or included in, this Registration Statement on Form S-8 (the
"Registration Statement").

Item 2.  Registrant Information and Employee Plan Annual Information.

     The documents containing the information specified in this Item 2 will be
sent or given to directors and employees who have been awarded options under the
Plan. In accordance with Section 10(a) of the Securities Act and Rules 424 and
428 thereunder, such documents are not being filed with, or included in, this
Registration Statement.

          PART II - INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

Item 3.  Incorporation of Documents by Reference.

     The following documents, which have been filed with the Commission by the
Registrant are incorporated by reference in this Registration Statement. The
information incorporated by reference is considered to be part of this
Registration Statement, and information that the Registrant files later with the
Commission will automatically update and supersede this information. The
Registrant incorporates by reference the documents listed below and any future
filings the Registrant makes with the Commission under Sections 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934 prior to the filing of a
post-effective amendment that indicates that all securities offered have been
sold or which deregisters all securities then remaining unsold. Such future
filings shall be deemed to be incorporated by reference in the Registration
Statement and to be part thereof from the date of filing of such document.

             (a) The Registrant's annual report on Form 10-KSB for the year
ended December 31, 2000, filed with the Commission by the Registrant on March
28, 2001.

             (b) None.

             (c) The description of the Registrant's common stock contained in
the Registrant's Registration Statement on Form 8-A, as filed with the
Commission on August 7, 1997 pursuant to Section 12 of the Securities Exchange
Act of 1934, as amended.

Item 4.  Description of Securities.

     Not applicable.
Item 5.  Interests of Named Experts and Counsel.

     None

     The validity of the common stock has been passed upon by Paul, Hastings,
Janofsky & Walker LLP for the Registrant.

Item 6.  Indemnification of Directors and Officers.

     In accordance with Section 418 of the Maryland General Corporation Law,
Articles XII and XIII of the Registrant's Amended and Restated Certificate of
Incorporation eliminate, with certain exceptions, the Registrant's directors'
personal liability to the Registrant or its stockholders for monetary damages
for breach of fiduciary duty as a director. Articles XII and XIII of the
Registrant's Amended and Restated Certificate of Incorporation read as follows:

     ARTICLE XII The Corporation shall indemnify to the fullest extent
permissible under the Maryland General Corporation Law any individual who is or
was a director, officer, employee, or agent of the Corporation, and any
individual who serves or served at the Corporation's request as a director,
officer, partner, trustee, employee, or agent of another corporation,
partnership, joint venture, trust or other enterprise, in any proceeding in
which the individual is made a party as a result of his service in such
capacity. An individual will not be indemnified if it is proved that the act or
omission at issue was material to the cause of action adjudicated in the subject
proceeding and that (i) it was committed in bad faith, or (ii) it was the result
of active and deliberate dishonesty, or (iii) the individual actually received
an improper personal benefit in money, property, or services, or (iv) in the
case of a criminal proceeding, the individual had reasonable cause to believe
that the act or omission was unlawful.

     ARTICLE XIII Limitations on Liability of Officers and Directors. An officer
or director of the Corporation shall not be personally liable to the Corporation
or its shareholders for monetary damages for breach of their fiduciary duty as
an officer or director, unless: (i) it is proved that the individual officer or
director actually received an improper benefit or profit in money, property or
services from the Corporation; or (ii) a judgment or other final adjudication
adverse to the individual officer or director is entered in a proceeding based
on a finding in the proceeding that the individual's action, or failure to act,
was the result of active and deliberate dishonesty and was material to the cause
of action adjudicated in the proceeding. If the Maryland General Corporation Law
is amended to further eliminate or limit the personal liability of officers and
directors, then the liability of officers and directors of the Corporation shall
be eliminated or limited to the fullest extent permitted by the Maryland General
Corporation Law, as so amended. Any repeal or modification of the foregoing
paragraph by the shareholders of the Corporation shall not adversely affect any
right or protection of a director of the Corporation existing at the time of
such repeal or modification.

Item 7.  Exemption from Registration Claimed.

     Not applicable.
Item 8.  Exhibits.

Exhibits

4.1         Annapolis National Bancorp, Inc. 2000 Stock Incentive Plan
            (the "Plan")

5.1         Opinion of Paul, Hastings, Janofsky & Walker LLP regarding
            the legality of the securities being registered by the
            Registrant.

23.1        Consent of Paul, Hastings, Janofsky & Walker LLP
            (contained in Exhibit 5.1 hereof)

23.2        Consent of Rowles and Company, LLP

23.3        Consent of Stegman & Company

24.1        Power of Attorney (contained in the signature page hereof)

99.1        Form of Stock Option Award associated with the Plan

99.2        Form of Restricted Stock Award associated with the Plan

99.3        Form of Deferred Share Award associated with the Plan

Item 9.  Undertakings.

     (a) The Registrant hereby undertakes:

             (1) To file, during any period in which it offers or sells
securities, a post-effective amendment to this Registration Statement to:

                  i) Include any prospectus required by Section 10(a)(3) of the
             Securities Act;

                  ii) Reflect in the prospectus any facts or events which,
             individually or in the aggregate, represent a fundamental change in
             the information set forth in the Registration Statement.
             Notwithstanding the foregoing, any increase or decrease in volume
             of securities offered (if the total dollar value of securities
             offered would not exceed that which was registered) and any
             deviation from the low or high end of the estimated maximum
             offering range may be reflected in the form of prospectus filed
             with the Commission pursuant to Rule 424(b) if, in the aggregate,
             the changes in volume and price represent no more than a 20% change
             in the maximum aggregate offering price set forth in the
             "Calculation of Registration Fee" table in the effective
             registration statement.

                  iii) Include any additional or changed material information on
             to the plan of distribution.

            (2) For determining any liability under the Securities Act, treat
       each such post-effective amendment as a new registration statement of the
       securities offered therein, and the offering of such securities at that
       time to be the initial bona fide offering thereof.

            (3) To file a post-effective amendment to remove from registration
       any of the securities being registered that remain unsold at the end of
       the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement 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.

     (c) 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 Commission such
indemnification is against public policy as expressed in the Securities 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.

                                   SIGNATURES

     Pursuant to 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 S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Annapolis, State of Maryland, on April , 2001.

                                           ANNAPOLIS NATIONAL BANCORP, INC.

                                           By:   /s/ Richard M. Lerner
                                               --------------------------
                                                 Richard M. Lerner
                                              Chief Executive Officer

                                POWER OF ATTORNEY

     Each person whose signature appears below constitutes and appoints Richard
M. Lerner as his or her true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for such person and in such person's
name, place and stead, in any and all capacities, to sign any or all amendments
(including post-effective amendments) to this Registration Statement (or any
registration statement for the same offering that is to be effective upon filing
pursuant to Rule 426(b) under the Securities Act of 1933) and to cause the same
to be filed, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby granting to said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite or desirable to be done in and about the premises,
as fully to all intents and purposes as the undersigned might or could do in
person, hereby ratifying and confirming all acts and things that said
attorney-in-fact and agent or his substitutes or substitute, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.

Signature                         Title                          Date
---------                         -----                          ----
/s/ Richard M. Lerner
--------------------------        President, Chief Executive     April 9, 2001
Richard M. Lerner                 Officer and Director

/s/ Margaret Theiss Faison
--------------------------        Chief Financial Officer        April 9, 2001
Margaret Theiss Faison

/s/ Rita D. Demma
-------------------------         Secretary                      April 9, 2001
Rita D. Demma

/s/ Albert Phillips
-------------------------         Director and Chairman of the   April 9, 2001
Albert Phillips                   Board

/s/ Mark H. Anders
-------------------------         Director                       April 9, 2001
Mark H. Anders

/s/ F. Carter Heim
-------------------------         Director                       April 9, 2001
F. Carter Heim

/s/ Dimitri P. Mallios
-------------------------         Director                       April 9, 2001
Dimitri P. Mallios

/s/ Ermis Sfakiyanudis
-------------------------         Director                       April 9, 2001
Ermis Sfakiyanudis

/s/ Lawrence W. Schwartz
-------------------------         Director                       April 9, 2001
Lawrence W. Schwartz

/s/ Lawrence E. Lerner
-------------------------         Director                       April 9, 2001
Lawrence E. Lerner

/s/ Stanley J. Klos, Jr.
-------------------------         Director                       April 9, 2001
Stanley J. Klos, Jr.
EXHIBIT INDEX

Exhibits

4.1         Annapolis National Bancorp, Inc. 2000 Stock Incentive Plan
            (the "Plan")

5.1         Opinion of Paul, Hastings, Janofsky & Walker LLP regarding
            the legality of the securities being registered by the
            Registrant.

23.1        Consent of Paul, Hastings, Janofsky & Walker LLP
            (contained in Exhibit 5.1 hereof)

23.2        Consent of Rowles and Company, LLP

23.3        Consent of Stegman & Company

24.1        Power of Attorney (contained in the signature page hereof)

99.1        Form of Stock Option Award associated with the Plan

99.2        Form of Restricted Stock Award associated with the Plan

99.3        Form of Deferred Share Award associated with the Plan
EXHIBIT 4.1

                        Annapolis National Bancorp, Inc.
                            2000 Stock Incentive Plan
ANNAPOLIS NATIONAL BANCORP, INC.
                            2000 STOCK INCENTIVE PLAN

1.    Purpose

      The proper execution of the duties and  responsibilities of the directors,
executives,   and   employees  of  Annapolis   National   Bancorp,   Inc.   (the
"Corporation")  and its  subsidiaries is a vital factor in the continued  growth
and success of the Corporation.  Toward this end, it is necessary to attract and
retain  effective and capable  individuals to assume  positions that  contribute
materially to the successful  operation of the business of the  Corporation  and
its  subsidiaries.  It will  benefit  the  Corporation,  therefore,  to bind the
interests of these persons more closely to its own interests by offering them an
attractive  opportunity to acquire a proprietary interest in the Corporation and
thereby  provide  them with  added  incentive  to remain in the  service  of the
Corporation and its  subsidiaries  and to increase the prosperity,  growth,  and
earnings of the  Corporation.  This stock option plan is intended to serve these
purposes.

2.    Definitions

      The following terms wherever used herein shall have the meanings set forth
below.

          (a) The  term  "Awards"  shall  mean  Options,  Deferred  Shares,  and
              Restricted Share Awards, collectively.

          (b) The term "Board of Directors" shall mean the Board of Directors of
              the Corporation.

          (c) The term  "Change  in  Control  of the  Corporation"  shall mean a
              change  in  control  of a  nature  that  would be  required  to be
              reported in response  to Item 6(c) of Schedule  14A of  Regulation
              14A  promulgated  under  the  Exchange  Act,  whether  or not  the
              Corporation  is in fact  required  to comply  therewith,  provided
              that, without limitation, such a change in control shall be deemed
              to have  occurred  if (A) any  "person"  (as such  term is used in
              Section 13(d) and 14(d) of the Exchange Act), other than a trustee
              or other fiduciary  holding  securities  under an employee benefit
              plan  of  the  Corporation  or  any  of  its   subsidiaries  or  a
              corporation owned, directly or indirectly,  by the stockholders of
              the  Corporation  in  substantially  the same  proportions  as the
              ownership  of Common  Stock of the  Corporation,  and  other  than
              Lawrence E. Lerner or any member or members of this family,  is or
              becomes the "beneficial owner" (as defined in Rule 13d-3 under the
              Exchange  Act),  directly  or  indirectly,  of  securities  of the
              Corporation  representing 20% or more of the combined voting
power of the Corporation's then outstanding securities; (B) during
              any  period of two  consecutive  years (not  including  any period
              prior  to  the  adoption  of  the  Plan)  individuals  who  at the
              beginning of such period constitute the Board and any new director
              (other than a director designated by a person who has entered into
              an  agreement  with  the   Corporation  to  affect  a  transaction
              described in clauses (A) or (B) of this definition) whose election
              by the Board or  termination  for  election  by the  Corporation's
              stockholders  was approved by a vote of at least two-thirds of the
              directors  then still in office who either were  directors  at the
              beginning  of the  period  or whose  election  or  nomination  for
              election  was  previously  so  approved,  cause for any  reason to
              constitute  a majority of the Board;  (C) the  Corporation  enters
              into an agreement,  the  consummation of which would result in the
              occurrence  of a Change in  Control  of the  Corporation;  (D) the
              stockholders of the Corporation  approve a merger,  share exchange
              or consolidation  of the Corporation  with any other  corporation,
              other than a merger,  share exchange or  consolidation  that would
              result in the voting  securities of the  Corporation,  outstanding
              immediately prior thereto held by Lawrence E. Lerner or any member
              or  members  of his  family  continuing  to  represent  (either by
              remaining outstanding or by being converted into voting securities
              of the surviving entity) at least 50% of the combined voting power
              of the voting  securities  of the  Corporation  or such  surviving
              entity outstanding  immediately after such merger,  share exchange
              or consolidation, or the stockholders of the Corporation approve a
              plan of complete  liquidation of the Corporation or any agreements
              for  the  sale  of  disposition  by  the  Corporation  of  all  or
              substantially all the Corporation's assets.

          (d) The term "Code" shall mean the Internal  Revenue Code of 1986,  as
              amended, and any regulations promulgated thereunder.

          (e) The term "Committee" shall mean a committee to be appointed by the
              Board of  Directors  to consist of three or more  members,  all of
              whom are members of the Board of Directors  and are  "non-employee
              directors" within the meaning of Rule 16-3 under the Exchange Act.

          (f) The term "Common Stock" shall mean the shares of common stock, par
              value $0.01 per share, of the Corporation.

          (g) The term  "Corporation"  shall mean  Annapolis  National  Bancorp,
              Inc., a Maryland corporation.

          (h) The term "Deferred  Shares" shall mean Shares that the Company has
              credited,   pursuant  to   Paragraph  9  hereof,   to  a  deferred
              compensation account in the name of a Participant.

                                       2
(i) The term "Exchange Act" shall mean the Securities  Exchange Act of
              1934, as amended.

          (j) The term "Fair  Market  Value"  shall mean the then  current  fair
              market value of Common  Stock,  as determined in good faith by the
              Committee and in a manner  consistent  with the rules set forth in
              Treas. Reg. Section 20.2031-2.

          (k) The term  "Incentive  Stock Option"  shall mean an Option  granted
              pursuant  to the Plan that is  designated  as an  Incentive  Stock
              Option and which  satisfies the  requirements of Section 422(b) of
              the Code.

          (l) The term "Nonqualified  Stock Option" shall mean an Option granted
              pursuant to the Plan that is not an Incentive Stock Option.

          (m) The term  "Option" or "Stock  Option"  shall mean a right  granted
              pursuant to the Plan to purchase shares of Common Stock, and shall
              include the terms  Incentive Stock Option and  Nonqualified  Stock
              Option.

          (n) The term  "Option  Agreement"  shall  mean the  written  agreement
              representing  Options granted pursuant to the Plan as contemplated
              by Paragraph 7 of the Plan.

          (o) The term "Plan" shall mean the Annapolis  National  Bancorp,  Inc.
              2000 Stock Incentive Plan as approved by the Board of Directors on
              March 24, 2000, as the same may be amended from time to time.

          (p) The term "Restricted Share Award" shall mean a right granted under
              Section 10 of this Plan to receive Shares.

          (q) The term "subsidiary" or  "subsidiaries"  shall mean a corporation
              of  which  capital  stock  possessing  50% or  more  of the  total
              combined voting power of all classes of its capital stock entitled
              to vote  generally  in the  election of  directors is owned to the
              aggregate by the Corporation directly or indirectly through one or
              more subsidiaries.

3.    Effective Date of the Plan

      The Plans shall become effective upon stockholder approval,  provided that
such approval is received  before March 24, 2001, and provided  further that the
Board of Directors may grant Options  pursuant to the Plan prior to  stockholder
approval  if  such  Options  by  their  terms  are  contingent  upon  subsequent
stockholder approval of the Plan.

                                       3
4.    Administration

          (a) The Plan shall be administered by the Committee, provided that the
          Board  may act in lieu  of the  Committee  on any  matter  within  the
          Committee's discretion or authority.

          (b) The  Committee  may  establish,  from time to time and at any time
          subject to the limitations of the Plan as set forth herein, such rules
          and  regulations  and amendments and  supplements  thereto as it deems
          necessary to comply with  applicable  law and  regulation  and for the
          proper  administration  of the Plan.  A majority of the members of the
          Committee  shall  constitute  a quorum.  The vote of a  majority  of a
          quorum shall constitute action by the Committee.

          (c) The  Committee  shall  from  time to time  submit  to the Board of
          Directors  for its  approval  the  names of those  executives  and key
          employees  who, in its  opinion,  should  receive  Options,  and shall
          recommend the numbers of shares on which Options  should be granted to
          each such person and the nature of the Options to be granted.

          (d)  Options  shall be  granted  by the  Committee  and  shall  become
          effective  only after  execution  of an Option  Agreement  between the
          Corporation and the Option holder.

          (e) The Commission's interpretation and construction of the provisions
          of the Plan and the rules and  regulations  adopted by the  Commission
          shall be final, unless otherwise determined by the Board of Directors.
          No member of the  Committee or the Board of Directors  shall be liable
          for my action or  determination  made, in respect of the Plan, in good
          faith.

5.    Participation in the Plan

          (a)  Participants  in the Plan shall be limited to the  employees  and
          directors  of the  Corporation  and  its  subsidiaries  who  shall  be
          designated by the Committee.

          (b) No member of the Board of Directors  who is also an officer of the
          Corporation shall be eligible to serve on the Committee.

6.    Stock Subject to the Plan

          (a) There shall be reserved for the granting of Awards pursuant to the
          Plan and for issuance and sale pursuant to such Awards  200,000 shares
          of Common  Stock.  To  determine  the number of shares of Common Stock
          available  at any time for the  granting  of  Awards,  there  shall be
          deducted from

                                       4
the total  number of reserved  shares of Common  Stock,  the number of
          shares of Common  Stock in respect of which  Awards have been  granted
          pursuant  to  the  Plan  that  are  still  outstanding  or  have  been
          exercised.  The shares of Common  Stock to be issued upon the exercise
          or vesting of Awards shall be made  available  from the authorized and
          unissued  shares of Common  Stock.  If for any reason shares of Common
          Stock as to which an Award has been  granted  cease to be  subject  to
          purchase or delivery to Award holders thereunder,  then such shares of
          Common  Stock again shall be available  for  issuance  pursuant to new
          Awards.

          (b)  Proceeds  from the  purchase  of shares of Common  Stock upon the
          exercise of Options granted pursuant to the Plan shall be used for the
          general business purposes of the Corporation.

          (c) In the event of the reorganization, recapitalization, stock split,
          stock  dividend,  combination  of  shares  of  Common  Stock,  merger,
          consolidation, share exchange acquisition of property of stock, or any
          change in the capital  structure  of the  Corporation,  the  Committee
          shall make such adjustments as may be equitable and appropriate in the
          number and kind of shares  reserved  for  purchases by  executives  or
          other key employees,  in the number,  kind and price of shares covered
          by Awards granted pursuant to the Plan and then outstanding.

7.    Terms and Conditions of Options

          (a) Each Option granted  pursuant to the Plan shall be evidenced by an
          Option  agreement in such form as the Committee  from time to time may
          determine.

          (b) The exercise  price per share for Options shall be  established by
          the Board of Directors upon the recommendation of the Committee at the
          time of the  grant of  Options  pursuant  to the Plan and shall not be
          less than the Fair Market Value of a share of Common Stock on the date
          on which the Option is  granted.  If the Board of  Directors  does not
          establish  a specific  exercise  price per share at the time of grant,
          the  exercise  price per share shall be equal to the Fair Market Value
          of a share of Common Stock on the date of grant of the Options.

          (c) Each  Option,  subject to the other  limitations  set forth in the
          Plan, may extend for a period of up to 10 years from the date on which
          it is granted.  The term of each  Option  shall be  determined  by the
          Board of Director at the time of grant of the Option, provided that if
          no term is  established  by the  Board  of  Directors  the term of the
          Option shall be 10 years from the date on which it is granted.

                                       5
(d) The Board of Directors upon  recommendation of the Committee,  may
          provide in the Option Agreement that the right to exercise each Option
          for the number of shares  subject to each Option  shall  vest,  in the
          Option  holder  over  such  period  of time as the  Committee,  in its
          direction, shall determine for each Option holder. Notwithstanding the
          foregoing,   each  Option  Agreement  shall  provide  that,  upon  the
          occurrence of a Change in Control of the Corporation, all Options then
          outstanding shall become immediately exercisable.

