Somerset Valley Bank Deferred Compensation Plan


                              SOMERSET VALLEY BANK

                           Deferred Compensation Plan

THIS  AGREEMENT  made this first day of January 1, 2000 by and between  SOMERSET
VALLEY BANK, with its principal  offices located at 58-72 East Main Street,  The
Hamon Building, Somerville, New Jersey 08876 (herein referred to as the "Bank"),
and ROBERT P. CORCORAN  residing at 12 Harvest  Court,  Flemington,  New Jersey,
08822 (herein referred to as the "Executive").

                                WITNESSETH THAT:

WHEREAS, the Executive is employed by the Bank; and

WHEREAS,  the Bank recognizes the valuable services heretofore  performed for it
by the Executive and wishes to encourage his continued employment; and

WHEREAS,  the  Executive  wishes to be  assured  that he will be  entitled  to a
certain amount of  compensation  for some definite period of time from and after
his retirement  from active service with the Bank, or other  termination of such
employment whether by reason of his death or otherwise; and

WHEREAS,  the parties hereto wish to provide the terms and conditions upon which
the Bank shall pay such  additional  compensation to the Executive or his family
after his retirement or such termination of his employment;

NOW,  THEREFORE,  in  consideration  of the premises and of the mutual  promises
herein contained, the parties hereto agree as follows:

1.   In  consideration  of the  Executive's  remaining  in its employ,  the Bank
     agrees that the Bank shall  thereafter pay the Executive the sum of $70,000
     per annum (the "benefit") for a period of ten (10) years from and after the
     occurrence  of an event  entitling  the  Executive  to payments  hereunder,
     payable in equal monthly installments, commencing with the first day of the
     first month following the occurrence of such event.

2.   The  benefit  payable  hereunder  shall  be  paid  to  each  Executive,  or
     applicable Beneficiary  designated by or for such Executive,  on account of
     any of the following events: (a) termination of employment;  (b) death; (c)
     retirement; (d) disability; or (e) an approved financial hardship due to an
     unforeseeable emergency.

(A)      TERMINATION OF EMPLOYMENT.
         If an  Executive  terminates  his  relationship  with the  Bank,  or is
         terminated without cause, before the commencement of Retirement and not
         due  to a  disability,  the  benefit  shall  continue  to  defer


<PAGE>
         until Retirement.

(B)      DEATH BENEFITS.
         If an Executive dies before the  termination of his  relationship  with
         the Bank and before  Retirement  and the Executive  was not  previously
         disabled,  the  participant's  then named beneficiary shall be paid the
         benefit payable in accordance with Paragraph 1.

         Upon the death of an Executive after the  commencement of Retirement or
         receipt of Disability Retirement benefits, but before the Executive has
         received all payments  under the Plan,  the  remaining  payments  shall
         continue to the person or persons designated in the last designation of
         beneficiary  form received by the Bank from the Executive  prior to the
         Executive's death.

(C)      RETIREMENT.
         At Retirement, an Executive shall be entitled to receive payments under
         the Plan,  provided that the Executive ceases to provide services as an
         employee to the Bank after such date.  "Retirement" shall be defined as
         age sixty-five  (65), of which the Board may adjust annually as it sees
         fit. A change in the age of retirement shall not be effective until the
         calendar  year  following  such change and will not be effective if the
         Executive has commenced payments herein.

(D)      DISABILITY.
         The Executive shall be entitled to receive payments  hereunder prior to
         Retirement,  if the Executive  becomes eligible to receive and actually
         commences  receipt of benefit payments under the Bank's Group Long Term
         Disability  Insurance Policy. If the Executive is not covered under the
         Policy,  a  determination  as to whether  the  Executive  can no longer
         perform  duties  required  of  an  Executive  because  of  ill  health,
         accident, or general inability because of age of the Executive shall be
         made by a duly licensed  physician  selected by the Bank.  Should it be
         determined that the Executive is rendered totally or permanently unable
         to  perform  in  accordance  with  the  terms  and  conditions  of  the
         Executive's contract with the Bank and the contract is terminated,  the
         Bank shall immediately commence payment of benefits to the Executive in
         accordance with Paragraph 1.

(E)      UNFORESEEABLE EMERGENCY.
         An  unforeseeable  emergency means a severe  financial  hardship to the
         Executive resulting from a sudden and unexpected illness or accident of
         the  Executive  or  of a  dependent  of  the  Executive,  loss  of  the
         Executive's  property due to casualty,  or other similar  extraordinary
         and  unforeseeable  circumstances  arising as a result of events beyond
         the control of the  Executive.  The  circumstances  that  constitute an
         "Unforeseeable  Emergency"  would  depend  upon the facts of each case,
         but,  in any  case,  payment  may not be made in the  event  that  such
         hardship  is  or  may  be  relieved   (1)  through   reimbursement   or
         compensation  by  insurance or  otherwise,  or (2)  liquidation  of the
         Executive's assets, to the extent that liquidation of such assets would
         not  itself  cause  severe  financial  hardship.  The  need  to  send a
         Executive's child to college or the desire to purchase a home shall not
         be construed as an Unforeseeable Emergency.

