NEWTEK CAPITAL INC
DEFERRED COMPENSATION PLAN
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>2
<FILENAME>0002.txt
<DESCRIPTION>DEFERRED COMPENSATION PLAN
<TEXT>

                              NEWTEK CAPITAL, INC.
                            2000 STOCK INCENTIVE AND
                           DEFERRED COMPENSATION PLAN


     1. PURPOSE OF THE PLAN.

     The purpose of this Plan is to advance the interests of the Company through
providing  Directors and select Employees of the Company and its Affiliates with
the  opportunity to acquire Shares.  By encouraging  such stock  ownership,  the
Company seeks to attract,  retain and motivate the best available  personnel for
positions of substantial  responsibility and to provide additional incentives to
Directors  and  Employees of the Company or any Affiliate to promote the success
of the  business.  This Plan also has deferred  compensation  features  that are
intended to provide  deferred  income and retirement  benefits for the Company's
directors and any officers  selected by its Board of Directors.  The Plan is not
tax-qualified  under  Section  401 of the Code,  and the  deferred  compensation
features of the Plan are unfunded and primarily for a select group of Directors,
management or highly compensated  employees within the meaning of Section 201(2)
of the Employee Retirement Income Security Act of 1974, as amended.

     2. DEFINITIONS.

     As used herein, the following definitions shall apply.

     (a)  "Acceptance"  shall mean  acceptance by the  Committee,  or a Deferral
Election Form,  Distribution  Election Form, or Investment  Election Form (which
acceptance shall be presumed unless, within ten business days of a Participant's
election to a Director,  the Committee  provides the Participant  with a written
notice detailing the reasons for its rejection).

     (b) "Account" shall mean a bookkeeping account maintained by the Company in
the name of the Participant.

     (c)  "Affiliate"  has the  meaning  set forth in Rule 12b-2 of the  General
Rules and Regulations of the Securities Exchange Act of 1934, as amended.

     (d) "Agreement"  shall mean a written  agreement entered into in accordance
with Paragraph 5(c).

     (e) "Award" shall mean a Deferred Share, Option, Restricted Share Award, or
SAR awarded pursuant to the Plan.

     (f) "Board" shall mean the Board of Directors of the Company.

     (g) "Change in Control" shall mean any one of the following events: (1) the
acquisition following the Effective Date of ownership,  holding or power to vote
more than 25% of the Company's  voting stock, (2) the acquisition of the ability
to control  the  election  of a majority  of the  Company's  directors,  (3) the
acquisition  of a controlling  influence  over the management or policies of the
Company by any person or by persons  acting as a "group"  (within


<PAGE>

the meaning of Section  13(d) of the  Securities  Exchange Act of 1934),  or (4)
during  any  period  of two  consecutive  years,  individuals  (the  "Continuing
Directors")  who at the  beginning  of  such  period  constitute  the  Board  of
Directors  of the  Company  (the  "Existing  Board")  cease  for any  reason  to
constitute  at least  two-thirds  thereof,  provided that any  individual  whose
election  or  nomination  for  election  as a member of the  Existing  Board was
approved by a vote of at least  two-thirds of the  Continuing  Directors then in
office  shall be  considered  a  Continuing  Director.  For purposes of defining
Change in Control,  the term "person"  refers to an individual or a corporation,
partnership,   trust,   association,   joint  venture,  pool,  syndicate,   sole
proprietorship,  unincorporated  organization  or any other  form of entity  not
specifically listed herein. The decision of the Committee as to whether a Change
in Control has occurred shall be conclusive and binding.

     (h) "Code" shall mean the Internal Revenue Code of 1986, as amended.

     (i) "Committee" shall mean the Stock Incentive  Committee  appointed by the
Board in accordance with Paragraph 5(a) hereof;  provided that the Board may act
in lieu of the  Committee  with respect to any matter as to which the  Committee
may act.

     (j) "Common Stock" shall mean the common stock of the Company.

     (k) "Company" shall mean Newtek Capital, Inc.

     (l)  "Continuous  Service"  shall mean the absence of any  interruption  or
termination  of  service  as an  Employee  or  Director  of  the  Company  or an
Affiliate. Continuous Service shall not be considered interrupted in the case of
(1) sick leave,  military  leave or any other  leave of absence  approved by the
Company,  (2) transfers  between payroll locations of the Company or between the
Company, an Affiliate or a successor,  (3) a Director's  performance of services
in an emeritus  or advisory  capacity,  or (4) changes  between a  Participant's
status as an Employee or  Director  provided  the  Participant  is  continuously
performing services for the Company or an Affiliate.

     (m) "Deferrals"  shall mean any  Participant-directed  deferrals that occur
pursuant to Section 10(a) hereof.

     (n)  "Deferred  Shares"  shall mean Shares  that the Company has  credited,
pursuant to Paragraph 10 hereof, to a deferred  compensation account in the name
of a Participant.

     (o)  "Director"  shall mean any member of the Board,  and any member of the
board of directors or manager,  in the case of a limited liability  company,  of
any Affiliate that the Board has by resolution  designated as being eligible for
participation in this Plan.