          (e) Options shall be nontransferable  and  nonassignable,  except that
          Options may be transferred by  testamentary  instrument or by the laws
          of descent and  distribution,  and  Nonqualified  Stock Options may be
          transferred  to  family  members  or  family  trusts,  subject  to the
          original terms of the Option.

          (f) Unless the Committee  specifies  otherwise in an Option agreement,
          upon  voluntary  or  involuntary  termination  of an  Option  holder's
          service with the  Corporation,  his Options and all rights  thereunder
          shall  terminate  effective  at the close of  business on the date the
          Option holder ceases to be a Director of regular,  full-time  employee
          of the  Corporation  or any of  its  subsidiaries,  except  (i) to the
          extent previously exercised and (ii) as provided in subparagraphs (g),
          (h) and (i) of this Paragraph 7.

          (g) In the event an Option  holder (i) takes a leave of  absence  from
          the Corporation or any of its  subsidiaries for personal reasons or as
          a result of entry into the armed forces of the United  States,  or any
          of the  departments  or agencies of the United States  government,  or
          (ii) terminates his employment,  or ceases  providing  services to the
          Corporation  or  any  of  its   subsidiaries,   by  reason  of  death,
          disability,  voluntary  termination with the consent of the Committee,
          or other  special  circumstances,  the Committee may consider his case
          and may take such action in respect of the related Option Agreement as
          it  may  deem   appropriate   under   the   circumstances,   including
          accelerating  the time previously  granted for Options to be exercised
          and extending the time  following the Option  holder's  termination of
          active  employment  or  service  during  which  the  Option  holder is
          entitled  to  purchase  the  shares of Common  Stock  subject  to such
          Options,  provided that in no event may any Option be exercised  after
          the expiration of the time of the Option.

          (h) If an Option  holder  dies  during the term of his Option  without
          having fully exercised this Option,  the executor or  administrator of
          his estate or the person who inherits the right to exercise the Option
          by bequest or inheritance shall have the right within two years of the
          Option holder's death to purchase the number of shares of Common Stock
          that the deceased  Option  holder was entitled to purchase at the date
          of his death, after which the Option shall

                                       6
lapse, provided that in no event may any Option be exercised after the
          expiration of the term of the Option.

          (i) If an Option holder terminates employment without his having fully
          exercised  his Option due to his  retirement  with the  consent of the
          Corporation,  then such  Option  holder  shall  have the right  within
          ninety (90) days of the Option  holder's  termination of employment or
          service  to  purchase  the  number of shares of Common  Stock that the
          Option holder was entitled to purchase at the date of his termination,
          after which the Option shall lapse,  provided that in no event may any
          Option be exercised  after the  expiration  of the term of the Option.
          The  Committee  may  cancel  the  Option  during the ninety day period
          referred  to  in  this  paragraph,   if  the  Participant  engages  in
          employment or activities  which, in the opinion of the Committee,  are
          contrary to the best interests of the Corporation. The Committee shall
          determine in each case whether a termination  of employment or service
          shall be considered a retirement with the consent of the  Corporation,
          and,  subject to  applicable  law,  whether a leave of  absence  shall
          constitute a termination of employment.  Any such determination of the
          Committee  shall be final  and  conclusive,  unless  overruled  by the
          Board.

          (j)  The  granting  of an  Option  pursuant  to  the  Plan  shall  not
          constitute or be evidence of any agreement or  understanding,  express
          or implied,  on the part of the Corporation or any of its subsidiaries
          to retain or employ the Option holder for any specified period.

          (k) In addition to the general terms and  conditions set forth in this
          Paragraph  7 in  respect  of  Options  granted  pursuant  to the Plan,
          Incentive Stock Options granted  pursuant to the Plan shall be subject
          to the following additional terms and conditions:

                (i)   "Incentive   Stock  Options"  shall  be  granted  only  to
                individuals  who,  at the  date  of  grant  of the  Option,  are
                employees of the Corporation or any of its subsidiaries;

                (ii) No  employee  who owns  beneficially  more  than 10% of the
                total  combined  voting  power  of all  classes  of stock of the
                Corporation  shall be eligible to be granted an "Incentive Stock
                Option;"

                (iii) The aggregate  fair market value  (determined  at the time
                the  Incentive  Stock Option is granted) of the shares of Common
                Stock  in  respect  of  which   "incentive  stock  options"  are
                exercisable  for the first time by the Option  holder during any
                calendar year (under all such plans of the  Corporation  and its
                subsidiaries) shall not exceed $100,000; and

                                       7
(iv) Any other terms and  conditions  specified  by the Board of
                Directors that are not inconsistent  with the Plan,  except that
                such  terms  and   conditions   must  be  consistent   with  the
                requirements  for "incentive stock options" under Section 422 of
                the Code.

8.    Methods of Exercise of Options

          (a) An Option holder (or other person or person,  if any,  entitled to
          exercise an Option  hereunder)  desiring to exercise an Option granted
          pursuant  to the Plan as to all or part of the shares of Common  Stock
          covered by the Option shall (i) notify the  Corporation  in writing as
          its principal  office at 1000  Bestgate  Road,  Suite 400,  Annapolis,
          Maryland  21401,  to that effect,  specifying  the number of shares of
          Common Stock to be purchased and the method of payment therefore,  and
          (ii) make  payment or  provision  for payment for the shares of Common
          Stock as purchased in accordance  with this  Paragraph 8. Such written
          notice  may be  given  by  means  of a  facsimile  transmission.  If a
          facsimile  transmission  is used,  the Option  holder  should mail the
          original  executed  copy  of the  written  notice  to the  Corporation
          promptly thereafter.

          (b) Payment or provision for payment shall be made as follows:

                (i) The Option  holder shall deliver to the  Corporation  at the
                address set forth in subparagraph 8(a) United States currency in
                an amount equal to the aggregate purchase price of the shares of
                Common Stock as to which such exercise relates; or

                (ii) The Option holder shall tender to the Corporation shares of
                Common Stock already  owned by the Option holder that,  together
                with any cash tendered therewith,  have no aggregate fair market
                value  (determined  based on the Fair Market Value of a share of
                Common  Stock on the date the notice  set forth in  subparagraph
                8(a) is  received  by the  Corporation)  equal to the  aggregate
                purchase  price of the  shares of Common  Stock as to which such
                exercise relates; or

                (iii) The Option  holder  shall  deliver to the  Corporation  an
                exercise  notice  together with  irrevocable  instructions  to a
                broker to deliver promptly to the Corporation the amount of sale
                or loan proceeds  necessary to pay the aggregate  purchase price
                of the shares of Common Stock as to which such exercise  relates
                and to sell  the  shares  of  Common  Stock  to be  issued  upon
                exercise  of the  Option and  deliver  the cash  proceeds,  less
                commission and brokerage fees to the

                                       8
Option holder or to deliver the remaining shares of Common Stock
                to the Option holder.

          Notwithstanding the foregoing provisions,  the Committee and the Board
          of Directors,  in granting Options pursuant to the Plan, may limit the
          methods in which an Option may be  exercised  by any  person  and,  in
          processing any purported exercise of an Option granted pursuant to the
          Plan,  may refuse to recognize the method of exercise  selected by the
          Option  holder  (other  than  the  method  of  exercise  set  forth in
          subparagraph 8(b)(i)).

          (c) In addition to the  alternative  methods of exercise  set forth in
          paragraph  8(b),  holders  of  Nonqualified  Stock  Options  shall  be
          entitled,  at or prior to the time the written notice  provided for in
          subparagraph  8(a) is delivered to the  Corporation,  to elect to have
          the  Corporation  withhold  from  the  shares  of  Common  Stock to be
          delivered upon exercise of the  Nonqualified  Stock Option that number
          of shares of Common Stock  (determined  based on the Fair Market Value
          of a share  of  Common  Stock  on the date  the  notice  set  forth in
          subparagraph 8(a) is received by the Corporation) necessary to satisfy
          any withholding taxes attributable to the exercise of the Nonqualified
          Stock  Option.  Alternatively,  such  holder of a  Nonqualified  Stock
          Option may elect to deliver  previously  owned  shares of Common Stock
          upon  exercise  of  the  Nonqualified  Stock  Option  to  satisfy  any
          withholding  taxes  attributable  to the exercise of the  Nonqualified
          Stock  Option.  If  the  Board  of  Directors  does  not  include  any
          provisions  relating to this  withholding  feature in its  resolutions
          granting the Nonqualified Stock Option or in the Option Agreement. The
          maximum  amount that an Option  holder may elect to have withheld from
          the shares of Common Stock otherwise  deliverable upon exercise or the
          maximum number of previously owned shares in Option holder may deliver
          shall  be  equal  to  the  minimum  federal  and  state   withholding.
          Notwithstanding the foregoing  provisions,  the Committee or the Board
          of Directors may include in the Option Agreement  relating to any such
          Nonqualified  Stock  Option  provisions  limiting or  eliminating  the
          Option  holder's  ability to pay his  withholding  tax obligation with
          shares of Common Stock;  or if no such  provisions are included in the
          Option Agreement,  but in the opinion of the Committee or the Board of
          Directors  such  withholding  would have an adverse tax or  accounting
          effect to the Corporation, at or prior to exercise of the Nonqualified
          Stock  Option the  Committee  or the Board of  Directors  may limit or
          eliminate  the  Option  holder's  ability to pay his  withholding  tax
          obligation with shares of Common Stock.  Notwithstanding the foregoing
          provisions, a holder of Nonqualified Stock Option may not elect any of
          the methods of satisfying his withholding tax obligation in respect of
          any exercise if, in the opinion of counsel to the  Corporation,  there
          is a  substantial  likelihood  that  the  election  or  timing  of the
          election  would

                                       9
subject the holder to a substantial risk of liability under Section 16
          of the Exchange Act.

          (d) An Option  holder at any time may elect in  writing  to abandon an
          Option  in  respect  of all or part of the  number of shares of Common
          Stock as to which the Option shall not have been exercised.

          (e) An Option holder shall have none of the rights of a stockholder of
          the Corporation until the shares of Common Stock covered by the Option
          are issued to him upon exercise of the Option.

9.    Deferred Shares

          (a)  Elections  to  Defer.  The  Committee  may at any time  allow any
          Participant  (or  Participants)  who  is a  member  of  the  Board  of
          Directors,  or a member  of a select  group of  management  or  highly
          compensated employees (within the meaning of the Employees' Retirement
          Income Security Act of 1973, with each such individual  being referred
          to herein  as a  "Participant")  may  irrevocably  elect,  on the form
          attached  hereto as  Exhibit A (the  "Election  Form"),  to forego the
          receipt  of  cash  compensation  and  in  lieu  thereof  to  have  the
          Corporation credit Deferred Shares to the Participant's Account with a
          Fair Market Value equal to the  compensation  deferred.  Each Election
          Form shall take effect five  business  days after its  delivery to the
          Committee,  unless in the meantime the Committee sends the Participant
          a  written  notice  explaining  why  the  Election  Form  is  invalid.
          Notwithstanding  the  foregoing  sentence,  Election  Forms  shall  be
          ineffective with respect to any compensation  that a Participant earns
          before the date on which the Committee receives the Election Form.

          (b) Vesting.  Deferred Shares shall be 100% vested at all times.

          (c)  Recordkeeping;  Cash Earnings on Deferred  Shares.  The Committee
          shall  establish  and  maintain  an  individual   account  (the  "Cash
          Account") in the name of each  Participant who files an Election Form.
          On the last day of each fiscal quarter,  the Corporation  shall credit
          to the  Participant's  Cash  Account  any cash  dividends  paid on the
          balance of Deferred Shares credited to the Participant's  Account.  On
          the last day of each fiscal  year of the  Corporation,  the  Committee
          shall  credit to the  Participant's  Account  Deferred  Shares  with a
          Market  Value equal to the balance of the  Participant's  Cash Account
          (without  regard  to  fractional  shares),  and  the  balance  of  the
          Participant's  Cash  Account  shall be reduced to zero.  The  Trustees
          shall hold each  Participant's  Deferred Shares until  distribution is
          required pursuant to subsection (d) hereof.

                                       10
(d) Distributions of Deferred Shares and Earnings.  The Trustees shall
          distribute a Participant's Deferred Shares in five substantially equal
          annual  installments  that are paid before the last day of each of the
          five fiscal years of the Corporation  that end after the date on which
          the   Participant's   Continuous   Service   terminates,   unless  the
          Participant has properly elected a different form of distribution,  on
          the form (the "Distribution Election Form") approved by the Committee,
          and the Committee has received the Participant's Distribution Election
          Form  either more than 90 days before a Change in Control or more than
          one year before the date on which the Participant's Continuous Service
          terminates for any reason. Fractional Shares shall not be distributed.

          (e) Hardship  Withdrawals.  Notwithstanding any other provision of the
          Plan or a  Participant's  Election Form, in the event the  Participant
          suffers an  unforeseeable  hardship within the  contemplation  of this
          Section,  the  Participant may apply to the Committee for an immediate
          distribution of all or a portion of his Deferred Shares.  The hardship
          must  result from a sudden and  unexpected  illness or accident of the
          Participant  or a  dependent  of the  Participant,  casualty  loss  of
          property,  or other  similar  conditions  beyond  the  control  of the
          Participant.  Examples of purposes which are not considered  hardships
          include  post-secondary  school  expenses  or the desire to purchase a
          residence.  In no event will a distribution  be made to the extent the
          hardship could be relieved  through  reimbursement  or compensation by
          insurance  or  otherwise,  or  by  liquidation  of  the  Participant's
          nonessential  assets to the extent such  liquidation  would not itself
          cause a severe  financial  hardship.  The  amount of any  distribution
          hereunder  shall be  limited to the amount  necessary  to relieve  the
          Participant's  financial  hardship.  The  determination  of  whether a
          Participant  has a qualifying  hardship and the amount which qualifies
          for  distribution,  if any, shall be made by the Committee in its sole
          discretion.  The  Committee  may  require  evidence of the purpose and
          amount  of the  need,  and may  establish  such  application  or other
          procedures as it deems appropriate.

          (e) Rights to Deferred Shares. A Participant may not assign his or her
          claim to Deferred  Shares during his or her lifetime.  A Participant's
          right to Deferred  Shares shall at all times  constitute  an unsecured
          promise of the Corporation to pay benefits as they come due. The right
          of the  Participant  or his or her  beneficiary  to  receive  benefits
          hereunder  shall be solely an  unsecured  claim  against  the  general
          assets of the  Corporation.  Neither  the  Participant  nor his or her
          beneficiary  shall have any claim  against  or rights in any  specific
          assets, shares, or other funds of the Corporation.

                                       11
10.   Restricted Share Awards

          (a)  Grants.   The  Committee  shall  have  the  discretion  to  grant
          Restricted  Share  Awards to  Employees  and  members  of the Board of
          Directors.  As promptly as practicable  after a determination  is made
          that a  Restricted  Share  Award is to be made,  the  Committee  shall
          notify the  Participant  in  writing  of the grant of the  Award,  the
          number of Shares  covered by the  Award,  and the terms upon which the
          Shares  subject  to the  Award  may be  earned.  The date on which the
          Committee so notifies the Participant  shall be considered the date of
          grant of the  Restricted  Share Awards.  The Committee  shall maintain
          records as to all grants of Restricted Share Awards under the Plan.

          (b) Earning Shares. Unless the Committee  specifically  eliminates any
          vesting  schedule in an Agreement  granting a Restricted  Share Award,
          Shares  subject to Restricted  Share Awards shall be earned and become
          non-forfeitable by a Participant  according to the following schedule,
          provided the  Participant  is an Employee or Director on the scheduled
          vesting date:

                                          Vested Percentage
               Years of Service        (applied to Restricted
               ----------------               Shares)
                                              -------

                  Less than 1                     0%
                       1                         25%
                       2                         50%
                       3                         75%
                   4 or More                     100%

       Notwithstanding   the  foregoing  and  unless  otherwise  provided  in  a
   Participant's  Restricted Stock Award,  each Participant  shall become (100%)
   vested  immediately (i) upon termination of the Participant's  service due to
   the  Participant's  disability or death,  or (ii) upon a Change in Control of
   the Corporation.

    (c)Accrual  of  Dividends.  Whenever  Shares  are paid to a  Participant  or
    Beneficiary  under Section 11(d), such Participant or Beneficiary shall also
    be entitled to receive,  with respect to each Share paid, an amount equal to
    any cash  dividends  (including  special large and  nonrecurring  dividends,
    including   one  that  has  the  effect  of  a  return  of  capital  to  the
    Corporation's  stockholders) and a number of shares of Common Stock equal to
    any stock  dividends,  declared  and paid with  respect to a share of Common
    Stock  between the date the relevant  Restricted  Share Award was  initially
    granted to such  Participant and the date the Shares are being  distributed.
    There shall

                                       12
also be  distributed  an  appropriate  amount of net earnings,  if any, with
    respect to any cash dividends so paid out.

    (d)Distribution of Shares.

                (i) Timing of  Distributions:  General Rule. Except as otherwise
                expressly  stated in this Plan, the Committee  shall  distribute
                Shares and  accumulated  cash from dividends and interest to the
                Participant or his  Beneficiary,  as the case may be, as soon as
                practicable  after they have been earned.  No fractional  shares
                shall be distributed.

                (ii) Form of  Distribution.  The Committee shall  distribute all
                Shares,  together with any shares  representing stock dividends,
                in the form of Common Stock.  One share of Common Stock shall be
                given  for  each  Share  earned.   Payments   representing  cash
                dividends (and earnings thereon) shall be made in cash.

                (iii)  Withholding.  The Committee  shall withhold from any cash
                payment  made  under this Plan  sufficient  amounts to cover any
                applicable  withholding and employment  taxes, and if the amount
                of such cash  payment is not  sufficient,  the  Committee  shall
                require the  Participant  or Beneficiary to pay to the Committee
                the amount  required to be withheld as a condition of delivering
                the Shares.  The Committee  shall pay over to the Corporation or
                Affiliate  which employs or employed such  Participant  any such
                amount withheld from or paid by the Participant or Beneficiary.

                (iv)Regulatory   Exceptions.   No  Restricted  Shares  shall  be
                    distributed  unless and until all of the requirements of all
                    applicable  law  and  regulations   shall  have  been  fully
                    complied with, including the receipt of approval of the Plan
                    by the stockholders of the Corporation by such vote, if any,
                    as may be required by applicable law and regulations.

    (e)Voting  of Plan  Shares.  All  shares of Common  Stock  subject to Awards
    (whether or not subject to a  Restricted  Share Award) shall be voted by the
    Board in the manner directed by the Board.

    (f)Deferral  Elections.  At any time 12 months  prior to the date on which a
    Participant  becomes  vested in any shares  subject to his or her Restricted
    Share Award,  a Participant  who is a member of a select group of management
    or highly  compensated  employees  (within  the  meaning  of the  Employees'
    Retirement  Income Security Act of 1973) may irrevocably  elect, on the form
    (the "Election Form") approved by the Committee, to defer the receipt of all
    or a percentage  of the Shares that would  otherwise be  transferred  to the
    Participant upon the vesting of such

                                       13
Award.  If such an  election  is made,  the Shares  shall be credited to the
    Participant's  Account  as  Deferred  Shares on the date such  Shares  would
    otherwise have been distributed to the Participant.

11.   Amendments and Discontinuance of the Plan

      The Board of  Directors  shall have the right at any time and from time to
time to amend, modify, or discontinue the Plan provided that, except as provided
in subparagraph 6(c), no such amendment,  modification, or discontinuance of the
Plan shall (i) revoke or alter the terms of any valid Option previously  granted
pursuant to the Plan,  (ii)  increase  the number of share of Common Stock to be
reserved for issuance and sale pursuant to Options granted pursuant to the Plan,
(iii)  decrease the exercise  price  determined  pursuant to the  provisions  of
subparagraph  7(b), or (iv) provide for Options  exercisable  more than 10 years
after the date granted.

12.   Plan Subject to Governmental Laws and Regulations

      The Plan and the grant of Awards  pursuant to the Plan shall be subject to
all applicable  governmental  laws and  regulations.  Notwithstanding  any other
provision of the Plan to the  contrary,  the Board of Directors  may in its sole
and  absolute  discretion  make such  changes in the Plan as may be  required to
conform the Plan to such laws and regulations.

13.   Duration of the Plan

      No  Option  shall be  granted  pursuant  to the Plan  after  the  close of
business on March 23, 2010.