         An  Executive  may  request  a  distribution  due  to an  Unforeseeable
         Emergency by submitting a written  request to the Bank  accompanied  by
         evidence  to  demonstrate  that  the  circumstances  being

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<PAGE>
         experienced qualify as an Unforeseeable  Emergency. The Bank shall have
         the  authority  to  require  such  evidence  as it deems  necessary  to
         determine if a  distribution  is  warranted.  If an  application  for a
         hardship  distribution due to an  Unforeseeable  Emergency is approved,
         the distribution shall be limited to both the amount sufficient to meet
         the  emergency  and  the  Executive's  accrued  account  balance.   The
         allowable  distribution  shall be payable in a method determined by the
         Bank as soon as possible after approval of such distribution.

         Distributions made for an Unforeseeable  Emergency will directly reduce
         the benefit on a proportionate basis over the payment period.

         An Executive who has commenced  receiving  benefits  under the Plan may
         request  acceleration of such payments in the event of an Unforeseeable
         Emergency.  The Bank may permit accelerated payments to the extent such
         accelerated  payment  does not exceed the amount  necessary to meet the
         emergency.

3.   In  consideration  of  the  foregoing  agreements  of the  Bank  and of the
     payments to be made by the Bank  pursuant  thereto,  the  Executive  hereby
     agrees  that,  so long as he remains in the active  employ of the Bank,  he
     will devote  substantially all of his time, skill,  diligence and attention
     to the business of the Bank, and will not actively engage,  either directly
     or indirectly,  in any business or other activity which is or may be deemed
     to be in any way  competitive  with or adverse to the best interests of the
     business of the Bank.

4.       a. Nothing contained in this Agreement, and no action taken pursuant to
         its provisions by either party hereto shall create,  or be construed to
         create,  a trust of any kind, or a fiduciary  relationship  between the
         Bank and the Executive, his designated beneficiary, other beneficiaries
         of the Executive or any other person.

         b. The payments to the Executive or his  designated  beneficiary or any
         other  beneficiary  hereunder  shall be made from  assets  which  shall
         continue,  for all purposes,  to be a part of the general assets of the
         Bank,  and no person shall have,  by virtue of the  provisions  of this
         Agreement,  any interest in such assets.  To the extent that any person
         acquires a right to receive payments from the Bank under the provisions
         hereof,  such right shall be no greater than the right of any unsecured
         general creditor of the Bank.

5.   In the event that,  in its  discretion,  the Bank  purchases  an  insurance
     policy or policies  insuring the life of the Executive to allow the Bank to
     recover  the  cost  of  providing  the  benefits,  in  whole,  or in  part,
     hereunder,  neither the Executive, his designated beneficiary nor any other
     beneficiary shall have any rights whatsoever therein; the Bank shall be the
     sole owner and  beneficiary  thereof and shall possess and may exercise all
     incidents of ownership therein.

6.   Nothing  contained herein shall be construed to be a contract of employment
     for any term of years,  nor as  conferring  upon the Executive the right to
     continue  in the  employ  of the  Bank  in any  capacity.  It is  expressly
     understood by the parties hereto that this Agreement relates exclusively to
     additional

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<PAGE>
     compensation for the Executive's services, payable after termination of his
     employment with the Bank, and is not intended to be an employment contract.

7.   Neither the Executive,  his spouse,  nor any other  beneficiary  under this
     Agreement  shall have any power or right to transfer,  assign,  anticipate,
     hypothecate  or otherwise  encumber any part or all of the amounts  payable
     hereunder,  nor shall such amounts be subject to seizure by any creditor of
     any such  beneficiary,  by a  proceeding  at law or in equity,  and no such
     benefit  shall  be  transferable  by  operation  of  law in  the  event  of
     bankruptcy,  insolvency or death of the Executive, his spouse, or any other
     beneficiary  hereunder.  Any such attempted assignment or transfer shall be
     void and shall terminate this Agreement,  and the Bank shall thereupon have
     no further liability hereunder.