     (p) "Disability"  shall mean a physical or mental  condition,  which in the
sole and absolute  discretion of the Committee,  is reasonably expected to be of
indefinite  duration and to substantially  prevent a Participant from fulfilling
his or her duties or responsibilities to the Company or an Affiliate.

     (q) "Effective Date" shall mean the date specified in Paragraph 14 hereof.

                                       2
<PAGE>

     (r)  "Employee"  shall  mean  any  person  employed  by the  Company  or an
Affiliate.

     (s)  "Exercise  Price" shall mean the price per Optioned  Share at which an
Option may be exercised.

     (t) "Investment Election Form" means shall mean the form attached hereto as
Exhibit "C".

     (u) "ISO" shall mean an option to purchase  Common  Stock,  which meets the
requirements,  set forth in the Plan,  and which an Agreement  identifies  as an
"incentive stock option" within the meaning of Section 422 of the Code.

     (v) "Market Value" shall mean the fair market value of the Common Stock, as
determined under Paragraph 7(b) hereof.

     (w) "Non-Employee Director" shall have the meaning provided in Rule 16b-3.

     (x) "Non-ISO" shall mean an option to purchase Common Stock which meets the
requirements  set forth in the Plan but  which an  Agreement  identifies  as not
being an ISO.

     (y) "Option" shall mean an ISO or a Non-ISO.

     (z)  "Optioned  Shares"  shall mean  Shares  subject  to an Option  granted
pursuant to this Plan.

     (aa) "Participant"  shall mean any person who receives an Award pursuant to
the Plan.

     (bb) "Plan" shall mean this Newtek  Capital,  Inc. 2000 Stock Incentive and
Deferred Compensation Plan.

     (cc)  "Restricted  Share Award" shall mean a right granted under Section 11
of this Plan to receive Shares.

     (dd)  "Rule  16b-3"  shall  mean  Rule  16b-3  of  the  General  Rules  and
Regulations under the Securities Exchange Act of 1934, as amended.

     (ee) "Share" shall mean one share of Common Stock.

     (ff) "SAR" (or "Stock  Appreciation  Right")  shall mean a right to receive
the  appreciation  in value,  or a portion of the  appreciation  in value,  of a
specified number of shares of Common Stock over a specified period of time.

     (gg) "Trust" shall mean the trust created under the Trust Agreement.

     (hh) "Trust  Agreement"  shall mean the agreement  entered into between the
Company and the Trustee, pursuant to the terms hereof.

                                       3
<PAGE>

     (ii)  "Trustee"  shall  mean  the  person(s)  or  entity  appointed  by the
Committee pursuant to the Trust Agreement to hold legal title to the Plan assets
for the purposes set forth herein.

     (jj) "Year of Service" shall mean a full twelve-month period, measured from
the grant date of an Award and each  annual  anniversary  of that  date,  during
which a Participant has not terminated Continuous Service for any reason.

     3. TERM OF THE PLAN AND OPTIONS.

     (a) Term of the Plan. This Plan shall remain in effect until  terminated by
the Board.  Termination  of the Plan  shall not  affect  any  Awards  previously
granted,  and such Awards  shall remain valid and in effect until they have been
earned and paid, or by their terms expire or are  forfeited.  No Option shall be
granted under the Plan after ten years from the Effective Date.

     (b) Term of Options.  The term of each Option  granted under the Plan shall
be  established  by the  Committee,  but  shall not  exceed 10 years;  provided,
however,  that in the case of an Employee who owns Shares representing more than
10% of the outstanding  Common Stock at the time an ISO is granted,  the term of
such ISO shall not exceed five years.

     4. SHARES SUBJECT TO THE PLAN.

     Except as otherwise  required  under  Section 12, the  aggregate  number of
Shares  deliverable  pursuant to Awards shall not exceed 2,250,000 Shares.  Such
Shares may either be authorized but unissued Shares, Shares held in treasury, or
Shares  held in a grantor  trust  created by the  Company.  If any Award  should
expire, become unexercisable, or be forfeited for any reason, the Shares subject
to the Award shall, unless the Plan shall have been terminated, be available for
the grant of additional Awards under the Plan.

     5. ADMINISTRATION OF THE PLAN.

     (a)  Composition of the Committee.  The Plan shall be  administered  by the
Committee, appointed by the Board, and consisting of at least two members of the
Board who are  Non-Employee  Directors.  Members of the Committee shall serve at
the  pleasure  of the  Board.  In the  absence  at any time of a duly  appointed
Committee,  the Plan shall be administered by those members of the Board who are
Non-Employee Directors.

     (b) Powers of the Committee. Except as limited by the express provisions of
the Plan or by resolutions  adopted by the Board,  the Committee shall have sole
and complete  authority  and  discretion  (i) to select  Participants  and grant
Awards,  (ii) to determine the form and content of Awards to be issued under the
Plan,  (iii) to interpret the Plan,  (iv) to prescribe,  amend and rescind rules
and  regulations  relating  to the Plan,  and (v) to make  other  determinations
necessary or advisable for the  administration  of the Plan. The Committee shall
have and may exercise  such other power and  authority as may be delegated to it
by the  Board  from time to time.  A  majority  of the  entire  Committee  shall
constitute  a quorum and the action of a majority of the members  present at any
meeting at which a quorum is present,  or acts approved in writing by a majority
of the Committee without a meeting, shall be deemed the action of the Committee.