                                       14
EXHIBIT 5.1

                Opinion of Paul, Hastings, Janofsky & Walker LLP
  regarding the legality of the securities being registered by the Registrant.
Law Offices of
                       Paul, Hastings, Janofsky & Walker LLP
                          1299 Pennsylvania Avenue, NW
                               Washington DC 20004
                            Telephone (202) 508-6000
                            Facsimile (202) 508-9700

                                             April 9, 2001

Board of Directors
Annapolis National Bancorp, Inc.
1000 Bestgate Road, Suite 400
Annapolis, Maryland  21401

      Re:   Registration Statement on Form S-8
            ----------------------------------

Dear Board Members:

     We  have  acted  as  counsel  to  Annapolis  National  Bancorp,  Inc.  (the
"Company") in connection with the preparation of the  Registration  Statement on
Form S-8 filed with the Securities and Exchange  Commission  (the  "Registration
Statement")  under the Securities  Act of 1933, as amended,  relating to 200,000
shares of common  stock,  par value $0.01 per share (the "Common  Stock") of the
Company which may be issued pursuant to the Company's 2000 Stock Incentive Plan,
as such numbers of shares may be increased in  accordance  with said plan in the
event of a merger, consolidation, reorganization, liquidation, recapitalization,
stock dividend, stock split, or similar event involving the Registrant. You have
requested  the opinion of this firm with respect to certain legal aspects of the
proposed offering.

     We have  examined  such  documents,  records  and matters of law as we have
deemed  necessary for purposes of this opinion and based thereon,  we are of the
opinion that the Common Stock when issued pursuant to and in accordance with the
terms of the Plan will be legally issued, fully paid, and nonassessable.

     We hereby  consent  to the  filing of this  opinion  as an  exhibit  to the
Registration Statement on Form S-8.

                                       Very truly yours,

                                          /s/ J. Mark Poerio
                                          J. Mark Poerio, Esq.
                                    for Paul, Hastings, Janofsky & Walker LLP
EXHIBIT 23.1

                Consent of Paul, Hastings, Janofsky & Walker, LLP
                        (contained in Exhibit 5.1 hereof)
EXHIBIT 23.2

                         Consent of Rowles & Company LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

Annapolis National Bancorp, Inc.
Annapolis, Maryland

     We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report, dated January 20, 2001, appearing in the
annual report on Form 10-KSB of Annapolis National Bancorp, Inc. and Subsidiary
for the year ended December 31, 1999 and 1998

                                                /s/  Rowles & Company, LLP
                                                ROWLES & COMPANY LLP

Baltimore, Maryland
April 2, 2001
EXHIBIT 23.3

                          Consent of Stegman & Company
CONSENT OF INDEPENDENT AUDITORS

     We hereby consent to the incorporation by reference in this Form S-8 of
Annapolis National Bancorp, Inc. of our report dated January 26, 2001 relating
to the consolidated balance sheet of Annapolis National Bancorp, Inc. as of
December 31, 2000 and related statements of income, changes in stockholders'
equity and cash flows for the year then ended which are included in the 2000
Annual Report on Form 10-KSB.

Baltimore, Maryland
April 3, 2001

                                                /s/ Stegman & Company
EXHIBIT 99.1

                           Form of Stock Option Award
                            associated with the Plan
Annapolis National Bancorp, Inc.
                            2000 Stock Incentive Plan
                         ------------------------------

                          Stock Option Award Agreement
                         ------------------------------

     You are hereby  awarded  the  following  stock  option  (the  "Option")  to
purchase  Common Stock of Annapolis  National  Bancorp,  Inc.  (the  "Company"),
subject  to the  terms  and  conditions  set forth in this  Stock  Option  Award
Agreement  (this  "Award") and in the Company's  2000 Stock  Incentive Plan (the
"Plan"),  which is attached hereto as Exhibit A.  Capitalized  terms used herein
and not otherwise  defined herein shall have the meanings given to such terms in
Exhibit A.

1. Variable Terms.  The Option shall be controlled by and interpreted  according
to the following terms:

            Name of Optionee:             _____________________________

            Type of Stock Option:         |_| Incentive Stock Option ("ISO")(1)

                                          |_| Nonqualified Stock Option

         Number of Shares subject to
         Award:                            _____________________________

         Option Exercise Price per         $                          (2)
         Share:                            _____________________________

         Date of Award:
                                           _____________________________

         Expiration Date:                 |_| 5 years after Date of Award(2)

                                          |_| 10 years after Date of Award

----------
1 ISOs may only be granted to employees.

2 ISO granted to an employee  who owns more than 10% of the voting  power of all
classes of stock of the Company  may not have a term  exceeding 5 years and must
have an  exercise  price  not less  than  110% of the fair  market  value of the
underlying shares on the grant date.
Vesting Schedule:

         --------------------------------------------------------------
                Vested Percentage               Years of Service
                                                after Award Date
         --------------------------------------------------------------
                        0%                        Less than 1
         --------------------------------------------------------------
                                                       1
         --------------------------------------------------------------
                                                       2
         --------------------------------------------------------------
                                                       3
         --------------------------------------------------------------
                                                       4
         --------------------------------------------------------------
                                                       5
         --------------------------------------------------------------

2. Term of Option.  The term of the Option will expire at 5:00 p.m.  (E.D.T.  or
E.S.T., as applicable) on the above-mentioned anniversary of the Date of Award.

3. Right to Exercise. The amount of Shares for which the Option may be exercised
is  cumulative;  that is, if the  Optionee  fails to exercise  all of the Shares
subject to the Option during any period set forth above, then any Shares subject
to the Option that were not exercised during such period may be exercised during
any subsequent period, until the termination of the Option pursuant to Section 2
of this Award and the terms of the Plan.

4.  Premature  Disposition  of an ISO. If the Option is an ISO and the  Optionee
sells or otherwise  disposes of Shares  acquired upon its exercise within 1 year
from the date such Shares were  acquired or 2 years from the Date of Award,  the
Optionee  agrees that the Optionee will deliver a written  report to the Company
within 10 days following the sale or other  disposition of such Shares detailing
the net proceeds of such sale or disposition.

5. Manner of Exercise of the Option. The Option shall be exercised in the manner
set forth in the Plan.

6.  Termination  of  Continuous  Service.  In all  events  where the  Optionee's
Continuous  Service to the  Company is  terminated,  the Option  (including  the
vesting periods set forth in the schedule above) shall be governed by the Plan.

7. Subject to Plan. This Option is subject to all of the terms and conditions of
the Plan, and by executing this Award, the Optionee agrees to be bound by all of
the  Plan's  terms and  conditions  as if it had been set out  verbatim  in this
Award. In addition,  the Optionee recognizes and agrees that all determinations,
interpretations  or other actions  respecting the Plan may be made by a majority
of the Board or of the Committee, and that such determinations,  interpretations
or other actions are final,  conclusive and binding upon all parties,  including
the Optionee, his or her heirs, and representatives.

8.  Designation  of  Beneficiary.   Notwithstanding  anything  to  the  contrary
contained  herein or in the Plan,  following  the  execution of this Award,  the
Optionee may expressly designate a beneficiary (the "Beneficiary") to his or her
interest  in the  Option  awarded  hereby.  The  Optionee  shall  designate  the
Beneficiary by completing  and executing a designation of beneficiary  agreement
substantially  in the form  attached  hereto as Exhibit B (the  "Designation  of
Beneficiary")  and delivering an executed copy of the Designation of Beneficiary
to the Company.

9. Notices.  Any notice,  payment or  communication  required or permitted to be
given by any  provision of this Award shall be in writing and shall be delivered
personally or sent by certified  mail,  return receipt  requested,  addressed as
follows:  (i) if to the Company,  at 1000 Bestgate Road,  Suite 400,  Annapolis,
Maryland 21401  (attention:  2000 Stock  Incentive Plan  Committee);  (ii) if to
Optionee,  at the address set forth below his or her  signature on the signature
page  hereto.  Each party may,  from time to time,  by notice to the other party
hereto,  specify a new address for delivery of notices to such party  hereunder.
Any such notice  shall be deemed to be  delivered,  given,  and received for all
purposes as of the date such notice is received or properly mailed.

10. Binding Effect.  Except as otherwise  provided in this Award or in the Plan,
every  covenant,  term,  and  provision  of this Award shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs, legatees,
legal representatives, successors, transferees, and assigns.

11.  Headings.  Section  and  other  headings  contained  in this  Award are for
reference purposes only and are not intended to describe,  interpret,  define or
limit the scope or intent of this Award or any provision hereof.

12.  Severability.  Every provision of this Award and of the Plan is intended to
be  severable.  If any term hereof is illegal or invalid  for any  reason,  such
illegality  or  invalidity  shall not affect the  validity  or  legality  of the
remaining terms of this Award.

13.  Governing  Law. The laws of the State of Maryland shall govern the validity
of this Award,  the  construction of its terms,  and the  interpretation  of the
rights and duties of the parties hereto.

14.  Counterparts.  This Award may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute one and the same instrument.
BY  YOUR  SIGNATURE  BELOW,  along  with  the  signature  of the  Company's
representative,  you and the Company  agree that the Option is awarded under and
governed by the terms and conditions of this Award and the Plan.

                  Annapolis National Bancorp, Inc.

                  By: _________________________________   Date:_______________
                      An authorized member of the
                      Annapolis National Bancorp, Inc.
                      2000 Stock Incentive Plan Committee

               The  undersigned  Optionee hereby accepts the terms of this Award
               and the Plan.

                  By: _________________________________   Date:_______________
                  Name of Optionee
                  Address:
                  ---------------------------------------------------------

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

                  ---------------------------------------------------------
Exhibit A
                                  ------------

           Annapolis National Bancorp, Inc. 2000 Stock Incentive Plan
ANNAPOLIS NATIONAL BANCORP, INC.
                            2000 STOCK INCENTIVE PLAN

1.    Purpose

      The proper execution of the duties and  responsibilities of the directors,
executives,   and   employees  of  Annapolis   National   Bancorp,   Inc.   (the
"Corporation")  and its  subsidiaries is a vital factor in the continued  growth
and success of the Corporation.  Toward this end, it is necessary to attract and
retain  effective and capable  individuals to assume  positions that  contribute
materially to the successful  operation of the business of the  Corporation  and
its  subsidiaries.  It will  benefit  the  Corporation,  therefore,  to bind the
interests of these persons more closely to its own interests by offering them an
attractive  opportunity to acquire a proprietary interest in the Corporation and
thereby  provide  them with  added  incentive  to remain in the  service  of the
Corporation and its  subsidiaries  and to increase the prosperity,  growth,  and
earnings of the  Corporation.  This stock option plan is intended to serve these
purposes.

2.    Definitions

      The following terms wherever used herein shall have the meanings set forth
below.

          (a) The  term  "Awards"  shall  mean  Options,  Deferred  Shares,  and
              Restricted Share Awards, collectively.

          (b) The term "Board of Directors" shall mean the Board of Directors of
              the Corporation.

          (c) The term  "Change  in  Control  of the  Corporation"  shall mean a
              change  in  control  of a  nature  that  would be  required  to be
              reported in response  to Item 6(c) of Schedule  14A of  Regulation
              14A  promulgated  under  the  Exchange  Act,  whether  or not  the
              Corporation  is in fact  required  to comply  therewith,  provided
              that, without limitation, such a change in control shall be deemed
              to have  occurred  if (A) any  "person"  (as such  term is used in
              Section 13(d) and 14(d) of the Exchange Act), other than a trustee
              or other fiduciary  holding  securities  under an employee benefit
              plan  of  the  Corporation  or  any  of  its   subsidiaries  or  a
              corporation owned, directly or indirectly,  by the stockholders of
              the  Corporation  in  substantially  the same  proportions  as the
              ownership  of Common  Stock of the  Corporation,  and  other  than
              Lawrence E. Lerner or any member or members of this family,  is or
              becomes the "beneficial owner" (as defined in Rule 13d-3 under the
              Exchange  Act),  directly  or  indirectly,  of  securities  of the
              Corporation  representing 20% or more of the combined voting
power of the Corporation's then outstanding securities; (B) during
              any  period of two  consecutive  years (not  including  any period
              prior  to  the  adoption  of  the  Plan)  individuals  who  at the
              beginning of such period constitute the Board and any new director
              (other than a director designated by a person who has entered into
              an  agreement  with  the   Corporation  to  affect  a  transaction
              described in clauses (A) or (B) of this definition) whose election
              by the Board or  termination  for  election  by the  Corporation's
              stockholders  was approved by a vote of at least two-thirds of the
              directors  then still in office who either were  directors  at the
              beginning  of the  period  or whose  election  or  nomination  for
              election  was  previously  so  approved,  cause for any  reason to
              constitute  a majority of the Board;  (C) the  Corporation  enters
              into an agreement,  the  consummation of which would result in the
              occurrence  of a Change in  Control  of the  Corporation;  (D) the
              stockholders of the Corporation  approve a merger,  share exchange
              or consolidation  of the Corporation  with any other  corporation,
              other than a merger,  share exchange or  consolidation  that would
              result in the voting  securities of the  Corporation,  outstanding
              immediately prior thereto held by Lawrence E. Lerner or any member
              or  members  of his  family  continuing  to  represent  (either by
              remaining outstanding or by being converted into voting securities
              of the surviving entity) at least 50% of the combined voting power
              of the voting  securities  of the  Corporation  or such  surviving
              entity outstanding  immediately after such merger,  share exchange
              or consolidation, or the stockholders of the Corporation approve a
              plan of complete  liquidation of the Corporation or any agreements
              for  the  sale  of  disposition  by  the  Corporation  of  all  or
              substantially all the Corporation's assets.

          (d) The term "Code" shall mean the Internal  Revenue Code of 1986,  as
              amended, and any regulations promulgated thereunder.

          (e) The term "Committee" shall mean a committee to be appointed by the
              Board of  Directors  to consist of three or more  members,  all of
              whom are members of the Board of Directors  and are  "non-employee
              directors" within the meaning of Rule 16-3 under the Exchange Act.

          (f) The term "Common Stock" shall mean the shares of common stock, par
              value $0.01 per share, of the Corporation.

          (g) The term  "Corporation"  shall mean  Annapolis  National  Bancorp,
              Inc., a Maryland corporation.

          (h) The term "Deferred  Shares" shall mean Shares that the Company has
              credited,   pursuant  to   Paragraph  9  hereof,   to  a  deferred
              compensation account in the name of a Participant.

                                       2
(i) The term "Exchange Act" shall mean the Securities  Exchange Act of
              1934, as amended.

          (j) The term "Fair  Market  Value"  shall mean the then  current  fair
              market value of Common  Stock,  as determined in good faith by the
              Committee and in a manner  consistent  with the rules set forth in
              Treas. Reg. Section 20.2031-2.

          (k) The term  "Incentive  Stock Option"  shall mean an Option  granted
              pursuant  to the Plan that is  designated  as an  Incentive  Stock
              Option and which  satisfies the  requirements of Section 422(b) of
              the Code.

          (l) The term "Nonqualified  Stock Option" shall mean an Option granted
              pursuant to the Plan that is not an Incentive Stock Option.

          (m) The term  "Option" or "Stock  Option"  shall mean a right  granted
              pursuant to the Plan to purchase shares of Common Stock, and shall
              include the terms  Incentive Stock Option and  Nonqualified  Stock
              Option.

          (n) The term  "Option  Agreement"  shall  mean the  written  agreement
              representing  Options granted pursuant to the Plan as contemplated
              by Paragraph 7 of the Plan.

          (o) The term "Plan" shall mean the Annapolis  National  Bancorp,  Inc.
              2000 Stock Incentive Plan as approved by the Board of Directors on
              March 24, 2000, as the same may be amended from time to time.

          (p) The term "Restricted Share Award" shall mean a right granted under
              Section 10 of this Plan to receive Shares.

          (q) The term "subsidiary" or  "subsidiaries"  shall mean a corporation
              of  which  capital  stock  possessing  50% or  more  of the  total
              combined voting power of all classes of its capital stock entitled
              to vote  generally  in the  election of  directors is owned to the
              aggregate by the Corporation directly or indirectly through one or
              more subsidiaries.

3.    Effective Date of the Plan

      The Plans shall become effective upon stockholder approval,  provided that
such approval is received  before March 24, 2001, and provided  further that the
Board of Directors may grant Options  pursuant to the Plan prior to  stockholder
approval  if  such  Options  by  their  terms  are  contingent  upon  subsequent
stockholder approval of the Plan.

                                       3
4.    Administration

          (a) The Plan shall be administered by the Committee, provided that the
          Board  may act in lieu  of the  Committee  on any  matter  within  the
          Committee's discretion or authority.

          (b) The  Committee  may  establish,  from time to time and at any time
          subject to the limitations of the Plan as set forth herein, such rules
          and  regulations  and amendments and  supplements  thereto as it deems
          necessary to comply with  applicable  law and  regulation  and for the
          proper  administration  of the Plan.  A majority of the members of the
          Committee  shall  constitute  a quorum.  The vote of a  majority  of a
          quorum shall constitute action by the Committee.

          (c) The  Committee  shall  from  time to time  submit  to the Board of
          Directors  for its  approval  the  names of those  executives  and key
          employees  who, in its  opinion,  should  receive  Options,  and shall
          recommend the numbers of shares on which Options  should be granted to
          each such person and the nature of the Options to be granted.

          (d)  Options  shall be  granted  by the  Committee  and  shall  become
          effective  only after  execution  of an Option  Agreement  between the
          Corporation and the Option holder.

          (e) The Commission's interpretation and construction of the provisions
          of the Plan and the rules and  regulations  adopted by the  Commission
          shall be final, unless otherwise determined by the Board of Directors.
          No member of the  Committee or the Board of Directors  shall be liable
          for my action or  determination  made, in respect of the Plan, in good
          faith.

5.    Participation in the Plan

          (a)  Participants  in the Plan shall be limited to the  employees  and
          directors  of the  Corporation  and  its  subsidiaries  who  shall  be
          designated by the Committee.

          (b) No member of the Board of Directors  who is also an officer of the
          Corporation shall be eligible to serve on the Committee.

6.    Stock Subject to the Plan

          (a) There shall be reserved for the granting of Awards pursuant to the
          Plan and for issuance and sale pursuant to such Awards  200,000 shares
          of Common  Stock.  To  determine  the number of shares of Common Stock
          available  at any time for the  granting  of  Awards,  there  shall be
          deducted from

                                       4
the total  number of reserved  shares of Common  Stock,  the number of
          shares of Common  Stock in respect of which  Awards have been  granted
          pursuant  to  the  Plan  that  are  still  outstanding  or  have  been
          exercised.  The shares of Common  Stock to be issued upon the exercise
          or vesting of Awards shall be made  available  from the authorized and
          unissued  shares of Common  Stock.  If for any reason shares of Common
          Stock as to which an Award has been  granted  cease to be  subject  to
          purchase or delivery to Award holders thereunder,  then such shares of
          Common  Stock again shall be available  for  issuance  pursuant to new
          Awards.

          (b)  Proceeds  from the  purchase  of shares of Common  Stock upon the
          exercise of Options granted pursuant to the Plan shall be used for the
          general business purposes of the Corporation.

          (c) In the event of the reorganization, recapitalization, stock split,
          stock  dividend,  combination  of  shares  of  Common  Stock,  merger,
          consolidation, share exchange acquisition of property of stock, or any
          change in the capital  structure  of the  Corporation,  the  Committee
          shall make such adjustments as may be equitable and appropriate in the
          number and kind of shares  reserved  for  purchases by  executives  or
          other key employees,  in the number,  kind and price of shares covered
          by Awards granted pursuant to the Plan and then outstanding.

7.    Terms and Conditions of Options

          (a) Each Option granted  pursuant to the Plan shall be evidenced by an
          Option  agreement in such form as the Committee  from time to time may
          determine.

          (b) The exercise  price per share for Options shall be  established by
          the Board of Directors upon the recommendation of the Committee at the
          time of the  grant of  Options  pursuant  to the Plan and shall not be
          less than the Fair Market Value of a share of Common Stock on the date
          on which the Option is  granted.  If the Board of  Directors  does not
          establish  a specific  exercise  price per share at the time of grant,
          the  exercise  price per share shall be equal to the Fair Market Value
          of a share of Common Stock on the date of grant of the Options.

          (c) Each  Option,  subject to the other  limitations  set forth in the
          Plan, may extend for a period of up to 10 years from the date on which
          it is granted.  The term of each  Option  shall be  determined  by the
          Board of Director at the time of grant of the Option, provided that if
          no term is  established  by the  Board  of  Directors  the term of the
          Option shall be 10 years from the date on which it is granted.

