CENTRAL FEDERAL CORPORATION INCENTIVE COMPENSATION PLAN

I.

PLAN OBJECTIVES

·

provide employees with incentives that appropriately balance risk and reward;

·

are compatible with effective controls and risk management; and

·

are supported by strong corporate governance, including active and effective oversight by the Board.

II.

GRANTING AWARDS

(a)

Selection of Participants.  For each Performance Period, the Compensation Committee shall approve those key employees and officers of the Company who have been selected to be Participants for that Performance Period.

(b)

Selection of Performance Objectives.  For each Performance Period, the Compensation Committee shall approve or establish:

(i)

Performance objectives based on the Performance Criteria described in Section IX of the Plan that will be used to determine the amount payable with respect to Awards, based on recommendations provided by the Company;

(ii)

The requisite level of achievement (which may include “threshold,” “target” and “maximum” levels) of such performance objectives;

(iii)

The method for determining the amount payable based on the achievement of the performance objectives; and

(iv)

Any other terms and conditions of the Award, including, without limitation, a requirement that some portion of the Award be payable in the form of equity or that payment be deferred.

(c)

Timing.  The Compensation Committee shall establish the performance objectives, the level of achievement and the method for determining the amount payable with respect to Awards before the outcome of such performance objectives is substantially certain for such Performance Period and as soon as reasonably practicable. 

(d)

Newly Eligible Participants.  The eligibility of an employee who becomes a Participant during a Performance Period to receive an Award under this Plan for such Performance Period shall be determined by the Compensation Committee in its sole discretion.

(e)

Modifying Performance Objectives.  Performance objectives relating to such Awards may be calculated without regard to extraordinary items or may be adjusted, as the Compensation Committee deems equitable, in recognition of unusual or non-recurring events affecting the Company (or its Affiliates) or changes in applicable tax laws or accounting principles.

III.

PAYMENT OF AWARDS

(a)

Determination of Amount Payable.  For each Performance Period, the Compensation Committee shall determine the extent to which the performance objectives and other terms and conditions applicable to an Award have been achieved, if at all, and based on this determination, shall certify the amount “earned,” if any, with respect to each Award. 

(b)

Eligibility for Payment.  Except as otherwise determined by the Committee, in order to receive payment with respect to an Award, the Participant must: 

(i)

Have achieved a satisfactory performance level; and

(ii)

Except as otherwise provided herein, remain an active employee of the Company or an Affiliate on the date that payment is made.

(c)

Timing of Payment.  Unless the Participant has forfeited an Award pursuant to Sections IV(b) or VII of the Plan or the Board or Compensation Committee has exercised its discretion to reduce an earned Award pursuant to Section III(e) of the Plan,  the entire earned Award shall be paid within two and one-half months following the end of the relevant Performance Period.

(d)

Effect of Death, Disability or Retirement.  Except as otherwise determined by the Board or Compensation Committee at the time an Award is granted or thereafter, if a Participant dies, becomes Disabled or Retires prior to the date on which an Award is paid, the Participant shall remain eligible for payment with respect to that Award; however, the amount payable with respect to such Award shall be prorated based on the ratio of the number of whole months elapsed during the Performance Period prior to the Participant’s death, Disability or Retirement to the number of whole months in the Performance Period.  Any payment due under this Section III(d) of the Plan in connection with a Participant’s death or Disability shall be paid within 30 days after the later of (i) the date of the Participant’s death or Disability, or (ii) the date the first payment under Section III(c)(i) would otherwise have been payable in connection with an Award had the Participant been employed on that date.  Any payment due under this Section III(d) of the Plan in connection with the Participant’s Retirement shall be paid at the time otherwise provided under Section III(c).

(e)

Negative Discretion.    The amount actually payable with respect to an Award to a Participant may be less than the amount otherwise payable based on the satisfaction of the performance objectives and other terms and conditions of such Award if the Board or Compensation Committee, in its sole discretion, determines that payment of the full amount would not be consistent with the intent and purposes of the Plan and Award or would otherwise violate law or regulation of any exchange on which an Company’s stock is traded.    

IV.

CONTROLS

(a)

Limitations on Payment.  Payments to Participants will be made following an external review and validation of the organization’s financials for the incentive period or any other factors that would impact the financial condition of the organization. No amount will be payable under the Plan if payment with respect to Awards would jeopardize the safety and soundness of the Company or any Affiliate. 

(b)

Forfeiture of Awards. Participants who, in the sole judgment of the Board or Compensation Committee, have willfully engaged in any activity, injurious to the Company or any Affiliate, including the inappropriate manipulation of performance or financial results, will forfeit any Award earned during the Performance Period in which the termination occurred.