                                       4
<PAGE>

     (c)  Agreement.  Each  Award  shall be  evidenced  by a  written  agreement
containing  such  provisions  as may be  approved  by the  Committee.  Each such
Agreement  shall  constitute  a binding  contract  between  the  Company and the
Participant, and every Participant,  upon acceptance of such Agreement, shall be
bound by the terms and restrictions of the Plan and of such Agreement. The terms
of each such Agreement  shall be in accordance with the Plan, but each Agreement
may include  such  additional  provisions  and  restrictions  determined  by the
Committee,  in its  discretion,  provided that such  additional  provisions  and
restrictions are not inconsistent with the terms of the Plan. In particular, for
an Agreement awarding an Option, the Committee shall set forth in each Agreement
(i) the Exercise  Price of an Option,  (ii) the number of Shares subject to, and
the expiration date of, the Option,  (iii) the manner, time and rate (cumulative
or otherwise) of exercise or vesting of such Option,  and (iv) the restrictions,
if any, to be placed upon such  Option,  or upon Shares which may be issued upon
exercise of such Option.

     The  Chairman of the  Committee  and such other  Directors  and officers as
shall be designated by the Committee are hereby authorized to execute Agreements
on behalf of the Company and to cause them to be delivered to the  recipients of
the Awards.

     (d) Effect of the Committee's Decisions. All decisions,  determinations and
interpretations  of the Committee  shall be final and  conclusive on all persons
affected thereby.

     (e) Indemnification. In addition to such other rights of indemnification as
they may have, the members of the Committee  shall be indemnified by the Company
in connection with any claim,  action, suit or proceeding relating to any action
taken or  failure  to act  under or in  connection  with the Plan or any  Award,
granted hereunder to the full extent provided for under the Company's  governing
instruments with respect to the indemnification of Directors.

     6. GRANT OF OPTIONS.

     (a)  General  Rule.  The  Committee  shall  have  the  discretion  to grant
Directors (including members of the Committee) and Employees Options to purchase
Optioned  Shares,  which  shall be subject  to any  restrictions  or  conditions
imposed pursuant to Section 18 of this Plan.

     (b) Automatic Grants to Non-Employee  Directors.  Notwithstanding any other
provisions of this Plan, each Non-Employee  Director shall receive, on July 1 of
each year,  beginning on the year following  three years of Continuous  Service,
Non-ISOs to purchase 10,000 Shares.

     (c) Special Rules for ISOs. The aggregate  Market Value, as of the date the
Option is granted,  of the Shares with respect to which ISOs are exercisable for
the first time by an Employee  during any  calendar  year  (under all  incentive
stock option plans, as defined in Section 422 of the Code, of the Company or any
present  or  future  Affiliate  of  the  Company)  shall  not  exceed  $100,000.
Notwithstanding the foregoing,  the Committee may grant Options in excess of the
foregoing  limitations,  in which  case such  Options  granted in excess of such
limitation shall be Options which are Non-ISOs.

                                       5
<PAGE>

     7. EXERCISE PRICE FOR OPTIONS.

     (a) Limits on Committee Discretion. The Exercise Price for an ISO shall not
be less  than 100% of the  Market  Value of the  Optioned  Shares on the date of
grant. In the case of an Employee who owns Shares  representing more than 10% of
the Company's  outstanding Shares of Common Stock at the time an ISO is granted,
the  Exercise  Price  shall  not be less than  110% of the  Market  Value of the
Optioned Shares at the time the ISO is granted. The Exercise Price for a Non-ISO
shall not be less than 50% of the  Market  Value of the  Optioned  Shares on the
date of grant.

     (b) Standards for Determining Exercise Price. If the Common Stock is listed
on a national  securities exchange (including the NASDAQ National Market System)
on the date in question, then the Market Value per Share shall be the average of
the highest and lowest  selling price on such exchange on such date, or if there
were no sales on such date,  then the  Exercise  Price shall be the mean between
the bid and asked price on such date.  If the Common  Stock is traded  otherwise
than on a national securities exchange on the date in question,  then the Market
Value per Share shall be the mean  between the bid and asked price on such date,
or,  if there is no bid and asked  price on such  date,  then on the next  prior
business day on which there was a bid and asked price.  If no such bid and asked
price is  available,  then the Market  Value per Share  shall be its fair market
value as determined by the Committee, in its sole and absolute discretion.