                                       5
(d) The Board of Directors upon  recommendation of the Committee,  may
          provide in the Option Agreement that the right to exercise each Option
          for the number of shares  subject to each Option  shall  vest,  in the
          Option  holder  over  such  period  of time as the  Committee,  in its
          direction, shall determine for each Option holder. Notwithstanding the
          foregoing,   each  Option  Agreement  shall  provide  that,  upon  the
          occurrence of a Change in Control of the Corporation, all Options then
          outstanding shall become immediately exercisable.

          (e) Options shall be nontransferable  and  nonassignable,  except that
          Options may be transferred by  testamentary  instrument or by the laws
          of descent and  distribution,  and  Nonqualified  Stock Options may be
          transferred  to  family  members  or  family  trusts,  subject  to the
          original terms of the Option.

          (f) Unless the Committee  specifies  otherwise in an Option agreement,
          upon  voluntary  or  involuntary  termination  of an  Option  holder's
          service with the  Corporation,  his Options and all rights  thereunder
          shall  terminate  effective  at the close of  business on the date the
          Option holder ceases to be a Director of regular,  full-time  employee
          of the  Corporation  or any of  its  subsidiaries,  except  (i) to the
          extent previously exercised and (ii) as provided in subparagraphs (g),
          (h) and (i) of this Paragraph 7.

          (g) In the event an Option  holder (i) takes a leave of  absence  from
          the Corporation or any of its  subsidiaries for personal reasons or as
          a result of entry into the armed forces of the United  States,  or any
          of the  departments  or agencies of the United States  government,  or
          (ii) terminates his employment,  or ceases  providing  services to the
          Corporation  or  any  of  its   subsidiaries,   by  reason  of  death,
          disability,  voluntary  termination with the consent of the Committee,
          or other  special  circumstances,  the Committee may consider his case
          and may take such action in respect of the related Option Agreement as
          it  may  deem   appropriate   under   the   circumstances,   including
          accelerating  the time previously  granted for Options to be exercised
          and extending the time  following the Option  holder's  termination of
          active  employment  or  service  during  which  the  Option  holder is
          entitled  to  purchase  the  shares of Common  Stock  subject  to such
          Options,  provided that in no event may any Option be exercised  after
          the expiration of the time of the Option.

          (h) If an Option  holder  dies  during the term of his Option  without
          having fully exercised this Option,  the executor or  administrator of
          his estate or the person who inherits the right to exercise the Option
          by bequest or inheritance shall have the right within two years of the
          Option holder's death to purchase the number of shares of Common Stock
          that the deceased  Option  holder was entitled to purchase at the date
          of his death, after which the Option shall

                                       6
lapse, provided that in no event may any Option be exercised after the
          expiration of the term of the Option.

          (i) If an Option holder terminates employment without his having fully
          exercised  his Option due to his  retirement  with the  consent of the
          Corporation,  then such  Option  holder  shall  have the right  within
          ninety (90) days of the Option  holder's  termination of employment or
          service  to  purchase  the  number of shares of Common  Stock that the
          Option holder was entitled to purchase at the date of his termination,
          after which the Option shall lapse,  provided that in no event may any
          Option be exercised  after the  expiration  of the term of the Option.
          The  Committee  may  cancel  the  Option  during the ninety day period
          referred  to  in  this  paragraph,   if  the  Participant  engages  in
          employment or activities  which, in the opinion of the Committee,  are
          contrary to the best interests of the Corporation. The Committee shall
          determine in each case whether a termination  of employment or service
          shall be considered a retirement with the consent of the  Corporation,
          and,  subject to  applicable  law,  whether a leave of  absence  shall
          constitute a termination of employment.  Any such determination of the
          Committee  shall be final  and  conclusive,  unless  overruled  by the
          Board.

          (j)  The  granting  of an  Option  pursuant  to  the  Plan  shall  not
          constitute or be evidence of any agreement or  understanding,  express
          or implied,  on the part of the Corporation or any of its subsidiaries
          to retain or employ the Option holder for any specified period.

          (k) In addition to the general terms and  conditions set forth in this
          Paragraph  7 in  respect  of  Options  granted  pursuant  to the Plan,
          Incentive Stock Options granted  pursuant to the Plan shall be subject
          to the following additional terms and conditions:

                (i)   "Incentive   Stock  Options"  shall  be  granted  only  to
                individuals  who,  at the  date  of  grant  of the  Option,  are
                employees of the Corporation or any of its subsidiaries;

                (ii) No  employee  who owns  beneficially  more  than 10% of the
                total  combined  voting  power  of all  classes  of stock of the
                Corporation  shall be eligible to be granted an "Incentive Stock
                Option;"

                (iii) The aggregate  fair market value  (determined  at the time
                the  Incentive  Stock Option is granted) of the shares of Common
                Stock  in  respect  of  which   "incentive  stock  options"  are
                exercisable  for the first time by the Option  holder during any
                calendar year (under all such plans of the  Corporation  and its
                subsidiaries) shall not exceed $100,000; and

                                       7
(iv) Any other terms and  conditions  specified  by the Board of
                Directors that are not inconsistent  with the Plan,  except that
                such  terms  and   conditions   must  be  consistent   with  the
                requirements  for "incentive stock options" under Section 422 of
                the Code.

8.    Methods of Exercise of Options

          (a) An Option holder (or other person or person,  if any,  entitled to
          exercise an Option  hereunder)  desiring to exercise an Option granted
          pursuant  to the Plan as to all or part of the shares of Common  Stock
          covered by the Option shall (i) notify the  Corporation  in writing as
          its principal  office at 1000  Bestgate  Road,  Suite 400,  Annapolis,
          Maryland  21401,  to that effect,  specifying  the number of shares of
          Common Stock to be purchased and the method of payment therefore,  and
          (ii) make  payment or  provision  for payment for the shares of Common
          Stock as purchased in accordance  with this  Paragraph 8. Such written
          notice  may be  given  by  means  of a  facsimile  transmission.  If a
          facsimile  transmission  is used,  the Option  holder  should mail the
          original  executed  copy  of the  written  notice  to the  Corporation
          promptly thereafter.

          (b) Payment or provision for payment shall be made as follows:

                (i) The Option  holder shall deliver to the  Corporation  at the
                address set forth in subparagraph 8(a) United States currency in
                an amount equal to the aggregate purchase price of the shares of
                Common Stock as to which such exercise relates; or

                (ii) The Option holder shall tender to the Corporation shares of
                Common Stock already  owned by the Option holder that,  together
                with any cash tendered therewith,  have no aggregate fair market
                value  (determined  based on the Fair Market Value of a share of
                Common  Stock on the date the notice  set forth in  subparagraph
                8(a) is  received  by the  Corporation)  equal to the  aggregate
                purchase  price of the  shares of Common  Stock as to which such
                exercise relates; or

                (iii) The Option  holder  shall  deliver to the  Corporation  an
                exercise  notice  together with  irrevocable  instructions  to a
                broker to deliver promptly to the Corporation the amount of sale
                or loan proceeds  necessary to pay the aggregate  purchase price
                of the shares of Common Stock as to which such exercise  relates
                and to sell  the  shares  of  Common  Stock  to be  issued  upon
                exercise  of the  Option and  deliver  the cash  proceeds,  less
                commission and brokerage fees to the

                                       8
Option holder or to deliver the remaining shares of Common Stock
                to the Option holder.

          Notwithstanding the foregoing provisions,  the Committee and the Board
          of Directors,  in granting Options pursuant to the Plan, may limit the
          methods in which an Option may be  exercised  by any  person  and,  in
          processing any purported exercise of an Option granted pursuant to the
          Plan,  may refuse to recognize the method of exercise  selected by the
          Option  holder  (other  than  the  method  of  exercise  set  forth in
          subparagraph 8(b)(i)).

          (c) In addition to the  alternative  methods of exercise  set forth in
          paragraph  8(b),  holders  of  Nonqualified  Stock  Options  shall  be
          entitled,  at or prior to the time the written notice  provided for in
          subparagraph  8(a) is delivered to the  Corporation,  to elect to have
          the  Corporation  withhold  from  the  shares  of  Common  Stock to be
          delivered upon exercise of the  Nonqualified  Stock Option that number
          of shares of Common Stock  (determined  based on the Fair Market Value
          of a share  of  Common  Stock  on the date  the  notice  set  forth in
          subparagraph 8(a) is received by the Corporation) necessary to satisfy
          any withholding taxes attributable to the exercise of the Nonqualified
          Stock  Option.  Alternatively,  such  holder of a  Nonqualified  Stock
          Option may elect to deliver  previously  owned  shares of Common Stock
          upon  exercise  of  the  Nonqualified  Stock  Option  to  satisfy  any
          withholding  taxes  attributable  to the exercise of the  Nonqualified
          Stock  Option.  If  the  Board  of  Directors  does  not  include  any
          provisions  relating to this  withholding  feature in its  resolutions
          granting the Nonqualified Stock Option or in the Option Agreement. The
          maximum  amount that an Option  holder may elect to have withheld from
          the shares of Common Stock otherwise  deliverable upon exercise or the
          maximum number of previously owned shares in Option holder may deliver
          shall  be  equal  to  the  minimum  federal  and  state   withholding.
          Notwithstanding the foregoing  provisions,  the Committee or the Board
          of Directors may include in the Option Agreement  relating to any such
          Nonqualified  Stock  Option  provisions  limiting or  eliminating  the
          Option  holder's  ability to pay his  withholding  tax obligation with
          shares of Common Stock;  or if no such  provisions are included in the
          Option Agreement,  but in the opinion of the Committee or the Board of
          Directors  such  withholding  would have an adverse tax or  accounting
          effect to the Corporation, at or prior to exercise of the Nonqualified
          Stock  Option the  Committee  or the Board of  Directors  may limit or
          eliminate  the  Option  holder's  ability to pay his  withholding  tax
          obligation with shares of Common Stock.  Notwithstanding the foregoing
          provisions, a holder of Nonqualified Stock Option may not elect any of
          the methods of satisfying his withholding tax obligation in respect of
          any exercise if, in the opinion of counsel to the  Corporation,  there
          is a  substantial  likelihood  that  the  election  or  timing  of the
          election  would

                                       9
subject the holder to a substantial risk of liability under Section 16
          of the Exchange Act.

          (d) An Option  holder at any time may elect in  writing  to abandon an
          Option  in  respect  of all or part of the  number of shares of Common
          Stock as to which the Option shall not have been exercised.

          (e) An Option holder shall have none of the rights of a stockholder of
          the Corporation until the shares of Common Stock covered by the Option
          are issued to him upon exercise of the Option.

9.    Deferred Shares

          (a)  Elections  to  Defer.  The  Committee  may at any time  allow any
          Participant  (or  Participants)  who  is a  member  of  the  Board  of
          Directors,  or a member  of a select  group of  management  or  highly
          compensated employees (within the meaning of the Employees' Retirement
          Income Security Act of 1973, with each such individual  being referred
          to herein  as a  "Participant")  may  irrevocably  elect,  on the form
          attached  hereto as  Exhibit A (the  "Election  Form"),  to forego the
          receipt  of  cash  compensation  and  in  lieu  thereof  to  have  the
          Corporation credit Deferred Shares to the Participant's Account with a
          Fair Market Value equal to the  compensation  deferred.  Each Election
          Form shall take effect five  business  days after its  delivery to the
          Committee,  unless in the meantime the Committee sends the Participant
          a  written  notice  explaining  why  the  Election  Form  is  invalid.
          Notwithstanding  the  foregoing  sentence,  Election  Forms  shall  be
          ineffective with respect to any compensation  that a Participant earns
          before the date on which the Committee receives the Election Form.

          (b) Vesting.  Deferred Shares shall be 100% vested at all times.

          (c)  Recordkeeping;  Cash Earnings on Deferred  Shares.  The Committee
          shall  establish  and  maintain  an  individual   account  (the  "Cash
          Account") in the name of each  Participant who files an Election Form.
          On the last day of each fiscal quarter,  the Corporation  shall credit
          to the  Participant's  Cash  Account  any cash  dividends  paid on the
          balance of Deferred Shares credited to the Participant's  Account.  On
          the last day of each fiscal  year of the  Corporation,  the  Committee
          shall  credit to the  Participant's  Account  Deferred  Shares  with a
          Market  Value equal to the balance of the  Participant's  Cash Account
          (without  regard  to  fractional  shares),  and  the  balance  of  the
          Participant's  Cash  Account  shall be reduced to zero.  The  Trustees
          shall hold each  Participant's  Deferred Shares until  distribution is
          required pursuant to subsection (d) hereof.

                                       10
(d) Distributions of Deferred Shares and Earnings.  The Trustees shall
          distribute a Participant's Deferred Shares in five substantially equal
          annual  installments  that are paid before the last day of each of the
          five fiscal years of the Corporation  that end after the date on which
          the   Participant's   Continuous   Service   terminates,   unless  the
          Participant has properly elected a different form of distribution,  on
          the form (the "Distribution Election Form") approved by the Committee,
          and the Committee has received the Participant's Distribution Election
          Form  either more than 90 days before a Change in Control or more than
          one year before the date on which the Participant's Continuous Service
          terminates for any reason. Fractional Shares shall not be distributed.

          (e) Hardship  Withdrawals.  Notwithstanding any other provision of the
          Plan or a  Participant's  Election Form, in the event the  Participant
          suffers an  unforeseeable  hardship within the  contemplation  of this
          Section,  the  Participant may apply to the Committee for an immediate
          distribution of all or a portion of his Deferred Shares.  The hardship
          must  result from a sudden and  unexpected  illness or accident of the
          Participant  or a  dependent  of the  Participant,  casualty  loss  of
          property,  or other  similar  conditions  beyond  the  control  of the
          Participant.  Examples of purposes which are not considered  hardships
          include  post-secondary  school  expenses  or the desire to purchase a
          residence.  In no event will a distribution  be made to the extent the
          hardship could be relieved  through  reimbursement  or compensation by
          insurance  or  otherwise,  or  by  liquidation  of  the  Participant's
          nonessential  assets to the extent such  liquidation  would not itself
          cause a severe  financial  hardship.  The  amount of any  distribution
          hereunder  shall be  limited to the amount  necessary  to relieve  the
          Participant's  financial  hardship.  The  determination  of  whether a
          Participant  has a qualifying  hardship and the amount which qualifies
          for  distribution,  if any, shall be made by the Committee in its sole
          discretion.  The  Committee  may  require  evidence of the purpose and
          amount  of the  need,  and may  establish  such  application  or other
          procedures as it deems appropriate.

          (e) Rights to Deferred Shares. A Participant may not assign his or her
          claim to Deferred  Shares during his or her lifetime.  A Participant's
          right to Deferred  Shares shall at all times  constitute  an unsecured
          promise of the Corporation to pay benefits as they come due. The right
          of the  Participant  or his or her  beneficiary  to  receive  benefits
          hereunder  shall be solely an  unsecured  claim  against  the  general
          assets of the  Corporation.  Neither  the  Participant  nor his or her
          beneficiary  shall have any claim  against  or rights in any  specific
          assets, shares, or other funds of the Corporation.

                                       11
10.   Restricted Share Awards

          (a)  Grants.   The  Committee  shall  have  the  discretion  to  grant
          Restricted  Share  Awards to  Employees  and  members  of the Board of
          Directors.  As promptly as practicable  after a determination  is made
          that a  Restricted  Share  Award is to be made,  the  Committee  shall
          notify the  Participant  in  writing  of the grant of the  Award,  the
          number of Shares  covered by the  Award,  and the terms upon which the
          Shares  subject  to the  Award  may be  earned.  The date on which the
          Committee so notifies the Participant  shall be considered the date of
          grant of the  Restricted  Share Awards.  The Committee  shall maintain
          records as to all grants of Restricted Share Awards under the Plan.

          (b) Earning Shares. Unless the Committee  specifically  eliminates any
          vesting  schedule in an Agreement  granting a Restricted  Share Award,
          Shares  subject to Restricted  Share Awards shall be earned and become
          non-forfeitable by a Participant  according to the following schedule,
          provided the  Participant  is an Employee or Director on the scheduled
          vesting date:

                                          Vested Percentage
               Years of Service        (applied to Restricted
               ----------------               Shares)
                                              -------

                  Less than 1                     0%
                       1                         25%
                       2                         50%
                       3                         75%
                   4 or More                     100%

       Notwithstanding   the  foregoing  and  unless  otherwise  provided  in  a
   Participant's  Restricted Stock Award,  each Participant  shall become (100%)
   vested  immediately (i) upon termination of the Participant's  service due to
   the  Participant's  disability or death,  or (ii) upon a Change in Control of
   the Corporation.

    (c)Accrual  of  Dividends.  Whenever  Shares  are paid to a  Participant  or
    Beneficiary  under Section 11(d), such Participant or Beneficiary shall also
    be entitled to receive,  with respect to each Share paid, an amount equal to
    any cash  dividends  (including  special large and  nonrecurring  dividends,
    including   one  that  has  the  effect  of  a  return  of  capital  to  the
    Corporation's  stockholders) and a number of shares of Common Stock equal to
    any stock  dividends,  declared  and paid with  respect to a share of Common
    Stock  between the date the relevant  Restricted  Share Award was  initially
    granted to such  Participant and the date the Shares are being  distributed.
    There shall

                                       12
also be  distributed  an  appropriate  amount of net earnings,  if any, with
    respect to any cash dividends so paid out.

    (d)Distribution of Shares.

                (i) Timing of  Distributions:  General Rule. Except as otherwise
                expressly  stated in this Plan, the Committee  shall  distribute
                Shares and  accumulated  cash from dividends and interest to the
                Participant or his  Beneficiary,  as the case may be, as soon as
                practicable  after they have been earned.  No fractional  shares
                shall be distributed.

                (ii) Form of  Distribution.  The Committee shall  distribute all
                Shares,  together with any shares  representing stock dividends,
                in the form of Common Stock.  One share of Common Stock shall be
                given  for  each  Share  earned.   Payments   representing  cash
                dividends (and earnings thereon) shall be made in cash.

                (iii)  Withholding.  The Committee  shall withhold from any cash
                payment  made  under this Plan  sufficient  amounts to cover any
                applicable  withholding and employment  taxes, and if the amount
                of such cash  payment is not  sufficient,  the  Committee  shall
                require the  Participant  or Beneficiary to pay to the Committee
                the amount  required to be withheld as a condition of delivering
                the Shares.  The Committee  shall pay over to the Corporation or
                Affiliate  which employs or employed such  Participant  any such
                amount withheld from or paid by the Participant or Beneficiary.

                (iv)Regulatory   Exceptions.   No  Restricted  Shares  shall  be
                    distributed  unless and until all of the requirements of all
                    applicable  law  and  regulations   shall  have  been  fully
                    complied with, including the receipt of approval of the Plan
                    by the stockholders of the Corporation by such vote, if any,
                    as may be required by applicable law and regulations.

    (e)Voting  of Plan  Shares.  All  shares of Common  Stock  subject to Awards
    (whether or not subject to a  Restricted  Share Award) shall be voted by the
    Board in the manner directed by the Board.

    (f)Deferral  Elections.  At any time 12 months  prior to the date on which a
    Participant  becomes  vested in any shares  subject to his or her Restricted
    Share Award,  a Participant  who is a member of a select group of management
    or highly  compensated  employees  (within  the  meaning  of the  Employees'
    Retirement  Income Security Act of 1973) may irrevocably  elect, on the form
    (the "Election Form") approved by the Committee, to defer the receipt of all
    or a percentage  of the Shares that would  otherwise be  transferred  to the
    Participant upon the vesting of such

                                       13
Award.  If such an  election  is made,  the Shares  shall be credited to the
    Participant's  Account  as  Deferred  Shares on the date such  Shares  would
    otherwise have been distributed to the Participant.

11.   Amendments and Discontinuance of the Plan

      The Board of  Directors  shall have the right at any time and from time to
time to amend, modify, or discontinue the Plan provided that, except as provided
in subparagraph 6(c), no such amendment,  modification, or discontinuance of the
Plan shall (i) revoke or alter the terms of any valid Option previously  granted
pursuant to the Plan,  (ii)  increase  the number of share of Common Stock to be
reserved for issuance and sale pursuant to Options granted pursuant to the Plan,
(iii)  decrease the exercise  price  determined  pursuant to the  provisions  of
subparagraph  7(b), or (iv) provide for Options  exercisable  more than 10 years
after the date granted.

12.   Plan Subject to Governmental Laws and Regulations

      The Plan and the grant of Awards  pursuant to the Plan shall be subject to
all applicable  governmental  laws and  regulations.  Notwithstanding  any other
provision of the Plan to the  contrary,  the Board of Directors  may in its sole
and  absolute  discretion  make such  changes in the Plan as may be  required to
conform the Plan to such laws and regulations.