8.            a. The Bank is hereby designated as the named fiduciary under this
              Agreement. The named fiduciary shall have authority to control and
              manage the operation and administration of this Agreement,  and it
              shall be responsible for  establishing  and carrying out a funding
              policy  and  method   consistent   with  the  objectives  of  this
              Agreement.

              b. The Bank shall make all determinations as to rights to benefits
              under this Agreement.  Any decision by the Bank denying a claim by
              the Executive or his beneficiary for benefits under this Agreement
              shall  be  stated  in  writing  and  delivered  or  mailed  to the
              Executive or such  beneficiary.  Such decision shall set forth the
              specific reasons for the denial, written to the best of the Bank's
              ability  in a  manner  that  may be  understood  without  legal or
              actuarial counsel. In addition, the Bank shall afford a reasonable
              able  opportunity to the Executive or such  beneficiary for a full
              and fair review of the decision denying such claim.

              c.  Subject to the  foregoing,  the Board of Directors of the Bank
              shall have full power and  authority  to  interpret,  construe and
              administer this Agreement.  The interpretation and construction of
              this  Agreement  by the Board of  Directors  of the Bank,  and any
              action taken thereunder,  shall be binding and conclusive upon all
              parties in  interest.  No member of the Board of  Directors of the
              Bank shall,  in any event,  be liable to any person for any action
              taken   or   omitted   to  be  taken   in   connection   with  the
              interpretation,  construction or administration of this Agreement,
              so long as such action or omission to act be made in good faith.

9.   This Agreement may not be amended, altered or modified, except by a written
     instrument signed by the parties hereto, or their respective  successors or
     assigns, and may not be otherwise terminated except as provided herein.

10.  This  Agreement  shall be binding upon and inure to the benefit of the Bank
     and its successors and assigns, and the Executive, his successors, assigns,
     heirs, executors, administrators and beneficiaries.

11.  Any notice,  consent or demand  required or permitted to be given under the
     provisions of this  Agreement  shall be in writing,  and shall be signed by
     the party giving or making the same.  If such notice,  consent or demand is
     mailed to a party hereto, it shall be sent by United States certified mail,
     postage  prepaid,  addressed to such party's last known address as shown on
     the records of the Bank.  The date of such mailing shall be deemed the date
     of notice, consent or demand.

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<PAGE>
12.  This Agreement, and the rights of the parties hereunder,  shall be governed
     by and construed in accordance with the laws of the State of New Jersey.

IN WITNESS  WHEREOF,  the Bank has caused this  Agreement  to be executed by its
duly authorized  officers and Executive has hereunto set his hand and seal as of
the date first above written.

                                                SOMERSET VALLEY BANK

                                                By /s/John K. Kitchen
                                                   ------------------
                                                   John K. Kitchen
                                                   Chairman

ATTEST:
/s/Bedzaida Rodriguez
---------------------
Bedzaida Rodriguez
Assistant Secretary
                                                   /s/Robert P. Corcoran
                                                   ---------------------
                                                   Robert P. Corcoran


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<PAGE>
                 Somerset Valley Bank Deferred Compensation Plan

                                   Page 5 of 5

                              SOMERSET VALLEY BANK

                           Deferred Compensation Plan

THIS  AGREEMENT  made this first day of January 1, 2000 by and between  SOMERSET
VALLEY BANK, with its principal  offices located at 58-72 East Main Street,  The
Hamon Building, Somerville, New Jersey 08876 (herein referred to as the "Bank"),
and ARTHUR E.  BRATTLOF  residing  at 9 Steeple  Chase  Court,  Bedminster,  New
Jersey, 07921 (herein referred to as the "Executive").

                                WITNESSETH THAT:

In  consideration  of the  agreements  hereinafter  contained the parties hereto
agree as follows:

1.   The Bank agrees to employ the Executive  and the Executive  agrees to serve
     the Bank in such  capacity  as the  Board  of  Directors  of the Bank  (the
     "Board") may designate  from time to time,  beginning from the date of this
     agreement and  continuing  until  terminated by either party on at least 90
     days prior written notice to the other.

2.   During the term of his  employment,  the Executive  shall devote all of his
     time,  attention skill and efforts to the performance of his duties for the
     Bank.

3.   The  Bank  shall  pay the  Executive,  during  the  term of his  employment
     hereunder,  such salary payable  monthly as the Board may from time to time
     determine,  together  with  deferred  compensation  payable as  provided in
     paragraph 5 below,  unless forfeited by the occurrence of any of the events
     of forfeiture specified in paragraph 7, below.

4.       (a) The Bank shall credit to a book reserve to a Deferred  Compensation
         Account (the "Account")  established  for this purpose,  $27,000 on the
         last day of December,  1999,  and on the last day of December each year
         thereafter  continuing until the Executive's  retirement.  "Retirement"
         shall be defined as age sixty-five  (65), of which the Board may adjust
         annually as it sees fit. A change in the age of retirement shall not be
         effective until the calendar year following such change.

