PEOPLES SAVINGS BANK
                              2002 STOCK BONUS PLAN
                               AND TRUST AGREEMENT


                                    Article I

                       ESTABLISHMENT OF THE PLAN AND TRUST

     1.01 Peoples  Savings Bank  ("Savings  Bank") hereby  establishes  the 2002
Stock  Bonus  Plan (the  "Plan")  and  Trust  (the  "Trust")  upon the terms and
conditions  hereinafter stated in this Restricted Stock Plan and Trust Agreement
(the "Agreement").

     1.02 The  Trustee  hereby  accepts  this Trust and agrees to hold the Trust
assets  existing on the date of this  Agreement and all additions and accretions
thereto upon the terms and conditions hereinafter stated.

                                   Article II

                               PURPOSE OF THE PLAN

     2.01 The  purpose  of the Plan is to  reward  and to  retain  personnel  of
experience and ability in key positions of responsibility  with the Savings Bank
and its  subsidiaries,  by providing  such personnel of the Savings Bank and its
subsidiaries with an increased equity interest in the parent  corporation of the
Savings Bank,  Farnsworth Bancorp,  Inc.  ("Parent"),  as compensation for their
future  professional  contributions  and  service  to the  Savings  Bank and its
subsidiaries.

                                   Article III

                                   DEFINITIONS

     The  following  words and  phrases  when used in this Plan with an  initial
capital letter,  unless the context clearly indicates otherwise,  shall have the
meaning as set forth below.  Wherever  appropriate,  the masculine pronoun shall
include the feminine pronoun and the singular shall include the plural.

     "Beneficiary"  means the person or persons designated by the Participant to
receive any benefits  payable under the Plan in the event of such  Participant's
death.  Such person or persons shall be designated in writing by the Participant
and addressed to the Bank or the Committee on forms provided for this purpose by
the  Committee and delivered to the Bank and may be changed from time to time by
similar written notice to the Committee. A Participant's last will and testament
or  any  codicil  thereto  shall  not  constitute   written   designation  of  a
Beneficiary.  In the absence of such written designation,  the Beneficiary shall
be the  Participant's  surviving  spouse,  if any, or if none, the Participant's
estate.

     "Board"  means the Board of Directors of the Savings Bank, or any successor
corporation thereto.

     "Cause" means the personal  dishonesty,  incompetence,  willful misconduct,
breach of fiduciary  duty involving  personal  profits,  intentional  failure to
perform stated  duties,  willful  violation of a material  provision of any law,
rule or regulation  (other than traffic  violations and similar  offense),  or a
material

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violation of a final cease-and-desist order or any other action which results in
a substantial financial loss to the Parent, Savings Bank or its Subsidiaries.

     "Change in Control" shall mean: (i) the sale of all, or a material portion,
of the assets of the Parent or Savings Bank; (ii) the merger or recapitalization
of the Parent or the Savings  Bank whereby the Parent or Savings Bank is not the
surviving  entity;  (iii) a change in control of the Parent or Savings  Bank, as
otherwise defined or determined by the Office of Thrift  Supervision  ("OTS") or
regulations promulgated by it; or (iv) the acquisition,  directly or indirectly,
of the  beneficial  ownership  (within the meaning of that term as it is used in
Section  13(d)  of the  1934  Act  and the  rules  and  regulations  promulgated
thereunder)  of  twenty-five  percent  (25%) or more of the  outstanding  voting
securities of the Parent or Savings Bank by any person,  trust, entity or group.
This  limitation  shall not apply to the  purchase of shares of up to 25% of any
class of  securities of the Parent or Savings Bank by a  tax-qualified  employee
stock  benefit  plan which is exempt from the approval  requirements,  set forth
under 12  C.F.R.  ss.574.3(c)(1)(vi)  as now in effect  or as may  hereafter  be
amended.   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.

     "Committee"  means the  Board of  Directors  of the Bank or the  Restricted
Stock Plan Committee appointed by the Board of Directors of the Bank pursuant to
Article IV hereof.

     "Common  Stock"  means  shares of the common  stock of the  Parent,  or any
successor corporation or parent thereto.

     "Director" means a member of the Board of the Savings Bank.