V.

ADMINISTRATION

VI.

AMENDMENT AND TERMINATION

VII.

RECOUPMENT OF INCENTIVE COMPENSATION

VIII.

MISCELLANEOUS

(a)

No Guarantee of Employment.  This Plan is not an employment policy or contract.  It does not give any Participant the right to remain an employee of the Company or an Affiliate, nor does it interfere with the Company’s or an Affiliate’s right to terminate the Participant, with or without case, which right is expressly reserved. 

(b)

Non-Transferability.  The rights of Participants under this Plan cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.

(c)

Applicable Law.  The Plan and all rights hereunder shall be governed by the laws of the State of Ohio, without regard to any conflicts of laws principles, except to the extent preempted by the laws of the United States of America.

(d)

Entire Plan.  This Plan (including any written or electronic communication to a Participant setting forth the terms and conditions of an Award for a Plan Year) constitutes the entire agreement between the Company and the Participant as to the subject matter hereof.  No rights are granted to the Participant by virtue of this Plan other than those specifically set forth herein.

(e)

Tax Withholding.  The Company or an Affiliate, as applicable, shall have the power and the right to deduct, withhold or collect any amount required by law or regulation to be withheld with respect to any taxable event arising with respect to an Award granted under the Plan. 

(f)

Section 409A of the Code.  Awards granted pursuant to the Plan that are subject to Section 409A of the Code, or that are subject to Section 409A of the Code but for which an exception from Section 409A of the Code applies, are intended to comply with or be exempt from Section 409A of the Code and the Treasury Regulations promulgated thereunder, and the Plan shall be interpreted, administered and operated accordingly.  If a Participant is determined to be a “specified employee” (within the meaning of Section 409A of the Code and as determined under the Company’s policy for determining specified employees), the Participant shall not be entitled to payment or to distribution of any portion of an Award that is subject to Section 409A of the Code (and for which no exception applies) and is payable or distributable on account of the Participant’s “separation from service” (within the meaning of Section 409A of the Code) until the expiration of six (6) months from the date of such separation from service (or, if earlier, the Participant’s death).  Such Award, or portion thereof, shall be paid or distributed on the first (1st) business day of the seventh (7th) month following such separation from service.  Nothing in the Plan shall be construed as an entitlement to or guarantee of any particular tax treatment to a Participant and none of the Company, its Affiliates, or members of the Board or Compensation Committee shall have any liability with respect to any failure to comply with the requirements of Section 409A of the Code.

IX.

DEFINITIONS

(a)

Affiliate means any entity that, along with the Company, would be treated as a single employer for purposes of Sections 414(b) or 414(c) of the Code, but as modified under any Code section relevant to the purpose for which the definition is applied.

(b)

Award means the right to a payment of compensation pursuant to this Plan based on the achievement of performance objectives established by the Compensation Committee pursuant to this Plan.

(c)

Board means the Company’s board of directors as constituted from time to time.

(d)

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

(e)

Company means Central Federal Corporation and any successor.

(f)

Compensation Committee means the compensation committee of the Board.

(g)

Disability or Disabled means a Participant’s eligibility for benefits under the Company’s long-term disability plan, or in the absence of any such plan Disability shall mean a physical or mental condition which, in the sole discretion of the Compensation Committee, is reasonably expected to be of indefinite duration and to substantially prevent the Participant from fulfilling his duties or responsibilities to the Company or an Affiliate.

(h)

Participant means, with respect to each Performance Period, each employee approved for participation by the Compensation Committee. 

(i)

Performance Criteria means: (a) earnings or earnings per share (whether on a pre-tax, after-tax, operational or other basis); (b) return on equity; (c) return on assets; (d) revenues; (e) expenses or expense levels; (f) one or more capital or operating ratios; (g) stock price; (h) stockholder return; (i) market share; (j) cash flow; (k) capital expenditures; (l) net borrowing, debt, leverage levels or debt ratings; (m) strategic objectives (including, mergers, acquisitions, dispositions, public offerings or similar extraordinary business transactions); (n) net asset value per share, (o) growth in deposits or assets; (p) asset or credit quality; (q) economic value added; (r) regulatory compliance; or (s) such other measures as the Board may select from time to time.

(j)

Performance Period means, unless a different period is established by the Compensation Committee, each 12 month period beginning January 1.

(k)

Plan means this Central Federal Corporation Incentive Compensation Plan, as it may be amended from time to time.

(l)

Retirement or Retires means a Participant’s termination from employment in accordance with the official retirement policies of the Company.

X.

ETHICS AND INTERPRETATION