         (b) Any such funds so  credited  to the  Account may be kept in cash or
         invested and reinvested in mutual funds, stocks,  bonds,  securities or
         any other assets as may be selected by the Board in its discretion.  In
         the exercise of the  foregoing  discretionary  investment  powers,  the
         Board may engage investment counsel and, if it so desires, may delegate
         to such counsel full or limited authority to select the assets in which
         the funds are to be invested.

         (c) The Bank  agrees to credit a fixed  rate of  interest  equal to 7%,
         compounded at least monthly, to the Executive's Account.  Such interest
         rate may be adjusted annually as the Board shall determine.
<PAGE>
(d)      Title  to and  beneficial  ownership  of any  assets,  whether  cash or
         investments  which the Bank may earmark to pay the contingent  deferred
         compensation  hereunder,  shall at all times remain in the Bank and the
         Executive and his  designated  beneficiary  shall not have any property
         interest whatsoever in any specific assets of the Bank.

5.   The benefits to be paid as deferred compensation (unless they are forfeited
     by the occurrence of any of the events of forfeiture specified in paragraph
     7, below) are as follows:

         TERMINATION PRIOR TO RETIREMENT

(a)      If the  Executive's  employment  hereunder is terminated for any reason
         other than death and disability before the Executive shall have reached
         retirement,  then the Executive  shall receive the Account in 10 annual
         installments,  said  installments to be adjusted annually in accordance
         with paragraph 5(b).  Notwithstanding the foregoing, if before reaching
         retirement the Executive  should die, or if before reaching  retirement
         the Executive  should become  disabled,  then payments shall be made in
         the same manner and to the same extent as set forth in  paragraph  5(e)
         and 5(f), respectively.

         RETIREMENT

(b)      In the calendar year prior to reaching retirement,  the Executive shall
         have the option  either to receive the full value of the Account in one
         lump sum or to  receive  the  Account in 10 annual  installments  in an
         amount  equal to the fair market  value of the assets in the Account as
         of such date. If the Executive fails to make a timely election, he will
         receive the Account in 10 annual  installments  in accordance  with the
         provisions contained herein.

         Notwithstanding  anything to the contrary,  if the Executive chooses to
         receive annual payments the total amount payable to the Executive shall
         be  appropriately  increased  or  decreased as the case may be, but not
         more than semi-annually, to reflect the appreciation or depreciation in
         value and the net income or loss on the funds which remain  invested in
         the Account.

         DEATH OR DISABILITY

(c)      If the  Executive's  employment is terminated  because of disability or
         death  before any payments  from the Account  have been made,  then the
         Bank shall pay in one lump sum an amount equal to the fair market value
         of the assets in the Account as of such date,  to the Executive (in the
         event of his disability) or his designated beneficiary (in the event of
         his death).

         If the Executive is receiving payments and should die before a total of
         10 annual  payments are made by the Bank,  then the remaining  value of
         the Account  shall be  determined as of the date of the death and shall
         be paid as promptly as possible in one lump sum to the Executive's then
         designated beneficiary.

         If the  Executive is  receiving  payments  and should  become  disabled
         before a total of 10 annual  payments  are made by the Bank,  then said
         payments  shall  continue and be adjusted  until all payments have been
         made in accordance with paragraph 5(b).

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<PAGE>
         The  beneficiary  referred to in this  paragraph  may be  designated or
         changed by the Executive (without the consent of any prior beneficiary)
         on a form  provided  by the Bank and  delivered  to the Bank before his
         death.  If no such  beneficiary  shall have been  designated,  or if no
         designated  beneficiary  shall  survive  the  Executive,  the  lump sum
         payable  under  paragraph  5(c)  shall be  payable  to the  Executive's
         estate.

         The Executive  shall be deemed to have become  disabled for purposes of
         paragraph  5(c) if said  Executive is deemed  disabled under the Bank's
         group long-term  disability plan (if any) or if the Board shall find on
         the  basis of  medical  evidence  satisfactory  to the  Board  that the
         Executive  is totally  disabled,  mentally or  physically,  so as to be
         prevented from engaging in further employment by the Bank and that such
         disability will be permanent and continuous during the remainder of his
         life.

         UNFORESEEABLE EMERGENCY

(d)      The  Executive  may  request  a  distribution  due to an  Unforeseeable
         Emergency by submitting a written  request to the Bank  accompanied  by
         evidence  to  demonstrate  that  the  circumstances  being  experienced
         qualify  as  an  Unforeseeable  Emergency.  The  Bank  shall  have  the
         authority to require such  evidence as it deems  necessary to determine
         if a  distribution  is  warranted.  If an  application  for a  hardship
         distribution  due  to  an  Unforeseeable  Emergency  is  approved,  the
         distribution shall be limited to both the amount sufficient to meet the
         emergency and the Executive's  accrued account  balance.  The allowable
         distribution  shall be  payable in a method  determined  by the Bank as
         soon as possible after approval of such distribution.