     "Director Emeritus" means a person serving as a director emeritus, advisory
director,  consulting director, or other similar position as may be appointed by
the Board of Directors of the Savings Bank or the Parent from time to time.

     "Disability"  means any  physical or mental  impairment  which  renders the
Participant  incapable of continuing in the employment or service of the Savings
Bank or the Parent in his current capacity as determined by the Committee.

     "Effective  Date" shall mean August 5, 2002,  the date of Board approval of
such Plan.

     "Employee"  means any  person  who is  employed  by the  Savings  Bank or a
Subsidiary.

     "Parent" shall mean Farnsworth Bancorp, Inc., the parent corporation of the
Savings Bank.

     "Participant" means an Employee, Director or Director Emeritus who receives
a Plan Share Award under the Plan.

     "Plan  Shares"  means  shares of Common  Stock held in the Trust  which are
awarded or issuable to a Participant pursuant to the Plan.


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     "Plan Share Award" or "Award" means a right granted to a Participant  under
this Plan to earn or to receive Plan Shares.

     "Plan  Share  Reserve"  means the shares of Common  Stock held by the Trust
pursuant to Sections 5.03 and 5.04.

     "Savings  Bank" or "Bank" means  Peoples  Savings  Bank,  and any successor
corporation thereto.

     "Subsidiary"  means those  subsidiaries of the Savings Bank which, with the
consent of the Board, agree to participate in this Plan.

     "Trustee" or "Trustee  Committee"  means that person(s) or entity nominated
by the Committee and approved by the Board pursuant to Sections 4.01 and 4.02 to
hold legal title to the Plan assets for the purposes set forth herein.

                                   Article IV

                           ADMINISTRATION OF THE PLAN

     4.01 Role of the Committee.  The Plan shall be administered and interpreted
by the Board of  Directors  of the Bank or a Committee  appointed by said Board,
which  shall  consist of not less than two non-  employee  members of the Board,
which shall have all of the powers allocated to it in this and other sections of
the  Plan.  All  persons  designated  as  members  of  the  Committee  shall  be
"Non-Employee  Directors"  within the meaning of Rule 16b-3 under the Securities
Exchange  Act  of  1934,  as  amended  ("1934  Act").  The   interpretation  and
construction by the Committee of any provisions of the Plan or of any Plan Share
Award granted  hereunder shall be final and binding.  The Committee shall act by
vote or written  consent of a majority  of its  members.  Subject to the express
provisions  and  limitations  of the Plan,  the  Committee may adopt such rules,
regulations  and  procedures  as it deems  appropriate  for the  conduct  of its
affairs.  The Committee  shall report its actions and decisions  with respect to
the Plan to the Board at appropriate  times,  but in no event less than one time
per  calendar  year.  The  Committee  shall  recommend  to the Board one or more
persons or entity to act as Trustee in  accordance  with the  provision  of this
Plan and Trust and the terms of Article VIII hereof.

     4.02 Role of the Board.  The members of the Committee and the Trustee shall
be appointed  or approved  by, and will serve at the pleasure of the Board.  The
Board  may in its  discretion  from time to time  remove  members  from,  or add
members to, the Committee,  and may remove,  replace or add Trustees.  The Board
shall have all of the powers  allocated to it in this and other  sections of the
Plan,  may take any action under or with respect to the Plan which the Committee
is authorized to take,  and may reverse or override any action taken or decision
made by the Committee under or with respect to the Plan, provided, however, that
the Board may not revoke any Plan Share Award already made except as provided in
Section 7.01(b) herein.