     8. EXERCISE OF OPTIONS.

     (a)  Generally.  Unless the Committee  specifically  eliminates any vesting
requirement or imposes a different vesting schedule in an Agreement  granting an
Option, each Option Participant shall became vested in the right to exercise his
or her Options according to the following schedule:

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

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


     Notwithstanding the foregoing,  each Participant shall become (100%) vested
immediately (i) upon termination of the Participant's  Continuous Service due to
the  Participant's  Disability or death, or (ii) upon a Change in Control or, if
earlier,  the execution of an agreement to effect a Change in Control. An Option
may not be exercised for a fractional Share.

     (b) Procedure for Exercise.  A Participant may exercise an Option,  subject
to provisions relative to its termination and limitations on its exercise,  only
by (i)  written  notice of

                                       6
<PAGE>

intent to exercise the Option with respect to a specified number of Shares,  and
(ii) payment to the Company  (contemporaneously with delivery of such notice) in
cash, in Common Stock,  or a combination of cash and Common Stock, of the amount
of the Exercise  Price for the number of Shares with respect to which the Option
is then being exercised.  Each such notice (and payment where required) shall be
delivered,  or mailed by prepaid registered or certified mail,  addressed to the
Treasurer of the Company at its executive offices. Common Stock utilized in full
or partial  payment of the  Exercise  Price for  Options  shall be valued at its
Market Value at the date of exercise.

     (c)  Period of  Exercisability.  Except to the  extent  otherwise  provided
herein  or in the  terms  of an  Agreement,  an  Option  may be  exercised  by a
Participant only while he has maintained Continuous Service from the date of the
grant of the Option,  or within one year after  termination  of such  Continuous
Service  (but  not  later  than the date on which  the  Option  would  otherwise
expire).  Notwithstanding  the foregoing,  the Participant's  rights to exercise
such Option shall expire --

          (1)  immediately  upon  termination  of the  Participant's  Continuous
     Service  due to "Just  Cause"  which for  purposes  hereof  shall  have the
     meaning set forth in any  unexpired  employment,  consulting,  or severance
     agreement  between the  Participant and the Company (and, in the absence of
     any such agreement,  shall mean  termination  because of the  Participant's
     personal dishonesty,  incompetence, willful misconduct, breach of fiduciary
     duty  involving  personal  profit,  intentional  failure to perform  stated
     duties,  willful  violation  of any law,  rule or  regulation  (other  than
     traffic violations or similar offenses) or final cease-and-desist order;

          (2)  immediately  upon a  determination  by  the  Committee  that  the
     Participant  has  violated  a  noncompetition  provision  contained  in any
     unexpired employment, or consulting, or other written agreement between the
     Participant and the Company or an Affiliate; or

          (3) two  years  from the date on which  the  Participant's  Continuous
     Service  terminates  due to his death (but not later than the date on which
     the Option  would  otherwise  expire),  during which time the Option may be
     exercised (to the extent that the  Participant  would have been entitled to
     exercise it immediately prior to his death) by the personal representatives
     of his estate or person or persons  to whom his  rights  under such  Option
     shall have passed by will or by laws of descent and distribution.

     (d) Effect of the  Committee's  Decisions.  The  Committee's  determination
whether a Participant's  Continuous  Service has ceased,  and the effective date
thereof, shall be final and conclusive on all persons affected thereby.

     (e) Reload Options.  For each Optioned Share purchased upon the exercise of
an Option  within two years  after the first date on which such  Option  becomes
exercisable  pursuant to Section  8(a)  hereof,  the  Committee  shall grant the
Participant a new Option  ("Reload  Option") to purchase an additional  Optioned
Share. The Exercise Price of the Reload Option shall be determined in accordance
with Section 7 hereof.  The Reload  Option shall  become  exercisable

                                       7
<PAGE>

two years after its grant date.  The number of  Optioned  Shares  subject to the
Reload  Option shall be reduced by each Share sold or  otherwise  disposed of by
the Participant  after the grant date and before the exercise date of the Reload
Option without prior Committee approval (which shall not be withheld in the case
of the Participant's financial hardship).

     9. SARS (STOCK APPRECIATION RIGHTS)

     (a) Granting of SARs. In its sole  discretion,  the Committee may from time
to time grant SARs to Employees either in conjunction with, or independently of,
any Options granted under the Plan. An SAR granted in conjunction with an Option
may be an  alternative  right wherein the exercise of the Option  terminates the
SAR to the extent of the number of shares  purchased upon exercise of the Option
and,  correspondingly,  the  exercise  of the SAR  terminates  the Option to the
extent of the  number  of Shares  with  respect  to which the SAR is  exercised.
Alternatively, an SAR granted in conjunction with an Option may be an additional
right  wherein both the SAR and the Option may be  exercised.  An SAR may not be
granted in conjunction with an ISO under  circumstances in which the exercise of
the SAR affects the right to exercise the ISO or vice versa,  unless the SAR, by
its terms, meets all of the following  requirements:  (1) the SAR will expire no
later than the ISO; (2) the SAR may be for no more than the  difference  between
the Exercise  Price of the ISO and the Market Value of the Shares subject to the
ISO at the time the SAR is exercised;  (3) the SAR is transferable only when the
ISO is transferable, and under the same conditions; (4) the SAR may be exercised
only when the ISO may be exercised;  and (5) the SAR may be exercised  only when
the Market Value of the Shares  subject to the ISO exceeds the Exercise Price of
the ISO.