         An Executive who has commenced  receiving  benefits  under the Plan may
         request  acceleration of such payments in the event of an Unforeseeable
         Emergency.  The Bank may permit accelerated payments to the extent such
         accelerated  payment  does not exceed the amount  necessary to meet the
         emergency.

         An "Unforeseeable  Emergency" means a severe financial  hardship to the
         Executive resulting from a sudden and unexpected illness or accident of
         the  Executive  or  of a  dependent  of  the  Executive,  loss  of  the
         Executive's  property due to casualty,  or other similar  extraordinary
         and  unforeseeable  circumstances  arising as a result of events beyond
         the control of the  Executive.  The  circumstances  that  constitute an
         "Unforeseeable  Emergency"  would  depend  upon the facts of each case,
         but,  in any  case,  payment  may not be made in the  event  that  such
         hardship  is  or  may  be  relieved   (1)  through   reimbursement   or
         compensation  by  insurance or  otherwise,  or (2)  liquidation  of the
         Executive's assets, to the extent that liquidation of such assets would
         not  itself  cause  severe  financial  hardship.  The  need  to  send a
         Participant's  child to college or the desire to  purchase a home shall
         not be construed as an Unforeseeable Emergency.

6.   The Installment  payments to be made to the Executive under paragraphs 5(a)
     and 5(c) shall  commence on the first day of the month next  following  the
     date of the termination of his employment.  The installment  payments to be
     made to the  designated  beneficiary  under the  provisions  of paragraph 5
     shall  commence  on a date to be selected by the Bank but within six months
     from the date of death of the Executive.

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<PAGE>
     Notwithstanding  anything herein contained to the contrary, the Board shall
     have the right in its sole  discretion  to vary or adjust  the  manner  and
     timing of installment distributions provided in this paragraph and may make
     such  distributions in lump sums or over a shorter or longer period of time
     than 10 years  as it may find  appropriate,  so long as such  variation  or
     adjustment  does not impose a hardship upon the Executive or his designated
     beneficiary.

7.   Nothing  contained in this  Agreement  and no action taken  pursuant to the
     provisions of this Agreement shall create or be construed to create a trust
     of  any  kind,  or a  fiduciary  relationship  between  the  Bank  and  the
     Executive,  his designated beneficiary or any other person. Any funds which
     may be invested under the  provisions of this Agreement  shall continue for
     all  purposes to be a part of the  general  funds of the Bank and no person
     other than the Bank  shall by virtue of the  provisions  of this  Agreement
     have any interest in such funds.  To the extent that any person  acquires a
     right to receive  payments from the Bank under this  agreement,  such right
     shall be no greater than the right of any unsecured general creditor of the
     Bank.

8.   Notwithstanding  anything herein  contained to the contrary,  no payment of
     any unpaid  installments  of  deferred  compensation  shall be made and all
     rights under the Agreement of the Executive,  his  designated  beneficiary,
     executors  of  administrators,  or any other  person,  to receive  payments
     thereof shall be forfeited if the Executive shall engage in any activity or
     conduct  which is illegal or, in the  opinion of the Board,  is inimical to
     the best interests of the Bank.

9.   The right of the  Executive  or any other person to the payment of deferred
     compensation  or other benefits under this Agreement shall not be assigned,
     transferred, pledged or encumbered except by will or by the laws of descent
     and distribution.

10.  If the Board  shall  find that any  person to whom any  payment  is payable
     under this  Agreement is unable to care for his affairs  because of illness
     or accident,  or is a minor, any payment due (unless a prior claim therefor
     shall have been made by a duly appointed guardian, committee or other legal
     representative)  may be paid to the spouse, a child, a parent, or a brother
     or sister,  or to any person deemed by the Board to have  incurred  expense
     for  such  person  otherwise  entitled  to  payment,  in  such  manner  and
     proportions  as the  Board  may  determine.  Any  such  payment  shall be a
     complete discharge of the liabilities of the Bank under this agreement.

11.  Nothing  contained  herein  shall  be  construed  as  conferring  upon  the
     Executive the right to continue in the employ
     of the Bank as an executive or in any other capacity.

12.  Any deferred  compensation payable under this Agreement shall not be deemed
     salary or other  compensation to the Executive for the purpose of computing
     benefits  to which  he may be  entitled  under  any  pension  plan or other
     arrangement of the Bank for the benefit of its employees.