     4.03 Limitation on Liability.  No member of the Board, the Committee or the
Trustee shall be liable for any determination made in good faith with respect to
the Plan or any Plan Share Awards granted.  If a member of the Board,  Committee
or any Trustee is a party or is threatened to be made a party to any threatened,
pending or  completed  action,  suit or  proceeding,  whether  civil,  criminal,
administrative or  investigative,  by any reason of anything done or not done by
him in such  capacity  under or with  respect  to the Plan,  the  Parent and the
Savings Bank shall indemnify such member against expenses (including

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attorney's fees),  judgments,  fines and amounts paid in settlement actually and
reasonably  incurred  by him or her in  connection  with  such  action,  suit or
proceeding if he or she acted in good faith and in a manner he or she reasonably
believed to be in the best  interests  of the Parent,  the Savings  Bank and its
Subsidiaries  and,  with respect to any criminal  action or  proceeding,  had no
reasonable cause to believe his conduct was unlawful.  Notwithstanding  anything
herein to the contrary, in no event shall the Savings Bank take any actions with
respect to this Section 4.03 which is not in compliance  with the limitations or
requirements  set forth at 12 C.F.R.  545.121,  as may be  amended  from time to
time.

                                    Article V

                        CONTRIBUTIONS; PLAN SHARE RESERVE

     5.01  Amount and Timing of  Contributions.  The Board of  Directors  of the
Savings Bank shall  determine the number of shares of Common Stock or the amount
of cash to be  contributed  by the Savings Bank to the Trust  established  under
this Plan. Such  contributions to the Trust shall be delivered to the Trustee at
the time of such  contribution.  No  contributions  to the Trust by Participants
shall  be  permitted  except  with  respect  to  amounts  necessary  to meet tax
withholding obligations.

     5.02 Initial Investment. Any funds held by the Trust prior to investment in
the Common  Stock  shall be  invested  by the  Trustee in such  interest-bearing
account or accounts at the Savings  Bank as the Trustee  shall  determine  to be
appropriate.

     5.03 Maximum Plan Share  Reserve;  Investment  of Trust  Assets.  The Trust
shall  purchase  Common  Stock in an amount not greater than 100% of the Trust's
cash assets,  after  providing  for any required  withholding  as needed for tax
purposes,  provided,  however,  that the Trust  shall not  distribute  more than
10,826  shares of Common  Stock in the  aggregate  pursuant to Awards  under the
Plan.  The Trustee may accept the  transfer of Common  Stock held by the Bank in
other trust accounts,  purchase shares of Common Stock in the open market or, in
the alternative, may purchase authorized but unissued shares of the Common Stock
or treasury shares from the Parent sufficient to fund the Plan Share Reserve.

     5.04  Effect of  Allocations,  Returns  and  Forfeitures  Upon  Plan  Share
Reserves. Upon the allocation of Plan Share Awards under Sections 6.02 and 6.05,
or the decision of the  Committee to return Plan Shares to the Parent,  the Plan
Share Reserve shall be reduced by the number of Shares  subject to the Awards so
allocated  or  returned.  Any Shares  subject  to an Award  which are not earned
because of forfeiture by the Participant pursuant to Section 7.01 shall be added
to the Plan Share Reserve.

                                   Article VI

                            ELIGIBILITY; ALLOCATIONS

     6.01  Eligibility.  Employees  are  eligible to receive  Plan Share  Awards
within the sole  discretion  of the  Committee.  Directors who are not otherwise
Employees shall receive Plan Share Awards pursuant to Section 6.05.



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     6.02 Allocations.  The Committee will determine which of the Employees will
be granted  Plan Share  Awards and the number of Shares  covered by each  Award,
provided,  however, that in no event shall any Awards be made which will violate
the Charter or Bylaws of the Savings Bank or its Parent or  Subsidiaries  or any
applicable federal or state law or regulation. In the event Shares are forfeited
for any reason or additional Shares are purchased by the Trustee,  the Committee
may, from time to time,  determine  which of the Employees  will be granted Plan
Share Awards to be awarded from forfeited  Shares.  In selecting those Employees
to whom Plan Share  Awards will be granted  and the number of shares  covered by
such Awards,  the  Committee  shall  consider the prior and  anticipated  future
position, duties and responsibilities of the Employees, the value of their prior
and anticipated  future services to the Savings Bank and its  Subsidiaries,  and
any other factors the Committee may deem relevant.  All actions by the Committee
shall be deemed final, except to the extent that such actions are revoked by the
Board.  Notwithstanding  anything herein to the contrary,  in no event shall any
Participant  receive  Plan Share Awards in excess of 30% of the  aggregate  Plan
Shares authorized under the Plan.