13.   Duration of the Plan

      No  Option  shall be  granted  pursuant  to the Plan  after  the  close of
business on March 23, 2010.

                                       14
EXHIBIT 99.2

                         Form of Restricted Stock Award
                            associated with the Plan
Annapolis National Bancorp, Inc.
                            2000 Stock Incentive Plan
                         ------------------------------

                        Restricted Stock Award Agreement
                         ------------------------------

     Annapolis  National Bancorp,  Inc. (the "Company") hereby grants, as of the
Award  Date set  forth  below in  Section  1 hereto  (the  "Award  Date"),  this
restricted  stock award (this  "Award")  to the  Participant  named in Section 1
hereto pursuant to the Company's 2000 Stock  Incentive Plan (the "Plan"),  which
is attached hereto as Exhibit A.

     The  Participant  recognizes  that this Award is compensatory in nature and
accordingly subject to taxation as gross income under Section 83 of the Internal
Revenue Code of 1986, as that Section may be amended and  interpreted  from time
to time. The Participant  further recognizes that, unless the election described
in Section 5 is made,  taxation will occur whenever shares subject to this Award
(the "Restricted Shares") are delivered to the Participant.

     Capitalized  terms used  herein and not  otherwise  defined  shall have the
meanings given to such terms in Exhibit A.

1. Variable Terms.  This Award shall be controlled by and interpreted  according
to the following terms:

Name of Participant:                            _________________________

Award Date:                                     _________________________

Number of Restricted Shares Awarded to
Participant:                                    _________________________

Purchase Price of Restricted Shares (if         $
applicable):                                    _________________________

2. Vesting Schedule.  Subject to Sections 3 and 5 hereof,  the Participant shall
become vested in the Restricted  Shares and the  Restricted  Shares shall become
nonforfeitable according to the following schedule:

         ---------------------------------------------------------
              Vested Percentage            Years of Service
                                           after Award Date
         ---------------------------------------------------------
                     0%                      Less than 1
         ---------------------------------------------------------
                                                  1
         ---------------------------------------------------------
                                                  2
         ---------------------------------------------------------
                                                  3
         ---------------------------------------------------------
                                                  4
         ---------------------------------------------------------
                                                  5
         ---------------------------------------------------------
3. Restriction Period. The term "Restriction  Period" means that period from the
Award  Date  until the first to occur of (i) the  Participant's  termination  of
service,  (ii) the  Participant's  completion of four years of service after the
Award  Date,  or (iii) a Change in Control of the  Corporation.  Any  Restricted
Shares in which the  Participant  does not earn a vested  interest  during  this
period shall be forfeited at the end of the last day of the Restricted Period.

4.  Certain Tax  Matters.  Set forth below is a brief  summary of certain of the
federal income tax consequences of the Participant's receipt of this Award. THIS
SUMMARY IS PURPOSELY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO
CHANGE OR DIFFERENT INTERPRETATION.  ACCORDINGLY, THE PARTICIPANT SHOULD CONSULT
A TAX ADVISOR BEFORE ACCEPTING THIS GRANT.

     The Participant  acknowledges having been advised by the Company that he or
she will generally recognize income in an amount equal to the excess of the Fair
Market Value of the Restricted  Shares over the purchase price (if any) for such
Restricted  Shares  (as set forth in  Section 1 hereto).  The  Participant  will
recognize this income at the time the Restricted Shares become vested,  measured
with reference to the Fair Market Value of the  Restricted  Shares at such time,
unless,  pursuant to Section  83(b) of the  Internal  Revenue  Code (and similar
state tax provisions, if applicable), within thirty (30) days of the Award Date,
an  election  is filed by the  Participant  with the  Company  and the  Internal
Revenue Service in  substantially  the form attached hereto as Exhibit B and, if
necessary,  the proper state authorities,  to be taxed currently with respect to
the excess amount described in the first sentence of this paragraph.

     THE  PARTICIPANT  HEREBY  ASSUMES  ALL THE  RESPONSIBILITY  FOR FILING SUCH
ELECTION,  AND FOR PAYING ANY TAXES  RESULTING FROM RECEIPT OF THIS AWARD,  SUCH
ELECTION OR ANY RESTRICTED SHARES BECOMING VESTED SHARES HEREUNDER.

5.  Termination  of  Continuous  Service.  In  all  events  where  Participant's
Continuous Service to the Company is terminated, the effect on the Award granted
hereunder shall be governed by the Plan.

6. Voting and  Dividend  Rights.  With  respect to the  Restricted  Shares,  the
Company  has the right to vote such  Restricted  Shares  during the  Restriction
Period,  and  shall  accumulate  dividends  as they  are  accrue  in the form of
additional  Restricted  Shares that then have a fair  market  value equal to the
dividend accrued.

7.  Delivery  of   Restricted   Certificates   Following  End  of   Restriction.
Notwithstanding  anything to the contrary  contained herein or in the Plan, upon
the lapse and release from  restriction of the Restricted  Shares,  certificates
for such Shares shall be delivered to the  Participant  within 30 days after the
last day of the Restriction Period.

8.  Nontransferability.  Any Restricted Shares awarded under this Award shall be
subject to the restrictions on transferability as specified in the Plan.

9. Subject to Plan.  This Award is subject to all of the terms and conditions of
the Plan, and by executing this Award, the Participant acknowledges receipt of a
copy of the Plan and hereby
accepts and agrees to be bound by all of its terms and  conditions  as if it had
been set out verbatim in this Award. In addition, the Participant recognizes and
agrees that all determinations,  interpretations or other actions respecting the
Plan may be made by a majority of the Board or of the  Committee,  and that such
determinations,  interpretations  or other  actions  are final,  conclusive  and
binding  upon all  parties,  including  the  Participant,  his or her  heirs and
representatives.

10.  Designation  of  Beneficiary.  Notwithstanding  anything  to  the  contrary
contained  herein or in the Plan,  following  the  execution of this Award,  the
Participant may expressly  designate a beneficiary (the "Beneficiary") to his or
her  interest in the Award  granted  under this  Award.  The  Participant  shall
designate  the   Beneficiary  by  completing  and  executing  a  designation  of
beneficiary  agreement  substantially  in the form attached  hereto as Exhibit C
(the  "Designation  of  Beneficiary")  and  delivering  an executed  copy of the
Designation of Beneficiary to the Company at its main office.

11. Notices.  Any notice,  payment or communication  required or permitted to be
given by any  provision of this Award shall be in writing and shall be delivered
personally or sent by certified  mail,  return receipt  requested,  addressed as
follows:  (i) if to the Company,  at 1000 Bestgate Road,  Suite 400,  Annapolis,
Maryland 21401  (attention:  2000 Stock  Incentive Plan  Committee);  (ii) if to
Participant,  at the address set forth on the signature page hereto.  Each party
may,  from time to time,  by notice to the  other  party  hereto,  specify a new
address for delivery of notices to such party  hereunder.  Any such notice shall
be deemed to be delivered,  given,  and received for all purposes as of the date
such notice is received or properly mailed.

12. Binding Effect.  Except as otherwise  provided in this Award or in the Plan,
every  covenant,  term,  and  provision  of this Award shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs, legatees,
legal representatives, successors, transferees, and assigns.

13.  Headings.  Section  and  other  headings  contained  in this  Award are for
reference purposes only and are not intended to describe,  interpret,  define or
limit the scope or intent of this Award or any provision hereof.

14. Severability.  Every provision of this Award is intended to be severable. If
any term  hereof is  illegal or  invalid  for any  reason,  such  illegality  or
invalidity  shall not affect the validity or legality of the remaining  terms of
this Award.

15.  Governing  Law. The laws of the State of Maryland shall govern the validity
of this Award,  the  construction of its terms,  and the  interpretation  of the
rights and duties of the parties hereto.

16.  Counterparts.  This Award may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute one and the same instrument.
IN WITNESS  WHEREOF,  the parties  hereto have caused this Award to be duly
executed on the day and year first indicated above.

            ANNAPOLIS NATIONAL BANCORP, INC.

            By: _________________________________   Date:_______________
                An authorized member of the
                Annapolis National Bancorp, Inc.
                2000 Stock Incentive Plan Committee

            The  undersigned   Participant  hereby  accepts  the  terms  of this
            Award and the Plan.

            By: _________________________________   Date:_______________

            Name of Participant:_________________________________________

            Social Security Number:______________________________________

            Address:

            _________________________________________________________

            _________________________________________________________

            _________________________________________________________

                                       4
Exhibit A
                                  ------------

           Annapolis National Bancorp, Inc. 2000 Stock Incentive Plan
ANNAPOLIS NATIONAL BANCORP, INC.
                            2000 STOCK INCENTIVE PLAN

1.    Purpose

      The proper execution of the duties and  responsibilities of the directors,
executives,   and   employees  of  Annapolis   National   Bancorp,   Inc.   (the
"Corporation")  and its  subsidiaries is a vital factor in the continued  growth
and success of the Corporation.  Toward this end, it is necessary to attract and
retain  effective and capable  individuals to assume  positions that  contribute
materially to the successful  operation of the business of the  Corporation  and
its  subsidiaries.  It will  benefit  the  Corporation,  therefore,  to bind the
interests of these persons more closely to its own interests by offering them an
attractive  opportunity to acquire a proprietary interest in the Corporation and
thereby  provide  them with  added  incentive  to remain in the  service  of the
Corporation and its  subsidiaries  and to increase the prosperity,  growth,  and
earnings of the  Corporation.  This stock option plan is intended to serve these
purposes.

2.    Definitions

      The following terms wherever used herein shall have the meanings set forth
below.

          (a) The  term  "Awards"  shall  mean  Options,  Deferred  Shares,  and
              Restricted Share Awards, collectively.

          (b) The term "Board of Directors" shall mean the Board of Directors of
              the Corporation.

          (c) The term  "Change  in  Control  of the  Corporation"  shall mean a
              change  in  control  of a  nature  that  would be  required  to be
              reported in response  to Item 6(c) of Schedule  14A of  Regulation
              14A  promulgated  under  the  Exchange  Act,  whether  or not  the
              Corporation  is in fact  required  to comply  therewith,  provided
              that, without limitation, such a change in control shall be deemed
              to have  occurred  if (A) any  "person"  (as such  term is used in
              Section 13(d) and 14(d) of the Exchange Act), other than a trustee
              or other fiduciary  holding  securities  under an employee benefit
              plan  of  the  Corporation  or  any  of  its   subsidiaries  or  a
              corporation owned, directly or indirectly,  by the stockholders of
              the  Corporation  in  substantially  the same  proportions  as the
              ownership  of Common  Stock of the  Corporation,  and  other  than
              Lawrence E. Lerner or any member or members of this family,  is or
              becomes the "beneficial owner" (as defined in Rule 13d-3 under the
              Exchange  Act),  directly  or  indirectly,  of  securities  of the
              Corporation  representing 20% or more of the combined voting
power of the Corporation's then outstanding securities; (B) during
              any  period of two  consecutive  years (not  including  any period
              prior  to  the  adoption  of  the  Plan)  individuals  who  at the
              beginning of such period constitute the Board and any new director
              (other than a director designated by a person who has entered into
              an  agreement  with  the   Corporation  to  affect  a  transaction
              described in clauses (A) or (B) of this definition) whose election
              by the Board or  termination  for  election  by the  Corporation's
              stockholders  was approved by a vote of at least two-thirds of the
              directors  then still in office who either were  directors  at the
              beginning  of the  period  or whose  election  or  nomination  for
              election  was  previously  so  approved,  cause for any  reason to
              constitute  a majority of the Board;  (C) the  Corporation  enters
              into an agreement,  the  consummation of which would result in the
              occurrence  of a Change in  Control  of the  Corporation;  (D) the
              stockholders of the Corporation  approve a merger,  share exchange
              or consolidation  of the Corporation  with any other  corporation,
              other than a merger,  share exchange or  consolidation  that would
              result in the voting  securities of the  Corporation,  outstanding
              immediately prior thereto held by Lawrence E. Lerner or any member
              or  members  of his  family  continuing  to  represent  (either by
              remaining outstanding or by being converted into voting securities
              of the surviving entity) at least 50% of the combined voting power
              of the voting  securities  of the  Corporation  or such  surviving
              entity outstanding  immediately after such merger,  share exchange
              or consolidation, or the stockholders of the Corporation approve a
              plan of complete  liquidation of the Corporation or any agreements
              for  the  sale  of  disposition  by  the  Corporation  of  all  or
              substantially all the Corporation's assets.

          (d) The term "Code" shall mean the Internal  Revenue Code of 1986,  as
              amended, and any regulations promulgated thereunder.

          (e) The term "Committee" shall mean a committee to be appointed by the
              Board of  Directors  to consist of three or more  members,  all of
              whom are members of the Board of Directors  and are  "non-employee
              directors" within the meaning of Rule 16-3 under the Exchange Act.

          (f) The term "Common Stock" shall mean the shares of common stock, par
              value $0.01 per share, of the Corporation.

          (g) The term  "Corporation"  shall mean  Annapolis  National  Bancorp,
              Inc., a Maryland corporation.

          (h) The term "Deferred  Shares" shall mean Shares that the Company has
              credited,   pursuant  to   Paragraph  9  hereof,   to  a  deferred
              compensation account in the name of a Participant.

                                       2
(i) The term "Exchange Act" shall mean the Securities  Exchange Act of
              1934, as amended.

          (j) The term "Fair  Market  Value"  shall mean the then  current  fair
              market value of Common  Stock,  as determined in good faith by the
              Committee and in a manner  consistent  with the rules set forth in
              Treas. Reg. Section 20.2031-2.

          (k) The term  "Incentive  Stock Option"  shall mean an Option  granted
              pursuant  to the Plan that is  designated  as an  Incentive  Stock
              Option and which  satisfies the  requirements of Section 422(b) of
              the Code.

          (l) The term "Nonqualified  Stock Option" shall mean an Option granted
              pursuant to the Plan that is not an Incentive Stock Option.

          (m) The term  "Option" or "Stock  Option"  shall mean a right  granted
              pursuant to the Plan to purchase shares of Common Stock, and shall
              include the terms  Incentive Stock Option and  Nonqualified  Stock
              Option.

          (n) The term  "Option  Agreement"  shall  mean the  written  agreement
              representing  Options granted pursuant to the Plan as contemplated
              by Paragraph 7 of the Plan.

          (o) The term "Plan" shall mean the Annapolis  National  Bancorp,  Inc.
              2000 Stock Incentive Plan as approved by the Board of Directors on
              March 24, 2000, as the same may be amended from time to time.

          (p) The term "Restricted Share Award" shall mean a right granted under
              Section 10 of this Plan to receive Shares.

          (q) The term "subsidiary" or  "subsidiaries"  shall mean a corporation
              of  which  capital  stock  possessing  50% or  more  of the  total
              combined voting power of all classes of its capital stock entitled
              to vote  generally  in the  election of  directors is owned to the
              aggregate by the Corporation directly or indirectly through one or
              more subsidiaries.

3.    Effective Date of the Plan

      The Plans shall become effective upon stockholder approval,  provided that
such approval is received  before March 24, 2001, and provided  further that the
Board of Directors may grant Options  pursuant to the Plan prior to  stockholder
approval  if  such  Options  by  their  terms  are  contingent  upon  subsequent
stockholder approval of the Plan.

                                       3
4.    Administration

          (a) The Plan shall be administered by the Committee, provided that the
          Board  may act in lieu  of the  Committee  on any  matter  within  the
          Committee's discretion or authority.

          (b) The  Committee  may  establish,  from time to time and at any time
          subject to the limitations of the Plan as set forth herein, such rules
          and  regulations  and amendments and  supplements  thereto as it deems
          necessary to comply with  applicable  law and  regulation  and for the
          proper  administration  of the Plan.  A majority of the members of the
          Committee  shall  constitute  a quorum.  The vote of a  majority  of a
          quorum shall constitute action by the Committee.

          (c) The  Committee  shall  from  time to time  submit  to the Board of
          Directors  for its  approval  the  names of those  executives  and key
          employees  who, in its  opinion,  should  receive  Options,  and shall
          recommend the numbers of shares on which Options  should be granted to
          each such person and the nature of the Options to be granted.

          (d)  Options  shall be  granted  by the  Committee  and  shall  become
          effective  only after  execution  of an Option  Agreement  between the
          Corporation and the Option holder.

          (e) The Commission's interpretation and construction of the provisions
          of the Plan and the rules and  regulations  adopted by the  Commission
          shall be final, unless otherwise determined by the Board of Directors.
          No member of the  Committee or the Board of Directors  shall be liable
          for my action or  determination  made, in respect of the Plan, in good
          faith.

5.    Participation in the Plan

          (a)  Participants  in the Plan shall be limited to the  employees  and
          directors  of the  Corporation  and  its  subsidiaries  who  shall  be
          designated by the Committee.

          (b) No member of the Board of Directors  who is also an officer of the
          Corporation shall be eligible to serve on the Committee.

6.    Stock Subject to the Plan

          (a) There shall be reserved for the granting of Awards pursuant to the
          Plan and for issuance and sale pursuant to such Awards  200,000 shares
          of Common  Stock.  To  determine  the number of shares of Common Stock
          available  at any time for the  granting  of  Awards,  there  shall be
          deducted from

                                       4
the total  number of reserved  shares of Common  Stock,  the number of
          shares of Common  Stock in respect of which  Awards have been  granted
          pursuant  to  the  Plan  that  are  still  outstanding  or  have  been
          exercised.  The shares of Common  Stock to be issued upon the exercise
          or vesting of Awards shall be made  available  from the authorized and
          unissued  shares of Common  Stock.  If for any reason shares of Common
          Stock as to which an Award has been  granted  cease to be  subject  to
          purchase or delivery to Award holders thereunder,  then such shares of
          Common  Stock again shall be available  for  issuance  pursuant to new
          Awards.

          (b)  Proceeds  from the  purchase  of shares of Common  Stock upon the
          exercise of Options granted pursuant to the Plan shall be used for the
          general business purposes of the Corporation.

          (c) In the event of the reorganization, recapitalization, stock split,
          stock  dividend,  combination  of  shares  of  Common  Stock,  merger,
          consolidation, share exchange acquisition of property of stock, or any
          change in the capital  structure  of the  Corporation,  the  Committee
          shall make such adjustments as may be equitable and appropriate in the
          number and kind of shares  reserved  for  purchases by  executives  or
          other key employees,  in the number,  kind and price of shares covered
          by Awards granted pursuant to the Plan and then outstanding.

7.    Terms and Conditions of Options

          (a) Each Option granted  pursuant to the Plan shall be evidenced by an
          Option  agreement in such form as the Committee  from time to time may
          determine.

          (b) The exercise  price per share for Options shall be  established by
          the Board of Directors upon the recommendation of the Committee at the
          time of the  grant of  Options  pursuant  to the Plan and shall not be
          less than the Fair Market Value of a share of Common Stock on the date
          on which the Option is  granted.  If the Board of  Directors  does not
          establish  a specific  exercise  price per share at the time of grant,
          the  exercise  price per share shall be equal to the Fair Market Value
          of a share of Common Stock on the date of grant of the Options.

          (c) Each  Option,  subject to the other  limitations  set forth in the
          Plan, may extend for a period of up to 10 years from the date on which
          it is granted.  The term of each  Option  shall be  determined  by the
          Board of Director at the time of grant of the Option, provided that if
          no term is  established  by the  Board  of  Directors  the term of the
          Option shall be 10 years from the date on which it is granted.

                                       5
(d) The Board of Directors upon  recommendation of the Committee,  may
          provide in the Option Agreement that the right to exercise each Option
          for the number of shares  subject to each Option  shall  vest,  in the
          Option  holder  over  such  period  of time as the  Committee,  in its
          direction, shall determine for each Option holder. Notwithstanding the
          foregoing,   each  Option  Agreement  shall  provide  that,  upon  the
          occurrence of a Change in Control of the Corporation, all Options then
          outstanding shall become immediately exercisable.

          (e) Options shall be nontransferable  and  nonassignable,  except that
          Options may be transferred by  testamentary  instrument or by the laws
          of descent and  distribution,  and  Nonqualified  Stock Options may be
          transferred  to  family  members  or  family  trusts,  subject  to the
          original terms of the Option.