13.  The Board shall have full power and authority to interpret,  construe,  and
     administer this Agreement and the Board's  interpretations and construction
     thereof, and actions thereunder, including any valuation of the Account, or
     the  amount or  recipient  of the  payment to be made  therefrom,  shall be

                                       4
<PAGE>
     binding and  conclusive on all persons for all  purposes.  No member of the
     Board  shall be liable to any  person  for any  action  taken or omitted in
     connection with the  interpretation  and  administration  of this Agreement
     unless attributable to his own willful misconduct or lack of good faith.


14.  This agreement  shall be binding upon and inure to the benefit of the Bank,
     its  successors  and assigns,  and the Executive and his heirs,  executors,
     administrators, and legal representatives.

15.  This  Agreement  shall be construed in accordance  with and governed by the
     law of the State of New Jersey.

IN WITNESS  WHEREOF,  the Bank has caused this  Agreement  to be executed by its
duly authorized  officers and Executive has hereunto set his hand and seal as of
the date first above written.

                                                     SOMERSET VALLEY BANK

                                                     By  /s/John K. Kitchen
                                                         ------------------
                                                         John K. Kitchen
                                                         Chairman

ATTEST:
/s/Bedzaida Rodriguez
---------------------
Bedzaida Rodriguez
Assistant Secretary
                                                         /s/Arthur E. Brattlof
                                                         ---------------------
                                                         Arthur E. Brattlof


                                       5
<PAGE>
                 Somerset Valley Bank Deferred Compensation Plan


                              SOMERSET VALLEY BANK

                           Deferred Compensation Plan

THIS  AGREEMENT  made this first day of January 1, 2000 by and between  SOMERSET
VALLEY BANK, with its principal  offices located at 58-72 East Main Street,  The
Hamon Building, Somerville, New Jersey 08876 (herein referred to as the "Bank"),
and KEITH B. MCCARTHY residing at 501 Red School Lane, Phillipsburg, New Jersey,
08865 (herein referred to as the "Executive").

                                WITNESSETH THAT:

In  consideration  of the  agreements  hereinafter  contained the parties hereto
agree as follows:

1.   The Bank agrees to employ the Executive  and the Executive  agrees to serve
     the Bank in such  capacity  as the  Board  of  Directors  of the Bank  (the
     "Board") may designate  from time to time,  beginning from the date of this
     agreement and  continuing  until  terminated by either party on at least 90
     days prior written notice to the other.

2.   During the term of his  employment,  the Executive  shall devote all of his
     time,  attention skill and efforts to the performance of his duties for the
     Bank.

3.   The  Bank  shall  pay the  Executive,  during  the  term of his  employment
     hereunder,  such salary payable  monthly as the Board may from time to time
     determine,  together  with  deferred  compensation  payable as  provided in
     paragraph 5 below,  unless forfeited by the occurrence of any of the events
     of forfeiture specified in paragraph 7, below.

4.       (a) The Bank shall credit to a book reserve to a Deferred  Compensation
         Account (the  "Account")  established  for this purpose,  $6,700 on the
         last day of December,  1999,  and on the last day of December each year
         thereafter  continuing until the Executive's  retirement.  "Retirement"
         shall be defined as age sixty-five  (65), of which the Board may adjust
         annually as it sees fit. A change in the age of retirement shall not be
         effective until the calendar year following such change.

         (b) Any such funds so  credited  to the  Account may be kept in cash or
         invested and reinvested in mutual funds, stocks,  bonds,  securities or
         any other assets as may be selected by the Board in its discretion.  In
         the exercise of the  foregoing  discretionary  investment  powers,  the
         Board may engage investment counsel and, if it so desires, may delegate
         to such counsel full or limited authority to select the assets in which
         the funds are to be invested.

         (c) The Bank  agrees to credit a fixed  rate of  interest  equal to 7%,
         compounded at least monthly, to the Executive's Account.  Such interest
         rate may be adjusted annually as the Board shall determine.
<PAGE>
         Regardless of any provision  contained herein,  the Account shall equal
         the greater of the accrued  balance  including  principal  deposits and
         interest credited thereto or $100,000.

(d)      Title  to and  beneficial  ownership  of any  assets,  whether  cash or
         investments  which the Bank may earmark to pay the contingent  deferred
         compensation  hereunder,  shall at all times remain in the Bank and the
         Executive and his  designated  beneficiary  shall not have any property
         interest whatsoever in any specific assets of the Bank.

5.   The benefits to be paid as deferred compensation (unless they are forfeited
     by the occurrence of any of the events of forfeiture specified in paragraph
     7, below) are as follows:

                         TERMINATION PRIOR TO RETIREMENT

(a)      If the  Executive's  employment  hereunder is terminated for any reason
         other than death and disability before the Executive shall have reached
         retirement,  then the Executive  shall receive the Account in 10 annual
         installments,  said  installments to be adjusted annually in accordance
         with paragraph 5(b).  Notwithstanding the foregoing, if before reaching
         retirement the Executive  should die, or if before reaching  retirement
         the Executive  should become  disabled,  then payments shall be made in
         the same manner and to the same extent as set forth in  paragraph  5(e)
         and 5(f), respectively.