     6.03 Form of Allocation.  As promptly as practicable  after a determination
is made  pursuant to Section  6.02 or Section 6.05 that a Plan Share Award is to
be made, the Committee  shall notify the  Participant in writing of the grant of
the Award,  the number of Plan Shares  covered by the Award,  and the terms upon
which the Plan Shares subject to the award may be earned.  The date on which the
Committee  makes its award  determination  or the date the Committee so notifies
the  Participant  shall be considered the date of grant of the Plan Share Awards
as determined by the Committee.  The Committee shall maintain  records as to all
grants of Plan Share Awards under the Plan.

     6.04 Allocations Not Required.  Notwithstanding anything to the contrary at
Sections 6.01,  6.02 or 6.05, no Employee shall have any right or entitlement to
receive a Plan Share Award  hereunder,  such Awards being at the sole discretion
of the Committee  and the Board,  nor shall the Employees as a group have such a
right.  The Committee may, with the approval of the Board (or, if so directed by
the Board) return all Common Stock in the Plan Share Reserve to the Savings Bank
at any time, and cease issuing Plan Share Awards.

     6.05 Awards to Directors.  Notwithstanding anything herein to the contrary,
upon the Effective Date, a Plan Share Award  consisting of the following  number
of Plan Shares shall be awarded to each Director of the Savings Bank that is not
otherwise an Employee. Such Plan Share Award shall be earned and non-forfeitable
at the rate of one-fourth  as of September 5, 2002 and an additional  one-fourth
following  each of the next  three  successive  years  during  such  periods  of
continued service as a Director or Director Emeritus.  Further,  such Plan Share
Award shall be immediately 100% earned and  non-forfeitable  in the event of the
death or Disability of such Director or Director  Emeritus,  or upon a Change in
Control of the Savings Bank or Parent.  Subsequent to the Effective  Date,  Plan
Share  Awards may be awarded to newly  elected  or  appointed  Directors  of the
Savings Bank by the Committee,  provided that total Plan Share Awards granted to
non-employee  Directors  of the Savings  Bank shall not exceed  4,800 Plan Share
Awards in the aggregate under the Plan.


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               Director                             Plan Shares
               --------                             -----------
        George G. Aaronson, Jr.                          668
        Joseph H. Kelly                                  928
        G. Edward Koenig, Jr.                            466
        Edgar N. Peppler                               1,046
        Charles E. Adams                                 884
        William H. Wainwright, Jr.                     1,134


                                   Article VII

             EARNINGS AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS

     7.01 Earnings Plan Shares; Forfeitures.

     (a) General Rules.  Unless the Committee  shall  specifically  state to the
contrary at the time a Plan Share Award is  granted,  Plan Shares  subject to an
Award  shall be  earned  and  non-forfeitable  by a  Participant  at the rate of
one-fourth  of such Award  following  one year after the granting of such Award,
and an additional  one-fourth following each of the next three successive years;
provided  that such  Participant  remains an  Employee,  Director,  or  Director
Emeritus during such period.

     (b)  Revocation  for  Misconduct.  Notwithstanding  anything  herein to the
contrary,  the Board  shall,  by  resolution,  immediately  revoke,  rescind and
terminate any Plan Share Award,  or portion  thereof,  previously  awarded under
this Plan, to the extent Plan Shares have not been  delivered  thereunder to the
Participant,  whether or not yet  earned,  in the case of a  Participant  who is
discharged  from  the  employ  or  service  of the  Parent,  Savings  Bank  or a
Subsidiary for Cause,  or who is discovered  after  termination of employment or
service to have engaged in conduct  that would have  justified  termination  for
Cause.  A  determination  of Cause  shall be made by the Board  within  its sole
discretion.

     (c) Exception for Terminations Due to Death or Disability.  Notwithstanding
the general rule contained in Section 7.01(a) above,  all Plan Shares subject to
a Plan Share Award held by a  Participant  whose  employment or service with the
Parent,  Savings Bank or a  Subsidiary  terminates  due to death or  Disability,
shall be deemed earned and  nonforfeitable as of the Participant's  last date of
employment or service with the Parent,  Savings Bank or Subsidiary  and shall be
distributed as soon as practicable thereafter.