     (b) Exercise  Price.  The Exercise Price as to any particular SAR shall not
be less than the Market Value of the Optioned Shares on the date of grant.

     (c) Timing of Exercise. The provisions of Section 8(c) regarding the period
of  exercisability  of Options are incorporated by reference  herein,  and shall
determine the period of exercisability of SARs.

     (d) Exercise of SARs. An SAR granted hereunder shall be exercisable at such
times and under such  conditions as shall be permissible  under the terms of the
Plan and of the Agreement granted to a Participant, provided that an SAR may not
be exercised for a fractional  Share.  Upon exercise of an SAR, the  Participant
shall be entitled to receive, without payment to the Company, an amount equal to
the  excess of (or,  in the  discretion  of the  Committee  if  provided  in the
Agreement,  a portion of) the excess of the then  aggregate  Market Value of the
number of Optioned  Shares with respect to which the  Participant  exercises the
SAR, over the aggregate  Exercise Price of such number of Optioned Shares.  This
amount shall be payable by the Company,  at the discretion of the Committee,  in
cash or in Shares valued at the then Market Value  thereof,  or any  combination
thereof.

     (e) Procedure for Exercising SARs. To the extent not inconsistent herewith,
the  provisions of Section 8(b) as to the procedure for  exercising  Options are
incorporated  by reference,  and shall  determine  the procedure for  exercising
SARs.

                                       8
<PAGE>

     10. DEFERRALS; DEFERRED SHARES.

     (a) Deferrals.  The Committee may permit any Participant who is a Director,
or 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 attached hereto as Exhibit A (the "Election
Form"),  make  Deferrals by directing that his or her fees,  salary,  bonuses or
other cash  compensation be reduced on a pre-tax basis.  Such  Participants  may
elect to defer up to 25% of their  salary  and up to 100% of any  board  fees or
cash bonuses. Such elections shall (i) be irrevocable until the calendar year in
which they are made,  and (ii) be effective on the January 1st  following  their
Acceptance;  provided  that a  Participant  may elect to have an  election  take
effect as soon as administratively practicable with respect to compensation that
the  Participant  may  receive  in the  future  and as to which the  Participant
currently has no legal right or claim.  As soon as practicable  after the end of
each pay period,  the bank shall  credit  each  Participant's  Account  with any
Deferrals that occurred during the pay period. The Company may create a Trust to
satisfy its liability for the Deferrals and earnings thereon.

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

     (c) Investment Returns.

                  (1) Deferred Shares.  Each  Participant  shall be permitted to
irrevocably  elect  on his or her  Investment  Election  Form to  have  all or a
portion of his or her Deferrals  invested in Deferred Shares. On the last day of
each  fiscal   quarter,   the  Company  shall  credit  Deferred  Shares  to  the
Participant's Account with a Market Value equal to the Participant's  Deferrals,
or portion thereof,  deferred during that quarter. The Committee shall establish
and maintain an individual account (the "Earnings  Account") in the name of each
Participant  who elects to invest in  Deferred  Shares.  On the last day of each
fiscal quarter,  the Company shall credit to the Participant's  Earnings 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 Company,  the
Committee  shall  credit to the  Participant's  Account  Deferred  Shares with a
Market Value equal to the balance of the Participant's Earnings Account, and the
balance of the  Participant's  Earnings  Account  shall be reduced to zero.  The
Trustees shall hold each  Participant's  Deferred  Shares until  distribution is
required pursuant to subsection (d) hereof.

                  (2)  Other  investment  returns.   The  Committee  may  permit
Participants  to individually  elect  alternative  investment  returns using the
Investment Election Form.

                  (3) Effective Date of Investment Elections. Initial Investment
elections  shall be effective  on their date of  Acceptance.  Participant's  may
change their investment  elections by filing a superceding  Investment  Election
Form,  which shall become effective on the January 1st following its Acceptance.
Notwithstanding the forgoing,  a superceding election may only change the manner
in which Deferrals are invested in the future and may not revoke valid elections
for which the Participant's Account has been credited with Deferred Shares.

     (d) Post-Termination Distributions. If the Participant's Continuous Service
with the Company  terminates for any reason other than death,  the Trustee shall
distribute a Participant's

                                       9
<PAGE>

Account in the manner  selected by the  Participant  on his or her  Distribution
Election  Form.  In  the  absence  of  a  valid   distribution   election,   the
Participant's  Account 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  Company  that end after the date on which the  Participant's  Continuous
Service  terminates.  Distributions  of Deferred  Shares shall be made in Common
Stock (without regard to fractional shares).