         RETIREMENT

(b)      In the calendar year prior to reaching retirement,  the Executive shall
         have the option  either to receive the full value of the Account in one
         lump sum or to  receive  the  Account in 10 annual  installments  in an
         amount  equal to the fair market  value of the assets in the Account as
         of such date. If the Executive fails to make a timely election, he will
         receive the Account in 10 annual  installments  in accordance  with the
         provisions contained herein.

         Notwithstanding  anything to the contrary,  if the Executive chooses to
         receive annual payments the total amount payable to the Executive shall
         be  appropriately  increased  or  decreased as the case may be, but not
         more than semi-annually, to reflect the appreciation or depreciation in
         value and the net income or loss on the funds which remain  invested in
         the Account.

         DEATH OR DISABILITY

(c)      If the  Executive's  employment is terminated  because of disability or
         death  before any payments  from the Account  have been made,  then the
         Bank shall pay in one lump sum an amount equal to the fair market value
         of the assets in the Account as of such date,  to the Executive (in the
         event of his disability) or his designated beneficiary (in the event of
         his death).

         If the Executive is receiving payments and should die before a total of
         10 annual  payments are made by the Bank,  then the remaining  value of
         the Account  shall be  determined as of the date of the death and shall
         be paid as promptly as possible in one lump sum to the Executive's then
         designated beneficiary.

                                       2
<PAGE>
         If the  Executive is  receiving  payments  and should  become  disabled
         before a total of 10 annual  payments  are made by the Bank,  then said
         payments  shall  continue and be adjusted  until all payments have been
         made in accordance with paragraph 5(b).

         The  beneficiary  referred to in this  paragraph  may be  designated or
         changed by the Executive (without the consent of any prior beneficiary)
         on a form  provided  by the Bank and  delivered  to the Bank before his
         death.  If no such  beneficiary  shall have been  designated,  or if no
         designated  beneficiary  shall  survive  the  Executive,  the  lump sum
         payable  under  paragraph  5(c)  shall be  payable  to the  Executive's
         estate.

         The Executive  shall be deemed to have become  disabled for purposes of
         paragraph  5(c) if said  Executive is deemed  disabled under the Bank's
         group long-term  disability plan (if any) or if the Board shall find on
         the  basis of  medical  evidence  satisfactory  to the  Board  that the
         Executive  is totally  disabled,  mentally or  physically,  so as to be
         prevented from engaging in further employment by the Bank and that such
         disability will be permanent and continuous during the remainder of his
         life.

         UNFORESEEABLE EMERGENCY

(d)      The  Executive  may  request  a  distribution  due to an  Unforeseeable
         Emergency by submitting a written  request to the Bank  accompanied  by
         evidence  to  demonstrate  that  the  circumstances  being  experienced
         qualify  as  an  Unforeseeable  Emergency.  The  Bank  shall  have  the
         authority to require such  evidence as it deems  necessary to determine
         if a  distribution  is  warranted.  If an  application  for a  hardship
         distribution  due  to  an  Unforeseeable  Emergency  is  approved,  the
         distribution shall be limited to both the amount sufficient to meet the
         emergency and the Executive's  accrued account  balance.  The allowable
         distribution  shall be  payable in a method  determined  by the Bank as
         soon as possible after approval of such distribution.

         An Executive who has commenced  receiving  benefits  under the Plan may
         request  acceleration of such payments in the event of an Unforeseeable
         Emergency.  The Bank may permit accelerated payments to the extent such
         accelerated  payment  does not exceed the amount  necessary to meet the
         emergency.

         An "Unforeseeable  Emergency" means a severe financial  hardship to the
         Executive resulting from a sudden and unexpected illness or accident of
         the  Executive  or  of a  dependent  of  the  Executive,  loss  of  the
         Executive's  property due to casualty,  or other similar  extraordinary
         and  unforeseeable  circumstances  arising as a result of events beyond
         the control of the  Executive.  The  circumstances  that  constitute an
         "Unforeseeable  Emergency"  would  depend  upon the facts of each case,
         but,  in any  case,  payment  may not be made in the  event  that  such
         hardship  is  or  may  be  relieved   (1)  through   reimbursement   or
         compensation  by  insurance or  otherwise,  or (2)  liquidation  of the
         Executive's assets, to the extent that liquidation of such assets would
         not  itself  cause  severe  financial  hardship.  The  need  to  send a
         Participant's  child to college or the desire to  purchase a home shall
         not be construed as an Unforeseeable Emergency.