     (d) Exception for  Termination  after a Change in Control.  Notwithstanding
the general rule  contained in Section 7.01 above,  all Plan Shares subject to a
Plan Share Award held by a Participant  shall be deemed to be  immediately  100%
earned and  non-forfeitable in the event of a Change in Control of the Parent or
Savings Bank and shall be distributed as soon as practicable thereafter.



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     7.02 Payment of Dividends  on Plan Share  Awards.  A holder of a Plan Share
Award,  whether or not earned, shall also be entitled to receive an amount equal
to any cash  dividends  declared and paid with respect to shares of Common Stock
represented  by such Plan Share Award  between the date the relevant  Plan Share
Award  was  granted  to such  Participant  and the  date  the  Plan  Shares  are
distributed.  Such cash amounts shall be paid as compensation to the Participant
by the Trust or the Bank within 30 days of the applicable dividend payment date,
less applicable tax withholding, if applicable.

     7.03 Distribution of Plan Shares.

     (a)  Timing  of   Distributions:   General  Rule.  Except  as  provided  in
Subsections  (d)  and  (e)  below,  Plan  Shares  shall  be  distributed  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.
Notwithstanding  anything  herein  to the  contrary,  at the  discretion  of the
Committee,  Plan  Shares  may be  distributed  prior to such  Shares  being 100%
earned,  provided  that such Plan  Shares  shall  contain a  restrictive  legend
detailing the applicable limitations of such shares with respect to transfer and
forfeiture.

     (b)  Form of  Distribution.  All Plan  Shares,  together  with  any  shares
representing stock dividends,  shall be distributed in the form of Common Stock.
One share of Common  Stock shall be given for each Plan Share  earned.  Payments
representing  cash  dividends  (and  earnings  thereon)  shall  be made in cash.
Notwithstanding  anything  within  the Plan to the  contrary,  upon a Change  in
Control  whereby  substantially  all of the Common  Stock of the Parent shall be
acquired for cash, all Plan Shares  associated with Plan Share Awards,  together
with any shares representing stock dividends  associated with Plan Share Awards,
shall  be,  at the  sole  discretion  of the  Committee,  distributed  as of the
effective  date of  such  Change  in  Control,  or as  soon as  administratively
feasible thereafter,  in the form of cash equal to the consideration received in
exchange for such Common Stock represented by such Plan Shares.

     (c) Withholding.  The Trustee may withhold from any payment or distribution
made  under  this Plan  sufficient  amounts  of cash or  shares of Common  Stock
necessary to cover any applicable  withholding and employment  taxes, and if the
amount of such  payment or  distribution  is not  sufficient,  the  Trustee  may
require the Participant or Beneficiary to pay to the Trustee the amount required
to be  withheld in taxes as a  condition  of  delivering  the Plan  Shares.  The
Trustee shall pay over to the Parent,  Savings Bank or Subsidiary  which employs
or  employed  such  Participant  any such  amount  withheld  from or paid by the
Participant or Beneficiary.

     (d) Timing: Exception for 10% Shareholders.  Notwithstanding Subsection (a)
above,  no Plan  Shares may be  distributed  to the extent  the  Participant  or
Beneficiary,  as the case may be,  would  after  receipt  of such  Shares own in
excess of ten  percent  (10%) of the  issued  and  outstanding  shares of Common
Stock,  unless  such  action  is  approved  in  advance  by a  majority  vote of
disinterested directors of the Board of the Parent.

     (e) Regulatory  Exceptions.  No Plan Shares shall be distributed,  however,
unless and until all of the  requirements  of all  applicable law and regulation
shall have been fully  complied  with as  determined by the Board upon advice of
legal counsel.

     7.04 Voting of Plan Shares.  After a Plan Share Award has become earned and
non-forfeitable,  the Participant  shall be entitled to direct the Trustee as to
the voting of the Plan Shares which are associated with the Plan Share Award and
which have not yet been distributed pursuant to Section 7.03, subject to rules

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and procedures  adopted by the Committee for this purpose.  All shares of Common
Stock held by the Trust as to which  Participants are not entitled to direct, or
have not directed,  the voting of such Shares,  shall be voted by the Trustee as
directed by the Committee.