          (f) Unless the Committee  specifies  otherwise in an Option agreement,
          upon  voluntary  or  involuntary  termination  of an  Option  holder's
          service with the  Corporation,  his Options and all rights  thereunder
          shall  terminate  effective  at the close of  business on the date the
          Option holder ceases to be a Director of regular,  full-time  employee
          of the  Corporation  or any of  its  subsidiaries,  except  (i) to the
          extent previously exercised and (ii) as provided in subparagraphs (g),
          (h) and (i) of this Paragraph 7.

          (g) In the event an Option  holder (i) takes a leave of  absence  from
          the Corporation or any of its  subsidiaries for personal reasons or as
          a result of entry into the armed forces of the United  States,  or any
          of the  departments  or agencies of the United States  government,  or
          (ii) terminates his employment,  or ceases  providing  services to the
          Corporation  or  any  of  its   subsidiaries,   by  reason  of  death,
          disability,  voluntary  termination with the consent of the Committee,
          or other  special  circumstances,  the Committee may consider his case
          and may take such action in respect of the related Option Agreement as
          it  may  deem   appropriate   under   the   circumstances,   including
          accelerating  the time previously  granted for Options to be exercised
          and extending the time  following the Option  holder's  termination of
          active  employment  or  service  during  which  the  Option  holder is
          entitled  to  purchase  the  shares of Common  Stock  subject  to such
          Options,  provided that in no event may any Option be exercised  after
          the expiration of the time of the Option.

          (h) If an Option  holder  dies  during the term of his Option  without
          having fully exercised this Option,  the executor or  administrator of
          his estate or the person who inherits the right to exercise the Option
          by bequest or inheritance shall have the right within two years of the
          Option holder's death to purchase the number of shares of Common Stock
          that the deceased  Option  holder was entitled to purchase at the date
          of his death, after which the Option shall

                                       6
lapse, provided that in no event may any Option be exercised after the
          expiration of the term of the Option.

          (i) If an Option holder terminates employment without his having fully
          exercised  his Option due to his  retirement  with the  consent of the
          Corporation,  then such  Option  holder  shall  have the right  within
          ninety (90) days of the Option  holder's  termination of employment or
          service  to  purchase  the  number of shares of Common  Stock that the
          Option holder was entitled to purchase at the date of his termination,
          after which the Option shall lapse,  provided that in no event may any
          Option be exercised  after the  expiration  of the term of the Option.
          The  Committee  may  cancel  the  Option  during the ninety day period
          referred  to  in  this  paragraph,   if  the  Participant  engages  in
          employment or activities  which, in the opinion of the Committee,  are
          contrary to the best interests of the Corporation. The Committee shall
          determine in each case whether a termination  of employment or service
          shall be considered a retirement with the consent of the  Corporation,
          and,  subject to  applicable  law,  whether a leave of  absence  shall
          constitute a termination of employment.  Any such determination of the
          Committee  shall be final  and  conclusive,  unless  overruled  by the
          Board.

          (j)  The  granting  of an  Option  pursuant  to  the  Plan  shall  not
          constitute or be evidence of any agreement or  understanding,  express
          or implied,  on the part of the Corporation or any of its subsidiaries
          to retain or employ the Option holder for any specified period.

          (k) In addition to the general terms and  conditions set forth in this
          Paragraph  7 in  respect  of  Options  granted  pursuant  to the Plan,
          Incentive Stock Options granted  pursuant to the Plan shall be subject
          to the following additional terms and conditions:

                (i)   "Incentive   Stock  Options"  shall  be  granted  only  to
                individuals  who,  at the  date  of  grant  of the  Option,  are
                employees of the Corporation or any of its subsidiaries;

                (ii) No  employee  who owns  beneficially  more  than 10% of the
                total  combined  voting  power  of all  classes  of stock of the
                Corporation  shall be eligible to be granted an "Incentive Stock
                Option;"

                (iii) The aggregate  fair market value  (determined  at the time
                the  Incentive  Stock Option is granted) of the shares of Common
                Stock  in  respect  of  which   "incentive  stock  options"  are
                exercisable  for the first time by the Option  holder during any
                calendar year (under all such plans of the  Corporation  and its
                subsidiaries) shall not exceed $100,000; and

                                       7
(iv) Any other terms and  conditions  specified  by the Board of
                Directors that are not inconsistent  with the Plan,  except that
                such  terms  and   conditions   must  be  consistent   with  the
                requirements  for "incentive stock options" under Section 422 of
                the Code.

8.    Methods of Exercise of Options

          (a) An Option holder (or other person or person,  if any,  entitled to
          exercise an Option  hereunder)  desiring to exercise an Option granted
          pursuant  to the Plan as to all or part of the shares of Common  Stock
          covered by the Option shall (i) notify the  Corporation  in writing as
          its principal  office at 1000  Bestgate  Road,  Suite 400,  Annapolis,
          Maryland  21401,  to that effect,  specifying  the number of shares of
          Common Stock to be purchased and the method of payment therefore,  and
          (ii) make  payment or  provision  for payment for the shares of Common
          Stock as purchased in accordance  with this  Paragraph 8. Such written
          notice  may be  given  by  means  of a  facsimile  transmission.  If a
          facsimile  transmission  is used,  the Option  holder  should mail the
          original  executed  copy  of the  written  notice  to the  Corporation
          promptly thereafter.

          (b) Payment or provision for payment shall be made as follows:

                (i) The Option  holder shall deliver to the  Corporation  at the
                address set forth in subparagraph 8(a) United States currency in
                an amount equal to the aggregate purchase price of the shares of
                Common Stock as to which such exercise relates; or

                (ii) The Option holder shall tender to the Corporation shares of
                Common Stock already  owned by the Option holder that,  together
                with any cash tendered therewith,  have no aggregate fair market
                value  (determined  based on the Fair Market Value of a share of
                Common  Stock on the date the notice  set forth in  subparagraph
                8(a) is  received  by the  Corporation)  equal to the  aggregate
                purchase  price of the  shares of Common  Stock as to which such
                exercise relates; or

                (iii) The Option  holder  shall  deliver to the  Corporation  an
                exercise  notice  together with  irrevocable  instructions  to a
                broker to deliver promptly to the Corporation the amount of sale
                or loan proceeds  necessary to pay the aggregate  purchase price
                of the shares of Common Stock as to which such exercise  relates
                and to sell  the  shares  of  Common  Stock  to be  issued  upon
                exercise  of the  Option and  deliver  the cash  proceeds,  less
                commission and brokerage fees to the

                                       8
Option holder or to deliver the remaining shares of Common Stock
                to the Option holder.

          Notwithstanding the foregoing provisions,  the Committee and the Board
          of Directors,  in granting Options pursuant to the Plan, may limit the
          methods in which an Option may be  exercised  by any  person  and,  in
          processing any purported exercise of an Option granted pursuant to the
          Plan,  may refuse to recognize the method of exercise  selected by the
          Option  holder  (other  than  the  method  of  exercise  set  forth in
          subparagraph 8(b)(i)).

          (c) In addition to the  alternative  methods of exercise  set forth in
          paragraph  8(b),  holders  of  Nonqualified  Stock  Options  shall  be
          entitled,  at or prior to the time the written notice  provided for in
          subparagraph  8(a) is delivered to the  Corporation,  to elect to have
          the  Corporation  withhold  from  the  shares  of  Common  Stock to be
          delivered upon exercise of the  Nonqualified  Stock Option that number
          of shares of Common Stock  (determined  based on the Fair Market Value
          of a share  of  Common  Stock  on the date  the  notice  set  forth in
          subparagraph 8(a) is received by the Corporation) necessary to satisfy
          any withholding taxes attributable to the exercise of the Nonqualified
          Stock  Option.  Alternatively,  such  holder of a  Nonqualified  Stock
          Option may elect to deliver  previously  owned  shares of Common Stock
          upon  exercise  of  the  Nonqualified  Stock  Option  to  satisfy  any
          withholding  taxes  attributable  to the exercise of the  Nonqualified
          Stock  Option.  If  the  Board  of  Directors  does  not  include  any
          provisions  relating to this  withholding  feature in its  resolutions
          granting the Nonqualified Stock Option or in the Option Agreement. The
          maximum  amount that an Option  holder may elect to have withheld from
          the shares of Common Stock otherwise  deliverable upon exercise or the
          maximum number of previously owned shares in Option holder may deliver
          shall  be  equal  to  the  minimum  federal  and  state   withholding.
          Notwithstanding the foregoing  provisions,  the Committee or the Board
          of Directors may include in the Option Agreement  relating to any such
          Nonqualified  Stock  Option  provisions  limiting or  eliminating  the
          Option  holder's  ability to pay his  withholding  tax obligation with
          shares of Common Stock;  or if no such  provisions are included in the
          Option Agreement,  but in the opinion of the Committee or the Board of
          Directors  such  withholding  would have an adverse tax or  accounting
          effect to the Corporation, at or prior to exercise of the Nonqualified
          Stock  Option the  Committee  or the Board of  Directors  may limit or
          eliminate  the  Option  holder's  ability to pay his  withholding  tax
          obligation with shares of Common Stock.  Notwithstanding the foregoing
          provisions, a holder of Nonqualified Stock Option may not elect any of
          the methods of satisfying his withholding tax obligation in respect of
          any exercise if, in the opinion of counsel to the  Corporation,  there
          is a  substantial  likelihood  that  the  election  or  timing  of the
          election  would

                                       9
subject the holder to a substantial risk of liability under Section 16
          of the Exchange Act.

          (d) An Option  holder at any time may elect in  writing  to abandon an
          Option  in  respect  of all or part of the  number of shares of Common
          Stock as to which the Option shall not have been exercised.

          (e) An Option holder shall have none of the rights of a stockholder of
          the Corporation until the shares of Common Stock covered by the Option
          are issued to him upon exercise of the Option.

9.    Deferred Shares

          (a)  Elections  to  Defer.  The  Committee  may at any time  allow any
          Participant  (or  Participants)  who  is a  member  of  the  Board  of
          Directors,  or a member  of a select  group of  management  or  highly
          compensated employees (within the meaning of the Employees' Retirement
          Income Security Act of 1973, with each such individual  being referred
          to herein  as a  "Participant")  may  irrevocably  elect,  on the form
          attached  hereto as  Exhibit A (the  "Election  Form"),  to forego the
          receipt  of  cash  compensation  and  in  lieu  thereof  to  have  the
          Corporation credit Deferred Shares to the Participant's Account with a
          Fair Market Value equal to the  compensation  deferred.  Each Election
          Form shall take effect five  business  days after its  delivery to the
          Committee,  unless in the meantime the Committee sends the Participant
          a  written  notice  explaining  why  the  Election  Form  is  invalid.
          Notwithstanding  the  foregoing  sentence,  Election  Forms  shall  be
          ineffective with respect to any compensation  that a Participant earns
          before the date on which the Committee receives the Election Form.

          (b) Vesting.  Deferred Shares shall be 100% vested at all times.

          (c)  Recordkeeping;  Cash Earnings on Deferred  Shares.  The Committee
          shall  establish  and  maintain  an  individual   account  (the  "Cash
          Account") in the name of each  Participant who files an Election Form.
          On the last day of each fiscal quarter,  the Corporation  shall credit
          to the  Participant's  Cash  Account  any cash  dividends  paid on the
          balance of Deferred Shares credited to the Participant's  Account.  On
          the last day of each fiscal  year of the  Corporation,  the  Committee
          shall  credit to the  Participant's  Account  Deferred  Shares  with a
          Market  Value equal to the balance of the  Participant's  Cash Account
          (without  regard  to  fractional  shares),  and  the  balance  of  the
          Participant's  Cash  Account  shall be reduced to zero.  The  Trustees
          shall hold each  Participant's  Deferred Shares until  distribution is
          required pursuant to subsection (d) hereof.

                                       10
(d) Distributions of Deferred Shares and Earnings.  The Trustees shall
          distribute a Participant's Deferred Shares in five substantially equal
          annual  installments  that are paid before the last day of each of the
          five fiscal years of the Corporation  that end after the date on which
          the   Participant's   Continuous   Service   terminates,   unless  the
          Participant has properly elected a different form of distribution,  on
          the form (the "Distribution Election Form") approved by the Committee,
          and the Committee has received the Participant's Distribution Election
          Form  either more than 90 days before a Change in Control or more than
          one year before the date on which the Participant's Continuous Service
          terminates for any reason. Fractional Shares shall not be distributed.

          (e) Hardship  Withdrawals.  Notwithstanding any other provision of the
          Plan or a  Participant's  Election Form, in the event the  Participant
          suffers an  unforeseeable  hardship within the  contemplation  of this
          Section,  the  Participant may apply to the Committee for an immediate
          distribution of all or a portion of his Deferred Shares.  The hardship
          must  result from a sudden and  unexpected  illness or accident of the
          Participant  or a  dependent  of the  Participant,  casualty  loss  of
          property,  or other  similar  conditions  beyond  the  control  of the
          Participant.  Examples of purposes which are not considered  hardships
          include  post-secondary  school  expenses  or the desire to purchase a
          residence.  In no event will a distribution  be made to the extent the
          hardship could be relieved  through  reimbursement  or compensation by
          insurance  or  otherwise,  or  by  liquidation  of  the  Participant's
          nonessential  assets to the extent such  liquidation  would not itself
          cause a severe  financial  hardship.  The  amount of any  distribution
          hereunder  shall be  limited to the amount  necessary  to relieve  the
          Participant's  financial  hardship.  The  determination  of  whether a
          Participant  has a qualifying  hardship and the amount which qualifies
          for  distribution,  if any, shall be made by the Committee in its sole
          discretion.  The  Committee  may  require  evidence of the purpose and
          amount  of the  need,  and may  establish  such  application  or other
          procedures as it deems appropriate.

          (e) Rights to Deferred Shares. A Participant may not assign his or her
          claim to Deferred  Shares during his or her lifetime.  A Participant's
          right to Deferred  Shares shall at all times  constitute  an unsecured
          promise of the Corporation to pay benefits as they come due. The right
          of the  Participant  or his or her  beneficiary  to  receive  benefits
          hereunder  shall be solely an  unsecured  claim  against  the  general
          assets of the  Corporation.  Neither  the  Participant  nor his or her
          beneficiary  shall have any claim  against  or rights in any  specific
          assets, shares, or other funds of the Corporation.

                                       11
10.   Restricted Share Awards

          (a)  Grants.   The  Committee  shall  have  the  discretion  to  grant
          Restricted  Share  Awards to  Employees  and  members  of the Board of
          Directors.  As promptly as practicable  after a determination  is made
          that a  Restricted  Share  Award is to be made,  the  Committee  shall
          notify the  Participant  in  writing  of the grant of the  Award,  the
          number of Shares  covered by the  Award,  and the terms upon which the
          Shares  subject  to the  Award  may be  earned.  The date on which the
          Committee so notifies the Participant  shall be considered the date of
          grant of the  Restricted  Share Awards.  The Committee  shall maintain
          records as to all grants of Restricted Share Awards under the Plan.

          (b) Earning Shares. Unless the Committee  specifically  eliminates any
          vesting  schedule in an Agreement  granting a Restricted  Share Award,
          Shares  subject to Restricted  Share Awards shall be earned and become
          non-forfeitable by a Participant  according to the following schedule,
          provided the  Participant  is an Employee or Director on the scheduled
          vesting date:

                                          Vested Percentage
               Years of Service        (applied to Restricted
               ----------------               Shares)
                                              -------

                  Less than 1                     0%
                       1                         25%
                       2                         50%
                       3                         75%
                   4 or More                     100%

       Notwithstanding   the  foregoing  and  unless  otherwise  provided  in  a
   Participant's  Restricted Stock Award,  each Participant  shall become (100%)
   vested  immediately (i) upon termination of the Participant's  service due to
   the  Participant's  disability or death,  or (ii) upon a Change in Control of
   the Corporation.

    (c)Accrual  of  Dividends.  Whenever  Shares  are paid to a  Participant  or
    Beneficiary  under Section 11(d), such Participant or Beneficiary shall also
    be entitled to receive,  with respect to each Share paid, an amount equal to
    any cash  dividends  (including  special large and  nonrecurring  dividends,
    including   one  that  has  the  effect  of  a  return  of  capital  to  the
    Corporation's  stockholders) and a number of shares of Common Stock equal to
    any stock  dividends,  declared  and paid with  respect to a share of Common
    Stock  between the date the relevant  Restricted  Share Award was  initially
    granted to such  Participant and the date the Shares are being  distributed.
    There shall

                                       12
also be  distributed  an  appropriate  amount of net earnings,  if any, with
    respect to any cash dividends so paid out.

    (d)Distribution of Shares.

                (i) Timing of  Distributions:  General Rule. Except as otherwise
                expressly  stated in this Plan, the Committee  shall  distribute
                Shares and  accumulated  cash from dividends and interest to the
                Participant or his  Beneficiary,  as the case may be, as soon as
                practicable  after they have been earned.  No fractional  shares
                shall be distributed.

                (ii) Form of  Distribution.  The Committee shall  distribute all
                Shares,  together with any shares  representing stock dividends,
                in the form of Common Stock.  One share of Common Stock shall be
                given  for  each  Share  earned.   Payments   representing  cash
                dividends (and earnings thereon) shall be made in cash.

                (iii)  Withholding.  The Committee  shall withhold from any cash
                payment  made  under this Plan  sufficient  amounts to cover any
                applicable  withholding and employment  taxes, and if the amount
                of such cash  payment is not  sufficient,  the  Committee  shall
                require the  Participant  or Beneficiary to pay to the Committee
                the amount  required to be withheld as a condition of delivering
                the Shares.  The Committee  shall pay over to the Corporation or
                Affiliate  which employs or employed such  Participant  any such
                amount withheld from or paid by the Participant or Beneficiary.

                (iv)Regulatory   Exceptions.   No  Restricted  Shares  shall  be
                    distributed  unless and until all of the requirements of all
                    applicable  law  and  regulations   shall  have  been  fully
                    complied with, including the receipt of approval of the Plan
                    by the stockholders of the Corporation by such vote, if any,
                    as may be required by applicable law and regulations.

    (e)Voting  of Plan  Shares.  All  shares of Common  Stock  subject to Awards
    (whether or not subject to a  Restricted  Share Award) shall be voted by the
    Board in the manner directed by the Board.

    (f)Deferral  Elections.  At any time 12 months  prior to the date on which a
    Participant  becomes  vested in any shares  subject to his or her Restricted
    Share Award,  a Participant  who is a member of a select group of management
    or highly  compensated  employees  (within  the  meaning  of the  Employees'
    Retirement  Income Security Act of 1973) may irrevocably  elect, on the form
    (the "Election Form") approved by the Committee, to defer the receipt of all
    or a percentage  of the Shares that would  otherwise be  transferred  to the
    Participant upon the vesting of such

                                       13
Award.  If such an  election  is made,  the Shares  shall be credited to the
    Participant's  Account  as  Deferred  Shares on the date such  Shares  would
    otherwise have been distributed to the Participant.

11.   Amendments and Discontinuance of the Plan

      The Board of  Directors  shall have the right at any time and from time to
time to amend, modify, or discontinue the Plan provided that, except as provided
in subparagraph 6(c), no such amendment,  modification, or discontinuance of the
Plan shall (i) revoke or alter the terms of any valid Option previously  granted
pursuant to the Plan,  (ii)  increase  the number of share of Common Stock to be
reserved for issuance and sale pursuant to Options granted pursuant to the Plan,
(iii)  decrease the exercise  price  determined  pursuant to the  provisions  of
subparagraph  7(b), or (iv) provide for Options  exercisable  more than 10 years
after the date granted.

12.   Plan Subject to Governmental Laws and Regulations

      The Plan and the grant of Awards  pursuant to the Plan shall be subject to
all applicable  governmental  laws and  regulations.  Notwithstanding  any other
provision of the Plan to the  contrary,  the Board of Directors  may in its sole
and  absolute  discretion  make such  changes in the Plan as may be  required to
conform the Plan to such laws and regulations.

13.   Duration of the Plan

      No  Option  shall be  granted  pursuant  to the Plan  after  the  close of
business on March 23, 2010.

                                       14
EXHIBIT 99.3

                          Form of Deferred Share Award
                            associated with the Plan
Annapolis National Bancorp, Inc.
                            2000 Stock Incentive Plan
                         ------------------------------

                              Deferred Share Award
                         ------------------------------

     Annapolis  National  Bancorp,  Inc. (the "Company") hereby agrees to permit
the  Participant  named in Section 1 below to irrevocably  elect pursuant to the
Company's 2000 Stock  Incentive Plan (the "Plan"),  which is attached  hereto as
Exhibit A (1) to forego the receipt of cash  compensation and in lieu thereof to
have the Company credit  Deferred  Shares to an account payable on the Company's
financial  statements.  Those  Deferred  Shares a Fair Market Value equal to the
compensation  deferred by the  Participant.  In addition,  this  Participant may
elect to defer the receipt of all or a percentage of shares that would otherwise
be  transferred  to the  Participant  upon the vesting of an award of Restricted
Shares and to have the Company  credit the  Participant's  Account with Deferred
Shares equal to the number of Restricted  Shares being deferred pursuant to this
Agreement (the "Agreement").