                                       3
<PAGE>
6.   The Installment  payments to be made to the Executive under paragraphs 5(a)
     and 5(c) shall  commence on the first day of the month next  following  the
     date of the termination of his employment.  The installment  payments to be
     made to the  designated  beneficiary  under the  provisions  of paragraph 5
     shall  commence  on a date to be selected by the Bank but within six months
     from the date of death of the Executive.

     Notwithstanding  anything herein contained to the contrary, the Board shall
     have the right in its sole  discretion  to vary or adjust  the  manner  and
     timing of installment distributions provided in this paragraph and may make
     such  distributions in lump sums or over a shorter or longer period of time
     than 10 years  as it may find  appropriate,  so long as such  variation  or
     adjustment  does not impose a hardship upon the Executive or his designated
     beneficiary.

7.   Nothing  contained in this  Agreement  and no action taken  pursuant to the
     provisions of this Agreement shall create or be construed to create a trust
     of  any  kind,  or a  fiduciary  relationship  between  the  Bank  and  the
     Executive,  his designated beneficiary or any other person. Any funds which
     may be invested under the  provisions of this Agreement  shall continue for
     all  purposes to be a part of the  general  funds of the Bank and no person
     other than the Bank  shall by virtue of the  provisions  of this  Agreement
     have any interest in such funds.  To the extent that any person  acquires a
     right to receive  payments from the Bank under this  agreement,  such right
     shall be no greater than the right of any unsecured general creditor of the
     Bank.

8.   Notwithstanding  anything herein  contained to the contrary,  no payment of
     any unpaid  installments  of  deferred  compensation  shall be made and all
     rights under the Agreement of the Executive,  his  designated  beneficiary,
     executors  of  administrators,  or any other  person,  to receive  payments
     thereof shall be forfeited if the Executive shall engage in any activity or
     conduct  which is illegal or, in the  opinion of the Board,  is inimical to
     the best interests of the Bank.

9.   The right of the  Executive  or any other person to the payment of deferred
     compensation  or other benefits under this Agreement shall not be assigned,
     transferred, pledged or encumbered except by will or by the laws of descent
     and distribution.

10.  If the Board  shall  find that any  person to whom any  payment  is payable
     under this  Agreement is unable to care for his affairs  because of illness
     or accident,  or is a minor, any payment due (unless a prior claim therefor
     shall have been made by a duly appointed guardian, committee or other legal
     representative)  may be paid to the spouse, a child, a parent, or a brother
     or sister,  or to any person deemed by the Board to have  incurred  expense
     for  such  person  otherwise  entitled  to  payment,  in  such  manner  and
     proportions  as the  Board  may  determine.  Any  such  payment  shall be a
     complete discharge of the liabilities of the Bank under this agreement.

11.  Nothing  contained  herein  shall  be  construed  as  conferring  upon  the
     Executive  the right to continue in the employ of the Bank as an  executive
     or in any other capacity.

                                       4
<PAGE>
12.  Any deferred  compensation payable under this Agreement shall not be deemed
     salary or other  compensation to the Executive for the purpose of computing
     benefits  to which  he may be  entitled  under  any  pension  plan or other
     arrangement of the Bank for the benefit of its employees.

13.  The Board shall have full power and authority to interpret,  construe,  and
     administer this Agreement and the Board's  interpretations and construction
     thereof, and actions thereunder, including any valuation of the Account, or
     the  amount or  recipient  of the  payment to be made  therefrom,  shall be
     binding and  conclusive on all persons for all  purposes.  No member of the
     Board  shall be liable to any  person  for any  action  taken or omitted in
     connection with the  interpretation  and  administration  of this Agreement
     unless attributable to his own willful misconduct or lack of good faith.

14.  This agreement  shall be binding upon and inure to the benefit of the Bank,
     its  successors  and assigns,  and the Executive and his heirs,  executors,
     administrators, and legal representatives.

15.  This  Agreement  shall be construed in accordance  with and governed by the
     law of the State of New Jersey.


IN WITNESS  WHEREOF,  the Bank has caused this  Agreement  to be executed by its
duly authorized  officers and Executive has hereunto set his hand and seal as of
the date first above written.

                                                     SOMERSET VALLEY BANK

                                                     By  /s/John K. Kitchen
                                                         ------------------
                                                         John K. Kitchen
                                                         Chairman

ATTEST:
/s/Bedzaida Rodriguez
---------------------
Bedzaida Rodriguez
Assistant Secretary
                                                         /s/Keith B. McCarthy
                                                         ---------------------
                                                         Keith B. McCarthy