                                  Article VIII

                                      TRUST

     8.01 Trust. The Trustee shall receive,  hold,  administer,  invest and make
distributions and disbursements from the Trust in accordance with the provisions
of the  Plan  and  Trust  and the  applicable  directions,  rules,  regulations,
procedures and policies established by the Committee pursuant to the Plan.

     8.02  Management of Trust.  It is the intention of this Plan and Trust that
the Trustee shall have complete  authority  and  discretion  with respect to the
management,  control and  investment  of the Trust,  and that the Trustee  shall
invest all assets of the Trust, except those attributable to cash dividends paid
with respect to Plan Shares not held in the Plan Share Reserve,  in Common Stock
to the  fullest  extent  practicable,  except  to the  extent  that the  Trustee
determines  that the holding of monies in cash or cash  equivalents is necessary
to meet the obligations of the Trust. In performing  their duties,  the Trustees
shall have the power to do all things and  execute  such  instruments  as may be
deemed necessary or proper, including the following powers:

               (a) To  invest  up to one  hundred  percent  (100%)  of all Trust
          assets in the Common Stock without  regard to any law now or hereafter
          in force limiting  investments for Trustees or other fiduciaries.  The
          investment authorized herein may constitute the only investment of the
          Trust,  and in making such  investment,  the Trustee is  authorized to
          purchase  Common Stock from the Parent or from any other  source,  and
          such Common Stock so purchased may be  outstanding,  newly issued,  or
          treasury shares.

               (b)  To  invest  any  Trust  assets  not  otherwise  invested  in
          accordance with (a) above in such deposit  accounts,  and certificates
          of deposit  (including those issued by the Savings Bank),  obligations
          of  the  United  States  government  or its  agencies  or  such  other
          investments as shall be considered the equivalent of cash.

               (c) To sell, exchange or otherwise dispose of any property at any
          time held or acquired by the Trust.

               (d) To cause stocks,  bonds or other  securities to be registered
          in the name of a nominee,  without the  addition  of words  indicating
          that such  security  is an asset of the Trust  (but  accurate  records
          shall be  maintained  showing  that such  security  is an asset of the
          Trust).

               (e) To hold cash  without  interest in such  amounts as may be in
          the opinion of the Trustee  reasonable for the proper operation of the
          Plan and Trust.

               (f)  To  employ  brokers,  agents,  custodians,  consultants  and
          accountants.

               (g) To hire  counsel  to  render  advice  with  respect  to their
          rights,  duties  and  obligations  hereunder,  and  such  other  legal
          services or representation as they may deem desirable.


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               (h)  To hold funds and securities  representing the amounts to be
          distributed to a Participant or his  Beneficiary as a consequence of a
          dispute as to the disposition thereof, whether in a segregated account
          or held in common with other assets.

               (i) As may be directed by the Committee or the Board from time to
          time,  the Trustee  shall pay to the Saving Bank earnings of the Trust
          attributable to the Plan Share Reserve.

     Notwithstanding  anything  herein  contained to the  contrary,  the Trustee
shall not be required to make any  inventory,  appraisal or settlement or report
to any court,  or to secure any order of a court for the  exercise  of any power
herein contained, or to maintain bond.

     8.03 Records and Accounts. The Trustee shall maintain accurate and detailed
records and accounts of all transactions of the Trust,  which shall be available
at all reasonable  times for inspection by any legally entitled person or entity
to the extent required by applicable law, or any other person  determined by the
Committee.

     8.04 Earnings. All earnings,  gains and losses with respect to Trust assets
shall be allocated in  accordance  with a  reasonable  procedure  adopted by the
Committee, to bookkeeping accounts for Participants or to the general account of
the Trust,  depending on the nature and allocation of the assets generating such
earnings,  gains and losses.  In  particular,  any  earnings  on cash  dividends
received  with  respect to shares of Common Stock shall be allocated to accounts
for Participants,  except to the extent that such cash dividends are distributed
to  Participants,  if such  shares  are the  subject of  outstanding  Plan Share
Awards, or, otherwise to the Plan Share Reserve.