     (e)  Distribution  Elections.  In order to be  effective,  Acceptance  of a
Participant's  Distribution  Election  Form must occur  either (i) more than one
year before the date on which the Participant's Continuous Service terminates or
(ii)  within  30  days  of  the  Participant's   initial  commencement  of  Plan
participation,  or (iii)  more than 90 days  before  the  closing of a Change in
Control.  In the event a  Participant  files  more  than one valid  Distribution
Election Form, the most recent valid election shall  supersede any and all prior
elections.  Nevertheless,  Beneficiary  designations  made  pursuant to executed
Election  Forms  shall be  revocable  during the  Participant's  lifetime  and a
Participant  may, by  submitting an effective  superseding  Election Form at any
time and from time to time,  prospectively change the designated Beneficiary and
the manner of payment to a Beneficiary.

     (f) Death  Benefits.  If a Participant  dies before  receiving all Benefits
payable  pursuant  this  Section 10, then the  remaining  vested  balance of the
Participant's  Account shall be distributed  in a lump sum to the  Participant's
Beneficiary as soon as  administratively  practicable  following the date of the
Participant's death; provided that a Participant may specify on the Distribution
Election Form the  distribution  period elected by the  Participant  pursuant to
Section 10(d) hereof.

     (g) 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 or her  Account  balance.  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.

     (h) Source of Benefits

                  (1) General Rule.  Benefits  accumulated  under the Plan shall
constitute an unfunded,  unsecured  promise by the Bank to provide such payments
in the  future,  as and to the

                                       10
<PAGE>

extent such benefits become payable.  Benefits  accumulated under the Plan shall
be paid from the general assets of the Company,  and no person shall,  by virtue
of this Plan,  have any  interest  in such  assets,  other than as an  unsecured
creditor of the Company.  For any Plan Year during which a Trust is  maintained,
(i) the Trustee shall inform the Committee annually prior to the commencement of
each fiscal year as to the manner in which such Trust  assets shall be invested,
and (ii) the  Committee  shall,  as soon as  practicable  after  the end of each
calendar quarter,  provide the Trustee with a schedule  specifying the amount of
any Trust  contribution that is attributable to the Participant's  Account.  The
Company  shall also,  at least  annually,  provide  the Trustee  with a schedule
specifying the amounts payable to each Participant, and the time for making such
payments. All interest, dividends, and realized gain/losses on Trust assets will
be taxed to the Company.

                  (2) Trust  Funding  on Change  in  Control.  In the event of a
Change in Control,  the Company shall contribute to a Trust an amount sufficient
to provide the Trust with assets having an overall value equivalent to the value
of the aggregate Account balances under the Plan.

     (i) Assignment.  Except as otherwise expressly provided by this Plan, it is
agreed that neither the Participant nor his or her  Beneficiary,  to include the
Participant's executors and administrators,  heirs, legatees,  distributees, and
any other person or persons  claiming  any benefits  under him or her under this
Plan,  shall  have any right to assign,  transfer,  pledge,  hypothecate,  sell,
transfer,  alienate and  encumber or  otherwise  convey the right to receive any
Deferrals   and   earning   thereon,   which  are   expressly   declared  to  be
nontransferable.  The right to receive  Deferrals  and  earnings  thereon  shall
likewise not be subject to execution, attachment, garnishment,  sequestration or
similar  legal,  equitable or other process to the benefit of the  Participant's
creditors. Any attempted assignment,  transfer,  pledge,  hypothecation or other
disposition  of the  Participant's  rights to  receive  Deferrals  and  earnings
thereon under this Plan or the levy of any  attachment,  garnishment  or similar
process thereupon, shall be null and void and without effect.

     11. RESTRICTED SHARE AWARDS

     (a) Grants.  The Committee  shall have the  discretion to grant  Restricted
Share Awards to Employees  and  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:

                                       11
<PAGE>
                                                    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,  each Participant shall become (100%) vested
immediately (i) upon termination of the Participant's  Continuous Service due to
the  Participant's  Disability or death, or (ii) upon a Change in Control or, if
earlier, the execution of an agreement to effect a Change in Control.

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

     (d) Distribution of Shares.

                  (1) Timing of Distributions: General Rule. Except as otherwise
expressly  stated  in  this  Plan,  the  Trustee  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.

                  (2) Form of  Distribution.  The Trustee 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.

     (e)  Deferral  Elections.  At any time prior 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
attached  hereto as Exhibit "A" (the "Election  Form"),  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 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.

                                       12
<PAGE>

     12.  CHANGE IN CONTROL;  EFFECT OF CHANGES IN COMMON  STOCK  SUBJECT TO THE
PLAN.

     (a)  Change in  Control.  Upon a Change in  Control  or,  if  earlier,  the
execution of an  agreement  to effect a Change in Control,  all Options and SARs
shall become fully  exercisable  and all  Restricted  Share Awards shall be 100%
vested, notwithstanding any other provision of the Plan or any Agreement.

     (b)  Recapitalizations;  Stock  Splits,  Etc. The number and kind of Shares
reserved for issuance  under the Plan, and the number and kind of Shares subject
to outstanding Awards, and the Exercise Price thereof,  shall be proportionately
adjusted  for any  increase,  decrease,  change  or  exchange  of  Shares  for a
different  number or kind of shares or other  securities  of the  Company  which
results  from  a  merger,   consolidation,   recapitalization,   reorganization,
reclassification,  stock dividend,  split-up,  combination of shares, or similar
event in which the number or kind of shares is changed  without  the  receipt or
payment of consideration by the Company.