     The Participant  recognizes that the receipt of the Deferred Shares in lieu
of  compensation  or the  receipt of all or a  percentage  of shares  that would
otherwise  be  transferred  to the  Participant  upon the vesting of an award of
Restricted Shares is compensatory in nature and accordingly  subject to taxation
as gross income under  Section 83 of the Internal  Revenue Code of 1986, as that
Section  may be  amended  and  interpreted  from time to time.  The  Participant
further  recognizes  that,  unless the election is made,  described in Section 5
taxation  will occur  whenever  shares  subject  to this Award (the  "Restricted
Shares") are delivered to the Participant.

     Capitalized  terms used  herein and not  otherwise  defined  shall have the
meanings given to such terms in Exhibit A.

1. Variable Terms.  This Award shall be controlled by and interpreted  according
to the following terms:

Name of Participant:               ________________________________

Date of this Deferred Share
Election:                          ________________________________

Compensation to be deferred:       |_| _____% of any regular
                                   salary or board fees

                                   |_| _____% of any cash bonus

                                   |_| _____% of any Restricted
                                      Shares that would otherwise
                                      vest.
2. Vesting Schedule.  Deferred Shares shall be one hundred percent (100%) vested
at all times.

3.  Certain Tax  Matters.  Set forth below is a brief  summary of certain of the
federal income tax consequences of the Participant's receipt of Deferred Shares.
THIS  SUMMARY IS  PURPOSELY  INCOMPLETE,  AND THE TAX LAWS AND  REGULATIONS  ARE
SUBJECT TO CHANGE OR  DIFFERENT  INTERPRETATION.  ACCORDINGLY,  THE  PARTICIPANT
SHOULD CONSULT A TAX ADVISOR BEFORE ACCEPTING THIS GRANT.

     The Participant  acknowledges having been advised by the Company that he or
she shall recognize  ordinary income in an amount equal to the Fair Market Value
of any Deferred  Shares that are  transferred to the Participant as unrestricted
Shares.  The  Participant  will  recognize  this income at the time the Deferred
Shares are transferred to him or her.

     THE PARTICIPANT  HEREBY ASSUMES ALL THE RESPONSIBILITY FOR PAYING ANY TAXES
RESULTING FROM RECEIPT OF THE DEFERRED SHARES.

4.  Termination  of  Continuous  Service.  In  all  events  where  Participant's
Continuous Service to the Company is terminated,  the receipt of Deferred Shares
shall be governed by the Plan.

5. Dividend and Voting Rights.  With respect to the Deferred Shares, the Company
has the right to vote such  Deferred  Shares and at the end of each  fiscal year
shall credit the Participant's  Account with additional Deferred Shares having a
Market Value equal to any cash dividends  accrued on previously  Deferred Shares
during the fiscal year.

6. Lapse of  Restriction.  Notwithstanding  anything to the  contrary  contained
herein  or in the  Plan,  upon the lapse and  release  from  restriction  of any
Deferred  Shares  that  are  Restricted  Shares,  an  entry  shall  be  made  in
Participant's Account evidencing the lapse and release from restriction.

7. Distribution of Deferred Shares. Deferred Shares shall be distributed in five
substantially  equal  annual  installments  that are paid before the last day of
each of the five  fiscal  years of the  Corporation  that end  after the date on
which the Participant's  Continuous Service  terminates,  unless the Participant
has properly  elected a different form of distribution  either at least one year
before terminating  Continuous  Service, or more than 90 days before a Change in
Control; subject to all applicable laws and regulations.

8.  Hardship  Withdrawals.  A  Participant  may  apply to the  Committee  for an
immediate  distribution  of all or a portion  of his or her  Deferred  Shares in
accordance with the terms of the Plan.

9. Rights to Deferred  Shares.  A participant may not assign his or her claim to
Deferred Shares during his or her lifetime.  A Participant's rights at all times
shall be governed by the Plan.

10. Subject to Plan. The election to receive  Deferred  Shares is subject to all
of the terms and  conditions  of the Plan.  By  executing  this  Agreement,  the
Participant  acknowledges  receipt of a copy of the Plan and hereby  accepts and
agrees to be bound by all of its terms and  conditions as if it had been set out
verbatim in this Agreement.  In addition,  the Participant recognizes and
agrees that all determinations,  interpretations or other actions respecting the
Plan may be made by a majority of the Board or of the  Committee,  and that such
determinations,  interpretations  or other  actions  are final,  conclusive  and
binding  upon all  parties,  including  the  Participant,  his or her  heirs and
representatives.

11.  Designation  of  Beneficiary.  Notwithstanding  anything  to  the  contrary
contained  herein or in the Plan,  following  the  execution of this Award,  the
Participant may expressly  designate a beneficiary (the "Beneficiary") to his or
her  interest in the Award  granted  under this  Award.  The  Participant  shall
designate  the   Beneficiary  by  completing  and  executing  a  designation  of
beneficiary  agreement  substantially  in the form attached  hereto as Exhibit B
(the  "Designation  of  Beneficiary")  and  delivering  an executed  copy of the
Designation of Beneficiary to the Company at its main office.

12. Notices.  Any notice,  payment or communication  required or permitted to be
given by any  provision  of this  Agreement  shall be in  writing  and  shall be
delivered  personally  or sent by  certified  mail,  return  receipt  requested,
addressed as follows:  (i) if to the Company,  at 1000 Bestgate Road, Suite 400,
Annapolis, Maryland 21401 (attention: 2000 Stock Incentive Plan Committee); (ii)
if to Participant,  at the address set forth on the signature page hereto.  Each
party may, from time to time, by notice to the other party hereto, specify a new
address for delivery of notices to such party  hereunder.  Any such notice shall
be deemed to be delivered,  given,  and received for all purposes as of the date
such notice is received or properly mailed.

13.  Binding  Effect.  Except as otherwise  provided in this Agreement or in the
Plan,  every  covenant,  term, and provision of this Agreement  shall be binding
upon and inure to the benefit of the parties hereto and their respective  heirs,
legatees, legal representatives, successors, transferees, and assigns.

14.  Headings.  Section and other  headings  contained in this Agreement are for
reference purposes only and are not intended to describe,  interpret,  define or
limit the scope or intent of this Agreement or any provision hereof.

15. Severability. Every provision of this Agreement is intended to be severable.
If any term  hereof is illegal or invalid  for any reason,  such  illegality  or
invalidity  shall not affect the validity or legality of the remaining  terms of
this Agreement.

16.  Governing  Law. The laws of the State of Maryland shall govern the validity
of this Agreement,  the construction of its terms, and the interpretation of the
rights and duties of the parties hereto.

17.  Counterparts.  This  Agreement  may be executed  by the  parties  hereto in
separate counterparts,  each of which when so executed and delivered shall be an
original,  but all such counterparts shall together  constitute one and the same
instrument.
IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be duly
executed on the day and year first indicated above.

            ANNAPOLIS NATIONAL BANCORP, INC.

            By: _________________________________   Date:_______________
                An authorized member of the
                Annapolis National Bancorp, Inc.
                2000 Stock Incentive Plan Committee

            The  undersigned  Participant  hereby  accepts  the  terms  of  this
Agreement and the Plan.

            By: _________________________________   Date:_______________

            Name of Participant:_________________________________________

            Social Security Number:______________________________________

            Address:

            _________________________________________________________

            _________________________________________________________

            _________________________________________________________
Exhibit A
                                    ---------

                        ANNAPOLIS NATIONAL BANCORP, INC.
                            2000 STOCK INCENTIVE PLAN
ANNAPOLIS NATIONAL BANCORP, INC.
                            2000 STOCK INCENTIVE PLAN

1.    Purpose

      The proper execution of the duties and  responsibilities of the directors,
executives,   and   employees  of  Annapolis   National   Bancorp,   Inc.   (the
"Corporation")  and its  subsidiaries is a vital factor in the continued  growth
and success of the Corporation.  Toward this end, it is necessary to attract and
retain  effective and capable  individuals to assume  positions that  contribute
materially to the successful  operation of the business of the  Corporation  and
its  subsidiaries.  It will  benefit  the  Corporation,  therefore,  to bind the
interests of these persons more closely to its own interests by offering them an
attractive  opportunity to acquire a proprietary interest in the Corporation and
thereby  provide  them with  added  incentive  to remain in the  service  of the
Corporation and its  subsidiaries  and to increase the prosperity,  growth,  and
earnings of the  Corporation.  This stock option plan is intended to serve these
purposes.

2.    Definitions

      The following terms wherever used herein shall have the meanings set forth
below.

          (a) The  term  "Awards"  shall  mean  Options,  Deferred  Shares,  and
              Restricted Share Awards, collectively.

          (b) The term "Board of Directors" shall mean the Board of Directors of
              the Corporation.

          (c) The term  "Change  in  Control  of the  Corporation"  shall mean a
              change  in  control  of a  nature  that  would be  required  to be
              reported in response  to Item 6(c) of Schedule  14A of  Regulation
              14A  promulgated  under  the  Exchange  Act,  whether  or not  the
              Corporation  is in fact  required  to comply  therewith,  provided
              that, without limitation, such a change in control shall be deemed
              to have  occurred  if (A) any  "person"  (as such  term is used in
              Section 13(d) and 14(d) of the Exchange Act), other than a trustee
              or other fiduciary  holding  securities  under an employee benefit
              plan  of  the  Corporation  or  any  of  its   subsidiaries  or  a
              corporation owned, directly or indirectly,  by the stockholders of
              the  Corporation  in  substantially  the same  proportions  as the
              ownership  of Common  Stock of the  Corporation,  and  other  than
              Lawrence E. Lerner or any member or members of this family,  is or
              becomes the "beneficial owner" (as defined in Rule 13d-3 under the
              Exchange  Act),  directly  or  indirectly,  of  securities  of the
              Corporation  representing 20% or more of the combined voting
power of the Corporation's then outstanding securities; (B) during
              any  period of two  consecutive  years (not  including  any period
              prior  to  the  adoption  of  the  Plan)  individuals  who  at the
              beginning of such period constitute the Board and any new director
              (other than a director designated by a person who has entered into
              an  agreement  with  the   Corporation  to  affect  a  transaction
              described in clauses (A) or (B) of this definition) whose election
              by the Board or  termination  for  election  by the  Corporation's
              stockholders  was approved by a vote of at least two-thirds of the
              directors  then still in office who either were  directors  at the
              beginning  of the  period  or whose  election  or  nomination  for
              election  was  previously  so  approved,  cause for any  reason to
              constitute  a majority of the Board;  (C) the  Corporation  enters
              into an agreement,  the  consummation of which would result in the
              occurrence  of a Change in  Control  of the  Corporation;  (D) the
              stockholders of the Corporation  approve a merger,  share exchange
              or consolidation  of the Corporation  with any other  corporation,
              other than a merger,  share exchange or  consolidation  that would
              result in the voting  securities of the  Corporation,  outstanding
              immediately prior thereto held by Lawrence E. Lerner or any member
              or  members  of his  family  continuing  to  represent  (either by
              remaining outstanding or by being converted into voting securities
              of the surviving entity) at least 50% of the combined voting power
              of the voting  securities  of the  Corporation  or such  surviving
              entity outstanding  immediately after such merger,  share exchange
              or consolidation, or the stockholders of the Corporation approve a
              plan of complete  liquidation of the Corporation or any agreements
              for  the  sale  of  disposition  by  the  Corporation  of  all  or
              substantially all the Corporation's assets.

          (d) The term "Code" shall mean the Internal  Revenue Code of 1986,  as
              amended, and any regulations promulgated thereunder.

          (e) The term "Committee" shall mean a committee to be appointed by the
              Board of  Directors  to consist of three or more  members,  all of
              whom are members of the Board of Directors  and are  "non-employee
              directors" within the meaning of Rule 16-3 under the Exchange Act.

          (f) The term "Common Stock" shall mean the shares of common stock, par
              value $0.01 per share, of the Corporation.

          (g) The term  "Corporation"  shall mean  Annapolis  National  Bancorp,
              Inc., a Maryland corporation.

          (h) The term "Deferred  Shares" shall mean Shares that the Company has
              credited,   pursuant  to   Paragraph  9  hereof,   to  a  deferred
              compensation account in the name of a Participant.

                                       2
(i) The term "Exchange Act" shall mean the Securities  Exchange Act of
              1934, as amended.

          (j) The term "Fair  Market  Value"  shall mean the then  current  fair
              market value of Common  Stock,  as determined in good faith by the
              Committee and in a manner  consistent  with the rules set forth in
              Treas. Reg. Section 20.2031-2.

          (k) The term  "Incentive  Stock Option"  shall mean an Option  granted
              pursuant  to the Plan that is  designated  as an  Incentive  Stock
              Option and which  satisfies the  requirements of Section 422(b) of
              the Code.

          (l) The term "Nonqualified  Stock Option" shall mean an Option granted
              pursuant to the Plan that is not an Incentive Stock Option.

          (m) The term  "Option" or "Stock  Option"  shall mean a right  granted
              pursuant to the Plan to purchase shares of Common Stock, and shall
              include the terms  Incentive Stock Option and  Nonqualified  Stock
              Option.

          (n) The term  "Option  Agreement"  shall  mean the  written  agreement
              representing  Options granted pursuant to the Plan as contemplated
              by Paragraph 7 of the Plan.

          (o) The term "Plan" shall mean the Annapolis  National  Bancorp,  Inc.
              2000 Stock Incentive Plan as approved by the Board of Directors on
              March 24, 2000, as the same may be amended from time to time.

          (p) The term "Restricted Share Award" shall mean a right granted under
              Section 10 of this Plan to receive Shares.

          (q) The term "subsidiary" or  "subsidiaries"  shall mean a corporation
              of  which  capital  stock  possessing  50% or  more  of the  total
              combined voting power of all classes of its capital stock entitled
              to vote  generally  in the  election of  directors is owned to the
              aggregate by the Corporation directly or indirectly through one or
              more subsidiaries.

3.    Effective Date of the Plan

      The Plans shall become effective upon stockholder approval,  provided that
such approval is received  before March 24, 2001, and provided  further that the
Board of Directors may grant Options  pursuant to the Plan prior to  stockholder
approval  if  such  Options  by  their  terms  are  contingent  upon  subsequent
stockholder approval of the Plan.

                                       3
4.    Administration

          (a) The Plan shall be administered by the Committee, provided that the
          Board  may act in lieu  of the  Committee  on any  matter  within  the
          Committee's discretion or authority.

          (b) The  Committee  may  establish,  from time to time and at any time
          subject to the limitations of the Plan as set forth herein, such rules
          and  regulations  and amendments and  supplements  thereto as it deems
          necessary to comply with  applicable  law and  regulation  and for the
          proper  administration  of the Plan.  A majority of the members of the
          Committee  shall  constitute  a quorum.  The vote of a  majority  of a
          quorum shall constitute action by the Committee.

          (c) The  Committee  shall  from  time to time  submit  to the Board of
          Directors  for its  approval  the  names of those  executives  and key
          employees  who, in its  opinion,  should  receive  Options,  and shall
          recommend the numbers of shares on which Options  should be granted to
          each such person and the nature of the Options to be granted.

          (d)  Options  shall be  granted  by the  Committee  and  shall  become
          effective  only after  execution  of an Option  Agreement  between the
          Corporation and the Option holder.

          (e) The Commission's interpretation and construction of the provisions
          of the Plan and the rules and  regulations  adopted by the  Commission
          shall be final, unless otherwise determined by the Board of Directors.
          No member of the  Committee or the Board of Directors  shall be liable
          for my action or  determination  made, in respect of the Plan, in good
          faith.

5.    Participation in the Plan

          (a)  Participants  in the Plan shall be limited to the  employees  and
          directors  of the  Corporation  and  its  subsidiaries  who  shall  be
          designated by the Committee.

          (b) No member of the Board of Directors  who is also an officer of the
          Corporation shall be eligible to serve on the Committee.

6.    Stock Subject to the Plan

          (a) There shall be reserved for the granting of Awards pursuant to the
          Plan and for issuance and sale pursuant to such Awards  200,000 shares
          of Common  Stock.  To  determine  the number of shares of Common Stock
          available  at any time for the  granting  of  Awards,  there  shall be
          deducted from

                                       4
the total  number of reserved  shares of Common  Stock,  the number of
          shares of Common  Stock in respect of which  Awards have been  granted
          pursuant  to  the  Plan  that  are  still  outstanding  or  have  been
          exercised.  The shares of Common  Stock to be issued upon the exercise
          or vesting of Awards shall be made  available  from the authorized and
          unissued  shares of Common  Stock.  If for any reason shares of Common
          Stock as to which an Award has been  granted  cease to be  subject  to
          purchase or delivery to Award holders thereunder,  then such shares of
          Common  Stock again shall be available  for  issuance  pursuant to new
          Awards.

          (b)  Proceeds  from the  purchase  of shares of Common  Stock upon the
          exercise of Options granted pursuant to the Plan shall be used for the
          general business purposes of the Corporation.

          (c) In the event of the reorganization, recapitalization, stock split,
          stock  dividend,  combination  of  shares  of  Common  Stock,  merger,
          consolidation, share exchange acquisition of property of stock, or any
          change in the capital  structure  of the  Corporation,  the  Committee
          shall make such adjustments as may be equitable and appropriate in the
          number and kind of shares  reserved  for  purchases by  executives  or
          other key employees,  in the number,  kind and price of shares covered
          by Awards granted pursuant to the Plan and then outstanding.

7.    Terms and Conditions of Options

          (a) Each Option granted  pursuant to the Plan shall be evidenced by an
          Option  agreement in such form as the Committee  from time to time may
          determine.

          (b) The exercise  price per share for Options shall be  established by
          the Board of Directors upon the recommendation of the Committee at the
          time of the  grant of  Options  pursuant  to the Plan and shall not be
          less than the Fair Market Value of a share of Common Stock on the date
          on which the Option is  granted.  If the Board of  Directors  does not
          establish  a specific  exercise  price per share at the time of grant,
          the  exercise  price per share shall be equal to the Fair Market Value
          of a share of Common Stock on the date of grant of the Options.

          (c) Each  Option,  subject to the other  limitations  set forth in the
          Plan, may extend for a period of up to 10 years from the date on which
          it is granted.  The term of each  Option  shall be  determined  by the
          Board of Director at the time of grant of the Option, provided that if
          no term is  established  by the  Board  of  Directors  the term of the
          Option shall be 10 years from the date on which it is granted.

                                       5
(d) The Board of Directors upon  recommendation of the Committee,  may
          provide in the Option Agreement that the right to exercise each Option
          for the number of shares  subject to each Option  shall  vest,  in the
          Option  holder  over  such  period  of time as the  Committee,  in its
          direction, shall determine for each Option holder. Notwithstanding the
          foregoing,   each  Option  Agreement  shall  provide  that,  upon  the
          occurrence of a Change in Control of the Corporation, all Options then
          outstanding shall become immediately exercisable.

          (e) Options shall be nontransferable  and  nonassignable,  except that
          Options may be transferred by  testamentary  instrument or by the laws
          of descent and  distribution,  and  Nonqualified  Stock Options may be
          transferred  to  family  members  or  family  trusts,  subject  to the
          original terms of the Option.

          (f) Unless the Committee  specifies  otherwise in an Option agreement,
          upon  voluntary  or  involuntary  termination  of an  Option  holder's
          service with the  Corporation,  his Options and all rights  thereunder
          shall  terminate  effective  at the close of  business on the date the
          Option holder ceases to be a Director of regular,  full-time  employee
          of the  Corporation  or any of  its  subsidiaries,  except  (i) to the
          extent previously exercised and (ii) as provided in subparagraphs (g),
          (h) and (i) of this Paragraph 7.