     8.05  Expenses.  All costs  and  expenses  incurred  in the  operation  and
administration of this Plan,  including those incurred by the Trustee,  shall be
paid by the Savings Bank.

     8.06  Indemnification.  Subject  to the  requirements  and  limitations  of
applicable  laws  and  regulations,  the  Parent  and  the  Savings  Bank  shall
indemnify, defend and hold the Trustee harmless against all claims, expenses and
liabilities  arising out of or related to the exercise of the  Trustee's  powers
and the  discharge  of their duties  hereunder,  unless the same shall be due to
their gross negligence or willful misconduct.

                                   Article IX

                                  MISCELLANEOUS

     9.01 Adjustments for Capital  Changes.  The aggregate number of Plan Shares
available  for  issuance  pursuant  to the Plan  Share  Awards and the number of
Shares to which any Plan Share Award relates shall be  proportionately  adjusted
for any increase or decrease in the total number of outstanding shares of Common
Stock issued  subsequent to the effective  date of the Plan  resulting  from any
split,  subdivision  or  consolidation  of the  Common  Stock or  other  capital
adjustment,  change or  exchange  of the  Common  Stock,  or other  increase  or
decrease in the number or kind of shares effected  without receipt or payment of
consideration by the Parent.


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     9.02  Amendment and  Termination of the Plan. The Board may, by resolution,
at any time,  amend or terminate  the Plan.  The power to amend or terminate the
Plan shall  include  the power to direct the Trustee to return to the Parent all
or any part of the assets of the Trust, including shares of Common Stock held in
the Plan  Share  Reserve,  as well as shares of  Common  Stock and other  assets
subject to Plan Share Awards which have not yet been earned by the  Participants
to whom they have been awarded.  However, the termination of the Trust shall not
affect a Participant's  right to earn Plan Share Awards and to the  distribution
of Common Stock relating thereto, including earnings thereon, in accordance with
the terms of this Plan and the grant by the Committee or the Board.

     9.03 Nontransferable. Plan Share Awards and rights to Plan Shares shall not
be  transferable by a Participant,  and during the lifetime of the  Participant,
Plan Shares may only be earned by and paid to the  Participant  who was notified
in  writing  of  the  Award  by the  Committee  pursuant  to  Section  6.03.  No
Participant or Beneficiary shall have any right in or claim to any assets of the
Plan or Trust, nor shall the Parent,  Savings Bank, or any Subsidiary be subject
to any claim for benefits hereunder.

     9.04 No Employment  Rights.  Neither the Plan nor any grant of a Plan Share
Award  or Plan  Shares  hereunder  nor any  action  taken  by the  Trustee,  the
Committee  or the Board in  connection  with the Plan  shall  create  any right,
either  express or implied,  on the part of any  Participant  to continue in the
employ or service of the Parent, Savings Bank, or a Subsidiary thereof.

     9.05 Voting and Dividend  Rights.  No Participant  shall have any voting or
dividend  rights of a stockholder  with respect to any Plan Shares  covered by a
Plan Share Award,  except as expressly provided in Sections 7.02 and 7.04 above,
prior to the time said Plan Shares are actually distributed to such Participant.

     9.06  Governing  Law. The Plan and Trust shall be governed by and construed
under the laws of the State of New Jersey, except to the extent that Federal Law
shall be deemed applicable.

     9.07 Effective  Date. The Plan shall be effective as of August 5, 2002, the
date of approval of the Plan by the Board of the Bank.

     9.08 Term of Plan.  This Plan shall  remain in effect  until the earlier of
(i) termination by the Board,  (ii) the distribution of all assets of the Trust,
or (iii) 21 years from the  Effective  Date.  Termination  of the Plan shall not
effect any Plan Share  Awards  previously  granted,  and such Plan Share  Awards
shall  remain  valid and in effect  until they have been earned and paid,  or by
their terms expire or are forfeited.

     9.09 Tax Status of Trust. It is intended that the Trust established  hereby
shall be treated as a grantor trust of the Savings Bank under the  provisions of
Section 671 et seq. of the  Internal  Revenue Code of 1986,  as amended,  as the
same may be amended from time to time.



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