     (c) Transactions in which the Company is Not the Surviving  Entity.  In the
event of (i) the  liquidation or  dissolution  of the Company,  (ii) a merger or
consolidation  in which the Company is not the  surviving  entity,  or (iii) the
sale or disposition of all or substantially  all of the Company's assets (any of
the  foregoing  to be referred to herein as a  "Transaction"),  all  outstanding
Awards,  together with the Exercise Prices thereof,  shall be equitably adjusted
for any change or exchange of Shares for a different number or kind of shares or
other  securities  which  results  from  the  Transaction,  and  the  forfeiture
provisions set forth in subsections 8(c)(2) and 17(c) shall automatically become
null and void.

     (d) Special Rule for ISOs. Any adjustment  made pursuant to subsections (a)
or  (b)  hereof  shall  be  made  in  such a  manner  as  not  to  constitute  a
modification,  within the meaning of Section  424(h) of the Code, of outstanding
ISOs.

     (e) Conditions and Restrictions on New, Additional,  or Different Shares or
Securities.  If, by reason of any  adjustment  made pursuant to this Section,  a
Participant becomes entitled to new, additional, or different shares of stock or
securities,  then,  except as  expressly  provided  in this  Section,  such new,
additional,  or  different  shares of stock or  securities  shall  thereupon  be
subject to all of the conditions and  restrictions  which were applicable to the
Shares pursuant to the Award before the adjustment was made.

     (f) Other  Issuances.  Except as expressly  provided in this  Section,  the
issuance by the Company or an Affiliate  of shares of stock of any class,  or of
securities  convertible  into  Shares  or stock of  another  class,  for cash or
property or for labor or services  either upon direct sale or upon the  exercise
of rights or warrants to subscribe therefor, shall not affect, and no adjustment
shall be made with respect to, the number,  class,  or Exercise  Price of Shares
then subject to Awards or reserved for issuance under the Plan.

     (g) Certain Special  Dividends.  The Exercise Price of and number of Shares
subject  to  outstanding  Options  shall be  proportionately  adjusted  upon the
payment of a special  large and  nonrecurring  dividend that has the effect of a
return of capital to the stockholders.

                                       13
<PAGE>

     13. TRANSFERABILITY OF AWARDS.

ISOs may not be sold, pledged, assigned,  hypothecated,  transferred or disposed
of in any manner other than by will or by the laws of descent and  distribution.
Notwithstanding  the  foregoing,   or  any  other  provision  of  this  Plan,  a
Participant  who holds  Restricted  Share Awards,  SARs or Non-ISOs may transfer
such Awards to his or her spouse, lineal ascendants, lineal descendants, or to a
duly established trust for the benefit of one or more of these individuals.  The
Awards so transferred may thereafter be transferred  only to the Participant who
originally  received  the  grant  or to an  individual  or  trust  to  whom  the
Participant could have initially transferred the Awards pursuant to this Section
13.  Awards  which  are  transferred  pursuant  to  this  Section  13  shall  be
exercisable  or  earned  by the  transferee  according  to the  same  terms  and
conditions as applied to the Participant. Notwithstanding any other provision of
this Plan to the  contrary,  Common Stock that is received  pursuant to an Award
may not be sold within the  six-month  period  following  the grant date of that
Award,  except in the event of the  Participant's  death or Disability,  or such
other event as the Board may specifically deem appropriate.

     14. TIME OF GRANTING OPTIONS.

     The date of grant of an Option shall, for all purposes, be the later of the
date on which the Committee makes the determination of granting such Option, and
the  Effective  Date.  Notice  of the  determination  shall  be  given  to  each
Participant to whom an Option is so granted  within a reasonable  time after the
date of such grant.

     15. EFFECTIVE DATE.

     The Plan shall become effective immediately upon its adoption by the Board,
but its  effectiveness  and the  effectiveness  of any grants of Awards shall be
contingent upon the Plan's  approval by a favorable vote of stockholders  owning
at least a  majority  of the total  votes cast at a duly  called  meeting of the
Company's stockholders held in accordance with applicable laws.

     16. MODIFICATION OF OPTIONS.

     At any time,  and from time to time,  the Board may authorize the Committee
to direct  execution of an  instrument  providing  for the  modification  of any
outstanding Option,  provided no such modification shall confer on the holder of
said  Option any right or benefit  which  could not be  conferred  on him by the
grant of a new Option at such time, or impair the Option  without the consent of
the holder of the Option.

                                       14
<PAGE>

     17. AMENDMENT AND TERMINATION OF THE PLAN.

     The  Board may from  time to time  amend  the  terms of the Plan and,  with
respect to any Shares at the time not subject to Options,  suspend or  terminate
the Plan. No amendment, suspension or termination of the Plan shall, without the
consent  of any  affected  holders  of an  Award,  alter or impair  the  balance
credited to the  Participant's  Account or any rights or  obligations  under any
Award theretofore granted.