          (g) In the event an Option  holder (i) takes a leave of  absence  from
          the Corporation or any of its  subsidiaries for personal reasons or as
          a result of entry into the armed forces of the United  States,  or any
          of the  departments  or agencies of the United States  government,  or
          (ii) terminates his employment,  or ceases  providing  services to the
          Corporation  or  any  of  its   subsidiaries,   by  reason  of  death,
          disability,  voluntary  termination with the consent of the Committee,
          or other  special  circumstances,  the Committee may consider his case
          and may take such action in respect of the related Option Agreement as
          it  may  deem   appropriate   under   the   circumstances,   including
          accelerating  the time previously  granted for Options to be exercised
          and extending the time  following the Option  holder's  termination of
          active  employment  or  service  during  which  the  Option  holder is
          entitled  to  purchase  the  shares of Common  Stock  subject  to such
          Options,  provided that in no event may any Option be exercised  after
          the expiration of the time of the Option.

          (h) If an Option  holder  dies  during the term of his Option  without
          having fully exercised this Option,  the executor or  administrator of
          his estate or the person who inherits the right to exercise the Option
          by bequest or inheritance shall have the right within two years of the
          Option holder's death to purchase the number of shares of Common Stock
          that the deceased  Option  holder was entitled to purchase at the date
          of his death, after which the Option shall

                                       6
lapse, provided that in no event may any Option be exercised after the
          expiration of the term of the Option.

          (i) If an Option holder terminates employment without his having fully
          exercised  his Option due to his  retirement  with the  consent of the
          Corporation,  then such  Option  holder  shall  have the right  within
          ninety (90) days of the Option  holder's  termination of employment or
          service  to  purchase  the  number of shares of Common  Stock that the
          Option holder was entitled to purchase at the date of his termination,
          after which the Option shall lapse,  provided that in no event may any
          Option be exercised  after the  expiration  of the term of the Option.
          The  Committee  may  cancel  the  Option  during the ninety day period
          referred  to  in  this  paragraph,   if  the  Participant  engages  in
          employment or activities  which, in the opinion of the Committee,  are
          contrary to the best interests of the Corporation. The Committee shall
          determine in each case whether a termination  of employment or service
          shall be considered a retirement with the consent of the  Corporation,
          and,  subject to  applicable  law,  whether a leave of  absence  shall
          constitute a termination of employment.  Any such determination of the
          Committee  shall be final  and  conclusive,  unless  overruled  by the
          Board.

          (j)  The  granting  of an  Option  pursuant  to  the  Plan  shall  not
          constitute or be evidence of any agreement or  understanding,  express
          or implied,  on the part of the Corporation or any of its subsidiaries
          to retain or employ the Option holder for any specified period.

          (k) In addition to the general terms and  conditions set forth in this
          Paragraph  7 in  respect  of  Options  granted  pursuant  to the Plan,
          Incentive Stock Options granted  pursuant to the Plan shall be subject
          to the following additional terms and conditions:

                (i)   "Incentive   Stock  Options"  shall  be  granted  only  to
                individuals  who,  at the  date  of  grant  of the  Option,  are
                employees of the Corporation or any of its subsidiaries;

                (ii) No  employee  who owns  beneficially  more  than 10% of the
                total  combined  voting  power  of all  classes  of stock of the
                Corporation  shall be eligible to be granted an "Incentive Stock
                Option;"

                (iii) The aggregate  fair market value  (determined  at the time
                the  Incentive  Stock Option is granted) of the shares of Common
                Stock  in  respect  of  which   "incentive  stock  options"  are
                exercisable  for the first time by the Option  holder during any
                calendar year (under all such plans of the  Corporation  and its
                subsidiaries) shall not exceed $100,000; and

                                       7
(iv) Any other terms and  conditions  specified  by the Board of
                Directors that are not inconsistent  with the Plan,  except that
                such  terms  and   conditions   must  be  consistent   with  the
                requirements  for "incentive stock options" under Section 422 of
                the Code.

8.    Methods of Exercise of Options

          (a) An Option holder (or other person or person,  if any,  entitled to
          exercise an Option  hereunder)  desiring to exercise an Option granted
          pursuant  to the Plan as to all or part of the shares of Common  Stock
          covered by the Option shall (i) notify the  Corporation  in writing as
          its principal  office at 1000  Bestgate  Road,  Suite 400,  Annapolis,
          Maryland  21401,  to that effect,  specifying  the number of shares of
          Common Stock to be purchased and the method of payment therefore,  and
          (ii) make  payment or  provision  for payment for the shares of Common
          Stock as purchased in accordance  with this  Paragraph 8. Such written
          notice  may be  given  by  means  of a  facsimile  transmission.  If a
          facsimile  transmission  is used,  the Option  holder  should mail the
          original  executed  copy  of the  written  notice  to the  Corporation
          promptly thereafter.

          (b) Payment or provision for payment shall be made as follows:

                (i) The Option  holder shall deliver to the  Corporation  at the
                address set forth in subparagraph 8(a) United States currency in
                an amount equal to the aggregate purchase price of the shares of
                Common Stock as to which such exercise relates; or

                (ii) The Option holder shall tender to the Corporation shares of
                Common Stock already  owned by the Option holder that,  together
                with any cash tendered therewith,  have no aggregate fair market
                value  (determined  based on the Fair Market Value of a share of
                Common  Stock on the date the notice  set forth in  subparagraph
                8(a) is  received  by the  Corporation)  equal to the  aggregate
                purchase  price of the  shares of Common  Stock as to which such
                exercise relates; or

                (iii) The Option  holder  shall  deliver to the  Corporation  an
                exercise  notice  together with  irrevocable  instructions  to a
                broker to deliver promptly to the Corporation the amount of sale
                or loan proceeds  necessary to pay the aggregate  purchase price
                of the shares of Common Stock as to which such exercise  relates
                and to sell  the  shares  of  Common  Stock  to be  issued  upon
                exercise  of the  Option and  deliver  the cash  proceeds,  less
                commission and brokerage fees to the

                                       8
Option holder or to deliver the remaining shares of Common Stock
                to the Option holder.

          Notwithstanding the foregoing provisions,  the Committee and the Board
          of Directors,  in granting Options pursuant to the Plan, may limit the
          methods in which an Option may be  exercised  by any  person  and,  in
          processing any purported exercise of an Option granted pursuant to the
          Plan,  may refuse to recognize the method of exercise  selected by the
          Option  holder  (other  than  the  method  of  exercise  set  forth in
          subparagraph 8(b)(i)).

          (c) In addition to the  alternative  methods of exercise  set forth in
          paragraph  8(b),  holders  of  Nonqualified  Stock  Options  shall  be
          entitled,  at or prior to the time the written notice  provided for in
          subparagraph  8(a) is delivered to the  Corporation,  to elect to have
          the  Corporation  withhold  from  the  shares  of  Common  Stock to be
          delivered upon exercise of the  Nonqualified  Stock Option that number
          of shares of Common Stock  (determined  based on the Fair Market Value
          of a share  of  Common  Stock  on the date  the  notice  set  forth in
          subparagraph 8(a) is received by the Corporation) necessary to satisfy
          any withholding taxes attributable to the exercise of the Nonqualified
          Stock  Option.  Alternatively,  such  holder of a  Nonqualified  Stock
          Option may elect to deliver  previously  owned  shares of Common Stock
          upon  exercise  of  the  Nonqualified  Stock  Option  to  satisfy  any
          withholding  taxes  attributable  to the exercise of the  Nonqualified
          Stock  Option.  If  the  Board  of  Directors  does  not  include  any
          provisions  relating to this  withholding  feature in its  resolutions
          granting the Nonqualified Stock Option or in the Option Agreement. The
          maximum  amount that an Option  holder may elect to have withheld from
          the shares of Common Stock otherwise  deliverable upon exercise or the
          maximum number of previously owned shares in Option holder may deliver
          shall  be  equal  to  the  minimum  federal  and  state   withholding.
          Notwithstanding the foregoing  provisions,  the Committee or the Board
          of Directors may include in the Option Agreement  relating to any such
          Nonqualified  Stock  Option  provisions  limiting or  eliminating  the
          Option  holder's  ability to pay his  withholding  tax obligation with
          shares of Common Stock;  or if no such  provisions are included in the
          Option Agreement,  but in the opinion of the Committee or the Board of
          Directors  such  withholding  would have an adverse tax or  accounting
          effect to the Corporation, at or prior to exercise of the Nonqualified
          Stock  Option the  Committee  or the Board of  Directors  may limit or
          eliminate  the  Option  holder's  ability to pay his  withholding  tax
          obligation with shares of Common Stock.  Notwithstanding the foregoing
          provisions, a holder of Nonqualified Stock Option may not elect any of
          the methods of satisfying his withholding tax obligation in respect of
          any exercise if, in the opinion of counsel to the  Corporation,  there
          is a  substantial  likelihood  that  the  election  or  timing  of the
          election  would

                                       9
subject the holder to a substantial risk of liability under Section 16
          of the Exchange Act.

          (d) An Option  holder at any time may elect in  writing  to abandon an
          Option  in  respect  of all or part of the  number of shares of Common
          Stock as to which the Option shall not have been exercised.

          (e) An Option holder shall have none of the rights of a stockholder of
          the Corporation until the shares of Common Stock covered by the Option
          are issued to him upon exercise of the Option.

9.    Deferred Shares

          (a)  Elections  to  Defer.  The  Committee  may at any time  allow any
          Participant  (or  Participants)  who  is a  member  of  the  Board  of
          Directors,  or a member  of a select  group of  management  or  highly
          compensated employees (within the meaning of the Employees' Retirement
          Income Security Act of 1973, with each such individual  being referred
          to herein  as a  "Participant")  may  irrevocably  elect,  on the form
          attached  hereto as  Exhibit A (the  "Election  Form"),  to forego the
          receipt  of  cash  compensation  and  in  lieu  thereof  to  have  the
          Corporation credit Deferred Shares to the Participant's Account with a
          Fair Market Value equal to the  compensation  deferred.  Each Election
          Form shall take effect five  business  days after its  delivery to the
          Committee,  unless in the meantime the Committee sends the Participant
          a  written  notice  explaining  why  the  Election  Form  is  invalid.
          Notwithstanding  the  foregoing  sentence,  Election  Forms  shall  be
          ineffective with respect to any compensation  that a Participant earns
          before the date on which the Committee receives the Election Form.

          (b) Vesting.  Deferred Shares shall be 100% vested at all times.

          (c)  Recordkeeping;  Cash Earnings on Deferred  Shares.  The Committee
          shall  establish  and  maintain  an  individual   account  (the  "Cash
          Account") in the name of each  Participant who files an Election Form.
          On the last day of each fiscal quarter,  the Corporation  shall credit
          to the  Participant's  Cash  Account  any cash  dividends  paid on the
          balance of Deferred Shares credited to the Participant's  Account.  On
          the last day of each fiscal  year of the  Corporation,  the  Committee
          shall  credit to the  Participant's  Account  Deferred  Shares  with a
          Market  Value equal to the balance of the  Participant's  Cash Account
          (without  regard  to  fractional  shares),  and  the  balance  of  the
          Participant's  Cash  Account  shall be reduced to zero.  The  Trustees
          shall hold each  Participant's  Deferred Shares until  distribution is
          required pursuant to subsection (d) hereof.

                                       10
(d) Distributions of Deferred Shares and Earnings.  The Trustees shall
          distribute a Participant's Deferred Shares in five substantially equal
          annual  installments  that are paid before the last day of each of the
          five fiscal years of the Corporation  that end after the date on which
          the   Participant's   Continuous   Service   terminates,   unless  the
          Participant has properly elected a different form of distribution,  on
          the form (the "Distribution Election Form") approved by the Committee,
          and the Committee has received the Participant's Distribution Election
          Form  either more than 90 days before a Change in Control or more than
          one year before the date on which the Participant's Continuous Service
          terminates for any reason. Fractional Shares shall not be distributed.

          (e) Hardship  Withdrawals.  Notwithstanding any other provision of the
          Plan or a  Participant's  Election Form, in the event the  Participant
          suffers an  unforeseeable  hardship within the  contemplation  of this
          Section,  the  Participant may apply to the Committee for an immediate
          distribution of all or a portion of his Deferred Shares.  The hardship
          must  result from a sudden and  unexpected  illness or accident of the
          Participant  or a  dependent  of the  Participant,  casualty  loss  of
          property,  or other  similar  conditions  beyond  the  control  of the
          Participant.  Examples of purposes which are not considered  hardships
          include  post-secondary  school  expenses  or the desire to purchase a
          residence.  In no event will a distribution  be made to the extent the
          hardship could be relieved  through  reimbursement  or compensation by
          insurance  or  otherwise,  or  by  liquidation  of  the  Participant's
          nonessential  assets to the extent such  liquidation  would not itself
          cause a severe  financial  hardship.  The  amount of any  distribution
          hereunder  shall be  limited to the amount  necessary  to relieve  the
          Participant's  financial  hardship.  The  determination  of  whether a
          Participant  has a qualifying  hardship and the amount which qualifies
          for  distribution,  if any, shall be made by the Committee in its sole
          discretion.  The  Committee  may  require  evidence of the purpose and
          amount  of the  need,  and may  establish  such  application  or other
          procedures as it deems appropriate.

          (e) Rights to Deferred Shares. A Participant may not assign his or her
          claim to Deferred  Shares during his or her lifetime.  A Participant's
          right to Deferred  Shares shall at all times  constitute  an unsecured
          promise of the Corporation to pay benefits as they come due. The right
          of the  Participant  or his or her  beneficiary  to  receive  benefits
          hereunder  shall be solely an  unsecured  claim  against  the  general
          assets of the  Corporation.  Neither  the  Participant  nor his or her
          beneficiary  shall have any claim  against  or rights in any  specific
          assets, shares, or other funds of the Corporation.

                                       11
10.   Restricted Share Awards

          (a)  Grants.   The  Committee  shall  have  the  discretion  to  grant
          Restricted  Share  Awards to  Employees  and  members  of the Board of
          Directors.  As promptly as practicable  after a determination  is made
          that a  Restricted  Share  Award is to be made,  the  Committee  shall
          notify the  Participant  in  writing  of the grant of the  Award,  the
          number of Shares  covered by the  Award,  and the terms upon which the
          Shares  subject  to the  Award  may be  earned.  The date on which the
          Committee so notifies the Participant  shall be considered the date of
          grant of the  Restricted  Share Awards.  The Committee  shall maintain
          records as to all grants of Restricted Share Awards under the Plan.

          (b) Earning Shares. Unless the Committee  specifically  eliminates any
          vesting  schedule in an Agreement  granting a Restricted  Share Award,
          Shares  subject to Restricted  Share Awards shall be earned and become
          non-forfeitable by a Participant  according to the following schedule,
          provided the  Participant  is an Employee or Director on the scheduled
          vesting date:

                                          Vested Percentage
               Years of Service        (applied to Restricted
               ----------------               Shares)
                                              -------

                  Less than 1                     0%
                       1                         25%
                       2                         50%
                       3                         75%
                   4 or More                     100%

       Notwithstanding   the  foregoing  and  unless  otherwise  provided  in  a
   Participant's  Restricted Stock Award,  each Participant  shall become (100%)
   vested  immediately (i) upon termination of the Participant's  service due to
   the  Participant's  disability or death,  or (ii) upon a Change in Control of
   the Corporation.

    (c)Accrual  of  Dividends.  Whenever  Shares  are paid to a  Participant  or
    Beneficiary  under Section 11(d), such Participant or Beneficiary shall also
    be entitled to receive,  with respect to each Share paid, an amount equal to
    any cash  dividends  (including  special large and  nonrecurring  dividends,
    including   one  that  has  the  effect  of  a  return  of  capital  to  the
    Corporation's  stockholders) and a number of shares of Common Stock equal to
    any stock  dividends,  declared  and paid with  respect to a share of Common
    Stock  between the date the relevant  Restricted  Share Award was  initially
    granted to such  Participant and the date the Shares are being  distributed.
    There shall

                                       12
also be  distributed  an  appropriate  amount of net earnings,  if any, with
    respect to any cash dividends so paid out.

    (d)Distribution of Shares.

                (i) Timing of  Distributions:  General Rule. Except as otherwise
                expressly  stated in this Plan, the Committee  shall  distribute
                Shares and  accumulated  cash from dividends and interest to the
                Participant or his  Beneficiary,  as the case may be, as soon as
                practicable  after they have been earned.  No fractional  shares
                shall be distributed.

                (ii) Form of  Distribution.  The Committee shall  distribute all
                Shares,  together with any shares  representing stock dividends,
                in the form of Common Stock.  One share of Common Stock shall be
                given  for  each  Share  earned.   Payments   representing  cash
                dividends (and earnings thereon) shall be made in cash.

                (iii)  Withholding.  The Committee  shall withhold from any cash
                payment  made  under this Plan  sufficient  amounts to cover any
                applicable  withholding and employment  taxes, and if the amount
                of such cash  payment is not  sufficient,  the  Committee  shall
                require the  Participant  or Beneficiary to pay to the Committee
                the amount  required to be withheld as a condition of delivering
                the Shares.  The Committee  shall pay over to the Corporation or
                Affiliate  which employs or employed such  Participant  any such
                amount withheld from or paid by the Participant or Beneficiary.

                (iv)Regulatory   Exceptions.   No  Restricted  Shares  shall  be
                    distributed  unless and until all of the requirements of all
                    applicable  law  and  regulations   shall  have  been  fully
                    complied with, including the receipt of approval of the Plan
                    by the stockholders of the Corporation by such vote, if any,
                    as may be required by applicable law and regulations.

    (e)Voting  of Plan  Shares.  All  shares of Common  Stock  subject to Awards
    (whether or not subject to a  Restricted  Share Award) shall be voted by the
    Board in the manner directed by the Board.

    (f)Deferral  Elections.  At any time 12 months  prior to the date on which a
    Participant  becomes  vested in any shares  subject to his or her Restricted
    Share Award,  a Participant  who is a member of a select group of management
    or highly  compensated  employees  (within  the  meaning  of the  Employees'
    Retirement  Income Security Act of 1973) may irrevocably  elect, on the form
    (the "Election Form") approved by the Committee, to defer the receipt of all
    or a percentage  of the Shares that would  otherwise be  transferred  to the
    Participant upon the vesting of such

                                       13
Award.  If such an  election  is made,  the Shares  shall be credited to the
    Participant's  Account  as  Deferred  Shares on the date such  Shares  would
    otherwise have been distributed to the Participant.

11.   Amendments and Discontinuance of the Plan

      The Board of  Directors  shall have the right at any time and from time to
time to amend, modify, or discontinue the Plan provided that, except as provided
in subparagraph 6(c), no such amendment,  modification, or discontinuance of the
Plan shall (i) revoke or alter the terms of any valid Option previously  granted
pursuant to the Plan,  (ii)  increase  the number of share of Common Stock to be
reserved for issuance and sale pursuant to Options granted pursuant to the Plan,
(iii)  decrease the exercise  price  determined  pursuant to the  provisions  of
subparagraph  7(b), or (iv) provide for Options  exercisable  more than 10 years
after the date granted.

12.   Plan Subject to Governmental Laws and Regulations

      The Plan and the grant of Awards  pursuant to the Plan shall be subject to
all applicable  governmental  laws and  regulations.  Notwithstanding  any other
provision of the Plan to the  contrary,  the Board of Directors  may in its sole
and  absolute  discretion  make such  changes in the Plan as may be  required to
conform the Plan to such laws and regulations.

13.   Duration of the Plan

      No  Option  shall be  granted  pursuant  to the Plan  after  the  close of
business on March 23, 2010.

                                       14
Exhibit B
                                    ---------
                           Designation of Beneficiary

     In connection  with the Deferred  Share  Agreement  (the  "Deferred  Shares
Agreement")  entered  into on ________,  2000,  between the  Annapolis  National
Bancorp, Inc. (the "Company") and _________________________________________,  an
individual  residing at  _________________________________________________  (the
"Participant"),  the Participant hereby designates the person specified below as
the  beneficiary  of the  Participant's  interest in ______  Deferred  Shares of
Common Stock of the Company awarded  pursuant to the Deferred Shares  Agreement.
This  designation  shall  remain in  effect  until  revoked  in  writing  by the
Participant.

               Name of Beneficiary:    __________________________

               Address:                __________________________

                                       __________________________

                                       __________________________

               Social Security No.:    __________________________

     The Participant  understands that this designation  operates to entitle the
above-named beneficiary to the rights conferred by the Deferred Shares Agreement
from the date this form is  delivered  to the  Company  until  such date as this
designation is revoked in writing by the  Participant,  including by delivery to
the Company of a written designation of beneficiary  executed by the Participant
on a later date.

                                         Date:   ______________________________

                                           By:   ______________________________
                                                 [Participant Name]

Sworn to before me this

___ day of __________, _____.

_________________________
Notary Public

County of _______________

State of _________________