     18. VOTING OF PLAN SHARES.

     All shares of Common  Stock held by the Trust shall be voted by the Trustee
in the manner  directed  by the Board.  In the  absence of such  direction,  the
Trustee shall have sole discretion as to the voting of such shares.

     19. CONDITIONS UPON ISSUANCE OF SHARES.

     (a) Compliance  with Securities  Laws.  Shares of Common Stock shall not be
issued  with  respect to any Option  unless the  issuance  and  delivery of such
Shares shall  comply with all relevant  provisions  of law,  including,  without
limitation,  the Securities Act of 1933, as amended,  the rules and  regulations
promulgated   thereunder,   any  applicable   state   securities  law,  and  the
requirements of any stock exchange upon which the Shares may then be listed.

     (b) Special Circumstances.  The inability of the Company to obtain approval
from any  regulatory  body or authority  deemed by the  Company's  counsel to be
necessary to the lawful issuance and sale of any Shares  hereunder shall relieve
the  Company of any  liability  in respect of the  non-issuance  or sale of such
Shares. As a condition to the exercise of an Option, the Company may require the
person exercising the Option to make such  representations and warranties as may
be necessary to assure the  availability  of an exemption from the  registration
requirements of federal or state securities law.

     (c) Repurchase  Right;  Damages.  The Company shall have the right to cause
the  forfeiture of the Shares (in the case of Optioned  Shares,  in exchange for
any Exercise Price paid by the Participant) that a Participant receives pursuant
to an  Award if the  Participant  breaches  a  noncompetition  provision  in any
unexpired  employment,   consulting  or  other  written  agreement  between  the
Participant  and the Company or an Affiliate.  If a Participant  has disposed of
such Shares, the Company may seek compensatory damages from the Participant,  as
well as seek  specific  performance  for the sale to the  Company  of such other
Shares that the Participant  owns or controls (but only to the extent  necessary
to  provide  the  Company  with  the  recovery  contemplated  in  the  preceding
sentence).

     (d)  Committee  Discretion.  The  Committee  shall  have the  discretionary
authority to impose in  Agreements  such  restrictions  on Shares as it may deem
appropriate or desirable, including but not limited to the authority to impose a
right of first refusal, or to establish repurchase rights, or to pay an Optionee
the in-the-money  value of his Option in consideration for its cancellation,  or
all of these restrictions.

                                       15
<PAGE>

     20. RESERVATION OF SHARES.

     The Company, during the term of the Plan, will reserve and keep available a
number of Shares sufficient to satisfy the requirements of the Plan.

     21. WITHHOLDING TAX.

     The Company's  obligation to deliver Shares or make cash payments  pursuant
to an Award shall be subject to the Participant's satisfaction of all applicable
federal, state and local income and employment tax withholding obligations.  The
Committee,  in its  discretion,  may  permit  the  Participant  to  satisfy  the
obligation,  in whole or in part,  by  irrevocably  electing to have the Company
withhold  Shares,  or to deliver to the  Company  Shares  that he already  owns,
having a value  equal to the amount  required to be  withheld.  The value of the
Shares to be withheld, or delivered to the Company, shall be based on the Market
Value of the Shares on the date the amount of tax to be withheld is  determined.
As an alternative,  the Company may retain,  or sell without notice, a number of
such Shares sufficient to cover the amount required to be withheld.

     22. NO SHAREHOLDER RIGHTS

     No Participant  shall have any voting or dividend rights or other rights of
a  stockholder  in respect of any Shares  covered by an Award  prior to the time
said Shares are actually distributed to him.

     23. NO EMPLOYMENT OR OTHER RIGHTS.

     In no event shall an Employee's or Director's eligibility to participate or
participation  in the Plan create or be deemed to create any legal or  equitable
right of the Employee, Director, or any other party to continue service with the
Company or any Affiliate of such corporations.  Except to the extent provided in
Sections 6(b) and 9(a), no Employee or Director shall have a right to be granted
an Option  or,  having  received  an  Option,  the right to again be  granted an
Option.  However, an Employee or Director who has been granted an Option may, if
otherwise eligible, be granted an additional Option or Options.

     24. GOVERNING LAW.

     The Plan shall be governed by and construed in accordance  with the laws of
the State of New York,  except to the extent that federal law shall be deemed to
apply.

     25. TAX STATUS OF TRUST.

     It is intended that (i) the Trust  associated with the Plan be treated as a
grantor trust of the Company under the  provisions of Section 671 et seq. of the
Code, as the same may be amended from time to time,  and (ii) that in accordance
with  Revenue  Procedure  92-64 (as the same may be amended  from time to time),
Participants have the status of general unsecured creditors of the Company,  the
Plan constitutes a mere unfunded promise to make benefit payments in the future,
the  Plan is  unfunded  for tax  purposes  and for  purposes  of  Title I of the
Employee  Retirement Income Security Act of 1974, as amended,  and the Trust has
been and will continue to be maintained  in  conformity  with Revenue  Procedure
92-64 (as the same may be amended from time to time).

                                       16
</TEXT>
</DOCUMENT>
